PRINTER'S NO. 1392
No. 1157 Session of 1997
INTRODUCED BY WENGER, HART, GREENLEAF, MADIGAN, SALVATORE, LEMMOND, O'PAKE, STOUT, RHOADES, WOZNIAK AND THOMPSON, OCTOBER 14, 1997
REFERRED TO JUDICIARY, OCTOBER 14, 1997
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 § 135. Requirements to be met by filed documents. 26 * * * 27 (e) Distinguishable names.--A name shall not be considered 28 distinguishable upon the records of the department from another 29 name for purposes of this title and Title 54 (relating to names) 30 solely because the names differ from each other in any or all of 19970S1157B1392 - 2 -
1 the following respects: 2 (1) the use of punctuation marks; 3 (2) the use of the definite or indefinite article; or 4 (3) the use of any of the following terms to designate 5 the status of an association: "corporation," "company," 6 "incorporated," "limited," "association," "fund," 7 "syndicate," "limited partnership," "limited liability 8 company," "trust" or "business trust" or abbreviations of any 9 of the foregoing terms or words or abbreviations of like 10 import in languages other than English. 11 § 138. Statement of correction. 12 * * * 13 (b) Effect of filing.-- 14 * * * 15 (2) A filing under this section shall not have the 16 effect of causing original articles of incorporation of a 17 corporation or a similar type of document creating any other 18 form of association to be stricken from the records of the 19 department but the articles or other document may be 20 corrected under this section. 21 * * * 22 (d) Cross reference.--See section 135 (relating to 23 requirements to be met by filed documents). 24 § 161. Domestication of certain alien associations. 25 * * * 26 (b) Statement of domestication.--The statement of 27 domestication shall be executed by the association and shall set 28 forth in the English language: 29 (1) The name of the association. If the name is in a 30 foreign language, it shall be set forth in Roman letters or 19970S1157B1392 - 3 -
1 characters or Arabic or Roman numerals. If the name is one 2 that is rendered unavailable for use by a corporation by any 3 provision of section 1303(b) or (c) (relating to corporate 4 name), the association shall adopt a new name, in accordance 5 with any procedures for changing the name of the association 6 that are applicable prior to the domestication of the 7 association, and shall set forth the new name in the 8 statement. 9 (2) The name of the jurisdiction under the laws of which 10 and the date on which it was first formed, incorporated or 11 otherwise came into being. 12 (3) The name of the jurisdiction that constituted the 13 seat, siege social or principal place of business or control 14 administration of the association, or any equivalent under 15 applicable law, immediately prior to the filing of the 16 statement. 17 (4) A statement [that upon domestication the association 18 will be a domestic association under the laws of this 19 Commonwealth] of the type of domestic association that the 20 association will be upon domestication. 21 (5) A statement that the filing of the statement of 22 domestication and, if desired, the renunciation of the prior 23 domicile has been authorized (unless its charter or other 24 organic documents require a greater vote) by a majority in 25 interest of the shareholders, members or other proprietors of 26 the association. 27 (6) If the association will be a type of domestic 28 association that is created by a filing in the department, 29 such other provisions as are required to be included in an 30 initial filing to create that type of domestic association, 19970S1157B1392 - 4 -
1 except that it shall not be necessary to set forth the name 2 of the person organizing the association. 3 (7) Any other provision that the association may choose 4 to insert unless this title prohibits the inclusion of such a 5 provision in a filing that creates the type of domestic 6 association that the association will be upon domestication. 7 (c) Execution.--The statement shall be signed on behalf of 8 the association by any authorized person. 9 (d) Effect of domestication.--Upon the filing of the 10 statement of domestication, the association shall be 11 domesticated in this Commonwealth and the association shall 12 thereafter be subject to any applicable provisions of this 13 title[, except Subpart B of Part II (relating to business 14 corporations),] and [to] any other provisions of law applicable 15 to associations existing under the laws of this Commonwealth. If 16 the association will be a type of domestic association that is 17 created by a filing in the department, the statement of 18 domestication shall constitute that filing. The domestication of 19 any association in this Commonwealth pursuant to this section 20 shall not be deemed to affect any obligations or liabilities of 21 the association incurred prior to its domestication. 22 (e) Exclusion.--An association that can be domesticated 23 under [section 4161 (relating to domestication) or 6161 24 (relating to domestication)] any of the following sections shall 25 not be domesticated under this section: 26 Section 4161 (relating to domestication). 27 Section 6161 (relating to domestication). 28 Section 8590 (relating to domestication). 29 Section 8982 (relating to domestication). 30 Section 9501(a)(1)(ii) (relating to application and 19970S1157B1392 - 5 -
1 effect of chapter). 2 (f) Definition.--As used in this section, the term 3 "association," except as restricted by subsection (e), includes 4 any alien incorporated organization, private law corporation 5 (whether or not organized for business purposes), public law 6 corporation, partnership, proprietorship, joint venture, 7 foundation, trust, association or similar organization or entity 8 existing under the laws of any jurisdiction other than this 9 Commonwealth. 10 (g) 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 § 162. Contingent domestication of certain alien associations. 14 * * * 15 (c) Statement of consummation of domestication.--At any time 16 after the filing of a statement of contingent domestication, the 17 association may file in the department a statement of 18 consummation of domestication which shall be executed by the 19 association and shall set forth: 20 (1) The name of the association[. If the name is in a 21 foreign language, it shall be set forth in Roman letters or 22 characters or Arabic or Roman numerals.] as set forth in its 23 statement of contingent domestication. 24 * * * 25 (j) 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 § 1303. Corporate name. 29 * * * 30 (b) Duplicate use of names.--The corporate name shall [not 19970S1157B1392 - 6 -
1 be the same as or confusingly similar to] be distinguishable 2 upon the records of the Department of State from: 3 (1) The name of any other domestic corporation for 4 profit or not-for-profit which is either in existence or for 5 which articles of incorporation have been filed but have not 6 yet become effective, or of any foreign corporation for 7 profit or not-for-profit which is either authorized to do 8 business in this Commonwealth or for which an application for 9 a certificate of authority has been filed but has not yet 10 become effective, [or of any domestic or foreign limited 11 partnership that has filed in the Department of State a 12 certificate or qualified under Chapter 85 (relating to 13 limited partnerships) or under corresponding provisions of 14 prior law,] or the name of any association registered at any 15 time under 54 Pa.C.S. Ch. 5 (relating to corporate and other 16 association names), unless[: (i) where the name is the same 17 or confusingly similar,] the other association: 18 [(A)] (i) has stated that it is about to change 19 its name, or to cease to do business, or is being 20 wound up, or is a foreign association about to 21 withdraw from doing business in this Commonwealth, 22 and the statement and [the] a written consent [of the 23 other association] to the adoption of the name 24 executed by the other association is filed in the 25 Department of State; 26 [(B)] (ii) has filed with the Department of 27 Revenue a certificate of out of existence, or has 28 failed for a period of three successive years to file 29 with the Department of Revenue a report or return 30 required by law and the fact of such failure has been 19970S1157B1392 - 7 -
1 certified by the Department of Revenue to the 2 Department of State; 3 [(C)] (iii) has abandoned its name under the 4 laws of its jurisdiction of incorporation, by 5 amendment, merger, consolidation, division, 6 expiration, dissolution or otherwise, without its 7 name being adopted by a successor in a merger, 8 consolidation, division or otherwise, and an official 9 record of that fact, certified as provided by 42 10 Pa.C.S. § 5328 (relating to proof of official 11 records), is presented by any person to the 12 department; or 13 [(D)] (iv) has had the registration of its name 14 under 54 Pa.C.S. Ch. 5 terminated and, if the 15 termination was effected by operation of 54 Pa.C.S. § 16 504 (relating to effect of failure to make decennial 17 filings), the application for the use of the name is 18 accompanied by a verified statement stating that at 19 least 30 days' written notice of intention to 20 appropriate the name was given to the delinquent 21 association at its [registered office] last known 22 place of business and that, after diligent search by 23 the affiant, the affiant believes the association to 24 be out of existence.[; or 25 (ii) where the name is confusingly similar, the 26 consent of the other association to the adoption of the 27 name is filed in the Department of State. 28 The consent of the association shall be evidenced by a 29 statement to that effect executed by the association.] 30 * * * 19970S1157B1392 - 8 -
1 (e) Remedies for violation of section.--The use of a name in 2 violation of this section shall not vitiate or otherwise affect 3 the corporate existence but any court having jurisdiction may 4 enjoin the corporation from using or continuing to use a name in 5 violation of this section, upon the application of: 6 (1) the Attorney General, acting on his own motion or at 7 the instance of any administrative department, board or 8 commission of this Commonwealth; or 9 (2) any person adversely affected.[; 10 may enjoin the corporation from using or continuing to use a 11 name in violation of this section.] 12 (f) Cross references.--See sections 135(e) (relating to 13 distinguishable names) and 1106(b)(2) (relating to uniform 14 application of subpart). 15 § 1304. Required name changes by senior corporations. 16 * * * 17 (b) Enforcement of undertaking to release name.--If a 18 corporation has used a name [the same as or confusingly similar 19 to] that is not distinguishable upon the records of the 20 Department of State from the name of another corporation or 21 other association as permitted by section [1303(b)(1)(i)] 22 1303(b)(1) (relating to duplicate use of names) and the other 23 corporation or other association continues to use its name in 24 this Commonwealth and does not change its name, cease to do 25 business, be wound up or withdraw as it proposed to do in its 26 consent or change its name as required by subsection (a), any 27 court having jurisdiction may enjoin the other corporation or 28 other association from continuing to use its name or a name that 29 is not distinguishable therefrom, upon the application of: 30 (1) the Attorney General, acting on his own motion or at 19970S1157B1392 - 9 -
1 the instance of any administrative department, board or 2 commission of this Commonwealth; or 3 (2) any person adversely affected.[; 4 may enjoin the other corporation or other association from 5 continuing to use its name or a confusingly similar name.] 6 § 1311. Filing of statement of summary of record by certain 7 corporations. 8 (a) General rule.--Where any of the [valid] charter 9 documents of a business corporation are not on file in the 10 Department of State or there is an error in any such document as 11 transferred to the department pursuant to section 140 (relating 12 to custody and management of orphan corporate and business 13 records), and the corporation desires to file any document in 14 the department under any other provision of this subpart or the 15 corporation desires to secure from the department any 16 certificate to the effect that the corporation is a corporation 17 duly incorporated and existing under the laws of this 18 Commonwealth or a certified copy of the articles of the 19 corporation or the corporation desires to correct the text of 20 its charter documents as on file in the department, the 21 corporation shall file in the department a statement of summary 22 of record which shall be executed by the corporation and shall 23 set forth: 24 (1) The name of the corporation and, subject to section 25 109 (relating to name of commercial registered office 26 provider in lieu of registered address), the location, 27 including street and number, if any, of its registered 28 office. 29 (2) The statute by or under which the corporation was 30 incorporated. 19970S1157B1392 - 10 -
1 (3) The name under which, the manner in which and the 2 date on which the corporation was originally incorporated, 3 including the date when and the place where the original 4 articles were recorded. 5 (4) The place or places, including volume and page 6 numbers or their equivalent, where the documents 7 [constituting the currently effective articles are] that are 8 not on file in the department or that require correction in 9 the records of the department were originally filed or 10 recorded, the date or dates of each filing or recording and 11 the correct text of the [currently effective articles.] 12 documents. The information specified in this paragraph may be 13 omitted in a statement of summary of record that is delivered 14 to the department contemporaneously with amended and restated 15 articles of the corporation filed under this subpart. 16 [(5) Each name by which the corporation was known, if 17 any, other than its original name and its current name, and 18 the date or dates on which each change of name of the 19 corporation became effective. 20 (6) In the case of any entity brought within the scope 21 of Chapter 29 (relating to professional corporations) by or 22 pursuant to section 2905 (relating to election of 23 professional associations to become professional 24 corporations), amended and restated articles of incorporation 25 which shall include all of the information required to be set 26 forth in restated articles of a professional corporation. 27 A corporation shall be required to make only one filing under 28 this subsection.] 29 (b) Validation of prior defects in incorporation.--Upon the 30 filing of a statement by a corporation under this section or the 19970S1157B1392 - 11 -
1 transfer to the department of the records relating to a 2 corporation pursuant to section 140, the corporation [named in 3 the statement] shall be deemed to be a validly subsisting 4 corporation to the same extent as if it had been duly 5 incorporated and was existing under this subpart and the 6 department shall so certify regardless of any absence of or 7 defect in the prior proceedings relating to incorporation. 8 (c) Cross [reference] references.--See [section] sections 9 134 (relating to docketing statement), 135 (relating to 10 requirements to be met by filed documents) and 1106(b)(2) 11 (relating to uniform application of subpart). 12 § 1504. Adoption, amendment and contents of bylaws. 13 * * * 14 (d) Amendment of voting provisions.-- 15 (1) Unless otherwise provided in a bylaw adopted by the 16 shareholders, whenever [the bylaws require] a bylaw adopted 17 by the shareholders requires for the taking of any action by 18 the shareholders or a class of shareholders a specific number 19 or percentage of votes, the provision of the bylaws setting 20 forth that requirement shall not be amended or repealed by 21 any lesser number or percentage of votes of the shareholders 22 or of the class of shareholders or only by action of the 23 board of directors. 24 (2) Paragraph (1) shall not apply to a bylaw setting 25 forth the right of shareholders to act by unanimous written 26 consent as provided in section 1766(a) (relating to unanimous 27 consent). 28 § 1505. Persons bound by bylaws. 29 Except as otherwise provided by section 1713 (relating to 30 personal liability of directors) or any similar provision of 19970S1157B1392 - 12 -
1 law, the bylaws of a business corporation shall operate only as 2 regulations among the shareholders, directors and officers of 3 the corporation and shall not affect contracts or other dealings 4 with other persons unless those persons have actual knowledge of 5 the bylaws. 6 § 1508. Corporate records; inspection by shareholders. 7 (a) Required records.--Every business corporation shall keep 8 complete and accurate books and records of account, minutes of 9 the proceedings of the incorporators, shareholders and directors 10 and a share register giving the names and addresses of all 11 shareholders and the number and class of shares held by each. 12 The share register shall be kept at [either] any of the 13 following locations: 14 (1) the registered office of the corporation in this 15 Commonwealth [or at its]; 16 (2) the principal place of business of the corporation 17 wherever situated; 18 (3) any actual business office of the corporation; or 19 [at] 20 (4) the office of [its] the registrar or transfer agent 21 of the corporation. [Any books, minutes or other records may 22 be in written form or any other form capable of being 23 converted into written form within a reasonable time.] 24 (b) Right of inspection by a shareholder.--Every shareholder 25 shall, upon written verified demand stating the purpose thereof, 26 have a right to examine, in person or by agent or attorney, 27 during the usual hours for business for any proper purpose, the 28 share register, books and records of account, and records of the 29 proceedings of the incorporators, shareholders and directors and 30 to make copies or extracts therefrom. A proper purpose shall 19970S1157B1392 - 13 -
1 mean a purpose reasonably related to the interest of the person 2 as a shareholder. In every instance where an attorney or other 3 agent is the person who seeks the right of inspection, the 4 demand shall be accompanied by a verified power of attorney or 5 other writing that authorizes the attorney or other agent to so 6 act on behalf of the shareholder. The demand shall be directed 7 to the corporation: 8 (1) at its registered office in this Commonwealth [or]; 9 (2) at its principal place of business wherever 10 situated; or 11 (3) in care of the person in charge of an actual 12 business office of the corporation. 13 (c) Proceedings for the enforcement of inspection by a 14 shareholder.--If the corporation, or an officer or agent 15 thereof, refuses to permit an inspection sought by a shareholder 16 or attorney or other agent acting for the shareholder pursuant 17 to subsection (b) or does not reply to the demand within five 18 business days after the demand has been made, the shareholder 19 may apply to the court for an order to compel the inspection. 20 The court shall determine whether or not the person seeking 21 inspection is entitled to the inspection sought. The court may 22 summarily order the corporation to permit the shareholder to 23 inspect the share register and the other books and records of 24 the corporation and to make copies or extracts therefrom, or the 25 court may order the corporation to furnish to the shareholder a 26 list of its shareholders as of a specific date on condition that 27 the shareholder first pay to the corporation the reasonable cost 28 of obtaining and furnishing the list and on such other 29 conditions as the court deems appropriate. Where the shareholder 30 seeks to inspect the books and records of the corporation, other 19970S1157B1392 - 14 -
1 than its share register or list of shareholders, he shall first 2 establish: 3 (1) That he has complied with the provisions of this 4 section respecting the form and manner of making demand for 5 inspection of the document. 6 (2) That the inspection he seeks is for a proper 7 purpose. 8 Where the shareholder seeks to inspect the share register or 9 list of shareholders of the corporation and he has complied with 10 the provisions of this section respecting the form and manner of 11 making demand for inspection of the documents, the burden of 12 proof shall be upon the corporation to establish that the 13 inspection he seeks is for an improper purpose. The court may, 14 in its discretion, prescribe any limitations or conditions with 15 reference to the inspection or award such other or further 16 relief as the court deems just and proper. The court may order 17 books, documents and records, pertinent extracts therefrom, or 18 duly authenticated copies thereof, to be brought into this 19 Commonwealth and kept in this Commonwealth upon such terms and 20 conditions as the order may prescribe. 21 (d) Certain provisions of articles ineffective.--This 22 section may not be relaxed by any provision of the articles. 23 (e) Cross [reference] references.--See [section] sections 24 107 (relating to form of records), 1512 (relating to 25 informational rights of a director) and 1763(c) (relating to 26 certification by nominee). 27 § 1512. Informational rights of a director. 28 (a) General rule.--To the extent reasonably related to the 29 performance of the duties of the director, including those 30 arising from service as a member of a committee of the board of 19970S1157B1392 - 15 -
1 directors, a director of a business corporation is entitled: 2 (1) in person or by any attorney or other agent, at any 3 reasonable time, to inspect and copy corporate books, records 4 and documents and, in addition, to inspect, and receive 5 information regarding, the assets, liabilities and operations 6 of the corporation and any subsidiaries of the corporation 7 incorporated or otherwise organized or created under the laws 8 of this Commonwealth that are controlled directly or 9 indirectly by the corporation; and 10 (2) to demand that the corporation exercise whatever 11 rights it may have to obtain information regarding any other 12 subsidiaries of the corporation. 13 (b) Proceedings for enforcement of inspection by a 14 director.--If the corporation, or an officer or agent thereof, 15 refuses to permit an inspection or obtain or provide information 16 sought by a director or attorney or other agent acting for the 17 director pursuant to subsection (a) or does not reply to the 18 request within two business days after the request has been 19 made, the director may apply to the court for an order to compel 20 the inspection or the obtaining or providing of the information. 21 The court shall summarily order the corporation to permit the 22 requested inspection or to obtain the information unless the 23 corporation establishes that the information to be obtained by 24 the exercise of the right is not reasonably related to the 25 performance of the duties of the director or that the director 26 or the attorney or agent of the director is likely to use the 27 information in a manner that would violate the duty of the 28 director to the corporation. The order of the court may contain 29 provisions protecting the corporation from undue burden or 30 expense and prohibiting the director from using the information 19970S1157B1392 - 16 -
1 in a manner that would violate the duty of the director to the 2 corporation. 3 (c) Cross references.--See sections 107 (relating to form of 4 records) and 1508 (relating to corporate records; inspection by 5 shareholders) and 42 Pa.C.S. § 2503(7) (relating to right of 6 participants to receive counsel fees). 7 § 1521. Authorized shares. 8 * * * 9 (b) Provisions specifically authorized.-- 10 (1) Without limiting the authority contained in 11 subsection (a), a corporation, when so authorized in its 12 articles, may issue classes or series of shares: 13 (i) Subject to the right or obligation of the 14 corporation to redeem any of the shares for the 15 consideration, if any, fixed by or in the manner provided 16 by the articles for the redemption thereof. Unless 17 otherwise provided in the articles, any shares subject to 18 redemption shall be redeemable only pro rata or by lot or 19 by such other equitable method as may be selected by the 20 corporation. [An amendment of the articles to add or 21 amend a provision permitting the redemption of any shares 22 by a method that is not pro rata nor by lot nor otherwise 23 equitable may be effected only pursuant to section 1906 24 (relating to special treatment of holders of shares of 25 same class or series).] 26 (ii) Entitling the holders thereof to cumulative, 27 noncumulative or partially cumulative dividends. 28 (iii) Having preference over any other shares as to 29 dividends or assets or both. 30 (iv) Convertible into shares of any other class or 19970S1157B1392 - 17 -
1 series, or into obligations of the corporation. 2 (2) Any of the terms of a class or series of shares may 3 be made dependent upon: 4 (i) Facts ascertainable outside of the articles if 5 the manner in which the facts will operate upon the terms 6 of the class or series is set forth in the articles. Such 7 facts may include, without limitation, actions or events 8 within the control of or determinations made by the 9 corporation or a representative of the corporation. 10 * * * 11 (d) Status and rights.--Shares of a business corporation 12 shall be deemed personal property. Except as otherwise provided 13 by the articles or, when so permitted by subsection (c), by one 14 or more bylaws adopted by the shareholders, each share shall be 15 in all respects equal to every other share. See section 16 1906(d)(4) (relating to special treatment of holders of shares 17 of same class or series). 18 § 1526. Liability of [subscribers and] shareholders. 19 [A subscriber to, or holder or owner of, shares of a business 20 corporation shall not be under any liability to the corporation 21 or any creditor thereof with respect to the shares other than 22 the personal obligation of a shareholder who has acquired his 23 shares by subscription to comply with the terms of the 24 subscription.] (a) General rule.--A shareholder of a business 25 corporation shall not be liable, solely by reason of being a 26 shareholder, under an order of a court or in any other manner 27 for a debt, obligation or liability of the corporation of any 28 kind or for the acts of any shareholder or representative of the 29 corporation. 30 (b) Professional relationship unaffected.--Subsection (a) 19970S1157B1392 - 18 -
1 shall not afford the shareholders of a business corporation that 2 is not a professional corporation, but that provides 3 professional services, with greater immunity than is available 4 to the officers, shareholders, employees or agents of a business 5 corporation that is a professional corporation. See section 2925 6 (relating to professional relationship retained). 7 (c) Disciplinary jurisdiction unaffected.--A business 8 corporation providing professional services shall be subject to 9 the applicable rules and regulations adopted by, and all the 10 disciplinary powers of, the court, department, board, commission 11 or other government unit regulating the profession in which the 12 corporation is engaged. The court, department, board or other 13 government unit may require that a corporation include in its 14 articles provisions that conform to any rule or regulation 15 heretofore or hereafter promulgated for the purpose of enforcing 16 the ethics of a profession. This subpart shall not affect or 17 impair the disciplinary powers of the court, department, board, 18 commission or other government unit over licensed persons or any 19 law, rule or regulation pertaining to the standards for 20 professional conduct of licensed persons or to the professional 21 relationship between any licensed person rendering professional 22 services and the person receiving professional services. 23 § 1571. Application and effect of subchapter. 24 (a) General rule.--Except as otherwise provided in 25 subsection (b), any shareholder (as defined in section 1572 26 (relating to definitions)) of a business corporation shall have 27 the right to dissent from, and to obtain payment of the fair 28 value of his shares in the event of, any corporate action, or to 29 otherwise obtain fair value for his shares, only where this part 30 expressly provides that a shareholder shall have the rights and 19970S1157B1392 - 19 -
1 remedies provided in this subchapter. See: 2 Section 1906(c) (relating to dissenters rights upon 3 special treatment). 4 Section 1930 (relating to dissenters rights). 5 Section 1931(d) (relating to dissenters rights in share 6 exchanges). 7 Section 1932(c) (relating to dissenters rights in asset 8 transfers). 9 Section 1952(d) (relating to dissenters rights in 10 division). 11 Section 1962(c) (relating to dissenters rights in 12 conversion). 13 Section 2104(b) (relating to procedure). 14 Section 2324 (relating to corporation option where a 15 restriction on transfer of a security is held invalid). 16 Section 2325(b) (relating to minimum vote requirement). 17 Section 2704(c) (relating to dissenters rights upon 18 election). 19 Section 2705(d) (relating to dissenters rights upon 20 renewal of election). 21 Section 2904(b) (relating to procedure). 22 Section 2907(a) (relating to proceedings to terminate 23 breach of qualifying conditions). 24 Section 7104(b)(3) (relating to procedure). 25 (b) Exceptions.-- 26 (1) Except as otherwise provided in paragraph (2), the 27 holders of the shares of any class or series of shares [that, 28 at] shall not have the right to dissent and obtain payment of 29 the fair value of the shares under this subchapter if, on the 30 record date fixed to determine the shareholders entitled to 19970S1157B1392 - 20 -
1 notice of and to vote at the meeting at which a plan 2 specified in any of section 1930, 1931(d), 1932(c) or 1952(d) 3 is to be voted on, or on the date of the first public 4 announcement that such a plan has been approved by the 5 shareholders by written consent without a meeting, the shares 6 are either: 7 (i) listed on a national securities exchange or 8 designated as a national market system security on an 9 interdealer quotation system by the National Association 10 of Securities Dealers, Inc.; or 11 (ii) held beneficially or of record by more than 12 2,000 [shareholders; 13 shall not have the right to obtain payment of the fair value 14 of any such shares under this subchapter.] persons. 15 (2) Paragraph (1) shall not apply to and dissenters 16 rights shall be available without regard to the exception 17 provided in that paragraph in the case of: 18 (i) [Shares converted by a plan if the shares are 19 not converted solely into shares of the acquiring, 20 surviving, new or other corporation or solely into such 21 shares and money in lieu of fractional shares.] 22 (Repealed.) 23 (ii) Shares of any preferred or special class or 24 series unless the articles, the plan or the terms of the 25 transaction entitle all shareholders of the class or 26 series to vote thereon and require for the adoption of 27 the plan or the effectuation of the transaction the 28 affirmative vote of a majority of the votes cast by all 29 shareholders of the class or series. 30 (iii) Shares entitled to dissenters rights under 19970S1157B1392 - 21 -
1 section 1906(c) (relating to dissenters rights upon 2 special treatment). 3 (3) The shareholders of a corporation that acquires by 4 purchase, lease, exchange or other disposition all or 5 substantially all of the shares, property or assets of 6 another corporation by the issuance of shares, obligations or 7 otherwise, with or without assuming the liabilities of the 8 other corporation and with or without the intervention of 9 another corporation or other person, shall not be entitled to 10 the rights and remedies of dissenting shareholders provided 11 in this subchapter regardless of the fact, if it be the case, 12 that the acquisition was accomplished by the issuance of 13 voting shares of the corporation to be outstanding 14 immediately after the acquisition sufficient to elect a 15 majority or more of the directors of the corporation. 16 * * * 17 (g) Computation of beneficial ownership.--For purposes of 18 subsection (b)(1)(ii), shares that are held beneficially as 19 joint tenants, tenants by the entireties, tenants in common or 20 in trust by two or more persons, as fiduciaries or otherwise, 21 shall be deemed to be held beneficially by one person. 22 [(g)] (h) Cross references.--See sections 1105 (relating to 23 restriction on equitable relief), 1904 (relating to de facto 24 transaction doctrine abolished), 1763(c) (relating to 25 determination of shareholders of record) and 2512 (relating to 26 dissenters rights procedure). 27 § 1572. Definitions. 28 The following words and phrases when used in this subchapter 29 shall have the meanings given to them in this section unless the 30 context clearly indicates otherwise: 19970S1157B1392 - 22 -
1 "Corporation." The issuer of the shares held or owned by the 2 dissenter before the corporate action or the successor by 3 merger, consolidation, division, conversion or otherwise of that 4 issuer. A plan of division may designate which one or more of 5 the resulting corporations is the successor corporation for the 6 purposes of this subchapter. The designated successor 7 corporation or corporations in a division shall have sole 8 responsibility for payments to dissenters and other liabilities 9 under this subchapter except as otherwise provided in the plan 10 of division. 11 "Dissenter." A shareholder [or beneficial owner] who is 12 entitled to and does assert dissenters rights under this 13 subchapter and who has performed every act required up to the 14 time involved for the assertion of those rights. 15 * * * 16 "Shareholder." A shareholder as defined in section 1103 17 (relating to definitions), or an ultimate beneficial owner of 18 shares, including without limitation a holder of depository 19 receipts, where the beneficial interest owned includes an 20 interest in the assets of the corporation upon dissolution. 21 § 1704. Place and notice of meetings of shareholders. 22 (a) Place.--Meetings of shareholders may be held at such 23 place within or without this Commonwealth as may be provided in 24 or fixed pursuant to the bylaws. Unless otherwise provided in or 25 pursuant to the bylaws, all meetings of the shareholders shall 26 be held [in this Commonwealth at the registered office of the 27 corporation] at the executive office of the corporation wherever 28 situated. 29 * * * 30 § 1709. Conduct of shareholders meeting. 19970S1157B1392 - 23 -
1 (a) Presiding officer.--There shall be a presiding officer 2 at every meeting of the shareholders. The presiding officer 3 shall be appointed in the manner provided in the bylaws or, in 4 the absence of such provision, by the board of directors. If the 5 bylaws are silent on the appointment of the presiding officer 6 and the board fails to designate a presiding officer, the 7 president shall be the presiding officer. 8 (b) Authority of the presiding officer.--Except as otherwise 9 provided in the bylaws, the presiding officer shall determine 10 the order of business and shall have the authority to establish 11 rules for the conduct of the meeting. 12 (c) Procedural standard.--Any action by the presiding 13 officer in adopting rules for, and in conducting, a meeting 14 shall be fair to the shareholders. 15 (d) Closing of the polls.--The presiding officer shall 16 announce at the meeting when the polls close for each matter 17 voted upon. If no announcement is made, the polls shall be 18 deemed to have closed upon the final adjournment of the meeting. 19 After the polls close, no ballots, proxies or votes, nor any 20 revocations or changes thereto, may be accepted. 21 § 1729. Voting rights of directors. 22 (a) General rule.--Unless otherwise provided in a bylaw 23 adopted by the shareholders, every director of a business 24 corporation shall be entitled to one vote. Without limiting the 25 generality of the foregoing, a bylaw adopted by the shareholders 26 may provide that a class or other defined group of directors 27 shall have multiple or fractional voting rights, or no right to 28 vote, either generally or under specified circumstances. 29 (b) [Multiple and fractional voting] Application of 30 procedural requirements.--Any requirement of this subpart for 19970S1157B1392 - 24 -
1 the presence of or vote or other action by a specified
2 percentage of directors shall be satisfied by the presence of or
3 vote or other action by directors entitled to cast the specified
4 percentage of the votes that all voting directors in office are
5 entitled to cast.
6 § 1731. Executive and other committees of the board.
7 (a) Establishment and powers.--Unless otherwise restricted
8 in the bylaws:
9 * * *
10 (2) Any committee, to the extent provided in the
11 resolution of the board of directors or in the bylaws, shall
12 have and may exercise all of the powers and authority of the
13 board of directors except that a committee shall not have any
14 power or authority as to the following:
15 (i) The submission to shareholders of any action
16 requiring approval of shareholders under this subpart.
17 (ii) The creation or filling of vacancies in the
18 board of directors.
19 (iii) The adoption, amendment or repeal of the
20 bylaws.
21 (iv) The amendment or repeal of any resolution of
22 the board that by its terms is amendable or repealable
23 only by the board.
24 (v) Action on matters committed by the bylaws or
25 resolution of the board of directors exclusively to
26 another committee of the board.
27 * * *
28 § 1745. Advancing expenses.
29 Expenses (including attorneys' fees) incurred in defending
30 any action or proceeding referred to in this subchapter may be
19970S1157B1392 - 25 -
1 paid by a business corporation in advance of the final 2 disposition of the action or proceeding upon receipt of an 3 undertaking by or on behalf of the representative to repay the 4 amount if it is ultimately determined that he is not entitled to 5 be indemnified by the corporation as authorized in this 6 subchapter or otherwise. Except as otherwise provided in the 7 bylaws, advancement of expenses shall be authorized by the board 8 of directors. Sections 1728 (relating to interested directors or 9 officers; quorum) and 2538 (relating to approval of transactions 10 with interested shareholders) shall not be applicable to the 11 advancement of expenses under this section. 12 § 1748. Application to surviving or new corporations. 13 [For] (a) General rule.--Except as provided in subsection 14 (b), for the purposes of this subchapter, references to "the 15 corporation" include all constituent corporations absorbed in a 16 consolidation, merger or division, as well as the surviving or 17 new corporations surviving or resulting therefrom, so that any 18 person who is or was a representative of the constituent, 19 surviving or new corporation, or is or was serving at the 20 request of the constituent, surviving or new corporation as a 21 representative of another domestic or foreign corporation for 22 profit or not-for-profit, partnership, joint venture, trust or 23 other enterprise, shall stand in the same position under the 24 provisions of this subchapter with respect to the surviving or 25 new corporation as he would if he had served the surviving or 26 new corporation in the same capacity. 27 (b) Divisions.--Notwithstanding subsection (a), the 28 obligations of a dividing corporation to indemnify and advance 29 expenses to its representatives, whether arising under this 30 subchapter or otherwise, may be allocated in a division in the 19970S1157B1392 - 26 -
1 same manner and with the same effect as any other liability of 2 the dividing corporation. 3 § 1756. Quorum. 4 (a) General rule.--A meeting of shareholders of a business 5 corporation duly called shall not be organized for the 6 transaction of business unless a quorum is present. Unless 7 otherwise provided in a bylaw adopted by the shareholders: 8 * * * 9 (4) If a proxy casts a vote on behalf of a shareholder 10 on any issue considered at a meeting of shareholders, the 11 shareholder shall be deemed to be present during the entire 12 meeting for purposes of determining whether a quorum is 13 present for consideration of any other issue. 14 * * * 15 § 1758. Voting rights of shareholders. 16 * * * 17 (b) Procedures for election of directors.--[If the bylaws 18 provide a fair and reasonable procedure for the nomination of 19 candidates for any office, only candidates who have been duly 20 nominated in accordance therewith shall be eligible for 21 election.] Unless otherwise restricted in the bylaws, in 22 elections for directors, voting need not be by ballot unless 23 required by vote of the shareholders before the voting for 24 election of directors begins. The candidates for election as 25 directors receiving the highest number of votes from each class 26 or group of classes, if any, entitled to elect directors 27 separately up to the number of directors to be elected by the 28 class or group of classes shall be elected. If at any meeting of 29 shareholders, directors of more than one class are to be 30 elected, each class of directors shall be elected in a separate 19970S1157B1392 - 27 -
1 election. 2 * * * 3 (e) Advance notice of nominations and other business.--If 4 the bylaws provide a fair and reasonable procedure for the 5 nomination of candidates for election as directors, only 6 candidates who have been duly nominated in accordance therewith 7 shall be eligible for election. If the bylaws impose a fair and 8 reasonable requirement of advance notice of proposals to be made 9 by a shareholder at the annual meeting of the shareholders, only 10 proposals for which advance notice has been properly given may 11 be acted upon at the meeting. 12 § 1906. Special treatment of holders of shares of same class or 13 series. 14 (a) General rule.--Except as otherwise restricted in the 15 articles, [an amendment or] a plan may contain a provision 16 classifying the holders of shares of a class or series into one 17 or more separate groups by reference to any facts or 18 circumstances that are not manifestly unreasonable and providing 19 mandatory treatment for shares of the class or series held by 20 particular shareholders or groups of shareholders that differs 21 materially from the treatment accorded other shareholders or 22 groups of shareholders holding shares of the same class or 23 series (including a provision modifying or rescinding rights 24 previously created under this section) if: 25 (1) (i) such provision is specifically authorized by a 26 majority of the votes cast by all shareholders entitled 27 to vote on the [amendment or] plan, as well as by a 28 majority of the votes cast by any class or series of 29 shares any of the shares of which are so classified into 30 groups, whether or not such class or series would 19970S1157B1392 - 28 -
1 otherwise be entitled to vote on the [amendment or] plan;
2 and
3 (ii) the provision voted on specifically enumerates
4 the type and extent of the special treatment authorized;
5 or
6 (2) under all the facts and circumstances, a court of
7 competent jurisdiction finds such special treatment is
8 undertaken in good faith, after reasonable deliberation and
9 is in the best interest of the corporation.
10 (b) Statutory voting rights upon special treatment.--Except
11 as provided in subsection (c), if [an amendment or] a plan
12 contains a provision for special treatment, each group of
13 holders of any outstanding shares of a class or series who are
14 to receive the same special treatment under the [amendment or]
15 plan shall be entitled to vote as a special class in respect to
16 the plan regardless of any limitations stated in the articles or
17 bylaws on the voting rights of any class or series.
18 (c) Dissenters rights upon special treatment.--If any
19 [amendment or] plan contains a provision for special treatment
20 without requiring for the adoption of the [amendment or] plan
21 the statutory class vote required by subsection (b), the holder
22 of any outstanding shares the statutory class voting rights of
23 which are so denied, who objects to the [amendment or] plan and
24 complies with Subchapter D of Chapter 15 (relating to dissenters
25 rights), shall be entitled to the rights and remedies of
26 dissenting shareholders provided in that subchapter.
27 (d) Exceptions.--This section shall not apply to:
28 (1) The creation or issuance of securities, contracts,
29 warrants or other instruments evidencing any shares, option
30 rights, securities having conversion or option rights or
19970S1157B1392 - 29 -
1 obligations authorized by section 2513 (relating to disparate 2 treatment of certain persons). 3 (2) A provision of [an amendment or] a plan that offers 4 to all holders of shares of a class or series the same option 5 to elect certain treatment. 6 (3) [An amendment or] A plan that contains an express 7 provision that this section shall not apply or that fails to 8 contain an express provision that this section shall apply. 9 The shareholders of a corporation that proposes [an amendment 10 or] a plan to which this section is not applicable by reason 11 of this paragraph shall have the remedies contemplated by 12 section 1105 (relating to restriction on equitable relief). 13 (4) A provision of a plan that treats all of the holders 14 of a particular class or series of shares differently from 15 the holders of another class or series. A provision of a plan 16 that treats the holders of a class or series of shares 17 differently from the holders of another class or series of 18 shares shall not constitute a violation of section 1521(d) 19 (relating to authorized shares). 20 (e) Definition.--As used in this section, the term "plan" 21 includes: 22 (1) an amendment of the articles that effects a 23 reclassification of shares, whether or not the amendment is 24 accompanied by a separate plan of reclassification; and 25 (2) a resolution recommending that the corporation 26 dissolve voluntarily adopted under section 1972(a) (relating 27 to proposal of voluntary dissolution). 28 § 1912. Proposal of amendments. 29 * * * 30 (c) Terms of amendment.--The resolution or petition may set 19970S1157B1392 - 30 -
1 forth the manner and basis of reclassifying the shares of the 2 corporation. Any of the terms of a plan of reclassification or 3 other action contained in an amendment may be made dependent 4 upon facts ascertainable outside of the amendment if the manner 5 in which the facts will operate upon the terms of the amendment 6 is set forth in the amendment. Such facts may include, without 7 limitation, actions or events within the control of or 8 determinations made by the corporation or a representative of 9 the corporation. 10 § 1914. Adoption of amendments. 11 * * * 12 (b) Statutory voting rights.--Except as provided in this 13 subpart, the holders of the outstanding shares of a class or 14 series of shares shall be entitled to vote as a class in respect 15 of a proposed amendment regardless of any limitations stated in 16 the articles or bylaws on the voting rights of any class or 17 series if [a proposed] the amendment would: 18 (1) authorize the board of directors to fix and 19 determine the relative rights and preferences, as between 20 series, of any preferred or special class; 21 (2) make any change in the preferences, limitations or 22 special rights (other than preemptive rights or the right to 23 vote cumulatively) of the shares of a class or series adverse 24 to the class or series; 25 (3) authorize a new class or series of shares having a 26 preference as to dividends or assets which is senior to the 27 shares of a class or series; [or] 28 (4) increase the number of authorized shares of any 29 class or series having a preference as to dividends or assets 30 which is senior in any respect to the shares of a class or 19970S1157B1392 - 31 -
1 series; or 2 (5) make the outstanding shares of a class or series 3 redeemable by a method that is not pro rata, by lot or 4 otherwise equitable. 5 [then the holders of the outstanding shares of the class or 6 series shall be entitled to vote as a class in respect to the 7 amendment regardless of any limitations stated in the articles 8 or bylaws on the voting rights of any class or series.] 9 (c) Adoption by board of directors.--Unless otherwise 10 restricted in the articles, an amendment of articles shall not 11 require the approval of the shareholders of the corporation if: 12 (1) shares have not been issued; 13 (2) the amendment is restricted to [any] one or more of 14 the following: 15 (i) changing the corporate name; 16 (ii) providing for perpetual existence; 17 (iii) reflecting a reduction in authorized shares 18 effected by operation of section 1552(a) (relating to 19 power of corporation to acquire its own shares) and, if 20 appropriate, deleting all references to a class or series 21 of shares that is no longer outstanding; [or] 22 (iv) adding or deleting a provision authorized by 23 section 1528(f) (relating to uncertificated shares)[.]; 24 or 25 (v) adding, changing or eliminating the par value of 26 any class or series of shares if the par value of that 27 class or series does not have any substantive effect 28 under the terms of that or any other class or series of 29 shares; 30 (3) (i) the corporation has only one class or series of 19970S1157B1392 - 32 -
1 voting shares outstanding; 2 (ii) the corporation does not have any class or 3 series of shares outstanding that is: 4 (A) convertible into those voting shares; 5 (B) junior in any way to those voting shares; or 6 (C) entitled to participate on any basis in 7 distributions with those voting shares; and 8 (iii) the amendment is effective solely to 9 accomplish one of the following purposes with respect to 10 those voting shares: 11 [(i)] (A) in connection with effectuating a stock 12 dividend of voting shares on the voting shares, to 13 increase the number of authorized shares [to the extent 14 necessary to permit the board of directors to effectuate 15 a stock dividend in the shares of the corporation] of the 16 voting shares in the same proportion that the voting 17 shares to be distributed in the stock dividend increase 18 the issued voting shares; or 19 [(ii) effectuate a] (B) to split the voting shares 20 and, if desired, increase the number of authorized shares 21 of the voting shares or change the par value of [the 22 authorized] the voting shares, or both, in proportion 23 thereto; 24 (4) to the extent the amendment has not been approved by 25 the shareholders, it restates without change all of the 26 operative provisions of the articles as theretofore amended 27 or as amended thereby; or 28 (5) the amendment accomplishes any combination of 29 purposes specified in this subsection. 30 Whenever a provision of this subpart authorizes the board of 19970S1157B1392 - 33 -
1 directors to take any action without the approval of the 2 shareholders and provides that a statement, certificate, plan or 3 other document relating to such action shall be filed in the 4 Department of State and shall operate as an amendment of the 5 articles, the board upon taking such action may, in lieu of 6 filing the statement, certificate, plan or other document, amend 7 the articles under this subsection without the approval of the 8 shareholders to reflect the taking of such action. An amendment 9 of articles under this subsection shall be deemed adopted by the 10 corporation when it has been adopted by the board of directors 11 pursuant to section 1912 (relating to proposal of amendments). 12 * * * 13 (f) Definition.--As used in this section, the term "voting 14 shares" has the meaning specified in section 2552 (relating to 15 definitions). 16 § 1922. Plan of merger or consolidation. 17 (a) Preparation of plan.--A plan of merger or consolidation, 18 as the case may be, shall be prepared, setting forth: 19 * * * 20 (5) Such other provisions as are deemed desirable. 21 [Any of the terms of the plan may be made dependent upon facts 22 ascertainable outside of the plan if the manner in which the 23 facts will operate upon the terms of the plan is set forth in 24 the plan.] 25 (b) Post-adoption amendment.--A plan of merger or 26 consolidation may contain a provision that the boards of 27 directors of the constituent corporations may amend the plan at 28 any time prior to its effective date, except that an amendment 29 made subsequent to the adoption of the plan by the shareholders 30 of any constituent domestic business corporation shall not 19970S1157B1392 - 34 -
1 change: 2 (1) The amount or kind of shares, obligations, cash, 3 property or rights to be received in exchange for or on 4 conversion of all or any of the shares of the constituent 5 domestic business corporation adversely to the holders of 6 those shares. 7 (2) Any [term] provision of the articles of the 8 surviving or new corporation [to be effected by] as it is to 9 be in effect immediately following consummation of the merger 10 or consolidation, except provisions that may be amended 11 without the approval of the shareholders under section 12 1914(c)(2) (relating to adoption of amendments). 13 (3) Any of the other terms and conditions of the plan if 14 the change would adversely affect the holders of any shares 15 of the constituent domestic business corporation. 16 (c) Proposal.--[Every] Except where the approval of the 17 board of directors is unnecessary under this subchapter, every 18 merger or consolidation shall be proposed in the case of each 19 domestic business corporation by the adoption by the board of 20 directors of a resolution approving the plan of merger or 21 consolidation. Except where the approval of the shareholders is 22 unnecessary under this subchapter, the board of directors shall 23 direct that the plan be submitted to a vote of the shareholders 24 entitled to vote thereon at a regular or special meeting of the 25 shareholders. 26 * * * 27 (e) Reference to outside facts.--Any of the terms of a plan 28 of merger or consolidation may be made dependent upon facts 29 ascertainable outside of the plan if the manner in which the 30 facts will operate upon the terms of the plan is set forth in 19970S1157B1392 - 35 -
1 the plan. Such facts may include, without limitation, actions or 2 events within the control of or determinations made by a party 3 to the plan or a representative of a party to the plan. 4 § 1923. Notice of meeting of shareholders. 5 (a) General rule.--Written notice of the meeting of 6 shareholders that will act on the proposed plan shall be given 7 to each shareholder of record, whether or not entitled to vote 8 thereon, of each domestic business corporation that is a party 9 to the merger or consolidation. There shall be included in, or 10 enclosed with, the notice a copy of the proposed plan or a 11 summary thereof and, if Subchapter D of Chapter 15 (relating to 12 dissenters rights) is applicable to the holders of shares of any 13 class or series, a copy of that subchapter and of section 1930 14 (relating to dissenters rights) shall be furnished to the 15 holders of shares of that class or series. The notice shall 16 state that a copy of the bylaws of the surviving or new 17 corporation will be furnished to any shareholder on request and 18 without cost. 19 * * * 20 § 1924. Adoption of plan. 21 * * * 22 (b) Adoption by board of directors.-- 23 (1) Unless otherwise required by its bylaws, a plan of 24 merger or consolidation shall not require the approval of the 25 shareholders of a constituent domestic business corporation 26 if: 27 * * * 28 (ii) immediately prior to the adoption of the plan 29 and at all times thereafter prior to its effective date, 30 another corporation that is a party to the [merger or 19970S1157B1392 - 36 -
1 consolidation] plan owns directly or indirectly 80% or 2 more of the outstanding shares of each class of the 3 constituent corporation; or 4 * * * 5 (3) If a merger or consolidation of a subsidiary 6 corporation with a parent corporation is effected pursuant to 7 paragraph (1)(ii), the plan of merger or consolidation shall 8 be deemed adopted by the subsidiary corporation when it has 9 been adopted by the board of the parent corporation and 10 neither approval of the plan by the board of directors of the 11 subsidiary corporation nor execution of articles of merger or 12 consolidation by the subsidiary corporation shall [not] be 13 necessary. 14 (4) (i) Unless other required by its bylaws, a plan of 15 merger or consolidation providing for the merger or 16 consolidation of a domestic business corporation 17 (referred to in this paragraph as the "constituent 18 corporation") with or into a single indirect wholly owned 19 subsidiary (referred to in this paragraph as the 20 "subsidiary corporation") of the constituent corporation 21 shall not require the approval of the shareholders of 22 either the constitutent corporation or the subsidiary 23 corporation if all of the provisions of this paragraph 24 are satisfied. 25 (ii) A merger or consolidation under this paragraph 26 shall satisfy the following conditions: 27 (A) The constituent corporation and the 28 subsidiary corporation are the only parties to the 29 merger or consolidation, other than the resulting 30 corporation, if any, in a consolidation (the 19970S1157B1392 - 37 -
1 corporation that survives or results from the merger 2 or consolidation is referred to in this paragraph as 3 the "resulting subsidiary"). 4 (B) Each share or fraction of a share of the 5 capital stock of the constituent corporation 6 outstanding immediately prior to the effective time 7 of the merger or consolidation is converted in the 8 merger or consolidation into a share or equal 9 fraction of a share of capital stock of a holding 10 company having the same designations, rights, powers 11 and preferences and the qualifications, limitations 12 and restrictions as the share of stock of the 13 constituent corporation being converted in the merger 14 or consolidation. 15 (C) The holding company and the resulting 16 subsidiary are each domestic business corporations. 17 (D) Immediately following the effective time of 18 the merger or consolidation, the articles of 19 incorporation and bylaws of the holding company are 20 identical to the articles of incorporation and bylaws 21 of the constituent corporation immediately before the 22 effective time of the merger or consolidation, except 23 for changes that could be made without shareholder 24 approval under section 1914(c) (relating to adoption 25 by board of directors). 26 (E) Immediately following the effective time of 27 the merger or consolidation, the resulting subsidiary 28 is a direct or indirect wholly owned subsidiary of 29 the holding company. 30 (F) The directors of the constituent corporation 19970S1157B1392 - 38 -
1 become or remain the directors of the holding company 2 upon the effective time of the merger or 3 consolidation. 4 (G) The board of directors of the constituent 5 corporation has made a good faith determination that 6 the shareholders of the constituent corporation will 7 not recognize gain or loss for United States Federal 8 Income Tax purposes. 9 (iii) As used in this paragraph only, the term 10 "holding company" means a corporation that, from its 11 incorporation until consummation of the merger or 12 consolidation governed by this paragraph, was at all 13 times a direct wholly owned subsidiary of the constituent 14 corporation and whose capital stock is issued in the 15 merger or consolidation. 16 (iv) If the holding company is a registered 17 corporation, the shares of the holding company issued in 18 connection with the merger or consolidation shall be 19 deemed to have been acquired at the time that the shares 20 of the constituent corporation converted in the merger or 21 consolidation were acquired. 22 (5) A plan of merger or consolidation adopted by the 23 board of directors under this subsection without the approval 24 of the shareholders shall not, by itself, create or impair 25 any rights or obligations on the part of any person under 26 section 2538 (relating to approval of transactions with 27 interested shareholders) or under Subchapters E (relating to 28 control transactions), F (relating to business combinations), 29 G (relating to control-share acquisitions), H (relating to 30 disgorgement by certain controlling shareholders following 19970S1157B1392 - 39 -
1 attempts to acquire control), I (relating to severance 2 compensation for employees terminated following certain 3 control-share acquisitions) and J (relating to business 4 combination transactions - labor contracts) of Chapter 25, 5 nor shall it change the standard of care applicable to the 6 directors under Subchapter B of Chapter 17 (relating to 7 fiduciary duty). 8 * * * 9 § 1929. Effect of merger or consolidation. 10 * * * 11 (b) Property rights.--All the property, real, personal and 12 mixed, and franchises of each of the corporations parties to the 13 merger or consolidation, and all debts due on whatever account 14 to any of them, including subscriptions for shares and other 15 choses in action belonging to any of them, shall be deemed to be 16 [transferred to and] vested in and shall belong to the surviving 17 or new corporation, as the case may be, without further action, 18 and the title to any real estate, or any interest therein, 19 vested in any of the corporations shall not revert or be in any 20 way impaired by reason of the merger or consolidation. The 21 surviving or new corporation shall thenceforth be responsible 22 for all the liabilities of each of the corporations so merged or 23 consolidated. Liens upon the property of the merging or 24 consolidating corporations shall not be impaired by the merger 25 or consolidation and any claim existing or action or proceeding 26 pending by or against any of the corporations may be prosecuted 27 to judgment as if the merger or consolidation had not taken 28 place or the surviving or new corporation may be proceeded 29 against or substituted in its place. 30 * * * 19970S1157B1392 - 40 -
1 § 1930. Dissenters rights. 2 * * * 3 (b) Plans adopted by directors only.--Except as otherwise 4 provided pursuant to section 1571(c) (relating to grant of 5 optional dissenters rights), Subchapter D of Chapter 15 shall 6 not apply to any of the shares of a corporation that is a party 7 to a merger or consolidation pursuant to section 1924(b)(1)(i) 8 or (4) (relating to adoption by board of directors). 9 * * * 10 § 1931. Share exchanges. 11 (a) General rule.--All the outstanding shares of one or more 12 classes or series of a domestic business corporation, designated 13 in this section as the exchanging corporation, may, in the 14 manner provided in this section, be acquired by any person, 15 designated in this section as the acquiring person, through an 16 exchange of all the shares pursuant to a plan of exchange. The 17 plan of exchange may also provide for the conversion of any 18 other shares of the exchanging corporation into shares, other 19 securities or obligations of any person or cash, property or 20 rights. The procedure authorized by this section shall not be 21 deemed to limit the power of any person to acquire all or part 22 of the shares or other securities of any class or series of a 23 corporation through a voluntary exchange or otherwise by 24 agreement with the holders of the shares or other securities. 25 (b) Plan of exchange.--A plan of exchange shall be prepared, 26 setting forth: 27 (1) The terms and conditions of the exchange. 28 (2) The manner and basis of exchanging or converting the 29 shares of the exchanging corporation into shares or other 30 securities or obligations of the acquiring person, and, if 19970S1157B1392 - 41 -
1 any of the shares of the exchanging corporation are not to be
2 exchanged or converted solely into shares or other securities
3 or obligations of the acquiring person, the shares or other
4 securities or obligations of any other person or cash,
5 property or rights that the holders of the shares of the
6 exchanging corporation are to receive in exchange for, or
7 upon conversion of, the shares and the surrender of any
8 certificates evidencing them, which securities or
9 obligations, if any, of any other person or cash, property
10 and rights may be in addition to or in lieu of the shares or
11 other securities or obligations of the acquiring person.
12 (3) Any changes desired to be made in the articles of
13 the exchanging corporation, which may include a restatement
14 of the articles.
15 (4) Any provisions desired providing special treatment
16 of shares held by any shareholder or group of shareholders as
17 authorized by, and subject to the provisions of, section 1906
18 (relating to special treatment of holders of shares of same
19 class or series). Notwithstanding subsection (a), a plan that
20 provides special treatment may affect less than all of the
21 outstanding shares of a class or series.
22 (5) 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 (c) Proposal and adoption.--The plan of exchange shall be
28 proposed and adopted and may be amended after its adoption and
29 terminated by the exchanging corporation in the manner provided
30 by this subchapter for the proposal, adoption, amendment and
19970S1157B1392 - 42 -
1 termination of a plan of merger except section 1924(b) (relating 2 to adoption by board of directors). There shall be included in, 3 or enclosed with, the notice of the meeting of shareholders to 4 act on the plan a copy or a summary of the plan and, if 5 Subchapter D of Chapter 15 (relating to dissenters rights) is 6 applicable, a copy of the subchapter and of subsection (d). The 7 holders of any class of shares to be [acquired] exchanged or 8 converted pursuant to the plan of exchange shall be entitled to 9 vote as a class on the plan if they would have been entitled to 10 vote on a plan of merger that affects the class in substantially 11 the same manner as the plan of exchange. 12 (d) Dissenters rights in share exchanges.--Any holder of 13 shares that are to be [acquired] exchanged or converted pursuant 14 to a plan of exchange who objects to the plan and complies with 15 the provisions of Subchapter D of Chapter 15 shall be entitled 16 to the rights and remedies of dissenting shareholders therein 17 provided, if any. See section 1906(c) (relating to dissenter 18 rights upon special treatment). 19 (e) Articles of exchange.--Upon adoption of a plan of 20 exchange, as provided in this section, articles of exchange 21 shall be executed by the exchanging corporation and shall set 22 forth: 23 (1) The name and, subject to section 109 (relating to 24 name of commercial registered office provider in lieu of 25 registered address), the location of the registered office, 26 including street and number, if any, of the exchanging 27 corporation. 28 (2) If the plan is to be effective on a specified date, 29 the hour, if any, and the month, day and year of the 30 effective date. 19970S1157B1392 - 43 -
1 (3) The manner in which the plan was adopted by the 2 exchanging corporation. 3 (4) Except as provided in section 1901 (relating to 4 omission of certain provisions from filed plans), the plan of 5 exchange. 6 The articles of exchange shall be filed in the Department of 7 State. See [section] sections 134 (relating to docketing 8 statement) and 135 (relating to requirements to be met by filed 9 documents. 10 * * * 11 (i) Reference to outside facts.--Any of the terms of a plan 12 of exchange may be made dependent upon facts ascertainable 13 outside of the plan if the manner in which the facts will 14 operate upon the terms of the plan is set forth in the plan. 15 Such facts may include, without limitation, actions or events 16 within the control of or determinations made by a party to the 17 plan or a representative of a party to the plan. 18 § 1932. Voluntary transfer of corporate assets. 19 * * * 20 (b) Shareholder approval required.-- 21 (1) A sale, lease, exchange or other disposition of all, 22 or substantially all, the property and assets, with or 23 without the goodwill, of a business corporation, if not made 24 pursuant to subsection (a) or (d) or to section 1551 25 (relating to distributions to shareholders) or Subchapter D 26 (relating to division), may be made only pursuant to a plan 27 of asset transfer[.] in the manner provided in this 28 subsection. A corporation selling, leasing or otherwise 29 disposing of all, or substantially all, its property and 30 assets is referred to in this subsection and in subsection 19970S1157B1392 - 44 -
1 (c) as the "transferring corporation." 2 (2) The property or assets of a direct or indirect 3 subsidiary corporation that is controlled by a parent 4 corporation shall also be deemed the property or assets of 5 the parent corporation for the purposes of this subsection 6 and of subsection (c). A merger or consolidation to which 7 such a subsidiary corporation is a party and in which a third 8 party acquires direct or indirect ownership of the property 9 or assets of the subsidiary corporation constitutes an "other 10 disposition" of the property or assets of the parent 11 corporation within the meaning of that term as used in this 12 section. 13 (3) The plan of asset transfer shall set forth the terms 14 and conditions of the sale, lease, exchange or other 15 disposition or may authorize the board of directors to fix 16 any or all of the terms and conditions, including the 17 consideration to be received by the corporation therefor. The 18 plan may provide for the distribution to the shareholders of 19 some or all of the consideration to be received by the 20 corporation, including provisions for special treatment of 21 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). It shall not be necessary for the person 25 acquiring the property or assets of the transferring 26 corporation to be a party to the plan. Any of the terms of 27 the plan may be made dependent upon facts ascertainable 28 outside of the plan if the manner in which the facts will 29 operate upon the terms of the plan is set forth in the plan. 30 Such facts may include, without limitation, actions or events 19970S1157B1392 - 45 -
1 within the control of or determinations made by the 2 corporation or a representative of the corporation. 3 (4) The plan of asset transfer shall be proposed and 4 adopted, and may be amended after its adoption and 5 terminated, by [a business] the transferring corporation in 6 the manner provided in this subchapter for the proposal, 7 adoption, amendment and termination of a plan of merger, 8 except section 1924(b) (relating to adoption by board of 9 directors). The procedures of this subchapter shall not be 10 applicable to the person acquiring the property or assets of 11 the transferring corporation. There shall be included in, or 12 enclosed with, the notice of the meeting of the shareholders 13 of the transferring corporation to act on the plan a copy or 14 a summary of the plan and, if Subchapter D of Chapter 15 15 (relating to dissenters rights) is applicable, a copy of the 16 subchapter and of subsection (c). 17 (5) In order to make effective the plan of asset 18 transfer so adopted, it shall not be necessary to file any 19 articles or other documents in the Department of State. 20 (c) Dissenters rights in asset transfers.-- 21 (1) If a shareholder of a transferring corporation that 22 adopts a plan of asset transfer objects to the plan and 23 complies with Subchapter D of Chapter 15, the shareholder 24 shall be entitled to the rights and remedies of dissenting 25 shareholders therein provided, if any. 26 (2) Paragraph (1) shall not apply to a sale pursuant to 27 an order of court having jurisdiction in the premises or a 28 sale [for money on terms requiring] pursuant to a plan of 29 asset transfer that requires that all or substantially all of 30 the net proceeds of sale be distributed to the shareholders 19970S1157B1392 - 46 -
1 in accordance with their respective interests within one year
2 after the date of sale or to a liquidating trust.
3 * * *
4 § 1952. Proposal and adoption of plan of division.
5 (a) Preparation of plan.--A plan of division shall be
6 prepared, setting forth:
7 (1) The terms and conditions of the division, including
8 the manner and basis of:
9 (i) The reclassification of the shares of the
10 surviving corporation, if there be one, and, if any of
11 the shares of the dividing corporation are not to be
12 converted solely into shares or other securities or
13 obligations of one or more of the resulting corporations,
14 the shares or other securities or obligations of any
15 other person, or cash, property or rights that the
16 holders of such shares are to receive in exchange for or
17 upon conversion of such shares, and the surrender of any
18 certificates evidencing them, which securities or
19 obligations, if any, of any other person or cash,
20 property or rights may be in addition to or in lieu of
21 shares or other securities or obligations of one or more
22 of the resulting corporations.
23 (ii) The disposition of the shares and other
24 securities or obligations, if any, of the new corporation
25 or corporations resulting from the division.
26 (2) A statement that the dividing corporation will, or
27 will not, survive the division.
28 (3) Any changes desired to be made in the articles of
29 the surviving corporation, if there be one, including a
30 restatement of the articles.
19970S1157B1392 - 47 -
1 (4) The articles of incorporation required by subsection 2 (b). 3 (5) Any provisions desired providing special treatment 4 of shares held by any shareholder or group of shareholders as 5 authorized by, and subject to the provisions of, section 1906 6 (relating to special treatment of holders of shares of same 7 class or series). 8 (6) Such other provisions as are deemed desirable. 9 [Any of the terms of the plan may be made dependent upon facts 10 ascertainable outside of the plan if the manner in which the 11 facts will operate upon the terms of the plan is set forth in 12 the plan.] 13 * * * 14 (g) [Action by] Rights of holders of indebtedness.--[Unless 15 otherwise provided by an indenture or other contract by which 16 the dividing corporation is bound, a plan of division shall not 17 require the approval of the holders of any debt securities or 18 other obligations of the dividing corporation or of any 19 representative of the holders, if the transfer of assets 20 effected by the division, if effected by means of a sale, lease, 21 exchange or other disposition, and any related distribution, 22 would not require the approval of the holders or representatives 23 thereof.] If any debt securities, notes or similar evidences of 24 indebtedness for money borrowed, whether secured or unsecured, 25 indentures or other contracts were issued, incurred or executed 26 by the dividing corporation before (the Legislative Reference 27 Bureau shall insert here the effective date of the amendments of 28 this section) and have not been amended subsequent to that date, 29 the liability of the dividing corporation thereunder shall not 30 be affected by the division nor shall the rights of the obligees 19970S1157B1392 - 48 -
1 thereunder be impaired by the division, and each of the 2 resulting corporations may be proceeded against or substituted 3 in place of the dividing corporation as joint and several 4 obligors on such liability, regardless of any provision of the 5 plan of division apportioning the liabilities of the dividing 6 corporations. 7 * * * 8 (i) Reference to outside facts.--Any of the terms of a plan 9 of division may be made dependent upon facts ascertainable 10 outside of the plan if the manner in which the facts will 11 operate upon the terms of the plan is set forth in the plan. 12 Such facts may include, without limitation, actions or events 13 within the control of or determinations made by the dividing 14 corporation or a representative of the dividing corporation. 15 § 1953. Division without shareholder approval. 16 (a) General rule.--Unless otherwise restricted by its bylaws 17 or required by section 1952(f) (relating to action by holders of 18 preferred or special shares), a plan of division that does not 19 alter the state of incorporation of a business corporation, 20 provide for special treatment nor amend in any respect the 21 provisions of its articles (except amendments which under 22 section 1914(c) (relating to adoption by board of directors) may 23 be made without shareholder action) shall not require the 24 approval of the shareholders of the corporation if: 25 (1) the dividing corporation has only one class of 26 shares outstanding and the shares and other securities, if 27 any, of each corporation resulting from the plan are 28 distributed pro rata to the shareholders of the dividing 29 corporation; 30 (2) the dividing corporation survives the division and 19970S1157B1392 - 49 -
1 all the shares and other securities and obligations, if any, 2 of all new corporations resulting from the plan are owned 3 solely by the surviving corporation; or 4 (3) the [transfers] allocation of assets among the 5 resulting corporations effected by the division, if effected 6 by means of a sale, lease, exchange or other disposition, 7 would not require the approval of shareholders under section 8 1932(b) (relating to shareholder approval required). 9 (b) Limitation.--A plan of division adopted by the board of 10 directors under this section without the approval of the 11 shareholders shall not, by itself, create or impair any rights 12 or obligations on the part of any person under section 2538 13 (relating to approval of transactions with interested 14 shareholders) or under Subchapters E (relating to control 15 transactions), F (relating to business combinations), G 16 (relating to control-share acquisitions), H (relating to 17 disgorgement by certain controlling shareholders following 18 attempts to acquire control), I (relating to severance 19 compensation for employees terminated following certain control- 20 share acquisitions) and J (relating to business combination 21 transactions - labor contracts) of Chapter 25, nor shall it 22 change the standard of care applicable to the directors under 23 Subchapter B of Chapter 17 (relating to fiduciary duty). 24 § 1955. Filing of articles of division. 25 (a) General rule.--The articles of division, and the 26 certificates or statement, if any, required by section 139 27 (relating to tax clearance of certain fundamental transactions) 28 shall be filed in the Department of State. 29 (b) Cross [reference] references.--See [section] sections 30 134 (relating to docketing statement) and 135 (relating to 19970S1157B1392 - 50 -
1 requirements to be met by filed documents). 2 § 1957. Effect of division. 3 * * * 4 (b) Property rights; allocations of assets and 5 liabilities.-- 6 (1) (i) All the property, real, personal and mixed, and 7 franchises of the dividing corporation, and all debts due 8 on whatever account to it, including subscriptions for 9 shares and other choses in action belonging to it, shall 10 (except as otherwise provided in paragraph (2)), to the 11 extent [transfers] allocations of assets are contemplated 12 by the plan of division, be deemed without further action 13 to be [transferred] allocated to and vested in the 14 resulting corporations on such a manner and basis and 15 with such effect as is specified in the plan, or per 16 capita among the resulting corporations, as tenants in 17 common, if no specification is made in the plan, and the 18 title to any real estate, or interest therein, vested in 19 any of the corporations shall not revert or be in any way 20 impaired by reason of the division. 21 (ii) Upon the division becoming effective, the 22 resulting corporations shall each thenceforth be 23 responsible as separate and distinct corporations only 24 for such liabilities as each corporation may undertake or 25 incur in its own name but shall be liable for the 26 liabilities of the dividing corporation in the manner and 27 on the basis provided in subparagraphs (iv) and (v). 28 (iii) Liens upon the property of the dividing 29 corporation shall not be impaired by the division. 30 (iv) [One] To the extent allocations of liabilities 19970S1157B1392 - 51 -
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 the liabilities 8 of the dividing corporation to the extent, if any, 9 specified in the plan, if in either case: 10 (A) no fraud [of corporate creditors, or of] on 11 minority shareholders or shareholders without voting 12 rights or violation of law shall be effected thereby, 13 and [if applicable provisions of law are complied 14 with.] 15 (B) the plan does not constitute a fradulent 16 transfer under 12 Pa.C.S. Ch. 51 (relating to 17 fradulent transfers). 18 (v) If the conditions in subparagraph (iv) for 19 freeing one or more of the resulting corporations from 20 the liabilities of the dividing corporation, or for 21 allocating some or all of the liabilities of the dividing 22 corporation, are not satisfied, the liabilities of the 23 dividing corporation as to which those conditions are not 24 satisfied shall not be affected by the division nor shall 25 the rights of creditors [thereof or of any person dealing 26 with the corporation] thereunder be impaired by the 27 division and any claim existing or action or proceeding 28 pending by or against the corporation with respect to 29 those liabilities may be prosecuted to judgment as if the 30 division had not taken place, or the resulting 19970S1157B1392 - 52 -
1 corporations may be proceeded against or substituted in 2 [its] place of the dividing corporation as joint and 3 several obligors on [such liability] those liabilities, 4 regardless of any provision of the plan of division 5 apportioning the liabilities of the dividing corporation. 6 (vi) The conditions in subparagraph (iv) for freeing 7 one or more of the resulting corporations from the 8 liabilities of the dividing corporation and for 9 allocating some or all of the liabilities of the dividing 10 corporation shall be conclusively deemed to have been 11 satisfied if the plan of division has been approved by 12 the Department of Banking, the Insurance Department or 13 the Pennsylvania Public Utility Commission in a final 14 order issued after (the Legislative Reference Bureau 15 shall insert here the effective date of the amendments of 16 this section) that has become not subject to further 17 appeal. 18 (2) (i) The [transfer] allocation of any fee or 19 freehold interest or leasehold having a remaining term of 20 30 years or more in any tract or parcel of real property 21 situate in this Commonwealth owned by a dividing 22 corporation (including property owned by a foreign 23 business corporation dividing solely under the law of 24 another jurisdiction) to a new corporation resulting from 25 the division shall not be effective until one of the 26 following documents is filed in the office for the 27 recording of deeds of the county, or each of them, in 28 which the tract or parcel is situated: 29 (A) A deed, lease or other instrument of 30 confirmation describing the tract or parcel. 19970S1157B1392 - 53 -
1 (B) A duly executed duplicate original copy of 2 the articles of division. 3 (C) A copy of the articles of division certified 4 by the Department of State. 5 (D) A declaration of acquisition setting forth 6 the value of real estate holdings in such county of 7 the corporation as an acquired company. 8 (ii) The provisions of 75 Pa.C.S. § 1114 (relating 9 to transfer of vehicle by operation of law) shall not be 10 applicable to [a transfer] an allocation of ownership of 11 any motor vehicle, trailer or semitrailer [from a 12 dividing corporation] to a new corporation under this 13 section or under a similar law of any other jurisdiction 14 but any such [transfer] allocation shall be effective 15 only upon compliance with the requirements of 75 Pa.C.S. 16 § 1116 (relating to issuance of new certificate following 17 transfer). 18 (3) It shall not be necessary for a plan of division to 19 list each individual asset or liability of the dividing 20 corporation to be allocated to a new corporation so long as 21 those assets and liabilities are described in a reasonable 22 manner. 23 (4) Each new corporation shall hold any assets and 24 liabilities allocated to it as the successor to the dividing 25 corporation, and those assets and liabilities shall not be 26 deemed to have been assigned to the new corporation in any 27 manner, whether directly or indirectly or by operation of 28 law. 29 * * * 30 (h) Conflict of laws.--It is the intent of the General 19970S1157B1392 - 54 -
1 Assembly that: 2 (1) The effect of a division of a domestic business 3 corporation shall be governed solely by the laws of this 4 Commonwealth and any other jurisdiction under the laws of 5 which any of the resulting corporations is incorporated. 6 (2) The effect of a division on the assets and 7 liabilities of the dividing corporation shall be governed 8 solely by the laws of this Commonwealth and any other 9 jurisdiction under the laws of which any of the resulting 10 corporations is incorporated. 11 (3) The validity of any allocations of assets or 12 liabilities by a plan of division of a domestic business 13 corporation, regardless of whether or not any of the new 14 corporations is a foreign business corporation, shall be 15 governed solely by the laws of this Commonwealth. 16 (4) In addition to the express provisions of this 17 subsection, this subchapter shall otherwise generally be 18 granted the protection of full faith and credit under the 19 Constitution of the United States. 20 § 1962. Proposal and adoption of plan of conversion. 21 (a) Preparation of plan.--A plan of conversion shall be 22 prepared, setting forth: 23 (1) The terms and conditions of the conversion. 24 (2) A restatement of the articles of the resulting 25 corporation, which articles shall comply with the 26 requirements of this part relating to nonprofit corporations. 27 (3) Any provisions desired providing special treatment 28 of shares held by any shareholder or group of shareholders as 29 authorized by, and subject to the provisions of, section 1906 30 (relating to special treatment of holders of shares of same 19970S1157B1392 - 55 -
1 class or series). 2 (4) Such other provisions as are deemed desirable. 3 [Any of the terms of the plan may be made dependent upon facts 4 ascertainable outside of the plan if the manner in which the 5 facts will operate upon the terms of the plan is set forth in 6 the plan.] 7 * * * 8 (d) Reference to outside facts.--Any of the terms of a plan 9 of conversion may be made dependent upon facts ascertainable 10 outside of the plan if the manner in which the facts will 11 operate upon the terms of the plan is set forth in the plan. 12 Such facts may include, without limitation, actions or events 13 within the control of or determinations made by the corporation 14 or a representative of the corporation. 15 § 1972. Proposal of voluntary dissolution. 16 (a) General rule.--Any business corporation that has 17 commenced business may dissolve voluntarily in the manner 18 provided in this subchapter and wind up its affairs in the 19 manner provided in section 1975 (relating to predissolution 20 provision for liabilities) or Subchapter H (relating to 21 postdissolution provision for liabilities). Voluntary 22 dissolution shall be proposed by the adoption by the board of 23 directors of a resolution recommending that the corporation be 24 dissolved voluntarily. The resolution shall contain a statement 25 either that the dissolution shall proceed under section 1975 or 26 that the dissolution shall proceed under Subchapter H. The 27 resolution may set forth provisions for the distribution to 28 shareholders of any surplus remaining after paying or providing 29 for all liabilities of the corporation, including provisions for 30 special treatment of shares held by any shareholder or group of 19970S1157B1392 - 56 -
1 shareholders as authorized by, and subject to the provisions of, 2 section 1906 (relating to special treatment of holders of shares 3 of same class or series). 4 (b) Submission to shareholders.--The board of directors 5 shall direct that the [question of] resolution recommending 6 dissolution be submitted to a vote of the shareholders of the 7 corporation entitled to vote thereon at a regular or special 8 meeting of the shareholders. 9 * * * 10 § 1973. Notice of meeting of shareholders. 11 (a) General rule.--Written notice of the meeting of 12 shareholders that will consider the [advisability of voluntarily 13 dissolving a] resolution recommending dissolution of the 14 business corporation shall be given to each shareholder of 15 record entitled to vote thereon and the purpose shall be 16 included in the notice of the meeting. 17 * * * 18 § 1975. Predissolution provision for liabilities. 19 (a) Powers of board.--The board of directors of a business 20 corporation that has elected to proceed under this section shall 21 have full power to wind up and settle the affairs of [a 22 business] the corporation in accordance with this section prior 23 to filing articles of dissolution in accordance with section 24 1977 (relating to articles of dissolution). 25 (b) Notice to creditors and taxing authorities.--After the 26 approval by the shareholders of the [proposal] resolution 27 recommending that the corporation dissolve voluntarily, the 28 corporation shall immediately cause notice of the winding up 29 proceedings to be officially published and to be mailed by 30 certified or registered mail to each known creditor and claimant 19970S1157B1392 - 57 -
1 and to each municipal corporation in which [its registered 2 office or principal] it has a place of business in this 3 Commonwealth [is located]. 4 (c) Winding up and distribution.--The corporation shall, as 5 speedily as possible, proceed to collect all sums due it, 6 convert into cash all corporate assets the conversion of which 7 into cash is required to discharge its liabilities and, out of 8 the assets of the corporation, discharge or make adequate 9 provision for the discharge of all liabilities of the 10 corporation, according to their respective priorities. Any 11 surplus remaining after paying or providing for all liabilities 12 of the corporation shall be distributed to the shareholders 13 according to their respective rights and preferences. See 14 section 1972(a) (relating to proposal of voluntary dissolution). 15 § 1976. Judicial supervision of proceedings. 16 A business corporation that has elected to proceed under 17 section 1975 (relating to predissolution provision for 18 liabilities), at any time during the winding up proceedings, may 19 apply to the court to have the proceedings continued under the 20 supervision of the court and thereafter the proceedings shall 21 continue under the supervision of the court as provided in 22 Subchapter G (relating to involuntary liquidation and 23 dissolution). 24 § 1977. Articles of dissolution. 25 (a) General rule.--Articles of dissolution and the 26 certificates or statement required by section 139 (relating to 27 tax clearance of certain fundamental transactions) shall be 28 filed in the Department of State when: 29 (1) all liabilities of the business corporation have 30 been discharged, or adequate provision has been made 19970S1157B1392 - 58 -
1 therefor, in accordance with section 1975 (relating to 2 predissolution provision for liabilities), and all of the 3 remaining assets of the corporation have been distributed as 4 provided in section 1975 (or in case its assets are not 5 sufficient to discharge its liabilities, when all the assets 6 have been fairly and equitably applied, as far as they will 7 go, to the payment of such liabilities); or 8 (2) an election to proceed under Subchapter H (relating 9 to postdissolution provision for liabilities) has been made. 10 [See section 134 (relating to docketing statement).] 11 (b) Contents of articles.--The articles of dissolution shall 12 be executed by the corporation and shall set forth: 13 * * * 14 (5) A statement that: 15 (i) [that] all liabilities of the corporation have 16 been discharged or that adequate provision has been made 17 therefor; [or] 18 (ii) [that] the assets of the corporation are not 19 sufficient to discharge its liabilities, and that all the 20 assets of the corporation have been fairly and equitably 21 applied, as far as they will go, to the payment of such 22 liabilities[. An election by]; or 23 (iii) the corporation has elected to proceed under 24 Subchapter H [shall constitute the making of adequate 25 provision for the liabilities of the corporation, 26 including any judgment or decree that may be obtained 27 against the corporation in any pending action or 28 proceeding]. 29 * * * 30 (7) [A] In the case of a corporation that has not 19970S1157B1392 - 59 -
1 elected to proceed under Subchapter H, a statement that no 2 actions or proceedings are pending against the corporation in 3 any court, or that adequate provision has been made for the 4 satisfaction of any judgment or decree that may be obtained 5 against the corporation in each pending action or proceeding. 6 (8) [A] In the case of a corporation that has not 7 elected to proceed under Subchapter H, a statement that 8 notice of the winding-up proceedings of the corporation was 9 mailed by certified or registered mail to each known creditor 10 and claimant and to each municipal corporation in which the 11 [registered office or principal place of business of the] 12 corporation has a place of business in this Commonwealth [is 13 located]. 14 * * * 15 (d) Cross references.--See sections 134 (relating to 16 docketing statement) and 135 (relating to requirements to be met 17 by filed documents). 18 § 1978. Winding up of corporation after dissolution. 19 * * * 20 (b) Standard of care of directors and officers.--The 21 dissolution of the corporation shall not subject its directors 22 or officers to standards of conduct different from those 23 prescribed by or pursuant to Chapter 17 (relating to officers, 24 directors and shareholders). Directors of a dissolved 25 corporation who have complied with section 1975 (relating to 26 predissolution provision for liabilities) or Subchapter H 27 (relating to postdissolution provision for liabilities) shall 28 not be personally liable to the creditors of the dissolved 29 corporation. 30 § 1979. Survival of remedies and rights after dissolution. 19970S1157B1392 - 60 -
1 (a) General rule.--The dissolution of a business 2 corporation, either under this subchapter or under Subchapter G 3 (relating to involuntary liquidation and dissolution) or by 4 expiration of its period of duration or otherwise, shall not 5 eliminate nor impair any remedy available to or against the 6 corporation or its directors, officers or shareholders for any 7 right or claim existing, or liability incurred, prior to the 8 dissolution, if an action or proceeding thereon is brought on 9 behalf of: 10 (1) the corporation within the time otherwise limited by 11 law; or 12 (2) any other person before or within two years after 13 the date of the dissolution or within the time otherwise 14 limited by this subpart or other provision of law, whichever 15 is less. See sections 1987 (relating to proof of claims), 16 1993 (relating to acceptance or rejection of matured claims) 17 and 1994 (relating to disposition of unmatured claims). 18 [The actions or proceedings may be prosecuted against and 19 defended by the corporation in its corporate name.] 20 * * * 21 (e) Conduct of actions.--An action or proceeding may be 22 prosecuted against and defended by a dissolved corporation in 23 its corporate name. 24 § 1980. Dissolution by domestication. 25 Whenever a domestic business corporation has domesticated 26 itself under the laws of another jurisdiction by action similar 27 to that provided by section 4161 (relating to domestication) and 28 has authorized that action by the vote required by this 29 subchapter for the approval of a proposal that the corporation 30 dissolve voluntarily, the corporation may surrender its charter 19970S1157B1392 - 61 -
1 under the laws of this Commonwealth by filing in the Department 2 of State articles of dissolution under this subchapter 3 containing the statement specified by section [1977(a)(1)] 4 1977(b)(1) through (4) (relating to [preparation of articles).] 5 articles of dissolution). If the corporation as domesticated in 6 the other jurisdiction qualifies to do business in this 7 Commonwealth either prior to or simultaneously with the filing 8 of the articles of dissolution under this section, the 9 corporation shall not be required to file with the articles of 10 dissolution the tax clearance certificates that would otherwise 11 be required by section 139 (relating to tax clearance of certain 12 fundamental transactions). 13 § 1991.1. Authority of board of directors. 14 (a) General rule.--The board of directors of a business 15 corporation that has elected to proceed under this subchapter 16 shall have full power to wind up and settle the affairs of the 17 corporation in accordance with this subchapter both prior to and 18 after the filing of articles of dissolution in accordance with 19 section 1977 (relating to articles of dissolution). 20 (b) Winding up.--The corporation shall, as speedily as 21 possible, proceed to comply with the requirements of this 22 subchapter while simultaneously collecting all sums due it and 23 converting into cash all corporate assets, the conversion of 24 which into cash is required to make adequate provision for its 25 liabilities. 26 § 1992. Notice to claimants. 27 * * * 28 (c) Publication and service of notices.-- 29 (1) The notices required by this section shall be 30 officially published at least once a week for two consecutive 19970S1157B1392 - 62 -
1 weeks and, in the case of a corporation having $10,000,000 or 2 more in total assets at the time of its dissolution, at least 3 once in all editions of a daily newspaper with a national 4 circulation. 5 (2) Concurrently with or preceding the publication, the 6 corporation or successor entity shall send a copy of the 7 notice by certified or registered mail, return receipt 8 requested, to each: 9 (i) known creditor or claimant; 10 (ii) holder of a claim described in subsection (b); 11 and 12 (iii) municipal corporation in which [the registered 13 office or principal] a place of business of the 14 corporation in this Commonwealth was located at the time 15 of filing the articles of dissolution in the department. 16 * * * 17 § 1997. Payments and distributions. 18 * * * 19 (b) Disposition.--The claims and liabilities shall be paid 20 in full and any provision for payment shall be made in full if 21 there are sufficient assets. If there are insufficient assets, 22 the claims and liabilities shall be paid or provided for in 23 order of their priority, and, among claims of equal priority, 24 ratably to the extent of funds legally available therefor. Any 25 remaining assets shall be distributed to the shareholders of the 26 corporation according to their respective rights and 27 preferences, except that the distribution shall not be made less 28 than 60 days after the last notice of rejection, if any, was 29 given under section 1993 (relating to acceptance or rejection of 30 matured claims). See section 1972(a) (relating to proposal of 19970S1157B1392 - 63 -
1 voluntary dissolution). 2 * * * 3 [(d) Liability of directors.--Directors of a dissolved 4 corporation or governing persons of a successor entity that has 5 complied with this section shall not be personally liable to the 6 claimants of the dissolved corporation.] 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 19970S1157B1392 - 64 -
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 19970S1157B1392 - 65 -
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 19970S1157B1392 - 66 -
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 19970S1157B1392 - 67 -
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 § 4146. Provisions applicable to all foreign corporations. 19970S1157B1392 - 68 -
1 The following provisions of this subpart shall, except as 2 otherwise provided in this section, be applicable to every 3 foreign corporation for profit, whether or not required to 4 procure a certificate of authority under this chapter: 5 Section 1503 (relating to defense of ultra vires), as to 6 contracts and conveyances [made in] governed by the laws of 7 this Commonwealth and conveyances affecting real property 8 situated in this Commonwealth. 9 Section 1506 (relating to form of execution of 10 instruments), as to instruments or other documents [made or 11 to be performed in] governed by the laws of this Commonwealth 12 or affecting real property situated in this Commonwealth. 13 Section 1510 (relating to certain specifically authorized 14 debt terms), as to obligations (as defined in the section) 15 [executed or effected in] governed by the laws of this 16 Commonwealth or affecting real property situated in this 17 Commonwealth. 18 * * * 19 § 4161. Domestication. 20 * * * 21 (b) Articles of domestication.--The articles of 22 domestication shall be executed by the corporation and shall set 23 forth in the English language: 24 (1) The name of the corporation. If the name is in a 25 foreign language, it shall be set forth in Roman letters or 26 characters or Arabic or Roman numerals. If the name is one 27 that is rendered unavailable by any provision of section 28 1303(b) or (c) (relating to corporate name), the corporation 29 shall adopt, in accordance with any procedures for changing 30 the name of the corporation that are applicable prior to the 19970S1157B1392 - 69 -
1 domestication of the corporation, and shall set forth in the 2 articles of domestication an available name. 3 * * * 4 (c) Cross [reference] references.--See [section] sections 5 134 (relating to docketing statement) and 135 (relating to 6 requirements to be met by filed documents). 7 § 4162. Effect of domestication. 8 (a) General rule.--As a domestic business corporation, the 9 domesticated corporation shall no longer be a foreign business 10 corporation for the purposes of this subpart and shall [have], 11 instead, be a domestic business corporation with all the powers 12 and privileges and [be subject to] all the duties and 13 limitations granted and imposed upon domestic business 14 corporations. [The property, franchises, debts, liens, estates, 15 taxes, penalties and public accounts due the Commonwealth shall 16 continue to be vested in and imposed upon the corporation to the 17 same extent as if it were the successor by merger of the 18 domesticating corporation with and into a domestic business 19 corporation under Subchapter C of Chapter 19 (relating to 20 merger, consolidation, share exchanges and sale of assets).] In 21 all other respects, the domesticated corporation shall be deemed 22 to be the same corporation as it was prior to the domestication 23 without any change in or effect on its existence. Without 24 limiting the generality of the previous sentence, the 25 domestication shall not be deemed to have affected in any way: 26 (1) the right and title of the corporation in and to its 27 assets, property, franchises, estates and choses in action; 28 (2) the liability of the corporation for its debts, 29 obligations, penalties and public accounts due the 30 Commonwealth; 19970S1157B1392 - 70 -
1 (3) any liens or other encumbrances on the property or 2 assets of the corporation; or 3 (4) any contract, license or other agreement to which 4 the corporation is a party or under which it has any rights 5 or obligations. 6 (b) Reclassification of shares.--The shares of the 7 domesticated corporation shall be unaffected by the 8 domestication except to the extent, if any, reclassified in the 9 articles of domestication. 10 § 5303. Corporate name. 11 * * * 12 (b) Duplicate use of names.--The corporate name shall [not 13 be the same as or confusingly similar to] be distinguishable 14 upon the records of the Department of State from: 15 (1) The name of any other domestic corporation for 16 profit or not-for-profit which is either in existence or for 17 which articles of incorporation have been filed but have not 18 yet become effective, or of any foreign corporation for 19 profit or not-for-profit which is either authorized to do 20 business in this Commonwealth or for which an application for 21 a certificate of authority has been filed but which has not 22 yet become effective, [or of any domestic or foreign limited 23 partnership that has filed in the Department of State a 24 certificate or qualified under Chapter 85 (relating to 25 limited partnerships) or under corresponding provisions of 26 prior law,] or the name of any association registered at any 27 time under 54 Pa.C.S. Ch. 5 (relating to corporate and other 28 association names), unless[: 29 (i) where the name is the same or confusingly 30 similar,] the other association: 19970S1157B1392 - 71 -
1 [(A)] (i) has stated that it is about to change 2 its name, or to cease to do business, or is being 3 wound up, or is a foreign association about to 4 withdraw from doing business in this Commonwealth, 5 and the statement and [the] a written consent [of the 6 other association] to the adoption of the name 7 executed by the other association is filed in the 8 Department of State; 9 [(B)] (ii) has filed with the Department of 10 Revenue a certificate of out of existence, or has 11 failed for a period of three successive years to file 12 with the Department of Revenue a report or return 13 required by law and the fact of such failure has been 14 certified by the Department of Revenue to the 15 Department of State; 16 [(C)] (iii) has abandoned its name under the 17 laws of its jurisdiction of incorporation, by 18 amendment, merger, consolidation, division, 19 expiration, dissolution or otherwise, without its 20 name being adopted by a successor in a merger, 21 consolidation, division or otherwise, and an official 22 record of that fact, certified as provided by 42 23 Pa.C.S. § 5328 (relating to proof of official 24 records), is presented by any person to the 25 department; or 26 [(D)] (iv) has had the registration of its name 27 under 54 Pa.C.S. Ch. 5 terminated and, if the 28 termination was effected by operation of 54 Pa.C.S. § 29 504 (relating to effect of failure to make decennial 30 filings), the application for the use of the name is 19970S1157B1392 - 72 -
1 accompanied by a verified statement stating that at 2 least 30 days' written notice of intention to 3 appropriate the name was given to the delinquent 4 association at its [registered office] last known 5 place of business and that, after diligent search by 6 the affiant, the affiant believes the association to 7 be out of existence.[; or 8 (ii) where the name is confusingly similar, the 9 consent of the other association to the adoption of the 10 name is filed in the Department of State. 11 The consent of the association shall be evidenced by a 12 statement to that effect executed by the association.] 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 5106(b)(2) (relating to limited 27 uniform application of subpart). 28 § 5304. Required name changes by senior corporations. 29 (a) Adoption of new name upon reactivation.--Where a 30 corporate name is made available on the basis that the 19970S1157B1392 - 73 -
1 corporation or [nonprofit unincorporated] other association 2 [which] that formerly registered [such] the name has failed to 3 file with the Department of Revenue [or in the Department of 4 State] a report or a return required by law or where the 5 corporation or [nonprofit unincorporated] other association has 6 filed with the Department of Revenue a certificate of out of 7 existence, [such] the corporation or other association shall 8 cease to have by virtue of its prior registration any right to 9 the use of [such] the name[, and such]. The corporation or other 10 association, upon withdrawal of the certificate of out of 11 existence or upon the removal of its delinquency in the filing 12 of the required reports or returns, shall make inquiry with the 13 Department of State with regard to the availability of its 14 name[,] and, if [such] the name has been made available to 15 another domestic or foreign corporation for profit or not-for- 16 profit or other association by virtue of [the above] these 17 conditions, shall adopt a new name in accordance with law before 18 resuming its activities. 19 (b) Enforcement of undertaking to release name.--If a 20 corporation has used a name [the same as, or deceptively similar 21 to,] that is not distinguishable upon the records of the 22 Department of State from the name of another corporation or 23 [nonprofit unincorporated] other association as permitted by 24 section 5303(b)(1)[(i)] (relating to duplicate use of names) and 25 the other corporation or [nonprofit unincorporated] other 26 association continues to use its name in this Commonwealth and 27 does not change its name, cease to do business, be wound up, or 28 withdraw as it proposed to do in its consent or change its name 29 as required by subsection (a), any court [of competent] having 30 jurisdiction may enjoin the other corporation or other 19970S1157B1392 - 74 -
1 association from continuing to use its name or a name that is 2 not distinguishable therefrom, upon the application of: 3 (1) the Attorney General, acting on his own motion or at 4 the instance of any administrative department, board or 5 commission of this Commonwealth[,]; or 6 (2) upon the application of any person adversely 7 affected[, may enjoin the other corporation or association 8 from continuing to use its name or a name deceptively similar 9 thereto]. 10 § 5311. Filing of statement of summary of record by certain 11 corporations. 12 (a) General rule.--Where any of the [valid] charter 13 documents of a nonprofit corporation are not on file in the 14 Department of State or there is an error in any such document as 15 transferred to the department pursuant to section 140 (relating 16 to custody and management of orphan corporate and business 17 records), and the corporation desires to file any document in 18 the department under any other provision of this [article] 19 subpart or the corporation desires to secure from the department 20 any certificate to the effect that the corporation is a 21 corporation duly incorporated and existing under the laws of 22 this Commonwealth or a certified copy of the articles of the 23 corporation or the corporation desires to correct the text of 24 its charter documents as on file in the department, the 25 corporation shall file in the department a statement of summary 26 of record which shall be executed by the corporation and shall 27 set forth: 28 (1) The name of the corporation and, subject to section 29 109 (relating to name of commercial registered office 30 provides in lieu of registered address), the location, 19970S1157B1392 - 75 -
1 including street and number, if any, of its registered 2 office. 3 (2) The statute by or under which the corporation was 4 incorporated. 5 (3) The name under which, the manner in which and the 6 date on which the corporation was originally incorporated, 7 including the date when and the place where the original 8 articles were recorded. 9 (4) The place or places, including volume and page 10 numbers or their equivalent, where the documents 11 [constituting the currently effective articles are] that are 12 not on file in the department or that require correction in 13 the records of the department were originally filed or 14 recorded, the date or dates of each [such] filing or 15 recording and the correct text of [such currently effective 16 articles] the documents. The information specified in this 17 paragraph may be omitted in a statement of summary of record 18 that is delivered to the department contemporaneously with 19 amended and restated articles of the corporation filed under 20 this subpart. 21 [(5) Each name by which the corporation was known, if 22 any, other than its original name and its current name, and 23 the date or dates on which each change of name of the 24 corporation became effective. 25 A corporation shall be required to make only one filing under 26 this subsection.] 27 (b) Validation of prior defects in incorporation.--Upon the 28 filing of a statement by a corporation under this section or the 29 transfer to the department of the records relating to a 30 corporation pursuant to section 140, the corporation [named in 19970S1157B1392 - 76 -
1 the statement] shall be deemed to be a validly subsisting 2 corporation to the same extent as if it had been duly 3 incorporated and was existing under this subpart and the 4 department shall so certify regardless of any absence of or 5 defect in the prior proceedings relating to incorporation. 6 (c) Cross [reference] references.--See [section] sections 7 134 (relating to docketing statement), 135 (relating to 8 requirements to be met by filed documents) and 5106(b)(2) 9 (relating to uniform application of subpart). 10 § 5503. Defense of ultra vires. 11 (a) General rule.--[No] A limitation upon the business, 12 [purpose or] purposes[,] or powers of a nonprofit corporation, 13 expressed or implied in its articles or bylaws or implied by 14 law, shall not be asserted in order to defend any action at law 15 or in equity between the corporation and a third person, or 16 between a member and a third person, involving any contract to 17 which the corporation is a party or any right of property or any 18 alleged liability of [whatsoever] whatever nature[; but such], 19 but the limitation may be asserted: 20 (1) In an action by a member against the corporation to 21 enjoin the doing of unauthorized acts or the transaction or 22 continuation of unauthorized business. If the unauthorized 23 acts or business sought to be enjoined are being transacted 24 pursuant to any contract to which the corporation is a party, 25 the court may, if all of the parties to the contract are 26 parties to the action[,] and if it deems [such action] the 27 result to be equitable, set aside and enjoin the performance 28 of [such] the contract, and in so doing shall allow to the 29 corporation, or to the other parties to the contract, as the 30 case may be, such compensation as may be [equitable] 19970S1157B1392 - 77 -
1 appropriate for the loss or damage sustained by any of them 2 from the action of the court in setting aside and enjoining 3 the performance of [such] the contract, but anticipated 4 profits to be derived from the performance of the contract 5 shall not be awarded by the court as a loss or damage 6 sustained. 7 (2) In any action by or in the right of the corporation 8 to procure a judgment in its favor against an incumbent or 9 former officer, director or member of an other body of the 10 corporation for loss or damage due to his unauthorized acts. 11 (3) In a proceeding by the Commonwealth under section 12 503 (relating to actions to revoke corporate franchises)[,] 13 or in a proceeding by the Commonwealth to enjoin the 14 corporation from the doing of unauthorized or unlawful 15 business. 16 (b) Conveyances of property by or to a corporation.--[No] A 17 conveyance or transfer by or to a nonprofit corporation of 18 property, real or personal, of any kind or description, shall 19 not be invalid or fail because in making [such] the conveyance 20 or transfer, or in acquiring the property, real or personal, 21 [the board of directors or other body or any of the officers] 22 any representative of the corporation acting within the scope of 23 the actual or apparent authority given to [them] him by the 24 [board of directors or other body, have] corporation has 25 exceeded any of the purposes or powers of the corporation. 26 (c) [Nonqualified foreign corporations.--The provisions of 27 this section shall extend to contracts and conveyances made by 28 nonqualified foreign corporations in this Commonwealth and to 29 conveyances by nonqualified foreign corporations of real 30 property situated in this Commonwealth.] Cross reference.--See 19970S1157B1392 - 78 -
1 section 6146 (relating to provisions applicable to all foreign 2 corporations). 3 § 5505. Persons bound by bylaws. 4 Except as otherwise provided by section 5713 (relating to 5 personal liability of directors) or any similar provision of 6 law, bylaws of a nonprofit corporation shall operate only as 7 regulations among the members, directors, members of an other 8 body and officers of the corporation, and shall not affect 9 contracts or other dealings with other persons, unless those 10 persons have actual knowledge of the bylaws. 11 § 5506. Form of execution of instruments. 12 (a) General rule.--Any form of execution provided in the 13 articles or bylaws to the contrary notwithstanding, any note, 14 mortgage, evidence of indebtedness, contract[,] or other 15 [instrument in writing] document, or any assignment or 16 endorsement thereof, executed or entered into between any 17 nonprofit corporation and any other person, when signed by one 18 or more officers or agents having actual or apparent authority 19 to sign it, or by the president or vice-president and secretary 20 or assistant secretary or treasurer or assistant treasurer of 21 [such] the corporation, shall be held to have been properly 22 executed for and in behalf of the corporation. 23 (b) Seal unnecessary.--[Except as otherwise required by 24 statute, the] The affixation of the corporate seal shall not be 25 necessary to the valid execution, assignment or endorsement by a 26 corporation of any instrument [in writing] or other document. 27 (c) [Nonqualified foreign corporations.--The provisions of 28 this section shall extend to instruments in writing made or to 29 be performed in this Commonwealth by a nonqualified foreign 30 corporation and to instruments executed by nonqualified foreign 19970S1157B1392 - 79 -
1 corporations affecting real property situated in this 2 Commonwealth.] Cross reference.--See section 6146 (relating to 3 provisions applicable to all foreign corporations). 4 § 5508. Corporate records; inspection by members. 5 (a) Required records.--Every nonprofit corporation shall 6 keep [an original or duplicate record] minutes of the 7 proceedings of the members [and], the directors[,] and [of] any 8 other body [exercising powers or performing duties which under 9 this article may be exercised or performed by such other body, 10 the original or a copy of its bylaws, including all amendments 11 thereto to date, certified by the secretary of the corporation], 12 and [an original or] a [duplicate] membership register, giving 13 the names [of the members, and showing their respective] and 14 addresses of all members and the class and other details of the 15 membership of each. [Every such] The corporation shall also keep 16 appropriate, complete and accurate books or records of account. 17 The records provided for in this subsection shall be kept at 18 [either] any of the following locations: 19 (1) the registered office of the corporation in this 20 Commonwealth [or at its]; 21 (2) the principal place of business wherever 22 situated[.]; or 23 (3) any actual business office of the corporation. 24 (b) Right of inspection by a member.--Every member shall, 25 upon written verified demand [under oath] stating the purpose 26 thereof, have a right to examine, in person or by agent or 27 attorney, during the usual hours for business for any proper 28 purpose, the membership register, books and records of account, 29 and records of the proceedings of the members, directors and 30 [such] any other body, and to make copies or extracts therefrom. 19970S1157B1392 - 80 -
1 A proper purpose shall mean a purpose reasonably related to the 2 interest of [such] the person as a member. In every instance 3 where an attorney or other agent [shall be] is the person who 4 seeks the right [to] of inspection, the demand [under oath] 5 shall be accompanied by a verified power of attorney or [such] 6 other writing [which] that authorizes the attorney or other 7 agent to so act on behalf of the member. The demand [under oath] 8 shall be directed to the corporation: 9 (1) at its registered office in this Commonwealth [or]; 10 (2) at its principal place of business wherever 11 situated[.]; or 12 (3) in care of the person in charge of an actual 13 business office of the corporation. 14 (c) Proceedings for the enforcement of inspection by a 15 member.--If the corporation, or an officer or agent thereof, 16 refuses to permit an inspection sought by a member or attorney 17 or other agent acting for the member pursuant to subsection (b) 18 [of this section] or does not reply to the demand within five 19 business days after the demand has been made, the member may 20 apply to the court for an order to compel [such] the inspection. 21 The court shall determine whether or not the person seeking 22 inspection is entitled to the inspection sought. The court may 23 summarily order the corporation to permit the member to inspect 24 the membership register and the other books and records of the 25 corporation and to make copies or extracts therefrom; or the 26 court may order the corporation to furnish to the member a list 27 of its members as of a specific date on condition that the 28 member first pay to the corporation the reasonable cost of 29 obtaining and furnishing [such] the list and on such other 30 conditions as the court deems appropriate. Where the member 19970S1157B1392 - 81 -
1 seeks to inspect the books and records of the corporation, other 2 than its membership register or list of members, he shall first 3 establish: 4 (1) that he has complied with the provisions of this 5 section respecting the form and manner of making demand for 6 inspection of such document; and 7 (2) that the inspection he seeks is for a proper 8 purpose. 9 Where the member seeks to inspect the membership register or 10 list of members of the corporation and he has complied with the 11 provisions of this section respecting the form and manner of 12 making demand for inspection of [such] the documents, the burden 13 of proof shall be upon the corporation to establish that the 14 inspection he seeks is for an improper purpose. The court may, 15 in its discretion, prescribe any limitations or conditions with 16 reference to the inspection, or award such other or further 17 relief as the court [may deem] deems just and proper. The court 18 may order books, documents and records, pertinent extracts 19 therefrom, or duly authenticated copies thereof, to be brought 20 [within] into this Commonwealth and kept in this Commonwealth 21 upon such terms and conditions as the order may prescribe. 22 (d) Cross references.--See sections 107 (relating to form of 23 records) and 5512 (relating to informational rights of a 24 director). 25 § 5510. [(Reserved).] Certain specifically authorized debt 26 terms. 27 (a) Interest rates.--A nonprofit corporation shall not plead 28 or set up usury, or the taking of more than the lawful rate of 29 interest, or the taking of any finance, service or default 30 charge in excess of any maximum rate therefor provided or 19970S1157B1392 - 82 -
1 prescribed by law, as a defense to any action or proceeding 2 brought against it to recover damages on, or to enforce payment 3 of, or to enforce any other remedy on, any obligation executed 4 or effected by the corporation. 5 (b) Yield maintenance premiums.--A prepayment premium 6 determined by reference to the approximate spread between the 7 yield at issuance, or at the date of amendment of any of the 8 terms, of an obligation of a corporation and the yield at or 9 about such date of an interest rate index of independent 10 significance and contingent upon a change in the ownership of or 11 memberships in the corporation or a default by or other change 12 in the condition or prospects of the corporation or any 13 affiliate of the corporation shall be deemed liquidated damages 14 and shall not constitute a penalty. 15 (c) Definitions.--As used in this section, the following 16 words and phrases shall have the meanings given to them in this 17 subsection: 18 "Affiliate." An affiliate or associate as defined in section 19 2552 (relating to definitions). 20 "Obligation." Includes an installment sale contract. 21 (d) Cross reference.--See section 6146 (relating to 22 provisions applicable to all foreign corporations). 23 § 5512. Informational rights of a director. 24 (a) General rule.--To the extent reasonably related to the 25 performance of the duties of the director, including those 26 arising from service as a member of a committee of the board of 27 directors, a director of a nonprofit corporation is entitled: 28 (1) in person or by any attorney or other agent, at any 29 reasonable time, to inspect and copy corporate books, records 30 and documents and, in addition, to inspect, and receive 19970S1157B1392 - 83 -
1 information regarding, the assets, liabilities and operations 2 of the corporation and any subsidiaries of the corporation 3 incorporated or otherwise organized or created under the laws 4 of this Commonwealth that are controlled directly or 5 indirectly by the corporation; and 6 (2) to demand that the corporation exercise whatever 7 rights it may have to obtain information regarding any other 8 subsidiaries of the corporation. 9 (b) Proceedings for the enforcement of inspection by a 10 director.--If the corporation, or an officer or agent thereof, 11 refuses to permit an inspection or obtain or provide information 12 sought by a director or attorney or other agent acting for the 13 director pursuant to subsection (a) or does not reply to the 14 request within two business days after the request has been 15 made, the director may apply to the court for an order to compel 16 the inspection or the obtaining or providing of the information. 17 The court shall summarily order the corporation to permit the 18 requested inspection or to obtain the information unless the 19 corporation establishes that the information to be obtained by 20 the exercise of the right is not reasonably related to the 21 performance of the duties of the director or that the director 22 or the attorney or agent of the director is likely to use the 23 information in a manner that would violate the duty of the 24 director to the corporation. The order of the court may contain 25 provisions protecting the corporation from undue burden or 26 expense and prohibiting the director from using the information 27 in a manner that would violate the duty of the director to the 28 corporation. 29 (c) Cross references.--See sections 107 (relating to form of 30 records), 5508 (relating to corporate records; inspection by 19970S1157B1392 - 84 -
1 members) and 42 Pa.C.S. § 2503(7) (relating to right of 2 participants to receive counsel fees). 3 § 5545. Income from corporate activities. 4 (a) General rule.--A nonprofit corporation whose lawful 5 activities involve among other things the charging of fees or 6 prices for its services or products, shall have the right to 7 receive [such] that income and, in so doing, may make [an 8 incidental] a profit. All [such incidental] profits shall be 9 applied to the maintenance and operation of the lawful 10 activities of the corporation, or any of its subordinate units 11 or of any not-for-profit association to which it is subordinate, 12 and [in no case] shall otherwise not be divided or distributed 13 in any manner whatsoever among the members, directors, members 14 of an other body or officers of the corporation. [As used in 15 this section the terms fees or prices do not include rates of 16 contribution, fees or dues levied under an insurance certificate 17 issued by a fraternal benefit society, so long as the 18 distribution of profits arising from said fees or prices is 19 limited to the purposes set forth in this section and section 20 5551 (relating to dividends prohibited; compensation and certain 21 payments authorized).] 22 (b) Cross references.--See sections 5511 (relating to 23 establishment of subordinate units) and 5551(relating to 24 dividends prohibited; compensation and certain payments 25 authorized). 26 § 5546. Purchase, sale[, mortgage] and lease of [real] 27 property. 28 [Except for an industrial development corporation whose 29 articles or bylaws otherwise provide, no purchase of real 30 property shall be made by a nonprofit corporation and no 19970S1157B1392 - 85 -
1 corporation shall sell, mortgage, lease away or otherwise 2 dispose of its real property, unless authorized by the vote of 3 two-thirds of the members in office of the board of directors or 4 other body, except that if there are 21 or more directors or 5 members of such other body, the vote of a majority of the 6 members in office shall be sufficient. No application to or 7 confirmation of any court shall be required and, unless 8 otherwise restricted in the bylaws, no vote or consent of the 9 members shall be required to make effective such action by the 10 board or other body. If the real property is subject to a trust 11 the conveyance away shall be free of trust and the trust shall 12 be impinged upon the proceeds of such conveyance.] Except as 13 otherwise provided in this subpart and unless otherwise provided 14 in the bylaws, no application to or confirmation of any court 15 shall be required for the purchase by or the sale, lease or 16 other disposition of the real or personal property, or any part 17 thereof, of a nonprofit corporation, and, unless otherwise 18 restricted in section 5930 (relating to voluntary transfer of 19 corporate assets) or in the bylaws, no vote or consent of the 20 members shall be required to make effective such action by the 21 board or other body. If the property is subject to a trust, the 22 conveyance away shall be free of trust, and the trust shall be 23 impinged upon the proceeds of the conveyance. 24 § 5547. Authority to take and hold trust property. 25 (a) General rule.--Every nonprofit corporation incorporated 26 for a charitable purpose or purposes may take, receive and hold 27 such real and personal property as may be given, devised to[,] 28 or otherwise vested in [such] the corporation, in trust or 29 otherwise, for the purpose or purposes set forth in its 30 articles. 19970S1157B1392 - 86 -
1 (b) Standard of conduct.--The board of directors or other 2 body of the corporation shall, as trustees of [such] trust 3 property, be held to the same degree of responsibility and 4 accountability as if not incorporated, unless: 5 (1) a less degree or a particular degree of 6 responsibility and accountability is prescribed in the trust 7 instrument, or [unless] 8 (2) the board of directors or such other body remain 9 under the control of the members of the corporation or third 10 persons who retain the right to direct, and do direct, the 11 actions of the board or other body as to the use of the trust 12 property from time to time. 13 [(b)] (c) Nondiversion of certain property.--[Property 14 committed to charitable purposes] Trust property shall not, by 15 any proceeding under Chapter 59 (relating to fundamental 16 changes) or otherwise, be diverted from the objects to which it 17 was donated, granted or devised, unless and until the [board of 18 directors or other body] corporation obtains from the court an 19 order under 20 Pa.C.S. Ch. 61 (relating to estates) specifying 20 the disposition of the property. 21 § 5551. Dividends prohibited; compensation and certain payments 22 authorized. 23 (a) General rule.--[A] Except as provided in section 5545 24 (relating to income from corporate activities), a nonprofit 25 corporation shall not pay dividends or distribute any part of 26 its net income or profits to its members, directors, members of 27 an other body or officers. [Nothing herein contained shall 28 prohibit a fraternal benefit society operating under the 29 insurance laws of Pennsylvania from paying dividends or refunds 30 by whatever name known pursuant to the terms of its insurance 19970S1157B1392 - 87 -
1 contracts.] A contribution by a corporation to a not-for-profit 2 association made on or after February 13, 1973, shall not be 3 deemed a dividend or distribution for purposes of this subpart. 4 (b) Reasonable compensation for services.--A [nonprofit] 5 corporation may pay compensation in a reasonable amount to 6 members, directors, members of an other body or officers for 7 services rendered. 8 (c) Certain payments authorized.--A [nonprofit] corporation 9 may confer monetary or other benefits upon members or nonmembers 10 in conformity with its purposes, may repay capital 11 contributions, and may redeem its [subvention certificates or 12 evidences of indebtedness] subventions or obligations, as 13 authorized by this [article, except when the corporation is 14 currently insolvent or would thereby be made insolvent or 15 rendered unable to carry on its corporate purposes, or when the 16 fair value of the assets of the corporation remaining after such 17 conferring of benefits, payment or redemption would be 18 insufficient to meet its liabilities.] subpart unless, after 19 giving effect thereto, the corporation would be unable to pay 20 its debts as they become due in the usual course of its 21 business. A [nonprofit] corporation may make distributions of 22 cash or property to members upon dissolution or final 23 liquidation as permitted by this article. 24 § 5552. Liabilities of members. 25 (a) General rule.--[The members of a nonprofit corporation 26 shall not be personally liable for the debts, liabilities or 27 obligations of the corporation.] A member of a nonprofit 28 corporation shall not be liable, solely by reason of being a 29 member, under an order of a court or in any other manner for a 30 debt, obligation or liability of the corporation of any kind or 19970S1157B1392 - 88 -
1 for the acts of any member or representative of the corporation. 2 (b) Obligations of member to corporation.--A member shall be 3 liable to the corporation only to the extent of any unpaid 4 portion of the capital contributions, membership dues or 5 assessments which the corporation may have lawfully imposed upon 6 him, or for any other indebtedness owed by him to the 7 corporation. No action shall be brought by any creditor of the 8 corporation to reach and apply any such liability to any debt of 9 the corporation until after: 10 (1) final judgment [shall have] has been rendered 11 against the corporation in favor of the creditor and 12 execution thereon returned unsatisfied[, or the corporation 13 shall have been adjudged bankrupt, or]; 14 (2) a case involving the corporation has been brought 15 under 11 U.S.C. Ch. 7 (relating to liquidation) and a 16 distribution has been made and the case closed or a notice of 17 no assets has been issued; or 18 (3) a receiver [shall have] has been appointed with 19 power to collect debts, and [which] the receiver, on demand 20 of a creditor to bring an action thereon, has refused to sue 21 for [such] the unpaid amount, or the corporation [shall have] 22 has been dissolved or ceased its activities leaving debts 23 unpaid. 24 [No such] (c) Action by a creditor.--An action by a creditor 25 under subsection (b) shall not be brought more than three years 26 after the happening of [any one of such events.] the first to 27 occur of the events listed in subsection (b)(1) through (3). 28 § 5709. Conduct of members meeting. 29 (a) Presiding officer.--There shall be a presiding officer 30 at every meeting of the members. The presiding officer shall be 19970S1157B1392 - 89 -
1 appointed in the manner provided in the bylaws or, in the 2 absence of such provision, by the board of directors. If the 3 bylaws are silent on the appointment of the presiding officer 4 and the board fails to designate a presiding officer, the 5 president shall be the presiding officer. 6 (b) Authority of the presiding officer.--Except as otherwise 7 provided in the bylaws, the presiding officer shall determine 8 the order of business and shall have the authority to establish 9 rules for the conduct of the meeting. 10 (c) Procedural standard.--Any action by the presiding 11 officer in adopting rules for, and in conducting, a meeting 12 shall be fair to the members. 13 (d) Closing of the polls.--The presiding officer shall 14 announce at the meeting when the polls close for each matter 15 voted upon. If no announcement is made, the polls shall be 16 deemed to have closed upon the final adjournment of the meeting. 17 After the polls close, no ballots, proxies or votes, nor any 18 revocations or changes thereto, may be accepted. 19 § 5729. Voting rights of directors. 20 (a) General rule.--Unless otherwise provided in a bylaw 21 adopted by the members, every director of a nonprofit 22 corporation shall be entitled to one vote. Without limiting the 23 generality of the foregoing, a bylaw adopted by the members may 24 provide that a class or other defined group of directors shall 25 have multiple or fractional voting rights, or no right to vote, 26 either generally or under specified circumstances. 27 (b) [Multiple and fractional voting.--The requirement of 28 this article] Application of procedural requirements.--Any 29 requirement of this subpart for the presence of or vote or other 30 action by a specified percentage of directors shall be satisfied 19970S1157B1392 - 90 -
1 by the presence of or vote or other action by directors entitled 2 to cast [such] the specified percentage of the votes [which all] 3 that all voting directors in office are entitled to cast. 4 § 5731. Executive and other committees of the board. 5 (a) Establishment and powers.--Unless otherwise restricted 6 in the bylaws: 7 (1) The board of directors may, by resolution adopted by 8 a majority of the directors in office, establish one or more 9 committees to consist of one or more directors of the 10 corporation. 11 (2) Any [such] committee, to the extent provided in the 12 resolution of the board of directors or in the bylaws, shall 13 have and may exercise all of the powers and authority of the 14 board of directors, except that [no such] a committee shall 15 not have any power or authority as to the following: 16 (i) The submission to members of any action 17 requiring approval of members under this [article] 18 subpart. 19 (ii) The creation or filling of vacancies in the 20 board of directors. 21 (iii) The adoption, amendment or repeal of the 22 bylaws. 23 (iv) The amendment or repeal of any resolution of 24 the board that by its terms is amendable or repealable 25 only by the board. 26 (v) Action on matters committed by the bylaws or a 27 resolution of the board of directors exclusively to 28 another committee of the board. 29 [(2)] (3) The board may designate one or more directors 30 as alternate members of any committee, who may replace any 19970S1157B1392 - 91 -
1 absent or disqualified member at any meeting of the 2 committee. In the absence or disqualification of a member of 3 a committee, the member or members thereof present at any 4 meeting and not disqualified from voting, whether or not he 5 or they constitute a quorum, may unanimously appoint another 6 director to act at the meeting in the place of any [such] 7 absent or disqualified member. 8 (b) Term.--Each committee of the board shall serve at the 9 pleasure of the board. 10 § 5745. Advancing expenses. 11 Expenses (including attorneys' fees) incurred in defending 12 any action or proceeding referred to in this subchapter may be 13 paid by a nonprofit corporation in advance of the final 14 disposition of the action or proceeding upon receipt of an 15 undertaking by or on behalf of the representative to repay the 16 amount if it is ultimately determined that he is not entitled to 17 be indemnified by the corporation as authorized in this 18 subchapter or otherwise. Except as otherwise provided in the 19 bylaws, advancement of expenses shall be authorized by the board 20 of directors. Section 5728 (relating to interested members, 21 directors or officers; quorum) shall not be applicable to the 22 advancement of expenses under this section. 23 § 5748. Application to surviving or new corporations. 24 [For] (a) General rule.--Except as provided in subsection 25 (b), for the purposes of this subchapter, references to "the 26 corporation" include all constituent corporations absorbed in a 27 consolidation, merger or division, as well as the surviving or 28 new corporations surviving or resulting therefrom, so that any 29 person who is or was a representative of the constituent, 30 surviving or new corporation, or is or was serving at the 19970S1157B1392 - 92 -
1 request of the constituent, surviving or new corporation as a 2 representative of another domestic or foreign corporation for 3 profit or not-for-profit, partnership, joint venture, trust or 4 other enterprise, shall stand in the same position under the 5 provisions of this subchapter with respect to the surviving or 6 new corporation as he would if he had served the surviving or 7 new corporation in the same capacity. 8 (b) Divisions.--Notwithstanding subsection (a), the 9 obligations of a dividing corporation to indemnify and advance 10 expenses of its representatives, whether arising under this 11 subchapter or otherwise, may be allocated in a division in the 12 same manner and with the same effect as any other liability of 13 the dividing corporation. 14 § 5758. Voting rights of members. 15 (a) General rule.--Unless otherwise provided in a bylaw 16 adopted by the members, every member of a nonprofit corporation 17 shall be entitled to one vote. 18 (b) Procedures.--The manner of voting on any matter, 19 including changes in the articles or bylaws, may be by ballot, 20 mail or any reasonable means provided in a bylaw adopted by the 21 members. If a bylaw adopted by the members provides a fair and 22 reasonable procedure for the nomination of candidates for any 23 office, only candidates who have been duly nominated in 24 accordance therewith shall be eligible for election. Unless 25 otherwise provided in such a bylaw, in elections for directors, 26 voting shall be by ballot, and the candidates receiving the 27 highest number of votes from each class or group of classes, if 28 any, of members entitled to elect directors separately up to the 29 number of directors to be elected by such class or group of 30 classes shall be elected. If at any meeting of members directors 19970S1157B1392 - 93 -
1 of more than one class are to be elected, each class of 2 directors shall be elected in a separate election. 3 (c) Cumulative voting.--[The members of a nonprofit 4 corporation shall have the right to cumulate their votes for the 5 election of directors only if and to the extent a bylaw adopted 6 by the members so provides.] If a bylaw adopted by the members 7 so provides, in each election of directors of a nonprofit 8 corporation every member entitled to vote shall have the right 9 to multiply the number of votes to which he may be entitled by 10 the total number of directors to be elected in the same election 11 by the members or the class of members to which he belongs and 12 he may cast the whole number of his votes for one candidate or 13 he may distribute them among any two or more candidates. 14 (d) Sale of votes.--No member shall sell his vote or issue a 15 proxy for money or anything of value. 16 (e) Voting lists.--Upon request of a member, the books or 17 records of membership shall be produced at any regular or 18 special meeting of the corporation. If at any meeting the right 19 of a person to vote is challenged, the presiding officer shall 20 require [such] the books or records to be produced as evidence 21 of the right of the person challenged to vote, and all persons 22 who appear by [such] the books or records to be members entitled 23 to vote may vote. See section 6145 (relating to applicability of 24 certain safeguards to foreign corporations). 25 § 5782. Actions against directors, members of an other body and 26 officers. 27 (a) General rule.--Except as provided in subsection (b), in 28 any action or proceeding brought to enforce a secondary right on 29 the part of one or more members of a nonprofit corporation 30 against any present or former officer, director or member of an 19970S1157B1392 - 94 -
1 other body of the corporation because the corporation refuses to 2 enforce rights that may properly be asserted by it, each 3 plaintiff must aver and it must be made to appear that each 4 plaintiff was a member of the corporation at the time of the 5 transaction of which he complains. 6 (b) Exception.--Any member who, except for the provisions of 7 subsection (a), would be entitled to maintain the action or 8 proceeding and who does not meet such requirements may, 9 nevertheless in the discretion of the court, be allowed to 10 maintain the action or proceeding on preliminary showing to the 11 court, by application and upon such verified statements and 12 depositions as may be required by the court, that there is a 13 strong prima facie case in favor of the claim asserted on behalf 14 of the corporation and that without the action serious injustice 15 will result. 16 (c) Security for costs.--In any action or proceeding 17 instituted or maintained by less than the smaller of 50 members 18 of any class or 5% of the members of any class of the 19 corporation, the corporation in whose right the action or 20 proceeding is brought shall be entitled at any stage of the 21 proceedings to require the plaintiffs to give security for the 22 reasonable expenses, including attorney fees, that may be 23 incurred by it in connection therewith or for which it may 24 become liable pursuant to section 5743 (relating to mandatory 25 indemnification), but only insofar as relates to actions by or 26 in the right of the corporation, to which security the 27 corporation shall have recourse in such amount as the court 28 determines upon the termination of the action or proceeding. The 29 amount of security may, from time to time, be increased or 30 decreased in the discretion of the court upon showing that the 19970S1157B1392 - 95 -
1 security provided has or may become inadequate or excessive. The 2 security may be denied or limited in the discretion of the court 3 upon preliminary showing to the court, by application and upon 4 such verified statements and depositions as may be required by 5 the court, establishing prima facie that the requirement of full 6 or partial security would impose undue hardship on plaintiffs 7 and serious injustice would result. 8 (d) Cross reference.--See section 6146 (relating to 9 provisions applicable to all foreign corporations). 10 § 5903. Bankruptcy or insolvency proceedings. 11 (a) General rule.--[Whenever] Unless otherwise provided in 12 the bylaws, whenever a nonprofit corporation is insolvent or in 13 financial difficulty, the board of directors may, by resolution 14 and without the consent of the members, authorize and designate 15 the officers of the corporation to execute a deed of assignment 16 for the benefit of creditors, or file a voluntary petition in 17 bankruptcy, or file an answer consenting to the appointment of a 18 receiver upon a complaint in the nature of an equity action 19 filed by creditors or members, or, if insolvent, file an answer 20 to an involuntary petition in bankruptcy admitting the 21 insolvency of the corporation and its willingness to be adjudged 22 a debtor on that ground. 23 (b) Bankruptcy proceedings.--[A] If authorized pursuant to 24 subsection (a), a nonprofit corporation may participate in 25 proceedings under and in the manner provided by Title 11 of the 26 United States Code (relating to bankruptcy) notwithstanding any 27 contrary provision of its articles or bylaws or this subpart, 28 other than [section] sections 103 (relating to subordination of 29 title to regulatory laws) and 5107 (relating to subordination of 30 subpart to canon law). The corporation shall have full power and 19970S1157B1392 - 96 -
1 authority to put into effect and carry out a plan of 2 reorganization or arrangement and the decrees and orders of the 3 court, or judge or referee relative thereto, and may take any 4 proceeding and do any act provided in the plan or arrangement or 5 directed by such decrees and orders, without further action by 6 its directors or members. Such power and authority may be 7 exercised, and such proceedings and acts may be taken, as may be 8 directed by such decrees or orders, by the trustees or receivers 9 of the corporation appointed in the bankruptcy proceedings, or a 10 majority thereof, or, if none be appointed and acting, by 11 designated officers of the corporation, or by a master or other 12 representative appointed by the court or judge or referee, with 13 the effect as if exercised and taken by unanimous action of the 14 directors and members of the corporation. Without limiting the 15 generality or effect of the foregoing, the corporation may: 16 * * * 17 § 5912. Proposal of amendments. 18 (a) General rule.--Every amendment [to] of the articles of a 19 nonprofit corporation shall be proposed [by]: 20 (1) by the adoption by the board of directors or other 21 body of a resolution setting forth the proposed amendment; 22 (2) unless otherwise provided in the articles, by 23 petition of members entitled to cast at least 10% of the 24 votes [which] that all members are entitled to cast thereon, 25 setting forth the proposed amendment, which petition shall be 26 directed to the board of directors and filed with the 27 secretary of the corporation; or 28 (3) by such other method as may be provided in the 29 bylaws. 30 [The] (b) Submission to members.--Except where the approval 19970S1157B1392 - 97 -
1 of the members is unnecessary under this subchapter, the board 2 of directors or other body [or the petitioning members] shall 3 direct that the proposed amendment be submitted to a vote of the 4 members entitled to vote thereon at a regular or special meeting 5 of the members. 6 [(b)] (c) Form of amendment.--[The resolution or petition 7 shall contain the language of the proposed amendment to the 8 articles by providing that the articles shall be amended so as 9 to read as therein set forth in full, or that any provision 10 thereof be amended so as to read as therein set forth in full, 11 or that the matter stated in the resolution or petition be added 12 to or stricken from the articles. The resolution or petition may 13 set forth the manner and basis of reclassifying the shares of 14 the corporation.] The resolution or petition shall contain the 15 language of the proposed amendment of the articles: 16 (1) by setting forth the existing text of the articles 17 or the provision thereof that is proposed to be amended, with 18 brackets around language that is to be deleted and 19 underscoring under language that is to be added; or 20 (2) by providing that the articles shall be amended so 21 as to read as therein set forth in full, or that any 22 provision thereof be amended so as to read as therein set 23 forth in full, or that the matter stated in the resolution or 24 petition be added to or stricken from the articles. 25 (d) Terms of amendment.--The resolution or petition may set 26 forth the manner and basis of reclassifying the memberships in 27 or shares of the corporation. Any of the terms of a plan of 28 reclassification or other action contained in an amendment may 29 be made dependent upon facts ascertainable outside of the 30 amendment if the manner in which the facts will operate upon the 19970S1157B1392 - 98 -
1 terms of the amendment is set forth in the amendment. Such facts 2 may include, without limitation, actions or events within the 3 control of or determinations made by the corporation or a 4 representative of the corporation. 5 § 5922. Plan of merger or consolidation. 6 (a) Preparation of plan.--A plan of merger or consolidation, 7 as the case may be, shall be prepared, setting forth: 8 (1) The terms and conditions of the merger or 9 consolidation. 10 [(2) The mode of carrying the merger or consolidation 11 into effect. 12 (3)] (2) If the surviving or new corporation is or is to 13 be a domestic nonprofit corporation: 14 (i) any changes desired to be made in the articles, 15 which may include a restatement of the articles in the 16 case of a merger; or 17 (ii) in the case of a consolidation, all of the 18 statements required by this [article] subpart to be set 19 forth in restated articles. 20 [(4)] (3) Such other [details and] provisions as are 21 deemed desirable. 22 (b) Post-adoption amendment.--A plan of merger or 23 consolidation may contain a provision that the boards of 24 directors or other bodies of the constituent corporations may 25 amend the plan at any time prior to its effective date, except 26 that an amendment made subsequent to the adoption of the plan by 27 the members of any constituent corporation shall not change: 28 (1) The term of memberships or the amount or kind of 29 securities, obligations, cash, property or rights to be 30 received in exchange for or on conversion of all or any of 19970S1157B1392 - 99 -
1 the memberships in the constituent corporation. 2 (2) Any term of the articles of the surviving or new 3 corporation to be effected by the merger or consolidation. 4 (3) Any of the terms and conditions of the plan if the 5 change would adversely affect the members of the constituent 6 corporation. 7 [(b)] (c) Proposal.--Every merger or consolidation shall be 8 proposed in the case of each domestic nonprofit corporation 9 [by]: 10 (1) by the adoption by the board of directors or other 11 body of a resolution approving the plan of merger or 12 consolidation; 13 (2) unless otherwise provided in the articles, by 14 petition of members entitled to cast at least 10% of the 15 votes [which] that all members are entitled to cast thereon, 16 setting forth the proposed plan of merger or consolidation, 17 which petition shall be directed to the board of directors 18 and filed with the secretary of the corporation; or 19 (3) by such other method as may be provided in the 20 bylaws. 21 [The] (d) Submission to members.--Except where the 22 corporation has no members entitled to vote thereon, the board 23 of directors or other body [or the petitioning members] shall 24 direct that the plan be submitted to a vote of the members 25 entitled to vote thereon at a regular or special meeting of the 26 members. 27 (e) Party to plan or transaction.--A corporation, 28 partnership, business trust or other association that approves a 29 plan in its capacity as a member or creditor of a merging or 30 consolidating corporation, or that furnishes all or a part of 19970S1157B1392 - 100 -
1 the consideration contemplated by a plan, does not thereby 2 become a party to the plan or the merger or consolidation for 3 the purposes of this subchapter. 4 (f) Reference to outside facts.--Any of the terms of a plan 5 of merger or consolidation may be made dependent upon facts 6 ascertainable outside of the plan if the manner in which the 7 facts will operate upon the terms of the plan is set forth in 8 the plan. Such facts may include, without limitation, actions or 9 events within the control of or determinations made by a party 10 to the plan or a representative of a party to the plan. 11 § 5923. Notice of meeting of members. 12 (a) General rule.--Written notice of the meeting of members 13 that will act on the proposed plan shall[, not less than ten 14 days before the meeting of members called for the purpose of 15 considering the proposed plan,] be given to each member of 16 record, whether or not entitled to vote thereon, of each 17 domestic nonprofit corporation that is a party to the merger or 18 consolidation. There shall be included in, or enclosed with, 19 [such] the notice a copy of the proposed plan or a summary 20 thereof. The notice shall state that a copy of the bylaws of the 21 surviving or new corporation will be furnished to any member on 22 request and without cost. 23 (b) Cross reference.--See Subchapter A of Chapter 57 24 (relating to notice and meetings generally). 25 § 5929. Effect of merger or consolidation. 26 (a) Single surviving or new corporation.--Upon the merger or 27 consolidation becoming effective, the several corporations 28 parties to the [plan of] merger or consolidation shall be a 29 single corporation which, in the case of a merger, shall be 30 [that] the corporation designated in the plan of merger as the 19970S1157B1392 - 101 -
1 surviving corporation[,] and, in the case of a consolidation, 2 shall be the new corporation provided for in the plan of 3 consolidation. The separate existence of all corporations 4 parties to the [plan of] merger or consolidation shall cease, 5 except that of the surviving corporation, in the case of a 6 merger. The surviving or new corporation, as the case may be, if 7 it is a domestic nonprofit corporation, shall not thereby 8 acquire authority to engage in any business or exercise any 9 right [which] that a corporation may not be incorporated under 10 this [article] subpart to engage in or exercise. 11 (b) Property rights.--Except as otherwise provided by order, 12 if any, obtained pursuant to section [5547(b)] 5547(c) (relating 13 to nondiversion of certain property), all the property, real, 14 personal[,] and mixed, and franchises of each of the 15 corporations parties to the [plan of] merger or consolidation, 16 and all debts due on whatever account to any of them, including 17 subscriptions for membership and other choses in action 18 belonging to any of them, shall be [taken and] deemed to be 19 [transferred to and] vested in and shall belong to the surviving 20 or new corporation, as the case may be, without further [act or 21 deed] action, and the title to any real estate, or any interest 22 therein, vested in any of the corporations shall not revert or 23 be in any way impaired by reason of the merger or consolidation. 24 The surviving or new corporation shall thenceforth be 25 responsible for all the liabilities [and obligations] of each of 26 the corporations so merged or consolidated. [No liens] Liens 27 upon the property of the merging or consolidating corporations 28 shall not be impaired by [such] the merger or consolidation, and 29 any claim existing or action or proceeding pending by or against 30 any of [such] the corporations may be prosecuted to judgment as 19970S1157B1392 - 102 -
1 if [such] the merger or consolidation had not taken place, or 2 the surviving or new corporation may be proceeded against or 3 substituted in its place. Any devise, gift or grant contained in 4 any will or other instrument, in trust or otherwise, made before 5 or after such merger or consolidation, to or for any of the 6 constituent corporations, shall inure to the surviving or new 7 corporation, as the case may be, subject to compliance with the 8 requirements of section 5550 (relating to devises, bequests and 9 gifts after certain fundamental changes). 10 (c) Taxes.--Any taxes, penalties and public accounts of the 11 Commonwealth, claimed against any of the merging or 12 consolidating corporations, but not settled, assessed or 13 determined prior to [such] the merger or consolidation, shall be 14 settled, assessed or determined against the surviving or new 15 corporation[,] and, together with interest thereon, shall be a 16 lien against the franchises and property, both real and 17 personal, of the surviving or new corporation. 18 (d) Articles of incorporation.--In the case of a merger, the 19 articles of incorporation of the surviving domestic nonprofit 20 corporation, if any, shall be deemed to be amended to the 21 extent, if any, that changes in its articles are stated in the 22 plan of merger[; and in]. In the case of a consolidation into a 23 domestic nonprofit corporation, the statements [which] that are 24 set forth in the plan of consolidation, or articles of 25 incorporation set forth therein, shall be deemed to be the 26 articles of incorporation of the new corporation. 27 § 5952. 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 19970S1157B1392 - 103 -
1 the manner and basis of: 2 (i) [the] The reclassification of the membership 3 interests or shares [or obligations] of the surviving 4 corporation, if there be one[; and]. 5 (ii) [the] The disposition of the membership 6 interests or shares [and] or obligations, if any, of the 7 new corporation or corporations resulting from the 8 division. 9 [(2) The mode of carrying the division into effect. 10 (3)] (2) A statement that the dividing nonprofit 11 corporation will, or will not, survive the division. 12 [(4)] (3) Any changes desired to be made in the articles 13 of the surviving corporation, if there be one, including a 14 restatement of the articles. 15 [(5)] (4) The articles of incorporation required by 16 subsection (b) [of this section]. 17 [(6)] (5) Such other [details and] provisions as are 18 deemed desirable. 19 (b) Articles of new corporations.--There shall be included 20 in or annexed to the plan of division: 21 (1) Articles of incorporation, which shall contain all 22 of the statements required by this [article] subpart to be 23 set forth in restated articles, for each of the new domestic 24 nonprofit corporations, if any, resulting from the division. 25 (2) Articles of incorporation, certificates of 26 incorporation[,] or other charter documents for each of the 27 new foreign nonprofit corporations [not-for-profit], if any, 28 resulting from the division. 29 (c) Proposal and adoption.--[The] Except as otherwise 30 provided in section 5953 (relating to division without member 19970S1157B1392 - 104 -
1 approval), the plan of division shall be proposed and adopted, 2 and may be amended after its adoption and terminated, by a 3 domestic nonprofit corporation in the manner provided for the 4 proposal, adoption, amendment and termination of a plan of 5 merger in Subchapter C (relating to merger, consolidation and 6 sale of assets) or, if the dividing corporation is a foreign 7 nonprofit corporation [not-for-profit], in accordance with the 8 laws of the jurisdiction in which it is incorporated[.] and, in 9 the case of a foreign domiciliary corporation, the provisions of 10 this subpart to the extent provided by section 6145 (relating to 11 applicability of certain safeguards to foreign corporations). 12 There shall be included in or enclosed with the notice of the 13 meeting of members that will act on the plan a copy or summary 14 of the plan. 15 (d) Special requirements.--If any provision of the bylaws of 16 a dividing domestic nonprofit corporation adopted before January 17 1, 1972 shall require for the adoption of a plan of merger or 18 consolidation or a plan involving the sale, lease or exchange of 19 all or substantially all of the property and assets of the 20 corporation a specific number or percentage of votes of 21 directors, members, or members of an other body or other special 22 procedures, the plan of division shall not be adopted without 23 such number or percentage of votes or compliance with such other 24 special procedures. 25 (e) Financial status of resulting corporations.--Unless the 26 plan of division provides that the dividing corporation shall 27 survive the division and that all membership interests or shares 28 or obligations, if any, of all new corporations resulting from 29 the plan shall be owned solely by the surviving corporation, no 30 plan of division may be made effective at a time when the 19970S1157B1392 - 105 -
1 dividing corporation is insolvent or when the division would 2 render any of the resulting corporations insolvent. 3 (f) Rights of holders of indebtedness.--If any debt 4 securities, notes or similar evidences of indebtedness for money 5 borrowed, whether secured or unsecured, indentures or other 6 contracts were issued, incurred or executed by the dividing 7 corporation before January 1, 1972, and have not been amended 8 subsequent to that date, the liability of the dividing 9 corporation thereunder shall not be affected by the division nor 10 shall the rights of the obligees thereunder be impaired by the 11 division, and each of the resulting corporations may be 12 proceeded against or substituted in place of the dividing 13 corporation as joint and several obligors on such liability, 14 regardless of any provision of the plan of division apportioning 15 the liabilities of the dividing corporation. 16 (g) Reference to outside facts.--Any of the terms of a plan 17 of division may be made dependent upon facts ascertainable 18 outside of the plan if the manner in which the facts will 19 operate upon the terms of the plan is set forth in the plan. 20 Such facts may include, without limitation, actions or events 21 within the control of or determinations made by the dividing 22 corporation or a representative of the dividing corporation. 23 § 5953. [(Reserved).] Division without member approval. 24 Unless otherwise required by its bylaws or by section 5952 25 (relating to proposal and adoption of plan of division), a plan 26 of division that does not alter the state of incorporation of a 27 nonprofit corporation nor amend in any respect the provisions of 28 its articles, except amendments that under section 5914(b) 29 (relating to adoption in absence of voting members) may be made 30 without member action, shall not require the approval of the 19970S1157B1392 - 106 -
1 members of the corporation if the transfers of assets effected 2 by the division, if effected by means of a sale, lease, exchange 3 or other disposition, would not require the approval of members 4 under section 5930 (relating to voluntary transfer of corporate 5 assets). 6 § 5957. Effect of division. 7 (a) Multiple resulting corporations.--Upon the division 8 becoming effective, the dividing corporation shall be subdivided 9 into the distinct and independent resulting corporations named 10 in the plan of division and, if the dividing corporation is not 11 to survive the division, the existence of the dividing 12 corporation shall cease. The resulting corporations, if they are 13 domestic nonprofit corporations, shall not thereby acquire 14 authority to engage in any business or exercise any right 15 [which] that a corporation may not be incorporated under this 16 [article] subpart to engage in or exercise. Any resulting 17 foreign nonprofit corporation [which] that is stated in the 18 articles of division to be a qualified foreign nonprofit 19 corporation shall be a qualified foreign nonprofit corporation 20 under [this subpart] Article C (relating to foreign nonprofit 21 corporations), and the articles of division shall be deemed to 22 be the application for a certificate of authority and the 23 certificate of authority issued thereon of [such] the 24 corporation. 25 (b) Property rights; allocations of assets and 26 liabilities.-- 27 (1) Except as otherwise provided by order, if any, 28 obtained pursuant to section [5547(b)] 5547(c) (relating to 29 nondiversion of certain property)[, all]: 30 (i) All the property, real, personal[,] and mixed, 19970S1157B1392 - 107 -
1 and franchises of the dividing corporation, and all debts 2 due on whatever account to it, including subscriptions 3 for membership and other choses in action belonging to 4 it, shall, to the extent allocations of assets are 5 contemplated by the plan of division, be [taken and] 6 deemed without further [act or deed] action to be 7 [transferred] allocated to and vested in the resulting 8 corporations on such a manner and basis and with such 9 effect as is specified in the plan [of division], or per 10 capita among the resulting corporations, as tenants in 11 common, if no [such] specification is made in the plan[. 12 The], and the title to any real estate, or interest 13 therein, vested in any of the corporations shall not 14 revert or be in any way impaired by reason of the 15 division. 16 (ii) Upon the division becoming effective, the 17 resulting corporations shall each thenceforth be 18 responsible as separate and distinct corporations only 19 for such liabilities [and obligations] as each 20 corporation may undertake or incur in its own name, but 21 shall be liable [inter se] for the [debts and] 22 liabilities of the dividing corporation in the manner and 23 on the basis [specified in the plan of division. No 24 liens] provided in paragraphs (4) and (5). 25 (iii) Liens upon the property of the dividing 26 corporation shall not be impaired by the division. 27 [One] (iv) To the extent allocations of liabilities 28 are contemplated by the plan of division, the liabilities 29 of the dividing corporation shall be deemed without 30 further action to be allocated to and become the 19970S1157B1392 - 108 -
1 liabilities of the resulting corporations on such a 2 manner and basis and with such effect as is specified in 3 the plan; and one or more, but less than all, of the 4 resulting corporations shall be free of [all] the 5 liabilities [and obligations] of the dividing corporation 6 to the extent, if any, specified in the plan, if in 7 either case: 8 (A) no fraud [of corporate creditors or] on 9 members without voting rights [and if no] or 10 violation of law shall be effected thereby[,]; and 11 [if applicable provisions of law are complied with. 12 Otherwise, the liability] 13 (B) the plan does not constitute a fraudulent 14 transfer under 12 Pa.C.S. Ch. 51 (relating to 15 fraudulent transfers). 16 (v) If the conditions in subparagraph (iv) for 17 freeing one or more of the resulting corporations from 18 the liabilities of the dividing corporation, or for 19 allocating some or all of the liabilities of the dividing 20 corporation, are not satisfied, the liabilities of the 21 dividing corporation[, or of its members, directors, or 22 officers,] as to which those conditions are not satisfied 23 shall not be affected by the division[,] nor shall the 24 rights of [the] creditors [thereof or of any person 25 dealing with such corporation] thereunder be impaired by 26 [such] the division[,] and[, except as otherwise provided 27 in this section,] any claim existing or action or 28 proceeding pending by or against [such] the corporation 29 with respect to those liabilities may be prosecuted to 30 judgment as if [such] the division had not taken place, 19970S1157B1392 - 109 -
1 or the resulting corporations may be proceeded against or 2 substituted in [its] place of the dividing corporation as 3 joint and several obligors on [such liability] those 4 liabilities, regardless of any provision of the plan of 5 division apportioning the [debts and] liabilities of the 6 dividing corporation. 7 (2) It shall not be necessary for a plan of division to 8 list each individual asset or liability of the dividing 9 corporation to be allocated to a new corporation so long as 10 those assets and liabilities are described in a reasonable 11 manner. 12 (3) Each new corporation shall hold any assets and 13 liabilities allocated to it as the successor to the dividing 14 corporation, and those assets and liabilities shall not be 15 deemed to have been assigned to the new corporation in any 16 manner, whether directly or indirectly or by operation of 17 law. 18 (c) Taxes.--Any taxes, penalties and public accounts of the 19 Commonwealth, claimed against the dividing corporation, but not 20 settled, assessed or determined prior to [such] the division, 21 shall be settled, assessed or determined against any of the 22 resulting corporations[,] and, together with interest thereon, 23 shall be a lien against the franchises and property, both real 24 and personal, of all [such] the corporations. [The] Upon the 25 application of the dividing corporation, the Department of 26 Revenue [may, upon the application of the dividing corporation], 27 with the concurrence of the Office of Employment Security of the 28 Department of Labor and Industry, shall release one or more, but 29 less than all, of the resulting corporations from liability and 30 liens for all taxes, penalties and public accounts of the 19970S1157B1392 - 110 -
1 dividing corporation due the Commonwealth [or any other taxing 2 authority] for periods prior to the effective date of the 3 division, if [the Department of Revenue is] those departments 4 are satisfied that the public revenues will be adequately 5 secured. 6 (d) Articles of surviving corporation.--The articles of 7 incorporation of the surviving corporation, if there be one, 8 shall be deemed to be amended to the extent, if any, that 9 changes in its articles are stated in the plan of division. 10 (e) Articles of new corporations.--The statements [which] 11 that are set forth in the plan of division with respect to each 12 new domestic nonprofit corporation and [which] that are required 13 or permitted to be set forth in restated articles of 14 incorporation of corporations incorporated under this [article] 15 subpart, or the articles of incorporation of each new 16 corporation set forth therein, shall be deemed to be the 17 articles of incorporation of each [such] new corporation. 18 (f) Directors and officers.--Unless otherwise provided in 19 the plan, the directors and officers of the dividing corporation 20 shall be the initial directors and officers of each of the 21 resulting corporations. 22 (g) Disposition of memberships.--Unless otherwise provided 23 in the plan, the memberships and other securities or 24 obligations, if any, of each new corporation resulting from the 25 division shall be distributable to: 26 (1) the surviving corporation, if the dividing 27 corporation survives the division; or 28 (2) the members of the dividing corporation pro rata, in 29 any other case. 30 (h) Conflict of laws.--It is the intent of the General 19970S1157B1392 - 111 -
1 Assembly that: 2 (1) The effect of a division of a domestic business 3 corporation shall be governed solely by the laws of this 4 Commonwealth and any other jurisdiction under the laws of 5 which any of the resulting corporations is incorporated. 6 (2) The effect of a division on the assets and 7 liabilities of the dividing corporation shall be governed 8 solely by the laws of this Commonwealth and any other 9 jurisdiction under the laws of which any of the resulting 10 corporations is incorporated. 11 (3) The validity of any allocations of assets or 12 liabilities by a plan of division of a domestic business 13 corporation, regardless of whether or not any of the new 14 corporations is a foreign business corporation, shall be 15 governed solely by the laws of this Commonwealth. 16 (4) In addition to the express provisions of this 17 subsection, this subchapter shall otherwise generally be 18 granted the protection of full faith and credit under the 19 Constitution of the United States. 20 § 5961. Conversion authorized. 21 (a) General rule.--Any nonprofit corporation may, in the 22 manner provided in this subchapter, be converted into a business 23 corporation, [hereinafter] designated in this subchapter as the 24 resulting corporation. 25 (b) Exceptions.-- 26 (1) This subchapter shall not authorize any conversion 27 involving: 28 [(i) A cooperative corporation. 29 (ii)] (i) Beneficial, benevolent, fraternal or 30 fraternal benefit societies having a lodge system and a 19970S1157B1392 - 112 -
1 representative form of government, or transacting any 2 type of insurance whatsoever. 3 [(iii)] (ii) Any corporation [which] that by the 4 laws of this Commonwealth is subject to the supervision 5 of the Department of Banking, the Insurance Department or 6 the Pennsylvania Public Utility Commission, unless the 7 agency expressly approves the transaction in writing. 8 (2) [Paragraph (1) of this subsection] Subsection (a) 9 shall not be construed as repealing any statute [which] that 10 provides a procedure for the conversion of a nonprofit 11 corporation into an insurance corporation. 12 § 5962. Proposal and adoption of plan of conversion. 13 (a) Preparation of plan.--A plan of conversion shall be 14 prepared, setting forth: 15 (1) The terms and conditions of the conversion. 16 [(2) The mode of carrying the conversion into effect. 17 (3)] (2) A restatement of the articles of the resulting 18 corporation, which articles shall comply with the 19 requirements of [Subpart B of Part II (relating to business 20 corporations)] this part relating to business corporations. 21 [(4)] (3) Such other [details and] provisions as are 22 deemed desirable. 23 (b) Proposal and adoption.--The plan of conversion shall be 24 proposed and adopted, and may be amended after its adoption and 25 terminated, by the nonprofit corporation in the manner provided 26 for the proposal, adoption, amendment and termination of a plan 27 of merger in Subchapter C (relating to merger, consolidation and 28 sale of assets). There shall be included in or enclosed with the 29 notice of meeting of members of the nonprofit corporation that 30 will act upon the plan a copy or a summary of the plan. 19970S1157B1392 - 113 -
1 (c) 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 § 5964. Filing of articles of conversion. 9 (a) General rule.--The articles of conversion shall be filed 10 in the Department of State. 11 (b) Cross [reference.--See section] references.--See 12 sections 134 (relating to docketing statement) and 135 (relating 13 to requirements to be met by filed documents). 14 § 5965. Effective date of conversion. 15 Upon the filing of articles of conversion in the Department 16 of State[,] or upon the effective date specified in the plan of 17 conversion, whichever is later, the conversion shall become 18 effective. 19 § 5966. Effect of conversion. 20 Upon the conversion becoming effective, the converting 21 nonprofit corporation shall be deemed to be a business 22 corporation subject to the provisions of this part relating to 23 business corporations for all purposes, shall cease to be a 24 nonprofit corporation[,] and may thereafter operate for a 25 purpose or purposes resulting in pecuniary profit, incidental or 26 otherwise, to its members or shareholders. [The] Unless the 27 shares of the corporation are to be uncertificated, the 28 corporation shall issue share certificates to each shareholder 29 entitled thereto. The corporation shall remain liable for all 30 existing obligations, public [and] or private, and taxes due the 19970S1157B1392 - 114 -
1 Commonwealth or any other taxing authority for periods prior to 2 the effective date of the conversion, and, as [such] a business 3 corporation, it shall continue to be entitled to all assets 4 theretofore pertaining to it as a nonprofit corporation except 5 as otherwise provided by order, if any, obtained pursuant to 6 section 5547(b) (relating to nondiversion of certain property). 7 § 5975. Predissolution provision for liabilities. 8 (a) Powers of board.--The board of directors or other body 9 of a nonprofit corporation that has elected to proceed under 10 this section shall have full power to wind up and settle the 11 affairs of [a nonprofit] the corporation in accordance with this 12 section prior to filing articles of dissolution in accordance 13 with section 5977 (relating to articles of dissolution). 14 (b) Notice to creditors and taxing authorities.--After the 15 approval by the members or the board of directors or other body 16 pursuant to section 5974(b) (relating to adoption in absence of 17 voting members) that the corporation dissolve voluntarily, the 18 corporation shall immediately cause notice of the winding up 19 proceedings to be officially published and to be mailed by 20 certified or registered mail to each known creditor and claimant 21 and to each municipal corporation in which [its registered 22 office or principal] it has a place of business in this 23 Commonwealth [is located]. 24 (c) Winding up and distribution.--The corporation shall, as 25 speedily as possible, proceed to collect all sums due it, 26 convert into cash all corporate assets the conversion of which 27 into cash is required to discharge its liabilities and, out of 28 the assets of the corporation, discharge or make adequate 29 provision for the discharge of all liabilities of the 30 corporation, according to their respective priorities. Except as 19970S1157B1392 - 115 -
1 otherwise provided in a bylaw adopted by the members or in this 2 subpart or by any other provision of law, any surplus remaining 3 after paying or providing for all liabilities of the corporation 4 shall be distributed to the shareholders, if any, pro rata, or 5 if there be no shareholders, among the members per capita. See 6 section 1972(a) (relating to proposal of voluntary dissolution). 7 § 5976. Judicial supervision of proceedings. 8 (a) General rule.--A nonprofit corporation that has elected 9 to proceed under section 1975 (relating to predissolution 10 provision for liabilities), at any time during the winding up 11 proceedings, may apply to the court to have the proceedings 12 continued under the supervision of the court and thereafter the 13 proceedings shall continue under the supervision of the court as 14 provided in Subchapter G (relating to involuntary liquidation 15 and dissolution). 16 * * * 17 § 5977. Articles of dissolution. 18 * * * 19 (b) Contents of articles.--The articles of dissolution shall 20 be executed by the corporation and shall set forth: 21 * * * 22 (5) A statement that: 23 (i) [that] all liabilities of the corporation have 24 been discharged or that adequate provision has been made 25 therefor; [or] 26 (ii) [that] the assets of the corporation are not 27 sufficient to discharge its liabilities, and that all the 28 assets of the corporation have been fairly and equitably 29 applied, as far as they will go, to the payment of such 30 liabilities[. An election by]; or 19970S1157B1392 - 116 -
1 (iii) the corporation has elected to proceed under 2 Subchapter H [shall constitute the making of adequate 3 provision for the liabilities of the corporation, 4 including any judgment or decree that may be obtained 5 against the corporation in any pending action or 6 proceeding]. 7 * * * 8 (7) [A] In the case of a corporation that has not 9 elected to proceed under Subchapter H, a statement that no 10 actions or proceedings are pending against the corporation in 11 any court, or that adequate provision has been made for the 12 satisfaction of any judgment or decree that may be obtained 13 against the corporation in each pending action or proceeding. 14 (8) [A] In the case of a corporation that has not 15 elected to proceed under Subchapter H, a statement that 16 notice of the winding-up proceedings of the corporation was 17 mailed by certified or registered mail to each known creditor 18 and claimant and to each municipal corporation in which the 19 [registered office or principal place of business of the] 20 corporation has a place of business in this Commonwealth [is 21 located]. 22 * * * 23 (d) Cross references.--See sections 134 (relating to 24 docketing statement) and 135 (relating to requirements to be met 25 by filed documents). 26 § 5991.1. Authority of board of directors. 27 (a) General rule.--The board of directors or other body of a 28 nonprofit corporation that has elected to proceed under this 29 subchapter shall have full power to wind up and settle the 30 affairs of the corporation in accordance with this subchapter 19970S1157B1392 - 117 -
1 both prior to and after the filing of articles of dissolution in 2 accordance with section 5977 (relating to articles of 3 dissolution). 4 (b) Winding up.--The corporation shall, as speedily as 5 possible, proceed to comply with the requirements of this 6 subchapter while simultaneously collecting all sums due it and 7 converting into cash all corporate assets, the conversion of 8 which into cash is required to make adequate provision for its 9 liabilities. 10 § 6146. Provisions applicable to all foreign corporations. 11 The following provisions of this subpart shall, except as 12 otherwise provided in this section, be applicable to every 13 foreign corporation not-for-profit, whether or not required to 14 procure a certificate of authority under this chapter: 15 Section 5503 (relating to defense of ultra vires), as to 16 contracts and conveyances governed by the laws of this 17 Commonwealth and conveyances affecting real property situated 18 in this Commonwealth. 19 Section 5506 (relating to form of execution of 20 instruments), as to instruments or other documents governed 21 by the laws of this Commonwealth or affecting real property 22 situated in this Commonwealth. 23 Section 5510 (relating to certain specifically authorized 24 debt terms), as to obligations (as defined in the section) 25 governed by the laws of this Commonwealth or affecting real 26 property situated in this Commonwealth. 27 Section 5782 (relating to actions against directors, 28 members of an other body and officers), as to any action or 29 proceeding brought in a court of this Commonwealth. 30 § 8105. Ownership of certain professional partnerships. 19970S1157B1392 - 118 -
1 Except as otherwise provided by statute, rule or regulation 2 applicable to a particular profession, all of the [partners in] 3 ultimate beneficial owners of the partnership interests in a 4 partnership that renders one or more restricted professional 5 services shall be licensed persons. As used in this section, 6 the term "restricted professional services" shall have the 7 meaning specified in section 8903 (relating to definitions and 8 index of definitions). 9 § 8201. Scope. 10 * * * 11 (e) Prohibited termination.--A registration under this 12 subchapter may not be terminated while the partnership is a 13 bankrupt as that term is defined in section 8903 (relating to 14 definitions and index of definitions). See section 8221(f) 15 (relating to annual registration). 16 (f) Alternative procedure.--In lieu of filing a statement of 17 registration as provided in subsection (a), a limited 18 partnership may register as a registered limited liability 19 partnership by including in its certificate of limited 20 partnership, either originally or by amendment, the statements 21 required by subsection (a)(3) and (4). To terminate its 22 registration, a limited partnership that uses the procedure 23 authorized by this subsection shall amend its certificate of 24 limited partnership to delete the statements required by this 25 subsection. 26 (g) Constructive notice.--Filing under this section shall 27 constitute constructive notice that the partnership is a 28 registered limited liability partnership and that the partners 29 are entitled to the protections from liability provided by this 30 subchapter. 19970S1157B1392 - 119 -
1 [(e)] (h) Cross references.--See sections 134 (relating to 2 docketing statement) and 135 (relating to requirements to be met 3 by filed documents). 4 § 8202. Definitions. 5 The following words and phrases when used in this chapter 6 shall have the meanings given to them in this section unless the 7 context clearly indicates otherwise: 8 * * * 9 "Partner." Includes a person who is or was a partner in a 10 registered limited liability partnership at any time while the 11 registration of the partnership under this subchapter is or was 12 in effect. 13 * * * 14 § 8204. Limitation on liability of partners. 15 (a) General rule.--Except as provided in subsection (b), a 16 partner in a registered limited liability partnership shall not 17 be individually liable directly or indirectly, whether by way of 18 indemnification, contribution or otherwise, for debts and 19 obligations of, or chargeable to, the partnership, whether 20 sounding in contract or tort or otherwise, that arise from any 21 negligent or wrongful acts or misconduct committed by another 22 partner or other representative of the partnership while the 23 registration of the partnership under this subchapter is in 24 effect. 25 (b) Exceptions.-- 26 (1) [Subsection (a) shall not apply to any debt or 27 obligation with respect to which the partnership is not in 28 compliance with section 8206(a) (relating to insurance).] 29 (Repealed). 30 * * * 19970S1157B1392 - 120 -
1 (3) Subsection (a) shall not affect in any way: 2 (i) the liability of the partnership itself for all 3 its debts and obligations; [or] 4 (ii) the availability of the entire assets of the 5 partnership to satisfy its debts and obligations; or 6 (iii) any obligation undertaken by a partner in 7 writing to individually indemnify another partner of the 8 partnership or to individually contribute toward a 9 liability of another partner. 10 * * * 11 § 8205. Liability of withdrawing partner. 12 * * * 13 (b) Exceptions.--Subsection (a) shall not affect the 14 liability of a partner: 15 * * * 16 (7) For any obligation undertaken by a partner in 17 writing to individually indemnify another partner of the 18 partnership or to individually contribute toward a liability 19 of another partner. 20 * * * 21 (e) Permissive filing.--Filing under this section is 22 permissive, and failure to make a filing under this section by a 23 partner entitled to do so shall not affect the right of that 24 partner to the limitation on liability provided by section 8204 25 (relating to limitation on liability of partners). 26 (f) Constructive notice.--Filing under this section shall 27 constitute constructive notice that the partner has withdrawn 28 from the partnership and is entitled to the protection from 29 liability provided by this section. 30 (g) Variation of section.--A written provision of the 19970S1157B1392 - 121 -
1 partnership agreement may restrict or condition the application 2 of this section to some or all of the partners of the 3 partnership. 4 (h) Application of section.--A partner in a foreign 5 registered limited liability partnership, regardless of whether 6 or not it has registered to do business in this Commonwealth 7 under section 8211 (relating to foreign registered limited 8 liability partnerships), shall not be entitled to make a filing 9 under this section with regard to that partnership. 10 [(e)] (i) Cross references.--See sections 134 (relating to 11 docketing statement) and 135 (relating to requirements to be met 12 by filed documents). 13 § 8211. Foreign registered limited liability partnerships. 14 (a) Governing law.--Subject to the Constitution of 15 Pennsylvania: 16 (1) The laws of the jurisdiction under which a foreign 17 registered limited liability partnership is organized govern 18 its organization and internal affairs and the liability of 19 its partners, except as provided in subsection (c). 20 (2) A foreign registered limited liability partnership 21 may not be denied registration by reason of any difference 22 between those laws and the laws of this Commonwealth. 23 (b) Registration to do business.--A foreign registered 24 limited liability partnership, regardless of whether or not it 25 is also a foreign limited partnership, shall be subject to 26 Subchapter K of Chapter 85 (relating to foreign limited 27 partnerships) as if it were a foreign limited partnership, 28 except that [the]: 29 (1) Its application for registration shall state that it 30 is a registered limited liability partnership. 19970S1157B1392 - 122 -
1 (2) The name under which [the foreign registered limited 2 liability partnership] it registers and conducts business in 3 this Commonwealth shall comply with the requirements of 4 section 8203 (relating to name). 5 (3) Section 8582(a)(5) and (6) (relating to 6 registration) shall not be applicable to the application for 7 registration of a foreign limited liability partnership that 8 is not a foreign limited partnership. 9 (c) Exception.--The liability of the partners in a foreign 10 registered limited liability partnership shall be governed by 11 the laws of the jurisdiction under which it is organized, except 12 that the partners shall not be entitled to greater protection 13 from liability than is available to the partners in a domestic 14 registered limited liability partnership. 15 § 8221. Annual registration. 16 * * * 17 (e) [Annual fee to be lien] Failure to pay annual fee.-- 18 (1) Failure to [pay the annual registration fee imposed] 19 file the certificate of annual registration required by this 20 section [shall not affect the existence or] for five 21 consecutive years shall result in the automatic termination 22 of the status of the registered limited liability partnership 23 as such[, but the]. In addition, any annual registration fee 24 that is not paid when due shall be a lien in the manner 25 provided in this subsection from the time the annual 26 registration fee is due and payable [upon]. If a certificate 27 of annual registration is not filed within 30 days after the 28 date on which it is due, the department shall assess a 29 penalty of $500 against the partnership, which shall also be 30 a lien in the manner provided in this subsection. The 19970S1157B1392 - 123 -
1 imposition of that penalty shall not be construed to relieve 2 the partnership from liability for any other penalty or 3 interest provided for under other applicable law. 4 (2) If the annual registration fee paid by a registered 5 limited liability partnership is subsequently determined to 6 be less than should have been paid because it was based on an 7 incorrect number of general partners or was otherwise 8 incorrectly computed, that fact shall not affect the 9 existence or status of the registered limited liability 10 partnership as such, but the amount of the additional annual 11 registration fee that should have been paid shall be a lien 12 in the manner provided in this subsection from the time the 13 incorrect payment is discovered 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 registered limited 21 liability partnership 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 registered 25 limited liability partnership in which a security interest 26 can be perfected in whole or in part by filing in the 27 department under 13 Pa.C.S. Div. 9 (relating to secured 28 transactions; sales of accounts, contract rights and chattel 29 paper), whether the property and proceeds are owned by the 30 partnership at the time the annual registration fee or any 19970S1157B1392 - 124 -
1 penalty or interest becomes due and payable or whether the 2 property and proceeds are acquired thereafter. Except as 3 otherwise provided by statute, the lien created by this 4 subsection shall have priority over all other liens, security 5 interests or other charges, except liens for taxes or other 6 charges due the Commonwealth. The lien created by this 7 subsection shall be entered on the records of the department 8 and indexed in the same manner as a financing statement filed 9 under 13 Pa.C.S. Div. 9. At the time an annual registration 10 fee, penalty or interest that has resulted in the creation of 11 a lien under this subsection is paid, the department shall 12 terminate the lien with respect to that annual registration 13 fee, penalty or interest without requiring a separate filing 14 by the partnership for that purpose. 15 (5) If the annual registration fee paid by a registered 16 limited liability partnership is subsequently determined to 17 be more than should have been paid for any reason, no refund 18 of the additional fee shall be made. 19 (6) Termination of the status of a registered limited 20 liability partnership as such, whether voluntarily or 21 involuntarily, shall not release it from the obligation to 22 pay any accrued fees, penalties and interest and shall not 23 release the lien created by this subsection. 24 (f) Exception for bankrupt partnerships.--A partnership that 25 would otherwise be required to pay the annual registration fee 26 set forth in subsection (b) shall not be required to pay that 27 fee with respect to any year during any part of which the 28 partnership is a bankrupt as defined in section 8903 (relating 29 to definitions and index of definitions). The partnership shall, 30 instead, indicate on its certificate of annual registration for 19970S1157B1392 - 125 -
1 that year that it is exempt from payment of the annual 2 registration fee pursuant to this subsection. If the partnership 3 fails to file timely a certificate of annual registration, a 4 lien shall be entered on the records of the department pursuant 5 to subsection (e) which shall not be removed until the 6 partnership files a certificate of annual registration 7 indicating its entitlement to an exemption from payment of the 8 annual registration fee as provided in this subsection. See 9 section 8201(e) (relating to scope). 10 § 8503. Definitions and index of definitions. 11 (a) Definitions.--The following words and phrases when used 12 in this chapter shall have the meanings given to them in this 13 section unless the context clearly indicates otherwise: 14 "Certificate of limited partnership." The certificate 15 referred to in section 8511 (relating to certificate of limited 16 partnership) and the certificate as amended. The term includes 17 any other statements or certificates permitted or required to be 18 filed in the Department of State by sections 108 (relating to 19 change in location or status of registered office provided by 20 agent) and 138 (relating to statement of correction) or this 21 part. If an amendment of the certificate of limited partnership 22 or a certificate of merger or division made in the manner 23 permitted by this chapter restates the certificate in its 24 entirety or if there is a certificate of consolidation, 25 thenceforth the "certificate of limited partnership" shall not 26 include any prior documents and any certificate issued by the 27 department with respect thereto shall so state. 28 * * * 29 "Court." Subject to any inconsistent general rule prescribed 30 by the Supreme Court of Pennsylvania: 19970S1157B1392 - 126 -
1 (1) the court of common pleas of the judicial district
2 embracing the county where the registered office of the
3 limited partnership is or is to be located; or
4 (2) where a limited partnership results from a merger,
5 consolidation, division or other transaction without
6 establishing a registered office in this Commonwealth or
7 withdraws as a foreign limited partnership, the court of
8 common pleas in which venue would have been laid immediately
9 prior to the transaction or withdrawal.
10 ["Department." The Department of State of the Commonwealth.]
11 * * *
12 "Partnership agreement." Any agreement, written or oral, of
13 the partners as to the affairs of a limited partnership and the
14 conduct of its business. [A written partnership agreement:
15 (1) May provide that a person shall be admitted as a
16 limited partner, or shall become an assignee of a partnership
17 interest or other rights or powers of a limited partner to
18 the extent assigned, and shall become bound by the
19 partnership agreement:
20 (i) if such person (or a representative authorized
21 by such person orally, in writing or by other action such
22 as payment for a partnership interest) executes the
23 partnership agreement or any other writing evidencing the
24 intent of such person to become a limited partner or
25 assignee; or
26 (ii) without such execution, if such person (or a
27 representative authorized by such person orally, in
28 writing or by other action such as payment for a
29 partnership interest) complies with the conditions for
30 becoming a limited partner or assignee as set forth in
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1 the partnership agreement or any other writing and 2 requests (orally, in writing or by other action such as 3 payment for a partnership interest) that the records of 4 the limited partnership reflect such admission or 5 assignment. 6 (2) Shall not be unenforceable by reason of its not 7 having been signed by a person being admitted as a limited 8 partner or becoming an assignee as provided in paragraph (1) 9 or by reason of its having been signed by a representative as 10 provided in section 8514(b) (relating to attorney-in-fact). 11 (3) May provide that, whenever a provision of this 12 chapter requires the vote or consent of a specified number or 13 percentage of partners or of a class of partners for the 14 taking of any action, a higher number or percentage of votes 15 or consents shall be required for the action. Except as 16 otherwise provided in the partnership agreement, whenever the 17 partnership agreement requires for the taking of any action 18 by the partners or a class of partners a specific number or 19 percentage of votes or consents, the provision of the 20 partnership agreement setting forth that requirement shall 21 not be amended or repealed by any lesser number or percentage 22 of votes or consents of the partners or the class of 23 partners.] 24 * * * 25 "Relax." When used with respect to a provision of the 26 certificate of limited partnership or partnership agreement, 27 means to provide lesser rights for an affected representative or 28 partner. 29 (b) Index of definitions.--Other definitions applying to 30 this chapter and the sections in which they appear are: 19970S1157B1392 - 128 -
1 "Act" or "action." Section 102. 2 "Department." Section 102. 3 "Licensed person." Section 102. 4 "Professional services." Section 102. 5 § 8510. Indemnification. 6 * * * 7 (b) When indemnification is not to be made.--Indemnification 8 pursuant to subsection (a) shall not be made in any case where 9 the act [or failure to act] giving rise to the claim for 10 indemnification is determined by a court to have constituted 11 willful misconduct or recklessness. The certificate of limited 12 partnership or partnership agreement may not provide for 13 indemnification in the case of willful misconduct or 14 recklessness. 15 * * * 16 (f) Mandatory indemnification.--Without regard to whether 17 indemnification or advancement of expenses is provided under 18 subsections (a) and (d), a limited partnership shall be subject 19 to section 8331(2) (relating to rules determining rights and 20 duties of partners). 21 SUBCHAPTER B 22 FORMATION[; CERTIFICATE OF LIMITED PARTNERSHIP] 23 § 8511. Certificate of limited partnership. 24 (a) General rule.--In order to form a limited partnership, a 25 certificate of limited partnership must be executed and filed in 26 the Department of State. The certificate shall set forth: 27 (1) The name of the limited partnership. 28 (2) Subject to section 109 (relating to name of 29 commercial registered office provider in lieu of registered 30 address), the address, including street and number, if any, 19970S1157B1392 - 129 -
1 of its registered office. 2 (3) The name and business address of each general 3 partner. 4 (4) If a partner's interest in the limited partnership 5 is to be evidenced by a certificate of partnership interest, 6 a statement to that effect. 7 (5) Any other [matters the partners determine to include 8 therein. A provision included in the certificate of limited 9 partnership pursuant to this paragraph shall be deemed to be 10 a provision of the partnership agreement for purposes of any 11 provision of this chapter that refers to a rule as set forth 12 in the partnership agreement.] provision, whether or not 13 specifically authorized by or in contravention of this 14 chapter, that the partners elect to set out in the 15 certificate of limited partnership for the regulation of the 16 internal affairs of the limited partnership, except where a 17 provision of this chapter expressly provides that the 18 certificate of limited partnership shall not relax or 19 contravene any provision on a specified subject. 20 (b) Effective date of formation.--A limited partnership is 21 formed at the time of the filing of the certificate of limited 22 partnership in the department or at any later time specified in 23 the certificate of limited partnership if, in either case, there 24 has been substantial compliance with the requirements of this 25 section or the corresponding provisions of prior law. 26 (c) [Duties of recorders of deeds.--Each recorder of deeds 27 shall continue to keep open for public inspection the record of 28 limited partnership certificates recorded under the statutes 29 supplied by this chapter and by prior law the custody of which 30 has not been transferred to the department pursuant to section 19970S1157B1392 - 130 -
1 140 (relating to custody and management of orphan corporate and 2 business records).] (Repealed). 3 (d) Transitional provision.--A limited partnership formed 4 under prior law shall not be required to set forth in its 5 certificate of limited partnership a registered office or the 6 business address of each general partner until such time as it 7 first amends its certificate of limited partnership under this 8 chapter. 9 (e) Effect of provisions.--A provision of the certificate of 10 limited partnership shall be deemed to be a provision of the 11 partnership agreement for purposes of any provision of this 12 chapter that refers to a rule as set forth in the partnership 13 agreement. 14 [(e)] (f) Cross references.--See sections 134 (relating to 15 docketing statement), 135 (relating to requirements to be met by 16 filed documents) and 8514 (relating to execution of 17 certificates). 18 § 8517. Notice. 19 The fact that a certificate of limited partnership is on file 20 in the Department of State is not notice of any fact other than: 21 (1) that the partnership is a limited partnership and 22 that all partners are limited partners except the persons 23 designated therein as general partners[, but it is not notice 24 of any other fact]; and 25 (2) if it is registered under Chapter 82 (relating to 26 registered limited liability partnerships), that it is also a 27 registered limited liability partnership. 28 § 8519. Filing of certificate of summary of record by limited 29 partnerships formed prior to 1976. 30 (a) General rule.--[Any limited partnership that was not 19970S1157B1392 - 131 -
1 formed under this chapter, has never made any filing under this 2 section or corresponding provisions of prior law and] Where any 3 of the organic documents of a limited partnership are not on 4 file in the Department of State or there is an error in any such 5 document as transferred to the department pursuant to section 6 140 (relating to custody and management of orphan corporate and 7 business records), and the limited partnership desires to file 8 any document in the [Department of State] department under any 9 other provision of this chapter or [that desires] to secure from 10 the department a certified copy of the certificate of limited 11 partnership or to correct the text of its organic documents as 12 on file in the department, the limited partnership shall file in 13 the department a certificate of summary of record which shall 14 set forth: 15 (1) The name of the limited partnership. 16 (2) Subject to section 109 (relating to name of 17 commercial registered office provider in lieu of registered 18 address), the address, including street and number, if any, 19 of its registered office. 20 (3) The statute under which the limited partnership was 21 formed. 22 (4) The name under which, and the date on which, the 23 limited partnership was originally formed, including the date 24 when and the place where the original certificate was 25 recorded. 26 (5) The place or places, including the volume and page 27 numbers or their equivalent, where the documents 28 [constituting the currently effective certificate are] that 29 are not on file in the department or that require correction 30 in the records of the department where originally recorded, 19970S1157B1392 - 132 -
1 the date or dates of each recording and the correct text of 2 the [currently effective certificate] documents. The 3 information specified in this paragraph may be omitted in a 4 certificate of summary of record that is delivered to the 5 department contemporaneously with an amended certificate 6 filed under this chapter that restates the certificate in its 7 entirety. 8 [(6) Each name by which the limited partnership was 9 known, if any, other than its original name and its current 10 name and the date or dates on which each change of name of 11 the partnership became effective.] 12 (b) Cross references.--See sections 134 (relating to 13 docketing statement), 135 (relating to requirements to be met by 14 filed documents) and 8514 (relating to execution of 15 certificates). 16 § 8520. Partnership agreement. 17 (a) Admission of limited partners.--A partnership agreement 18 may provide in writing that a person shall be admitted as a 19 limited partner, or shall become an assignee of a partnership 20 interest or other rights or powers of a limited partner to the 21 extent assigned, and shall become bound by the partnership 22 agreement: 23 (1) if such person (or a representative authorized by 24 such person orally, in writing or by other action such as 25 payment for a partnership interest) executes the partnership 26 agreement or any other writing evidencing the intent of such 27 person to become a limited partner or assignee; or 28 (2) without such execution, if such person (or a 29 representative authorized by such person orally, in writing 30 or by other action such as payment for a partnership 19970S1157B1392 - 133 -
1 interest) complies with the conditions for becoming a limited 2 partner or assignee as set forth in the partnership agreement 3 or any other writing and requests (orally, in writing or by 4 other action such as payment for a partnership interest) that 5 the records of the limited partnership reflect such admission 6 or assignment. 7 (b) Signature by limited partners.--A written partnership 8 agreement shall not be unenforceable by reason of its not having 9 been signed by a person being admitted as a limited partner or 10 becoming an assignee as provided in subsection (a) or by reason 11 of its having been signed by a representative as provided in 12 section 8514(b) (relating to attorney-in-fact). 13 (c) Voting requirements.--A partnership agreement may 14 provide in writing that, whenever a provision of this chapter 15 requires the vote or consent of a specified number or percentage 16 of partners or of a class of partners for the taking of any 17 action, a higher number or percentage of votes or consents shall 18 be required for the action. Except as otherwise provided in the 19 partnership agreement, whenever the partnership agreement 20 requires for the taking of any action by the partners or a class 21 of partners a specific number or percentage of votes or 22 consents, the provision of the partnership agreement setting 23 forth that requirement shall not be amended or repealed by any 24 lesser number or percentage of votes or consents of the partners 25 or the class of partners. 26 (d) Freedom of contract.--A written partnership agreement 27 may contain any provision for the regulation of the internal 28 affairs of the limited partnership agreed to by the partners, 29 whether or not specifically authorized by or in contravention of 30 this chapter, except where this chapter: 19970S1157B1392 - 134 -
1 (1) refers only to a rule as set forth in the 2 certificate of limited partnership; or 3 (2) expressly provides that the partnership agreement 4 shall not relax or contravene any provision on a specified 5 subject. 6 (e) Oral provisions.--A partnership agreement may provide in 7 writing that it cannot be amended or modified except in writing, 8 in which case an oral agreement, amendment or modification shall 9 not be enforceable. 10 (f) Cross reference.--See section 8511(a)(5) (relating to 11 certificate of limited partnership). 12 § 8523. Liability of limited partners to third parties. 13 (a) General rule.--A limited partner is not liable [for the 14 obligations of a limited partnership unless he is also a general 15 partner or, in addition to the exercise of his rights and powers 16 as a limited partner, he participates in the control of the 17 business. However, if the limited partner participates in the 18 control of the business, he is liable only to persons who 19 transact business with the limited partnership reasonably 20 believing, based upon the conduct of the limited partner, that 21 the limited partner is a general partner.], solely by reason of 22 being a limited partner, under an order of a court or in any 23 other manner, for a debt, obligation or liability of the limited 24 partnership of any kind or for the acts of any partner, agent or 25 employee of the limited partnership. 26 (b) [Activities compatible with limited partner status.--A 27 limited partner does not participate in the control of the 28 business within the meaning of subsection (a) solely by doing 29 one or more of the following: 30 (1) Being a contractor for, or an agent or employee of 19970S1157B1392 - 135 -
1 the limited partnership or of a general partner, or being an 2 officer, director, trustee, partner or shareholder of a 3 general partner. 4 (2) Consulting with and advising a general partner with 5 respect to any matter, including, without limitation, the 6 business of the limited partnership. 7 (3) (i) Acting as surety for the limited partnership, 8 or guaranteeing, endorsing or assuming one or more 9 specific obligations of the limited partnership, or a 10 general partner. 11 (ii) Borrowing money from the limited partnership or 12 a general partner. 13 (iii) Lending money to the limited partnership or a 14 general partner. 15 (iv) Providing collateral for the limited 16 partnership or a general partner. 17 (4) Taking any action required or permitted by law to 18 bring, pursue or settle or otherwise terminate a derivative 19 action in the right of the limited partnership. 20 (5) Requesting or attending a meeting of partners. 21 (6) Acting or causing the taking or refraining from the 22 taking of any action, including, without limitation, by 23 proposing, approving, consenting or disapproving, by voting 24 or otherwise, with respect to one or more of the following 25 matters: 26 (i) The dissolution and winding up of the limited 27 partnership, or an election to continue the limited 28 partnership or the business of the limited partnership. 29 (ii) The sale, exchange, lease, mortgage, pledge or 30 other transfer of, or the grant of a security interest 19970S1157B1392 - 136 -
1 in, any asset or assets of the limited partnership. 2 (iii) The incurrence, renewal, refinancing or 3 payment or other discharge of indebtedness by the limited 4 partnership. 5 (iv) A change in the nature of the business. 6 (v) The admission or removal of a general partner. 7 (vi) The admission or removal of a limited partner. 8 (vii) A transaction involving an actual or potential 9 conflict of interest between a general partner and the 10 limited partnership or the limited partners. 11 (viii) An amendment to the partnership agreement or 12 certificate of limited partnership. 13 (ix) The merger or consolidation of the limited 14 partnership. 15 (x) The indemnification of any partner or other 16 person. 17 (xi) Matters related to the business of the limited 18 partnership not otherwise enumerated in this subsection, 19 which the partnership agreement states in writing may be 20 subject to the approval or disapproval of limited 21 partners. 22 (7) Applying for dissolution of the partnership pursuant 23 to section 8572 (relating to judicial dissolution). 24 (8) Winding up the limited partnership pursuant to 25 section 8573 (relating to winding up). 26 (9) In the case of a registered investment company, 27 voting on one or more of the following matters: 28 (i) The approval or termination of investment 29 advisory or underwriting contracts. 30 (ii) The approval of auditors. 19970S1157B1392 - 137 -
1 (iii) Any other matter that by reason of the 2 Investment Company Act of 1940 (54 Stat. 789, 15 U.S.C. § 3 80a-1 et seq.) the general partners consider to be a 4 proper matter for the vote of the holders of voting 5 securities or beneficial interests in the limited 6 partnership. 7 (10) Serving on a committee of the limited partnership 8 or the limited partners. 9 (11) Exercising any right or power permitted to limited 10 partners under this chapter and not specifically enumerated 11 in this subsection. 12 (12) Exercising any other right or power stated in the 13 partnership agreement.] (Repealed). 14 (c) [Enumeration nonexclusive.--The enumeration in 15 subsection (b) does not mean that the possession or exercise of 16 any other powers, or having or acting in other capacities, by a 17 limited partner constitutes participation by him in the control 18 of the business of the limited partnership.] (Repealed). 19 (d) Use of name of limited partner.--A limited partner does 20 not [participate in the control of the business within the 21 meaning of subsection (a)] become liable for the obligations of 22 a limited partnership by reason of the fact that all or any part 23 of the name of the limited partner is included in the name of 24 the limited partnership. 25 (e) [Effect of section.--This section does not create rights 26 or powers of limited partners. Such rights and powers may be 27 created only by the certificate of limited partnership, 28 partnership agreement or any other agreement or other provisions 29 of this chapter.] (Repealed). 30 * * * 19970S1157B1392 - 138 -
1 § 8546. Approval of merger or consolidation.
2 (a) Preparation of plan of merger or consolidation.--A plan
3 of merger or consolidation, as the case may be, shall be
4 prepared, setting forth:
5 * * *
6 (3) The manner and basis of converting the partnership
7 interests of each limited partnership into partnership
8 interests, securities or obligations of the surviving or new
9 limited partnership, as the case may be, and, if any of the
10 partnership interests of any of the limited partnerships that
11 are parties to the [plan] merger or consolidation are not to
12 be converted solely into partnership interests, securities or
13 obligations of the surviving or new limited partnership, the
14 partnership interests, securities or obligations of any other
15 person or cash, property or rights that the holders of such
16 partnership interests are to receive in exchange for, or upon
17 conversion of, such partnership interests, and the surrender
18 of any certificates evidencing them, which securities or
19 obligations, if any, of any other person or cash, property or
20 rights may be in addition to or in lieu of the partnership
21 interests, securities or obligations of the surviving or new
22 limited partnership.
23 (4) Such other provisions as are deemed desirable.
24 [Any of the terms of the plan may be made dependent upon facts
25 ascertainable outside of the plan if the manner in which the
26 facts will operate upon the terms of the plan is set forth in
27 the plan.]
28 (b) Post-adoption amendment of plan of merger or
29 consolidation.--A plan of merger or consolidation may contain a
30 provision that the general partners of the constituent limited
19970S1157B1392 - 139 -
1 partnerships may amend the plan at any time prior to its 2 effective date, except that an amendment made subsequent to any 3 adoption of the plan by the limited partners of any constituent 4 domestic limited partnership shall not change: 5 (1) The amount or kind of partnership interests, 6 obligations, cash, property or rights to be received in 7 exchange for or on conversion of all or any of the 8 partnership interests of the constituent domestic limited 9 partnership adversely to the holders of those partnership 10 interests. 11 (2) Any term of the certificate of limited partnership 12 or partnership agreement of the surviving or new limited 13 partnership [to be effected by] as it is to be in effect 14 immediately following consummation of the merger or 15 consolidation except provisions that may be amended without 16 the approval of the limited partners. 17 (3) Any of the other terms and conditions of the plan if 18 the change would adversely affect the holders of any 19 partnership interests of the constituent domestic limited 20 partnership. 21 * * * 22 (d) Party to plan.--[A limited partnership] An association 23 that approves a plan in its capacity as a partner or creditor of 24 a merging or consolidating limited partnership, or that 25 furnishes all or a part of the consideration contemplated by a 26 plan, does not thereby become a party to the [plan] merger or 27 consolidation for the purposes of this subchapter. 28 (e) Notice of meeting of limited partners.--Notwithstanding 29 any other provision of the partnership agreement, written notice 30 of the meeting of limited partners called for the purpose of 19970S1157B1392 - 140 -
1 considering the proposed plan shall be given to each limited 2 partner of record, whether or not entitled to vote thereon, of 3 each domestic limited partnership that is a party to the [plan] 4 proposed merger or consolidation. There shall be included in, or 5 enclosed with, the notice a copy of the proposed plan or a 6 summary thereof. The provisions of this subsection may not be 7 relaxed by the certificate of limited partnership or partnership 8 agreement. 9 (f) Adoption of plan by limited partners.--The plan of 10 merger or consolidation shall be adopted upon receiving a 11 majority of the votes cast by all limited partners, if any, 12 entitled to vote thereon of each of the domestic limited 13 partnerships that is a party to the [plan] proposed merger or 14 consolidation and, if any class of limited partners is entitled 15 to vote thereon as a class, a majority of the votes cast in each 16 class vote. A proposed plan of merger or consolidation shall not 17 be deemed to have been adopted by the limited partnership unless 18 it has also been approved by the general partners, regardless of 19 the fact that the general partners have directed or suffered the 20 submission of the plan to the limited partners for action. 21 * * * 22 (h) Termination of plan.--Prior to the time when a merger or 23 consolidation becomes effective, the merger or consolidation may 24 be terminated pursuant to provisions therefor, if any, set forth 25 in the plan. If a certificate of merger or consolidation has 26 been filed in the department prior to the termination, a 27 certificate of termination executed by each limited partnership 28 that is a party to the [plan] merger or consolidation, unless 29 the plan permits termination by less than all of the limited 30 partnerships, in which case the certificate shall be executed on 19970S1157B1392 - 141 -
1 behalf of the limited partnership exercising the right to 2 terminate, shall be filed in the department. The certificate of 3 termination shall set forth: 4 (1) A copy of the certificate of merger or consolidation 5 relating to the plan that is terminated. 6 (2) A statement that the plan has been terminated in 7 accordance with the provisions therefor set forth therein. 8 See sections 134 (relating to docketing statement), 135 9 (relating to requirements to be met by filed documents), 138 10 (relating to statement of correction) and 8514 (relating to 11 execution of certificates). 12 * * * 13 (j) Reference to outside facts.--Any of the terms of a plan 14 of merger or consolidation may be made dependent upon facts 15 ascertainable outside of the plan if the manner in which the 16 facts will operate upon the terms of the plan is set forth in 17 the plan. Such facts may include, without limitation, actions or 18 events within the control of or determinations made by a party 19 to the plan or a representative of a party to the plan. 20 § 8553. Voluntary withdrawal of limited partner. 21 (a) General rule.--A limited partner may withdraw from a 22 limited partnership only at the time or upon the happening of 23 events specified in writing in the partnership agreement. [If 24 the partnership agreement does not specify in writing the time 25 or the events upon the happening of which a limited partner may 26 withdraw or a definite time for the dissolution and winding up 27 of the limited partnership, a limited partner may withdraw upon 28 not less than six months' prior written notice to each general 29 partner at his address on the books of the limited partnership.] 30 (b) [Prohibition of withdrawal.--The partnership agreement 19970S1157B1392 - 142 -
1 may provide that a limited partner may not withdraw from the 2 limited partnership or assign a partnership interest in the 3 limited partnership prior to the dissolution and winding up of 4 the limited partnership.] (Repealed). 5 (c) Transitional rule.--This section applies to all limited 6 partnerships formed on or after January 1, 1999. If the 7 partnership agreement of a limited partnership formed before 8 January 1, 1999, did not on December 31, 1998, specify in 9 writing the time or the events upon the happening of which a 10 limited partner could withdraw or a definite time for the 11 dissolution and winding up of the limited partnership, the 12 provisions of this section that were in effect prior to January 13 1, 1999, shall apply until such time, if any, as the partnership 14 agreement is amended in writing after January 1, 1999, to 15 specify: 16 (1) a time or the events upon the happening of which a 17 limited partner may withdraw; 18 (2) a definite time for the dissolution and winding up 19 of the limited partnership; or 20 (3) that this section as effective January 1, 1999, 21 shall apply to the limited partnership. 22 § 8557. [Limitations on distribution.] Distributions and 23 allocation of profits and losses. 24 [A partner may not receive a distribution from a limited 25 partnership to the extent that, after giving effect to the 26 distribution, all liabilities of the limited partnership, other 27 than liabilities to partners on account of their partnership 28 interests and liabilities as to which recourse of creditors is 29 limited to specified property of the limited partnership, exceed 30 the fair value of the partnership assets. The fair value of any 19970S1157B1392 - 143 -
1 property that is subject to a liability as to which recourse of 2 creditors is so limited shall be included in the partnership 3 assets only to the extent that the fair value of the property 4 exceeds that liability.] A limited partnership may from time to 5 time make distributions and allocate the profits and losses of 6 its business to the partners upon the basis stipulated in the 7 partnership agreement or, if not stipulated in the partnership 8 agreement, per capita. The allocation of losses pursuant to this 9 section shall not affect the limitation on liability of limited 10 partners as provided in section 8523 (relating to liability of 11 limited partners to third parties). 12 § 8558. Liability upon return of contribution. 13 * * * 14 (c) Determination of return of contribution.--A partner 15 receives a return of his contribution to the extent that a 16 distribution to him reduces his share of the fair value of the 17 net assets of the limited partnership[, as determined under 18 section 8557 (relating to limitations on distribution),] below 19 the value (as stated or determined in the manner provided in the 20 partnership agreement, if stated or provided for therein) of his 21 contribution (to the extent it has been received by the limited 22 partnership) that has not been distributed to him, and otherwise 23 to the extent of the fair value of the distribution. 24 (d) Fair value of net assets.--For purposes of computing the 25 fair value of the net assets of the limited partnership under 26 subsection (c): 27 (1) liabilities of the limited partnership to partners 28 on account of their partnership interests and liabilities as 29 to which recourse of creditors is limited to specified 30 property of the limited partnership shall not be considered; 19970S1157B1392 - 144 -
1 and 2 (2) the fair value of property that is subject to a 3 liability as to which recourse of creditors is so limited 4 shall be included in the partnership assets only to the 5 extent that the fair value of the property exceeds that 6 liability. 7 § 8571. Nonjudicial dissolution. 8 (a) General rule.--A limited partnership is dissolved and 9 its affairs shall be wound up upon the happening of the first to 10 occur of the following: 11 (1) At the time or upon the happening of events 12 specified in the certificate of limited partnership. 13 (2) At the time or upon the happening of events 14 specified in writing in the partnership agreement. 15 (3) Written consent of all partners. 16 (4) An event of withdrawal of a general partner unless 17 at the time there is at least one other general partner and 18 the written provisions of the partnership agreement permit 19 the business of the limited partnership to be carried on by 20 the remaining general partner and that partner does so. The 21 limited partnership is not dissolved and is not required to 22 be wound up by reason of any event of withdrawal if, within 23 180 days after the withdrawal, [all] a majority in interest, 24 or such greater number as shall be provided in writing in the 25 partnership agreement, of the partners agree in writing to 26 continue the business of the limited partnership or to the 27 appointment of one or more replacement general partners. 28 (5) Entry of an order of judicial dissolution under 29 section 8572 (relating to judicial dissolution). 30 * * * 19970S1157B1392 - 145 -
1 (c) Dissolution by domestication.--Whenever a domestic 2 limited partnership has domesticated itself under the laws of 3 another jurisdiction by action similar to that provided by 4 section 8590 (relating to domestication) and has authorized that 5 action in the manner required by this subchapter for the 6 approval of a proposal that the partnership dissolve 7 voluntarily, the partnership may surrender its certificate of 8 limited partnership under the laws of this Commonwealth by 9 filing in the department a certificate of cancellation under 10 section 8513 (relating to cancellation of certificate). If the 11 partnership, as domesticated in the other jurisdiction, 12 registers to do business in this Commonwealth either prior to or 13 simultaneously with the filing of the certificate of 14 cancellation under this subsection, the partnership shall not be 15 required to file with the certificate of cancellation the tax 16 clearance certificates that would otherwise be required by 17 section 139 (relating to tax clearance of certain fundamental 18 transactions). 19 [(c)] (d) Cross [references] reference.--See [sections 8103 20 (relating to continuation of certain limited partnerships) and] 21 section 8512(b) (relating to events requiring amendment). 22 § 8577. Proposal and adoption of plan of division. 23 * * * 24 (b) Reference to outside facts.--Any of the terms of the 25 plan may be made dependent upon facts ascertainable outside of 26 the plan if the manner in which the facts will operate upon the 27 terms of the plan is set forth in the plan. Such facts may 28 include, without limitation, actions or events within the 29 control of or determinations made by the dividing limited 30 partnership or a representative of the dividing limited 19970S1157B1392 - 146 -
1 partnership. 2 * * * 3 (e) [Restrictions on certain distributions.--A plan of 4 division may not be made effective if the effect of the plan is 5 to make a distribution to the holders of any class or series of 6 partnership interests of the dividing limited partnership unless 7 the distribution is permitted by section 8557 (relating to 8 limitations on distribution.] (Repealed). 9 (f) [Action by] Rights of holders of indebtedness.--[Unless 10 otherwise provided by an indenture or other contract by which 11 the dividing limited partnership is bound, a plan of division 12 shall not require the approval of the holders of any debt 13 securities or other obligations of the dividing limited 14 partnership or of any representative of the holders if the 15 transfer of assets effected by the division, if effected by 16 means of a sale, lease, exchange or other disposition, and any 17 related distribution would not require the approval of the 18 holders or representatives thereof.] If any such debt 19 securities, notes, similar evidences of indebtedness, indentures 20 or other contracts were issued, incurred or executed by the 21 dividing limited partnership before (the Legislative Reference 22 Bureau shall insert here the effective date of the amendments of 23 this section) and have not been amended subsequent to that date, 24 the liability of the dividing limited partnership thereunder 25 shall not be affected by the division nor shall the rights of 26 the obligees thereunder be impaired by the division, and each of 27 the resulting limited partnerships may be proceeded against or 28 substituted in place of the dividing limited partnership as 29 joint and several obligors on such liability, regardless of any 30 provision of the plan of division apportioning the liabilities 19970S1157B1392 - 147 -
1 of the dividing limited partnership. 2 * * * 3 § 8580. Effect of division. 4 * * * 5 (b) Property rights; allocations of assets and 6 liabilities.-- 7 (1) (i) All the property, real, personal and mixed, of 8 the dividing limited partnership, and all debts due on 9 whatever account to it, including subscriptions for 10 partnership interests or other causes of action belonging 11 to it, shall, except as otherwise provided in paragraph 12 (2), to the extent [transfers] allocations of assets are 13 contemplated by the plan of division, be deemed without 14 further action to be [transferred] allocated to and 15 vested in the resulting limited partnerships on such a 16 manner and basis and with such effect as is specified in 17 the plan, or per capita among the resulting limited 18 partnerships, as tenants in common, if no specification 19 is made in the plan, and the title to any real estate or 20 interest therein vested in any of the limited 21 partnerships shall not revert or be in any way impaired 22 by reason of the division. 23 (ii) Upon the division becoming effective, the 24 resulting limited partnerships shall each thenceforth be 25 responsible as separate and distinct limited partnerships 26 only for such liabilities as each limited partnership may 27 undertake or incur in its own name but shall be liable 28 for the liabilities of the dividing limited partnership 29 in the manner and on the basis provided in subparagraphs 30 (iv) and (v). 19970S1157B1392 - 148 -
1 (iii) Liens upon the property of the dividing 2 limited partnership shall not be impaired by the 3 division. 4 (iv) [One] To the extent allocations of liabilities 5 are contemplated by the plan of division, the liabilities 6 of the dividing limited partnership shall be deemed 7 without further action to be allocated to and become the 8 liabilities of the resulting limited partnerships on such 9 a manner and basis and with such effect as is specified 10 in the plan; and one or more but less than all of the 11 resulting limited partnerships shall be free of the 12 liabilities of the dividing limited partnership to the 13 extent, if any, specified in the plan [if no fraud of 14 creditors or partners or violation of law shall be 15 effected thereby and if all applicable provisions of law 16 are complied with.], if in either case: 17 (A) no fraud of partners or violation of law 18 shall be effected thereby; and 19 (B) the plan does not constitute a fraudulent 20 transfer under 12 Pa.C.S. Ch. 51 (relating to 21 fraudulent transfers). 22 (v) If the conditions in subparagraph (iv) for 23 freeing one or more of the resulting limited partnerships 24 from the liabilities of the dividing limited partnership, 25 or for allocating some or all of the liabilities of the 26 dividing limited partnership, are not satisfied, the 27 liabilities of the dividing limited partnership as to 28 which those conditions are not satisfied shall not be 29 affected by the division nor shall the rights of 30 creditors [thereof] thereunder or of any person dealing 19970S1157B1392 - 149 -
1 with the limited partnership be impaired by the division, 2 and any claim existing or action or proceeding pending by 3 or against the limited partnership with respect to those 4 liabilities may be prosecuted to judgment as if the 5 division had not taken place, or the resulting limited 6 partnerships may be proceeded against or substituted in 7 [its] place of the dividing limited partnership as joint 8 and several obligors on [such liability] those 9 liabilities, regardless of any provision of the plan of 10 division apportioning the liabilities of the dividing 11 limited partnership. 12 (vi) The conditions in subparagraph (iv) for freeing 13 one or more of the resulting limited partnerships from 14 the liabilities of the dividing limited partnership and 15 for allocating some or all of the liabilities of the 16 dividing limited partnership shall be conclusively deemed 17 to have been satisfied if the plan of division has been 18 approved by the Pennsylvania Public Utility Commission in 19 a final order issued after (the Legislative Reference 20 Bureau shall insert here the effective date of the 21 amendments of this section) that has become not subject 22 to further appeal. 23 (2) (i) The [transfer] allocation of any fee or 24 freehold interest or leasehold having a remaining term of 25 30 years or more in any tract or parcel of real property 26 situate in this Commonwealth owned by a dividing limited 27 partnership (including property owned by a foreign 28 limited partnership dividing solely under the law of 29 another jurisdiction) to a new limited partnership 30 resulting from the division shall not be effective until 19970S1157B1392 - 150 -
1 one of the following documents is filed in the office for 2 the recording of deeds of the county, or each of them, in 3 which the tract or parcel is situated: 4 (A) A deed, lease or other instrument of 5 confirmation describing the tract or parcel. 6 (B) A duly executed duplicate original copy of 7 the certificate of division. 8 (C) A copy of the certificate of division 9 certified by the Department of State. 10 (D) A declaration of acquisition setting forth 11 the value of real estate holdings in the county of 12 the limited partnership as an acquired company. 13 (ii) The provisions of 75 Pa.C.S. § 1114 (relating 14 to transfer of vehicle by operation of law) shall not be 15 applicable to [a transfer] an allocation of ownership of 16 any motor vehicle, trailer or semitrailer [from a 17 dividing limited partnership] to a new limited 18 partnership under this section or under a similar law of 19 any other jurisdiction, but any such [transfer] 20 allocation shall be effective only upon compliance with 21 the requirements of 75 Pa.C.S. § 1116 (relating to 22 issuance of new certificate following transfer). 23 (3) It shall not be necessary for a plan of division to 24 list each individual asset or liability of the dividing 25 limited partnership to be allocated to a new limited 26 partnership so long as those assets and liabilities are 27 described in a reasonable and customary manner. 28 (4) Each new limited partnership shall hold any assets 29 and liabilities allocated to it as the successor to the 30 dividing limited partnership, and those assets and 19970S1157B1392 - 151 -
1 liabilities shall not be deemed to have been assigned to the 2 new limited partnership in any manner, whether directly or 3 indirectly or by operation of law. 4 * * * 5 (g) Conflict of laws.--It is the intent of the General 6 Assembly that: 7 (1) The effect of a division of a domestic limited 8 partnership shall be governed solely by the laws of this 9 Commonwealth and any other jurisdiction under the laws of 10 which any of the resulting limited partnerships is organized. 11 (2) The effect of a division on the assets and 12 liabilities of the dividing limited partnership shall be 13 governed solely by the laws of this Commonwealth and any 14 other jurisdiction under the laws of which any of the 15 resulting limited partnerships is organized. 16 (3) The validity of any allocations of assets or 17 liabilities by a plan of division of a domestic limited 18 partnership, regardless of whether or not any of the new 19 limited partnerships is a foreign limited partnership, shall 20 be governed solely by the laws of this Commonwealth. 21 (4) In addition to the express provisions of this 22 subsection, this subchapter shall otherwise generally be 23 granted the protection of full faith and credit under the 24 Constitution of the United States. 25 § 8590. Domestication. 26 * * * 27 (b) Certificate of domestication.--The certificate of 28 domestication shall be executed by the limited partnership and 29 shall set forth in the English language: 30 (1) The name of the limited partnership. If the name is 19970S1157B1392 - 152 -
1 in a foreign language, it shall be set forth in Roman letters 2 or characters or Arabic or Roman numerals. If the name is one 3 that is rendered unavailable for use by any provision of 4 section 8505 (relating to name), the limited partnership 5 shall adopt, in accordance with any procedures for changing 6 the name of the limited partnership that are applicable prior 7 to the domestication of the limited partnership, and shall 8 set forth in the certificate of domestication an available 9 name. 10 * * * 11 (c) Effect of domestication.-- 12 (1) As a domestic limited partnership, the domesticated 13 limited partnership shall no longer be a foreign limited 14 partnership for the purposes of this chapter and shall [have] 15 instead be a domestic limited partnership with all the powers 16 and privileges and [be subject to] all the duties and 17 limitations granted and imposed upon domestic limited 18 partnerships. [The property, debts, liens, estates, taxes, 19 penalties and public accounts due the Commonwealth shall 20 continue to be vested in and imposed upon the limited 21 partnership to the same extent as if it were the successor by 22 merger of the domesticating limited partnership with and into 23 a domestic limited partnership under Subchapter F (relating 24 to merger and consolidation).] In all other respects, the 25 domesticated limited partnership shall be deemed to be the 26 same limited partnership as it was prior to the domestication 27 without any change in or affect on its existence. Without 28 limiting the generality of the previous sentence, the 29 domestication shall not be deemed to have dissolved the 30 limited partnership or to have affected in any way: 19970S1157B1392 - 153 -
1 (i) the right and title of the limited partnership 2 in and to its assets, property, franchises, estates and 3 choses in action; 4 (ii) the liability of the limited partnership for 5 its debts, obligations, penalties and public accounts due 6 the Commonwealth; 7 (iii) any liens or other encumbrances on the 8 property or assets of the limited partnership; or 9 (iv) any contract, license or other agreement to 10 which the limited partnership is a party or under which 11 it has any rights or obligations. 12 (2) The partnership interests in the domesticated 13 limited partnership shall be unaffected by the domestication 14 except to the extent, if any, reclassified in the certificate 15 of domestication. 16 § 8903. Definitions and index of definitions. 17 (a) Definitions.--The following words and phrases when used 18 in this chapter shall have the meanings given to them in this 19 section unless the context clearly indicates otherwise: 20 * * * 21 ["Department." The Department of State of the Commonwealth.] 22 * * * 23 "Event of dissociation." An event that causes a person to 24 cease to be a member of a limited liability company. See 25 section [8971(a)(4)] 8971(4) (relating to dissolution). 26 * * * 27 ["Licensed person." A natural person who is duly licensed or 28 admitted to practice his profession by a court, department, 29 board, commission or other agency of this Commonwealth or 30 another jurisdiction to render a professional service that is or 19970S1157B1392 - 154 -
1 will be rendered by the professional company of which he is or 2 intends to become a manager, member, employee or agent.] 3 "Limited liability company," "domestic limited liability 4 company" or "company." An association that is a limited 5 liability company organized and existing under this chapter. 6 * * * 7 "Operating agreement." Any [agreement of the members as to] 8 rules or procedures adopted for the regulation and governance of 9 the affairs of a limited liability company and the conduct of 10 its business. [The operating agreement need not be in writing 11 except where this chapter refers to a written provision of the 12 operating agreement. The operating agreement may contain any 13 provision for the regulation of the internal affairs of the 14 company agreed to by the members, whether or not specifically 15 authorized by or in contravention of this chapter, except where 16 this chapter: 17 (1) refers only to a rule as set forth in the 18 certificate of organization; or 19 (2) expressly provides that the operating agreement 20 shall not relax or contravene any provision on a specified 21 subject. See sections 8913(8) (relating to certificate of 22 organization) and 8915 (relating to modification by 23 agreement).] 24 * * * 25 ["Professional services." The term shall have the meaning 26 specified in section 2902 (relating to definitions).] 27 * * * 28 (b) Index of other definitions.--Other definitions applying 29 to this chapter and the sections in which they appear are: 30 "Act" or "action." Section 102. 19970S1157B1392 - 155 -
1 "Department." Section 102. 2 "Licensed person." Section 102. 3 "Professional services." Section 102. 4 SUBCHAPTER B 5 ORGANIZATION[; CERTIFICATE OF ORGANIZATION] 6 § 8915. Modification by agreement. 7 The provisions of this chapter are intended to permit a 8 limited liability company to qualify for taxation as an entity 9 that is not an association taxable as a corporation under the 10 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 11 et seq.). Notwithstanding the limitations in [the definition of 12 "operating agreement" in section 8903 (relating to definitions) 13 and the limitations in section] sections 8913(8) (relating to 14 certificate of organization) and 8916(b) (relating to operating 15 agreement), the certificate of organization and operating 16 agreement may effect any change in the form of organization of 17 the company, in addition to or in contravention of the 18 provisions of this chapter, that may be necessary to accomplish 19 that purpose. 20 § 8916. Operating agreement. 21 (a) General rule.--The operating agreement of a limited 22 liability company need not be in writing except where this 23 chapter refers to a written provision of the operating 24 agreement. If a written operating agreement provides that it 25 cannot be amended or modified except in writing, an oral 26 agreement, amendment or modification shall not be enforceable. 27 (b) Freedom of contract.--An operating agreement may contain 28 any provision for the regulation of the internal affairs of a 29 limited liability company adopted by the members, whether or not 30 specifically authorized by or in contravention of this chapter, 19970S1157B1392 - 156 -
1 except where this chapter: 2 (1) refers only to a rule as set forth in the 3 certificate of organization; or 4 (2) expressly provides that the operating agreement 5 shall not relax or contravene any provision on a specified 6 subject. 7 (c) Cross references.--See sections 8913(8) (relating to 8 certificate of organization) and 8915 (relating to modification 9 by agreement). 10 § 8922. Liability of members [and managers]. 11 (a) General rule.--[Neither] Except as provided in 12 subsection (e), the members of a limited liability company [nor 13 the managers of a company managed by one or more managers are] 14 shall not be liable, solely by reason of being a member [or a 15 manager], under an order of a court or in any other manner for a 16 debt, obligation or liability of the company of any kind or for 17 the acts [or omissions] of any [other] member, manager, agent or 18 employee of the company. 19 (b) Professional relationship unaffected.--Subsection (a) 20 shall not afford members [and managers] of a professional 21 company with greater immunity than is available to the officers, 22 shareholders, employees or agents of a professional corporation. 23 See section 2925 (relating to professional relationship 24 retained). 25 * * * 26 (d) Conflict of laws.--The personal liability of a member of 27 a company to any person or in any action or proceeding for the 28 debts, obligations or liabilities of the company or for the acts 29 [or omissions] of other members, managers, employees or agents 30 of the company shall be governed solely and exclusively by this 19970S1157B1392 - 157 -
1 chapter and the laws of this Commonwealth. Whenever a conflict 2 arises between the laws of this Commonwealth and the laws of any 3 other state with regard to the liability of members of a company 4 organized and existing under this chapter for the debts, 5 obligations and liabilities of the company or for the acts [or 6 omissions] of the other members, managers, employees or agents 7 of the company, the laws of this Commonwealth shall govern in 8 determining such liability. 9 (e) Expansion of liability.--The certificate of organization 10 may provide that some or all of the members shall be liable for 11 some or all of the debts, obligations and liabilities of the 12 company to the extent and under the circumstances provided in 13 the certificate. 14 (f) Medical professional liability.--A professional company 15 shall be deemed to be a partnership for purposes of section 811 16 of the act of October 15, 1975 (P.L.390, No.111), known as the 17 Health Care Services Malpractice Act. 18 [(e)] (g) Cross reference.--See section 8904(b) (relating to 19 rules for cases not provided for in this chapter). 20 § 8924. Limited transferability of membership interest. 21 (a) General rule.--The interest of a member in a limited 22 liability company constitutes the personal estate of the member 23 and may be transferred or assigned as provided in writing in the 24 operating agreement. Unless otherwise provided in writing in 25 the operating agreement, if all of the other members of the 26 company other than the member proposing to dispose of his 27 interest do not approve of the proposed transfer or assignment 28 by unanimous vote or written consent, which approval may be 29 unreasonably withheld by any of the other members, the 30 transferee of the interest of the member shall have no right to 19970S1157B1392 - 158 -
1 participate in the management of the business and affairs of the 2 company or to become a member. The transferee shall only be 3 entitled to receive the distributions and the return of 4 contributions to which that member would otherwise be entitled. 5 (b) Certificate of membership interest.--The certificate of 6 organization may provide that a member's interest in a company 7 may be evidenced by a certificate of membership interest issued 8 by the company [and]. If such provision is made for the issuance 9 of certificates of membership interest, the operating agreement 10 may [also] provide for the assignment or transfer of any 11 membership interest represented by such a certificate and make 12 other provisions with respect to such certificates. [See 13 13 Pa.C.S. § 8102 (relating to definitions and index of 14 definitions).] 15 § 8932. Distributions and allocation of profits and losses. 16 A limited liability company may from time to time [divide] 17 make distributions and allocate the profits and losses of its 18 business [and distribute the same] to [and allocate any losses 19 among] the members of the company upon the basis stipulated in 20 the operating agreement or, if not stipulated in the operating 21 agreement, per capita. The allocation of losses pursuant to this 22 section shall not affect the limitation on liability of members 23 as provided in section 8922 (relating to liability of members). 24 § 8942. Voting. 25 * * * 26 (c) Exception.--An amendment of the certificate of 27 organization that: 28 (1) restates without change all of the operative 29 provisions of the certificate of organization as theretofore 30 in effect; 19970S1157B1392 - 159 -
1 (2) changes the name or registered office of the 2 company; or 3 (3) accomplishes any combination of the foregoing 4 purposes; 5 is not an amendment of the certificate of organization for the 6 purposes of subsection (b). Unless otherwise provided in writing 7 in the operating agreement, an amendment described in this 8 subsection may be made by the affirmative vote of a majority of 9 the managers or, in the case of a company that is not managed by 10 one or more managers, of a majority of the members. 11 * * * 12 § 8943. Duties of managers and members. 13 * * * 14 (b) Companies with managers.--If the certificate of 15 organization provides that the company shall be managed by one 16 or more managers: 17 (1) [Unless otherwise provided in writing in the 18 operating agreement, the provisions of Subchapter B of 19 Chapter 17 (relating to officers, directors and 20 shareholders)] Sections 1711 (relating to alternative 21 provisions) through 1717 (relating to limitation on standing) 22 shall be applicable to representatives of the company. A 23 written provision of the operating agreement may increase, 24 but not relax, the duties of representatives of the company 25 to its members under those sections. For purposes of applying 26 the provisions of those sections, references to the "articles 27 of incorporation," "bylaws," "directors" and "shareholders" 28 shall mean the certificate of organization, operating 29 agreement, managers and members, respectively. 30 (2) A member who is not a manager shall have no duties 19970S1157B1392 - 160 -
1 to the company or to the other members solely by reason of 2 acting in his capacity as a member. 3 § 8944. [Classes of members.] Members. 4 (a) General rule.--A limited liability company may have one 5 or more members. 6 (b) Classes of members.--An operating agreement may provide 7 for: 8 (1) classes or groups of members having such relative 9 rights, powers and duties as the operating agreement may 10 provide; 11 (2) the future creation in the manner provided in the 12 operating agreement of additional classes or groups of 13 members having such relative rights, powers and duties as may 14 from time to time be established, including rights, powers 15 and duties senior to existing classes and groups of members; 16 and 17 (3) the taking of an action, including, without 18 limitation, amendment of the certificate of organization or 19 operating agreement or creation of a class or group of 20 interests in the limited liability company that was not 21 previously outstanding, without the vote or approval of any 22 member or class or group of members. 23 [(b)] (c) Class voting.--The operating agreement may grant 24 to all or certain identified members or a specified class or 25 group of members the right to vote (on a per capita or other 26 basis), separately or with all or any class or group of members, 27 upon any matter. 28 § 8945. Indemnification. 29 * * * 30 (f) Mandatory indemnification.--Without regard to whether 19970S1157B1392 - 161 -
1 indemnification or advancement of expenses is provided under 2 subsections (a) and (d), a limited liability company shall be 3 subject to section 8331(2) (relating to rules determining rights 4 and duties of partners) and both the members and the managers, 5 if any, shall be deemed to be general partners for purposes of 6 applying that section. 7 § 8948. [Dissociation of member limited.] Limitation on 8 dissociation or assignment of membership interest. 9 Notwithstanding anything to the contrary set forth in this 10 part, an operating agreement may provide that a member may not 11 voluntarily dissociate from the limited liability company or 12 assign his membership interest prior to the dissolution and 13 winding-up of the company, and an attempt by a member to 14 dissociate voluntarily from the company or to assign his 15 membership interest in violation of the operating agreement 16 shall be ineffective. 17 § 8957. Approval of merger or consolidation. 18 * * * 19 (b) Reference to outside facts.--Any of the terms of the 20 plan may be made dependent upon facts ascertainable outside of 21 the plan if the manner in which the facts will operate upon the 22 terms of the plan is set forth in the plan. Such facts may 23 include, without limitation, actions or events within the 24 control of or determinations made by a party to the plan or a 25 representative of a party to the plan. 26 (c) [Postadoption] Post-adoption amendment of plan of merger 27 or consolidation.--A plan of merger or consolidation may contain 28 a provision that the managers, if any, of the constituent 29 companies may amend the plan at any time prior to its effective 30 date, except that an amendment made subsequent to any adoption 19970S1157B1392 - 162 -
1 of the plan by the members of any constituent domestic company 2 shall not, without the approval of the members, change: 3 (1) The amount or kind of membership interests, 4 obligations, cash, property or rights to be received in 5 exchange for or on conversion of all or any of the membership 6 interests of the constituent domestic company adversely to 7 the holders of those membership interests. 8 (2) Any [term] provision of the certificate of 9 organization or operating agreement of the surviving or new 10 company [to be effected by] as it is to be in effect 11 immediately following consummation of the merger or 12 consolidation except provisions that may be amended without 13 the approval of the members. 14 (3) Any of the other terms and conditions of the plan if 15 the change would adversely affect the holders of any 16 membership interests of the constituent domestic company. 17 * * * 18 (e) Party to plan.--An association that approves a plan in 19 its capacity as a member or creditor of a merging or 20 consolidating company or that furnishes all or a part of the 21 consideration contemplated by a plan does not thereby become a 22 party to the [plan or the] merger or consolidation for the 23 purposes of this subchapter. 24 * * * 25 (i) Termination of plan.--Prior to the time when a merger or 26 consolidation becomes effective, the merger or consolidation may 27 be terminated pursuant to provisions therefor, if any, set forth 28 in the plan. If a certificate of merger or consolidation has 29 been filed in the department prior to the termination, a 30 certificate of termination executed by each company that is a 19970S1157B1392 - 163 -
1 party to the merger or consolidation, unless the plan permits 2 termination by less than all of the companies, in which case the 3 certificate shall be executed on behalf of the company 4 exercising the right to terminate, shall be filed in the 5 department. The certificate of termination shall set forth: 6 (1) A copy of the certificate of merger or consolidation 7 relating to the plan that is terminated. 8 (2) A statement that the plan has been terminated in 9 accordance with the provisions therefor set forth therein. 10 See sections 134 (relating to docketing statement), 135 11 (relating to requirements to be met by filed documents), 138 12 (relating to statement of correction) and 8907 (relating to 13 execution of documents). 14 * * * 15 § 8962. Proposal and adoption of plan of division. 16 * * * 17 (b) Reference to outside facts.--Any of the terms of the 18 plan may be made dependent upon facts ascertainable outside of 19 the plan if the manner in which the facts will operate upon the 20 terms of the plan is set forth in the plan. Such facts may 21 include, without limitation, actions or events within the 22 control of or determinations made by the dividing limited 23 liability company or a representative of the dividing limited 24 liability company. 25 * * * 26 (e) [Action by holders of indebtedness.--Unless otherwise 27 provided by an indenture or other contract by which the dividing 28 limited liability company is bound, a plan of division shall not 29 require the approval of the holders of any debt securities or 30 other obligations of the dividing company or of any 19970S1157B1392 - 164 -
1 representative of the holders if the transfer of assets effected 2 by the division, if effected by means of a sale, lease, exchange 3 or other disposition, and any related distribution would not 4 require the approval of the holders or representatives thereof.] 5 (Repealed). 6 § 8965. Effect of division. 7 * * * 8 (b) Property rights; allocations of assets and 9 liabilities.-- 10 (1) (i) All the property, real, personal and mixed, of 11 the dividing company and all debts due on whatever 12 account to it, including subscriptions for membership 13 interests and other causes of action belonging to it, 14 shall, except as otherwise provided in paragraph (2), to 15 the extent [transfers] allocations of assets are 16 contemplated by the plan of division, be deemed without 17 further action to be [transferred] allocated to and 18 vested in the resulting companies on such a manner and 19 basis and with such effect as is specified in the plan, 20 or per capita among the resulting companies as tenants in 21 common if no specification is made in the plan, and the 22 title to any real estate or interest therein vested in 23 any of the companies shall not revert or be in any way 24 impaired by reason of the division. 25 (ii) Upon the division becoming effective, the 26 resulting companies shall each thenceforth be responsible 27 as separate and distinct companies only for such 28 liabilities as each company may undertake or incur in its 29 own name but shall be liable for the liabilities of the 30 dividing company in the manner and on the basis provided 19970S1157B1392 - 165 -
1 in subparagraphs (iv) and (v). 2 (iii) Liens upon the property of the dividing 3 company shall not be impaired by the division. 4 (iv) [One] To the extent allocations of liabilities 5 are contemplated by the plan of division, the liabilities 6 of the dividing company shall be deemed without further 7 action to be allocated to and become the liabilities of 8 the resulting companies on such a manner and basis and 9 with such effect as is specified in the plan; and one or 10 more, but less than all, of the resulting companies shall 11 be free of the liabilities of the dividing company to the 12 extent, if any, specified in the plan [if no fraud of 13 creditors or members or violation of law shall be 14 effected thereby and if all applicable provisions of law 15 are complied with.], if in either case: 16 (A) no fraud on members or violation of law 17 shall be effected thereby; and 18 (B) the plan does not constitute a fraudulent 19 transfer under 12 Pa.C.S. Ch. 51 (relating to 20 fraudulent transfers). 21 (v) If the conditions in subparagraph (iv) for 22 freeing one or more of the resulting companies from the 23 liabilities of the dividing company, or for allocating 24 some or all of the liabilities of the dividing company, 25 are not satisfied, the liabilities of the dividing 26 company as to which those conditions are not satisfied 27 shall not be affected by the division nor shall the 28 rights of creditors [thereof] thereunder or of any person 29 dealing with the company be impaired by the division, and 30 any claim existing or action or proceeding pending by or 19970S1157B1392 - 166 -
1 against the company with respect to those liabilities may 2 be prosecuted to judgment as if the division had not 3 taken place, or the resulting companies may be proceeded 4 against or substituted in [its] place of the dividing 5 company as joint and several obligors on [such liability] 6 those liabilities, regardless of any provision of the 7 plan of division apportioning the liabilities of the 8 dividing company. 9 (vi) The conditions in subparagraph (iv) for freeing 10 one or more of the resulting companies from the 11 liabilities of the dividing company and for allocating 12 some or all of the liabilities of the dividing company 13 shall be conclusively deemed to have been satisfied if 14 the plan of division has been approved by the 15 Pennsylvania Public Utility Commission in a final order 16 issued after (the Legislative Reference Bureau shall 17 insert here the effective date of the amendments of this 18 section) that has become not subject to further appeal. 19 (2) (i) The [transfer] allocation of any fee or 20 freehold interest or leasehold having a remaining term of 21 30 years or more in any tract or parcel of real property 22 situate in this Commonwealth owned by a dividing company 23 (including property owned by a foreign limited liability 24 company dividing solely under the law of another 25 jurisdiction) to a new company resulting from the 26 division shall not be effective until one of the 27 following documents is filed in the office for the 28 recording of deeds of the county, or each of them, in 29 which the tract or parcel is situated: 30 (A) A deed, lease or other instrument of 19970S1157B1392 - 167 -
1 confirmation describing the tract or parcel. 2 (B) A duly executed duplicate original copy of 3 the certificate of division. 4 (C) A copy of the certificate of division 5 certified by the Department of State. 6 (D) A declaration of acquisition setting forth 7 the value of real estate holdings in such county of 8 the company as an acquired company. 9 (ii) The provisions of 75 Pa.C.S. § 1114 (relating 10 to transfer of vehicle by operation of law) shall not be 11 applicable to [a transfer] an allocation of ownership of 12 any motor vehicle, trailer or semitrailer [from a 13 dividing company] to a new company under this section or 14 under a similar law of any other jurisdiction but any 15 such [transfer] allocation shall be effective only upon 16 compliance with the requirements of 75 Pa.C.S. § 1116 17 (relating to issuance of new certificate following 18 transfer). 19 (3) It shall not be necessary for a plan of division to 20 list each individual asset or liability of the dividing 21 company to be allocated to a new company so long as those 22 assets and liabilities are described in a reasonable and 23 customary manner. 24 (4) Each new company shall hold any assets and 25 liabilities allocated to it as the successor to the dividing 26 company, and those assets and liabilities shall not be deemed 27 to have been assigned to the new company in any manner, 28 whether directly or indirectly or by operation of law. 29 * * * 30 (h) Conflict of laws.--It is the intent of the General 19970S1157B1392 - 168 -
1 Assembly that: 2 (1) The effect of a division of a domestic limited 3 liability company shall be governed by the laws of this 4 Commonwealth and any other jurisdiction under the laws of 5 which any of the resulting companies is organized. 6 (2) The effect of a division on the assets and 7 liabilities of the dividing company shall be governed solely 8 by the laws of this Commonwealth and any other jurisdiction 9 under the laws of which any of the resulting companies is 10 organized. 11 (3) The validity of any allocation of assets or 12 liabilities by a plan of division of a domestic limited 13 liability company, regardless of whether or not any of the 14 new companies is a foreign limited liability company, shall 15 be governed solely by the laws of this Commonwealth. 16 (4) In addition to the express provisions of this 17 subsection, this subchapter shall otherwise generally be 18 granted the protection of full faith and credit under the 19 Constitution of the United States. 20 § 8971. Dissolution. 21 [(a) General rule.--]A limited liability company is 22 dissolved and its affairs shall be wound up upon the happening 23 of the first to occur of the following events: 24 (1) At the time or upon the happening of events 25 specified in the certificate of organization. 26 (2) At the time or upon the happening of events 27 specified in writing in the operating agreement. 28 (3) By the unanimous written agreement or consent of all 29 members. 30 (4) [Upon] Except as otherwise provided in writing in 19970S1157B1392 - 169 -
1 the operating agreement, upon a member becoming a bankrupt or 2 executing an assignment for the benefit of creditors or the 3 death, retirement, insanity, resignation, expulsion or 4 dissolution of a member or the occurrence of any other event 5 that terminates the continued membership of a member in the 6 company unless the business of the company is continued by 7 the vote or consent of [all] a majority in interest, or such 8 greater number as shall be provided in writing in the 9 operating agreement, of the remaining members given within 10 [90] 180 days following such event [or under a right to do so 11 stated in the operating agreement]. 12 (5) Entry of an order of judicial dissolution under 13 section 8972 (relating to judicial dissolution). 14 [(b) Cross reference.--See section 8103 (relating to 15 continuation of certain limited partnerships and limited 16 liability companies).] 17 § 8974. Distribution of assets upon dissolution. 18 (a) General rule.--In settling accounts after dissolution, 19 the liabilities of the limited liability company shall be 20 entitled to payment in the following order: 21 (1) Those to creditors, including members or managers 22 who are creditors, in the order of priority as provided by 23 law, in satisfaction of the liabilities of the company, 24 whether by payment or the making of reasonable provision for 25 payment thereof, other than liabilities for distributions to 26 members under section 8932 (relating to distributions and 27 allocation of profits and losses) or 8933 (relating to 28 distributions upon an event of dissociation). 29 (2) Unless otherwise provided in the operating 30 agreement, to members and former members in satisfaction of 19970S1157B1392 - 170 -
1 liabilities for distributions under section 8932 or 8933. 2 (3) Unless otherwise provided in the operating 3 agreement, to members in respect of: 4 (i) Their contributions to capital. 5 (ii) Their share of the profits and other 6 compensation by way of income on their contributions. 7 * * * 8 § 8978. Dissolution by domestication. 9 Whenever a domestic limited liability company has 10 domesticated itself under the laws of another jurisdiction by 11 action similar to that provided by section 8982 (relating to 12 domestication) and has authorized that action by the vote 13 required by this subchapter for the approval of a proposal that 14 the company dissolve voluntarily, the company may surrender its 15 certificate of organization under the laws of this Commonwealth 16 by filing in the Department of State a certificate of 17 dissolution under section 8975 (relating to certificate of 18 dissolution). In lieu of the statements required by section 19 8975(a)(2) through (4), the certificate of dissolution shall set 20 forth a statement that the company has domesticated itself under 21 the laws of another jurisdiction. If the company, as 22 domesticated in the other jurisdiction, registers to do business 23 in this Commonwealth either prior to or simultaneously with the 24 filing of the certificate of dissolution under this section, the 25 company shall not be required to file with the certificate of 26 dissolution the tax clearance certificates that would otherwise 27 be required by section 139 (relating to tax clearance of certain 28 fundamental transactions). 29 § 8982. Domestication. 30 * * * 19970S1157B1392 - 171 -
1 (b) Certificate of domestication.--The certificate of 2 domestication shall be executed by the company and shall set 3 forth in the English language: 4 (1) The name of the company. If the name is in a foreign 5 language, it shall be set forth in Roman letters or 6 characters or Arabic or Roman numerals. If the name is one 7 that is rendered unavailable for use by any provision of 8 section 8905 (relating to name), the company shall adopt, in 9 accordance with any procedures for changing the name of the 10 company that are applicable prior to the domestication of the 11 company, and shall set forth in the certificate of 12 domestication, an available name. 13 * * * 14 (c) Effect of domestication.-- 15 (1) As a domestic limited liability company, the 16 domesticated company shall no longer be a foreign limited 17 liability company for the purposes of this chapter and shall 18 [have] instead be a domestic limited liability company with 19 all the powers and privileges and [be subject to] all the 20 duties and limitations granted and imposed upon domestic 21 limited liability companies. [The property, debts, liens, 22 estates, taxes, penalties and public accounts due the 23 Commonwealth shall continue to be vested in and imposed upon 24 the company to the same extent as if it were the successor by 25 merger of the domesticating company with and into a domestic 26 limited liability company under Subchapter G (relating to 27 mergers and consolidations).] In all other respects, the 28 domesticated limited liability company shall be deemed to be 29 the same limited liability company as it was prior to the 30 domestication without any change in or affect on its 19970S1157B1392 - 172 -
1 existence. Without limiting the generality of the previous 2 sentence, the domestication shall not be deemed to have 3 dissolved the company or to have affected in any way: 4 (i) the right and title of the company in and to its 5 assets, property, franchises, estates and choses in 6 action; 7 (ii) the liability of the company for its debts, 8 obligations, penalties and public accounts due the 9 Commonwealth; 10 (iii) any liens or other encumbrances on the 11 property or assets of the company; or 12 (iv) any contract, license or other agreement to 13 which the company is a party or under which it has any 14 rights or obligations. 15 (2) The [shares of] membership interests in the 16 domesticated company shall be unaffected by the domestication 17 except to the extent, if any, reclassified in the certificate 18 of domestication. 19 § 8996. Restrictions. 20 * * * 21 (b) Ownership and governance of restricted professional 22 companies.--Except as otherwise provided by a statute, rule or 23 regulation applicable to a particular profession, all of the 24 [members] ultimate beneficial owners of membership interests in 25 and all of the managers, if any, of a restricted professional 26 company shall be licensed persons. 27 * * * 28 (d) Application.--For purposes of applying subsection (a): 29 * * * 30 (3) The practice of the restricted professional service 19970S1157B1392 - 173 -
1 of law shall be deemed to include: 2 (i) serving as an attorney-in-fact, guardian, 3 custodian, executor, personal representative, trustee or 4 fiduciary; 5 (ii) serving as a director or trustee of a 6 corporation for profit or not-for-profit, manager of a 7 limited liability company or a similar position with any 8 other form of association; 9 (iii) testifying, teaching, lecturing or writing 10 about any topic related to the law; 11 (iv) serving as a master, receiver, arbitrator or 12 similar official; 13 (v) providing actuarial, insurance, investment, 14 estate and trust administration, tax return preparation, 15 financial and other similar services and advice; 16 (vi) conducting intellectual property and other real 17 and personal property title searches and providing other 18 title insurance agency services; and 19 (vii) engaging in any activity incidental to any of 20 the foregoing. 21 § 8998. Annual registration. 22 * * * 23 (f) Annual fee to be lien.-- 24 (1) Failure to [pay the annual registration fee imposed] 25 file the certificate of annual registration required by this 26 section shall not affect the existence or status of the 27 restricted professional company as such, but the annual 28 registration fee that would have been payable shall be a lien 29 in the manner provided in this subsection from the time the 30 annual registration fee is due and payable [upon]. If a 19970S1157B1392 - 174 -
1 certificate of annual registration is not filed within 30 2 days after the date on which it is due, the department shall 3 assess a penalty of $500 against the company, which shall 4 also be a lien in the manner provided in this subsection. The 5 imposition of that penalty shall not be construed to relieve 6 the company from liability for any other penalty or interest 7 provided for under other applicable law. 8 (2) If the annual registration fee paid by a restricted 9 professional company is subsequently determined to be less 10 than should have been paid because it was based on an 11 incorrect number of members or was otherwise incorrectly 12 computed, that fact shall not affect the existence or status 13 of the restricted professional company as such, but the 14 amount of the additional annual registration fee that should 15 have been paid shall be a lien in the manner provided in this 16 subsection from the time the incorrect payment is discovered 17 by the department. 18 (3) The annual registration fee shall bear simple 19 interest from the date that it becomes due and payable until 20 paid. The interest rate shall be that provided for in section 21 806 of the act of April 9, 1929 (P.L.343, No.176), known as 22 The Fiscal Code, with respect to unpaid taxes. The penalty 23 provided for in paragraph (1) shall not bear interest. The 24 payment of interest shall not relieve the restricted 25 professional company from liability for any other penalty or 26 interest provided for under other applicable law. 27 (4) The lien created by this subsection shall attach to 28 all of the property and proceeds thereof of the restricted 29 professional company in which a security interest can be 30 perfected, in whole or in part, by filing in the department 19970S1157B1392 - 175 -
1 under 13 Pa.C.S. Div. 9 (relating to secured transactions; 2 sales of accounts, contract rights and chattel paper), 3 whether the property and proceeds are owned by the company at 4 the time the annual registration fee or any penalty or 5 interest becomes due and payable or whether the property and 6 proceeds are acquired thereafter. Except as otherwise 7 provided by statute, the lien created by this subsection 8 shall have priority over all other liens, security interests 9 or other charges, except liens for taxes or other charges due 10 the Commonwealth. The lien created by this subsection shall 11 be entered on the records of the department and indexed in 12 the same manner as a financing statement filed under 13 13 Pa.C.S. Div. 9. At the time an annual registration fee, 14 penalty or interest that has resulted in the creation of 15 [the] a lien under this subsection is paid, the department 16 shall terminate the lien with respect to that annual 17 registration fee, penalty or interest without requiring a 18 separate filing by the company for that purpose. 19 (5) If the annual registration fee paid by a restricted 20 professional company is subsequently determined to be more 21 than should have been paid for any reason, no refund of the 22 additional fee shall be made. 23 * * * 24 § 9502. Creation, status and termination of business trusts. 25 (a) Creation.--A business trust may be created in real or 26 personal property, or both, with power in the trustee [or a 27 majority of the trustees]: 28 (1) To receive title to, hold, buy, sell, exchange, 29 transfer and convey real and personal property for the use of 30 the business trust. 19970S1157B1392 - 176 -
1 (2) To take, receive, invest or disburse the receipts, 2 earnings, rents, profits or returns from the trust estate. 3 (3) To carry on and conduct any lawful business 4 designated in the deed or other instrument of trust, and 5 generally to do any lawful act in relation to such trust 6 property that any individual owning the same absolutely might 7 do. 8 (4) To merge with another business trust or other 9 association, to divide or to engage in any other fundamental 10 or other transaction contemplated by the deed or other 11 instrument of trust. 12 (b) Term.--Except as otherwise provided in the instrument, a 13 business trust shall have perpetual existence. 14 (c) Separate entity.--A business trust is a separate legal 15 entity. Except as otherwise provided in the instrument, title to 16 real and personal property may be held in the name of the trust, 17 without in any manner diminishing the rights, powers and duties 18 of the trustees as provided in subsection (a). 19 (d) Termination.--Except as otherwise provided in the 20 instrument: 21 (1) The business trust may not be terminated, dissolved 22 or revoked by a beneficial owner or other person. 23 (2) The death, incapacity, dissolution, termination or 24 bankruptcy of a beneficial owner or a trustee shall not 25 result in the termination, dissolution or revocation of the 26 business trust. 27 (e) Contents of instrument.--The instrument may contain any 28 provision for the regulation of the internal affairs of the 29 business trust included in the instrument by the settlor, the 30 trustee or the beneficiaries in accordance with the applicable 19970S1157B1392 - 177 -
1 procedures for the adoption or amendment of the instrument. 2 § 9503. Documentation of trust. 3 (a) General rule.--A business trust shall not be valid 4 unless created by deed of trust or other written instrument 5 subscribed by one or more individuals, associations or other 6 entities. The trustees of a business trust shall promptly cause 7 the instrument or any amendment thereof, except an amendment 8 solely effecting or reflecting the substitution of or other 9 change in the trustees, to be filed in the Department of State. 10 [The failure to effect the filing shall not affect the validity 11 of a business trust. A trustee who violates the requirements of 12 this subsection shall be liable for a civil penalty in the 13 amount of $1,000 payable to the department.] 14 * * * 15 § 9505. [Succession of trustees.] Trustees. 16 (a) Succession of trustees.--An instrument may provide for 17 the succession of title to [the] any trust property not titled 18 in the name of the trust to a successor trustee, in case of the 19 death, resignation, removal or incapacity of any trustee. In the 20 case of any such succession, the title to [the] such trust 21 property shall at once vest in the succeeding trustee. 22 (b) Nature of service.--Service as the trustee of a business 23 trust by an association that is not a banking institution shall 24 not be deemed to constitute acting as a fiduciary for purposes 25 of the act of November 30, 1965 (P.L.847, No.356), known as the 26 Banking Code of 1965. 27 § 9506. Liability of trustees and beneficiaries. 28 (a) General rule.--[Liability to third parties for any act, 29 omission or obligation of a trustee of a business trust when 30 acting in such capacity shall extend to so much of the trust 19970S1157B1392 - 178 -
1 estate as may be necessary to discharge such liability, but 2 personal liability shall not attach to the trustee or the 3 beneficiaries of the trust for any such act, omission or 4 liability.] 5 (1) Except as otherwise provided in the instrument, the 6 beneficiaries of a business trust shall be entitled to the 7 same limitation of personal liability as is extended to 8 shareholders in a domestic business corporation. 9 (2) Except as otherwise provided in the instrument, the 10 trustees of a trust, when acting in that capacity, shall not 11 be personally liable to any person other than the trust or a 12 beneficiary for any act or obligation of the trust or any 13 trustee. 14 (3) An obligation of a trust based upon a writing may be 15 limited to a specific fund or other identified pool or group 16 of assets of the trust. 17 * * * 18 (f) Permissible beneficiaries.--Except as otherwise provided 19 by a statute, rule or regulation applicable to a particular 20 profession, all of the [beneficiaries of] ultimate beneficial 21 owners of interests in a business trust that renders one or more 22 restricted professional services shall be licensed persons. As 23 used in this subsection, the term "restricted professional 24 services" shall have the meaning specified in section 8903 25 (relating to definitions and index of definitions). 26 * * * 27 (h) Medical professional liability.--A business trust shall 28 be deemed to be a professional corporation for purposes of 29 section 811 of the act of October 15, 1975 (P.L.390, No.111), 30 known as the Health Care Services Malpractice Act. 19970S1157B1392 - 179 -
1 Section 3. Amendment of Title 54. 2 As much of Title 54 as is hereinafter set forth is amended or 3 added to read: 4 § 302. Definitions. 5 The following words and phrases when used in this chapter 6 shall have, unless the context clearly indicates otherwise, the 7 meanings given to them in this section: 8 "Business." Any commercial or professional activity. 9 "Entity." Any individual[,] or any corporation, association, 10 partnership, joint-stock company, business trust, syndicate, 11 joint adventureship or other combination or group of persons, 12 regardless of whether it is organized or formed under the laws 13 of this Commonwealth or any other jurisdiction. 14 "Fictitious name." Any assumed or fictitious name, style or 15 designation other than the proper name of the entity using such 16 name. The term includes [the], without limitation, any name [of 17 any association,] assumed by any general partnership, [business 18 trust,] syndicate, joint adventureship or similar combination or 19 group of persons. 20 "Proper name." When used with respect to an entity of a type 21 listed in the following paragraphs, the term means the name set 22 forth in: 23 (1) the articles of incorporation, if it is a 24 corporation; 25 (2) the statement of registration, if it is a limited 26 liability partnership; 27 (3) the certificate of limited partnership, if it is a 28 limited partnership; 29 (4) the statement of election, if it is an electing 30 partnership; 19970S1157B1392 - 180 -
1 (5) the certificate of organization, if it is a limited 2 liability company; 3 (6) the articles of association, if it is a professional 4 association; 5 (7) the deed of trust or other instrument, if it is a 6 business trust; or 7 (8) a publicly filed document of a type listed in any of 8 the foregoing paragraphs even though the document is referred 9 to by a different title under the laws of any other 10 jurisdiction. 11 § 303. Scope of chapter. 12 * * * 13 (b) Mandatory registration.-- 14 * * * 15 (2) Paragraph (1) shall not apply to any: 16 (i) Nonprofit or professional activities. 17 (ii) Activities [which] that are expressly or 18 impliedly prohibited by law from being carried on under a 19 fictitious name. 20 (iii) [Limited partnership which is registered in 21 the department pursuant to 15 Pa.C.S. Ch. 85 (relating to 22 limited partnerships) or under corresponding provisions 23 of prior law. The preceding sentence shall not apply to 24 any entity which includes the limited partnership as a 25 participant unless the entity is itself such a limited 26 partnership.] (Repealed). 27 (iv) Unincorporated nonprofit association. 28 (v) [Electing partnership existing under 15 Pa.C.S. 29 Ch. 87 (relating to electing partnerships).] (Repealed). 30 (vi) [Limited liability company which is registered 19970S1157B1392 - 181 -
1 in the department pursuant to 15 Pa.C.S. Ch. 89 (relating 2 to limited liability companies).] (Repealed). 3 (vii) [Registered limited liability partnership 4 which is registered in the department pursuant to 15 5 Pa.C.S. Ch. 82 (relating to registered limited liability 6 partnerships).] (Repealed). 7 (viii) [Business trust which is registered in the 8 department pursuant to 15 Pa.C.S. Ch. 95 (relating to 9 business trusts).] (Repealed). 10 * * * 11 § 311. Registration. 12 * * * 13 (e) Duplicate use of names.--The fictitious name shall not 14 be the same as or confusingly similar to: 15 (1) The name of any domestic corporation, or any foreign 16 corporation authorized to do business in this Commonwealth, 17 or the name of any corporation or other association 18 registered at any time under Chapter 5 (relating to corporate 19 and other association names) unless such name is available or 20 is made available for use under the provisions or procedures 21 of 15 Pa.C.S. § [5303(b)(1)(i) or (ii)] 5303(b)(1) (relating 22 to duplicate use of names) or the equivalent. 23 (2) [The name of any limited partnership organized under 24 15 Pa.C.S. Ch. 85 (relating to limited partnerships).] 25 (Repealed). 26 (3) The name of any administrative department, board or 27 commission or other agency of this Commonwealth. 28 (4) A name the exclusive right to which is at the time 29 reserved by any other person whatsoever in the manner 30 provided by statute. 19970S1157B1392 - 182 -
1 * * * 2 § 502. Certain additions to register. 3 * * * 4 (c) Limitation on names which may be registered.-- 5 Notwithstanding subsections (a) and (b), no new name shall be 6 registered or deemed to be registered under this section [which 7 is the same as or confusingly similar to] that is not 8 distinguishable upon the records of the department from any 9 other name then registered or deemed to be registered under this 10 chapter, without the consent of the senior registrant. 11 * * * 12 Section 4. Repeals. 13 The following acts and parts of acts are repealed: 14 As much as reads ", and act as the attorney-in-fact and 15 authorized agent of such corporations for the service of process 16 thereon" in section 806 of the act of April 9, 1929 (P.L.177, 17 No.175), known as The Administrative Code of 1929. 18 Section 404(b) of the act of December 19, 1990 (P.L.834, 19 No.198), known as the GAA Amendments Act of 1990, insofar as it 20 applies to 15 Pa.C.S. §§ 1745 and 5745. 21 15 Pa.C.S. §§ 5543.1, 5546.1, 5764.1, 8103 and 8206. 22 Section 5. Effective date. 23 This act shall take effect in 60 days. I8L15WMB/19970S1157B1392 - 183 -