PRIOR PRINTER'S NOS. 402, 2193 PRINTER'S NO. 2277
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
AS AMENDED ON SECOND CONSIDERATION, NOVEMBER 13, 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 § 138. Statement of correction.
26 * * *
27 (b) Effect of filing.--
28 * * *
29 (2) A filing under this section shall not have the
30 effect of causing original articles of incorporation of a
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1 corporation or a similar type of document creating any other
2 form of association to be stricken from the records of the
3 department but the articles or other document may be
4 corrected under this section.
5 * * *
6 (d) Cross reference.--See section 135 (relating to
7 requirements to be met by filed documents).
8 § 139. Tax clearance of certain fundamental transactions.
9 [A] (a) General rule.--Except as provided in subsection (c),
10 a domestic association shall not file articles or a certificate
11 of merger or consolidation effecting a merger or consolidation
12 into a nonqualified foreign association or articles or a
13 certificate of dissolution or a statement of revival, a
14 qualified foreign association shall not file an application for
15 termination of authority or similar document in the Department
16 of State and a domestic association shall not file articles or a
17 certificate of division dividing solely into nonqualified
18 foreign associations unless the articles, certificate,
19 application or other document are accompanied by clearance
20 certificates from the Department of Revenue and the Office of
21 Employment Security of the Department of Labor and Industry,
22 evidencing the payment by the association of all taxes and
23 charges due the Commonwealth required by law.
24 (b) Tax clearance in judicial proceedings.--Until the
25 clearance certificates described in subsection (a) have been
26 filed with the court:
27 (1) The court shall not order the dissolution of a
28 domestic business corporation, nonprofit corporation or
29 business trust.
30 (2) The court shall not approve a final distribution of
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1 the assets of a domestic general partnership, limited
2 partnership, electing partnership or limited liability
3 company if the court is supervising the winding up of the
4 association.
5 (c) Alternative provisions.--If clearance certificates are
6 filed with the court as required under subsection (b), it shall
7 not be necessary to file the clearance certificates with the
8 Department of State.
9 § 161. Domestication of certain alien associations.
10 * * *
11 (b) Statement of domestication.--The statement of
12 domestication shall be executed by the association and shall set
13 forth in the English language:
14 (1) The name of the association. If the name is in a
15 foreign language, it shall be set forth in Roman letters or
16 characters or Arabic or Roman numerals. If the name is one
17 that is rendered unavailable for use by a corporation by any
18 provision of section 1303(b) or (c) (relating to corporate
19 name), the association shall adopt a new name, in accordance
20 with any procedures for changing the name of the association
21 that are applicable prior to the domestication of the
22 association, and shall set forth the new name in the
23 statement.
24 (2) The name of the jurisdiction under the laws of which
25 and the date on which it was first formed, incorporated or
26 otherwise came into being.
27 (3) The name of the jurisdiction that constituted the
28 seat, siege social or principal place of business or control
29 administration of the association, or any equivalent under
30 applicable law, immediately prior to the filing of the
19990S0393B2277 - 7 -
1 statement.
2 (4) A statement [that upon domestication the association
3 will be a domestic association under the laws of this
4 Commonwealth] of the type of domestic association that the
5 association will be upon domestication.
6 (5) A statement that the filing of the statement of
7 domestication and, if desired, the renunciation of the prior
8 domicile has been authorized (unless its charter or other
9 organic documents require a greater vote) by a majority in
10 interest of the shareholders, members or other proprietors of
11 the association.
12 (6) If the association will be a type of domestic
13 association that is created by a filing in the department,
14 such other provisions as are required to be included in an
15 initial filing to create that type of domestic association,
16 except that it shall not be necessary to set forth the name
17 of the person organizing the association.
18 (7) Any other provision that the association may choose
19 to insert unless this title prohibits the inclusion of such a
20 provision in a filing that creates the type of domestic
21 association that the association will be upon domestication.
22 (c) Execution.--The statement shall be signed on behalf of
23 the association by any authorized person.
24 (d) Effect of domestication.--Upon the filing of the
25 statement of domestication, the association shall be
26 domesticated in this Commonwealth and the association shall
27 thereafter be subject to any applicable provisions of this
28 title[, except Subpart B of Part II (relating to business
29 corporations),] and [to] any other provisions of law applicable
30 to associations existing under the laws of this Commonwealth. If
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1 the association will be a type of domestic association that is
2 created by a filing in the department, the statement of
3 domestication shall constitute that filing. The domestication of
4 any association in this Commonwealth pursuant to this section
5 shall not be deemed to affect any obligations or liabilities of
6 the association incurred prior to its domestication.
7 (e) Exclusion.--An association that can be domesticated
8 under [section 4161 (relating to domestication) or 6161
9 (relating to domestication)] any of the following sections shall
10 not be domesticated under this section:
11 Section 4161 (relating to domestication).
12 Section 6161 (relating to domestication).
13 Section 8590 (relating to domestication).
14 Section 8982 (relating to domestication).
15 Section 9501(a)(1)(ii) (relating to application and
16 effect of chapter).
17 (f) Definition.--As used in this section, the term
18 "association," except as restricted by subsection (e), includes
19 any alien incorporated organization, private law corporation
20 (whether or not organized for business purposes), public law
21 corporation, partnership, proprietorship, joint venture,
22 foundation, trust, association or similar organization or entity
23 existing under the laws of any jurisdiction other than this
24 Commonwealth.
25 (g) Cross [reference] references.--See [section] sections
26 134 (relating to docketing statement) and 135 (relating to
27 requirements to be met by filed documents).
28 § 162. Contingent domestication of certain alien associations.
29 * * *
30 (c) Statement of consummation of domestication.--At any time
19990S0393B2277 - 9 -
1 after the filing of a statement of contingent domestication, the
2 association may file in the department a statement of
3 consummation of domestication which shall be executed by the
4 association and shall set forth:
5 (1) The name of the association[. If the name is in a
6 foreign language, it shall be set forth in Roman letters or
7 characters or Arabic or Roman numerals.] as set forth in its
8 statement of contingent domestication.
9 * * *
10 (j) Cross [reference] references.--See [section] sections
11 134 (relating to docketing statement) and 135 (relating to
12 requirements to be met by filed documents).
13 § 1106. Uniform application of subpart.
14 * * *
15 (b) Exceptions.--
16 * * *
17 (3) Subsection (a) shall not adversely affect the rights
18 specifically provided for or saved in this subpart. See:
19 The provisions of section 1524(e) (relating to
20 transitional provision).
21 The provisions of section 1554(c) (relating to
22 transitional provision).
23 The cumulative voting rights set forth in section
24 1758(c)(2) (relating to cumulative voting).
25 The special voting requirements specified in section
26 1931(h) (relating to special requirements).
27 The [special voting requirements specified in section
28 1952(h) (relating to special requirements).] provisions
29 of section 1952(g) and (h) (relating to proposal and
30 adoption of plan of division).
19990S0393B2277 - 10 -
1 The provisions of section 2301(d) (relating to
2 transitional provisions).
3 The provisions of section 2541(a)(2) and (3) and (c)
4 (relating to application and effect of subchapter).
5 The provisions of section 2543(b)(1) and (2)
6 (relating to exceptions generally).
7 The provisions of section 2551(b)(3)(i), (5) and (6)
8 (relating to exceptions).
9 The provisions of section 2553(b)(2) (relating to
10 exception).
11 * * *
12 § 1303. Corporate name.
13 * * *
14 (e) Remedies for violation of section.--The use of a name in
15 violation of this section shall not vitiate or otherwise affect
16 the corporate existence but any court having jurisdiction may
17 enjoin the corporation from using or continuing to use a name in
18 violation of this section, upon the application of:
19 (1) the Attorney General, acting on his own motion or at
20 the instance of any administrative department, board or
21 commission of this Commonwealth; or
22 (2) any person adversely affected.[;
23 may enjoin the corporation from using or continuing to use a
24 name in violation of this section.]
25 (f) Cross references.--See sections 135(e) (relating to
26 distinguishable names) and 1106(b)(2) (relating to uniform
27 application of subpart).
28 § 1304. Required name changes by senior corporations.
29 * * *
30 (b) Enforcement of undertaking to release name.--If a
19990S0393B2277 - 11 -
1 corporation has used a name [which] that is not distinguishable
2 upon the records of the [department] Department of State from
3 the name of another corporation or other association as
4 permitted by section 1303(b)(1) (relating to duplicate use of
5 names) and the other corporation or other association continues
6 to use its name in this Commonwealth and does not change its
7 name, cease to do business, be wound up or withdraw as it
8 proposed to do in its consent or change its name as required by
9 subsection (a), any court having jurisdiction may enjoin the
10 other corporation or other association from continuing to use
11 its name or a name that is not distinguishable therefrom, upon
12 the application of:
13 (1) the Attorney General, acting on his own motion or at
14 the instance of any administrative department, board or
15 commission of this Commonwealth; or
16 (2) any person adversely affected[;
17 may enjoin the other corporation or other association from
18 continuing to use its name].
19 § 1311. Filing of statement of summary of record by certain
20 corporations.
21 (a) General rule.--Where any of the [valid] charter
22 documents of a business corporation are not on file in the
23 Department of State or there is an error in any such document as
24 transferred to the department pursuant to section 140 (relating
25 to custody and management of orphan corporate and business
26 records), and the corporation desires to file any document in
27 the department under any other provision of this subpart or the
28 corporation desires to secure from the department any
29 certificate to the effect that the corporation is a corporation
30 duly incorporated and existing under the laws of this
19990S0393B2277 - 12 -
1 Commonwealth or a certified copy of the articles of the
2 corporation or the corporation desires to correct the text of
3 its charter documents as on file in the department, the
4 corporation shall file in the department a statement of summary
5 of record which shall be executed by the corporation and shall
6 set forth:
7 (1) The name of the corporation and, subject to section
8 109 (relating to name of commercial registered office
9 provider in lieu of registered address), the location,
10 including street and number, if any, of its registered
11 office.
12 (2) The statute by or under which the corporation was
13 incorporated.
14 (3) The name under which, the manner in which and the
15 date on which the corporation was originally incorporated,
16 including the date when and the place where the original
17 articles were recorded.
18 (4) The place or places, including volume and page
19 numbers or their equivalent, where the documents
20 [constituting the currently effective articles are] that are
21 not on file in the department or that require correction in
22 the records of the department were originally filed or
23 recorded, the date or dates of each filing or recording and
24 the correct text of the [currently effective articles.]
25 documents. The information specified in this paragraph may be
26 omitted in a statement of summary of record that is delivered
27 to the department contemporaneously with amended and restated
28 articles of the corporation filed under this subpart.
29 [(5) Each name by which the corporation was known, if
30 any, other than its original name and its current name, and
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1 the date or dates on which each change of name of the
2 corporation became effective.
3 (6) In the case of any entity brought within the scope
4 of Chapter 29 (relating to professional corporations) by or
5 pursuant to section 2905 (relating to election of
6 professional associations to become professional
7 corporations), amended and restated articles of incorporation
8 which shall include all of the information required to be set
9 forth in restated articles of a professional corporation.
10 A corporation shall be required to make only one filing under
11 this subsection.]
12 (b) Validation of prior defects in incorporation.--Upon the
13 filing of a statement by a corporation under this section or the
14 transfer to the department of the records relating to a
15 corporation pursuant to section 140, the corporation [named in
16 the statement] shall be deemed to be a validly subsisting
17 corporation to the same extent as if it had been duly
18 incorporated and was existing under this subpart and the
19 department shall so certify regardless of any absence of or
20 defect in the prior proceedings relating to incorporation.
21 (c) Cross [reference] references.--See [section] sections
22 134 (relating to docketing statement), 135 (relating to
23 requirements to be met by filed documents) and 1106(b)(2)
24 (relating to uniform application of subpart).
25 § 1505. Persons bound by bylaws.
26 Except as otherwise provided by section 1713 (relating to
27 personal liability of directors) or any similar provision of
28 law, the bylaws of a business corporation shall operate only as
29 regulations among the shareholders, directors and officers of
30 the corporation and shall not affect contracts or other dealings
19990S0393B2277 - 14 -
1 with other persons unless those persons have actual knowledge of
2 the bylaws.
3 § 1508. Corporate records; inspection by shareholders.
4 (a) Required records.--Every business corporation shall keep
5 complete and accurate books and records of account, minutes of
6 the proceedings of the incorporators, shareholders and directors
7 and a share register giving the names and addresses of all
8 shareholders and the number and class of shares held by each.
9 The share register shall be kept at [either] any of the
10 following locations:
11 (1) the registered office of the corporation in this
12 Commonwealth [or at its];
13 (2) the principal place of business of the corporation
14 wherever situated;
15 (3) any actual business office of the corporation; or
16 [at]
17 (4) the office of [its] the registrar or transfer agent
18 of the corporation. [Any books, minutes or other records may
19 be in written form or any other form capable of being
20 converted into written form within a reasonable time.]
21 (b) Right of inspection by a shareholder.--Every shareholder
22 shall, upon written verified demand stating the purpose thereof,
23 have a right to examine, in person or by agent or attorney,
24 during the usual hours for business for any proper purpose, the
25 share register, books and records of account, and records of the
26 proceedings of the incorporators, shareholders and directors and
27 to make copies or extracts therefrom. A proper purpose shall
28 mean a purpose reasonably related to the interest of the person
29 as a shareholder. In every instance where an attorney or other
30 agent is the person who seeks the right of inspection, the
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1 demand shall be accompanied by a verified power of attorney or
2 other writing that authorizes the attorney or other agent to so
3 act on behalf of the shareholder. The demand shall be directed
4 to the corporation:
5 (1) at its registered office in this Commonwealth [or];
6 (2) at its principal place of business wherever
7 situated; or
8 (3) in care of the person in charge of an actual
9 business office of the corporation.
10 (c) Proceedings for the enforcement of inspection by a
11 shareholder.--If the corporation, or an officer or agent
12 thereof, refuses to permit an inspection sought by a shareholder
13 or attorney or other agent acting for the shareholder pursuant
14 to subsection (b) or does not reply to the demand within five
15 business days after the demand has been made, the shareholder
16 may apply to the court for an order to compel the inspection.
17 The court shall determine whether or not the person seeking
18 inspection is entitled to the inspection sought. The court may
19 summarily order the corporation to permit the shareholder to
20 inspect the share register and the other books and records of
21 the corporation and to make copies or extracts therefrom, or the
22 court may order the corporation to furnish to the shareholder a
23 list of its shareholders as of a specific date on condition that
24 the shareholder first pay to the corporation the reasonable cost
25 of obtaining and furnishing the list and on such other
26 conditions as the court deems appropriate. Where the shareholder
27 seeks to inspect the books and records of the corporation, other
28 than its share register or list of shareholders, he shall first
29 establish:
30 (1) That he has complied with the provisions of this
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1 section respecting the form and manner of making demand for
2 inspection of the document.
3 (2) That the inspection he seeks is for a proper
4 purpose.
5 Where the shareholder seeks to inspect the share register or
6 list of shareholders of the corporation and he has complied with
7 the provisions of this section respecting the form and manner of
8 making demand for inspection of the documents, the burden of
9 proof shall be upon the corporation to establish that the
10 inspection he seeks is for an improper purpose. The court may,
11 in its discretion, prescribe any limitations or conditions with
12 reference to the inspection or award such other or further
13 relief as the court deems just and proper. The court may order
14 books, documents and records, pertinent extracts therefrom, or
15 duly authenticated copies thereof, to be brought into this
16 Commonwealth and kept in this Commonwealth upon such terms and
17 conditions as the order may prescribe.
18 (d) Certain provisions of articles ineffective.--This
19 section may not be relaxed by any provision of the articles.
20 (e) Cross [reference] references.--See [section] sections
21 107 (relating to form of records), 1512 (relating to
22 informational rights of a director) and 1763(c) (relating to
23 certification by nominee).
24 § 1512. Informational rights of a director.
25 (a) General rule.--To the extent reasonably related to the
26 performance of the duties of the director, including those
27 arising from service as a member of a committee of the board of
28 directors, a director of a business corporation is entitled:
29 (1) in person or by any attorney or other agent, at any
30 reasonable time, to inspect and copy corporate books, records
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1 and documents and, in addition, to inspect, and receive
2 information regarding, the assets, liabilities and operations
3 of the corporation and any subsidiaries of the corporation
4 incorporated or otherwise organized or created under the laws
5 of this Commonwealth that are controlled directly or
6 indirectly by the corporation; and
7 (2) to demand that the corporation exercise whatever
8 rights it may have to obtain information regarding any other
9 subsidiaries of the corporation.
10 (b) Proceedings for enforcement of inspection by a
11 director.--If the corporation, or an officer or agent thereof,
12 refuses to permit an inspection or obtain or provide information
13 sought by a director or attorney or other agent acting for the
14 director pursuant to subsection (a) or does not reply to the
15 request within two business days after the request has been
16 made, the director may apply to the court for an order to compel
17 the inspection or the obtaining or providing of the information.
18 The court shall summarily order the corporation to permit the
19 requested inspection or to obtain the information unless the
20 corporation establishes that the information to be obtained by
21 the exercise of the right is not reasonably related to the
22 performance of the duties of the director or that the director
23 or the attorney or agent of the director is likely to use the
24 information in a manner that would violate the duty of the
25 director to the corporation. The order of the court may contain
26 provisions protecting the corporation from undue burden or
27 expense and prohibiting the director from using the information
28 in a manner that would violate the duty of the director to the
29 corporation.
30 (c) Cross references.--See sections 107 (relating to form of
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1 records) and 1508 (relating to corporate records; inspection by
2 shareholders) and 42 Pa.C.S. § 2503(7) (relating to right of
3 participants to receive counsel fees).
4 § 1521. Authorized shares.
5 * * *
6 (b) Provisions specifically authorized.--
7 (1) Without limiting the authority contained in
8 subsection (a), a corporation, when so authorized in its
9 articles, may issue classes or series of shares:
10 (i) Subject to the right or obligation of the
11 corporation to redeem any of the shares for the
12 consideration, if any, fixed by or in the manner provided
13 by the articles for the redemption thereof. Unless
14 otherwise provided in the articles, any shares subject to
15 redemption shall be redeemable only pro rata or by lot or
16 by such other equitable method as may be selected by the
17 corporation. [An amendment of the articles to add or
18 amend a provision permitting the redemption of any shares
19 by a method that is not pro rata nor by lot nor otherwise
20 equitable may be effected only pursuant to section 1906
21 (relating to special treatment of holders of shares of
22 same class or series).]
23 (ii) Entitling the holders thereof to cumulative,
24 noncumulative or partially cumulative dividends.
25 (iii) Having preference over any other shares as to
26 dividends or assets or both.
27 (iv) Convertible into shares of any other class or
28 series, or into obligations of the corporation.
29 (2) Any of the terms of a class or series of shares may
30 be made dependent upon:
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1 (i) Facts ascertainable outside of the articles if
2 the manner in which the facts will operate upon the terms
3 of the class or series is set forth in the articles. Such
4 facts may include, without limitation, actions or events
5 within the control of or determinations made by the
6 corporation or a representative of the corporation.
7 * * *
8 (d) Status and rights.--Shares of a business corporation
9 shall be deemed personal property. Except as otherwise provided
10 by the articles or, when so permitted by subsection (c), by one
11 or more bylaws adopted by the shareholders, each share shall be
12 in all respects equal to every other share. See section
13 1906(d)(4) (relating to special treatment of holders of shares
14 of same class or series).
15 § 1526. Liability of [subscribers and] shareholders.
16 [A subscriber to, or holder or owner of, shares of a business
17 corporation shall not be under any liability to the corporation
18 or any creditor thereof with respect to the shares other than
19 the personal obligation of a shareholder who has acquired his
20 shares by subscription to comply with the terms of the
21 subscription.] (a) General rule.--A shareholder of a business
22 corporation shall not be liable, solely by reason of being a
23 shareholder, under an order of a court or in any other manner
24 for a debt, obligation or liability of the corporation of any
25 kind or for the acts of any shareholder or representative of the
26 corporation.
27 (b) Professional relationship unaffected.--Subsection (a)
28 shall not afford the shareholders of a business corporation that
29 is not a professional corporation, but that provides
30 professional services, with greater immunity than is available
19990S0393B2277 - 20 -
1 to the officers, shareholders, employees or agents of a business
2 corporation that is a professional corporation. See section 2925
3 (relating to professional relationship retained).
4 (c) Disciplinary jurisdiction unaffected.--A business
5 corporation providing professional services shall be subject to
6 the applicable rules and regulations adopted by, and all the
7 disciplinary powers of, the court, department, board, commission
8 or other government unit regulating the profession in which the
9 corporation is engaged. The court, department, board or other
10 government unit may require that a corporation include in its
11 articles provisions that conform to any rule or regulation
12 heretofore or hereafter promulgated for the purpose of enforcing
13 the ethics of a profession. This subpart shall not affect or
14 impair the disciplinary powers of the court, department, board,
15 commission or other government unit over licensed persons or any
16 law, rule or regulation pertaining to the standards for
17 professional conduct of licensed persons or to the professional
18 relationship between any licensed person rendering professional
19 services and the person receiving professional services.
20 § 1554. Financial reports to shareholders.
21 (a) General rule.--Except as otherwise provided in
22 subsection (d) or unless otherwise agreed between a business
23 corporation and a shareholder, every corporation shall furnish
24 to its shareholders annual financial statements, including at
25 least a balance sheet as of the end of each fiscal year and a
26 statement of income and expenses for the fiscal year. The
27 financial statements shall be prepared on the basis of generally
28 accepted accounting principles, if the corporation prepares
29 financial statements for the fiscal year on that basis for any
30 purpose, and may be consolidated statements of the corporation
19990S0393B2277 - 21 -
1 and one or more of its subsidiaries. The financial statements
2 shall be mailed by the corporation to each of its shareholders
3 entitled thereto within 120 days after the close of each fiscal
4 year and, after the mailing and upon written request, shall be
5 mailed by the corporation to any shareholder or beneficial owner
6 entitled thereto to whom a copy of the most recent annual
7 financial statements has not previously been mailed. In lieu of
8 mailing the statements, the corporation may send them by
9 facsimile, e-mail or other electronic transmission to any
10 shareholder who has supplied the corporation with a facsimile
11 number or address for electronic transmissions for the purpose
12 of receiving financial statements from the corporation.
13 Statements that are audited or reviewed by a certified public
14 accountant or a public accountant shall be accompanied by the
15 report of the accountant; in other cases, each copy shall be
16 accompanied by a statement of the person in charge of the
17 financial records of the corporation:
18 (1) Stating his reasonable belief as to whether or not
19 the financial statements were prepared in accordance with
20 generally accepted accounting principles and, if not,
21 describing the basis of presentation.
22 (2) Describing any material respects in which the
23 financial statements were not prepared on a basis consistent
24 with those prepared for the previous year.
25 * * *
26 § 1571. Application and effect of subchapter.
27 (a) General rule.--Except as otherwise provided in
28 subsection (b), any shareholder (as defined in section 1572
29 (relating to definitions)) of a business corporation shall have
30 the right to dissent from, and to obtain payment of the fair
19990S0393B2277 - 22 -
1 value of his shares in the event of, any corporate action, or to
2 otherwise obtain fair value for his shares, only where this part
3 expressly provides that a shareholder shall have the rights and
4 remedies provided in this subchapter. See:
5 Section 1906(c) (relating to dissenters rights upon
6 special treatment).
7 Section 1930 (relating to dissenters rights).
8 Section 1931(d) (relating to dissenters rights in share
9 exchanges).
10 Section 1932(c) (relating to dissenters rights in asset
11 transfers).
12 Section 1952(d) (relating to dissenters rights in
13 division).
14 Section 1962(c) (relating to dissenters rights in
15 conversion).
16 Section 2104(b) (relating to procedure).
17 Section 2324 (relating to corporation option where a
18 restriction on transfer of a security is held invalid).
19 Section 2325(b) (relating to minimum vote requirement).
20 Section 2704(c) (relating to dissenters rights upon
21 election).
22 Section 2705(d) (relating to dissenters rights upon
23 renewal of election).
24 Section 2904(b) (relating to procedure).
25 Section 2907(a) (relating to proceedings to terminate
26 breach of qualifying conditions).
27 Section 7104(b)(3) (relating to procedure).
28 (b) Exceptions.--
29 (1) Except as otherwise provided in paragraph (2), the
30 holders of the shares of any class or series of shares [that,
19990S0393B2277 - 23 -
1 at] shall not have the right to dissent and obtain payment of
2 the fair value of the shares under this subchapter if, on the
3 record date fixed to determine the shareholders entitled to
4 notice of and to vote at the meeting at which a plan
5 specified in any of section 1930, 1931(d), 1932(c) or 1952(d)
6 is to be voted on, or on the date of the first public
7 announcement that such a plan has been approved by the
8 shareholders by consent without a meeting, the shares are
9 either:
10 (i) listed on a national securities exchange or
11 designated as a national market system security on an
12 interdealer quotation system by the National Association
13 of Securities Dealers, Inc.; or
14 (ii) held beneficially or of record by more than
15 2,000 [shareholders;
16 shall not have the right to obtain payment of the fair value
17 of any such shares under this subchapter.] persons.
18 (2) Paragraph (1) shall not apply to and dissenters
19 rights shall be available without regard to the exception
20 provided in that paragraph in the case of:
21 (i) [Shares converted by a plan if the shares are
22 not converted solely into shares of the acquiring,
23 surviving, new or other corporation or solely into such
24 shares and money in lieu of fractional shares.]
25 (Repealed.)
26 (ii) Shares of any preferred or special class or
27 series unless the articles, the plan or the terms of the
28 transaction entitle all shareholders of the class or
29 series to vote thereon and require for the adoption of
30 the plan or the effectuation of the transaction the
19990S0393B2277 - 24 -
1 affirmative vote of a majority of the votes cast by all
2 shareholders of the class or series.
3 (iii) Shares entitled to dissenters rights under
4 section 1906(c) (relating to dissenters rights upon
5 special treatment).
6 (3) The shareholders of a corporation that acquires by
7 purchase, lease, exchange or other disposition all or
8 substantially all of the shares, property or assets of
9 another corporation by the issuance of shares, obligations or
10 otherwise, with or without assuming the liabilities of the
11 other corporation and with or without the intervention of
12 another corporation or other person, shall not be entitled to
13 the rights and remedies of dissenting shareholders provided
14 in this subchapter regardless of the fact, if it be the case,
15 that the acquisition was accomplished by the issuance of
16 voting shares of the corporation to be outstanding
17 immediately after the acquisition sufficient to elect a
18 majority or more of the directors of the corporation.
19 * * *
20 (g) Computation of beneficial ownership.--For purposes of
21 subsection (b)(1)(ii), shares that are held beneficially as
22 joint tenants, tenants by the entireties, tenants in common or
23 in trust by two or more persons, as fiduciaries or otherwise,
24 shall be deemed to be held beneficially by one person.
25 [(g)] (h) Cross references.--See sections 1105 (relating to
26 restriction on equitable relief), 1904 (relating to de facto
27 transaction doctrine abolished), 1763(c) (relating to
28 determination of shareholders of record) and 2512 (relating to
29 dissenters rights procedure).
30 § 1572. Definitions.
19990S0393B2277 - 25 -
1 The following words and phrases when used in this subchapter
2 shall have the meanings given to them in this section unless the
3 context clearly indicates otherwise:
4 "Corporation." The issuer of the shares held or owned by the
5 dissenter before the corporate action or the successor by
6 merger, consolidation, division, conversion or otherwise of that
7 issuer. A plan of division may designate which one or more of
8 the resulting corporations is the successor corporation for the
9 purposes of this subchapter. The designated successor
10 corporation or corporations in a division shall have sole
11 responsibility for payments to dissenters and other liabilities
12 under this subchapter except as otherwise provided in the plan
13 of division.
14 "Dissenter." A shareholder [or beneficial owner] who is
15 entitled to and does assert dissenters rights under this
16 subchapter and who has performed every act required up to the
17 time involved for the assertion of those rights.
18 * * *
19 "Shareholder." A shareholder as defined in section 1103
20 (relating to definitions), or an ultimate beneficial owner of
21 shares, including without limitation a holder of depository
22 receipts, where the beneficial interest owned includes an
23 interest in the assets of the corporation upon dissolution.
24 § 1702. Manner of giving notice.
25 (a) General rule.--[Whenever written]
26 (1) Any notice [is] required to be given to any person
27 under the provisions of this subpart or by the articles or
28 bylaws of any business corporation[, it may] shall be given
29 to the person either personally or by sending a copy thereof
30 [by] :
19990S0393B2277 - 26 -
1 (i) By first class or express mail, postage prepaid,
2 [or by telegram (with messenger service specified), telex
3 or TWX (with answerback received)] or courier service,
4 charges prepaid, [or by facsimile transmission,] to his
5 postal address [(or to his telex, TWX or facsimile
6 number)] appearing on the books of the corporation or, in
7 the case of directors, supplied by him to the corporation
8 for the purpose of notice. [If the notice is sent by
9 mail, telegraph or courier service, it shall be deemed to
10 have been given to the person entitled thereto when
11 deposited in the United States mail or with a telegraph
12 office or courier service for delivery to that person or,
13 in the case of telex or TWX, when dispatched.] Notice
14 pursuant to this subparagraph shall be deemed to have
15 been given to the person entitled thereto when deposited
16 in the United States mail or with a courier service for
17 delivery to that person.
18 (ii) By facsimile transmission, e-mail or other
19 electronic communication to his facsimile number or
20 address for e-mail or other electronic communications
21 supplied by him to the corporation for the purpose of
22 notice. Notice pursuant to this subparagraph shall be
23 deemed to have been given to the person entitled thereto
24 when sent.
25 (2) A notice of meeting shall specify the [place,] day
26 and hour and geographic location, if any, of the meeting and
27 any other information required by any other provision of this
28 subpart.
29 * * *
30 § 1704. Place and notice of meetings of shareholders.
19990S0393B2277 - 27 -
1 (a) Place.--Meetings of shareholders may be held at such
2 [place] geographic location within or without this Commonwealth
3 as may be provided in or fixed pursuant to the bylaws. Unless
4 otherwise provided in or pursuant to the bylaws, all meetings of
5 the shareholders shall be held [in this Commonwealth at the
6 registered office of the corporation] at the executive office of
7 the corporation wherever situated. If a meeting of the
8 shareholders is held by means of the Internet or other
9 electronic communications technology in a fashion pursuant to
10 which the shareholders have the opportunity to read or hear the
11 proceedings substantially concurrently with their occurrence,
12 vote on matters submitted to the shareholders and pose questions
13 to the directors, the meeting need not be held at a particular
14 geographic location.
15 * * *
16 § 1708. Use of conference telephone [and similar equipment] or
17 other electronic technology.
18 (a) Incorporators and directors.--Except as otherwise
19 provided in the bylaws, one or more persons may participate in a
20 meeting of the incorporators[,] or the board of directors [or
21 the shareholders] of a business corporation by means of
22 conference telephone or [similar communications equipment] other
23 electronic technology by means of which all persons
24 participating in the meeting can hear each other. Participation
25 in a meeting pursuant to this section shall constitute presence
26 in person at the meeting.
27 (b) Shareholders.--Except as otherwise provided in the
28 bylaws, the presence or participation, including voting and
29 taking other action, at a meeting of shareholders, or the
30 expression of consent or dissent to corporate action, by a
19990S0393B2277 - 28 -
1 shareholder by conference telephone or other electronic means,
2 including, without limitation, the Internet, shall constitute
3 the presence of, or vote or action by, or consent or dissent of
4 the shareholder for the purposes of this subpart.
5 § 1709. Conduct of shareholders meeting.
6 (a) Presiding officer.--There shall be a presiding officer
7 at every meeting of the shareholders. The presiding officer
8 shall be appointed in the manner provided in the bylaws or, in
9 the absence of such provision, by the board of directors. If the
10 bylaws are silent on the appointment of the presiding officer
11 and the board fails to designate a presiding officer, the
12 president shall be the presiding officer.
13 (b) Authority of the presiding officer.--Except as otherwise
14 provided in the bylaws, the presiding officer shall determine
15 the order of business and shall have the authority to establish
16 rules for the conduct of the meeting.
17 (c) Procedural standard.--Any action by the presiding
18 officer in adopting rules for, and in conducting, a meeting
19 shall be fair to the shareholders.
20 (d) Closing of the polls.--The presiding officer shall
21 announce at the meeting when the polls close for each matter
22 voted upon. If no announcement is made, the polls shall be
23 deemed to have closed upon the final adjournment of the meeting.
24 After the polls close, no ballots, proxies or votes, nor any
25 revocations or changes thereto, may be accepted.
26 § 1721. Board of directors.
27 (a) General rule.--Unless otherwise provided by statute or
28 in a bylaw adopted by the shareholders, all powers enumerated in
29 section 1502 (relating to general powers) and elsewhere in this
30 subpart or otherwise vested by law in a business corporation
19990S0393B2277 - 29 -
1 shall be exercised by or under the authority of, and the
2 business and affairs of every business corporation shall be
3 managed under the direction of, a board of directors. If any
4 such provision is made in the bylaws, the powers and duties
5 conferred or imposed upon the board of directors by this subpart
6 shall be exercised or performed to such extent and by such
7 person or persons as shall be provided in the bylaws. Persons
8 upon whom the liabilities of directors are imposed by this
9 section shall to that extent be entitled to the rights and
10 immunities conferred by or pursuant to this part and other
11 provisions of law upon directors of a corporation.
12 (b) Cross reference.--See section 2527 (relating to
13 authority of board of directors).
14 § 1727. Quorum of and action by directors.
15 * * *
16 (b) Action by [written] consent.--Unless otherwise
17 restricted in the bylaws, any action required or permitted to be
18 taken at a meeting of the directors may be taken without a
19 meeting if, prior or subsequent to the action, a consent or
20 consents thereto by all of the directors in office is filed with
21 the secretary of the corporation.
22 § 1729. Voting rights of directors.
23 * * *
24 (c) Cross reference.--See section 2526 (relating to voting
25 rights of directors).
26 § 1731. Executive and other committees of the board.
27 (a) Establishment and powers.--Unless otherwise restricted
28 in the bylaws:
29 * * *
30 (2) Any committee, to the extent provided in the
19990S0393B2277 - 30 -
1 resolution of the board of directors or in the bylaws, shall
2 have and may exercise all of the powers and authority of the
3 board of directors except that a committee shall not have any
4 power or authority as to the following:
5 (i) The submission to shareholders of any action
6 requiring approval of shareholders under this subpart.
7 (ii) The creation or filling of vacancies in the
8 board of directors.
9 (iii) The adoption, amendment or repeal of the
10 bylaws.
11 (iv) The amendment or repeal of any resolution of
12 the board that by its terms is amendable or repealable
13 only by the board.
14 (v) Action on matters committed by the bylaws or
15 resolution of the board of directors exclusively to
16 another committee of the board.
17 * * *
18 § 1745. Advancing expenses.
19 Expenses (including attorneys' fees) incurred in defending
20 any action or proceeding referred to in this subchapter may be
21 paid by a business corporation in advance of the final
22 disposition of the action or proceeding upon receipt of an
23 undertaking by or on behalf of the representative to repay the
24 amount if it is ultimately determined that he is not entitled to
25 be indemnified by the corporation as authorized in this
26 subchapter or otherwise. Except as otherwise provided in the
27 bylaws, advancement of expenses shall be authorized by the board
28 of directors. Sections 1728 (relating to interested directors or
29 officers; quorum) and 2538 (relating to approval of transactions
30 with interested shareholders) shall not be applicable to the
19990S0393B2277 - 31 -
1 advancement of expenses under this section.
2 § 1748. Application to surviving or new corporations.
3 [For] (a) General rule.--Except as provided in subsection
4 (b), for the purposes of this subchapter, references to "the
5 corporation" include all constituent corporations absorbed in a
6 consolidation, merger or division, as well as the surviving or
7 new corporations surviving or resulting therefrom, so that any
8 person who is or was a representative of the constituent,
9 surviving or new corporation, or is or was serving at the
10 request of the constituent, surviving or new corporation as a
11 representative of another domestic or foreign corporation for
12 profit or not-for-profit, partnership, joint venture, trust or
13 other enterprise, shall stand in the same position under the
14 provisions of this subchapter with respect to the surviving or
15 new corporation as he would if he had served the surviving or
16 new corporation in the same capacity.
17 (b) Divisions.--Notwithstanding subsection (a), the
18 obligations of a dividing corporation to indemnify and advance
19 expenses to its representatives, whether arising under this
20 subchapter or otherwise, may be allocated in a division in the
21 same manner and with the same effect as any other liability of
22 the dividing corporation.
23 § 1756. Quorum.
24 (a) General rule.--A meeting of shareholders of a business
25 corporation duly called shall not be organized for the
26 transaction of business unless a quorum is present. Unless
27 otherwise provided in a bylaw adopted by the shareholders:
28 * * *
29 (4) If a proxy casts a vote on behalf of a shareholder
30 on any issue other than a procedural motion considered at a
19990S0393B2277 - 32 -
1 meeting of shareholders, the shareholder shall be deemed to
2 be present during the entire meeting for purposes of
3 determining whether a quorum is present for consideration of
4 any other issue.
5 * * *
6 § 1758. Voting rights of shareholders.
7 * * *
8 (b) Procedures for election of directors.--[If the bylaws
9 provide a fair and reasonable procedure for the nomination of
10 candidates for any office, only candidates who have been duly
11 nominated in accordance therewith shall be eligible for
12 election.] Unless otherwise restricted in the bylaws, in
13 elections for directors, voting need not be by ballot unless
14 required by vote of the shareholders before the voting for
15 election of directors begins. The candidates for election as
16 directors receiving the highest number of votes from each class
17 or group of classes, if any, entitled to elect directors
18 separately up to the number of directors to be elected by the
19 class or group of classes shall be elected. If at any meeting of
20 shareholders, directors of more than one class are to be
21 elected, each class of directors shall be elected in a separate
22 election.
23 * * *
24 (e) Advance notice of nominations and other business.--If
25 the bylaws provide a fair and reasonable procedure for the
26 nomination of candidates for election as directors, only
27 candidates who have been duly nominated in accordance therewith
28 shall be eligible for election. If the bylaws impose a fair and
29 reasonable requirement of advance notice of proposals to be made
30 by a shareholder at the annual meeting of the shareholders, only
19990S0393B2277 - 33 -
1 proposals for which advance notice has been properly given may
2 be acted upon at the meeting.
3 § 1759. Voting and other action by proxy.
4 * * *
5 (b) Execution and filing.--Every proxy shall be executed [in
6 writing] or authenticated by the shareholder or by his duly
7 authorized attorney-in-fact and filed with or transmitted to the
8 secretary of the corporation or its designated agent. A
9 shareholder or his duly authorized attorney-in-fact may execute
10 or authenticate a writing or transmit an electronic message
11 authorizing another person to act for him by proxy. A telegram,
12 telex, cablegram, datagram, e-mail, Internet communication or
13 [similar] other means of electronic transmission from a
14 shareholder or attorney-in-fact, or a photographic, facsimile or
15 similar reproduction of a writing executed by a shareholder or
16 attorney-in-fact:
17 (1) may be treated as properly executed or authenticated
18 for purposes of this subsection; and
19 (2) shall be so treated if it sets forth or utilizes a
20 confidential and unique identification number or other mark
21 furnished by the corporation to the shareholder for the
22 purposes of a particular meeting or transaction.
23 (c) Revocation.--A proxy, unless coupled with an interest,
24 shall be revocable at will, notwithstanding any other agreement
25 or any provision in the proxy to the contrary, but the
26 revocation of a proxy shall not be effective until [written]
27 notice thereof has been given to the secretary of the
28 corporation or its designated agent in writing or by electronic
29 transmission. An unrevoked proxy shall not be valid after three
30 years from the date of its execution, authentication or
19990S0393B2277 - 34 -
1 transmission unless a longer time is expressly provided therein.
2 A proxy shall not be revoked by the death or incapacity of the
3 maker unless, before the vote is counted or the authority is
4 exercised, written notice of the death or incapacity is given to
5 the secretary of the corporation or its designated agent.
6 * * *
7 § 1766. Consent of shareholders in lieu of meeting.
8 * * *
9 (b) Partial [written] consent.--If the bylaws so provide,
10 any action required or permitted to be taken at a meeting of the
11 shareholders or of a class of shareholders may be taken without
12 a meeting upon the [written] consent of shareholders who would
13 have been entitled to cast the minimum number of votes that
14 would be necessary to authorize the action at a meeting at which
15 all shareholders entitled to vote thereon were present and
16 voting. The consents shall be filed with the secretary of the
17 corporation.
18 (c) Effectiveness of action by partial [written] consent.--
19 An action taken pursuant to subsection (b) shall not become
20 effective until after at least ten days' [written] notice of the
21 action has been given to each shareholder entitled to vote
22 thereon who has not consented thereto. This subsection may not
23 be relaxed by any provision of the articles.
24 * * *
25 § 1906. Special treatment of holders of shares of same class or
26 series.
27 (a) General rule.--Except as otherwise restricted in the
28 articles, [an amendment or] a plan may contain a provision
29 classifying the holders of shares of a class or series into one
30 or more separate groups by reference to any facts or
19990S0393B2277 - 35 -
1 circumstances that are not manifestly unreasonable and providing
2 mandatory treatment for shares of the class or series held by
3 particular shareholders or groups of shareholders that differs
4 materially from the treatment accorded other shareholders or
5 groups of shareholders holding shares of the same class or
6 series (including a provision modifying or rescinding rights
7 previously created under this section) if:
8 (1) (i) such provision is specifically authorized by a
9 majority of the votes cast by all shareholders entitled
10 to vote on the [amendment or] plan, as well as by a
11 majority of the votes cast by any class or series of
12 shares any of the shares of which are so classified into
13 groups, whether or not such class or series would
14 otherwise be entitled to vote on the [amendment or] plan;
15 and
16 (ii) the provision voted on specifically enumerates
17 the type and extent of the special treatment authorized;
18 or
19 (2) under all the facts and circumstances, a court of
20 competent jurisdiction finds such special treatment is
21 undertaken in good faith, after reasonable deliberation and
22 is in the best interest of the corporation.
23 (b) Statutory voting rights upon special treatment.--Except
24 as provided in subsection (c), if [an amendment or] a plan
25 contains a provision for special treatment, each group of
26 holders of any outstanding shares of a class or series who are
27 to receive the same special treatment under the [amendment or]
28 plan shall be entitled to vote as a special class in respect to
29 the plan regardless of any limitations stated in the articles or
30 bylaws on the voting rights of any class or series.
19990S0393B2277 - 36 -
1 (c) Dissenters rights upon special treatment.--If any
2 [amendment or] plan contains a provision for special treatment
3 without requiring for the adoption of the [amendment or] plan
4 the statutory class vote required by subsection (b), the holder
5 of any outstanding shares the statutory class voting rights of
6 which are so denied, who objects to the [amendment or] plan and
7 complies with Subchapter D of Chapter 15 (relating to dissenters
8 rights), shall be entitled to the rights and remedies of
9 dissenting shareholders provided in that subchapter.
10 (d) Exceptions.--This section shall not apply to:
11 (1) The creation or issuance of securities, contracts,
12 warrants or other instruments evidencing any shares, option
13 rights, securities having conversion or option rights or
14 obligations authorized by section 2513 (relating to disparate
15 treatment of certain persons).
16 (2) A provision of [an amendment or] a plan that offers
17 to all holders of shares of a class or series the same option
18 to elect certain treatment.
19 (3) [An amendment or] A plan that contains an express
20 provision that this section shall not apply or that fails to
21 contain an express provision that this section shall apply.
22 The shareholders of a corporation that proposes [an amendment
23 or] a plan to which this section is not applicable by reason
24 of this paragraph shall have the remedies contemplated by
25 section 1105 (relating to restriction on equitable relief).
26 (4) A provision of a plan that treats all of the holders
27 of a particular class or series of shares differently from
28 the holders of another class or series. A provision of a plan
29 that treats the holders of a class or series of shares
30 differently from the holders of another class or series of
19990S0393B2277 - 37 -
1 shares shall not constitute a violation of section 1521(d)
2 (relating to authorized shares).
3 (e) Definition.--As used in this section, the term "plan"
4 includes:
5 (1) an amendment of the articles that effects a
6 reclassification of shares, whether or not the amendment is
7 accompanied by a separate plan of reclassification; and
8 (2) a resolution recommending that the corporation
9 dissolve voluntarily adopted under section 1972(a) (relating
10 to proposal of voluntary dissolution).
11 § 1912. Proposal of amendments.
12 * * *
13 (c) Terms of amendment.--The resolution or petition may set
14 forth the manner and basis of reclassifying the shares of the
15 corporation. Any of the terms of a plan of reclassification or
16 other action contained in an amendment may be made dependent
17 upon facts ascertainable outside of the amendment if the manner
18 in which the facts will operate upon the terms of the amendment
19 is set forth in the amendment. Such facts may include, without
20 limitation, actions or events within the control of or
21 determinations made by the corporation or a representative of
22 the corporation.
23 § 1914. Adoption of amendments.
24 * * *
25 (b) Statutory voting rights.--Except as provided in this
26 subpart, the holders of the outstanding shares of a class or
27 series of shares shall be entitled to vote as a class in respect
28 of a proposed amendment regardless of any limitations stated in
29 the articles or bylaws on the voting rights of any class or
30 series if [a proposed] the amendment would:
19990S0393B2277 - 38 -
1 (1) authorize the board of directors to fix and
2 determine the relative rights and preferences, as between
3 series, of any preferred or special class;
4 (2) make any change in the preferences, limitations or
5 special rights (other than preemptive rights or the right to
6 vote cumulatively) of the shares of a class or series adverse
7 to the class or series;
8 (3) authorize a new class or series of shares having a
9 preference as to dividends or assets which is senior to the
10 shares of a class or series; [or]
11 (4) increase the number of authorized shares of any
12 class or series having a preference as to dividends or assets
13 which is senior in any respect to the shares of a class or
14 series; or
15 (5) make the outstanding shares of a class or series
16 redeemable by a method that is not pro rata, by lot or
17 otherwise equitable.
18 [then the holders of the outstanding shares of the class or
19 series shall be entitled to vote as a class in respect to the
20 amendment regardless of any limitations stated in the articles
21 or bylaws on the voting rights of any class or series.]
22 (c) Adoption by board of directors.--Unless otherwise
23 restricted in the articles, an amendment of articles shall not
24 require the approval of the shareholders of the corporation if:
25 (1) shares have not been issued;
26 (2) the amendment is restricted to [any] one or more of
27 the following:
28 (i) changing the corporate name;
29 (ii) providing for perpetual existence;
30 (iii) reflecting a reduction in authorized shares
19990S0393B2277 - 39 -
1 effected by operation of section 1552(a) (relating to
2 power of corporation to acquire its own shares) and, if
3 appropriate, deleting all references to a class or series
4 of shares that is no longer outstanding; [or]
5 (iv) adding or deleting a provision authorized by
6 section 1528(f) (relating to uncertificated shares)[.];
7 or
8 (v) adding, changing or eliminating the par value of
9 any class or series of shares if the par value of that
10 class or series does not have any substantive effect
11 under the terms of that or any other class or series of
12 shares;
13 (3) (i) the corporation has only one class or series of
14 voting shares outstanding;
15 (ii) the corporation does not have any class or
16 series of shares outstanding that is:
17 (A) convertible into those voting shares;
18 (B) junior in any way to those voting shares; or
19 (C) entitled to participate on any basis in
20 distributions with those voting shares; and
21 (iii) the amendment is effective solely to
22 accomplish one of the following purposes with respect to
23 those voting shares:
24 [(i)] (A) in connection with effectuating a stock
25 dividend of voting shares on the voting shares, to
26 increase the number of authorized shares [to the extent
27 necessary to permit the board of directors to effectuate
28 a stock dividend in the shares of the corporation] of the
29 voting shares in the same proportion that the voting
30 shares to be distributed in the stock dividend increase
19990S0393B2277 - 40 -
1 the issued voting shares; or
2 [(ii) effectuate a] (B) to split the voting shares
3 and, if desired, increase the number of authorized shares
4 of the voting shares or change the par value of [the
5 authorized] the voting shares, or both, in proportion
6 thereto;
7 (4) to the extent the amendment has not been approved by
8 the shareholders, it restates without change all of the
9 operative provisions of the articles as theretofore amended
10 or as amended thereby; or
11 (5) the amendment accomplishes any combination of
12 purposes specified in this subsection.
13 Whenever a provision of this subpart authorizes the board of
14 directors to take any action without the approval of the
15 shareholders and provides that a statement, certificate, plan or
16 other document relating to such action shall be filed in the
17 Department of State and shall operate as an amendment of the
18 articles, the board upon taking such action may, in lieu of
19 filing the statement, certificate, plan or other document, amend
20 the articles under this subsection without the approval of the
21 shareholders to reflect the taking of such action. An amendment
22 of articles under this subsection shall be deemed adopted by the
23 corporation when it has been adopted by the board of directors
24 pursuant to section 1912 (relating to proposal of amendments).
25 * * *
26 (f) Definition.--As used in this section, the term "voting
27 shares" has the meaning specified in section 2552 (relating to
28 definitions).
29 § 1922. Plan of merger or consolidation.
30 (a) Preparation of plan.--A plan of merger or consolidation,
19990S0393B2277 - 41 -
1 as the case may be, shall be prepared, setting forth:
2 * * *
3 (5) 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 (b) Post-adoption amendment.--A plan of merger or
9 consolidation may contain a provision that the boards of
10 directors of the constituent corporations may amend the plan at
11 any time prior to its effective date, except that an amendment
12 made subsequent to the adoption of the plan by the shareholders
13 of any constituent domestic business corporation shall not
14 change:
15 (1) The amount or kind of shares, obligations, cash,
16 property or rights to be received in exchange for or on
17 conversion of all or any of the shares of the constituent
18 domestic business corporation adversely to the holders of
19 those shares.
20 (2) Any [term] provision of the articles of the
21 surviving or new corporation [to be effected by] as it is to
22 be in effect immediately following consummation of the merger
23 or consolidation, except provisions that may be amended
24 without the approval of the shareholders under section
25 1914(c)(2) (relating to adoption of amendments).
26 (3) Any of the other terms and conditions of the plan if
27 the change would adversely affect the holders of any shares
28 of the constituent domestic business corporation.
29 (c) Proposal.--[Every] Except where the approval of the
30 board of directors is unnecessary under this subchapter, every
19990S0393B2277 - 42 -
1 merger or consolidation shall be proposed in the case of each
2 domestic business corporation by the adoption by the board of
3 directors of a resolution approving the plan of merger or
4 consolidation. Except where the approval of the shareholders is
5 unnecessary under this subchapter, the board of directors shall
6 direct that the plan be submitted to a vote of the shareholders
7 entitled to vote thereon at a regular or special meeting of the
8 shareholders.
9 * * *
10 (e) Reference to outside facts.--Any of the terms of a plan
11 of merger or consolidation 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. Such facts may include, without limitation, actions or
15 events within the control of or determinations made by a party
16 to the plan or a representative of a party to the plan.
17 § 1923. Notice of meeting of shareholders.
18 (a) General rule.--Written notice of the meeting of
19 shareholders that will act on the proposed plan shall be given
20 to each shareholder of record, whether or not entitled to vote
21 thereon, of each domestic business corporation that is a party
22 to the merger or consolidation. There shall be included in, or
23 enclosed with, the notice a copy of the proposed plan or a
24 summary thereof and, if Subchapter D of Chapter 15 (relating to
25 dissenters rights) is applicable to the holders of shares of any
26 class or series, a copy of that subchapter and of section 1930
27 (relating to dissenters rights) shall be furnished to the
28 holders of shares of that class or series. If the surviving or
29 new corporation will be a nonregistered corporation, the notice
30 shall state that a copy of its bylaws, as they will be in effect
19990S0393B2277 - 43 -
1 immediately following the merger or consolidation, will be
2 furnished to any shareholder on request and without cost.
3 * * *
4 § 1924. Adoption of plan.
5 * * *
6 (b) Adoption by board of directors.--
7 (1) Unless otherwise required by its bylaws, a plan of
8 merger or consolidation shall not require the approval of the
9 shareholders of a constituent domestic business corporation
10 if:
11 * * *
12 (ii) immediately prior to the adoption of the plan
13 and at all times thereafter prior to its effective date,
14 another corporation that is a party to the [merger or
15 consolidation] plan owns directly or indirectly 80% or
16 more of the outstanding shares of each class of the
17 constituent corporation; or
18 * * *
19 (3) If a merger or consolidation of a subsidiary
20 corporation with a parent corporation is effected pursuant to
21 paragraph (1)(ii), the plan of merger or consolidation shall
22 be deemed adopted by the subsidiary corporation when it has
23 been adopted by the board of the parent corporation and
24 neither approval of the plan by the board of directors of the
25 subsidiary corporation nor execution of articles of merger or
26 consolidation by the subsidiary corporation shall [not] be
27 necessary.
28 (4) (i) Unless other required by its bylaws, a plan of
29 merger or consolidation providing for the merger or
30 consolidation of a domestic business corporation
19990S0393B2277 - 44 -
1 (referred to in this paragraph as the "constituent
2 corporation") with or into a single indirect wholly owned
3 subsidiary (referred to in this paragraph as the
4 "subsidiary corporation") of the constituent corporation
5 shall not require the approval of the shareholders of
6 either the constituent corporation or the subsidiary
7 corporation if all of the provisions of this paragraph
8 are satisfied.
9 (ii) A merger or consolidation under this paragraph
10 shall satisfy the following conditions:
11 (A) The constituent corporation and the
12 subsidiary corporation are the only parties to the
13 merger or consolidation, other than the resulting
14 corporation, if any, in a consolidation (the
15 corporation that survives or results from the merger
16 or consolidation is referred to in this paragraph as
17 the "resulting subsidiary").
18 (B) Each share or fraction of a share of the
19 capital stock of the constituent corporation
20 outstanding immediately prior to the effective time
21 of the merger or consolidation is converted in the
22 merger or consolidation into a share or equal
23 fraction of a share of capital stock of a holding
24 company having the same designations, rights, powers
25 and preferences and the qualifications, limitations
26 and restrictions as the share of stock of the
27 constituent corporation being converted in the merger
28 or consolidation.
29 (C) The holding company and the resulting
30 subsidiary are each domestic business corporations.
19990S0393B2277 - 45 -
1 (D) Immediately following the effective time of
2 the merger or consolidation, the articles of
3 incorporation and bylaws of the holding company are
4 identical to the articles of incorporation and bylaws
5 of the constituent corporation immediately before the
6 effective time of the merger or consolidation, except
7 for changes that could be made without shareholder
8 approval under section 1914(c) (relating to adoption
9 by board of directors).
10 (E) Immediately following the effective time of
11 the merger or consolidation, the resulting subsidiary
12 is a direct or indirect wholly owned subsidiary of
13 the holding company.
14 (F) The directors of the constituent corporation
15 become or remain the directors of the holding company
16 upon the effective time of the merger or
17 consolidation.
18 (G) The board of directors of the constituent
19 corporation has made a good faith determination that
20 the shareholders of the constituent corporation will
21 not recognize gain or loss for United States Federal
22 Income Tax purposes.
23 (iii) As used in this paragraph only, the term
24 "holding company" means a corporation that, from its
25 incorporation until consummation of the merger or
26 consolidation governed by this paragraph, was at all
27 times a direct wholly owned subsidiary of the constituent
28 corporation and whose capital stock is issued in the
29 merger or consolidation.
30 (iv) If the holding company is a registered
19990S0393B2277 - 46 -
1 corporation, the shares of the holding company issued in
2 connection with the merger or consolidation shall be
3 deemed to have been acquired at the time that the shares
4 of the constituent corporation converted in the merger or
5 consolidation were acquired.
6 (5) A plan of merger or consolidation adopted by the
7 board of directors under this subsection without the approval
8 of the shareholders shall not, by itself, create or impair
9 any rights or obligations on the part of any person under
10 section 2538 (relating to approval of transactions with
11 interested shareholders) or under Subchapters E (relating to
12 control transactions), F (relating to business combinations),
13 G (relating to control-share acquisitions), H (relating to
14 disgorgement by certain controlling shareholders following
15 attempts to acquire control), I (relating to severance
16 compensation for employees terminated following certain
17 control-share acquisitions) and J (relating to business
18 combination transactions - labor contracts) of Chapter 25,
19 nor shall it change the standard of care applicable to the
20 directors under Subchapter B of Chapter 17 (relating to
21 fiduciary duty).
22 * * *
23 § 1929. Effect of merger or consolidation.
24 * * *
25 (b) Property rights.--All the property, real, personal and
26 mixed, and franchises of each of the corporations parties to the
27 merger or consolidation, and all debts due on whatever account
28 to any of them, including subscriptions for shares and other
29 choses in action belonging to any of them, shall be deemed to be
30 [transferred to and] vested in and shall belong to the surviving
19990S0393B2277 - 47 -
1 or new corporation, as the case may be, without further action,
2 and the title to any real estate, or any interest therein,
3 vested in any of the corporations shall not revert or be in any
4 way impaired by reason of the merger or consolidation. The
5 surviving or new corporation shall thenceforth be responsible
6 for all the liabilities of each of the corporations so merged or
7 consolidated. Liens upon the property of the merging or
8 consolidating corporations shall not be impaired by the merger
9 or consolidation and any claim existing or action or proceeding
10 pending by or against any of the corporations may be prosecuted
11 to judgment as if the merger or consolidation had not taken
12 place or the surviving or new corporation may be proceeded
13 against or substituted in its place.
14 (c) Taxes.--Any taxes, interest, penalties and public
15 accounts of the Commonwealth, claimed against any of the merging
16 or consolidating corporations [but not] that are settled,
17 assessed or determined prior to or after the merger or
18 consolidation, shall be [settled, assessed or determined
19 against] the liability of the surviving or new corporation and,
20 together with interest thereon, shall be a lien against the
21 franchises and property, both real and personal, of the
22 surviving or new corporation.
23 * * *
24 § 1930. Dissenters rights.
25 * * *
26 (b) Plans adopted by directors only.--Except as otherwise
27 provided pursuant to section 1571(c) (relating to grant of
28 optional dissenters rights), Subchapter D of Chapter 15 shall
29 not apply to any of the shares of a corporation that is a party
30 to a merger or consolidation pursuant to section 1924(b)(1)(i)
19990S0393B2277 - 48 -
1 or (4) (relating to adoption by board of directors).
2 * * *
3 § 1931. Share exchanges.
4 (a) General rule.--All the outstanding shares of one or more
5 classes or series of a domestic business corporation, designated
6 in this section as the exchanging corporation, may, in the
7 manner provided in this section, be acquired by any person,
8 designated in this section as the acquiring person, through an
9 exchange of all the shares pursuant to a plan of exchange. The
10 plan of exchange may also provide for the conversion of any
11 other shares of the exchanging corporation into shares, other
12 securities or obligations of any person or cash, property or
13 rights. The procedure authorized by this section shall not be
14 deemed to limit the power of any person to acquire all or part
15 of the shares or other securities of any class or series of a
16 corporation through a voluntary exchange or otherwise by
17 agreement with the holders of the shares or other securities.
18 (b) Plan of exchange.--A plan of exchange shall be prepared,
19 setting forth:
20 (1) The terms and conditions of the exchange.
21 (2) The manner and basis of exchanging or converting the
22 shares of the exchanging corporation into shares or other
23 securities or obligations of the acquiring person, and, if
24 any of the shares of the exchanging corporation are not to be
25 exchanged or converted solely into shares or other securities
26 or obligations of the acquiring person, the shares or other
27 securities or obligations of any other person or cash,
28 property or rights that the holders of the shares of the
29 exchanging corporation are to receive in exchange for, or
30 upon conversion of, the shares and the surrender of any
19990S0393B2277 - 49 -
1 certificates evidencing them, which securities or
2 obligations, if any, of any other person or cash, property
3 and rights may be in addition to or in lieu of the shares or
4 other securities or obligations of the acquiring person.
5 (3) Any changes desired to be made in the articles of
6 the exchanging corporation, which may include a restatement
7 of the articles.
8 (4) Any provisions desired providing special treatment
9 of shares held by any shareholder or group of shareholders as
10 authorized by, and subject to the provisions of, section 1906
11 (relating to special treatment of holders of shares of same
12 class or series). Notwithstanding subsection (a), a plan that
13 provides special treatment may affect less than all of the
14 outstanding shares of a class or series.
15 (5) Such other provisions as are deemed desirable.
16 [Any of the terms of the plan may be made dependent upon facts
17 ascertainable outside of the plan if the manner in which the
18 facts will operate upon the terms of the plan is set forth in
19 the plan.]
20 (c) Proposal and adoption.--The plan of exchange shall be
21 proposed and adopted and may be amended after its adoption and
22 terminated by the exchanging corporation in the manner provided
23 by this subchapter for the proposal, adoption, amendment and
24 termination of a plan of merger except section 1924(b) (relating
25 to adoption by board of directors). There shall be included in,
26 or enclosed with, the notice of the meeting of shareholders to
27 act on the plan a copy or a summary of the plan and, if
28 Subchapter D of Chapter 15 (relating to dissenters rights) is
29 applicable, a copy of the subchapter and of subsection (d). The
30 holders of any class of shares to be [acquired] exchanged or
19990S0393B2277 - 50 -
1 converted pursuant to the plan of exchange shall be entitled to
2 vote as a class on the plan if they would have been entitled to
3 vote on a plan of merger that affects the class in substantially
4 the same manner as the plan of exchange.
5 (d) Dissenters rights in share exchanges.--Any holder of
6 shares that are to be [acquired] exchanged or converted pursuant
7 to a plan of exchange who objects to the plan and complies with
8 the provisions of Subchapter D of Chapter 15 shall be entitled
9 to the rights and remedies of dissenting shareholders therein
10 provided, if any. See section 1906(c) (relating to dissenter
11 rights upon special treatment).
12 (e) Articles of exchange.--Upon adoption of a plan of
13 exchange, as provided in this section, articles of exchange
14 shall be executed by the exchanging corporation and shall set
15 forth:
16 (1) The name and, subject to section 109 (relating to
17 name of commercial registered office provider in lieu of
18 registered address), the location of the registered office,
19 including street and number, if any, of the exchanging
20 corporation.
21 (2) If the plan is to be effective on a specified date,
22 the hour, if any, and the month, day and year of the
23 effective date.
24 (3) The manner in which the plan was adopted by the
25 exchanging corporation.
26 (4) Except as provided in section 1901 (relating to
27 omission of certain provisions from filed plans), the plan of
28 exchange.
29 The articles of exchange shall be filed in the Department of
30 State. See [section] sections 134 (relating to docketing
19990S0393B2277 - 51 -
1 statement) and 135 (relating to requirements to be met by filed
2 documents.
3 * * *
4 (i) Reference to outside facts.--Any of the terms of a plan
5 of exchange may be made dependent upon facts ascertainable
6 outside of the plan if the manner in which the facts will
7 operate upon the terms of the plan is set forth in the plan.
8 Such facts may include, without limitation, actions or events
9 within the control of or determinations made by a party to the
10 plan or a representative of a party to the plan.
11 § 1932. Voluntary transfer of corporate assets.
12 * * *
13 (b) Shareholder approval required.--
14 (1) A sale, lease, exchange or other disposition of all,
15 or substantially all, the property and assets, with or
16 without the goodwill, of a business corporation, if not made
17 pursuant to subsection (a) or (d) or to section 1551
18 (relating to distributions to shareholders) or Subchapter D
19 (relating to division), may be made only pursuant to a plan
20 of asset transfer[.] in the manner provided in this
21 subsection. A corporation selling, leasing or otherwise
22 disposing of all, or substantially all, its property and
23 assets is referred to in this subsection and in subsection
24 (c) as the "transferring corporation."
25 (2) The property or assets of a direct or indirect
26 subsidiary corporation that is controlled by a parent
27 corporation shall also be deemed the property or assets of
28 the parent corporation for the purposes of this subsection
29 and of subsection (c). A merger or consolidation to which
30 such a subsidiary corporation is a party and in which a third
19990S0393B2277 - 52 -
1 party acquires direct or indirect ownership of the property
2 or assets of the subsidiary corporation constitutes an "other
3 disposition" of the property or assets of the parent
4 corporation within the meaning of that term as used in this
5 section.
6 (3) The plan of asset transfer shall set forth the terms
7 and conditions of the sale, lease, exchange or other
8 disposition or may authorize the board of directors to fix
9 any or all of the terms and conditions, including the
10 consideration to be received by the corporation therefor. The
11 plan may provide for the distribution to the shareholders of
12 some or all of the consideration to be received by the
13 corporation, including provisions for special treatment of
14 shares held by any shareholder or group of shareholders as
15 authorized by, and subject to the provisions of, section 1906
16 (relating to special treatment of holders of shares of same
17 class or series). It shall not be necessary for the person
18 acquiring the property or assets of the transferring
19 corporation to be a party to the plan. Any of the terms of
20 the plan may be made dependent upon facts ascertainable
21 outside of the plan if the manner in which the facts will
22 operate upon the terms of the plan is set forth in the plan.
23 Such facts may include, without limitation, actions or events
24 within the control of or determinations made by the
25 corporation or a representative of the corporation.
26 (4) The plan of asset transfer shall be proposed and
27 adopted, and may be amended after its adoption and
28 terminated, by [a business] the transferring corporation in
29 the manner provided in this subchapter for the proposal,
30 adoption, amendment and termination of a plan of merger,
19990S0393B2277 - 53 -
1 except section 1924(b) (relating to adoption by board of
2 directors). The procedures of this subchapter shall not be
3 applicable to the person acquiring the property or assets of
4 the transferring corporation. There shall be included in, or
5 enclosed with, the notice of the meeting of the shareholders
6 of the transferring corporation to act on the plan a copy or
7 a summary of the plan and, if Subchapter D of Chapter 15
8 (relating to dissenters rights) is applicable, a copy of the
9 subchapter and of subsection (c).
10 (5) In order to make effective the plan of asset
11 transfer so adopted, it shall not be necessary to file any
12 articles or other documents in the Department of State.
13 (c) Dissenters rights in asset transfers.--
14 (1) If a shareholder of a transferring corporation that
15 adopts a plan of asset transfer objects to the plan and
16 complies with Subchapter D of Chapter 15, the shareholder
17 shall be entitled to the rights and remedies of dissenting
18 shareholders therein provided, if any.
19 (2) Paragraph (1) shall not apply to a sale pursuant to
20 an order of court having jurisdiction in the premises or a
21 sale [for money on terms requiring] pursuant to a plan of
22 asset transfer that requires that all or substantially all of
23 the net proceeds of sale be distributed to the shareholders
24 in accordance with their respective interests within one year
25 after the date of sale or to a liquidating trust.
26 * * *
27 § 1952. Proposal and adoption of plan of division.
28 (a) Preparation of plan.--A plan of division shall be
29 prepared, setting forth:
30 (1) The terms and conditions of the division, including
19990S0393B2277 - 54 -
1 the manner and basis of:
2 (i) The reclassification of the shares of the
3 surviving corporation, if there be one, and, if any of
4 the shares of the dividing corporation are not to be
5 converted solely into shares or other securities or
6 obligations of one or more of the resulting corporations,
7 the shares or other securities or obligations of any
8 other person, or cash, property or rights that the
9 holders of such shares are to receive in exchange for or
10 upon conversion of such shares, and the surrender of any
11 certificates evidencing them, which securities or
12 obligations, if any, of any other person or cash,
13 property or rights may be in addition to or in lieu of
14 shares or other securities or obligations of one or more
15 of the resulting corporations.
16 (ii) The disposition of the shares and other
17 securities or obligations, if any, of the new corporation
18 or corporations resulting from the division.
19 (2) A statement that the dividing corporation will, or
20 will not, survive the division.
21 (3) Any changes desired to be made in the articles of
22 the surviving corporation, if there be one, including a
23 restatement of the articles.
24 (4) The articles of incorporation required by subsection
25 (b).
26 (5) Any provisions desired providing special treatment
27 of shares held by any shareholder or group of shareholders as
28 authorized by, and subject to the provisions of, section 1906
29 (relating to special treatment of holders of shares of same
30 class or series).
19990S0393B2277 - 55 -
1 (6) Such other provisions as are deemed desirable.
2 [Any of the terms of the plan may be made dependent upon facts
3 ascertainable outside of the plan if the manner in which the
4 facts will operate upon the terms of the plan is set forth in
5 the plan.]
6 * * *
7 (g) [Action by] Rights of holders of indebtedness.--[Unless
8 otherwise provided by an indenture or other contract by which
9 the dividing corporation is bound, a plan of division shall not
10 require the approval of the holders of any debt securities or
11 other obligations of the dividing corporation or of any
12 representative of the holders, if the transfer of assets
13 effected by the division, if effected by means of a sale, lease,
14 exchange or other disposition, and any related distribution,
15 would not require the approval of the holders or representatives
16 thereof.] If any debt securities, notes or similar evidences of
17 indebtedness for money borrowed, whether secured or unsecured,
18 indentures or other contracts were issued, incurred or executed
19 by the dividing corporation before (the Legislative Reference
20 Bureau shall insert here the effective date of the amendments of
21 this section) and have not been amended subsequent to that date,
22 the liability of the dividing corporation thereunder shall not
23 be affected by the division nor shall the rights of the obligees
24 thereunder be impaired by the division, and each of the
25 resulting corporations may be proceeded against or substituted
26 in place of the dividing corporation as joint and several
27 obligors on such liability, regardless of any provision of the
28 plan of division apportioning the liabilities of the dividing
29 corporation.
30 * * *
19990S0393B2277 - 56 -
1 (i) Reference to outside facts.--Any of the terms of a plan
2 of division may be made dependent upon facts ascertainable
3 outside of the plan if the manner in which the facts will
4 operate upon the terms of the plan is set forth in the plan.
5 Such facts may include, without limitation, actions or events
6 within the control of or determinations made by the dividing
7 corporation or a representative of the dividing corporation.
8 § 1953. Division without shareholder approval.
9 (a) General rule.--Unless otherwise restricted by its bylaws
10 or required by section 1952(f) (relating to action by holders of
11 preferred or special shares), a plan of division that does not
12 alter the state of incorporation of a business corporation,
13 provide for special treatment nor amend in any respect the
14 provisions of its articles (except amendments which under
15 section 1914(c) (relating to adoption by board of directors) may
16 be made without shareholder action) shall not require the
17 approval of the shareholders of the corporation if:
18 (1) the dividing corporation has only one class of
19 shares outstanding and the shares and other securities, if
20 any, of each corporation resulting from the plan are
21 distributed pro rata to the shareholders of the dividing
22 corporation;
23 (2) the dividing corporation survives the division and
24 all the shares and other securities and obligations, if any,
25 of all new corporations resulting from the plan are owned
26 solely by the surviving corporation; or
27 (3) the [transfers] allocation of assets among the
28 resulting corporations effected by the division, if effected
29 by means of a sale, lease, exchange or other disposition,
30 would not require the approval of shareholders under section
19990S0393B2277 - 57 -
1 1932(b) (relating to shareholder approval required).
2 (b) Limitation.--A plan of division adopted by the board of
3 directors under this section without the approval of the
4 shareholders shall not, by itself, create or impair any rights
5 or obligations on the part of any person under section 2538
6 (relating to approval of transactions with interested
7 shareholders) or under Subchapters E (relating to control
8 transactions), F (relating to business combinations), G
9 (relating to control-share acquisitions), H (relating to
10 disgorgement by certain controlling shareholders following
11 attempts to acquire control), I (relating to severance
12 compensation for employees terminated following certain control-
13 share acquisitions) and J (relating to business combination
14 transactions - labor contracts) of Chapter 25, nor shall it
15 change the standard of care applicable to the directors under
16 Subchapter B of Chapter 17 (relating to fiduciary duty).
17 § 1955. Filing of articles of division.
18 (a) General rule.--The articles of division, and the
19 certificates or statement, if any, required by section 139
20 (relating to tax clearance of certain fundamental transactions)
21 shall be filed in the Department of State.
22 (b) Cross [reference] references.--See [section] sections
23 134 (relating to docketing statement) and 135 (relating to
24 requirements to be met by filed documents).
25 § 1957. Effect of division.
26 * * *
27 (b) Property rights; allocations of assets and
28 liabilities.--
29 (1) (i) All the property, real, personal and mixed, and
30 franchises of the dividing corporation, and all debts due
19990S0393B2277 - 58 -
1 on whatever account to it, including subscriptions for
2 shares and other choses in action belonging to it, shall
3 (except as otherwise provided in paragraph (2)), to the
4 extent [transfers] allocations of assets are contemplated
5 by the plan of division, be deemed without further action
6 to be [transferred] allocated to and vested in the
7 resulting corporations on such a manner and basis and
8 with such effect as is specified in the plan, or per
9 capita among the resulting corporations, as tenants in
10 common, if no specification is made in the plan, and the
11 title to any real estate, or interest therein, vested in
12 any of the corporations shall not revert or be in any way
13 impaired by reason of the 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 as each corporation may undertake or
18 incur in its own name but shall be liable for the
19 liabilities of the dividing corporation in the manner and
20 on the basis provided in subparagraphs (iv) and (v).
21 (iii) Liens upon the property of the dividing
22 corporation shall not be impaired by the division.
23 (iv) [One] To the extent allocations of liabilities
24 are contemplated by the plan of division, the liabilities
25 of the dividing corporation shall be deemed without
26 further action to be allocated to and become the
27 liabilities of the resulting corporations on such a
28 manner and basis and with such effect as is specified in
29 the plan; and one or more, but less than all, of the
30 resulting corporations shall be free of the liabilities
19990S0393B2277 - 59 -
1 of the dividing corporation to the extent, if any,
2 specified in the plan, if in either case:
3 (A) no fraud [of corporate creditors, or of] on
4 minority shareholders or shareholders without voting
5 rights or violation of law shall be effected thereby,
6 and [if applicable provisions of law are complied
7 with.]
8 (B) the plan does not constitute a fraudulent
9 transfer under 12 Pa.C.S. Ch. 51 (relating to
10 fraudulent transfers).
11 (v) If the conditions in subparagraph (iv) for
12 freeing one or more of the resulting corporations from
13 the liabilities of the dividing corporation, or for
14 allocating some or all of the liabilities of the dividing
15 corporation, are not satisfied, the liabilities of the
16 dividing corporation as to which those conditions are not
17 satisfied shall not be affected by the division nor shall
18 the rights of creditors [thereof or of any person dealing
19 with the corporation] thereunder be impaired by the
20 division and any claim existing or action or proceeding
21 pending by or against the corporation with respect to
22 those liabilities may be prosecuted to judgment as if the
23 division had not taken place, or the resulting
24 corporations may be proceeded against or substituted in
25 [its] place of the dividing corporation as joint and
26 several obligors on [such liability] those liabilities,
27 regardless of any provision of the plan of division
28 apportioning the liabilities of the dividing corporation.
29 (vi) The conditions in subparagraph (iv) for freeing
30 one or more of the resulting corporations from the
19990S0393B2277 - 60 -
1 liabilities of the dividing corporation and for
2 allocating some or all of the liabilities of the dividing
3 corporation shall be conclusively deemed to have been
4 satisfied if the plan of division has been approved by
5 the Department of Banking, the Insurance Department or
6 the Pennsylvania Public Utility Commission in a final
7 order issued after (the Legislative Reference Bureau
8 shall insert here the effective date of the amendments of
9 this section) that has become not subject to further
10 appeal.
11 (2) (i) The [transfer] allocation of any fee or
12 freehold interest or leasehold having a remaining term of
13 30 years or more in any tract or parcel of real property
14 situate in this Commonwealth owned by a dividing
15 corporation (including property owned by a foreign
16 business corporation dividing solely under the law of
17 another jurisdiction) to a new corporation resulting from
18 the division shall not be effective until one of the
19 following documents is filed in the office for the
20 recording of deeds of the county, or each of them, in
21 which the tract or parcel is situated:
22 (A) A deed, lease or other instrument of
23 confirmation describing the tract or parcel.
24 (B) A duly executed duplicate original copy of
25 the articles of division.
26 (C) A copy of the articles of division certified
27 by the Department of State.
28 (D) A declaration of acquisition setting forth
29 the value of real estate holdings in such county of
30 the corporation as an acquired company.
19990S0393B2277 - 61 -
1 (ii) The provisions of 75 Pa.C.S. § 1114 (relating
2 to transfer of vehicle by operation of law) shall not be
3 applicable to [a transfer] an allocation of ownership of
4 any motor vehicle, trailer or semitrailer [from a
5 dividing corporation] to a new corporation under this
6 section or under a similar law of any other jurisdiction
7 but any such [transfer] allocation shall be effective
8 only upon compliance with the requirements of 75 Pa.C.S.
9 § 1116 (relating to issuance of new certificate following
10 transfer).
11 (3) It shall not be necessary for a plan of division to
12 list each individual asset or liability of the dividing
13 corporation to be allocated to a new corporation so long as
14 those assets and liabilities are described in a reasonable
15 manner.
16 (4) Each new corporation shall hold any assets and
17 liabilities allocated to it as the successor to the dividing
18 corporation, and those assets and liabilities shall not be
19 deemed to have been assigned to the new corporation in any
20 manner, whether directly or indirectly or by operation of
21 law.
22 * * *
23 (h) Conflict of laws.--It is the intent of the General
24 Assembly that:
25 (1) The effect of a division of a domestic business
26 corporation shall be governed solely by the laws of this
27 Commonwealth and any other jurisdiction under the laws of
28 which any of the resulting corporations is incorporated.
29 (2) The effect of a division on the assets and
30 liabilities of the dividing corporation shall be governed
19990S0393B2277 - 62 -
1 solely by the laws of this Commonwealth and any other
2 jurisdiction under the laws of which any of the resulting
3 corporations is incorporated.
4 (3) The validity of any allocations of assets or
5 liabilities by a plan of division of a domestic business
6 corporation, regardless of whether or not any of the new
7 corporations is a foreign business corporation, shall be
8 governed solely by the laws of this Commonwealth.
9 (4) In addition to the express provisions of this
10 subsection, this subchapter shall otherwise generally be
11 granted the protection of full faith and credit under the
12 Constitution of the United States.
13 § 1962. Proposal and adoption of plan of conversion.
14 (a) Preparation of plan.--A plan of conversion shall be
15 prepared, setting forth:
16 (1) The terms and conditions of the conversion.
17 (2) A restatement of the articles of the resulting
18 corporation, which articles shall comply with the
19 requirements of this part relating to nonprofit corporations.
20 (3) Any provisions desired providing special treatment
21 of shares held by any shareholder or group of shareholders as
22 authorized by, and subject to the provisions of, section 1906
23 (relating to special treatment of holders of shares of same
24 class or series).
25 (4) Such other provisions as are deemed desirable.
26 [Any of the terms of the plan may be made dependent upon facts
27 ascertainable outside of the plan if the manner in which the
28 facts will operate upon the terms of the plan is set forth in
29 the plan.]
30 * * *
19990S0393B2277 - 63 -
1 (d) Reference to outside facts.--Any of the terms of a plan
2 of conversion may be made dependent upon facts ascertainable
3 outside of the plan if the manner in which the facts will
4 operate upon the terms of the plan is set forth in the plan.
5 Such facts may include, without limitation, actions or events
6 within the control of or determinations made by the corporation
7 or a representative of the corporation.
8 § 1972. Proposal of voluntary dissolution.
9 (a) General rule.--Any business corporation that has
10 commenced business may dissolve voluntarily in the manner
11 provided in this subchapter and wind up its affairs in the
12 manner provided in section 1975 (relating to predissolution
13 provision for liabilities) or Subchapter H (relating to
14 postdissolution provision for liabilities). Voluntary
15 dissolution shall be proposed by the adoption by the board of
16 directors of a resolution recommending that the corporation be
17 dissolved voluntarily. The resolution shall contain a statement
18 either that the dissolution shall proceed under section 1975 or
19 that the dissolution shall proceed under Subchapter H. The
20 resolution may set forth provisions for the distribution to
21 shareholders of any surplus remaining after paying or providing
22 for all liabilities of the corporation, including provisions for
23 special treatment of shares held by any shareholder or group of
24 shareholders as authorized by, and subject to the provisions of,
25 section 1906 (relating to special treatment of holders of shares
26 of same class or series).
27 (b) Submission to shareholders.--The board of directors
28 shall direct that the [question of] resolution recommending
29 dissolution be submitted to a vote of the shareholders of the
30 corporation entitled to vote thereon at a regular or special
19990S0393B2277 - 64 -
1 meeting of the shareholders.
2 * * *
3 § 1973. Notice of meeting of shareholders.
4 (a) General rule.--Written notice of the meeting of
5 shareholders that will consider the [advisability of voluntarily
6 dissolving a] resolution recommending dissolution of the
7 business corporation shall be given to each shareholder of
8 record entitled to vote thereon and the purpose shall be
9 included in the notice of the meeting.
10 * * *
11 § 1975. Predissolution provision for liabilities.
12 (a) Powers of board.--The board of directors of a business
13 corporation that has elected to proceed under this section shall
14 have full power to wind up and settle the affairs of [a
15 business] the corporation in accordance with this section prior
16 to filing articles of dissolution in accordance with section
17 1977 (relating to articles of dissolution).
18 (b) Notice to creditors and taxing authorities.--After the
19 approval by the shareholders of the [proposal] resolution
20 recommending that the corporation dissolve voluntarily, the
21 corporation shall immediately cause notice of the winding up
22 proceedings to be officially published and to be mailed by
23 certified or registered mail to each known creditor and claimant
24 and to each municipal corporation in which [its registered
25 office or principal] it has a place of business in this
26 Commonwealth [is located].
27 (c) Winding up and distribution.--The corporation shall, as
28 speedily as possible, proceed to collect all sums due it,
29 convert into cash all corporate assets the conversion of which
30 into cash is required to discharge its liabilities and, out of
19990S0393B2277 - 65 -
1 the assets of the corporation, discharge or make adequate
2 provision for the discharge of all liabilities of the
3 corporation, according to their respective priorities. Any
4 surplus remaining after paying or providing for all liabilities
5 of the corporation shall be distributed to the shareholders
6 according to their respective rights and preferences. See
7 section 1972(a) (relating to proposal of voluntary dissolution).
8 § 1976. Judicial supervision of proceedings.
9 A business corporation that has elected to proceed under
10 section 1975 (relating to predissolution provision for
11 liabilities), at any time during the winding up proceedings, may
12 apply to the court to have the proceedings continued under the
13 supervision of the court and thereafter the proceedings shall
14 continue under the supervision of the court as provided in
15 Subchapter G (relating to involuntary liquidation and
16 dissolution).
17 § 1977. Articles of dissolution.
18 (a) General rule.--Articles of dissolution and the
19 certificates or statement required by section 139 (relating to
20 tax clearance of certain fundamental transactions) shall be
21 filed in the Department of State when:
22 (1) all liabilities of the business corporation have
23 been discharged, or adequate provision has been made
24 therefor, in accordance with section 1975 (relating to
25 predissolution provision for liabilities), and all of the
26 remaining assets of the corporation have been distributed as
27 provided in section 1975 (or in case its assets are not
28 sufficient to discharge its liabilities, when all the assets
29 have been fairly and equitably applied, as far as they will
30 go, to the payment of such liabilities); or
19990S0393B2277 - 66 -
1 (2) an election to proceed under Subchapter H (relating
2 to postdissolution provision for liabilities) has been made.
3 [See section 134 (relating to docketing statement).]
4 (b) Contents of articles.--The articles of dissolution shall
5 be executed by the corporation and shall set forth:
6 * * *
7 (5) A statement that:
8 (i) [that] all liabilities of the corporation have
9 been discharged or that adequate provision has been made
10 therefor; [or]
11 (ii) [that] the assets of the corporation are not
12 sufficient to discharge its liabilities, and that all the
13 assets of the corporation have been fairly and equitably
14 applied, as far as they will go, to the payment of such
15 liabilities[. An election by]; or
16 (iii) the corporation has elected to proceed under
17 Subchapter H [shall constitute the making of adequate
18 provision for the liabilities of the corporation,
19 including any judgment or decree that may be obtained
20 against the corporation in any pending action or
21 proceeding].
22 * * *
23 (7) [A] In the case of a corporation that has not
24 elected to proceed under Subchapter H, a statement that no
25 actions or proceedings are pending against the corporation in
26 any court, or that adequate provision has been made for the
27 satisfaction of any judgment or decree that may be obtained
28 against the corporation in each pending action or proceeding.
29 (8) [A] In the case of a corporation that has not
30 elected to proceed under Subchapter H, a statement that
19990S0393B2277 - 67 -
1 notice of the winding-up proceedings of the corporation was
2 mailed by certified or registered mail to each known creditor
3 and claimant and to each municipal corporation in which the
4 [registered office or principal place of business of the]
5 corporation has a place of business in this Commonwealth [is
6 located].
7 * * *
8 (d) Cross references.--See sections 134 (relating to
9 docketing statement) and 135 (relating to requirements to be met
10 by filed documents).
11 § 1978. Winding up of corporation after dissolution.
12 * * *
13 (b) Standard of care of directors and officers.--The
14 dissolution of the corporation shall not subject its directors
15 or officers to standards of conduct different from those
16 prescribed by or pursuant to Chapter 17 (relating to officers,
17 directors and shareholders). Directors of a dissolved
18 corporation who have complied with section 1975 (relating to
19 predissolution provision for liabilities) or Subchapter H
20 (relating to postdissolution provision for liabilities) shall
21 not be personally liable to the creditors of the dissolved
22 corporation.
23 § 1979. Survival of remedies and rights after dissolution.
24 (a) General rule.--The dissolution of a business
25 corporation, either under this subchapter or under Subchapter G
26 (relating to involuntary liquidation and dissolution) or by
27 expiration of its period of duration or otherwise, shall not
28 eliminate nor impair any remedy available to or against the
29 corporation or its directors, officers or shareholders for any
30 right or claim existing, or liability incurred, prior to the
19990S0393B2277 - 68 -
1 dissolution, if an action or proceeding thereon is brought on
2 behalf of:
3 (1) the corporation within the time otherwise limited by
4 law; or
5 (2) any other person before or within two years after
6 the date of the dissolution or within the time otherwise
7 limited by this subpart or other provision of law, whichever
8 is less. See sections 1987 (relating to proof of claims),
9 1993 (relating to acceptance or rejection of matured claims)
10 and 1994 (relating to disposition of unmatured claims).
11 [The actions or proceedings may be prosecuted against and
12 defended by the corporation in its corporate name.]
13 * * *
14 (e) Conduct of actions.--An action or proceeding may be
15 prosecuted against and defended by a dissolved corporation in
16 its corporate name.
17 § 1980. Dissolution by domestication.
18 Whenever a domestic business corporation has domesticated
19 itself under the laws of another jurisdiction by action similar
20 to that provided by section 4161 (relating to domestication) and
21 has authorized that action by the vote required by this
22 subchapter for the approval of a proposal that the corporation
23 dissolve voluntarily, the corporation may surrender its charter
24 under the laws of this Commonwealth by filing in the Department
25 of State articles of dissolution under this subchapter
26 containing the statement specified by section [1977(a)(1)]
27 1977(b)(1) through (4) (relating to [preparation of articles).]
28 articles of dissolution). If the corporation as domesticated in
29 the other jurisdiction qualifies to do business in this
30 Commonwealth either prior to or simultaneously with the filing
19990S0393B2277 - 69 -
1 of the articles of dissolution under this section, the
2 corporation shall not be required to file with the articles 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 § 1989. Articles of involuntary dissolution.
7 (a) General rule.--In a proceeding under this subchapter,
8 the court shall enter an order dissolving the business
9 corporation when the costs and expenses of the proceeding and
10 all liabilities of the corporation have been discharged, and all
11 of its remaining assets have been distributed to its
12 shareholders or, in case its assets are not sufficient to
13 discharge such costs, expenses and liabilities, when all the
14 assets have been applied, as far as they will go, to the payment
15 of such costs, expenses and liabilities. See section 139(b)
16 (relating to tax clearance in judicial proceedings).
17 (b) Filing.--After entry of an order of dissolution, the
18 office of the clerk of the court of common pleas shall prepare
19 and execute articles of dissolution substantially in the form
20 provided by section 1977 (relating to articles of dissolution),
21 attach thereto a certified copy of the order and transmit the
22 articles and attached order to the Department of State. [A
23 certificate or statement provided for by section 139 (relating
24 to tax clearance of certain fundamental transactions) shall not
25 be required, and the] The department shall not charge a fee in
26 connection with the filing of articles of dissolution under this
27 section. See [section] sections 134 (relating to docketing
28 statement) and 135 (relating to requirements to be met by filed
29 documents).
30 * * *
19990S0393B2277 - 70 -
1 § 1991.1. Authority of board of directors.
2 (a) General rule.--The board of directors of a business
3 corporation that has elected to proceed under this subchapter
4 shall have full power to wind up and settle the affairs of the
5 corporation in accordance with this subchapter both prior to and
6 after the filing of articles of dissolution in accordance with
7 section 1977 (relating to articles of dissolution).
8 (b) Winding up.--The corporation shall, as speedily as
9 possible, proceed to comply with the requirements of this
10 subchapter while simultaneously collecting all sums due it and
11 converting into cash all corporate assets, the conversion of
12 which into cash is required to make adequate provision for its
13 liabilities.
14 § 1992. Notice to claimants.
15 * * *
16 (c) Publication and service of notices.--
17 (1) The notices required by this section shall be
18 officially published at least once a week for two consecutive
19 weeks and, in the case of a corporation having $10,000,000 or
20 more in total assets at the time of its dissolution, at least
21 once in all editions of a daily newspaper with a national
22 circulation.
23 (2) Concurrently with or preceding the publication, the
24 corporation or successor entity shall send a copy of the
25 notice by certified or registered mail, return receipt
26 requested, to each:
27 (i) known creditor or claimant;
28 (ii) holder of a claim described in subsection (b);
29 and
30 (iii) municipal corporation in which [the registered
19990S0393B2277 - 71 -
1 office or principal] a place of business of the
2 corporation in this Commonwealth was located at the time
3 of filing the articles of dissolution in the department.
4 * * *
5 § 1997. Payments and distributions.
6 * * *
7 (b) Disposition.--The claims and liabilities shall be paid
8 in full and any provision for payment shall be made in full if
9 there are sufficient assets. If there are insufficient assets,
10 the claims and liabilities shall be paid or provided for in
11 order of their priority, and, among claims of equal priority,
12 ratably to the extent of funds legally available therefor. Any
13 remaining assets shall be distributed to the shareholders of the
14 corporation according to their respective rights and
15 preferences, except that the distribution shall not be made less
16 than 60 days after the last notice of rejection, if any, was
17 given under section 1993 (relating to acceptance or rejection of
18 matured claims). See section 1972(a) (relating to proposal of
19 voluntary dissolution).
20 * * *
21 [(d) Liability of directors.--Directors of a dissolved
22 corporation or governing persons of a successor entity that has
23 complied with this section shall not be personally liable to the
24 claimants of the dissolved corporation.]
25 § 2105. Termination of nonstock corporation status.
26 * * *
27 (c) Mutual insurance companies.--With respect to the
28 termination of the status of a mutual insurance company as a
29 nonstock corporation, see section 103 (relating to subordination
30 of title to regulatory laws) and [the act of December 10, 1970
19990S0393B2277 - 72 -
1 (P.L.884, No.279), referred to as the Mutual Insurance Company
2 Conversion Law.] Article VIII-A of the act of May 17, 1921
3 (P.L.682, No.284), known as The Insurance Company Law of 1921.
4 § 2524. Consent of shareholders in lieu of meeting.
5 (a) General rule.--An action may be authorized by the
6 shareholders of a registered corporation without a meeting by
7 less than unanimous [written] consent only if permitted by its
8 articles.
9 (b) Effectiveness of action.--An action authorized by the
10 shareholders of a registered corporation without a meeting by
11 less than unanimous [written] consent may become effective
12 immediately upon its authorization, but prompt notice of the
13 action shall be given to those shareholders entitled to vote
14 thereon who have not consented.
15 § 2526. Voting rights of directors.
16 Every director of a registered corporation described in
17 section 2502(1) (relating to registered corporation status)
18 shall be entitled to one vote, except as otherwise provided in:
19 (1) the articles; or
20 (2) a bylaw adopted by the shareholders either:
21 (i) on or before (the Legislative Reference Bureau
22 shall insert here the effective date of this section); or
23 (ii) at a time when the corporation was not a
24 registered corporation described in section 2502(1).
25 § 2527. Authority of board of directors.
26 The authority, powers and functions of the board of directors
27 of a registered corporation described in section 2502(1)
28 (relating to registered corporation status) may not be varied,
29 and a committee of the board of such a corporation may not be
30 established, by a bylaw adopted by the shareholders, unless the
19990S0393B2277 - 73 -
1 bylaw has been adopted:
2 (1) with the approval of the board of directors;
3 (2) on or before (the Legislative Reference Bureau shall
4 insert here the effective date of this section); or
5 (3) at a time when the corporation was not a registered
6 corporation described in section 2502(1).
7 § 2902. Definitions and index of definitions.
8 (a) Definitions.--The following words and phrases when used
9 in this chapter shall have the meanings given to them in this
10 section unless the context clearly indicates otherwise:
11 "Disqualified person." [A] The term "disqualified person" as
12 used in this chapter means a licensed person who for any reason
13 is or becomes legally disqualified (temporarily or permanently)
14 to render the same professional services that the particular
15 professional corporation of which he is an officer, director,
16 shareholder or employee is or was rendering.
17 ["Licensed person." Any natural person who is duly licensed
18 or admitted to practice his profession by a court, department,
19 board, commission or other agency of this Commonwealth or
20 another jurisdiction to render a professional service that is or
21 will be rendered by the professional corporation of which he is,
22 or intends to become, an officer, director, shareholder,
23 employee or agent.
24 "Profession." Includes the performance of any type of
25 personal service to the public that requires as a condition
26 precedent to the performance of the service the obtaining of a
27 license or admission to practice or other legal authorization,
28 including all personal services that prior to the enactment of
29 the act of July 9, 1970 (P.L.461, No.160), known as the
30 Professional Corporation Law, could not lawfully be rendered by
19990S0393B2277 - 74 -
1 means of a corporation. By way of example, and without limiting
2 the generality of the foregoing, the term includes for the
3 purposes of this chapter personal services rendered as an
4 architect, chiropractor, dentist, funeral director, osteopath,
5 podiatrist, physician, professional engineer, veterinarian,
6 certified public accountant or surgeon and, except as otherwise
7 prescribed by general rules, an attorney at law. Except as
8 otherwise expressly provided by law, the definition specified in
9 this paragraph shall be applicable to this chapter only and
10 shall not affect the interpretation of any other statute or any
11 local zoning ordinance or other official document heretofore or
12 hereafter enacted or promulgated.
13 "Professional services." Any type of services that may be
14 rendered by the member of any profession within the purview of
15 his profession.]
16 (b) Index of other definitions.--Other definitions applying
17 to this chapter and the sections in which they appear are:
18 "Licensed person." Section 102 (relating to definitions).
19 "Profession." Section 102.
20 "Professional services." Section 102.
21 § 2904. Election of an existing business corporation to become
22 a professional corporation.
23 * * *
24 (b) Procedure.--The amendment shall be adopted in accordance
25 with the requirements of Subchapter B of Chapter 19 (relating to
26 amendment of articles) [except that the amendment must be
27 approved by the unanimous consent of all shareholders of the
28 corporation regardless of any limitations on voting rights
29 stated in the articles or bylaws]. If any shareholder of a
30 business corporation that proposes to amend its articles to
19990S0393B2277 - 75 -
1 become a professional corporation objects to that amendment and
2 complies with the provisions of Subchapter D of Chapter 15
3 (relating to dissenters rights), the shareholder shall be
4 entitled to the rights and remedies of dissenting shareholders
5 therein provided, if any.
6 § 2922. Stated purposes.
7 * * *
8 (b) Additional powers.--A professional corporation may be [a
9 partner in or a shareholder] an equity owner of a partnership
10 [or], limited liability company, corporation or other
11 association engaged in the business of rendering the
12 professional service or services for which the professional
13 corporation was incorporated.
14 § 2923. Issuance and retention of shares.
15 (a) General rule.--Except as otherwise provided by a
16 statute, rule or regulation applicable to a particular
17 profession, all of the ultimate beneficial owners of shares in a
18 professional corporation [may be beneficially owned, directly or
19 indirectly, only by one or more] shall be licensed persons and
20 any issuance or transfer of shares in violation of this
21 restriction shall be void. A shareholder of a professional
22 corporation shall not enter into a voting trust, proxy or any
23 other arrangement vesting another person (other than [another
24 licensed] a person who is qualified to be a direct or indirect
25 shareholder of the same corporation) with the authority to
26 exercise the voting power of any or all of his shares, and any
27 such purported voting trust, proxy or other arrangement shall be
28 void.
29 (b) Ownership by estate.--Unless a lesser period of time is
30 provided in a bylaw [of the corporation] adopted by the
19990S0393B2277 - 76 -
1 shareholders or in a written agreement among the shareholders of
2 the corporation, the estate of a deceased shareholder may
3 continue to hold shares of the professional corporation for a
4 reasonable period of administration of the estate, but the
5 personal representative of the estate shall not by reason of the
6 retention of shares be authorized to participate in any
7 decisions concerning the rendering of professional service.
8 * * *
9 § 3133. Notice of meetings of members of mutual insurance
10 companies.
11 (a) General rule.--Unless otherwise restricted in the
12 bylaws, persons authorized or required to give notice of an
13 annual meeting of members of a mutual insurance company for the
14 election of directors or of a meeting of members of a mutual
15 insurance company called for the purpose of considering [an]
16 amendment of the articles or bylaws, or both, of the corporation
17 may, in lieu of any written notice of meeting of members
18 required to be given by this subpart, give notice of such
19 meeting by causing notice of such meeting to be officially
20 published. Such notice shall be published each week for at
21 least:
22 (1) Three successive weeks, in the case of an annual
23 meeting.
24 (2) Four successive weeks, in the case of a meeting to
25 consider [an] amendment of the articles or bylaws, or both.
26 * * *
27 § 4123. Requirements for foreign corporation names.
28 * * *
29 (b) Exceptions.--
30 (1) The provisions of section 1303(b) (relating to
19990S0393B2277 - 77 -
1 duplicate use of names) shall not prevent the issuance of a
2 certificate of authority to a foreign business corporation
3 setting forth a name that is [confusingly similar to] not
4 distinguishable upon the records of the department from the
5 name of any other domestic or foreign corporation for profit
6 or corporation not-for-profit, [or of any domestic or foreign
7 limited partnership that has filed a certificate or qualified
8 under Chapter 85 (relating to limited partnerships) or
9 corresponding provisions of prior law,] or of any corporation
10 or other association then registered under 54 Pa.C.S. Ch. 5
11 (relating to corporate and other association names) or to any
12 name reserved or registered as provided in this part, if the
13 foreign business corporation applying for a certificate of
14 authority files in the department [one of the following:
15 (i) A] a resolution of its board of directors
16 adopting a fictitious name for use in transacting
17 business in this Commonwealth, which fictitious name is
18 [not confusingly similar to] distinguishable upon the
19 records of the department from the name of the other
20 corporation or other association or [to] from any name
21 reserved or registered as provided in this part and that
22 is otherwise available for use by a domestic business
23 corporation.
24 [(ii) The written consent of the other corporation
25 or other association or holder of a reserved or
26 registered name to use the same or confusingly similar
27 name and one or more words are added to make the name
28 applied for distinguishable from the other name.]
29 * * *
30 § 4126. Amended certificate of authority.
19990S0393B2277 - 78 -
1 (a) General rule.--After receiving a certificate of
2 authority, a qualified foreign business corporation may, subject
3 to the provisions of this subchapter, change [the name under
4 which it is authorized to transact business in this
5 Commonwealth] or correct any of the information set forth in its
6 application for a certificate of authority or previous filings
7 under this section by filing in the Department of State an
8 application for an amended certificate of authority. The
9 application shall be executed by the corporation and shall
10 state:
11 (1) The name under which the applicant corporation
12 currently holds a certificate of authority to do business in
13 this Commonwealth.
14 [(2) The name of the jurisdiction under the laws of
15 which the corporation is incorporated.
16 (3) The address, including street and number, if any, of
17 its principal office under the laws of the jurisdiction in
18 which it is incorporated.
19 (4)] (2) Subject to section 109 (relating to name of
20 commercial registered office provider in lieu of registered
21 address), the address, including street and number, if any,
22 of its registered office in this Commonwealth.[, which may
23 constitute a change in the address of its registered office.
24 (5) The new name of the corporation and]
25 (3) The information to be changed or corrected.
26 (4) If the application reflects a change in the name of
27 the corporation, the application shall include a statement
28 that either:
29 (i) the change of name reflects a change effected in
30 the jurisdiction of incorporation; or
19990S0393B2277 - 79 -
1 (ii) documents complying with section 4123(b)
2 (relating to exception; name) accompany the application.
3 (b) Issuance of amended certificate of authority.--Upon the
4 filing of the application, the applicant corporation shall be
5 deemed to hold an amended certificate of authority.
6 (c) Cross [reference] references.--See [section] sections
7 134 (relating to docketing statement) and 135 (relating to
8 requirements to be met by filed documents).
9 § 4146. Provisions applicable to all foreign corporations.
10 The following provisions of this subpart shall, except as
11 otherwise provided in this section, be applicable to every
12 foreign corporation for profit, whether or not required to
13 procure a certificate of authority under this chapter:
14 Section 1503 (relating to defense of ultra vires), as to
15 contracts and conveyances [made in] governed by the laws of
16 this Commonwealth and conveyances affecting real property
17 situated in this Commonwealth.
18 Section 1506 (relating to form of execution of
19 instruments), as to instruments or other documents [made or
20 to be performed in] governed by the laws of this Commonwealth
21 or affecting real property situated in this Commonwealth.
22 Section 1510 (relating to certain specifically authorized
23 debt terms), as to obligations (as defined in the section)
24 [executed or effected in] governed by the laws of this
25 Commonwealth or affecting real property situated in this
26 Commonwealth.
27 * * *
28 § 4161. Domestication.
29 * * *
30 (b) Articles of domestication.--The articles of
19990S0393B2277 - 80 -
1 domestication shall be executed by the corporation and shall set
2 forth in the English language:
3 (1) The name of the corporation. If the name is in a
4 foreign language, it shall be set forth in Roman letters or
5 characters or Arabic or Roman numerals. If the name is one
6 that is rendered unavailable by any provision of section
7 1303(b) or (c) (relating to corporate name), the corporation
8 shall adopt, in accordance with any procedures for changing
9 the name of the corporation that are applicable prior to the
10 domestication of the corporation, and shall set forth in the
11 articles of domestication an available name.
12 * * *
13 (c) Cross [reference] references.--See [section] sections
14 134 (relating to docketing statement) and 135 (relating to
15 requirements to be met by filed documents).
16 § 4162. Effect of domestication.
17 (a) General rule.--As a domestic business corporation, the
18 domesticated corporation shall no longer be a foreign business
19 corporation for the purposes of this subpart and shall [have],
20 instead, be a domestic business corporation with all the powers
21 and privileges and [be subject to] all the duties and
22 limitations granted and imposed upon domestic business
23 corporations. [The property, franchises, debts, liens, estates,
24 taxes, penalties and public accounts due the Commonwealth shall
25 continue to be vested in and imposed upon the corporation to the
26 same extent as if it were the successor by merger of the
27 domesticating corporation with and into a domestic business
28 corporation under Subchapter C of Chapter 19 (relating to
29 merger, consolidation, share exchanges and sale of assets).] In
30 all other respects, the domesticated corporation shall be deemed
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1 to be the same corporation as it was prior to the domestication
2 without any change in or effect on its existence. Without
3 limiting the generality of the previous sentence, the
4 domestication shall not be deemed to have affected in any way:
5 (1) the right and title of the corporation in and to its
6 assets, property, franchises, estates and choses in action;
7 (2) the liability of the corporation for its debts,
8 obligations, penalties and public accounts due the
9 Commonwealth;
10 (3) any liens or other encumbrances on the property or
11 assets of the corporation; or
12 (4) any contract, license or other agreement to which
13 the corporation is a party or under which it has any rights
14 or obligations.
15 (b) Reclassification of shares.--The shares of the
16 domesticated corporation shall be unaffected by the
17 domestication except to the extent, if any, reclassified in the
18 articles of domestication.
19 § 5303. Corporate name.
20 * * *
21 (b) Duplicate use of names.--The corporate name shall [not
22 be the same as or confusingly similar to] be distinguishable
23 upon the records of the Department of State from:
24 (1) The name of any other domestic corporation for
25 profit or not-for-profit which is either in existence or for
26 which articles of incorporation have been filed but have not
27 yet become effective, or of any foreign corporation for
28 profit or not-for-profit which is either authorized to do
29 business in this Commonwealth or for which an application for
30 a certificate of authority has been filed but which has not
19990S0393B2277 - 82 -
1 yet become effective, [or of any domestic or foreign limited
2 partnership that has filed in the Department of State a
3 certificate or qualified under Chapter 85 (relating to
4 limited partnerships) or under corresponding provisions of
5 prior law,] or the name of any association registered at any
6 time under 54 Pa.C.S. Ch. 5 (relating to corporate and other
7 association names), unless[:
8 (i) where the name is the same or confusingly
9 similar,] the other association:
10 [(A)] (i) has stated that it is about to change
11 its name, or to cease to do business, or is being
12 wound up, or is a foreign association about to
13 withdraw from doing business in this Commonwealth,
14 and the statement and [the] a written consent [of the
15 other association] to the adoption of the name
16 executed by the other association is filed in the
17 Department of State;
18 [(B)] (ii) has filed with the Department of
19 Revenue a certificate of out of existence, or has
20 failed for a period of three successive years to file
21 with the Department of Revenue a report or return
22 required by law and the fact of such failure has been
23 certified by the Department of Revenue to the
24 Department of State;
25 [(C)] (iii) has abandoned its name under the
26 laws of its jurisdiction of incorporation, by
27 amendment, merger, consolidation, division,
28 expiration, dissolution or otherwise, without its
29 name being adopted by a successor in a merger,
30 consolidation, division or otherwise, and an official
19990S0393B2277 - 83 -
1 record of that fact, certified as provided by 42
2 Pa.C.S. § 5328 (relating to proof of official
3 records), is presented by any person to the
4 department; or
5 [(D)] (iv) has had the registration of its name
6 under 54 Pa.C.S. Ch. 5 terminated and, if the
7 termination was effected by operation of 54 Pa.C.S. §
8 504 (relating to effect of failure to make decennial
9 filings), the application for the use of the name is
10 accompanied by a verified statement stating that at
11 least 30 days' written notice of intention to
12 appropriate the name was given to the delinquent
13 association at its [registered office] last known
14 place of business and that, after diligent search by
15 the affiant, the affiant believes the association to
16 be out of existence.[; or
17 (ii) where the name is confusingly similar, the
18 consent of the other association to the adoption of the
19 name is filed in the Department of State.
20 The consent of the association shall be evidenced by a
21 statement to that effect executed by the association.]
22 * * *
23 (e) Remedies for violation of section.--The use of a name in
24 violation of this section shall not vitiate or otherwise affect
25 the corporate existence but any court having jurisdiction may
26 enjoin the corporation from using or continuing to use a name in
27 violation of this section, upon the application of:
28 (1) the Attorney General, acting on his own motion or at
29 the instance of any administrative department, board or
30 commission of this Commonwealth; or
19990S0393B2277 - 84 -
1 (2) any person adversely affected.[;
2 may enjoin the corporation from using or continuing to use a
3 name in violation of this section.]
4 (f) Cross references.--See sections 135(e) (relating to
5 distinguishable names) and 5106(b)(2) (relating to limited
6 uniform application of subpart).
7 § 5304. Required name changes by senior corporations.
8 (a) Adoption of new name upon reactivation.--Where a
9 corporate name is made available on the basis that the
10 corporation or [nonprofit unincorporated] other association
11 [which] that formerly registered [such] the name has failed to
12 file with the Department of Revenue [or in the Department of
13 State] a report or a return required by law or where the
14 corporation or [nonprofit unincorporated] other association has
15 filed with the Department of Revenue a certificate of out of
16 existence, [such] the corporation or other association shall
17 cease to have by virtue of its prior registration any right to
18 the use of [such] the name[, and such]. The corporation or other
19 association, upon withdrawal of the certificate of out of
20 existence or upon the removal of its delinquency in the filing
21 of the required reports or returns, shall make inquiry with the
22 Department of State with regard to the availability of its
23 name[,] and, if [such] the name has been made available to
24 another domestic or foreign corporation for profit or not-for-
25 profit or other association by virtue of [the above] these
26 conditions, shall adopt a new name in accordance with law before
27 resuming its activities.
28 (b) Enforcement of undertaking to release name.--If a
29 corporation has used a name [the same as, or deceptively similar
30 to,] that is not distinguishable upon the records of the
19990S0393B2277 - 85 -
1 Department of State from the name of another corporation or
2 [nonprofit unincorporated] other association as permitted by
3 section 5303(b)(1)[(i)] (relating to duplicate use of names) and
4 the other corporation or [nonprofit unincorporated] other
5 association continues to use its name in this Commonwealth and
6 does not change its name, cease to do business, be wound up, or
7 withdraw as it proposed to do in its consent or change its name
8 as required by subsection (a), any court [of competent] having
9 jurisdiction may enjoin the other corporation or other
10 association from continuing to use its name or a name that is
11 not distinguishable therefrom, upon the application of:
12 (1) the Attorney General, acting on his own motion or at
13 the instance of any administrative department, board or
14 commission of this Commonwealth[,]; or
15 (2) upon the application of any person adversely
16 affected[, may enjoin the other corporation or association
17 from continuing to use its name or a name deceptively similar
18 thereto].
19 § 5311. Filing of statement of summary of record by certain
20 corporations.
21 (a) General rule.--Where any of the [valid] charter
22 documents of a nonprofit corporation are not on file in the
23 Department of State or there is an error in any such document as
24 transferred to the department pursuant to section 140 (relating
25 to custody and management of orphan corporate and business
26 records), and the corporation desires to file any document in
27 the department under any other provision of this [article]
28 subpart or the corporation desires to secure from the department
29 any certificate to the effect that the corporation is a
30 corporation duly incorporated and existing under the laws of
19990S0393B2277 - 86 -
1 this Commonwealth or a certified copy of the articles of the
2 corporation or the corporation desires to correct the text of
3 its charter documents as on file in the department, the
4 corporation shall file in the department a statement of summary
5 of record which shall be executed by the corporation and shall
6 set forth:
7 (1) The name of the corporation and, subject to section
8 109 (relating to name of commercial registered office
9 provides in lieu of registered address), the location,
10 including street and number, if any, of its registered
11 office.
12 (2) The statute by or under which the corporation was
13 incorporated.
14 (3) The name under which, the manner in which and the
15 date on which the corporation was originally incorporated,
16 including the date when and the place where the original
17 articles were recorded.
18 (4) The place or places, including volume and page
19 numbers or their equivalent, where the documents
20 [constituting the currently effective articles are] that are
21 not on file in the department or that require correction in
22 the records of the department were originally filed or
23 recorded, the date or dates of each [such] filing or
24 recording and the correct text of [such currently effective
25 articles] the documents. The information specified in this
26 paragraph may be omitted in a statement of summary of record
27 that is delivered to the department contemporaneously with
28 amended and restated articles of the corporation filed under
29 this subpart.
30 [(5) Each name by which the corporation was known, if
19990S0393B2277 - 87 -
1 any, other than its original name and its current name, and
2 the date or dates on which each change of name of the
3 corporation became effective.
4 A corporation shall be required to make only one filing under
5 this subsection.]
6 (b) Validation of prior defects in incorporation.--Upon the
7 filing of a statement by a corporation under this section or the
8 transfer to the department of the records relating to a
9 corporation pursuant to section 140, the corporation [named in
10 the statement] shall be deemed to be a validly subsisting
11 corporation to the same extent as if it had been duly
12 incorporated and was existing under this subpart and the
13 department shall so certify regardless of any absence of or
14 defect in the prior proceedings relating to incorporation.
15 (c) Cross [reference] references.--See [section] sections
16 134 (relating to docketing statement), 135 (relating to
17 requirements to be met by filed documents) and 5106(b)(2)
18 (relating to uniform application of subpart).
19 § 5503. Defense of ultra vires.
20 (a) General rule.--[No] A limitation upon the business,
21 [purpose or] purposes[,] or powers of a nonprofit corporation,
22 expressed or implied in its articles or bylaws or implied by
23 law, shall not be asserted in order to defend any action at law
24 or in equity between the corporation and a third person, or
25 between a member and a third person, involving any contract to
26 which the corporation is a party or any right of property or any
27 alleged liability of [whatsoever] whatever nature[; but such],
28 but the limitation may be asserted:
29 (1) In an action by a member against the corporation to
30 enjoin the doing of unauthorized acts or the transaction or
19990S0393B2277 - 88 -
1 continuation of unauthorized business. If the unauthorized
2 acts or business sought to be enjoined are being transacted
3 pursuant to any contract to which the corporation is a party,
4 the court may, if all of the parties to the contract are
5 parties to the action[,] and if it deems [such action] the
6 result to be equitable, set aside and enjoin the performance
7 of [such] the contract, and in so doing shall allow to the
8 corporation, or to the other parties to the contract, as the
9 case may be, such compensation as may be [equitable]
10 appropriate for the loss or damage sustained by any of them
11 from the action of the court in setting aside and enjoining
12 the performance of [such] the contract, but anticipated
13 profits to be derived from the performance of the contract
14 shall not be awarded by the court as a loss or damage
15 sustained.
16 (2) In any action by or in the right of the corporation
17 to procure a judgment in its favor against an incumbent or
18 former officer, director or member of an other body of the
19 corporation for loss or damage due to his unauthorized acts.
20 (3) In a proceeding by the Commonwealth under section
21 503 (relating to actions to revoke corporate franchises)[,]
22 or in a proceeding by the Commonwealth to enjoin the
23 corporation from the doing of unauthorized or unlawful
24 business.
25 (b) Conveyances of property by or to a corporation.--[No] A
26 conveyance or transfer by or to a nonprofit corporation of
27 property, real or personal, of any kind or description, shall
28 not be invalid or fail because in making [such] the conveyance
29 or transfer, or in acquiring the property, real or personal,
30 [the board of directors or other body or any of the officers]
19990S0393B2277 - 89 -
1 any representative of the corporation acting within the scope of
2 the actual or apparent authority given to [them] him by the
3 [board of directors or other body, have] corporation has
4 exceeded any of the purposes or powers of the corporation.
5 (c) [Nonqualified foreign corporations.--The provisions of
6 this section shall extend to contracts and conveyances made by
7 nonqualified foreign corporations in this Commonwealth and to
8 conveyances by nonqualified foreign corporations of real
9 property situated in this Commonwealth.] Cross reference.--See
10 section 6146 (relating to provisions applicable to all foreign
11 corporations).
12 § 5505. Persons bound by bylaws.
13 Except as otherwise provided by section 5713 (relating to
14 personal liability of directors) or any similar provision of
15 law, bylaws of a nonprofit corporation shall operate only as
16 regulations among the members, directors, members of an other
17 body and officers of the corporation, and shall not affect
18 contracts or other dealings with other persons, unless those
19 persons have actual knowledge of the bylaws.
20 § 5506. Form of execution of instruments.
21 (a) General rule.--Any form of execution provided in the
22 articles or bylaws to the contrary notwithstanding, any note,
23 mortgage, evidence of indebtedness, contract[,] or other
24 [instrument in writing] document, or any assignment or
25 endorsement thereof, executed or entered into between any
26 nonprofit corporation and any other person, when signed by one
27 or more officers or agents having actual or apparent authority
28 to sign it, or by the president or vice-president and secretary
29 or assistant secretary or treasurer or assistant treasurer of
30 [such] the corporation, shall be held to have been properly
19990S0393B2277 - 90 -
1 executed for and in behalf of the corporation.
2 (b) Seal unnecessary.--[Except as otherwise required by
3 statute, the] The affixation of the corporate seal shall not be
4 necessary to the valid execution, assignment or endorsement by a
5 corporation of any instrument [in writing] or other document.
6 (c) [Nonqualified foreign corporations.--The provisions of
7 this section shall extend to instruments in writing made or to
8 be performed in this Commonwealth by a nonqualified foreign
9 corporation and to instruments executed by nonqualified foreign
10 corporations affecting real property situated in this
11 Commonwealth.] Cross reference.--See section 6146 (relating to
12 provisions applicable to all foreign corporations).
13 § 5508. Corporate records; inspection by members.
14 (a) Required records.--Every nonprofit corporation shall
15 keep [an original or duplicate record] minutes of the
16 proceedings of the members [and], the directors[,] and [of] any
17 other body [exercising powers or performing duties which under
18 this article may be exercised or performed by such other body,
19 the original or a copy of its bylaws, including all amendments
20 thereto to date, certified by the secretary of the corporation],
21 and [an original or] a [duplicate] membership register, giving
22 the names [of the members, and showing their respective] and
23 addresses of all members and the class and other details of the
24 membership of each. [Every such] The corporation shall also keep
25 appropriate, complete and accurate books or records of account.
26 The records provided for in this subsection shall be kept at
27 [either] any of the following locations:
28 (1) the registered office of the corporation in this
29 Commonwealth [or at its];
30 (2) the principal place of business wherever
19990S0393B2277 - 91 -
1 situated[.]; or
2 (3) any actual business office of the corporation.
3 (b) Right of inspection by a member.--Every member shall,
4 upon written verified demand [under oath] stating the purpose
5 thereof, have a right to examine, in person or by agent or
6 attorney, during the usual hours for business for any proper
7 purpose, the membership register, books and records of account,
8 and records of the proceedings of the members, directors and
9 [such] any other body, and to make copies or extracts therefrom.
10 A proper purpose shall mean a purpose reasonably related to the
11 interest of [such] the person as a member. In every instance
12 where an attorney or other agent [shall be] is the person who
13 seeks the right [to] of inspection, the demand [under oath]
14 shall be accompanied by a verified power of attorney or [such]
15 other writing [which] that authorizes the attorney or other
16 agent to so act on behalf of the member. The demand [under oath]
17 shall be directed to the corporation:
18 (1) at its registered office in this Commonwealth [or];
19 (2) at its principal place of business wherever
20 situated[.]; or
21 (3) in care of the person in charge of an actual
22 business office of the corporation.
23 (c) Proceedings for the enforcement of inspection by a
24 member.--If the corporation, or an officer or agent thereof,
25 refuses to permit an inspection sought by a member or attorney
26 or other agent acting for the member pursuant to subsection (b)
27 [of this section] or does not reply to the demand within five
28 business days after the demand has been made, the member may
29 apply to the court for an order to compel [such] the inspection.
30 The court shall determine whether or not the person seeking
19990S0393B2277 - 92 -
1 inspection is entitled to the inspection sought. The court may
2 summarily order the corporation to permit the member to inspect
3 the membership register and the other books and records of the
4 corporation and to make copies or extracts therefrom; or the
5 court may order the corporation to furnish to the member a list
6 of its members as of a specific date on condition that the
7 member first pay to the corporation the reasonable cost of
8 obtaining and furnishing [such] the list and on such other
9 conditions as the court deems appropriate. Where the member
10 seeks to inspect the books and records of the corporation, other
11 than its membership register or list of members, he shall first
12 establish:
13 (1) that he has complied with the provisions of this
14 section respecting the form and manner of making demand for
15 inspection of such document; and
16 (2) that the inspection he seeks is for a proper
17 purpose.
18 Where the member seeks to inspect the membership register or
19 list of members of the corporation and he has complied with the
20 provisions of this section respecting the form and manner of
21 making demand for inspection of [such] the documents, the burden
22 of proof shall be upon the corporation to establish that the
23 inspection he seeks is for an improper purpose. The court may,
24 in its discretion, prescribe any limitations or conditions with
25 reference to the inspection, or award such other or further
26 relief as the court [may deem] deems just and proper. The court
27 may order books, documents and records, pertinent extracts
28 therefrom, or duly authenticated copies thereof, to be brought
29 [within] into this Commonwealth and kept in this Commonwealth
30 upon such terms and conditions as the order may prescribe.
19990S0393B2277 - 93 -
1 (d) Cross references.--See sections 107 (relating to form of
2 records) and 5512 (relating to informational rights of a
3 director).
4 § 5510. [(Reserved).] Certain specifically authorized debt
5 terms.
6 (a) Interest rates.--A nonprofit corporation shall not plead
7 or set up usury, or the taking of more than the lawful rate of
8 interest, or the taking of any finance, service or default
9 charge in excess of any maximum rate therefor provided or
10 prescribed by law, as a defense to any action or proceeding
11 brought against it to recover damages on, or to enforce payment
12 of, or to enforce any other remedy on, any obligation executed
13 or effected by the corporation.
14 (b) Yield maintenance premiums.--A prepayment premium
15 determined by reference to the approximate spread between the
16 yield at issuance, or at the date of amendment of any of the
17 terms, of an obligation of a corporation and the yield at or
18 about such date of an interest rate index of independent
19 significance and contingent upon a change in the ownership of or
20 memberships in the corporation or a default by or other change
21 in the condition or prospects of the corporation or any
22 affiliate of the corporation shall be deemed liquidated damages
23 and shall not constitute a penalty.
24 (c) Definitions.--As used in this section, the following
25 words and phrases shall have the meanings given to them in this
26 subsection:
27 "Affiliate." An affiliate or associate as defined in section
28 2552 (relating to definitions).
29 "Obligation." Includes an installment sale contract.
30 (d) Cross reference.--See section 6146 (relating to
19990S0393B2277 - 94 -
1 provisions applicable to all foreign corporations).
2 § 5512. Informational rights of a director.
3 (a) General rule.--To the extent reasonably related to the
4 performance of the duties of the director, including those
5 arising from service as a member of a committee of the board of
6 directors, a director of a nonprofit corporation is entitled:
7 (1) in person or by any attorney or other agent, at any
8 reasonable time, to inspect and copy corporate books, records
9 and documents and, in addition, to inspect, and receive
10 information regarding, the assets, liabilities and operations
11 of the corporation and any subsidiaries of the corporation
12 incorporated or otherwise organized or created under the laws
13 of this Commonwealth that are controlled directly or
14 indirectly by the corporation; and
15 (2) to demand that the corporation exercise whatever
16 rights it may have to obtain information regarding any other
17 subsidiaries of the corporation.
18 (b) Proceedings for the enforcement of inspection by a
19 director.--If the corporation, or an officer or agent thereof,
20 refuses to permit an inspection or obtain or provide information
21 sought by a director or attorney or other agent acting for the
22 director pursuant to subsection (a) or does not reply to the
23 request within two business days after the request has been
24 made, the director may apply to the court for an order to compel
25 the inspection or the obtaining or providing of the information.
26 The court shall summarily order the corporation to permit the
27 requested inspection or to obtain the information unless the
28 corporation establishes that the information to be obtained by
29 the exercise of the right is not reasonably related to the
30 performance of the duties of the director or that the director
19990S0393B2277 - 95 -
1 or the attorney or agent of the director is likely to use the
2 information in a manner that would violate the duty of the
3 director to the corporation. The order of the court may contain
4 provisions protecting the corporation from undue burden or
5 expense and prohibiting the director from using the information
6 in a manner that would violate the duty of the director to the
7 corporation.
8 (c) Cross references.--See sections 107 (relating to form of
9 records), 5508 (relating to corporate records; inspection by
10 members) and 42 Pa.C.S. § 2503(7) (relating to right of
11 participants to receive counsel fees).
12 § 5552. Liabilities of members.
13 (a) General rule.--[The members of a nonprofit corporation
14 shall not be personally liable for the debts, liabilities or
15 obligations of the corporation.] A member of a nonprofit
16 corporation shall not be liable, solely by reason of being a
17 member, under an order of a court or in any other manner for a
18 debt, obligation or liability of the corporation of any kind or
19 for the acts of any member or representative of the corporation.
20 (b) Obligations of member to corporation.--A member shall be
21 liable to the corporation only to the extent of any unpaid
22 portion of the capital contributions, membership dues or
23 assessments which the corporation may have lawfully imposed upon
24 him, or for any other indebtedness owed by him to the
25 corporation. No action shall be brought by any creditor of the
26 corporation to reach and apply any such liability to any debt of
27 the corporation until after:
28 (1) final judgment [shall have] has been rendered
29 against the corporation in favor of the creditor and
30 execution thereon returned unsatisfied[, or the corporation
19990S0393B2277 - 96 -
1 shall have been adjudged bankrupt, or];
2 (2) a case involving the corporation has been brought
3 under 11 U.S.C. Ch. 7 (relating to liquidation) and a
4 distribution has been made and the case closed or a notice of
5 no assets has been issued; or
6 (3) a receiver [shall have] has been appointed with
7 power to collect debts, and [which] the receiver, on demand
8 of a creditor to bring an action thereon, has refused to sue
9 for [such] the unpaid amount, or the corporation [shall have]
10 has been dissolved or ceased its activities leaving debts
11 unpaid.
12 [No such] (c) Action by a creditor.--An action by a creditor
13 under subsection (b) shall not be brought more than three years
14 after the happening of [any one of such events.] the first to
15 occur of the events listed in subsection (b)(1) through (3).
16 § 5709. Conduct of members meeting.
17 (a) Presiding officer.--There shall be a presiding officer
18 at every meeting of the members. The presiding officer shall be
19 appointed in the manner provided in the bylaws or, in the
20 absence of such provision, by the board of directors. If the
21 bylaws are silent on the appointment of the presiding officer
22 and the board fails to designate a presiding officer, the
23 president shall be the presiding officer.
24 (b) Authority of the presiding officer.--Except as otherwise
25 provided in the bylaws, the presiding officer shall determine
26 the order of business and shall have the authority to establish
27 rules for the conduct of the meeting.
28 (c) Procedural standard.--Any action by the presiding
29 officer in adopting rules for, and in conducting, a meeting
30 shall be fair to the members.
19990S0393B2277 - 97 -
1 (d) Closing of the polls.--The presiding officer shall
2 announce at the meeting when the polls close for each matter
3 voted upon. If no announcement is made, the polls shall be
4 deemed to have closed upon the final adjournment of the meeting.
5 After the polls close, no ballots, proxies or votes, nor any
6 revocations or changes thereto, may be accepted.
7 § 5731. Executive and other committees of the board.
8 (a) Establishment and powers.--Unless otherwise restricted
9 in the bylaws:
10 (1) The board of directors may, by resolution adopted by
11 a majority of the directors in office, establish one or more
12 committees to consist of one or more directors of the
13 corporation.
14 (2) Any [such] committee, to the extent provided in the
15 resolution of the board of directors or in the bylaws, shall
16 have and may exercise all of the powers and authority of the
17 board of directors, except that [no such] a committee shall
18 not have any power or authority as to the following:
19 (i) The submission to members of any action
20 requiring approval of members under this [article]
21 subpart.
22 (ii) The creation or filling of vacancies in the
23 board of directors.
24 (iii) The adoption, amendment or repeal of the
25 bylaws.
26 (iv) The amendment or repeal of any resolution of
27 the board that by its terms is amendable or repealable
28 only by the board.
29 (v) Action on matters committed by the bylaws or a
30 resolution of the board of directors exclusively to
19990S0393B2277 - 98 -
1 another committee of the board.
2 [(2)] (3) The board may designate one or more directors
3 as alternate members of any committee, who may replace any
4 absent or disqualified member at any meeting of the
5 committee. In the absence or disqualification of a member of
6 a committee, the member or members thereof present at any
7 meeting and not disqualified from voting, whether or not he
8 or they constitute a quorum, may unanimously appoint another
9 director to act at the meeting in the place of any [such]
10 absent or disqualified member.
11 (b) Term.--Each committee of the board shall serve at the
12 pleasure of the board.
13 § 5745. Advancing expenses.
14 Expenses (including attorneys' fees) incurred in defending
15 any action or proceeding referred to in this subchapter may be
16 paid by a nonprofit corporation in advance of the final
17 disposition of the action or proceeding upon receipt of an
18 undertaking by or on behalf of the representative to repay the
19 amount if it is ultimately determined that he is not entitled to
20 be indemnified by the corporation as authorized in this
21 subchapter or otherwise. Except as otherwise provided in the
22 bylaws, advancement of expenses shall be authorized by the board
23 of directors. Section 5728 (relating to interested members,
24 directors or officers; quorum) shall not be applicable to the
25 advancement of expenses under this section.
26 § 5748. Application to surviving or new corporations.
27 [For] (a) General rule.--Except as provided in subsection
28 (b), for the purposes of this subchapter, references to "the
29 corporation" include all constituent corporations absorbed in a
30 consolidation, merger or division, as well as the surviving or
19990S0393B2277 - 99 -
1 new corporations surviving or resulting therefrom, so that any
2 person who is or was a representative of the constituent,
3 surviving or new corporation, or is or was serving at the
4 request of the constituent, surviving or new corporation as a
5 representative of another domestic or foreign corporation for
6 profit or not-for-profit, partnership, joint venture, trust or
7 other enterprise, shall stand in the same position under the
8 provisions of this subchapter with respect to the surviving or
9 new corporation as he would if he had served the surviving or
10 new corporation in the same capacity.
11 (b) Divisions.--Notwithstanding subsection (a), the
12 obligations of a dividing corporation to indemnify and advance
13 expenses of its representatives, whether arising under this
14 subchapter or otherwise, may be allocated in a division in the
15 same manner and with the same effect as any other liability of
16 the dividing corporation.
17 § 5758. Voting rights of members.
18 (a) General rule.--Unless otherwise provided in a bylaw
19 adopted by the members, every member of a nonprofit corporation
20 shall be entitled to one vote.
21 (b) Procedures.--The manner of voting on any matter,
22 including changes in the articles or bylaws, may be by ballot,
23 mail or any reasonable means provided in a bylaw adopted by the
24 members. If a bylaw adopted by the members provides a fair and
25 reasonable procedure for the nomination of candidates for any
26 office, only candidates who have been duly nominated in
27 accordance therewith shall be eligible for election. Unless
28 otherwise provided in such a bylaw, in elections for directors,
29 voting shall be by ballot, and the candidates receiving the
30 highest number of votes from each class or group of classes, if
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1 any, of members entitled to elect directors separately up to the
2 number of directors to be elected by such class or group of
3 classes shall be elected. If at any meeting of members directors
4 of more than one class are to be elected, each class of
5 directors shall be elected in a separate election.
6 (c) Cumulative voting.--[The members of a nonprofit
7 corporation shall have the right to cumulate their votes for the
8 election of directors only if and to the extent a bylaw adopted
9 by the members so provides.] If a bylaw adopted by the members
10 so provides, in each election of directors of a nonprofit
11 corporation every member entitled to vote shall have the right
12 to multiply the number of votes to which he may be entitled by
13 the total number of directors to be elected in the same election
14 by the members or the class of members to which he belongs and
15 he may cast the whole number of his votes for one candidate or
16 he may distribute them among any two or more candidates.
17 (d) Sale of votes.--No member shall sell his vote or issue a
18 proxy for money or anything of value.
19 (e) Voting lists.--Upon request of a member, the books or
20 records of membership shall be produced at any regular or
21 special meeting of the corporation. If at any meeting the right
22 of a person to vote is challenged, the presiding officer shall
23 require [such] the books or records to be produced as evidence
24 of the right of the person challenged to vote, and all persons
25 who appear by [such] the books or records to be members entitled
26 to vote may vote. See section 6145 (relating to applicability of
27 certain safeguards to foreign corporations).
28 § 5782. Actions against directors, members of an other body and
29 officers.
30 (a) General rule.--Except as provided in subsection (b), in
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1 any action or proceeding brought to enforce a secondary right on
2 the part of one or more members of a nonprofit corporation
3 against any present or former officer, director or member of an
4 other body of the corporation because the corporation refuses to
5 enforce rights that may properly be asserted by it, each
6 plaintiff must aver and it must be made to appear that each
7 plaintiff was a member of the corporation at the time of the
8 transaction of which he complains.
9 (b) Exception.--Any member who, except for the provisions of
10 subsection (a), would be entitled to maintain the action or
11 proceeding and who does not meet such requirements may,
12 nevertheless in the discretion of the court, be allowed to
13 maintain the action or proceeding on preliminary showing to the
14 court, by application and upon such verified statements and
15 depositions as may be required by the court, that there is a
16 strong prima facie case in favor of the claim asserted on behalf
17 of the corporation and that without the action serious injustice
18 will result.
19 (c) Security for costs.--In any action or proceeding
20 instituted or maintained by less than the smaller of 50 members
21 of any class or 5% of the members of any class of the
22 corporation, the corporation in whose right the action or
23 proceeding is brought shall be entitled at any stage of the
24 proceedings to require the plaintiffs to give security for the
25 reasonable expenses, including attorney fees, that may be
26 incurred by it in connection therewith or for which it may
27 become liable pursuant to section 5743 (relating to mandatory
28 indemnification), but only insofar as relates to actions by or
29 in the right of the corporation, to which security the
30 corporation shall have recourse in such amount as the court
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1 determines upon the termination of the action or proceeding. The
2 amount of security may, from time to time, be increased or
3 decreased in the discretion of the court upon showing that the
4 security provided has or may become inadequate or excessive. The
5 security may be denied or limited in the discretion of the court
6 upon preliminary showing to the court, by application and upon
7 such verified statements and depositions as may be required by
8 the court, establishing prima facie that the requirement of full
9 or partial security would impose undue hardship on plaintiffs
10 and serious injustice would result.
11 (d) Cross reference.--See section 6146 (relating to
12 provisions applicable to all foreign corporations).
13 § 5903. Bankruptcy or insolvency proceedings.
14 (a) General rule.--[Whenever] Unless otherwise provided in
15 the bylaws, whenever a nonprofit corporation is insolvent or in
16 financial difficulty, the board of directors may, by resolution
17 and without the consent of the members, authorize and designate
18 the officers of the corporation to execute a deed of assignment
19 for the benefit of creditors, or file a voluntary petition in
20 bankruptcy, or file an answer consenting to the appointment of a
21 receiver upon a complaint in the nature of an equity action
22 filed by creditors or members, or, if insolvent, file an answer
23 to an involuntary petition in bankruptcy admitting the
24 insolvency of the corporation and its willingness to be adjudged
25 a debtor on that ground.
26 (b) Bankruptcy proceedings.--[A] If authorized pursuant to
27 subsection (a), a nonprofit corporation may participate in
28 proceedings under and in the manner provided by Title 11 of the
29 United States Code (relating to bankruptcy) notwithstanding any
30 contrary provision of its articles or bylaws or this subpart,
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1 other than [section] sections 103 (relating to subordination of
2 title to regulatory laws) and 5107 (relating to subordination of
3 subpart to canon law). The corporation shall have full power and
4 authority to put into effect and carry out a plan of
5 reorganization or arrangement and the decrees and orders of the
6 court, or judge or referee relative thereto, and may take any
7 proceeding and do any act provided in the plan or arrangement or
8 directed by such decrees and orders, without further action by
9 its directors or members. Such power and authority may be
10 exercised, and such proceedings and acts may be taken, as may be
11 directed by such decrees or orders, by the trustees or receivers
12 of the corporation appointed in the bankruptcy proceedings, or a
13 majority thereof, or, if none be appointed and acting, by
14 designated officers of the corporation, or by a master or other
15 representative appointed by the court or judge or referee, with
16 the effect as if exercised and taken by unanimous action of the
17 directors and members of the corporation. Without limiting the
18 generality or effect of the foregoing, the corporation may:
19 * * *
20 § 5912. Proposal of amendments.
21 (a) General rule.--Every amendment [to] of the articles of a
22 nonprofit corporation shall be proposed [by]:
23 (1) by the adoption by the board of directors or other
24 body of a resolution setting forth the proposed amendment;
25 (2) unless otherwise provided in the articles, by
26 petition of members entitled to cast at least 10% of the
27 votes [which] that all members are entitled to cast thereon,
28 setting forth the proposed amendment, which petition shall be
29 directed to the board of directors and filed with the
30 secretary of the corporation; or
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1 (3) by such other method as may be provided in the
2 bylaws.
3 [The] (b) Submission to members.--Except where the approval
4 of the members is unnecessary under this subchapter, the board
5 of directors or other body [or the petitioning members] shall
6 direct that the proposed amendment be submitted to a vote of the
7 members entitled to vote thereon at a regular or special meeting
8 of the members.
9 [(b)] (c) Form of amendment.--[The resolution or petition
10 shall contain the language of the proposed amendment to the
11 articles by providing that the articles shall be amended so as
12 to read as therein set forth in full, or that any provision
13 thereof be amended so as to read as therein set forth in full,
14 or that the matter stated in the resolution or petition be added
15 to or stricken from the articles. The resolution or petition may
16 set forth the manner and basis of reclassifying the shares of
17 the corporation.] The resolution or petition shall contain the
18 language of the proposed amendment of the articles:
19 (1) by setting forth the existing text of the articles
20 or the provision thereof that is proposed to be amended, with
21 brackets around language that is to be deleted and
22 underscoring under language that is to be added; or
23 (2) by providing that the articles shall be amended so
24 as to read as therein set forth in full, or that any
25 provision thereof be amended so as to read as therein set
26 forth in full, or that the matter stated in the resolution or
27 petition be added to or stricken from the articles.
28 (d) Terms of amendment.--The resolution or petition may set
29 forth the manner and basis of reclassifying the memberships in
30 or shares of the corporation. Any of the terms of a plan of
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1 reclassification or other action contained in an amendment may
2 be made dependent upon facts ascertainable outside of the
3 amendment if the manner in which the facts will operate upon the
4 terms of the amendment is set forth in the amendment. Such facts
5 may include, without limitation, actions or events within the
6 control of or determinations made by the corporation or a
7 representative of the corporation.
8 § 5922. Plan of merger or consolidation.
9 (a) Preparation of plan.--A plan of merger or consolidation,
10 as the case may be, shall be prepared, setting forth:
11 (1) The terms and conditions of the merger or
12 consolidation.
13 [(2) The mode of carrying the merger or consolidation
14 into effect.
15 (3)] (2) If the surviving or new corporation is or is to
16 be a domestic nonprofit corporation:
17 (i) any changes desired to be made in the articles,
18 which may include a restatement of the articles in the
19 case of a merger; or
20 (ii) in the case of a consolidation, all of the
21 statements required by this [article] subpart to be set
22 forth in restated articles.
23 [(4)] (3) Such other [details and] provisions as are
24 deemed desirable.
25 (b) Post-adoption amendment.--A plan of merger or
26 consolidation may contain a provision that the boards of
27 directors or other bodies of the constituent corporations may
28 amend the plan at any time prior to its effective date, except
29 that an amendment made subsequent to the adoption of the plan by
30 the members of any constituent corporation shall not change:
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1 (1) The term of memberships or the amount or kind of
2 securities, obligations, cash, property or rights to be
3 received in exchange for or on conversion of all or any of
4 the memberships in the constituent corporation.
5 (2) Any term of the articles of the surviving or new
6 corporation to be effected by the merger or consolidation.
7 (3) Any of the terms and conditions of the plan if the
8 change would adversely affect the members of the constituent
9 corporation.
10 [(b)] (c) Proposal.--Every merger or consolidation shall be
11 proposed in the case of each domestic nonprofit corporation
12 [by]:
13 (1) by the adoption by the board of directors or other
14 body of a resolution approving the plan of merger or
15 consolidation;
16 (2) unless otherwise provided in the articles, by
17 petition of members entitled to cast at least 10% of the
18 votes [which] that all members are entitled to cast thereon,
19 setting forth the proposed plan of merger or consolidation,
20 which petition shall be directed to the board of directors
21 and filed with the secretary of the corporation; or
22 (3) by such other method as may be provided in the
23 bylaws.
24 [The] (d) Submission to members.--Except where the
25 corporation has no members entitled to vote thereon, the board
26 of directors or other body [or the petitioning members] shall
27 direct that the plan be submitted to a vote of the members
28 entitled to vote thereon at a regular or special meeting of the
29 members.
30 (e) Party to plan or transaction.--A corporation,
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1 partnership, business trust or other association that approves a
2 plan in its capacity as a member or creditor of a merging or
3 consolidating corporation, or that furnishes all or a part of
4 the consideration contemplated by a plan, does not thereby
5 become a party to the plan or the merger or consolidation for
6 the purposes of this subchapter.
7 (f) 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 § 5923. Notice of meeting of members.
15 (a) General rule.--Written notice of the meeting of members
16 that will act on the proposed plan shall[, not less than ten
17 days before the meeting of members called for the purpose of
18 considering the proposed plan,] be given to each member of
19 record, whether or not entitled to vote thereon, of each
20 domestic nonprofit corporation that is a party to the merger or
21 consolidation. There shall be included in, or enclosed with,
22 [such] the notice a copy of the proposed plan or a summary
23 thereof. The notice shall state that a copy of the bylaws of the
24 surviving or new corporation will be furnished to any member on
25 request and without cost.
26 (b) Cross reference.--See Subchapter A of Chapter 57
27 (relating to notice and meetings generally).
28 § 5929. Effect of merger or consolidation.
29 (a) Single surviving or new corporation.--Upon the merger or
30 consolidation becoming effective, the several corporations
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1 parties to the [plan of] merger or consolidation shall be a
2 single corporation which, in the case of a merger, shall be
3 [that] the corporation designated in the plan of merger as the
4 surviving corporation[,] and, in the case of a consolidation,
5 shall be the new corporation provided for in the plan of
6 consolidation. The separate existence of all corporations
7 parties to the [plan of] merger or consolidation shall cease,
8 except that of the surviving corporation, in the case of a
9 merger. The surviving or new corporation, as the case may be, if
10 it is a domestic nonprofit corporation, shall not thereby
11 acquire authority to engage in any business or exercise any
12 right [which] that a corporation may not be incorporated under
13 this [article] subpart to engage in or exercise.
14 (b) Property rights.--Except as otherwise provided by order,
15 if any, obtained pursuant to section [5547(b)] 5547(c) (relating
16 to nondiversion of certain property), all the property, real,
17 personal[,] and mixed, and franchises of each of the
18 corporations parties to the [plan of] merger or consolidation,
19 and all debts due on whatever account to any of them, including
20 subscriptions for membership and other choses in action
21 belonging to any of them, shall be [taken and] deemed to be
22 [transferred to and] vested in and shall belong to the surviving
23 or new corporation, as the case may be, without further [act or
24 deed] action, and the title to any real estate, or any interest
25 therein, vested in any of the corporations shall not revert or
26 be in any way impaired by reason of the merger or consolidation.
27 The surviving or new corporation shall thenceforth be
28 responsible for all the liabilities [and obligations] of each of
29 the corporations so merged or consolidated. [No liens] Liens
30 upon the property of the merging or consolidating corporations
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1 shall not be impaired by [such] the merger or consolidation, and
2 any claim existing or action or proceeding pending by or against
3 any of [such] the corporations may be prosecuted to judgment as
4 if [such] the merger or consolidation had not taken place, or
5 the surviving or new corporation may be proceeded against or
6 substituted in its place. Any devise, gift or grant contained in
7 any will or other instrument, in trust or otherwise, made before
8 or after such merger or consolidation, to or for any of the
9 constituent corporations, shall inure to the surviving or new
10 corporation, as the case may be, subject to compliance with the
11 requirements of section 5550 (relating to devises, bequests and
12 gifts after certain fundamental changes).
13 (c) Taxes.--Any taxes, penalties and public accounts of the
14 Commonwealth, claimed against any of the merging or
15 consolidating corporations, but not settled, assessed or
16 determined prior to [such] the merger or consolidation, shall be
17 settled, assessed or determined against the surviving or new
18 corporation[,] and, together with interest thereon, shall be a
19 lien against the franchises and property, both real and
20 personal, of the surviving or new corporation.
21 (d) Articles of incorporation.--In the case of a merger, the
22 articles of incorporation of the surviving domestic nonprofit
23 corporation, if any, shall be deemed to be amended to the
24 extent, if any, that changes in its articles are stated in the
25 plan of merger[; and in]. In the case of a consolidation into a
26 domestic nonprofit corporation, the statements [which] that are
27 set forth in the plan of consolidation, or articles of
28 incorporation set forth therein, shall be deemed to be the
29 articles of incorporation of the new corporation.
30 § 5952. Proposal and adoption of plan of division.
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1 (a) Preparation of plan.--A plan of division shall be
2 prepared, setting forth:
3 (1) The terms and conditions of the division, including
4 the manner and basis of:
5 (i) [the] The reclassification of the membership
6 interests or shares [or obligations] of the surviving
7 corporation, if there be one[; and].
8 (ii) [the] The disposition of the membership
9 interests or shares [and] or obligations, if any, of the
10 new corporation or corporations resulting from the
11 division.
12 [(2) The mode of carrying the division into effect.
13 (3)] (2) A statement that the dividing nonprofit
14 corporation will, or will not, survive the division.
15 [(4)] (3) Any changes desired to be made in the articles
16 of the surviving corporation, if there be one, including a
17 restatement of the articles.
18 [(5)] (4) The articles of incorporation required by
19 subsection (b) [of this section].
20 [(6)] (5) Such other [details and] provisions as are
21 deemed desirable.
22 (b) Articles of new corporations.--There shall be included
23 in or annexed to the plan of division:
24 (1) Articles of incorporation, which shall contain all
25 of the statements required by this [article] subpart to be
26 set forth in restated articles, for each of the new domestic
27 nonprofit corporations, if any, resulting from the division.
28 (2) Articles of incorporation, certificates of
29 incorporation[,] or other charter documents for each of the
30 new foreign nonprofit corporations [not-for-profit], if any,
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1 resulting from the division.
2 (c) Proposal and adoption.--[The] Except as otherwise
3 provided in section 5953 (relating to division without member
4 approval), the plan of division shall be proposed and adopted,
5 and may be amended after its adoption and terminated, by a
6 domestic nonprofit corporation in the manner provided for the
7 proposal, adoption, amendment and termination of a plan of
8 merger in Subchapter C (relating to merger, consolidation and
9 sale of assets) or, if the dividing corporation is a foreign
10 nonprofit corporation [not-for-profit], in accordance with the
11 laws of the jurisdiction in which it is incorporated[.] and, in
12 the case of a foreign domiciliary corporation, the provisions of
13 this subpart to the extent provided by section 6145 (relating to
14 applicability of certain safeguards to foreign corporations).
15 There shall be included in or enclosed with the notice of the
16 meeting of members that will act on the plan a copy or summary
17 of the plan.
18 (d) Special requirements.--If any provision of the bylaws of
19 a dividing domestic nonprofit corporation adopted before January
20 1, 1972 shall require for the adoption of a plan of merger or
21 consolidation or a plan involving the sale, lease or exchange of
22 all or substantially all of the property and assets of the
23 corporation a specific number or percentage of votes of
24 directors, members, or members of an other body or other special
25 procedures, the plan of division shall not be adopted without
26 such number or percentage of votes or compliance with such other
27 special procedures.
28 (e) Financial status of resulting corporations.--Unless the
29 plan of division provides that the dividing corporation shall
30 survive the division and that all membership interests or shares
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1 or obligations, if any, of all new corporations resulting from
2 the plan shall be owned solely by the surviving corporation, no
3 plan of division may be made effective at a time when the
4 dividing corporation is insolvent or when the division would
5 render any of the resulting corporations insolvent.
6 (f) Rights of holders of indebtedness.--If any debt
7 securities, notes or similar evidences of indebtedness for money
8 borrowed, whether secured or unsecured, indentures or other
9 contracts were issued, incurred or executed by the dividing
10 corporation before January 1, 1972, and have not been amended
11 subsequent to that date, the liability of the dividing
12 corporation thereunder shall not be affected by the division nor
13 shall the rights of the obligees thereunder be impaired by the
14 division, and each of the resulting corporations may be
15 proceeded against or substituted in place of the dividing
16 corporation as joint and several obligors on such liability,
17 regardless of any provision of the plan of division apportioning
18 the liabilities of the dividing corporation.
19 (g) Reference to outside facts.--Any of the terms of a plan
20 of division may be made dependent upon facts ascertainable
21 outside of the plan if the manner in which the facts will
22 operate upon the terms of the plan is set forth in the plan.
23 Such facts may include, without limitation, actions or events
24 within the control of or determinations made by the dividing
25 corporation or a representative of the dividing corporation.
26 § 5953. [(Reserved).] Division without member approval.
27 Unless otherwise required by its bylaws or by section 5952
28 (relating to proposal and adoption of plan of division), a plan
29 of division that does not alter the state of incorporation of a
30 nonprofit corporation nor amend in any respect the provisions of
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1 its articles, except amendments that under section 5914(b)
2 (relating to adoption in absence of voting members) may be made
3 without member action, shall not require the approval of the
4 members of the corporation if the transfers of assets effected
5 by the division, if effected by means of a sale, lease, exchange
6 or other disposition, would not require the approval of members
7 under section 5930 (relating to voluntary transfer of corporate
8 assets).
9 § 5957. Effect of division.
10 (a) Multiple resulting corporations.--Upon the division
11 becoming effective, the dividing corporation shall be subdivided
12 into the distinct and independent resulting corporations named
13 in the plan of division and, if the dividing corporation is not
14 to survive the division, the existence of the dividing
15 corporation shall cease. The resulting corporations, if they are
16 domestic nonprofit corporations, shall not thereby acquire
17 authority to engage in any business or exercise any right
18 [which] that a corporation may not be incorporated under this
19 [article] subpart to engage in or exercise. Any resulting
20 foreign nonprofit corporation [which] that is stated in the
21 articles of division to be a qualified foreign nonprofit
22 corporation shall be a qualified foreign nonprofit corporation
23 under [this subpart] Article C (relating to foreign nonprofit
24 corporations), and the articles of division shall be deemed to
25 be the application for a certificate of authority and the
26 certificate of authority issued thereon of [such] the
27 corporation.
28 (b) Property rights; allocations of assets and
29 liabilities.--
30 (1) Except as otherwise provided by order, if any,
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1 obtained pursuant to section [5547(b)] 5547(c) (relating to
2 nondiversion of certain property)[, all]:
3 (i) All the property, real, personal[,] and mixed,
4 and franchises of the dividing corporation, and all debts
5 due on whatever account to it, including subscriptions
6 for membership and other choses in action belonging to
7 it, shall, to the extent allocations of assets are
8 contemplated by the plan of division, be [taken and]
9 deemed without further [act or deed] action to be
10 [transferred] allocated to and vested in the resulting
11 corporations on such a manner and basis and with such
12 effect as is specified in the plan [of division], or per
13 capita among the resulting corporations, as tenants in
14 common, if no [such] specification is made in the plan[.
15 The], and the title to any real estate, or interest
16 therein, vested in any of the corporations shall not
17 revert or be in any way impaired by reason of the
18 division.
19 (ii) Upon the division becoming effective, the
20 resulting corporations shall each thenceforth be
21 responsible as separate and distinct corporations only
22 for such liabilities [and obligations] as each
23 corporation may undertake or incur in its own name, but
24 shall be liable [inter se] for the [debts and]
25 liabilities of the dividing corporation in the manner and
26 on the basis [specified in the plan of division. No
27 liens] provided in paragraphs (4) and (5).
28 (iii) Liens upon the property of the dividing
29 corporation shall not be impaired by the division.
30 [One] (iv) To the extent allocations of liabilities
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1 are contemplated by the plan of division, the liabilities
2 of the dividing corporation shall be deemed without
3 further action to be allocated to and become the
4 liabilities of the resulting corporations on such a
5 manner and basis and with such effect as is specified in
6 the plan; and one or more, but less than all, of the
7 resulting corporations shall be free of [all] the
8 liabilities [and obligations] of the dividing corporation
9 to the extent, if any, specified in the plan, if in
10 either case:
11 (A) no fraud [of corporate creditors or] on
12 members without voting rights [and if no] or
13 violation of law shall be effected thereby[,]; and
14 [if applicable provisions of law are complied with.
15 Otherwise, the liability]
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[, or of its members, directors, or
25 officers,] as to which those conditions are not satisfied
26 shall not be affected by the division[,] nor shall the
27 rights of [the] creditors [thereof or of any person
28 dealing with such corporation] thereunder be impaired by
29 [such] the division[,] and[, except as otherwise provided
30 in this section,] any claim existing or action or
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1 proceeding pending by or against [such] the corporation
2 with respect to those liabilities may be prosecuted to
3 judgment as if [such] the division had not taken place,
4 or the resulting corporations may be proceeded against or
5 substituted in [its] place of the dividing corporation as
6 joint and several obligors on [such liability] those
7 liabilities, regardless of any provision of the plan of
8 division apportioning the [debts and] liabilities of the
9 dividing corporation.
10 (2) It shall not be necessary for a plan of division to
11 list each individual asset or liability of the dividing
12 corporation to be allocated to a new corporation so long as
13 those assets and liabilities are described in a reasonable
14 manner.
15 (3) Each new corporation shall hold any assets and
16 liabilities allocated to it as the successor to the dividing
17 corporation, and those assets and liabilities shall not be
18 deemed to have been assigned to the new corporation in any
19 manner, whether directly or indirectly or by operation of
20 law.
21 (c) Taxes.--Any taxes, penalties and public accounts of the
22 Commonwealth, claimed against the dividing corporation, but not
23 settled, assessed or determined prior to [such] the division,
24 shall be settled, assessed or determined against any of the
25 resulting corporations[,] and, together with interest thereon,
26 shall be a lien against the franchises and property, both real
27 and personal, of all [such] the corporations. [The] Upon the
28 application of the dividing corporation, the Department of
29 Revenue [may, upon the application of the dividing corporation],
30 with the concurrence of the Office of Employment Security of the
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1 Department of Labor and Industry, shall release one or more, but
2 less than all, of the resulting corporations from liability and
3 liens for all taxes, penalties and public accounts of the
4 dividing corporation due the Commonwealth [or any other taxing
5 authority] for periods prior to the effective date of the
6 division, if [the Department of Revenue is] those departments
7 are satisfied that the public revenues will be adequately
8 secured.
9 (d) Articles of surviving corporation.--The articles of
10 incorporation of the surviving corporation, if there be one,
11 shall be deemed to be amended to the extent, if any, that
12 changes in its articles are stated in the plan of division.
13 (e) Articles of new corporations.--The statements [which]
14 that are set forth in the plan of division with respect to each
15 new domestic nonprofit corporation and [which] that are required
16 or permitted to be set forth in restated articles of
17 incorporation of corporations incorporated under this [article]
18 subpart, or the articles of incorporation of each new
19 corporation set forth therein, shall be deemed to be the
20 articles of incorporation of each [such] new corporation.
21 (f) Directors and officers.--Unless otherwise provided in
22 the plan, the directors and officers of the dividing corporation
23 shall be the initial directors and officers of each of the
24 resulting corporations.
25 (g) Disposition of memberships.--Unless otherwise provided
26 in the plan, the memberships and other securities or
27 obligations, if any, of each new corporation resulting from the
28 division shall be distributable to:
29 (1) the surviving corporation, if the dividing
30 corporation survives the division; or
19990S0393B2277 - 118 -
1 (2) the members of the dividing corporation pro rata, in
2 any other case.
3 (h) Conflict of laws.--It is the intent of the General
4 Assembly that:
5 (1) The effect of a division of a domestic business
6 corporation shall be governed solely by the laws of this
7 Commonwealth and any other jurisdiction under the laws of
8 which any of the resulting corporations is incorporated.
9 (2) The effect of a division on the assets and
10 liabilities of the dividing corporation shall be governed
11 solely by the laws of this Commonwealth and any other
12 jurisdiction under the laws of which any of the resulting
13 corporations is incorporated.
14 (3) The validity of any allocations of assets or
15 liabilities by a plan of division of a domestic business
16 corporation, regardless of whether or not any of the new
17 corporations is a foreign business corporation, shall be
18 governed solely by the laws of this Commonwealth.
19 (4) In addition to the express provisions of this
20 subsection, this subchapter shall otherwise generally be
21 granted the protection of full faith and credit under the
22 Constitution of the United States.
23 § 5975. Predissolution provision for liabilities.
24 (a) Powers of board.--The board of directors or other body
25 of a nonprofit corporation that has elected to proceed under
26 this section shall have full power to wind up and settle the
27 affairs of [a nonprofit] the corporation in accordance with this
28 section prior to filing articles of dissolution in accordance
29 with section 5977 (relating to articles of dissolution).
30 (b) Notice to creditors and taxing authorities.--After the
19990S0393B2277 - 119 -
1 approval by the members or the board of directors or other body
2 pursuant to section 5974(b) (relating to adoption in absence of
3 voting members) that the corporation dissolve voluntarily, the
4 corporation shall immediately cause notice of the winding up
5 proceedings to be officially published and to be mailed by
6 certified or registered mail to each known creditor and claimant
7 and to each municipal corporation in which [its registered
8 office or principal] it has a place of business in this
9 Commonwealth [is located].
10 (c) Winding up and distribution.--The corporation shall, as
11 speedily as possible, proceed to collect all sums due it,
12 convert into cash all corporate assets the conversion of which
13 into cash is required to discharge its liabilities and, out of
14 the assets of the corporation, discharge or make adequate
15 provision for the discharge of all liabilities of the
16 corporation, according to their respective priorities. Except as
17 otherwise provided in a bylaw adopted by the members or in this
18 subpart or by any other provision of law, any surplus remaining
19 after paying or providing for all liabilities of the corporation
20 shall be distributed to the shareholders, if any, pro rata, or
21 if there be no shareholders, among the members per capita. See
22 section 1972(a) (relating to proposal of voluntary dissolution).
23 § 5976. Judicial supervision of proceedings.
24 (a) General rule.--A nonprofit corporation that has elected
25 to proceed under section 1975 (relating to predissolution
26 provision for liabilities), at any time during the winding up
27 proceedings, may apply to the court to have the proceedings
28 continued under the supervision of the court and thereafter the
29 proceedings shall continue under the supervision of the court as
30 provided in Subchapter G (relating to involuntary liquidation
19990S0393B2277 - 120 -
1 and dissolution).
2 * * *
3 § 5977. Articles of dissolution.
4 * * *
5 (b) Contents of articles.--The articles of dissolution shall
6 be executed by the corporation and shall set forth:
7 * * *
8 (5) A statement that:
9 (i) [that] all liabilities of the corporation have
10 been discharged or that adequate provision has been made
11 therefor; [or]
12 (ii) [that] the assets of the corporation are not
13 sufficient to discharge its liabilities, and that all the
14 assets of the corporation have been fairly and equitably
15 applied, as far as they will go, to the payment of such
16 liabilities[. An election by]; or
17 (iii) the corporation has elected to proceed under
18 Subchapter H [shall constitute the making of adequate
19 provision for the liabilities of the corporation,
20 including any judgment or decree that may be obtained
21 against the corporation in any pending action or
22 proceeding].
23 * * *
24 (7) [A] In the case of a corporation that has not
25 elected to proceed under Subchapter H, a statement that no
26 actions or proceedings are pending against the corporation in
27 any court, or that adequate provision has been made for the
28 satisfaction of any judgment or decree that may be obtained
29 against the corporation in each pending action or proceeding.
30 (8) [A] In the case of a corporation that has not
19990S0393B2277 - 121 -
1 elected to proceed under Subchapter H, a statement that
2 notice of the winding-up proceedings of the corporation was
3 mailed by certified or registered mail to each known creditor
4 and claimant and to each municipal corporation in which the
5 [registered office or principal place of business of the]
6 corporation has a place of business in this Commonwealth [is
7 located].
8 * * *
9 (d) Cross references.--See sections 134 (relating to
10 docketing statement) and 135 (relating to requirements to be met
11 by filed documents).
12 § 5989. Articles of involuntary dissolution.
13 (a) General rule.--In a proceeding under this subchapter,
14 the court shall enter an order dissolving the nonprofit
15 corporation when the order, if any, obtained pursuant to section
16 5547(b) (relating to nondiversion of certain property) has been
17 entered and 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 the persons
20 entitled thereto, 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 5977 (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
19990S0393B2277 - 122 -
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 § 5991.1. Authority of board of directors.
10 (a) General rule.--The board of directors or other body of a
11 nonprofit corporation that has elected to proceed under this
12 subchapter shall have full power to wind up and settle the
13 affairs of the corporation in accordance with this subchapter
14 both prior to and after the filing of articles of dissolution in
15 accordance with section 5977 (relating to articles of
16 dissolution).
17 (b) Winding up.--The corporation shall, as speedily as
18 possible, proceed to comply with the requirements of this
19 subchapter while simultaneously collecting all sums due it and
20 converting into cash all corporate assets, the conversion of
21 which into cash is required to make adequate provision for its
22 liabilities.
23 § 6126. Amended certificate of authority.
24 (a) General rule.--After receiving a certificate of
25 authority, a qualified foreign nonprofit corporation may,
26 subject to the provisions of this subchapter, change [the name
27 under which it is authorized to transact business in this
28 Commonwealth] or correct any of the information set forth in its
29 application for a certificate of authority or previous filings
30 under this section by filing in the Department of State an
19990S0393B2277 - 123 -
1 application for an amended certificate of authority. The
2 application shall be executed by the corporation and shall
3 state:
4 (1) The name under which the applicant corporation
5 currently holds a certificate of authority to do business in
6 this Commonwealth.
7 [(2) The name of the jurisdiction under the laws of
8 which the corporation is incorporated.
9 (3) The address, including street and number, if any, of
10 its principal office under the laws of the jurisdiction in
11 which it is incorporated.
12 (4)] (2) Subject to section 109 (relating to name of
13 commercial registered office provider in lieu of registered
14 address), the address, including street and number, if any,
15 of its registered office in this Commonwealth. [which may
16 constitute a change in the address of its registered office.
17 (5) The new name of the corporation and]
18 (3) The information to be changed or corrected.
19 (4) If the application reflects a change in the name of
20 the corporation, the application shall include a statement
21 that either:
22 (i) the change of name reflects a change effected in
23 the jurisdiction of incorporation; or
24 (ii) documents complying with section 6123(b)
25 (relating to exceptions) accompany the application.
26 (b) Issuance of amended certificate of authority.--Upon the
27 filing of the application, the applicant corporation shall be
28 deemed to hold an amended certificate of authority.
29 (c) Cross reference.--See section 134 (relating to docketing
30 statement).
19990S0393B2277 - 124 -
1 § 6146. Provisions applicable to all foreign corporations.
2 The following provisions of this subpart shall, except as
3 otherwise provided in this section, be applicable to every
4 foreign corporation not-for-profit, whether or not required to
5 procure a certificate of authority under this chapter:
6 Section 5503 (relating to defense of ultra vires), as to
7 contracts and conveyances governed by the laws of this
8 Commonwealth and conveyances affecting real property situated
9 in this Commonwealth.
10 Section 5506 (relating to form of execution of
11 instruments), as to instruments or other documents governed
12 by the laws of this Commonwealth or affecting real property
13 situated in this Commonwealth.
14 Section 5510 (relating to certain specifically authorized
15 debt terms), as to obligations (as defined in the section)
16 governed by the laws of this Commonwealth or affecting real
17 property situated in this Commonwealth.
18 Section 5782 (relating to actions against directors,
19 members of an other body and officers), as to any action or
20 proceeding brought in a court of this Commonwealth.
21 § 8105. Ownership of certain professional partnerships.
22 Except as otherwise provided by statute, rule or regulation
23 applicable to a particular profession, all of the [partners in]
24 ultimate beneficial owners of the partnership interests in a
25 partnership that renders one or more restricted professional
26 services shall be licensed persons. As used in this section,
27 the term "restricted professional services" shall have the
28 meaning specified in section 8903 (relating to definitions and
29 index of definitions).
30 § 8201. Scope.
19990S0393B2277 - 125 -
1 * * *
2 (e) Prohibited termination.--A registration under this
3 subchapter may not be terminated while the partnership is a
4 bankrupt as that term is defined in section 8903 (relating to
5 definitions and index of definitions). See section 8221(f)
6 (relating to annual registration).
7 (f) Alternative procedure.--In lieu of filing a statement of
8 registration as provided in subsection (a), a limited
9 partnership may register as a registered limited liability
10 partnership by including in its certificate of limited
11 partnership, either originally or by amendment, the statements
12 required by subsection (a)(3) and (4). To terminate its
13 registration, a limited partnership that uses the procedure
14 authorized by this subsection shall amend its certificate of
15 limited partnership to delete the statements required by this
16 subsection.
17 (g) Constructive notice.--Filing under this section shall
18 constitute constructive notice that the partnership is a
19 registered limited liability partnership and that the partners
20 are entitled to the protections from liability provided by this
21 subchapter.
22 [(e)] (h) Cross references.--See sections 134 (relating to
23 docketing statement) and 135 (relating to requirements to be met
24 by filed documents).
25 § 8202. Definitions.
26 The following words and phrases when used in this chapter
27 shall have the meanings given to them in this section unless the
28 context clearly indicates otherwise:
29 * * *
30 "Partner." Includes a person who is or was a partner in a
19990S0393B2277 - 126 -
1 registered limited liability partnership at any time while the
2 registration of the partnership under this subchapter is or was
3 in effect.
4 * * *
5 § 8204. Limitation on liability of partners.
6 (a) General rule.--Except as provided in subsection (b), a
7 partner in a registered limited liability partnership shall not
8 be individually liable directly or indirectly, whether by way of
9 indemnification, contribution or otherwise, for debts and
10 obligations of, or chargeable to, the partnership, whether
11 sounding in contract or tort or otherwise, that arise from any
12 negligent or wrongful acts or misconduct committed by another
13 partner or other representative of the partnership while the
14 registration of the partnership under this subchapter is in
15 effect.
16 (b) Exceptions.--
17 (1) [Subsection (a) shall not apply to any debt or
18 obligation with respect to which the partnership is not in
19 compliance with section 8206(a) (relating to insurance).]
20 (Repealed).
21 * * *
22 (3) Subsection (a) shall not affect in any way:
23 (i) the liability of the partnership itself for all
24 its debts and obligations; [or]
25 (ii) the availability of the entire assets of the
26 partnership to satisfy its debts and obligations; or
27 (iii) any obligation undertaken by a partner in
28 writing to individually indemnify another partner of the
29 partnership or to individually contribute toward a
30 liability of another partner.
19990S0393B2277 - 127 -
1 * * *
2 § 8205. Liability of withdrawing partner.
3 * * *
4 (b) Exceptions.--Subsection (a) shall not affect the
5 liability of a partner:
6 * * *
7 (7) For any obligation undertaken by a partner in
8 writing to individually indemnify another partner of the
9 partnership or to individually contribute toward a liability
10 of another partner.
11 * * *
12 (e) Permissive filing.--Filing under this section is
13 permissive, and failure to make a filing under this section by a
14 partner entitled to do so shall not affect the right of that
15 partner to the limitation on liability provided by section 8204
16 (relating to limitation on liability of partners).
17 (f) Constructive notice.--Filing under this section shall
18 constitute constructive notice that the partner has withdrawn
19 from the partnership and is entitled to the protection from
20 liability provided by this section.
21 (g) Variation of section.--A written provision of the
22 partnership agreement may restrict or condition the application
23 of this section to some or all of the partners of the
24 partnership.
25 (h) Application of section.--A partner in a foreign
26 registered limited liability partnership, regardless of whether
27 or not it has registered to do business in this Commonwealth
28 under section 8211 (relating to foreign registered limited
29 liability partnerships), shall not be entitled to make a filing
30 under this section with regard to that partnership.
19990S0393B2277 - 128 -
1 [(e)] (i) Cross references.--See sections 134 (relating to
2 docketing statement) and 135 (relating to requirements to be met
3 by filed documents).
4 § 8211. Foreign registered limited liability partnerships.
5 (a) Governing law.--Subject to the Constitution of
6 Pennsylvania:
7 (1) The laws of the jurisdiction under which a foreign
8 registered limited liability partnership is organized govern
9 its organization and internal affairs and the liability of
10 its partners, except as provided in subsection (c).
11 (2) A foreign registered limited liability partnership
12 may not be denied registration by reason of any difference
13 between those laws and the laws of this Commonwealth.
14 (b) Registration to do business.--A foreign registered
15 limited liability partnership, regardless of whether or not it
16 is also a foreign limited partnership, shall be subject to
17 Subchapter K of Chapter 85 (relating to foreign limited
18 partnerships) as if it were a foreign limited partnership,
19 except that [the]:
20 (1) Its application for registration shall state that it
21 is a registered limited liability partnership.
22 (2) The name under which [the foreign registered limited
23 liability partnership] it registers and conducts business in
24 this Commonwealth shall comply with the requirements of
25 section 8203 (relating to name).
26 (3) Section 8582(a)(5) and (6) (relating to
27 registration) shall not be applicable to the application for
28 registration of a foreign limited liability partnership that
29 is not a foreign limited partnership.
30 (c) Exception.--The liability of the partners in a foreign
19990S0393B2277 - 129 -
1 registered limited liability partnership shall be governed by
2 the laws of the jurisdiction under which it is organized, except
3 that the partners shall not be entitled to greater protection
4 from liability than is available to the partners in a domestic
5 registered limited liability partnership.
6 § 8221. Annual registration.
7 * * *
8 (e) [Annual fee to be lien] Failure to pay annual fee.--
9 (1) Failure to [pay the annual registration fee imposed]
10 file the certificate of annual registration required by this
11 section [shall not affect the existence or] for five
12 consecutive years shall result in the automatic termination
13 of the status of the registered limited liability partnership
14 as such[, but the]. In addition, any annual registration fee
15 that is not paid when due shall be a lien in the manner
16 provided in this subsection from the time the annual
17 registration fee is due and payable [upon]. If a certificate
18 of annual registration is not filed within 30 days after the
19 date on which it is due, the department shall assess a
20 penalty of $500 against the partnership, which shall also be
21 a lien in the manner provided in this subsection. The
22 imposition of that penalty shall not be construed to relieve
23 the partnership from liability for any other penalty or
24 interest provided for under other applicable law.
25 (2) If the annual registration fee paid by a registered
26 limited liability partnership is subsequently determined to
27 be less than should have been paid because it was based on an
28 incorrect number of general partners or was otherwise
29 incorrectly computed, that fact shall not affect the
30 existence or status of the registered limited liability
19990S0393B2277 - 130 -
1 partnership as such, but the amount of the additional annual
2 registration fee that should have been paid shall be a lien
3 in the manner provided in this subsection from the time the
4 incorrect payment is discovered by the department.
5 (3) The annual registration fee shall bear simple
6 interest from the date that it becomes due and payable until
7 paid. The interest rate shall be that provided for in section
8 806 of the act of April 9, 1929 (P.L.343, No.176), known as
9 The Fiscal Code, with respect to unpaid taxes. The penalty
10 provided for in paragraph (1) shall not bear interest. The
11 payment of interest shall not relieve the registered limited
12 liability partnership from liability for any other penalty or
13 interest provided for under other applicable law.
14 (4) The lien created by this subsection shall attach to
15 all of the property and proceeds thereof of the registered
16 limited liability partnership in which a security interest
17 can be perfected in whole or in part by filing in the
18 department under 13 Pa.C.S. Div. 9 (relating to secured
19 transactions; sales of accounts, contract rights and chattel
20 paper), whether the property and proceeds are owned by the
21 partnership at the time the annual registration fee or any
22 penalty or interest becomes due and payable or whether the
23 property and proceeds are acquired thereafter. Except as
24 otherwise provided by statute, the lien created by this
25 subsection shall have priority over all other liens, security
26 interests or other charges, except liens for taxes or other
27 charges due the Commonwealth. The lien created by this
28 subsection shall be entered on the records of the department
29 and indexed in the same manner as a financing statement filed
30 under 13 Pa.C.S. Div. 9. At the time an annual registration
19990S0393B2277 - 131 -
1 fee, penalty or interest that has resulted in the creation of
2 a lien under this subsection is paid, the department shall
3 terminate the lien with respect to that annual registration
4 fee, penalty or interest without requiring a separate filing
5 by the partnership for that purpose.
6 (5) If the annual registration fee paid by a registered
7 limited liability partnership is subsequently determined to
8 be more than should have been paid for any reason, no refund
9 of the additional fee shall be made.
10 (6) Termination of the status of a registered limited
11 liability partnership as such, whether voluntarily or
12 involuntarily, shall not release it from the obligation to
13 pay any accrued fees, penalties and interest and shall not
14 release the lien created by this subsection.
15 (f) Exception for bankrupt partnerships.--A partnership that
16 would otherwise be required to pay the annual registration fee
17 set forth in subsection (b) shall not be required to pay that
18 fee with respect to any year during any part of which the
19 partnership is a bankrupt as defined in section 8903 (relating
20 to definitions and index of definitions). The partnership shall,
21 instead, indicate on its certificate of annual registration for
22 that year that it is exempt from payment of the annual
23 registration fee pursuant to this subsection. If the partnership
24 fails to file timely a certificate of annual registration, a
25 lien shall be entered on the records of the department pursuant
26 to subsection (e) which shall not be removed until the
27 partnership files a certificate of annual registration
28 indicating its entitlement to an exemption from payment of the
29 annual registration fee as provided in this subsection. See
30 section 8201(e) (relating to scope).
19990S0393B2277 - 132 -
1 § 8359. Right to wind up affairs.
2 Unless otherwise agreed, the partners who have not wrongfully
3 dissolved the partnership, or the legal representative of the
4 last surviving partner, not bankrupt, has the right to wind up
5 the partnership affairs except that any partner, his legal
6 representative or his assignee, upon cause shown, may obtain
7 winding up by the court. See section 139(b) (relating to tax
8 clearance in judicial proceedings).
9 § 8503. Definitions and index of definitions.
10 (a) Definitions.--The following words and phrases when used
11 in this chapter shall have the meanings given to them in this
12 section unless the context clearly indicates otherwise:
13 "Certificate of limited partnership." The certificate
14 referred to in section 8511 (relating to certificate of limited
15 partnership) and the certificate as amended. The term includes
16 any other statements or certificates permitted or required to be
17 filed in the Department of State by sections 108 (relating to
18 change in location or status of registered office provided by
19 agent) and 138 (relating to statement of correction) or this
20 part. If an amendment of the certificate of limited partnership
21 or a certificate of merger or division made in the manner
22 permitted by this chapter restates the certificate in its
23 entirety or if there is a certificate of consolidation,
24 thenceforth the "certificate of limited partnership" shall not
25 include any prior documents and any certificate issued by the
26 department with respect thereto shall so state.
27 * * *
28 "Court." Subject to any inconsistent general rule prescribed
29 by the Supreme Court of Pennsylvania:
30 (1) the court of common pleas of the judicial district
19990S0393B2277 - 133 -
1 embracing the county where the registered office of the
2 limited partnership is or is to be located; or
3 (2) where a limited partnership results from a merger,
4 consolidation, division or other transaction without
5 establishing a registered office in this Commonwealth or
6 withdraws as a foreign limited partnership, the court of
7 common pleas in which venue would have been laid immediately
8 prior to the transaction or withdrawal.
9 ["Department." The Department of State of the Commonwealth.]
10 * * *
11 "Partnership agreement." Any agreement, written or oral, of
12 the partners as to the affairs of a limited partnership and the
13 conduct of its business. [A written partnership agreement:
14 (1) May provide that a person shall be admitted as a
15 limited partner, or shall become an assignee of a partnership
16 interest or other rights or powers of a limited partner to
17 the extent assigned, and shall become bound by the
18 partnership agreement:
19 (i) if such person (or a representative authorized
20 by such person orally, in writing or by other action such
21 as payment for a partnership interest) executes the
22 partnership agreement or any other writing evidencing the
23 intent of such person to become a limited partner or
24 assignee; or
25 (ii) without such execution, if such person (or a
26 representative authorized by such person orally, in
27 writing or by other action such as payment for a
28 partnership interest) complies with the conditions for
29 becoming a limited partner or assignee as set forth in
30 the partnership agreement or any other writing and
19990S0393B2277 - 134 -
1 requests (orally, in writing or by other action such as
2 payment for a partnership interest) that the records of
3 the limited partnership reflect such admission or
4 assignment.
5 (2) Shall not be unenforceable by reason of its not
6 having been signed by a person being admitted as a limited
7 partner or becoming an assignee as provided in paragraph (1)
8 or by reason of its having been signed by a representative as
9 provided in section 8514(b) (relating to attorney-in-fact).
10 (3) May provide that, whenever a provision of this
11 chapter requires the vote or consent of a specified number or
12 percentage of partners or of a class of partners for the
13 taking of any action, a higher number or percentage of votes
14 or consents shall be required for the action. Except as
15 otherwise provided in the partnership agreement, whenever the
16 partnership agreement requires for the taking of any action
17 by the partners or a class of partners a specific number or
18 percentage of votes or consents, the provision of the
19 partnership agreement setting forth that requirement shall
20 not be amended or repealed by any lesser number or percentage
21 of votes or consents of the partners or the class of
22 partners.]
23 * * *
24 "Relax." When used with respect to a provision of the
25 certificate of limited partnership or partnership agreement,
26 means to provide lesser rights for an affected representative or
27 partner.
28 (b) Index of definitions.--Other definitions applying to
29 this chapter and the sections in which they appear are:
30 "Act" or "action." Section 102.
19990S0393B2277 - 135 -
1 "Department." Section 102.
2 "Licensed person." Section 102.
3 "Professional services." Section 102.
4 § 8510. Indemnification.
5 * * *
6 (b) When indemnification is not to be made.--Indemnification
7 pursuant to subsection (a) shall not be made in any case where
8 the act [or failure to act] giving rise to the claim for
9 indemnification is determined by a court to have constituted
10 willful misconduct or recklessness. The certificate of limited
11 partnership or partnership agreement may not provide for
12 indemnification in the case of willful misconduct or
13 recklessness.
14 * * *
15 (f) Mandatory indemnification.--Without regard to whether
16 indemnification or advancement of expenses is provided under
17 subsections (a) and (d), a limited partnership shall be subject
18 to section 8331(2) (relating to rules determining rights and
19 duties of partners).
20 SUBCHAPTER B
21 FORMATION[; CERTIFICATE OF LIMITED PARTNERSHIP]
22 § 8511. Certificate of limited partnership.
23 (a) General rule.--In order to form a limited partnership, a
24 certificate of limited partnership must be executed and filed in
25 the Department of State. The certificate shall set forth:
26 (1) The name of the limited partnership.
27 (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.
19990S0393B2277 - 136 -
1 (3) The name and business address of each general
2 partner.
3 (4) If a partner's interest in the limited partnership
4 is to be evidenced by a certificate of partnership interest,
5 a statement to that effect.
6 (5) Any other [matters the partners determine to include
7 therein. A provision included in the certificate of limited
8 partnership pursuant to this paragraph shall be deemed to be
9 a provision of the partnership agreement for purposes of any
10 provision of this chapter that refers to a rule as set forth
11 in the partnership agreement.] provision, whether or not
12 specifically authorized by or in contravention of this
13 chapter, that the partners elect to set out in the
14 certificate of limited partnership for the regulation of the
15 internal affairs of the limited partnership, except where a
16 provision of this chapter expressly provides that the
17 certificate of limited partnership shall not relax or
18 contravene any provision on a specified subject.
19 (b) Effective date of formation.--A limited partnership is
20 formed at the time of the filing of the certificate of limited
21 partnership in the department or at any later time specified in
22 the certificate of limited partnership if, in either case, there
23 has been substantial compliance with the requirements of this
24 section or the corresponding provisions of prior law.
25 (c) [Duties of recorders of deeds.--Each recorder of deeds
26 shall continue to keep open for public inspection the record of
27 limited partnership certificates recorded under the statutes
28 supplied by this chapter and by prior law the custody of which
29 has not been transferred to the department pursuant to section
30 140 (relating to custody and management of orphan corporate and
19990S0393B2277 - 137 -
1 business records).] (Repealed).
2 (d) Transitional provision.--A limited partnership formed
3 under prior law shall not be required to set forth in its
4 certificate of limited partnership a registered office or the
5 business address of each general partner until such time as it
6 first amends its certificate of limited partnership under this
7 chapter.
8 (e) Effect of provisions.--A provision of the certificate of
9 limited partnership shall be deemed to be a provision of the
10 partnership agreement for purposes of any provision of this
11 chapter that refers to a rule as set forth in the partnership
12 agreement.
13 [(e)] (f) Cross references.--See sections 134 (relating to
14 docketing statement), 135 (relating to requirements to be met by
15 filed documents) and 8514 (relating to execution of
16 certificates).
17 § 8517. Notice.
18 The fact that a certificate of limited partnership is on file
19 in the Department of State is not notice of any fact other than:
20 (1) that the partnership is a limited partnership and
21 that all partners are limited partners except the persons
22 designated therein as general partners[, but it is not notice
23 of any other fact]; and
24 (2) if it is registered under Chapter 82 (relating to
25 registered limited liability partnerships), that it is also a
26 registered limited liability partnership.
27 § 8519. Filing of certificate of summary of record by limited
28 partnerships formed prior to 1976.
29 (a) General rule.--[Any limited partnership that was not
30 formed under this chapter, has never made any filing under this
19990S0393B2277 - 138 -
1 section or corresponding provisions of prior law and] Where any
2 of the organic documents of a limited partnership are not on
3 file in the Department of State or there is an error in any such
4 document as transferred to the department pursuant to section
5 140 (relating to custody and management of orphan corporate and
6 business records), and the limited partnership desires to file
7 any document in the [Department of State] department under any
8 other provision of this chapter or [that desires] to secure from
9 the department a certified copy of the certificate of limited
10 partnership or to correct the text of its organic documents as
11 on file in the department, the limited partnership shall file in
12 the department a certificate of summary of record which shall
13 set forth:
14 (1) The name of the limited partnership.
15 (2) Subject to section 109 (relating to name of
16 commercial registered office provider in lieu of registered
17 address), the address, including street and number, if any,
18 of its registered office.
19 (3) The statute under which the limited partnership was
20 formed.
21 (4) The name under which, and the date on which, the
22 limited partnership was originally formed, including the date
23 when and the place where the original certificate was
24 recorded.
25 (5) The place or places, including the volume and page
26 numbers or their equivalent, where the documents
27 [constituting the currently effective certificate are] that
28 are not on file in the department or that require correction
29 in the records of the department where originally recorded,
30 the date or dates of each recording and the correct text of
19990S0393B2277 - 139 -
1 the [currently effective certificate] documents. The
2 information specified in this paragraph may be omitted in a
3 certificate of summary of record that is delivered to the
4 department contemporaneously with an amended certificate
5 filed under this chapter that restates the certificate in its
6 entirety.
7 [(6) Each name by which the limited partnership was
8 known, if any, other than its original name and its current
9 name and the date or dates on which each change of name of
10 the partnership became effective.]
11 (b) Cross references.--See sections 134 (relating to
12 docketing statement), 135 (relating to requirements to be met by
13 filed documents) and 8514 (relating to execution of
14 certificates).
15 § 8520. Partnership agreement.
16 (a) Admission of limited partners.--A partnership agreement
17 may provide in writing that a person shall be admitted as a
18 limited partner, or shall become an assignee of a partnership
19 interest or other rights or powers of a limited partner to the
20 extent assigned, and shall become bound by the partnership
21 agreement:
22 (1) if such person (or a representative authorized by
23 such person orally, in writing or by other action such as
24 payment for a partnership interest) executes the partnership
25 agreement or any other writing evidencing the intent of such
26 person to become a limited partner or assignee; or
27 (2) without such execution, if such person (or a
28 representative authorized by such person orally, in writing
29 or by other action such as payment for a partnership
30 interest) complies with the conditions for becoming a limited
19990S0393B2277 - 140 -
1 partner or assignee as set forth in the partnership agreement
2 or any other writing and requests (orally, in writing or by
3 other action such as payment for a partnership interest) that
4 the records of the limited partnership reflect such admission
5 or assignment.
6 (b) Signature by limited partners.--A written partnership
7 agreement shall not be unenforceable by reason of its not having
8 been signed by a person being admitted as a limited partner or
9 becoming an assignee as provided in subsection (a) or by reason
10 of its having been signed by a representative as provided in
11 section 8514(b) (relating to attorney-in-fact).
12 (c) Voting requirements.--A partnership agreement may
13 provide in writing that, whenever a provision of this chapter
14 requires the vote or consent of a specified number or percentage
15 of partners or of a class of partners for the taking of any
16 action, a higher number or percentage of votes or consents shall
17 be required for the action. Except as otherwise provided in the
18 partnership agreement, whenever the partnership agreement
19 requires for the taking of any action by the partners or a class
20 of partners a specific number or percentage of votes or
21 consents, the provision of the partnership agreement setting
22 forth that requirement shall not be amended or repealed by any
23 lesser number or percentage of votes or consents of the partners
24 or the class of partners.
25 (d) Freedom of contract.--A written partnership agreement
26 may contain any provision for the regulation of the internal
27 affairs of the limited partnership agreed to by the partners,
28 whether or not specifically authorized by or in contravention of
29 this chapter, except where this chapter:
30 (1) refers only to a rule as set forth in the
19990S0393B2277 - 141 -
1 certificate of limited partnership; or
2 (2) expressly provides that the partnership agreement
3 shall not relax or contravene any provision on a specified
4 subject.
5 (e) Oral provisions.--A partnership agreement may provide in
6 writing that it cannot be amended or modified except in writing,
7 in which case an oral agreement, amendment or modification shall
8 not be enforceable.
9 (f) Cross reference.--See section 8511(a)(5) (relating to
10 certificate of limited partnership).
11 § 8523. Liability of limited partners to third parties.
12 (a) General rule.--A limited partner is not liable [for the
13 obligations of a limited partnership unless he is also a general
14 partner or, in addition to the exercise of his rights and powers
15 as a limited partner, he participates in the control of the
16 business. However, if the limited partner participates in the
17 control of the business, he is liable only to persons who
18 transact business with the limited partnership reasonably
19 believing, based upon the conduct of the limited partner, that
20 the limited partner is a general partner.], solely by reason of
21 being a limited partner, under an order of a court or in any
22 other manner, for a debt, obligation or liability of the limited
23 partnership of any kind or for the acts of any partner, agent or
24 employee of the limited partnership.
25 (b) [Activities compatible with limited partner status.--A
26 limited partner does not participate in the control of the
27 business within the meaning of subsection (a) solely by doing
28 one or more of the following:
29 (1) Being a contractor for, or an agent or employee of
30 the limited partnership or of a general partner, or being an
19990S0393B2277 - 142 -
1 officer, director, trustee, partner or shareholder of a
2 general partner.
3 (2) Consulting with and advising a general partner with
4 respect to any matter, including, without limitation, the
5 business of the limited partnership.
6 (3) (i) Acting as surety for the limited partnership,
7 or guaranteeing, endorsing or assuming one or more
8 specific obligations of the limited partnership, or a
9 general partner.
10 (ii) Borrowing money from the limited partnership or
11 a general partner.
12 (iii) Lending money to the limited partnership or a
13 general partner.
14 (iv) Providing collateral for the limited
15 partnership or a general partner.
16 (4) Taking any action required or permitted by law to
17 bring, pursue or settle or otherwise terminate a derivative
18 action in the right of the limited partnership.
19 (5) Requesting or attending a meeting of partners.
20 (6) Acting or causing the taking or refraining from the
21 taking of any action, including, without limitation, by
22 proposing, approving, consenting or disapproving, by voting
23 or otherwise, with respect to one or more of the following
24 matters:
25 (i) The dissolution and winding up of the limited
26 partnership, or an election to continue the limited
27 partnership or the business of the limited partnership.
28 (ii) The sale, exchange, lease, mortgage, pledge or
29 other transfer of, or the grant of a security interest
30 in, any asset or assets of the limited partnership.
19990S0393B2277 - 143 -
1 (iii) The incurrence, renewal, refinancing or
2 payment or other discharge of indebtedness by the limited
3 partnership.
4 (iv) A change in the nature of the business.
5 (v) The admission or removal of a general partner.
6 (vi) The admission or removal of a limited partner.
7 (vii) A transaction involving an actual or potential
8 conflict of interest between a general partner and the
9 limited partnership or the limited partners.
10 (viii) An amendment to the partnership agreement or
11 certificate of limited partnership.
12 (ix) The merger or consolidation of the limited
13 partnership.
14 (x) The indemnification of any partner or other
15 person.
16 (xi) Matters related to the business of the limited
17 partnership not otherwise enumerated in this subsection,
18 which the partnership agreement states in writing may be
19 subject to the approval or disapproval of limited
20 partners.
21 (7) Applying for dissolution of the partnership pursuant
22 to section 8572 (relating to judicial dissolution).
23 (8) Winding up the limited partnership pursuant to
24 section 8573 (relating to winding up).
25 (9) In the case of a registered investment company,
26 voting on one or more of the following matters:
27 (i) The approval or termination of investment
28 advisory or underwriting contracts.
29 (ii) The approval of auditors.
30 (iii) Any other matter that by reason of the
19990S0393B2277 - 144 -
1 Investment Company Act of 1940 (54 Stat. 789, 15 U.S.C. §
2 80a-1 et seq.) the general partners consider to be a
3 proper matter for the vote of the holders of voting
4 securities or beneficial interests in the limited
5 partnership.
6 (10) Serving on a committee of the limited partnership
7 or the limited partners.
8 (11) Exercising any right or power permitted to limited
9 partners under this chapter and not specifically enumerated
10 in this subsection.
11 (12) Exercising any other right or power stated in the
12 partnership agreement.] (Repealed).
13 (c) [Enumeration nonexclusive.--The enumeration in
14 subsection (b) does not mean that the possession or exercise of
15 any other powers, or having or acting in other capacities, by a
16 limited partner constitutes participation by him in the control
17 of the business of the limited partnership.] (Repealed).
18 (d) Use of name of limited partner.--A limited partner does
19 not [participate in the control of the business within the
20 meaning of subsection (a)] become liable for the obligations of
21 a limited partnership by reason of the fact that all or any part
22 of the name of the limited partner is included in the name of
23 the limited partnership.
24 (e) [Effect of section.--This section does not create rights
25 or powers of limited partners. Such rights and powers may be
26 created only by the certificate of limited partnership,
27 partnership agreement or any other agreement or other provisions
28 of this chapter.] (Repealed).
29 * * *
30 § 8546. Approval of merger or consolidation.
19990S0393B2277 - 145 -
1 (a) Preparation of plan of merger or consolidation.--A plan
2 of merger or consolidation, as the case may be, shall be
3 prepared, setting forth:
4 * * *
5 (3) The manner and basis of converting the partnership
6 interests of each limited partnership into partnership
7 interests, securities or obligations of the surviving or new
8 limited partnership, as the case may be, and, if any of the
9 partnership interests of any of the limited partnerships that
10 are parties to the [plan] merger or consolidation are not to
11 be converted solely into partnership interests, securities or
12 obligations of the surviving or new limited partnership, the
13 partnership interests, securities or obligations of any other
14 person or cash, property or rights that the holders of such
15 partnership interests are to receive in exchange for, or upon
16 conversion of, such partnership interests, and the surrender
17 of any certificates evidencing them, which securities or
18 obligations, if any, of any other person or cash, property or
19 rights may be in addition to or in lieu of the partnership
20 interests, securities or obligations of the surviving or new
21 limited partnership.
22 (4) Such other provisions as are deemed desirable.
23 [Any of the terms of the plan may be made dependent upon facts
24 ascertainable outside of the plan if the manner in which the
25 facts will operate upon the terms of the plan is set forth in
26 the plan.]
27 (b) Post-adoption amendment of plan of merger or
28 consolidation.--A plan of merger or consolidation may contain a
29 provision that the general partners of the constituent limited
30 partnerships may amend the plan at any time prior to its
19990S0393B2277 - 146 -
1 effective date, except that an amendment made subsequent to any
2 adoption of the plan by the limited partners of any constituent
3 domestic limited partnership shall not change:
4 (1) The amount or kind of partnership interests,
5 obligations, cash, property or rights to be received in
6 exchange for or on conversion of all or any of the
7 partnership interests of the constituent domestic limited
8 partnership adversely to the holders of those partnership
9 interests.
10 (2) Any term of the certificate of limited partnership
11 or partnership agreement of the surviving or new limited
12 partnership [to be effected by] as it is to be in effect
13 immediately following consummation of the merger or
14 consolidation except provisions that may be amended without
15 the approval of the limited partners.
16 (3) Any of the other terms and conditions of the plan if
17 the change would adversely affect the holders of any
18 partnership interests of the constituent domestic limited
19 partnership.
20 * * *
21 (d) Party to plan.--[A limited partnership] An association
22 that approves a plan in its capacity as a partner or creditor of
23 a merging or consolidating limited partnership, or that
24 furnishes all or a part of the consideration contemplated by a
25 plan, does not thereby become a party to the [plan] merger or
26 consolidation for the purposes of this subchapter.
27 (e) Notice of meeting of limited partners.--Notwithstanding
28 any other provision of the partnership agreement, written notice
29 of the meeting of limited partners called for the purpose of
30 considering the proposed plan shall be given to each limited
19990S0393B2277 - 147 -
1 partner of record, whether or not entitled to vote thereon, of
2 each domestic limited partnership that is a party to the [plan]
3 proposed merger or consolidation. There shall be included in, or
4 enclosed with, the notice a copy of the proposed plan or a
5 summary thereof. The provisions of this subsection may not be
6 relaxed by the certificate of limited partnership or partnership
7 agreement.
8 (f) Adoption of plan by limited partners.--The plan of
9 merger or consolidation shall be adopted upon receiving a
10 majority of the votes cast by all limited partners, if any,
11 entitled to vote thereon of each of the domestic limited
12 partnerships that is a party to the [plan] proposed merger or
13 consolidation and, if any class of limited partners is entitled
14 to vote thereon as a class, a majority of the votes cast in each
15 class vote. A proposed plan of merger or consolidation shall not
16 be deemed to have been adopted by the limited partnership unless
17 it has also been approved by the general partners, regardless of
18 the fact that the general partners have directed or suffered the
19 submission of the plan to the limited partners for action.
20 * * *
21 (h) 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 limited partnership
27 that is a party to the [plan] merger or consolidation, unless
28 the plan permits termination by less than all of the limited
29 partnerships, in which case the certificate shall be executed on
30 behalf of the limited partnership exercising the right to
19990S0393B2277 - 148 -
1 terminate, shall be filed in the department. The certificate of
2 termination shall set forth:
3 (1) A copy of the certificate of merger or consolidation
4 relating to the plan that is terminated.
5 (2) A statement that the plan has been terminated in
6 accordance with the provisions therefor set forth therein.
7 See sections 134 (relating to docketing statement), 135
8 (relating to requirements to be met by filed documents), 138
9 (relating to statement of correction) and 8514 (relating to
10 execution of certificates).
11 * * *
12 (j) Reference to outside facts.--Any of the terms of a plan
13 of merger or consolidation may be made dependent upon facts
14 ascertainable outside of the plan if the manner in which the
15 facts will operate upon the terms of the plan is set forth in
16 the plan. Such facts may include, without limitation, actions or
17 events within the control of or determinations made by a party
18 to the plan or a representative of a party to the plan.
19 § 8549. Effect of merger or consolidation.
20 * * *
21 (b) Property rights.--All the property, real, personal and
22 mixed, of each of the limited partnerships parties to the plan
23 of merger or consolidation, and all debts due on whatever
24 account to any of them, as well as all other things and causes
25 of action belonging to any of them, shall be deemed to be
26 [transferred to and] vested in and shall belong to the surviving
27 or new limited partnership, as the case may be, without further
28 action, and the title to any real estate, or any interest
29 therein, vested in any of the limited partnerships shall not
30 revert or be in any way impaired by reason of the merger or
19990S0393B2277 - 149 -
1 consolidation. The surviving or new limited partnership shall
2 thenceforth be responsible for all the liabilities of each of
3 the limited partnerships so merged or consolidated. Liens upon
4 the property of the merging or consolidating limited
5 partnerships shall not be impaired by the merger or
6 consolidation, and any claim existing or action or proceeding
7 pending by or against any of the limited partnerships may be
8 prosecuted to judgment as if the merger or consolidation had not
9 taken place or the surviving or new limited partnership may be
10 proceeded against or substituted in its place.
11 (c) Taxes.--Any taxes, interest, penalties and public
12 accounts of the Commonwealth claimed against any of the merging
13 or consolidating limited partnerships [but not] that are
14 settled, assessed or determined prior to or after the merger or
15 consolidation shall be [settled, assessed or determined against]
16 the liability of the surviving or new limited partnership and,
17 together with interest thereon, shall be a lien against the
18 property, both real and personal, of the surviving or new
19 limited partnership.
20 * * *
21 § 8553. Voluntary withdrawal of limited partner.
22 (a) General rule.--A limited partner may withdraw from a
23 limited partnership only at the time or upon the happening of
24 events specified in writing in the partnership agreement. [If
25 the partnership agreement does not specify in writing the time
26 or the events upon the happening of which a limited partner may
27 withdraw or a definite time for the dissolution and winding up
28 of the limited partnership, a limited partner may withdraw upon
29 not less than six months' prior written notice to each general
30 partner at his address on the books of the limited partnership.]
19990S0393B2277 - 150 -
1 (b) [Prohibition of withdrawal.--The partnership agreement
2 may provide that a limited partner may not withdraw from the
3 limited partnership or assign a partnership interest in the
4 limited partnership prior to the dissolution and winding up of
5 the limited partnership.] (Repealed).
6 (c) Transitional rule.--This section applies to all limited
7 partnerships formed on or after January 1, 2001. If the
8 partnership agreement of a limited partnership formed before
9 January 1, 2001, did not on December 31, 2000, specify in
10 writing the time or the events upon the happening of which a
11 limited partner could withdraw or a definite time for the
12 dissolution and winding up of the limited partnership, the
13 provisions of this section that were in effect prior to January
14 1, 2001, shall apply until such time, if any, as the partnership
15 agreement is amended in writing after January 1, 2001, to
16 specify:
17 (1) a time or the events upon the happening of which a
18 limited partner may withdraw;
19 (2) a definite time for the dissolution and winding up
20 of the limited partnership; or
21 (3) that this section as effective January 1, 2001,
22 shall apply to the limited partnership.
23 § 8557. [Limitations on distribution.] Distributions and
24 allocation of profits and losses.
25 [A partner may not receive a distribution from a limited
26 partnership to the extent that, after giving effect to the
27 distribution, all liabilities of the limited partnership, other
28 than liabilities to partners on account of their partnership
29 interests and liabilities as to which recourse of creditors is
30 limited to specified property of the limited partnership, exceed
19990S0393B2277 - 151 -
1 the fair value of the partnership assets. The fair value of any
2 property that is subject to a liability as to which recourse of
3 creditors is so limited shall be included in the partnership
4 assets only to the extent that the fair value of the property
5 exceeds that liability.] A limited partnership may from time to
6 time make distributions and allocate the profits and losses of
7 its business to the partners upon the basis stipulated in the
8 partnership agreement or, if not stipulated in the partnership
9 agreement, per capita. The allocation of losses pursuant to this
10 section shall not affect the limitation on liability of limited
11 partners as provided in section 8523 (relating to liability of
12 limited partners to third parties).
13 § 8558. Liability upon return of contribution.
14 * * *
15 (c) Determination of return of contribution.--A partner
16 receives a return of his contribution to the extent that a
17 distribution to him reduces his share of the fair value of the
18 net assets of the limited partnership[, as determined under
19 section 8557 (relating to limitations on distribution),] below
20 the value (as stated or determined in the manner provided in the
21 partnership agreement, if stated or provided for therein) of his
22 contribution (to the extent it has been received by the limited
23 partnership) that has not been distributed to him, and otherwise
24 to the extent of the fair value of the distribution.
25 (d) Fair value of net assets.--For purposes of computing the
26 fair value of the net assets of the limited partnership under
27 subsection (c):
28 (1) liabilities of the limited partnership to partners
29 on account of their partnership interests and liabilities as
30 to which recourse of creditors is limited to specified
19990S0393B2277 - 152 -
1 property of the limited partnership shall not be considered;
2 and
3 (2) the fair value of property that is subject to a
4 liability as to which recourse of creditors is so limited
5 shall be included in the partnership assets only to the
6 extent that the fair value of the property exceeds that
7 liability.
8 § 8571. Nonjudicial dissolution.
9 (a) General rule.--A limited partnership is dissolved and
10 its affairs shall be wound up upon the happening of the first to
11 occur of the following:
12 (1) At the time or upon the happening of events
13 specified in the certificate of limited partnership.
14 (2) At the time or upon the happening of events
15 specified in writing in the partnership agreement.
16 (3) Written consent of all partners.
17 (4) An event of withdrawal of a general partner unless
18 at the time there is at least one other general partner and
19 the written provisions of the partnership agreement permit
20 the business of the limited partnership to be carried on by
21 the remaining general partner and that partner does so. The
22 limited partnership is not dissolved and is not required to
23 be wound up by reason of any event of withdrawal if, within
24 180 days after the withdrawal, [all] a majority in interest,
25 or such greater number as shall be provided in writing in the
26 partnership agreement, of the partners agree in writing to
27 continue the business of the limited partnership or to the
28 appointment of one or more replacement general partners.
29 (5) Entry of an order of judicial dissolution under
30 section 8572 (relating to judicial dissolution).
19990S0393B2277 - 153 -
1 * * *
2 (c) Dissolution by domestication.--Whenever a domestic
3 limited partnership has domesticated itself under the laws of
4 another jurisdiction by action similar to that provided by
5 section 8590 (relating to domestication) and has authorized that
6 action in the manner required by this subchapter for the
7 approval of a proposal that the partnership dissolve
8 voluntarily, the partnership may surrender its certificate of
9 limited partnership under the laws of this Commonwealth by
10 filing in the department a certificate of cancellation under
11 section 8513 (relating to cancellation of certificate). If the
12 partnership, as domesticated in the other jurisdiction,
13 registers to do business in this Commonwealth either prior to or
14 simultaneously with the filing of the certificate of
15 cancellation under this subsection, the partnership shall not be
16 required to file with the certificate of cancellation the tax
17 clearance certificates that would otherwise be required by
18 section 139 (relating to tax clearance of certain fundamental
19 transactions).
20 [(c)] (d) Cross [references] reference.--See [sections 8103
21 (relating to continuation of certain limited partnerships) and]
22 section 8512(b) (relating to events requiring amendment).
23 § 8573. Winding up.
24 Except as otherwise provided in the partnership agreement,
25 the general partners who have not wrongfully dissolved a limited
26 partnership or, if none, the limited partners, or a person
27 approved by the limited partners or, if there is more than one
28 class or group of limited partners, by each class or group of
29 limited partners, in either case by a majority in interest of
30 the limited partners in each class or group, may wind up the
19990S0393B2277 - 154 -
1 affairs of the limited partnership, but the court may wind up
2 the affairs of the limited partnership upon application of any
3 partner, his legal representative or assignee, and in connection
4 therewith, may appoint a liquidating trustee. See section 139(b)
5 (relating to tax clearance in judicial proceedings).
6 § 8577. Proposal and adoption of plan of division.
7 * * *
8 (b) Reference to outside facts.--Any of the terms of the
9 plan may be made dependent upon facts ascertainable outside of
10 the plan if the manner in which the facts will operate upon the
11 terms of the plan is set forth in the plan. Such facts may
12 include, without limitation, actions or events within the
13 control of or determinations made by the dividing limited
14 partnership or a representative of the dividing limited
15 partnership.
16 * * *
17 (e) [Restrictions on certain distributions.--A plan of
18 division may not be made effective if the effect of the plan is
19 to make a distribution to the holders of any class or series of
20 partnership interests of the dividing limited partnership unless
21 the distribution is permitted by section 8557 (relating to
22 limitations on distribution.] (Repealed).
23 (f) [Action by] Rights of holders of indebtedness.--[Unless
24 otherwise provided by an indenture or other contract by which
25 the dividing limited partnership is bound, a plan of division
26 shall not require the approval of the holders of any debt
27 securities or other obligations of the dividing limited
28 partnership or of any representative of the holders if the
29 transfer of assets effected by the division, if effected by
30 means of a sale, lease, exchange or other disposition, and any
19990S0393B2277 - 155 -
1 related distribution would not require the approval of the
2 holders or representatives thereof.] If any such debt
3 securities, notes, similar evidences of indebtedness, indentures
4 or other contracts were issued, incurred or executed by the
5 dividing limited partnership before (the Legislative Reference
6 Bureau shall insert here the effective date of the amendments of
7 this section) and have not been amended subsequent to that date,
8 the liability of the dividing limited partnership thereunder
9 shall not be affected by the division nor shall the rights of
10 the obligees thereunder be impaired by the division, and each of
11 the resulting limited partnerships may be proceeded against or
12 substituted in place of the dividing limited partnership as
13 joint and several obligors on such liability, regardless of any
14 provision of the plan of division apportioning the liabilities
15 of the dividing limited partnership.
16 * * *
17 § 8580. Effect of division.
18 * * *
19 (b) Property rights; allocations of assets and
20 liabilities.--
21 (1) (i) All the property, real, personal and mixed, of
22 the dividing limited partnership, and all debts due on
23 whatever account to it, including subscriptions for
24 partnership interests or other causes of action belonging
25 to it, shall, except as otherwise provided in paragraph
26 (2), to the extent [transfers] allocations of assets are
27 contemplated by the plan of division, be deemed without
28 further action to be [transferred] allocated to and
29 vested in the resulting limited partnerships on such a
30 manner and basis and with such effect as is specified in
19990S0393B2277 - 156 -
1 the plan, or per capita among the resulting limited
2 partnerships, as tenants in common, if no specification
3 is made in the plan, and the title to any real estate or
4 interest therein vested in any of the limited
5 partnerships shall not revert or be in any way impaired
6 by reason of the division.
7 (ii) Upon the division becoming effective, the
8 resulting limited partnerships shall each thenceforth be
9 responsible as separate and distinct limited partnerships
10 only for such liabilities as each limited partnership may
11 undertake or incur in its own name but shall be liable
12 for the liabilities of the dividing limited partnership
13 in the manner and on the basis provided in subparagraphs
14 (iv) and (v).
15 (iii) Liens upon the property of the dividing
16 limited partnership shall not be impaired by the
17 division.
18 (iv) [One] To the extent allocations of liabilities
19 are contemplated by the plan of division, the liabilities
20 of the dividing limited partnership shall be deemed
21 without further action to be allocated to and become the
22 liabilities of the resulting limited partnerships on such
23 a manner and basis and with such effect as is specified
24 in the plan; and one or more but less than all of the
25 resulting limited partnerships shall be free of the
26 liabilities of the dividing limited partnership to the
27 extent, if any, specified in the plan [if no fraud of
28 creditors or partners or violation of law shall be
29 effected thereby and if all applicable provisions of law
30 are complied with.], if in either case:
19990S0393B2277 - 157 -
1 (A) no fraud of partners or violation of law
2 shall be effected thereby; and
3 (B) the plan does not constitute a fraudulent
4 transfer under 12 Pa.C.S. Ch. 51 (relating to
5 fraudulent transfers).
6 (v) If the conditions in subparagraph (iv) for
7 freeing one or more of the resulting limited partnerships
8 from the liabilities of the dividing limited partnership,
9 or for allocating some or all of the liabilities of the
10 dividing limited partnership, are not satisfied, the
11 liabilities of the dividing limited partnership as to
12 which those conditions are not satisfied shall not be
13 affected by the division nor shall the rights of
14 creditors [thereof] thereunder or of any person dealing
15 with the limited partnership be impaired by the division,
16 and any claim existing or action or proceeding pending by
17 or against the limited partnership with respect to those
18 liabilities may be prosecuted to judgment as if the
19 division had not taken place, or the resulting limited
20 partnerships may be proceeded against or substituted in
21 [its] place of the dividing limited partnership as joint
22 and several obligors on [such liability] those
23 liabilities, regardless of any provision of the plan of
24 division apportioning the liabilities of the dividing
25 limited partnership.
26 (vi) The conditions in subparagraph (iv) for freeing
27 one or more of the resulting limited partnerships from
28 the liabilities of the dividing limited partnership and
29 for allocating some or all of the liabilities of the
30 dividing limited partnership shall be conclusively deemed
19990S0393B2277 - 158 -
1 to have been satisfied if the plan of division has been
2 approved by the Pennsylvania Public Utility Commission in
3 a final order issued after (the Legislative Reference
4 Bureau shall insert here the effective date of the
5 amendments of this section) that has become not subject
6 to further appeal.
7 (2) (i) The [transfer] allocation of any fee or
8 freehold interest or leasehold having a remaining term of
9 30 years or more in any tract or parcel of real property
10 situate in this Commonwealth owned by a dividing limited
11 partnership (including property owned by a foreign
12 limited partnership dividing solely under the law of
13 another jurisdiction) to a new limited partnership
14 resulting from the division shall not be effective until
15 one of the following documents is filed in the office for
16 the recording of deeds of the county, or each of them, in
17 which the tract or parcel is situated:
18 (A) A deed, lease or other instrument of
19 confirmation describing the tract or parcel.
20 (B) A duly executed duplicate original copy of
21 the certificate of division.
22 (C) A copy of the certificate of division
23 certified by the Department of State.
24 (D) A declaration of acquisition setting forth
25 the value of real estate holdings in the county of
26 the limited partnership as an acquired company.
27 (ii) The provisions of 75 Pa.C.S. § 1114 (relating
28 to transfer of vehicle by operation of law) shall not be
29 applicable to [a transfer] an allocation of ownership of
30 any motor vehicle, trailer or semitrailer [from a
19990S0393B2277 - 159 -
1 dividing limited partnership] to a new limited
2 partnership under this section or under a similar law of
3 any other jurisdiction, but any such [transfer]
4 allocation shall be effective only upon compliance with
5 the requirements of 75 Pa.C.S. § 1116 (relating to
6 issuance of new certificate following transfer).
7 (3) It shall not be necessary for a plan of division to
8 list each individual asset or liability of the dividing
9 limited partnership to be allocated to a new limited
10 partnership so long as those assets and liabilities are
11 described in a reasonable and customary manner.
12 (4) Each new limited partnership shall hold any assets
13 and liabilities allocated to it as the successor to the
14 dividing limited partnership, and those assets and
15 liabilities shall not be deemed to have been assigned to the
16 new limited partnership in any manner, whether directly or
17 indirectly or by operation of law.
18 * * *
19 (g) Conflict of laws.--It is the intent of the General
20 Assembly that:
21 (1) The effect of a division of a domestic limited
22 partnership shall be governed solely by the laws of this
23 Commonwealth and any other jurisdiction under the laws of
24 which any of the resulting limited partnerships is organized.
25 (2) The effect of a division on the assets and
26 liabilities of the dividing limited partnership shall be
27 governed solely by the laws of this Commonwealth and any
28 other jurisdiction under the laws of which any of the
29 resulting limited partnerships is organized.
30 (3) The validity of any allocations of assets or
19990S0393B2277 - 160 -
1 liabilities by a plan of division of a domestic limited
2 partnership, regardless of whether or not any of the new
3 limited partnerships is a foreign limited partnership, shall
4 be governed solely by the laws of this Commonwealth.
5 (4) In addition to the express provisions of this
6 subsection, this subchapter shall otherwise generally be
7 granted the protection of full faith and credit under the
8 Constitution of the United States.
9 § 8590. Domestication.
10 * * *
11 (b) Certificate of domestication.--The certificate of
12 domestication shall be executed by the limited partnership and
13 shall set forth in the English language:
14 (1) The name of the limited partnership. If the name is
15 in a foreign language, it shall be set forth in Roman letters
16 or characters or Arabic or Roman numerals. If the name is one
17 that is rendered unavailable for use by any provision of
18 section 8505 (relating to name), the limited partnership
19 shall adopt, in accordance with any procedures for changing
20 the name of the limited partnership that are applicable prior
21 to the domestication of the limited partnership, and shall
22 set forth in the certificate of domestication an available
23 name.
24 * * *
25 (c) Effect of domestication.--
26 (1) As a domestic limited partnership, the domesticated
27 limited partnership shall no longer be a foreign limited
28 partnership for the purposes of this chapter and shall [have]
29 instead be a domestic limited partnership with all the powers
30 and privileges and [be subject to] all the duties and
19990S0393B2277 - 161 -
1 limitations granted and imposed upon domestic limited
2 partnerships. [The property, debts, liens, estates, taxes,
3 penalties and public accounts due the Commonwealth shall
4 continue to be vested in and imposed upon the limited
5 partnership to the same extent as if it were the successor by
6 merger of the domesticating limited partnership with and into
7 a domestic limited partnership under Subchapter F (relating
8 to merger and consolidation).] In all other respects, the
9 domesticated limited partnership shall be deemed to be the
10 same limited partnership as it was prior to the domestication
11 without any change in or effect on its existence. Without
12 limiting the generality of the previous sentence, the
13 domestication shall not be deemed to have dissolved the
14 limited partnership or to have affected in any way:
15 (i) the right and title of the limited partnership
16 in and to its assets, property, franchises, estates and
17 choses in action;
18 (ii) the liability of the limited partnership for
19 its debts, obligations, penalties and public accounts due
20 the Commonwealth;
21 (iii) any liens or other encumbrances on the
22 property or assets of the limited partnership; or
23 (iv) any contract, license or other agreement to
24 which the limited partnership is a party or under which
25 it has any rights or obligations.
26 (2) The partnership interests in the domesticated
27 limited partnership shall be unaffected by the domestication
28 except to the extent, if any, reclassified in the certificate
29 of domestication.
30 § 8903. Definitions and index of definitions.
19990S0393B2277 - 162 -
1 (a) Definitions.--The following words and phrases when used
2 in this chapter shall have the meanings given to them in this
3 section unless the context clearly indicates otherwise:
4 * * *
5 ["Department." The Department of State of the Commonwealth.]
6 * * *
7 "Event of dissociation." An event that causes a person to
8 cease to be a member of a limited liability company. See
9 section [8971(a)(4)] 8971(4) (relating to dissolution).
10 * * *
11 ["Licensed person." A natural person who is duly licensed or
12 admitted to practice his profession by a court, department,
13 board, commission or other agency of this Commonwealth or
14 another jurisdiction to render a professional service that is or
15 will be rendered by the professional company of which he is or
16 intends to become a manager, member, employee or agent.]
17 "Limited liability company," "domestic limited liability
18 company" or "company." An association that is a limited
19 liability company organized and existing under this chapter.
20 * * *
21 "Operating agreement." Any [agreement of the members as to]
22 rules or procedures adopted for the regulation and governance of
23 the affairs of a limited liability company and the conduct of
24 its business. [The operating agreement need not be in writing
25 except where this chapter refers to a written provision of the
26 operating agreement. The operating agreement may contain any
27 provision for the regulation of the internal affairs of the
28 company agreed to by the members, whether or not specifically
29 authorized by or in contravention of this chapter, except where
30 this chapter:
19990S0393B2277 - 163 -
1 (1) refers only to a rule as set forth in the
2 certificate of organization; or
3 (2) expressly provides that the operating agreement
4 shall not relax or contravene any provision on a specified
5 subject. See sections 8913(8) (relating to certificate of
6 organization) and 8915 (relating to modification by
7 agreement).]
8 * * *
9 ["Professional services." The term shall have the meaning
10 specified in section 2902 (relating to definitions).]
11 * * *
12 (b) Index of other definitions.--Other definitions applying
13 to this chapter and the sections in which they appear are:
14 "Act" or "action." Section 102.
15 "Department." Section 102.
16 "Licensed person." Section 102.
17 "Professional services." Section 102.
18 SUBCHAPTER B
19 ORGANIZATION[; CERTIFICATE OF ORGANIZATION]
20 § 8915. Modification by agreement.
21 The provisions of this chapter are intended to permit a
22 limited liability company to qualify for taxation as an entity
23 that is not an association taxable as a corporation under the
24 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1
25 et seq.). Notwithstanding the limitations in [the definition of
26 "operating agreement" in section 8903 (relating to definitions)
27 and the limitations in section] sections 8913(8) (relating to
28 certificate of organization) and 8916(b) (relating to operating
29 agreement), the certificate of organization and operating
30 agreement may effect any change in the form of organization of
19990S0393B2277 - 164 -
1 the company, in addition to or in contravention of the
2 provisions of this chapter, that may be necessary to accomplish
3 that purpose.
4 § 8916. Operating agreement.
5 (a) General rule.--The operating agreement of a limited
6 liability company need not be in writing except where this
7 chapter refers to a written provision of the operating
8 agreement. If a written operating agreement provides that it
9 cannot be amended or modified except in writing, an oral
10 agreement, amendment or modification shall not be enforceable.
11 (b) Freedom of contract.--An operating agreement may contain
12 any provision for the regulation of the internal affairs of a
13 limited liability company adopted by the members, whether or not
14 specifically authorized by or in contravention of this chapter,
15 except where this chapter:
16 (1) refers only to a rule as set forth in the
17 certificate of organization; or
18 (2) expressly provides that the operating agreement
19 shall not relax or contravene any provision on a specified
20 subject.
21 (c) Cross references.--See sections 8913(8) (relating to
22 certificate of organization) and 8915 (relating to modification
23 by agreement).
24 § 8922. Liability of members [and managers].
25 (a) General rule.--[Neither] Except as provided in
26 subsection (e), the members of a limited liability company [nor
27 the managers of a company managed by one or more managers are]
28 shall not be liable, solely by reason of being a member [or a
29 manager], under an order of a court or in any other manner for a
30 debt, obligation or liability of the company of any kind or for
19990S0393B2277 - 165 -
1 the acts [or omissions] of any [other] member, manager, agent or
2 employee of the company.
3 (b) Professional relationship unaffected.--Subsection (a)
4 shall not afford members [and managers] of a professional
5 company with greater immunity than is available to the officers,
6 shareholders, employees or agents of a professional corporation.
7 See section 2925 (relating to professional relationship
8 retained).
9 * * *
10 (d) Conflict of laws.--The personal liability of a member of
11 a company to any person or in any action or proceeding for the
12 debts, obligations or liabilities of the company or for the acts
13 [or omissions] of other members, managers, employees or agents
14 of the company shall be governed solely and exclusively by this
15 chapter and the laws of this Commonwealth. Whenever a conflict
16 arises between the laws of this Commonwealth and the laws of any
17 other state with regard to the liability of members of a company
18 organized and existing under this chapter for the debts,
19 obligations and liabilities of the company or for the acts [or
20 omissions] of the other members, managers, employees or agents
21 of the company, the laws of this Commonwealth shall govern in
22 determining such liability.
23 (e) Expansion of liability.--The certificate of organization
24 may provide that some or all of the members shall be liable for
25 some or all of the debts, obligations and liabilities of the
26 company to the extent and under the circumstances provided in
27 the certificate.
28 (f) Medical professional liability.--A professional company
29 shall be deemed to be a partnership for purposes of section 811
30 of the act of October 15, 1975 (P.L.390, No.111), known as the
19990S0393B2277 - 166 -
1 Health Care Services Malpractice Act.
2 [(e)] (g) Cross reference.--See section 8904(b) (relating to
3 rules for cases not provided for in this chapter).
4 § 8924. Limited transferability of membership interest.
5 (a) General rule.--The interest of a member in a limited
6 liability company constitutes the personal estate of the member
7 and may be transferred or assigned as provided in writing in the
8 operating agreement. Unless otherwise provided in writing in
9 the operating agreement, if all of the other members of the
10 company other than the member proposing to dispose of his
11 interest do not approve of the proposed transfer or assignment
12 by unanimous vote or written consent, which approval may be
13 unreasonably withheld by any of the other members, the
14 transferee of the interest of the member shall have no right to
15 participate in the management of the business and affairs of the
16 company or to become a member. The transferee shall only be
17 entitled to receive the distributions and the return of
18 contributions to which that member would otherwise be entitled.
19 (b) Certificate of membership interest.--The certificate of
20 organization may provide that a member's interest in a company
21 may be evidenced by a certificate of membership interest issued
22 by the company [and]. If such provision is made for the issuance
23 of certificates of membership interest, the operating agreement
24 may [also] provide for the assignment or transfer of any
25 membership interest represented by such a certificate and make
26 other provisions with respect to such certificates. [See 13
27 Pa.C.S. § 8102 (relating to definitions and index of
28 definitions).]
29 § 8932. Distributions and allocation of profits and losses.
30 A limited liability company may from time to time [divide]
19990S0393B2277 - 167 -
1 make distributions and allocate the profits and losses of its
2 business [and distribute the same] to [and allocate any losses
3 among] the members of the company upon the basis stipulated in
4 the operating agreement or, if not stipulated in the operating
5 agreement, per capita. The allocation of losses pursuant to this
6 section shall not affect the limitation on liability of members
7 as provided in section 8922 (relating to liability of members).
8 § 8942. Voting.
9 * * *
10 (c) Exception.--An amendment of the certificate of
11 organization that:
12 (1) restates without change all of the operative
13 provisions of the certificate of organization as theretofore
14 in effect;
15 (2) changes the name or registered office of the
16 company; or
17 (3) accomplishes any combination of the foregoing
18 purposes;
19 is not an amendment of the certificate of organization for the
20 purposes of subsection (b). Unless otherwise provided in writing
21 in the operating agreement, an amendment described in this
22 subsection may be made by the affirmative vote of a majority of
23 the managers or, in the case of a company that is not managed by
24 one or more managers, of a majority of the members.
25 * * *
26 § 8943. Duties of managers and members.
27 * * *
28 (b) Companies with managers.--If the certificate of
29 organization provides that the company shall be managed by one
30 or more managers:
19990S0393B2277 - 168 -
1 (1) [Unless otherwise provided in writing in the
2 operating agreement, the provisions of Subchapter B of
3 Chapter 17 (relating to officers, directors and
4 shareholders)] Sections 1711 (relating to alternative
5 provisions) through 1717 (relating to limitation on standing)
6 shall be applicable to representatives of the company. A
7 written provision of the operating agreement may increase,
8 but not relax, the duties of representatives of the company
9 to its members under those sections. For purposes of applying
10 the provisions of those sections, references to the "articles
11 of incorporation," "bylaws," "directors" and "shareholders"
12 shall mean the certificate of organization, operating
13 agreement, managers and members, respectively.
14 (2) A member who is not a manager shall have no duties
15 to the company or to the other members solely by reason of
16 acting in his capacity as a member.
17 § 8944. [Classes of members.] Members.
18 (a) General rule.--A limited liability company may have one
19 or more members.
20 (b) Classes of members.--An operating agreement may provide
21 for:
22 (1) classes or groups of members having such relative
23 rights, powers and duties as the operating agreement may
24 provide;
25 (2) the future creation in the manner provided in the
26 operating agreement of additional classes or groups of
27 members having such relative rights, powers and duties as may
28 from time to time be established, including rights, powers
29 and duties senior to existing classes and groups of members;
30 and
19990S0393B2277 - 169 -
1 (3) the taking of an action, including, without
2 limitation, amendment of the certificate of organization or
3 operating agreement or creation of a class or group of
4 interests in the limited liability company that was not
5 previously outstanding, without the vote or approval of any
6 member or class or group of members.
7 [(b)] (c) Class voting.--The operating agreement may grant
8 to all or certain identified members or a specified class or
9 group of members the right to vote (on a per capita or other
10 basis), separately or with all or any class or group of members,
11 upon any matter.
12 § 8945. Indemnification.
13 * * *
14 (f) Mandatory indemnification.--Without regard to whether
15 indemnification or advancement of expenses is provided under
16 subsections (a) and (d), a limited liability company shall be
17 subject to section 8331(2) (relating to rules determining rights
18 and duties of partners) and both the members and the managers,
19 if any, shall be deemed to be general partners for purposes of
20 applying that section.
21 § 8948. [Dissociation of member limited.] Limitation on
22 dissociation or assignment of membership interest.
23 Notwithstanding anything to the contrary set forth in this
24 part, an operating agreement may provide that a member may not
25 voluntarily dissociate from the limited liability company or
26 assign his membership interest prior to the dissolution and
27 winding-up of the company, and an attempt by a member to
28 dissociate voluntarily from the company or to assign his
29 membership interest in violation of the operating agreement
30 shall be ineffective.
19990S0393B2277 - 170 -
1 § 8957. Approval of merger or consolidation.
2 * * *
3 (b) Reference to outside facts.--Any of the terms of the
4 plan may be made dependent upon facts ascertainable outside of
5 the plan if the manner in which the facts will operate upon the
6 terms of the plan is set forth in the plan. Such facts may
7 include, without limitation, actions or events within the
8 control of or determinations made by a party to the plan or a
9 representative of a party to the plan.
10 (c) [Postadoption] Post-adoption amendment of plan of merger
11 or consolidation.--A plan of merger or consolidation may contain
12 a provision that the managers, if any, of the constituent
13 companies may amend the plan at any time prior to its effective
14 date, except that an amendment made subsequent to any adoption
15 of the plan by the members of any constituent domestic company
16 shall not, without the approval of the members, change:
17 (1) The amount or kind of membership interests,
18 obligations, cash, property or rights to be received in
19 exchange for or on conversion of all or any of the membership
20 interests of the constituent domestic company adversely to
21 the holders of those membership interests.
22 (2) Any [term] provision of the certificate of
23 organization or operating agreement of the surviving or new
24 company [to be effected by] as it is to be in effect
25 immediately following consummation of the merger or
26 consolidation except provisions that may be amended without
27 the approval of the members.
28 (3) Any of the other terms and conditions of the plan if
29 the change would adversely affect the holders of any
30 membership interests of the constituent domestic company.
19990S0393B2277 - 171 -
1 * * *
2 (e) Party to plan.--An association that approves a plan in
3 its capacity as a member or creditor of a merging or
4 consolidating company or that furnishes all or a part of the
5 consideration contemplated by a plan does not thereby become a
6 party to the [plan or the] merger or consolidation for the
7 purposes of this subchapter.
8 * * *
9 (i) Termination of plan.--Prior to the time when a merger or
10 consolidation becomes effective, the merger or consolidation may
11 be terminated pursuant to provisions therefor, if any, set forth
12 in the plan. If a certificate of merger or consolidation has
13 been filed in the department prior to the termination, a
14 certificate of termination executed by each company that is a
15 party to the merger or consolidation, unless the plan permits
16 termination by less than all of the companies, in which case the
17 certificate shall be executed on behalf of the company
18 exercising the right to terminate, shall be filed in the
19 department. The certificate of termination shall set forth:
20 (1) A copy of the certificate of merger or consolidation
21 relating to the plan that is terminated.
22 (2) A statement that the plan has been terminated in
23 accordance with the provisions therefor set forth therein.
24 See sections 134 (relating to docketing statement), 135
25 (relating to requirements to be met by filed documents), 138
26 (relating to statement of correction) and 8907 (relating to
27 execution of documents).
28 * * *
29 § 8959. Effect of merger or consolidation.
30 * * *
19990S0393B2277 - 172 -
1 (b) Property rights.--All the property, real, personal and
2 mixed, of each of the companies parties to the merger or
3 consolidation and all debts due on whatever account to any of
4 them, as well as all other things and causes of action belonging
5 to any of them, shall be deemed to be [transferred to and]
6 vested in and shall belong to the surviving or new company, as
7 the case may be, without further action, and the title to any
8 real estate or any interest therein vested in any of the
9 companies shall not revert or be in any way impaired by reason
10 of the merger or consolidation. The surviving or new company
11 shall thenceforth be responsible for all the liabilities of each
12 of the companies so merged or consolidated. Liens upon the
13 property of the merging or consolidating companies shall not be
14 impaired by the merger or consolidation, and any claim existing
15 or action or proceeding pending by or against any of the
16 companies may be prosecuted to judgment as if the merger or
17 consolidation had not taken place or the surviving or new
18 company may be proceeded against or substituted in its place.
19 (c) Taxes.--Any taxes, interest, penalties and public
20 accounts of the Commonwealth claimed against any of the merging
21 or consolidating companies [but not] that are settled, assessed
22 or determined prior to or after the merger or consolidation
23 shall be [settled, assessed or determined against] the liability
24 of the surviving or new company and, together with interest
25 thereon, shall be a lien against the property, both real and
26 personal, of the surviving or new company.
27 * * *
28 § 8962. Proposal and adoption of plan of division.
29 * * *
30 (b) Reference to outside facts.--Any of the terms of the
19990S0393B2277 - 173 -
1 plan may be made dependent upon facts ascertainable outside of
2 the plan if the manner in which the facts will operate upon the
3 terms of the plan is set forth in the plan. Such facts may
4 include, without limitation, actions or events within the
5 control of or determinations made by the dividing limited
6 liability company or a representative of the dividing limited
7 liability company.
8 * * *
9 (e) [Action by holders of indebtedness.--Unless otherwise
10 provided by an indenture or other contract by which the dividing
11 limited liability company is bound, a plan of division shall not
12 require the approval of the holders of any debt securities or
13 other obligations of the dividing company or of any
14 representative of the holders if the transfer of assets effected
15 by the division, if effected by means of a sale, lease, exchange
16 or other disposition, and any related distribution would not
17 require the approval of the holders or representatives thereof.]
18 (Repealed).
19 § 8965. Effect of division.
20 * * *
21 (b) Property rights; allocations of assets and
22 liabilities.--
23 (1) (i) All the property, real, personal and mixed, of
24 the dividing company and all debts due on whatever
25 account to it, including subscriptions for membership
26 interests and other causes of action belonging to it,
27 shall, except as otherwise provided in paragraph (2), to
28 the extent [transfers] allocations of assets are
29 contemplated by the plan of division, be deemed without
30 further action to be [transferred] allocated to and
19990S0393B2277 - 174 -
1 vested in the resulting companies on such a manner and
2 basis and with such effect as is specified in the plan,
3 or per capita among the resulting companies as tenants in
4 common if no specification is made in the plan, and the
5 title to any real estate or interest therein vested in
6 any of the companies shall not revert or be in any way
7 impaired by reason of the division.
8 (ii) Upon the division becoming effective, the
9 resulting companies shall each thenceforth be responsible
10 as separate and distinct companies only for such
11 liabilities as each company may undertake or incur in its
12 own name but shall be liable for the liabilities of the
13 dividing company in the manner and on the basis provided
14 in subparagraphs (iv) and (v).
15 (iii) Liens upon the property of the dividing
16 company shall not be impaired by the division.
17 (iv) [One] To the extent allocations of liabilities
18 are contemplated by the plan of division, the liabilities
19 of the dividing company shall be deemed without further
20 action to be allocated to and become the liabilities of
21 the resulting companies on such a manner and basis and
22 with such effect as is specified in the plan; and one or
23 more, but less than all, of the resulting companies shall
24 be free of the liabilities of the dividing company to the
25 extent, if any, specified in the plan [if no fraud of
26 creditors or members or violation of law shall be
27 effected thereby and if all applicable provisions of law
28 are complied with.], if in either case:
29 (A) no fraud on members or violation of law
30 shall be effected thereby; and
19990S0393B2277 - 175 -
1 (B) the plan does not constitute a fraudulent
2 transfer under 12 Pa.C.S. Ch. 51 (relating to
3 fraudulent transfers).
4 (v) If the conditions in subparagraph (iv) for
5 freeing one or more of the resulting companies from the
6 liabilities of the dividing company, or for allocating
7 some or all of the liabilities of the dividing company,
8 are not satisfied, the liabilities of the dividing
9 company as to which those conditions are not satisfied
10 shall not be affected by the division nor shall the
11 rights of creditors [thereof] thereunder or of any person
12 dealing with the company be impaired by the division, and
13 any claim existing or action or proceeding pending by or
14 against the company with respect to those liabilities may
15 be prosecuted to judgment as if the division had not
16 taken place, or the resulting companies may be proceeded
17 against or substituted in [its] place of the dividing
18 company as joint and several obligors on [such liability]
19 those liabilities, regardless of any provision of the
20 plan of division apportioning the liabilities of the
21 dividing company.
22 (vi) The conditions in subparagraph (iv) for freeing
23 one or more of the resulting companies from the
24 liabilities of the dividing company and for allocating
25 some or all of the liabilities of the dividing company
26 shall be conclusively deemed to have been satisfied if
27 the plan of division has been approved by the
28 Pennsylvania Public Utility Commission in a final order
29 issued after (the Legislative Reference Bureau shall
30 insert here the effective date of the amendments of this
19990S0393B2277 - 176 -
1 section) that has become not subject to further appeal.
2 (2) (i) The [transfer] allocation of any fee or
3 freehold interest or leasehold having a remaining term of
4 30 years or more in any tract or parcel of real property
5 situate in this Commonwealth owned by a dividing company
6 (including property owned by a foreign limited liability
7 company dividing solely under the law of another
8 jurisdiction) to a new company resulting from the
9 division shall not be effective until one of the
10 following documents is filed in the office for the
11 recording of deeds of the county, or each of them, in
12 which the tract or parcel is situated:
13 (A) A deed, lease or other instrument of
14 confirmation describing the tract or parcel.
15 (B) A duly executed duplicate original copy of
16 the certificate of division.
17 (C) A copy of the certificate of division
18 certified by the Department of State.
19 (D) A declaration of acquisition setting forth
20 the value of real estate holdings in such county of
21 the company as an acquired company.
22 (ii) The provisions of 75 Pa.C.S. § 1114 (relating
23 to transfer of vehicle by operation of law) shall not be
24 applicable to [a transfer] an allocation of ownership of
25 any motor vehicle, trailer or semitrailer [from a
26 dividing company] to a new company under this section or
27 under a similar law of any other jurisdiction but any
28 such [transfer] allocation shall be effective only upon
29 compliance with the requirements of 75 Pa.C.S. § 1116
30 (relating to issuance of new certificate following
19990S0393B2277 - 177 -
1 transfer).
2 (3) It shall not be necessary for a plan of division to
3 list each individual asset or liability of the dividing
4 company to be allocated to a new company so long as those
5 assets and liabilities are described in a reasonable and
6 customary manner.
7 (4) Each new company shall hold any assets and
8 liabilities allocated to it as the successor to the dividing
9 company, and those assets and liabilities shall not be deemed
10 to have been assigned to the new company in any manner,
11 whether directly or indirectly or by operation of law.
12 * * *
13 (h) Conflict of laws.--It is the intent of the General
14 Assembly that:
15 (1) The effect of a division of a domestic limited
16 liability company shall be governed by the laws of this
17 Commonwealth and any other jurisdiction under the laws of
18 which any of the resulting companies is organized.
19 (2) The effect of a division on the assets and
20 liabilities of the dividing company shall be governed solely
21 by the laws of this Commonwealth and any other jurisdiction
22 under the laws of which any of the resulting companies is
23 organized.
24 (3) The validity of any allocation of assets or
25 liabilities by a plan of division of a domestic limited
26 liability company, regardless of whether or not any of the
27 new companies is a foreign limited liability company, shall
28 be governed solely by the laws of this Commonwealth.
29 (4) In addition to the express provisions of this
30 subsection, this subchapter shall otherwise generally be
19990S0393B2277 - 178 -
1 granted the protection of full faith and credit under the
2 Constitution of the United States.
3 § 8971. Dissolution.
4 (a) General rule.--limited liability company is dissolved
5 and its affairs shall be wound up upon the happening of the
6 first to occur of the following events:
7 (1) At the time or upon the happening of events
8 specified in the certificate of organization.
9 (2) At the time or upon the happening of events
10 specified in writing in the operating agreement.
11 (3) [By] Except as otherwise provided in the operating
12 agreement, by the unanimous written agreement or consent of
13 all members.
14 (4) [Upon] Except as otherwise provided in writing in
15 the operating agreement, upon a member becoming a bankrupt or
16 executing an assignment for the benefit of creditors or the
17 death, retirement, insanity, resignation, expulsion or
18 dissolution of a member or the occurrence of any other event
19 that terminates the continued membership of a member in the
20 company unless the business of the company is continued by
21 the vote or consent of [all] a majority in interest, or such
22 greater number as shall be provided in writing in the
23 operating agreement, of the remaining members given within
24 [90] 180 days following such event [or under a right to do so
25 stated in the operating agreement].
26 (5) Entry of an order of judicial dissolution under
27 section 8972 (relating to judicial dissolution).
28 [(b) Cross reference.--See section 8103 (relating to
29 continuation of certain limited partnerships and limited
30 liability companies).]
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1 (b) Perpetual existence.--The certificate of organization
2 may provide that the company shall have perpetual existence, in
3 which case subsection (a)(4) shall not be applicable to the
4 company.
5 § 8973. Winding up.
6 * * *
7 (b) Judicial supervision.--The court may wind up the affairs
8 of the company upon application of any member, his legal
9 representative or assignee and, in connection therewith, may
10 appoint a liquidating trustee. See section 139(b) (relating to
11 tax clearance in judicial proceedings).
12 § 8974. Distribution of assets upon dissolution.
13 (a) General rule.--In settling accounts after dissolution,
14 the liabilities of the limited liability company shall be
15 entitled to payment in the following order:
16 (1) Those to creditors, including members or managers
17 who are creditors, in the order of priority as provided by
18 law, in satisfaction of the liabilities of the company,
19 whether by payment or the making of reasonable provision for
20 payment thereof, other than liabilities for distributions to
21 members under section 8932 (relating to distributions and
22 allocation of profits and losses) or 8933 (relating to
23 distributions upon an event of dissociation).
24 (2) Unless otherwise provided in the operating
25 agreement, to members and former members in satisfaction of
26 liabilities for distributions under section 8932 or 8933.
27 (3) Unless otherwise provided in the operating
28 agreement, to members in respect of:
29 (i) Their contributions to capital.
30 (ii) Their share of the profits and other
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1 compensation by way of income on their contributions.
2 * * *
3 § 8978. Dissolution by domestication.
4 Whenever a domestic limited liability company has
5 domesticated itself under the laws of another jurisdiction by
6 action similar to that provided by section 8982 (relating to
7 domestication) and has authorized that action by the vote
8 required by this subchapter for the approval of a proposal that
9 the company dissolve voluntarily, the company may surrender its
10 certificate of organization under the laws of this Commonwealth
11 by filing in the Department of State a certificate of
12 dissolution under section 8975 (relating to certificate of
13 dissolution). In lieu of the statements required by section
14 8975(a)(2) through (4), the certificate of dissolution shall set
15 forth a statement that the company has domesticated itself under
16 the laws of another jurisdiction. If the company, as
17 domesticated in the other jurisdiction, registers to do business
18 in this Commonwealth either prior to or simultaneously with the
19 filing of the certificate of dissolution under this section, the
20 company shall not be required to file with the certificate of
21 dissolution the tax clearance certificates that would otherwise
22 be required by section 139 (relating to tax clearance of certain
23 fundamental transactions).
24 § 8982. Domestication.
25 * * *
26 (b) Certificate of domestication.--The certificate of
27 domestication shall be executed by the company and shall set
28 forth in the English language:
29 (1) The name of the company. If the name is in a foreign
30 language, it shall be set forth in Roman letters or
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1 characters or Arabic or Roman numerals. If the name is one
2 that is rendered unavailable for use by any provision of
3 section 8905 (relating to name), the company shall adopt, in
4 accordance with any procedures for changing the name of the
5 company that are applicable prior to the domestication of the
6 company, and shall set forth in the certificate of
7 domestication, an available name.
8 * * *
9 (c) Effect of domestication.--
10 (1) As a domestic limited liability company, the
11 domesticated company shall no longer be a foreign limited
12 liability company for the purposes of this chapter and shall
13 [have] instead be a domestic limited liability company with
14 all the powers and privileges and [be subject to] all the
15 duties and limitations granted and imposed upon domestic
16 limited liability companies. [The property, debts, liens,
17 estates, taxes, penalties and public accounts due the
18 Commonwealth shall continue to be vested in and imposed upon
19 the company to the same extent as if it were the successor by
20 merger of the domesticating company with and into a domestic
21 limited liability company under Subchapter G (relating to
22 mergers and consolidations).] In all other respects, the
23 domesticated limited liability company shall be deemed to be
24 the same limited liability company as it was prior to the
25 domestication without any change in or effect on its
26 existence. Without limiting the generality of the previous
27 sentence, the domestication shall not be deemed to have
28 dissolved the company or to have affected in any way:
29 (i) the right and title of the company in and to its
30 assets, property, franchises, estates and choses in
19990S0393B2277 - 182 -
1 action;
2 (ii) the liability of the company for its debts,
3 obligations, penalties and public accounts due the
4 Commonwealth;
5 (iii) any liens or other encumbrances on the
6 property or assets of the company; or
7 (iv) any contract, license or other agreement to
8 which the company is a party or under which it has any
9 rights or obligations.
10 (2) The [shares of] membership interests in the
11 domesticated company shall be unaffected by the domestication
12 except to the extent, if any, reclassified in the certificate
13 of domestication.
14 § 8996. Restrictions.
15 * * *
16 (b) Ownership and governance of restricted professional
17 companies.--Except as otherwise provided by a statute, rule or
18 regulation applicable to a particular profession, all of the
19 [members] ultimate beneficial owners of membership interests in
20 and all of the managers, if any, of a restricted professional
21 company shall be licensed persons.
22 * * *
23 (d) Application.--For purposes of applying subsection (a):
24 * * *
25 (3) The practice of the restricted professional service
26 of law shall be deemed to include the following activities
27 when conducted incidental to the practice of law:
28 (i) serving as an attorney-in-fact, guardian,
29 custodian, executor, personal representative, trustee or
30 fiduciary;
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1 (ii) serving as a director or trustee of a
2 corporation for profit or not-for-profit, manager of a
3 limited liability company or a similar position with any
4 other form of association;
5 (iii) testifying, teaching, lecturing or writing
6 about any topic related to the law;
7 (iv) serving as a master, receiver, arbitrator or
8 similar official;
9 (v) providing actuarial, insurance, investment,
10 estate and trust administration, tax return preparation,
11 financial and other similar services and advice; and
12 (vi) conducting intellectual property and other real
13 and personal property title searches and providing other
14 title insurance agency services.
15 § 8997. Taxation of restricted professional companies.
16 (a) General rule.--Except as provided in subsection (b) and
17 in section 8925(b) (relating to taxation of limited liability
18 companies), for the purposes of the imposition by the
19 Commonwealth or any political subdivision of any tax or license
20 fee on or with respect to any income, property, privilege,
21 transaction, subject or occupation, a domestic or qualified
22 foreign restricted professional company:
23 (1) during any period that it has only one member:
24 (i) shall be deemed to be a sole proprietorship and
25 the member of such a company, as such, shall be deemed to
26 be a sole proprietor; and
27 (ii) shall not be subject to Article VI of the act
28 of March 4, 1971 (P.L.6, No.2) known as the Tax Reform
29 Code of 1971, or
30 (2) during any period that it has more than one member,
19990S0393B2277 - 184 -
1 shall be deemed to be a limited partnership organized and
2 existing under Chapter 85 (relating to limited partnerships),
3 and a member of such a company, as such, shall be deemed a
4 limited partner of a limited partnership.
5 (b) Exception.--A domestic or qualified foreign restricted
6 professional company shall be subject to section 8925(a),
7 instead of subsection (a), for the whole of any taxable year of
8 the company during any part of which the company [has]:
9 (1) has engaged in any business not permitted by section
10 8996(a) (relating to purposes of restricted professional
11 companies);
12 (2) [had only one member; or] Repealed.
13 (3) HAS been a member of a limited liability company[.]; <--
14 or
15 (4) is taxable as a corporation for Federal income tax
16 purposes.
17 § 8998. Annual registration.
18 * * *
19 (f) Annual fee to be lien.--
20 (1) Failure to [pay the annual registration fee imposed]
21 file the certificate of annual registration required by this
22 section shall not affect the existence or status of the
23 restricted professional company as such, but the annual
24 registration fee that would have been payable shall be a lien
25 in the manner provided in this subsection from the time the
26 annual registration fee is due and payable [upon]. If a
27 certificate of annual registration is not filed within 30
28 days after the date on which it is due, the department shall
29 assess a penalty of $500 against the company, which shall
30 also be a lien in the manner provided in this subsection. The
19990S0393B2277 - 185 -
1 imposition of that penalty shall not be construed to relieve
2 the company from liability for any other penalty or interest
3 provided for under other applicable law.
4 (2) If the annual registration fee paid by a restricted
5 professional company is subsequently determined to be less
6 than should have been paid because it was based on an
7 incorrect number of members or was otherwise incorrectly
8 computed, that fact shall not affect the existence or status
9 of the restricted professional company as such, but the
10 amount of the additional annual registration fee that should
11 have been paid shall be a lien in the manner provided in this
12 subsection from the time the incorrect payment is discovered
13 by the department.
14 (3) The annual registration fee shall bear simple
15 interest from the date that it becomes due and payable until
16 paid. The interest rate shall be that provided for in section
17 806 of the act of April 9, 1929 (P.L.343, No.176), known as
18 The Fiscal Code, with respect to unpaid taxes. The penalty
19 provided for in paragraph (1) shall not bear interest. The
20 payment of interest shall not relieve the restricted
21 professional company from liability for any other penalty or
22 interest provided for under other applicable law.
23 (4) The lien created by this subsection shall attach to
24 all of the property and proceeds thereof of the restricted
25 professional company in which a security interest can be
26 perfected, in whole or in part, by filing in the department
27 under 13 Pa.C.S. Div. 9 (relating to secured transactions;
28 sales of accounts, contract rights and chattel paper),
29 whether the property and proceeds are owned by the company at
30 the time the annual registration fee or any penalty or
19990S0393B2277 - 186 -
1 interest becomes due and payable or whether the property and
2 proceeds are acquired thereafter. Except as otherwise
3 provided by statute, the lien created by this subsection
4 shall have priority over all other liens, security interests
5 or other charges, except liens for taxes or other charges due
6 the Commonwealth. The lien created by this subsection shall
7 be entered on the records of the department and indexed in
8 the same manner as a financing statement filed under 13
9 Pa.C.S. Div. 9. At the time an annual registration fee,
10 penalty or interest that has resulted in the creation of
11 [the] a lien under this subsection is paid, the department
12 shall terminate the lien with respect to that annual
13 registration fee, penalty or interest without requiring a
14 separate filing by the company for that purpose.
15 (5) If the annual registration fee paid by a restricted
16 professional company is subsequently determined to be more
17 than should have been paid for any reason, no refund of the
18 additional fee shall be made.
19 * * *
20 § 9502. Creation, status and termination of business trusts.
21 (a) Creation.--A business trust may be created in real or
22 personal property, or both, with power in the trustee [or a
23 majority of the trustees]:
24 (1) To receive title to, hold, buy, sell, exchange,
25 transfer and convey real and personal property for the use of
26 the business trust.
27 (2) To take, receive, invest or disburse the receipts,
28 earnings, rents, profits or returns from the trust estate.
29 (3) To carry on and conduct any lawful business
30 designated in the deed or other instrument of trust, and
19990S0393B2277 - 187 -
1 generally to do any lawful act in relation to such trust
2 property that any individual owning the same absolutely might
3 do.
4 (4) To merge with another business trust or other
5 association, to divide or to engage in any other fundamental
6 or other transaction contemplated by the deed or other
7 instrument of trust.
8 (b) Term.--Except as otherwise provided in the instrument, a
9 business trust shall have perpetual existence.
10 (c) Separate entity.--A business trust is a separate legal
11 entity. Except as otherwise provided in the instrument, title to
12 real and personal property may be held in the name of the trust,
13 without in any manner diminishing the rights, powers and duties
14 of the trustees as provided in subsection (a).
15 (d) Termination.--Except as otherwise provided in the
16 instrument:
17 (1) The business trust may not be terminated, dissolved
18 or revoked by a beneficial owner or other person.
19 (2) The death, incapacity, dissolution, termination or
20 bankruptcy of a beneficial owner or a trustee shall not
21 result in the termination, dissolution or revocation of the
22 business trust.
23 (e) Contents of instrument.--The instrument may contain any
24 provision for the regulation of the internal affairs of the
25 business trust included in the instrument by the settlor, the
26 trustee or the beneficiaries in accordance with the applicable
27 procedures for the adoption or amendment of the instrument.
28 § 9503. Documentation of trust.
29 (a) General rule.--A business trust shall not be valid
30 unless created by deed of trust or other written instrument
19990S0393B2277 - 188 -
1 subscribed by one or more individuals, associations or other
2 entities. The trustees of a business trust shall promptly cause
3 the instrument or any amendment thereof, except an amendment
4 solely effecting or reflecting the substitution of or other
5 change in the trustees, to be filed in the Department of State.
6 [The failure to effect the filing shall not affect the validity
7 of a business trust. A trustee who violates the requirements of
8 this subsection shall be liable for a civil penalty in the
9 amount of $1,000 payable to the department.]
10 * * *
11 § 9505. [Succession of trustees.] Trustees.
12 (a) Succession of trustees.--An instrument may provide for
13 the succession of title to [the] any trust property not titled
14 in the name of the trust to a successor trustee, in case of the
15 death, resignation, removal or incapacity of any trustee. In the
16 case of any such succession, the title to [the] such trust
17 property shall at once vest in the succeeding trustee.
18 (b) Nature of service.--Service as the trustee of a business
19 trust by an association that is not a banking institution shall
20 not be deemed to constitute acting as a fiduciary for purposes
21 of the act of November 30, 1965 (P.L.847, No.356), known as the
22 Banking Code of 1965.
23 § 9506. Liability of trustees and beneficiaries.
24 (a) General rule.--[Liability to third parties for any act,
25 omission or obligation of a trustee of a business trust when
26 acting in such capacity shall extend to so much of the trust
27 estate as may be necessary to discharge such liability, but
28 personal liability shall not attach to the trustee or the
29 beneficiaries of the trust for any such act, omission or
30 liability.]
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1 (1) Except as otherwise provided in the instrument, the
2 beneficiaries of a business trust shall be entitled to the
3 same limitation of personal liability as is extended to
4 shareholders in a domestic business corporation.
5 (2) Except as otherwise provided in the instrument, the
6 trustees of a trust, as such, shall not be personally liable
7 to any person for any act or obligation of the trust or any
8 other trustee.
9 (3) An obligation of a trust based upon a writing may be
10 limited to a specific fund or other identified pool or group
11 of assets of the trust.
12 * * *
13 (f) Permissible beneficiaries.--Except as otherwise provided
14 by a statute, rule or regulation applicable to a particular
15 profession, all of the [beneficiaries of] ultimate beneficial
16 owners of interests in a business trust that renders one or more
17 restricted professional services shall be licensed persons. As
18 used in this subsection, the term "restricted professional
19 services" shall have the meaning specified in section 8903
20 (relating to definitions and index of definitions).
21 * * *
22 (h) Medical professional liability.--A business trust shall
23 be deemed to be a professional corporation for purposes of
24 section 811 of the act of October 15, 1975 (P.L.390, No.111),
25 known as the Health Care Services Malpractice Act.
26 Section 3. Amendment of Title 54.
27 As much of Title 54 as is hereinafter set forth is amended or
28 added to read:
29 § 302. Definitions.
30 The following words and phrases when used in this chapter
19990S0393B2277 - 190 -
1 shall have, unless the context clearly indicates otherwise, the
2 meanings given to them in this section:
3 "Business." Any commercial or professional activity.
4 "Entity." Any individual or any corporation, association,
5 partnership, joint-stock company, business trust, syndicate,
6 joint adventureship or other combination or group of persons,
7 regardless of whether it is organized or formed under the laws
8 of this Commonwealth or any other jurisdiction.
9 "Proper name." [The] When used with respect to an
10 association of a type listed in the following paragraphs, the
11 term means the name set forth in:
12 (1) the articles of incorporation, for a corporation;
13 (2) the statement of registration, for a limited
14 liability partnership;
15 (3) the certificate of limited partnership, for a
16 limited partnership;
17 (4) the statement of election, for an electing
18 partnership;
19 (5) the certificate of organization, for a limited
20 liability company;
21 (6) the articles of association, for a professional
22 association;
23 (7) the deed of trust or other trust instrument, if any,
24 that has been filed in the Department of State, for a
25 business trust; or
26 * * *
27 § 503. Decennial filings required.
28 * * *
29 (b) Exceptions.--Subsection (a) shall not apply to any of
30 the following:
19990S0393B2277 - 191 -
1 (1) A corporation or other association [which] that
2 during the [preceding] ten years ending on December 31 of the
3 year in which a filing would otherwise be required under
4 subsection (a) has made any filing in the department pursuant
5 to a provision of this title or 15 Pa.C.S. (relating to
6 corporations and unincorporated associations), other than:
7 (i) a report required by subsection (a); or
8 (ii) a filing [required by] under:
9 (A) 15 Pa.C.S. § 1305 (relating to reservation
10 of corporate name);
11 (B) 15 Pa.C.S. § 5305 (relating to reservation
12 of corporate name);
13 (C) 15 Pa.C.S. § 8203(b) (relating to name);
14 (D) 15 Pa.C.S. § 8505(b) (relating to name); or
15 (E) 15 Pa.C.S. § 8905(b) (relating to name).
16 (2) A corporation whose name is registered pursuant to
17 section 501(a)(4) (relating to register established).
18 (3) A corporation [which] that has had officer
19 information forwarded to the department by the Department of
20 Revenue during the preceding ten years under 15 Pa.C.S. §
21 1110 (relating to annual report information).
22 [(b.1) Exemption.--An entity which made a filing after
23 December 31, 1989, and before January 1, 1991, pursuant to a
24 provision of this title or 15 Pa.C.S. (relating to corporations
25 and unincorporated associations) shall be exempt from the 2001
26 decennial filing. For purposes of this subsection, none of the
27 following shall be considered a filing:
28 (1) A filing under:
29 (i) 15 Pa.C.S. § 1305;
30 (ii) 15 Pa.C.S. § 5305;
19990S0393B2277 - 192 -
1 (iii) 15 Pa.C.S. § 8203(b);
2 (iv) 15 Pa.C.S. § 8505(b); or
3 (v) 15 Pa.C.S. § 8905(b).
4 (2) A name registration under section 501(a)(4).
5 (3) Forwarding of information to the department by the
6 Department of Revenue under 15 Pa.C.S. § 1110.]
7 (c) Exemptions.--An association shall be exempt from the
8 2001 decennial filing if the association made a filing:
9 (1) After December 31, 1989 and before January 1, 1992,
10 pursuant to a provision of this title or 15 Pa.C.S. other
11 than a filing under:
12 (i) 15 Pa.C.S. § 1305;
13 (ii) 15 Pa.C.S. § 5305;
14 (iii) 15 Pa.C.S. § 8203(b);
15 (iv) 15 Pa.C.S. § 8505(b); or
16 (v) 15 Pa.C.S. § 8905(b).
17 (2) Under this section during the year 2000.
18 [(c) Cross reference] (d) Cross references.--See 15 Pa.C.S.
19 §§ 134 (relating to docketing statement) and 135 (relating to
20 requirements to be met by filed documents).
21 § 1314. Decennial filings required. * * *
22 (b) Requirement satisfied by other filings.--Subsection (a)
23 shall not apply to a registrant which during the [preceding] ten
24 years ending on December 31 of the year in which a filing would
25 otherwise be required under subsection (a) has made any filing
26 with the department under this chapter other than a report
27 required by subsection (a).
28 * * *
29 § 1515. Decennial filings required.
30 * * *
19990S0393B2277 - 193 -
1 (b) Requirement satisfied by other filings.--Subsection (a)
2 shall not apply to a registrant which during the [preceding] ten
3 years ending on December 31 of the year in which a filing would
4 otherwise be required under subsection (a) has made any filing
5 with the department under this chapter other than a report
6 required by subsection (a).
7 * * *
8 Section 4. Repeals.
9 The following acts and parts of acts are repealed:
10 Section 32 of the act of June 1, 1889 (P.L.420, No.332),
11 entitled "A further supplement to an act entitled 'An act to
12 provide revenue by taxation,' approved the seventh day of June,
13 Anno Domini one thousand eight hundred and seventy-nine," to the
14 extent that it applies to the judicial dissolution of an
15 association under 15 Pa.C.S.
16 As much as reads ", and act as the attorney-in-fact and
17 authorized agent of such corporations for the service of process
18 thereon" in section 806 of the act of April 9, 1929 (P.L.177,
19 No.175), known as The Administrative Code of 1929.
20 Section 404(b) of the act of December 19, 1990 (P.L.834,
21 No.198), known as the GAA Amendments Act of 1990, insofar as it
22 applies to 15 Pa.C.S. §§ 1745 and 5745.
23 15 Pa.C.S. §§ 5543.1, 5546.1, 5764.1, 8103 and 8206.
24 Section 5. Effective date.
25 This act shall take effect in 60 days.
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