HOUSE AMENDED PRIOR PRINTER'S NOS. 1392, 1741, 2016, PRINTER'S NO. 2174 2066
No. 1157 Session of 1997
INTRODUCED BY WENGER, HART, GREENLEAF, MADIGAN, SALVATORE, LEMMOND, O'PAKE, STOUT, RHOADES, WOZNIAK AND THOMPSON, OCTOBER 14, 1997
AS REPORTED FROM COMMITTEE ON JUDICIARY, HOUSE OF REPRESENTATIVES, AS AMENDED, SEPTEMBER 29, 1998
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
1 in subsequent provisions of this title that are applicable to 2 specific provisions of this title, the following words and 3 phrases when used in this title shall have, unless the context 4 clearly indicates otherwise, the meanings given to them in this 5 section: 6 * * * 7 "Limited liability company." A domestic or foreign limited 8 liability company as defined in section 8903 (relating to 9 definitions and index of definitions). 10 "Profession." Includes the performance of any type of 11 personal service to the public that requires as a condition 12 precedent to the performance of the service the obtaining of a 13 license or admission to practice or other legal authorization 14 from the Supreme Court of Pennsylvania or a licensing board or 15 commission under the Bureau of Professional and Occupational 16 Affairs in the Department of State. Except as otherwise 17 expressly provided by law, this definition shall be applicable 18 to this title only and shall not affect the interpretation of 19 any other statute or any local zoning ordinance or other 20 official document heretofore or hereafter enacted or 21 promulgated. 22 "Professional services." Any type of services that may be 23 rendered by a member of a profession within the purview of his 24 profession. 25 * * * 26 § 134. Docketing statement. 27 (a) General rule.--The Department of State may, but shall 28 not be required to, prescribe by regulation one or more official 29 docketing statement forms designed to elicit from a person 30 effecting a filing under this title information that the 19970S1157B2174 - 2 -
1 department has found to be necessary or desirable in connection 2 with the processing of a filing. [A docketing statement 3 submitted with the articles of incorporation or division of a 4 proposed domestic corporation for profit or not-for-profit, the 5 articles of domestication or application for a certificate of 6 authority of a foreign corporation for profit or not-for-profit 7 or the certificate of election of an electing partnership shall 8 set forth, inter alia, the kind or kinds of business in which 9 the association actually intends to engage in this Commonwealth 10 within one year of the submission of the docketing statement. A 11 docketing statement submitted with articles of incorporation, 12 consolidation or division of a domestic corporation not-for- 13 profit or an application for a certificate of authority of a 14 foreign corporation not-for-profit shall set forth with respect 15 to the new corporation or corporations resulting therefrom, 16 inter alia, the statute by or under which it was incorporated, 17 the date of incorporation, the names and residence addresses of 18 its chief executive officer, secretary and treasurer, regardless 19 of the names or titles by which they may be designated, the 20 address of its principal place of business and the amount, if 21 any, of its authorized and issued capital stock.] A form of 22 docketing statement prescribed under this subsection: 23 (1) Shall be published in the Pennsylvania Code. 24 (2) Shall not be integrated into a single document 25 covering the requirements of the filing and its related 26 docketing statement. 27 (3) May be required by the department in connection with 28 a filing only if notice of the requirement appears on the 29 official format for the filing prescribed under section 30 133(d) (relating to physical characteristics and copies of 19970S1157B2174 - 3 -
1 documents). 2 (4) Shall not be required to be submitted on department- 3 furnished forms. 4 (5) Shall not constitute a document filed in, with or by 5 the department for the purposes of this title or any other 6 provision of law except 18 Pa.C.S. § 4904 (relating to 7 unsworn falsification to authorities). 8 (b) Transmission to Department of Revenue.--The department 9 shall note on the docketing statement the fact and date of the 10 filing [of articles of incorporation, consolidation, merger, 11 division, conversion or domestication or certificate of election 12 or issuance of the certificate of authority, as the case may be, 13 upon the docketing statement] to which the docketing statement 14 relates and shall transmit a copy of [it] the docketing 15 statement or the information contained therein to the Department 16 of Revenue. If a docketing statement is not required for a 17 particular filing, the Department of State may transmit a copy 18 of the filing or the information contained therein to the 19 Department of Revenue at no cost to the person effecting the 20 filing. 21 (c) Transmission to other agencies.--If the docketing 22 statement delivered to the Department of State sets forth any 23 kind of business in which a corporation, partnership or other 24 association may not engage without the approval of or a license 25 from any department, board or commission of the Commonwealth, 26 the Department of State shall, upon [the filing of articles of 27 incorporation, consolidation, division or domestication or 28 certificate of election or issuance of the certificate of 29 authority] processing the filing, promptly transmit a copy of 30 the docketing statement or the information contained therein to 19970S1157B2174 - 4 -
1 each such department, board or commission. 2 § 135. Requirements to be met by filed documents. 3 * * * 4 (e) Distinguishable names.--A name shall not be considered 5 distinguishable upon the records of the department from another 6 name for purposes of this title and Title 54 (relating to names) 7 solely because the names differ from each other in any or all of 8 the following respects: 9 (1) the use of punctuation marks; 10 (2) the use of the definite or indefinite article; or 11 (3) the use of any of the following terms to designate 12 the status of an association: "corporation," "company," 13 "incorporated," "limited," "association," "fund," 14 "syndicate," "limited partnership," "limited liability 15 company," "trust" or "business trust" or abbreviations of any 16 of the foregoing terms or words or abbreviations of like 17 import in languages other than English. 18 § 138. Statement of correction. 19 * * * 20 (b) Effect of filing.-- 21 * * * 22 (2) A filing under this section shall not have the 23 effect of causing original articles of incorporation of a 24 corporation or a similar type of document creating any other 25 form of association to be stricken from the records of the 26 department but the articles or other document may be 27 corrected under this section. 28 * * * 29 (d) Cross reference.--See section 135 (relating to 30 requirements to be met by filed documents). 19970S1157B2174 - 5 -
1 § 139. Tax clearance of certain fundamental transactions. 2 [A] (a) General rule.--Except as provided in subsection (c), 3 a domestic association shall not file articles or a certificate 4 of merger or consolidation effecting a merger or consolidation 5 into a nonqualified foreign association or articles or a 6 certificate of dissolution or a statement of revival, a 7 qualified foreign association shall not file an application for 8 termination of authority or similar document in the Department 9 of State and a domestic association shall not file articles or a 10 certificate of division dividing solely into nonqualified 11 foreign associations unless the articles, certificate, 12 application or other document are accompanied by clearance 13 certificates from the Department of Revenue and the Office of 14 Employment Security of the Department of Labor and Industry, 15 evidencing the payment by the association of all taxes and 16 charges due the Commonwealth required by law. 17 (b) Tax clearance in judicial proceedings.--Until the 18 clearance certificates described in subsection (a) have been 19 filed with the court: 20 (1) The court shall not order the dissolution of a 21 domestic business corporation, nonprofit corporation or 22 business trust. 23 (2) The court shall not approve a final distribution of 24 the assets of a domestic general partnership, limited 25 partnership, electing partnership or limited liability 26 company if the court is supervising the winding up of the 27 association. 28 (c) Alternative provisions.--If clearance certificates are 29 filed with the court as required under subsection (b), it shall 30 not be necessary to file the clearance certificates with the 19970S1157B2174 - 6 -
1 Department of State. 2 § 153. FEE SCHEDULE. <-- 3 (A) GENERAL RULE.--THE FEES OF THE CORPORATION BUREAU OF THE 4 DEPARTMENT OF STATE, INCLUDING FEES FOR THE PUBLIC ACTS AND 5 TRANSACTIONS OF THE SECRETARY OF THE COMMONWEALTH ADMINISTERED 6 THROUGH THE BUREAU, AND OF COUNTY FILING OFFICERS UNDER TITLE 13 7 (RELATING TO COMMERCIAL CODE), SHALL BE AS FOLLOWS: 8 * * * 9 (7) TRADEMARKS, EMBLEMS, UNION LABELS, 10 DESCRIPTION OF BOTTLES AND LIKE MATTERS: 11 [(I) REGISTRATION..................... 52 12 (II) EACH ANCILLARY TRANSACTION....... 52] 13 (I) TRADEMARK REGISTRATION............ 25 14 (II) EACH ANCILLARY TRADEMARK 15 TRANSACTION................................ 25 16 (III) ANY OTHER REGISTRATION UNDER 17 THIS PARAGRAPH............................. 52 18 (IV) ANY OTHER ANCILLARY TRANSACTION 19 UNDER THIS PARAGRAPH....................... 52 20 * * * 21 § 161. Domestication of certain alien associations. 22 * * * 23 (b) Statement of domestication.--The statement of 24 domestication shall be executed by the association and shall set 25 forth in the English language: 26 (1) The name of the association. If the name is in a 27 foreign language, it shall be set forth in Roman letters or 28 characters or Arabic or Roman numerals. If the name is one 29 that is rendered unavailable for use by a corporation by any 30 provision of section 1303(b) or (c) (relating to corporate 19970S1157B2174 - 7 -
1 name), the association shall adopt a new name, in accordance 2 with any procedures for changing the name of the association 3 that are applicable prior to the domestication of the 4 association, and shall set forth the new name in the 5 statement. 6 (2) The name of the jurisdiction under the laws of which 7 and the date on which it was first formed, incorporated or 8 otherwise came into being. 9 (3) The name of the jurisdiction that constituted the 10 seat, siege social or principal place of business or control 11 administration of the association, or any equivalent under 12 applicable law, immediately prior to the filing of the 13 statement. 14 (4) A statement [that upon domestication the association 15 will be a domestic association under the laws of this 16 Commonwealth] of the type of domestic association that the 17 association will be upon domestication. 18 (5) A statement that the filing of the statement of 19 domestication and, if desired, the renunciation of the prior 20 domicile has been authorized (unless its charter or other 21 organic documents require a greater vote) by a majority in 22 interest of the shareholders, members or other proprietors of 23 the association. 24 (6) If the association will be a type of domestic 25 association that is created by a filing in the department, 26 such other provisions as are required to be included in an 27 initial filing to create that type of domestic association, 28 except that it shall not be necessary to set forth the name 29 of the person organizing the association. 30 (7) Any other provision that the association may choose 19970S1157B2174 - 8 -
1 to insert unless this title prohibits the inclusion of such a 2 provision in a filing that creates the type of domestic 3 association that the association will be upon domestication. 4 (c) Execution.--The statement shall be signed on behalf of 5 the association by any authorized person. 6 (d) Effect of domestication.--Upon the filing of the 7 statement of domestication, the association shall be 8 domesticated in this Commonwealth and the association shall 9 thereafter be subject to any applicable provisions of this 10 title[, except Subpart B of Part II (relating to business 11 corporations),] and [to] any other provisions of law applicable 12 to associations existing under the laws of this Commonwealth. If 13 the association will be a type of domestic association that is 14 created by a filing in the department, the statement of 15 domestication shall constitute that filing. The domestication of 16 any association in this Commonwealth pursuant to this section 17 shall not be deemed to affect any obligations or liabilities of 18 the association incurred prior to its domestication. 19 (e) Exclusion.--An association that can be domesticated 20 under [section 4161 (relating to domestication) or 6161 21 (relating to domestication)] any of the following sections shall 22 not be domesticated under this section: 23 Section 4161 (relating to domestication). 24 Section 6161 (relating to domestication). 25 Section 8590 (relating to domestication). 26 Section 8982 (relating to domestication). 27 Section 9501(a)(1)(ii) (relating to application and 28 effect of chapter). 29 (f) Definition.--As used in this section, the term 30 "association," except as restricted by subsection (e), includes 19970S1157B2174 - 9 -
1 any alien incorporated organization, private law corporation 2 (whether or not organized for business purposes), public law 3 corporation, partnership, proprietorship, joint venture, 4 foundation, trust, association or similar organization or entity 5 existing under the laws of any jurisdiction other than this 6 Commonwealth. 7 (g) Cross [reference] references.--See [section] sections 8 134 (relating to docketing statement) and 135 (relating to 9 requirements to be met by filed documents). 10 § 162. Contingent domestication of certain alien associations. 11 * * * 12 (c) Statement of consummation of domestication.--At any time 13 after the filing of a statement of contingent domestication, the 14 association may file in the department a statement of 15 consummation of domestication which shall be executed by the 16 association and shall set forth: 17 (1) The name of the association[. If the name is in a 18 foreign language, it shall be set forth in Roman letters or 19 characters or Arabic or Roman numerals.] as set forth in its 20 statement of contingent domestication. 21 * * * 22 (j) Cross [reference] references.--See [section] sections 23 134 (relating to docketing statement) and 135 (relating to 24 requirements to be met by filed documents). 25 § 524. CERTAIN ACQUISITIONS AND PROPOSED ACQUISITIONS INVOLVING <-- 26 BANKS, BANK AND TRUST COMPANIES, TRUST COMPANIES, 27 NATIONAL BANKS AND BANK HOLDING COMPANIES. 28 (A) SCOPE.--THIS SECTION APPLIES TO ALL INSTITUTIONS AND 29 HOLDING COMPANIES AS DEFINED IN SUBSECTION (M). 30 (B) REQUIREMENT OF PRIOR APPROVAL.--EXCEPT AS PROVIDED IN 19970S1157B2174 - 10 -
1 SUBSECTION (I), IT SHALL BE UNLAWFUL, WITHOUT THE PRIOR WRITTEN 2 APPROVAL OF THE DEPARTMENT UNDER THIS SECTION, FOR ANY PERSON: 3 (1) TO ACQUIRE, OR TO MAKE A PROPOSAL TO ACQUIRE, VOTING 4 SHARES OF AN INSTITUTION OR VOTING SHARES OF A HOLDING 5 COMPANY IF THE AGGREGATE NUMBER OF VOTING SHARES HELD AFTER 6 SUCH ACQUISITION WOULD TOTAL MORE THAN 5% OF THE OUTSTANDING 7 VOTING SHARES OF ANY CLASS OF SUCH INSTITUTION OR HOLDING 8 COMPANY; OR 9 (2) TO ENTER INTO AN ACQUISITION TRANSACTION WITH AN 10 INSTITUTION OR WITH A HOLDING COMPANY; 11 WHETHER OR NOT ANY PRIOR ACQUISITION HAD BEEN APPROVED BY THE 12 DEPARTMENT UNDER THIS SECTION. 13 (C) APPLICATION FOR APPROVAL.--IF THE APPROVAL OF THE 14 DEPARTMENT IS REQUIRED UNDER SUBSECTION (B), A PERSON WHO 15 INTENDS TO ACQUIRE, OR TO MAKE A PROPOSAL TO ACQUIRE, VOTING 16 SHARES OF, OR TO ENTER INTO AN ACQUISITION TRANSACTION WITH, AN 17 INSTITUTION OR A HOLDING COMPANY SHALL: 18 (1) FILE AN APPLICATION FOR APPROVAL IN SUCH FORM AS THE 19 DEPARTMENT MAY PRESCRIBE; 20 (2) DELIVER TO THE DEPARTMENT FROM TIME TO TIME SUCH 21 OTHER INFORMATION AS THE DEPARTMENT MAY REQUIRE WITH SUCH 22 CERTIFICATION OF FINANCIAL INFORMATION AND SUCH VERIFICATION 23 BY OATH OR AFFIRMATION OF OTHER DATA AS THE DEPARTMENT MAY 24 SPECIFY; 25 (3) PAY SUCH INVESTIGATION FEE AS THE DEPARTMENT MAY 26 SPECIFY; AND 27 (4) EXCEPT IN THE CASE OF AN APPLICANT WHICH IS A 28 DOMESTIC CORPORATION OR A FOREIGN CORPORATION QUALIFIED TO DO 29 BUSINESS IN PENNSYLVANIA, DELIVER TO THE DEPARTMENT A WRITTEN 30 CONSENT TO SERVICE OF PROCESS IN ANY ACTION OR SUIT ARISING 19970S1157B2174 - 11 -
1 OUT OF OR IN CONNECTION WITH THE PROPOSED ACQUISITION THROUGH 2 SERVICE OF PROCESS ON THE SECRETARY OF BANKING. 3 (D) INVESTIGATION BY DEPARTMENT.--UPON RECEIPT OF AN 4 APPLICATION FOR APPROVAL AND OTHER ITEMS REQUIRED UNDER 5 SUBSECTION (C) THE DEPARTMENT SHALL CONDUCT AN INVESTIGATION TO 6 DETERMINE WHETHER THE APPLICANT HAS DEMONSTRATED BY A 7 PREPONDERANCE OF THE EVIDENCE THAT: 8 (1) THE ACQUISITION OF VOTING SHARES OR ACQUISITION 9 TRANSACTION, ITS PURPOSES AND PROBABLE EFFECTS WOULD BE 10 CONSISTENT WITH THE PURPOSES SET FORTH IN SECTION 103(A) OF 11 THE BANKING CODE; 12 (2) THE APPLICANT, OR ITS DIRECTORS AND OFFICERS IN THE 13 CASE OF A CORPORATION, AND ANY PROPOSED NEW OFFICERS OR 14 DIRECTORS OF THE INSTITUTION INVOLVED WOULD SATISFY THE TEST 15 FOR INCORPORATORS, DIRECTORS AND OFFICERS OF A NEW 16 INSTITUTION UNDER SECTION 1007(A) OF THE BANKING CODE; 17 (3) THE PROPOSED ACQUISITION OF VOTING SHARES OR 18 ACQUISITION TRANSACTION WOULD NOT BE PREJUDICIAL TO THE 19 INTERESTS OF THE DEPOSITORS, CREDITORS, BENEFICIARIES OF 20 FIDUCIARY ACCOUNTS OR SHAREHOLDERS OF THE INSTITUTION OR 21 HOLDING COMPANY INVOLVED; 22 (4) THE PROPOSED ACQUISITION OF VOTING SHARES OR 23 ACQUISITION TRANSACTION IS IN THE BEST INTERESTS OF THE 24 INSTITUTION AND, IF APPLICABLE, THE HOLDING COMPANY OF SUCH 25 INSTITUTION; 26 (5) COMPETITION AMONG INSTITUTIONS WILL NOT BE ADVERSELY 27 AFFECTED AND PUBLIC CONVENIENCE AND ADVANTAGE WILL BE 28 PROMOTED; AND 29 (6) THE APPLICANT HAS NOT BEEN PROTECTED BY THE 30 DEPARTMENT FROM AN ACQUISITION TRANSACTION. THE DEPARTMENT 19970S1157B2174 - 12 -
1 SHALL NOT APPROVE AN ACQUISITION TRANSACTION APPLICATION 2 WHICH IS SUBMITTED BY AN APPLICANT WHICH HAS ITSELF BEEN THE 3 TARGET OF A POTENTIAL ACQUISITION TRANSACTION AND BEEN 4 PROTECTED FROM THE ACQUISITION BY THE DEPARTMENT. 5 IN MAKING THE DETERMINATION UNDER PARAGRAPHS (4) AND (5), THE 6 DEPARTMENT SHALL NOT APPROVE AN ACQUISITION OF VOTING SHARES OR 7 ACQUISITION TRANSACTION UNLESS THE ACQUISITION OF VOTING SHARES 8 OR ACQUISITION TRANSACTION IS CONSISTENT WITH THE CONVENIENCE 9 AND NEEDS OF THE CUSTOMERS AND COMMUNITIES SERVED BY THE 10 INSTITUTION AFTER TAKING INTO ACCOUNT, AMONG OTHER THINGS, THE 11 RELATIVE RATINGS UNDER THE COMMUNITY REINVESTMENT ACT OF 1977 12 (91 STAT. 1111, 12 U.S.C. § 2901 ET SEQ.), OF THE INSTITUTION 13 AND THE APPLICANT, PROSPECTIVE BRANCH CLOSINGS AND PROSPECTIVE 14 JOB LOSSES. IN MAKING THE DETERMINATION UNDER PARAGRAPHS (4) AND 15 (5), THE DEPARTMENT SHALL CONSIDER, TO THE EXTENT IT DEEMS 16 APPROPRIATE, ALL RELEVANT FACTORS, INCLUDING WITHOUT LIMITATION 17 THE MATTERS SET FORTH IN SECTION 1715(A)(1), (2) AND (3) 18 (RELATING TO EXERCISE OF POWERS GENERALLY), AND WHETHER THE 19 APPLICANT HAS DEMONSTRATED THAT THE ACQUISITION OF VOTING SHARES 20 OR ACQUISITION TRANSACTION WILL RESULT IN NET NEW BENEFITS. 21 (E) INFORMATION FURNISHED TO SUBJECT INSTITUTION OR HOLDING 22 COMPANY.--AS PART OF ITS INVESTIGATION, THE DEPARTMENT SHALL 23 TRANSMIT TO THE INSTITUTION OR THE HOLDING COMPANY WHOSE VOTING 24 SHARES ARE PROPOSED TO BE ACQUIRED OR WHICH IS THE SUBJECT OF 25 SUCH ACQUISITION TRANSACTION A COPY OF THE APPLICATION AND ALL 26 OTHER INFORMATION RECEIVED FROM THE APPLICANT, EXCEPT SUCH 27 INFORMATION WHICH THE DEPARTMENT DETERMINES SHOULD BE KEPT 28 CONFIDENTIAL, FOR THE PURPOSE OF RECEIVING SUCH COMMENTS THEREON 29 AS SUCH INSTITUTION OR HOLDING COMPANY SHALL TRANSMIT TO THE 30 DEPARTMENT UPON ITS REQUEST. 19970S1157B2174 - 13 -
1 (F) ACTION BY DEPARTMENT.--WITHIN 60 DAYS AFTER RECEIPT OF 2 AN APPLICATION UNDER SUBSECTION (C) OR WITHIN A LONGER PERIOD 3 NOT IN EXCESS OF 30 DAYS AFTER RECEIPT FROM THE APPLICANT OF 4 ADDITIONAL INFORMATION REQUIRED BY THE DEPARTMENT, THE 5 DEPARTMENT SHALL APPROVE OR DISAPPROVE THE PROPOSED ACQUISITION 6 OF VOTING SHARES OR ACQUISITION TRANSACTION AND GIVE WRITTEN 7 NOTICE OF ITS DECISION TO THE APPLICANT AND THE INSTITUTION OR 8 HOLDING COMPANY WHOSE VOTING SHARES ARE PROPOSED TO BE ACQUIRED 9 OR THAT IS THE SUBJECT OF THE ACQUISITION TRANSACTION. IF THE 10 DEPARTMENT APPROVES A PROPOSED ACQUISITION OF VOTING SHARES 11 WHICH MAY RESULT IN A CHANGE OF CONTROL OR OWNERSHIP CHANGE OF 12 SUCH INSTITUTION OR HOLDING COMPANY OR AN ACQUISITION 13 TRANSACTION, IT MAY IMPOSE CONDITIONS TO BE OBSERVED AFTER SUCH 14 ACQUISITION OF VOTING SHARES OR ACQUISITION TRANSACTION, WITH 15 RESPECT TO TRANSACTIONS BETWEEN THE INSTITUTION INVOLVED AND THE 16 APPLICANT OR AFFILIATE OF THE APPLICANT, WITH RESPECT TO 17 DIVIDENDS OR DISTRIBUTIONS BY SUCH INSTITUTIONS, WITH RESPECT TO 18 EMPLOYEE RELATIONS, WITH RESPECT TO REIMBURSEMENT FOR ANY LOSS 19 OCCASIONED BY SUCH OWNERSHIP CHANGE OR WITH RESPECT TO SUCH 20 OTHER MATTERS AS THE DEPARTMENT MAY DEEM ADVISABLE ON THE BASIS 21 OF THE PURPOSES SET FORTH IN SECTION 103(A) OF THE BANKING CODE. 22 IN MAKING THE DETERMINATION UNDER SUBSECTION (D)(5), THE 23 DEPARTMENT SHALL CONSULT WITH THE ATTORNEY GENERAL. THE DECISION 24 OF THE DEPARTMENT SHALL BE SUBJECT TO REVIEW BY THE COMMONWEALTH 25 COURT IN THE MANNER PROVIDED BY LAW. 26 (G) PROHIBITION OF MISLEADING STATEMENTS.--IT SHALL BE 27 UNLAWFUL FOR ANY PERSON DIRECTLY OR INDIRECTLY TO MAKE ANY 28 UNTRUE STATEMENT OF A MATERIAL FACT OR TO OMIT TO STATE A 29 MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS MADE, IN 30 LIGHT OF THE CIRCUMSTANCES IN WHICH THEY WERE MADE, NOT 19970S1157B2174 - 14 -
1 MISLEADING IN CONNECTION WITH: 2 (1) ANY ACQUISITION OF, OR PROPOSAL TO ACQUIRE, VOTING 3 SHARES THAT REQUIRES APPROVAL UNDER THIS SECTION; 4 (2) AN ACQUISITION TRANSACTION THAT REQUIRES APPROVAL 5 UNDER THIS SECTION; OR 6 (3) ANY APPLICATION OR SUBMISSION OF INFORMATION TO THE 7 DEPARTMENT UNDER SUBSECTION (C). 8 (H) REGULATION BY DEPARTMENT.--THE ENFORCEMENT AND 9 IMPLEMENTATION OF THIS SECTION SHALL BE SUBJECT TO REGULATION BY 10 THE DEPARTMENT. 11 (I) EXEMPTIONS.--NO APPROVAL UNDER THIS SECTION SHALL BE 12 REQUIRED FOR AN ACQUISITION OF OR PROPOSAL TO ACQUIRE VOTING 13 SHARES OR FOR AN ACQUISITION TRANSACTION IN THE CASE OF EITHER: 14 (1) AN ACQUISITION OR PROPOSAL TO ACQUIRE VOTING SHARES 15 BY THE ISSUER THEREOF OR AN ACQUISITION OR PROPOSAL TO 16 ACQUIRE VOTING SHARES OF AN INSTITUTION BY ITS HOLDING 17 COMPANY, OR AN ACQUISITION TRANSACTION BETWEEN AN INSTITUTION 18 AND ITS HOLDING COMPANY OR ANY OTHER ENTITY WHICH IS 19 CONTROLLED BY SUCH HOLDING COMPANY; 20 (2) A TRANSACTION BY A BROKER-DEALER WHO DOES NO MORE 21 THAN PERFORM THE CUSTOMARY BROKER'S FUNCTION IN TRANSACTIONS 22 ON A STOCK EXCHANGE OR IN THE OVER-THE-COUNTER MARKET, WHO 23 RECEIVES NO MORE THAN THE CUSTOMARY BROKER'S COMMISSION AND 24 WHO DOES NOT SOLICIT OR ARRANGE FOR THE SOLICITATION OF 25 ORDERS; 26 (3) AN ACQUISITION OR PROPOSAL TO ACQUIRE VOTING SHARES 27 OF, OR AN ACQUISITION TRANSACTION WITH, AN INSTITUTION OR 28 HOLDING COMPANY BY ANY PERSON WHICH HAS BEEN APPROVED BY A 29 MAJORITY OF THE BOARD OF DIRECTORS OF THE INSTITUTION OR 30 HOLDING COMPANY, UNLESS AT THE TIME THE INSTITUTION OR 19970S1157B2174 - 15 -
1 HOLDING COMPANY APPROVES THE ACQUISITION OF VOTING SHARES OR 2 ACQUISITION TRANSACTION, 25% OR MORE OF THE INSTITUTION'S OR 3 HOLDING COMPANY'S BOARD IS COMPOSED OF NOMINEES, AGENTS, 4 AFFILIATES OF OR ANY OTHER PERSONS ACTING IN CONCERT WITH THE 5 PERSON OR ENTITY SEEKING TO ACQUIRE VOTING SHARES OF, OR 6 ENTER INTO AN ACQUISITION TRANSACTION WITH, THE INSTITUTION 7 OR HOLDING COMPANY; 8 (4) AN ACQUISITION OR PROPOSAL TO ACQUIRE VOTING SHARES 9 OF AN INSTITUTION OR HOLDING COMPANY BY ANY PERSON IF THE 10 AGGREGATE NUMBER OF SHARES HELD BY SUCH PERSON AFTER SUCH 11 ACQUISITION WOULD TOTAL LESS THAN 10% IN VOTING POWER OF THE 12 OUTSTANDING SHARES OF SUCH INSTITUTION OR HOLDING COMPANY 13 ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS AND 14 SUCH PERSON IS NOT REQUIRED TO OBTAIN THE APPROVAL OF THE 15 FEDERAL RESERVE BOARD UNDER THE BANK HOLDING COMPANY ACT OF 16 1956 (70 STAT. 133, 12 U.S.C. § 1841 ET SEQ.) IN CONNECTION 17 WITH SUCH ACQUISITION; OR 18 (5) A TRANSACTION OF A TYPE EXEMPTED BY REGULATION OF 19 THE DEPARTMENT IN LIGHT OF THE PURPOSES SET FORTH IN SECTION 20 103(A) OF THE BANKING CODE. 21 (J) CRIMINAL PENALTY FOR VIOLATION.--ANY PERSON WHO ACQUIRES 22 OR PROPOSES TO ACQUIRE VOTING SHARES OF AN INSTITUTION OR OF A 23 HOLDING COMPANY OR WHO ENGAGES IN AN ACQUISITION TRANSACTION IN 24 VIOLATION OF THIS SECTION OR WHO VIOLATES SUBSECTION (G) SHALL 25 BE GUILTY OF A MISDEMEANOR AND SHALL UPON CONVICTION THEREOF BE 26 SUBJECT, IN THE CASE OF AN INDIVIDUAL, TO IMPRISONMENT FOR A 27 PERIOD NOT EXCEEDING FIVE YEARS OR A FINE NOT EXCEEDING $5,000, 28 OR BOTH, AND, IN THE CASE OF ANY OTHER PERSON, TO A FINE NOT 29 EXCEEDING $50,000. 30 (K) CIVIL LIABILITY PENALTY FOR VIOLATION.--ANY PERSON WHO 19970S1157B2174 - 16 -
1 VIOLATES ANY PROVISION OF THIS SECTION SHALL BE LIABLE TO ANY 2 INSTITUTION OR HOLDING COMPANY OR SHAREHOLDER THEREOF DAMAGED 3 THEREBY AND, IN THE DISCRETION OF THE COURT, FOR PUNITIVE 4 DAMAGES. THE PROVISIONS OF THIS SECTION SHALL BE ENFORCEABLE IN 5 ANY ACTION OR SUIT INSTITUTED BY THE DEPARTMENT OR BY ANY SUCH 6 INSTITUTION, HOLDING COMPANY OR SHAREHOLDER TO ENJOIN OR 7 RESTRAIN ANY VIOLATION OR THREATENED VIOLATION OF THIS SECTION. 8 (L) SEVERABILITY.--THE PROVISIONS OF THIS SECTION SHALL BE 9 SEVERABLE. IF ANY PROVISION OF THIS SECTION OR THE APPLICATION 10 THEREOF TO ANY PERSON OR CIRCUMSTANCE IS HELD INVALID, THE 11 REMAINDER OF THIS SECTION, AND THE APPLICATION OF SUCH PROVISION 12 TO OTHER PERSONS OR CIRCUMSTANCES, SHALL NOT BE AFFECTED 13 THEREBY, UNLESS THE COURT FINDS THAT THE VALID PROVISIONS OF 14 THIS SECTION ARE SO ESSENTIALLY AND INSEPARABLY CONNECTED WITH, 15 AND SO DEPEND UPON, THE VOID PROVISION OR APPLICATION, THAT IT 16 CANNOT BE PRESUMED THE GENERAL ASSEMBLY WOULD HAVE ENACTED THE 17 REMAINING VALID PROVISIONS WITHOUT THE VOID ONE; OR UNLESS THE 18 COURT FINDS THAT THE REMAINING VALID PROVISIONS, STANDING ALONE, 19 ARE INCOMPLETE AND ARE INCAPABLE OF BEING EXECUTED IN ACCORDANCE 20 WITH THE LEGISLATIVE INTENT. 21 (M) DEFINITIONS.--AS USED IN THIS SECTION, THE FOLLOWING 22 WORDS AND PHRASES SHALL HAVE THE MEANINGS GIVEN TO THEM IN THIS 23 SUBSECTION: 24 "ACQUIRE." OBTAINING LEGAL OR BENEFICIAL OWNERSHIP OF VOTING 25 SHARES, WHETHER OBTAINED DIRECTLY OR INDIRECTLY, THROUGH AN 26 INTERMEDIARY OR OTHERWISE; BENEFICIAL OWNERSHIP BY A PERSON 27 SHALL BE DEEMED TO INCLUDE OWNERSHIP BY ANOTHER PERSON WHICH 28 CONTROLS, IS CONTROLLED BY OR IS UNDER COMMON CONTROL WITH SUCH 29 PERSON AND TO INCLUDE OWNERSHIP BY A SPOUSE OR MEMBER OF THE 30 FAMILY OF SUCH PERSON; THE ACQUISITION OF OPTIONS, WARRANTS AND 19970S1157B2174 - 17 -
1 RIGHTS TO SUBSCRIBE FOR, OR TO PURCHASE, VOTING SHARES AND THE 2 ACQUISITION OF RIGHTS TO OBTAIN VOTING SHARES THROUGH CONVERSION 3 OR EXCHANGE SHALL BE DEEMED AN ACQUISITION OF SUCH VOTING 4 SHARES. 5 "ACQUISITION TRANSACTION." A MERGER, SALE OF ASSETS OR OTHER 6 SIMILAR TRANSACTION INVOLVING AN INSTITUTION OR A HOLDING 7 COMPANY FOLLOWING WHICH: 8 (1) PERSONS WHO ARE DIRECTORS OF SUCH INSTITUTION OR 9 HOLDING COMPANY IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH 10 TRANSACTION SHALL NOT CONSTITUTE AT LEAST ONE-HALF OF THE 11 DIRECTORS OF THE SURVIVING, SUCCESSOR OR TRANSFEREE 12 INSTITUTION OR HOLDING COMPANY IMMEDIATELY FOLLOWING THE 13 CONSUMMATION OF SUCH TRANSACTION; OR 14 (2) HOLDERS OF VOTING SHARES OF SUCH INSTITUTION OR 15 HOLDING COMPANY IMMEDIATELY PRIOR TO THE CONSUMMATION OF SUCH 16 TRANSACTION SHALL NOT BE HOLDERS OF AT LEAST ONE-HALF OF THE 17 VOTING SHARES OF THE SURVIVING, SUCCESSOR OR TRANSFEREE 18 INSTITUTION OR HOLDING COMPANY IMMEDIATELY FOLLOWING THE 19 CONSUMMATION OF SUCH TRANSACTION. 20 "BANKING CODE." THE ACT OF NOVEMBER 30, 1965 (P.L.847, 21 NO.356), KNOWN AS THE BANKING CODE OF 1965. 22 "DEPARTMENT." THE DEPARTMENT OF BANKING OF THE COMMONWEALTH. 23 "HOLDING COMPANY." A CORPORATION THAT HAS THE POWER TO 24 ELECT, DIRECTLY OR INDIRECTLY, A MAJORITY OF THE BOARD OF 25 DIRECTORS OF AN INSTITUTION. 26 "INSTITUTION." A BANK, BANK AND TRUST COMPANY, NATIONAL BANK 27 OR STOCK SAVINGS BANK HAVING ITS MAIN OFFICE IN PENNSYLVANIA AND 28 HAVING DEPOSITS IN EXCESS OF $10,000,000,000 AS OF DECEMBER 31, 29 1997. 30 "NET NEW BENEFITS." INITIAL CAPITAL INVESTMENTS, JOB 19970S1157B2174 - 18 -
1 CREATION PLANS, CONSUMER AND BUSINESS SERVICES, COMMITMENTS TO 2 MAINTAIN AND OPEN BRANCH OFFICES WITHIN A BANKING INSTITUTION'S 3 DELINEATED LOCAL COMMUNITY AND SUCH OTHER MATTERS AS THE 4 DEPARTMENT MAY DEEM NECESSARY OR ADVISABLE. 5 "OWNERSHIP CHANGE." THE SAME MEANING AS IN SECTION 382 OF 6 THE INTERNAL REVENUE CODE OF 1986 (PUBLIC LAW 99-514, 26 U.S.C. 7 § 1 ET SEQ.). 8 "PROPOSAL TO ACQUIRE." ANY OFFER OR ATTEMPT TO BUY OR 9 SOLICITATION OF AN OFFER TO SELL OR OTHER ATTEMPT OR OFFER TO 10 ACQUIRE BY ANY MEANS, DIRECTLY OR INDIRECTLY, THROUGH AN 11 INTERMEDIARY OR OTHERWISE. 12 "VOTING SHARES." SHARES OF AN INSTITUTION OR HOLDING COMPANY 13 ENTITLED TO VOTE GENERALLY IN THE ELECTION OF DIRECTORS. 14 § 1303. Corporate name. 15 * * * 16 (b) Duplicate use of names.--The corporate name shall [not 17 be the same as or confusingly similar to] be distinguishable 18 upon the records of the Department of State from: 19 (1) The name of any other domestic corporation for 20 profit or not-for-profit which is either in existence or for 21 which articles of incorporation have been filed but have not 22 yet become effective, or of any foreign corporation for 23 profit or not-for-profit which is either authorized to do 24 business in this Commonwealth or for which an application for 25 a certificate of authority has been filed but has not yet 26 become effective, [or of any domestic or foreign limited 27 partnership that has filed in the Department of State a 28 certificate or qualified under Chapter 85 (relating to 29 limited partnerships) or under corresponding provisions of 30 prior law,] or the name of any association registered at any 19970S1157B2174 - 19 -
1 time under 54 Pa.C.S. Ch. 5 (relating to corporate and other 2 association names), unless[: (i) where the name is the same 3 or confusingly similar,] the other association: 4 [(A)] (i) has stated that it is about to change 5 its name, or to cease to do business, or is being 6 wound up, or is a foreign association about to 7 withdraw from doing business in this Commonwealth, 8 and the statement and [the] a written consent [of the 9 other association] to the adoption of the name 10 executed by the other association is filed in the 11 Department of State; 12 [(B)] (ii) has filed with the Department of 13 Revenue a certificate of out of existence, or has 14 failed for a period of three successive years to file 15 with the Department of Revenue a report or return 16 required by law and the fact of such failure has been 17 certified by the Department of Revenue to the 18 Department of State; 19 [(C)] (iii) has abandoned its name under the 20 laws of its jurisdiction of incorporation, by 21 amendment, merger, consolidation, division, 22 expiration, dissolution or otherwise, without its 23 name being adopted by a successor in a merger, 24 consolidation, division or otherwise, and an official 25 record of that fact, certified as provided by 42 26 Pa.C.S. § 5328 (relating to proof of official 27 records), is presented by any person to the 28 department; or 29 [(D)] (iv) has had the registration of its name 30 under 54 Pa.C.S. Ch. 5 terminated and, if the 19970S1157B2174 - 20 -
1 termination was effected by operation of 54 Pa.C.S. § 2 504 (relating to effect of failure to make decennial 3 filings), the application for the use of the name is 4 accompanied by a verified statement stating that at 5 least 30 days' written notice of intention to 6 appropriate the name was given to the delinquent 7 association at its [registered office] last known 8 place of business and that, after diligent search by 9 the affiant, the affiant believes the association to 10 be out of existence.[; or 11 (ii) where the name is confusingly similar, the 12 consent of the other association to the adoption of the 13 name is filed in the Department of State. 14 The consent of the association shall be evidenced by a 15 statement to that effect executed by the association.] 16 * * * 17 (e) Remedies for violation of section.--The use of a name in 18 violation of this section shall not vitiate or otherwise affect 19 the corporate existence but any court having jurisdiction may 20 enjoin the corporation from using or continuing to use a name in 21 violation of this section, upon the application of: 22 (1) the Attorney General, acting on his own motion or at 23 the instance of any administrative department, board or 24 commission of this Commonwealth; or 25 (2) any person adversely affected.[; 26 may enjoin the corporation from using or continuing to use a 27 name in violation of this section.] 28 (f) Cross references.--See sections 135(e) (relating to 29 distinguishable names) and 1106(b)(2) (relating to uniform 30 application of subpart). 19970S1157B2174 - 21 -
1 § 1304. Required name changes by senior corporations. 2 * * * 3 (b) Enforcement of undertaking to release name.--If a 4 corporation has used a name [the same as or confusingly similar 5 to] that is not distinguishable upon the records of the 6 Department of State from the name of another corporation or 7 other association as permitted by section [1303(b)(1)(i)] 8 1303(b)(1) (relating to duplicate use of names) and the other 9 corporation or other association continues to use its name in 10 this Commonwealth and does not change its name, cease to do 11 business, be wound up or withdraw as it proposed to do in its 12 consent or change its name as required by subsection (a), any 13 court having jurisdiction may enjoin the other corporation or 14 other association from continuing to use its name or a name that 15 is not distinguishable therefrom, upon the application of: 16 (1) the Attorney General, acting on his own motion or at 17 the instance of any administrative department, board or 18 commission of this Commonwealth; or 19 (2) any person adversely affected.[; 20 may enjoin the other corporation or other association from 21 continuing to use its name or a confusingly similar name.] 22 § 1311. Filing of statement of summary of record by certain 23 corporations. 24 (a) General rule.--Where any of the [valid] charter 25 documents of a business corporation are not on file in the 26 Department of State or there is an error in any such document as 27 transferred to the department pursuant to section 140 (relating 28 to custody and management of orphan corporate and business 29 records), and the corporation desires to file any document in 30 the department under any other provision of this subpart or the 19970S1157B2174 - 22 -
1 corporation desires to secure from the department any 2 certificate to the effect that the corporation is a corporation 3 duly incorporated and existing under the laws of this 4 Commonwealth or a certified copy of the articles of the 5 corporation or the corporation desires to correct the text of 6 its charter documents as on file in the department, the 7 corporation shall file in the department a statement of summary 8 of record which shall be executed by the corporation and shall 9 set forth: 10 (1) The name of the corporation and, subject to section 11 109 (relating to name of commercial registered office 12 provider in lieu of registered address), the location, 13 including street and number, if any, of its registered 14 office. 15 (2) The statute by or under which the corporation was 16 incorporated. 17 (3) The name under which, the manner in which and the 18 date on which the corporation was originally incorporated, 19 including the date when and the place where the original 20 articles were recorded. 21 (4) The place or places, including volume and page 22 numbers or their equivalent, where the documents 23 [constituting the currently effective articles are] that are 24 not on file in the department or that require correction in 25 the records of the department were originally filed or 26 recorded, the date or dates of each filing or recording and 27 the correct text of the [currently effective articles.] 28 documents. The information specified in this paragraph may be 29 omitted in a statement of summary of record that is delivered 30 to the department contemporaneously with amended and restated 19970S1157B2174 - 23 -
1 articles of the corporation filed under this subpart. 2 [(5) Each name by which the corporation was known, if 3 any, other than its original name and its current name, and 4 the date or dates on which each change of name of the 5 corporation became effective. 6 (6) In the case of any entity brought within the scope 7 of Chapter 29 (relating to professional corporations) by or 8 pursuant to section 2905 (relating to election of 9 professional associations to become professional 10 corporations), amended and restated articles of incorporation 11 which shall include all of the information required to be set 12 forth in restated articles of a professional corporation. 13 A corporation shall be required to make only one filing under 14 this subsection.] 15 (b) Validation of prior defects in incorporation.--Upon the 16 filing of a statement by a corporation under this section or the 17 transfer to the department of the records relating to a 18 corporation pursuant to section 140, the corporation [named in 19 the statement] shall be deemed to be a validly subsisting 20 corporation to the same extent as if it had been duly 21 incorporated and was existing under this subpart and the 22 department shall so certify regardless of any absence of or 23 defect in the prior proceedings relating to incorporation. 24 (c) Cross [reference] references.--See [section] sections 25 134 (relating to docketing statement), 135 (relating to 26 requirements to be met by filed documents) and 1106(b)(2) 27 (relating to uniform application of subpart). 28 § 1504. Adoption, amendment and contents of bylaws. 29 * * * 30 (d) Amendment of voting provisions.-- 19970S1157B2174 - 24 -
1 (1) Unless otherwise provided in a bylaw adopted by the 2 shareholders, whenever [the bylaws require] a bylaw adopted 3 by the shareholders requires for the taking of any action by 4 the shareholders or a class of shareholders a specific number 5 or percentage of votes, the provision of the bylaws setting 6 forth that requirement shall not be amended or repealed by 7 any lesser number or percentage of votes of the shareholders 8 or of the class of shareholders or only by action of the 9 board of directors. 10 (2) Paragraph (1) shall not apply to a bylaw setting 11 forth the right of shareholders to act by unanimous written 12 consent as provided in section 1766(a) (relating to unanimous 13 consent). 14 § 1505. Persons bound by bylaws. 15 Except as otherwise provided by section 1713 (relating to 16 personal liability of directors) or any similar provision of 17 law, the bylaws of a business corporation shall operate only as 18 regulations among the shareholders, directors and officers of 19 the corporation and shall not affect contracts or other dealings 20 with other persons unless those persons have actual knowledge of 21 the bylaws. 22 § 1508. Corporate records; inspection by shareholders. 23 (a) Required records.--Every business corporation shall keep 24 complete and accurate books and records of account, minutes of 25 the proceedings of the incorporators, shareholders and directors 26 and a share register giving the names and addresses of all 27 shareholders and the number and class of shares held by each. 28 The share register shall be kept at [either] any of the 29 following locations: 30 (1) the registered office of the corporation in this 19970S1157B2174 - 25 -
1 Commonwealth [or at its]; 2 (2) the principal place of business of the corporation 3 wherever situated; 4 (3) any actual business office of the corporation; or 5 [at] 6 (4) the office of [its] the registrar or transfer agent 7 of the corporation. [Any books, minutes or other records may 8 be in written form or any other form capable of being 9 converted into written form within a reasonable time.] 10 (b) Right of inspection by a shareholder.--Every shareholder 11 shall, upon written verified demand stating the purpose thereof, 12 have a right to examine, in person or by agent or attorney, 13 during the usual hours for business for any proper purpose, the 14 share register, books and records of account, and records of the 15 proceedings of the incorporators, shareholders and directors and 16 to make copies or extracts therefrom. A proper purpose shall 17 mean a purpose reasonably related to the interest of the person 18 as a shareholder. In every instance where an attorney or other 19 agent is the person who seeks the right of inspection, the 20 demand shall be accompanied by a verified power of attorney or 21 other writing that authorizes the attorney or other agent to so 22 act on behalf of the shareholder. The demand shall be directed 23 to the corporation: 24 (1) at its registered office in this Commonwealth [or]; 25 (2) at its principal place of business wherever 26 situated; or 27 (3) in care of the person in charge of an actual 28 business office of the corporation. 29 (c) Proceedings for the enforcement of inspection by a 30 shareholder.--If the corporation, or an officer or agent 19970S1157B2174 - 26 -
1 thereof, refuses to permit an inspection sought by a shareholder 2 or attorney or other agent acting for the shareholder pursuant 3 to subsection (b) or does not reply to the demand within five 4 business days after the demand has been made, the shareholder 5 may apply to the court for an order to compel the inspection. 6 The court shall determine whether or not the person seeking 7 inspection is entitled to the inspection sought. The court may 8 summarily order the corporation to permit the shareholder to 9 inspect the share register and the other books and records of 10 the corporation and to make copies or extracts therefrom, or the 11 court may order the corporation to furnish to the shareholder a 12 list of its shareholders as of a specific date on condition that 13 the shareholder first pay to the corporation the reasonable cost 14 of obtaining and furnishing the list and on such other 15 conditions as the court deems appropriate. Where the shareholder 16 seeks to inspect the books and records of the corporation, other 17 than its share register or list of shareholders, he shall first 18 establish: 19 (1) That he has complied with the provisions of this 20 section respecting the form and manner of making demand for 21 inspection of the document. 22 (2) That the inspection he seeks is for a proper 23 purpose. 24 Where the shareholder seeks to inspect the share register or 25 list of shareholders of the corporation and he has complied with 26 the provisions of this section respecting the form and manner of 27 making demand for inspection of the documents, the burden of 28 proof shall be upon the corporation to establish that the 29 inspection he seeks is for an improper purpose. The court may, 30 in its discretion, prescribe any limitations or conditions with 19970S1157B2174 - 27 -
1 reference to the inspection or award such other or further 2 relief as the court deems just and proper. The court may order 3 books, documents and records, pertinent extracts therefrom, or 4 duly authenticated copies thereof, to be brought into this 5 Commonwealth and kept in this Commonwealth upon such terms and 6 conditions as the order may prescribe. 7 (d) Certain provisions of articles ineffective.--This 8 section may not be relaxed by any provision of the articles. 9 (e) Cross [reference] references.--See [section] sections 10 107 (relating to form of records), 1512 (relating to 11 informational rights of a director) and 1763(c) (relating to 12 certification by nominee). 13 § 1512. Informational rights of a director. 14 (a) General rule.--To the extent reasonably related to the 15 performance of the duties of the director, including those 16 arising from service as a member of a committee of the board of 17 directors, a director of a business corporation is entitled: 18 (1) in person or by any attorney or other agent, at any 19 reasonable time, to inspect and copy corporate books, records 20 and documents and, in addition, to inspect, and receive 21 information regarding, the assets, liabilities and operations 22 of the corporation and any subsidiaries of the corporation 23 incorporated or otherwise organized or created under the laws 24 of this Commonwealth that are controlled directly or 25 indirectly by the corporation; and 26 (2) to demand that the corporation exercise whatever 27 rights it may have to obtain information regarding any other 28 subsidiaries of the corporation. 29 (b) Proceedings for enforcement of inspection by a 30 director.--If the corporation, or an officer or agent thereof, 19970S1157B2174 - 28 -
1 refuses to permit an inspection or obtain or provide information 2 sought by a director or attorney or other agent acting for the 3 director pursuant to subsection (a) or does not reply to the 4 request within two business days after the request has been 5 made, the director may apply to the court for an order to compel 6 the inspection or the obtaining or providing of the information. 7 The court shall summarily order the corporation to permit the 8 requested inspection or to obtain the information unless the 9 corporation establishes that the information to be obtained by 10 the exercise of the right is not reasonably related to the 11 performance of the duties of the director or that the director 12 or the attorney or agent of the director is likely to use the 13 information in a manner that would violate the duty of the 14 director to the corporation. The order of the court may contain 15 provisions protecting the corporation from undue burden or 16 expense and prohibiting the director from using the information 17 in a manner that would violate the duty of the director to the 18 corporation. 19 (c) Cross references.--See sections 107 (relating to form of 20 records) and 1508 (relating to corporate records; inspection by 21 shareholders) and 42 Pa.C.S. § 2503(7) (relating to right of 22 participants to receive counsel fees). 23 § 1521. Authorized shares. 24 * * * 25 (b) Provisions specifically authorized.-- 26 (1) Without limiting the authority contained in 27 subsection (a), a corporation, when so authorized in its 28 articles, may issue classes or series of shares: 29 (i) Subject to the right or obligation of the 30 corporation to redeem any of the shares for the 19970S1157B2174 - 29 -
1 consideration, if any, fixed by or in the manner provided 2 by the articles for the redemption thereof. Unless 3 otherwise provided in the articles, any shares subject to 4 redemption shall be redeemable only pro rata or by lot or 5 by such other equitable method as may be selected by the 6 corporation. [An amendment of the articles to add or 7 amend a provision permitting the redemption of any shares 8 by a method that is not pro rata nor by lot nor otherwise 9 equitable may be effected only pursuant to section 1906 10 (relating to special treatment of holders of shares of 11 same class or series).] 12 (ii) Entitling the holders thereof to cumulative, 13 noncumulative or partially cumulative dividends. 14 (iii) Having preference over any other shares as to 15 dividends or assets or both. 16 (iv) Convertible into shares of any other class or 17 series, or into obligations of the corporation. 18 (2) Any of the terms of a class or series of shares may 19 be made dependent upon: 20 (i) Facts ascertainable outside of the articles if 21 the manner in which the facts will operate upon the terms 22 of the class or series is set forth in the articles. Such 23 facts may include, without limitation, actions or events 24 within the control of or determinations made by the 25 corporation or a representative of the corporation. 26 * * * 27 (d) Status and rights.--Shares of a business corporation 28 shall be deemed personal property. Except as otherwise provided 29 by the articles or, when so permitted by subsection (c), by one 30 or more bylaws adopted by the shareholders, each share shall be 19970S1157B2174 - 30 -
1 in all respects equal to every other share. See section 2 1906(d)(4) (relating to special treatment of holders of shares 3 of same class or series). 4 § 1526. Liability of [subscribers and] shareholders. 5 [A subscriber to, or holder or owner of, shares of a business 6 corporation shall not be under any liability to the corporation 7 or any creditor thereof with respect to the shares other than 8 the personal obligation of a shareholder who has acquired his 9 shares by subscription to comply with the terms of the 10 subscription.] (a) General rule.--A shareholder of a business 11 corporation shall not be liable, solely by reason of being a 12 shareholder, under an order of a court or in any other manner 13 for a debt, obligation or liability of the corporation of any 14 kind or for the acts of any shareholder or representative of the 15 corporation. 16 (b) Professional relationship unaffected.--Subsection (a) 17 shall not afford the shareholders of a business corporation that 18 is not a professional corporation, but that provides 19 professional services, with greater immunity than is available 20 to the officers, shareholders, employees or agents of a business 21 corporation that is a professional corporation. See section 2925 22 (relating to professional relationship retained). 23 (c) Disciplinary jurisdiction unaffected.--A business 24 corporation providing professional services shall be subject to 25 the applicable rules and regulations adopted by, and all the 26 disciplinary powers of, the court, department, board, commission 27 or other government unit regulating the profession in which the 28 corporation is engaged. The court, department, board or other 29 government unit may require that a corporation include in its 30 articles provisions that conform to any rule or regulation 19970S1157B2174 - 31 -
1 heretofore or hereafter promulgated for the purpose of enforcing 2 the ethics of a profession. This subpart shall not affect or 3 impair the disciplinary powers of the court, department, board, 4 commission or other government unit over licensed persons or any 5 law, rule or regulation pertaining to the standards for 6 professional conduct of licensed persons or to the professional 7 relationship between any licensed person rendering professional 8 services and the person receiving professional services. 9 § 1571. Application and effect of subchapter. 10 (a) General rule.--Except as otherwise provided in 11 subsection (b), any shareholder (as defined in section 1572 12 (relating to definitions)) of a business corporation shall have 13 the right to dissent from, and to obtain payment of the fair 14 value of his shares in the event of, any corporate action, or to 15 otherwise obtain fair value for his shares, only where this part 16 expressly provides that a shareholder shall have the rights and 17 remedies provided in this subchapter. See: 18 Section 1906(c) (relating to dissenters rights upon 19 special treatment). 20 Section 1930 (relating to dissenters rights). 21 Section 1931(d) (relating to dissenters rights in share 22 exchanges). 23 Section 1932(c) (relating to dissenters rights in asset 24 transfers). 25 Section 1952(d) (relating to dissenters rights in 26 division). 27 Section 1962(c) (relating to dissenters rights in 28 conversion). 29 Section 2104(b) (relating to procedure). 30 Section 2324 (relating to corporation option where a 19970S1157B2174 - 32 -
1 restriction on transfer of a security is held invalid). 2 Section 2325(b) (relating to minimum vote requirement). 3 Section 2704(c) (relating to dissenters rights upon 4 election). 5 Section 2705(d) (relating to dissenters rights upon 6 renewal of election). 7 Section 2904(b) (relating to procedure). 8 Section 2907(a) (relating to proceedings to terminate 9 breach of qualifying conditions). 10 Section 7104(b)(3) (relating to procedure). 11 (b) Exceptions.-- 12 (1) Except as otherwise provided in paragraph (2), the 13 holders of the shares of any class or series of shares [that, 14 at] shall not have the right to dissent and obtain payment of 15 the fair value of the shares under this subchapter if, on the 16 record date fixed to determine the shareholders entitled to 17 notice of and to vote at the meeting at which a plan 18 specified in any of section 1930, 1931(d), 1932(c) or 1952(d) 19 is to be voted on, or on the date of the first public 20 announcement that such a plan has been approved by the 21 shareholders by written consent without a meeting, the shares 22 are either: 23 (i) listed on a national securities exchange or 24 designated as a national market system security on an 25 interdealer quotation system by the National Association 26 of Securities Dealers, Inc.; or 27 (ii) held beneficially or of record by more than 28 2,000 [shareholders; 29 shall not have the right to obtain payment of the fair value 30 of any such shares under this subchapter.] persons. 19970S1157B2174 - 33 -
1 (2) Paragraph (1) shall not apply to and dissenters 2 rights shall be available without regard to the exception 3 provided in that paragraph in the case of: 4 (i) [Shares converted by a plan if the shares are 5 not converted solely into shares of the acquiring, 6 surviving, new or other corporation or solely into such 7 shares and money in lieu of fractional shares.] 8 (Repealed.) 9 (ii) Shares of any preferred or special class or 10 series unless the articles, the plan or the terms of the 11 transaction entitle all shareholders of the class or 12 series to vote thereon and require for the adoption of 13 the plan or the effectuation of the transaction the 14 affirmative vote of a majority of the votes cast by all 15 shareholders of the class or series. 16 (iii) Shares entitled to dissenters rights under 17 section 1906(c) (relating to dissenters rights upon 18 special treatment). 19 (3) The shareholders of a corporation that acquires by 20 purchase, lease, exchange or other disposition all or 21 substantially all of the shares, property or assets of 22 another corporation by the issuance of shares, obligations or 23 otherwise, with or without assuming the liabilities of the 24 other corporation and with or without the intervention of 25 another corporation or other person, shall not be entitled to 26 the rights and remedies of dissenting shareholders provided 27 in this subchapter regardless of the fact, if it be the case, 28 that the acquisition was accomplished by the issuance of 29 voting shares of the corporation to be outstanding 30 immediately after the acquisition sufficient to elect a 19970S1157B2174 - 34 -
1 majority or more of the directors of the corporation. 2 * * * 3 (g) Computation of beneficial ownership.--For purposes of 4 subsection (b)(1)(ii), shares that are held beneficially as 5 joint tenants, tenants by the entireties, tenants in common or 6 in trust by two or more persons, as fiduciaries or otherwise, 7 shall be deemed to be held beneficially by one person. 8 [(g)] (h) Cross references.--See sections 1105 (relating to 9 restriction on equitable relief), 1904 (relating to de facto 10 transaction doctrine abolished), 1763(c) (relating to 11 determination of shareholders of record) and 2512 (relating to 12 dissenters rights procedure). 13 § 1572. Definitions. 14 The following words and phrases when used in this subchapter 15 shall have the meanings given to them in this section unless the 16 context clearly indicates otherwise: 17 "Corporation." The issuer of the shares held or owned by the 18 dissenter before the corporate action or the successor by 19 merger, consolidation, division, conversion or otherwise of that 20 issuer. A plan of division may designate which one or more of 21 the resulting corporations is the successor corporation for the 22 purposes of this subchapter. The designated successor 23 corporation or corporations in a division shall have sole 24 responsibility for payments to dissenters and other liabilities 25 under this subchapter except as otherwise provided in the plan 26 of division. 27 "Dissenter." A shareholder [or beneficial owner] who is 28 entitled to and does assert dissenters rights under this 29 subchapter and who has performed every act required up to the 30 time involved for the assertion of those rights. 19970S1157B2174 - 35 -
1 * * * 2 "Shareholder." A shareholder as defined in section 1103 3 (relating to definitions), or an ultimate beneficial owner of 4 shares, including without limitation a holder of depository 5 receipts, where the beneficial interest owned includes an 6 interest in the assets of the corporation upon dissolution. 7 § 1704. Place and notice of meetings of shareholders. 8 (a) Place.--Meetings of shareholders may be held at such 9 place within or without this Commonwealth as may be provided in 10 or fixed pursuant to the bylaws. Unless otherwise provided in or 11 pursuant to the bylaws, all meetings of the shareholders shall 12 be held [in this Commonwealth at the registered office of the 13 corporation] at the executive office of the corporation wherever 14 situated. 15 * * * 16 § 1709. Conduct of shareholders meeting. 17 (a) Presiding officer.--There shall be a presiding officer 18 at every meeting of the shareholders. The presiding officer 19 shall be appointed in the manner provided in the bylaws or, in 20 the absence of such provision, by the board of directors. If the 21 bylaws are silent on the appointment of the presiding officer 22 and the board fails to designate a presiding officer, the 23 president shall be the presiding officer. 24 (b) Authority of the presiding officer.--Except as otherwise 25 provided in the bylaws, the presiding officer shall determine 26 the order of business and shall have the authority to establish 27 rules for the conduct of the meeting. 28 (c) Procedural standard.--Any action by the presiding 29 officer in adopting rules for, and in conducting, a meeting 30 shall be fair to the shareholders. 19970S1157B2174 - 36 -
1 (d) Closing of the polls.--The presiding officer shall 2 announce at the meeting when the polls close for each matter 3 voted upon. If no announcement is made, the polls shall be 4 deemed to have closed upon the final adjournment of the meeting. 5 After the polls close, no ballots, proxies or votes, nor any 6 revocations or changes thereto, may be accepted. 7 § 1729. Voting rights of directors. 8 (a) General rule.--Unless otherwise provided in a bylaw 9 adopted by the shareholders, every director of a business 10 corporation shall be entitled to one vote. Without limiting the 11 generality of the foregoing, a bylaw adopted by the shareholders 12 may provide that a class or other defined group of directors 13 shall have multiple or fractional voting rights, or no right to 14 vote, either generally or under specified circumstances. 15 (b) [Multiple and fractional voting] Application of 16 procedural requirements.--Any requirement of this subpart for 17 the presence of or vote or other action by a specified 18 percentage of directors shall be satisfied by the presence of or 19 vote or other action by directors entitled to cast the specified 20 percentage of the votes that all voting directors in office are 21 entitled to cast. 22 § 1731. Executive and other committees of the board. 23 (a) Establishment and powers.--Unless otherwise restricted 24 in the bylaws: 25 * * * 26 (2) Any committee, to the extent provided in the 27 resolution of the board of directors or in the bylaws, shall 28 have and may exercise all of the powers and authority of the 29 board of directors except that a committee shall not have any 30 power or authority as to the following: 19970S1157B2174 - 37 -
1 (i) The submission to shareholders of any action 2 requiring approval of shareholders under this subpart. 3 (ii) The creation or filling of vacancies in the 4 board of directors. 5 (iii) The adoption, amendment or repeal of the 6 bylaws. 7 (iv) The amendment or repeal of any resolution of 8 the board that by its terms is amendable or repealable 9 only by the board. 10 (v) Action on matters committed by the bylaws or 11 resolution of the board of directors exclusively to 12 another committee of the board. 13 * * * 14 § 1745. Advancing expenses. 15 Expenses (including attorneys' fees) incurred in defending 16 any action or proceeding referred to in this subchapter may be 17 paid by a business corporation in advance of the final 18 disposition of the action or proceeding upon receipt of an 19 undertaking by or on behalf of the representative to repay the 20 amount if it is ultimately determined that he is not entitled to 21 be indemnified by the corporation as authorized in this 22 subchapter or otherwise. Except as otherwise provided in the 23 bylaws, advancement of expenses shall be authorized by the board 24 of directors. Sections 1728 (relating to interested directors or 25 officers; quorum) and 2538 (relating to approval of transactions 26 with interested shareholders) shall not be applicable to the 27 advancement of expenses under this section. 28 § 1748. Application to surviving or new corporations. 29 [For] (a) General rule.--Except as provided in subsection 30 (b), for the purposes of this subchapter, references to "the 19970S1157B2174 - 38 -
1 corporation" include all constituent corporations absorbed in a 2 consolidation, merger or division, as well as the surviving or 3 new corporations surviving or resulting therefrom, so that any 4 person who is or was a representative of the constituent, 5 surviving or new corporation, or is or was serving at the 6 request of the constituent, surviving or new corporation as a 7 representative of another domestic or foreign corporation for 8 profit or not-for-profit, partnership, joint venture, trust or 9 other enterprise, shall stand in the same position under the 10 provisions of this subchapter with respect to the surviving or 11 new corporation as he would if he had served the surviving or 12 new corporation in the same capacity. 13 (b) Divisions.--Notwithstanding subsection (a), the 14 obligations of a dividing corporation to indemnify and advance 15 expenses to its representatives, whether arising under this 16 subchapter or otherwise, may be allocated in a division in the 17 same manner and with the same effect as any other liability of 18 the dividing corporation. 19 § 1756. Quorum. 20 (a) General rule.--A meeting of shareholders of a business 21 corporation duly called shall not be organized for the 22 transaction of business unless a quorum is present. Unless 23 otherwise provided in a bylaw adopted by the shareholders: 24 * * * 25 (4) If a proxy casts a vote on behalf of a shareholder 26 on any issue considered at a meeting of shareholders, the 27 shareholder shall be deemed to be present during the entire 28 meeting for purposes of determining whether a quorum is 29 present for consideration of any other issue. 30 * * * 19970S1157B2174 - 39 -
1 § 1758. Voting rights of shareholders. 2 * * * 3 (b) Procedures for election of directors.--[If the bylaws 4 provide a fair and reasonable procedure for the nomination of 5 candidates for any office, only candidates who have been duly 6 nominated in accordance therewith shall be eligible for 7 election.] Unless otherwise restricted in the bylaws, in 8 elections for directors, voting need not be by ballot unless 9 required by vote of the shareholders before the voting for 10 election of directors begins. The candidates for election as 11 directors receiving the highest number of votes from each class 12 or group of classes, if any, entitled to elect directors 13 separately up to the number of directors to be elected by the 14 class or group of classes shall be elected. If at any meeting of 15 shareholders, directors of more than one class are to be 16 elected, each class of directors shall be elected in a separate 17 election. 18 * * * 19 (e) Advance notice of nominations and other business.--If 20 the bylaws provide a fair and reasonable procedure for the 21 nomination of candidates for election as directors, only 22 candidates who have been duly nominated in accordance therewith 23 shall be eligible for election. If the bylaws impose a fair and 24 reasonable requirement of advance notice of proposals to be made 25 by a shareholder at the annual meeting of the shareholders, only 26 proposals for which advance notice has been properly given may 27 be acted upon at the meeting. 28 § 1759. Voting and other action by proxy. 29 * * * 30 (b) Execution and filing.--Every proxy shall be executed [in 19970S1157B2174 - 40 -
1 writing] or authenticated by the shareholder or by his duly 2 authorized attorney-in-fact and filed with or transmitted to the 3 secretary of the corporation or its designated agent. A 4 shareholder or his duly authorized attorney-in-fact may execute 5 or authenticate a writing or transmit an electronic message 6 authorizing another person to act for him by proxy. A telegram, 7 telex, cablegram, datagram or [similar] other means of 8 electronic transmission from a shareholder or attorney-in-fact, 9 or a photographic, facsimile or similar reproduction of a 10 writing executed by a shareholder or attorney-in-fact: 11 (1) may be treated as properly executed or authenticated 12 for purposes of this subsection; and 13 (2) shall be so treated if it sets forth or utilizes a 14 confidential and unique identification number or other mark 15 furnished by the corporation to the shareholder for the 16 purposes of a particular meeting or transaction. 17 (c) Revocation.--A proxy, unless coupled with an interest, 18 shall be revocable at will, notwithstanding any other agreement 19 or any provision in the proxy to the contrary, but the 20 revocation of a proxy shall not be effective until [written] 21 notice thereof has been given to the secretary of the 22 corporation or its designated agent in writing or by electronic 23 transmission. An unrevoked proxy shall not be valid after three 24 years from the date of its execution, authentication or 25 transmission unless a longer time is expressly provided therein. 26 A proxy shall not be revoked by the death or incapacity of the 27 maker unless, before the vote is counted or the authority is 28 exercised, written notice of the death or incapacity is given to 29 the secretary of the corporation or its designated agent. 30 * * * 19970S1157B2174 - 41 -
1 § 1906. Special treatment of holders of shares of same class or 2 series. 3 (a) General rule.--Except as otherwise restricted in the 4 articles, [an amendment or] a plan may contain a provision 5 classifying the holders of shares of a class or series into one 6 or more separate groups by reference to any facts or 7 circumstances that are not manifestly unreasonable and providing 8 mandatory treatment for shares of the class or series held by 9 particular shareholders or groups of shareholders that differs 10 materially from the treatment accorded other shareholders or 11 groups of shareholders holding shares of the same class or 12 series (including a provision modifying or rescinding rights 13 previously created under this section) if: 14 (1) (i) such provision is specifically authorized by a 15 majority of the votes cast by all shareholders entitled 16 to vote on the [amendment or] plan, as well as by a 17 majority of the votes cast by any class or series of 18 shares any of the shares of which are so classified into 19 groups, whether or not such class or series would 20 otherwise be entitled to vote on the [amendment or] plan; 21 and 22 (ii) the provision voted on specifically enumerates 23 the type and extent of the special treatment authorized; 24 or 25 (2) under all the facts and circumstances, a court of 26 competent jurisdiction finds such special treatment is 27 undertaken in good faith, after reasonable deliberation and 28 is in the best interest of the corporation. 29 (b) Statutory voting rights upon special treatment.--Except 30 as provided in subsection (c), if [an amendment or] a plan 19970S1157B2174 - 42 -
1 contains a provision for special treatment, each group of 2 holders of any outstanding shares of a class or series who are 3 to receive the same special treatment under the [amendment or] 4 plan shall be entitled to vote as a special class in respect to 5 the plan regardless of any limitations stated in the articles or 6 bylaws on the voting rights of any class or series. 7 (c) Dissenters rights upon special treatment.--If any 8 [amendment or] plan contains a provision for special treatment 9 without requiring for the adoption of the [amendment or] plan 10 the statutory class vote required by subsection (b), the holder 11 of any outstanding shares the statutory class voting rights of 12 which are so denied, who objects to the [amendment or] plan and 13 complies with Subchapter D of Chapter 15 (relating to dissenters 14 rights), shall be entitled to the rights and remedies of 15 dissenting shareholders provided in that subchapter. 16 (d) Exceptions.--This section shall not apply to: 17 (1) The creation or issuance of securities, contracts, 18 warrants or other instruments evidencing any shares, option 19 rights, securities having conversion or option rights or 20 obligations authorized by section 2513 (relating to disparate 21 treatment of certain persons). 22 (2) A provision of [an amendment or] a plan that offers 23 to all holders of shares of a class or series the same option 24 to elect certain treatment. 25 (3) [An amendment or] A plan that contains an express 26 provision that this section shall not apply or that fails to 27 contain an express provision that this section shall apply. 28 The shareholders of a corporation that proposes [an amendment 29 or] a plan to which this section is not applicable by reason 30 of this paragraph shall have the remedies contemplated by 19970S1157B2174 - 43 -
1 section 1105 (relating to restriction on equitable relief). 2 (4) A provision of a plan that treats all of the holders 3 of a particular class or series of shares differently from 4 the holders of another class or series. A provision of a plan 5 that treats the holders of a class or series of shares 6 differently from the holders of another class or series of 7 shares shall not constitute a violation of section 1521(d) 8 (relating to authorized shares). 9 (e) Definition.--As used in this section, the term "plan" 10 includes: 11 (1) an amendment of the articles that effects a 12 reclassification of shares, whether or not the amendment is 13 accompanied by a separate plan of reclassification; and 14 (2) a resolution recommending that the corporation 15 dissolve voluntarily adopted under section 1972(a) (relating 16 to proposal of voluntary dissolution). 17 § 1912. Proposal of amendments. 18 * * * 19 (c) Terms of amendment.--The resolution or petition may set 20 forth the manner and basis of reclassifying the shares of the 21 corporation. Any of the terms of a plan of reclassification or 22 other action contained in an amendment may be made dependent 23 upon facts ascertainable outside of the amendment if the manner 24 in which the facts will operate upon the terms of the amendment 25 is set forth in the amendment. Such facts may include, without 26 limitation, actions or events within the control of or 27 determinations made by the corporation or a representative of 28 the corporation. 29 § 1914. Adoption of amendments. 30 * * * 19970S1157B2174 - 44 -
1 (b) Statutory voting rights.--Except as provided in this 2 subpart, the holders of the outstanding shares of a class or 3 series of shares shall be entitled to vote as a class in respect 4 of a proposed amendment regardless of any limitations stated in 5 the articles or bylaws on the voting rights of any class or 6 series if [a proposed] the amendment would: 7 (1) authorize the board of directors to fix and 8 determine the relative rights and preferences, as between 9 series, of any preferred or special class; 10 (2) make any change in the preferences, limitations or 11 special rights (other than preemptive rights or the right to 12 vote cumulatively) of the shares of a class or series adverse 13 to the class or series; 14 (3) authorize a new class or series of shares having a 15 preference as to dividends or assets which is senior to the 16 shares of a class or series; [or] 17 (4) increase the number of authorized shares of any 18 class or series having a preference as to dividends or assets 19 which is senior in any respect to the shares of a class or 20 series; or 21 (5) make the outstanding shares of a class or series 22 redeemable by a method that is not pro rata, by lot or 23 otherwise equitable. 24 [then the holders of the outstanding shares of the class or 25 series shall be entitled to vote as a class in respect to the 26 amendment regardless of any limitations stated in the articles 27 or bylaws on the voting rights of any class or series.] 28 (c) Adoption by board of directors.--Unless otherwise 29 restricted in the articles, an amendment of articles shall not 30 require the approval of the shareholders of the corporation if: 19970S1157B2174 - 45 -
1 (1) shares have not been issued; 2 (2) the amendment is restricted to [any] one or more of 3 the following: 4 (i) changing the corporate name; 5 (ii) providing for perpetual existence; 6 (iii) reflecting a reduction in authorized shares 7 effected by operation of section 1552(a) (relating to 8 power of corporation to acquire its own shares) and, if 9 appropriate, deleting all references to a class or series 10 of shares that is no longer outstanding; [or] 11 (iv) adding or deleting a provision authorized by 12 section 1528(f) (relating to uncertificated shares)[.]; 13 or 14 (v) adding, changing or eliminating the par value of 15 any class or series of shares if the par value of that 16 class or series does not have any substantive effect 17 under the terms of that or any other class or series of 18 shares; 19 (3) (i) the corporation has only one class or series of 20 voting shares outstanding; 21 (ii) the corporation does not have any class or 22 series of shares outstanding that is: 23 (A) convertible into those voting shares; 24 (B) junior in any way to those voting shares; or 25 (C) entitled to participate on any basis in 26 distributions with those voting shares; and 27 (iii) the amendment is effective solely to 28 accomplish one of the following purposes with respect to 29 those voting shares: 30 [(i)] (A) in connection with effectuating a stock 19970S1157B2174 - 46 -
1 dividend of voting shares on the voting shares, to 2 increase the number of authorized shares [to the extent 3 necessary to permit the board of directors to effectuate 4 a stock dividend in the shares of the corporation] of the 5 voting shares in the same proportion that the voting 6 shares to be distributed in the stock dividend increase 7 the issued voting shares; or 8 [(ii) effectuate a] (B) to split the voting shares 9 and, if desired, increase the number of authorized shares 10 of the voting shares or change the par value of [the 11 authorized] the voting shares, or both, in proportion 12 thereto; 13 (4) to the extent the amendment has not been approved by 14 the shareholders, it restates without change all of the 15 operative provisions of the articles as theretofore amended 16 or as amended thereby; or 17 (5) the amendment accomplishes any combination of 18 purposes specified in this subsection. 19 Whenever a provision of this subpart authorizes the board of 20 directors to take any action without the approval of the 21 shareholders and provides that a statement, certificate, plan or 22 other document relating to such action shall be filed in the 23 Department of State and shall operate as an amendment of the 24 articles, the board upon taking such action may, in lieu of 25 filing the statement, certificate, plan or other document, amend 26 the articles under this subsection without the approval of the 27 shareholders to reflect the taking of such action. An amendment 28 of articles under this subsection shall be deemed adopted by the 29 corporation when it has been adopted by the board of directors 30 pursuant to section 1912 (relating to proposal of amendments). 19970S1157B2174 - 47 -
1 * * * 2 (f) Definition.--As used in this section, the term "voting 3 shares" has the meaning specified in section 2552 (relating to 4 definitions). 5 § 1922. 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 * * * 9 (5) Such other provisions as are deemed desirable. 10 [Any of the terms of the plan may be made dependent upon facts 11 ascertainable outside of the plan if the manner in which the 12 facts will operate upon the terms of the plan is set forth in 13 the plan.] 14 (b) Post-adoption amendment.--A plan of merger or 15 consolidation may contain a provision that the boards of 16 directors of the constituent corporations may amend the plan at 17 any time prior to its effective date, except that an amendment 18 made subsequent to the adoption of the plan by the shareholders 19 of any constituent domestic business corporation shall not 20 change: 21 (1) The amount or kind of shares, obligations, cash, 22 property or rights to be received in exchange for or on 23 conversion of all or any of the shares of the constituent 24 domestic business corporation adversely to the holders of 25 those shares. 26 (2) Any [term] provision of the articles of the 27 surviving or new corporation [to be effected by] as it is to 28 be in effect immediately following consummation of the merger 29 or consolidation, except provisions that may be amended 30 without the approval of the shareholders under section 19970S1157B2174 - 48 -
1 1914(c)(2) (relating to adoption of amendments). 2 (3) Any of the other terms and conditions of the plan if 3 the change would adversely affect the holders of any shares 4 of the constituent domestic business corporation. 5 (c) Proposal.--[Every] Except where the approval of the 6 board of directors is unnecessary under this subchapter, every 7 merger or consolidation shall be proposed in the case of each 8 domestic business corporation by the adoption by the board of 9 directors of a resolution approving the plan of merger or 10 consolidation. Except where the approval of the shareholders is 11 unnecessary under this subchapter, the board of directors shall 12 direct that the plan be submitted to a vote of the shareholders 13 entitled to vote thereon at a regular or special meeting of the 14 shareholders. 15 * * * 16 (e) Reference to outside facts.--Any of the terms of a plan 17 of merger or consolidation may be made dependent upon facts 18 ascertainable outside of the plan if the manner in which the 19 facts will operate upon the terms of the plan is set forth in 20 the plan. Such facts may include, without limitation, actions or 21 events within the control of or determinations made by a party 22 to the plan or a representative of a party to the plan. 23 § 1923. Notice of meeting of shareholders. 24 (a) General rule.--Written notice of the meeting of 25 shareholders that will act on the proposed plan shall be given 26 to each shareholder of record, whether or not entitled to vote 27 thereon, of each domestic business corporation that is a party 28 to the merger or consolidation. There shall be included in, or 29 enclosed with, the notice a copy of the proposed plan or a 30 summary thereof and, if Subchapter D of Chapter 15 (relating to 19970S1157B2174 - 49 -
1 dissenters rights) is applicable to the holders of shares of any 2 class or series, a copy of that subchapter and of section 1930 3 (relating to dissenters rights) shall be furnished to the 4 holders of shares of that class or series. The notice shall 5 state that a copy of the bylaws of the surviving or new 6 corporation will be furnished to any shareholder on request and 7 without cost. 8 * * * 9 § 1924. Adoption of plan. 10 * * * 11 (b) Adoption by board of directors.-- 12 (1) Unless otherwise required by its bylaws, a plan of 13 merger or consolidation shall not require the approval of the 14 shareholders of a constituent domestic business corporation 15 if: 16 * * * 17 (ii) immediately prior to the adoption of the plan 18 and at all times thereafter prior to its effective date, 19 another corporation that is a party to the [merger or 20 consolidation] plan owns directly or indirectly 80% or 21 more of the outstanding shares of each class of the 22 constituent corporation; or 23 * * * 24 (3) If a merger or consolidation of a subsidiary 25 corporation with a parent corporation is effected pursuant to 26 paragraph (1)(ii), the plan of merger or consolidation shall 27 be deemed adopted by the subsidiary corporation when it has 28 been adopted by the board of the parent corporation and 29 neither approval of the plan by the board of directors of the 30 subsidiary corporation nor execution of articles of merger or 19970S1157B2174 - 50 -
1 consolidation by the subsidiary corporation shall [not] be 2 necessary. 3 (4) (i) Unless other required by its bylaws, a plan of 4 merger or consolidation providing for the merger or 5 consolidation of a domestic business corporation 6 (referred to in this paragraph as the "constituent 7 corporation") with or into a single indirect wholly owned 8 subsidiary (referred to in this paragraph as the 9 "subsidiary corporation") of the constituent corporation 10 shall not require the approval of the shareholders of 11 either the constituent corporation or the subsidiary 12 corporation if all of the provisions of this paragraph 13 are satisfied. 14 (ii) A merger or consolidation under this paragraph 15 shall satisfy the following conditions: 16 (A) The constituent corporation and the 17 subsidiary corporation are the only parties to the 18 merger or consolidation, other than the resulting 19 corporation, if any, in a consolidation (the 20 corporation that survives or results from the merger 21 or consolidation is referred to in this paragraph as 22 the "resulting subsidiary"). 23 (B) Each share or fraction of a share of the 24 capital stock of the constituent corporation 25 outstanding immediately prior to the effective time 26 of the merger or consolidation is converted in the 27 merger or consolidation into a share or equal 28 fraction of a share of capital stock of a holding 29 company having the same designations, rights, powers 30 and preferences and the qualifications, limitations 19970S1157B2174 - 51 -
1 and restrictions as the share of stock of the 2 constituent corporation being converted in the merger 3 or consolidation. 4 (C) The holding company and the resulting 5 subsidiary are each domestic business corporations. 6 (D) Immediately following the effective time of 7 the merger or consolidation, the articles of 8 incorporation and bylaws of the holding company are 9 identical to the articles of incorporation and bylaws 10 of the constituent corporation immediately before the 11 effective time of the merger or consolidation, except 12 for changes that could be made without shareholder 13 approval under section 1914(c) (relating to adoption 14 by board of directors). 15 (E) Immediately following the effective time of 16 the merger or consolidation, the resulting subsidiary 17 is a direct or indirect wholly owned subsidiary of 18 the holding company. 19 (F) The directors of the constituent corporation 20 become or remain the directors of the holding company 21 upon the effective time of the merger or 22 consolidation. 23 (G) The board of directors of the constituent 24 corporation has made a good faith determination that 25 the shareholders of the constituent corporation will 26 not recognize gain or loss for United States Federal 27 Income Tax purposes. 28 (iii) As used in this paragraph only, the term 29 "holding company" means a corporation that, from its 30 incorporation until consummation of the merger or 19970S1157B2174 - 52 -
1 consolidation governed by this paragraph, was at all 2 times a direct wholly owned subsidiary of the constituent 3 corporation and whose capital stock is issued in the 4 merger or consolidation. 5 (iv) If the holding company is a registered 6 corporation, the shares of the holding company issued in 7 connection with the merger or consolidation shall be 8 deemed to have been acquired at the time that the shares 9 of the constituent corporation converted in the merger or 10 consolidation were acquired. 11 (5) A plan of merger or consolidation adopted by the 12 board of directors under this subsection without the approval 13 of the shareholders shall not, by itself, create or impair 14 any rights or obligations on the part of any person under 15 section 2538 (relating to approval of transactions with 16 interested shareholders) or under Subchapters E (relating to 17 control transactions), F (relating to business combinations), 18 G (relating to control-share acquisitions), H (relating to 19 disgorgement by certain controlling shareholders following 20 attempts to acquire control), I (relating to severance 21 compensation for employees terminated following certain 22 control-share acquisitions) and J (relating to business 23 combination transactions - labor contracts) of Chapter 25, 24 nor shall it change the standard of care applicable to the 25 directors under Subchapter B of Chapter 17 (relating to 26 fiduciary duty). 27 * * * 28 § 1929. Effect of merger or consolidation. 29 * * * 30 (b) Property rights.--All the property, real, personal and 19970S1157B2174 - 53 -
1 mixed, and franchises of each of the corporations parties to the 2 merger or consolidation, and all debts due on whatever account 3 to any of them, including subscriptions for shares and other 4 choses in action belonging to any of them, shall be deemed to be 5 [transferred to and] vested in and shall belong to the surviving 6 or new corporation, as the case may be, without further action, 7 and the title to any real estate, or any interest therein, 8 vested in any of the corporations shall not revert or be in any 9 way impaired by reason of the merger or consolidation. The 10 surviving or new corporation shall thenceforth be responsible 11 for all the liabilities of each of the corporations so merged or 12 consolidated. Liens upon the property of the merging or 13 consolidating corporations shall not be impaired by the merger 14 or consolidation and any claim existing or action or proceeding 15 pending by or against any of the corporations may be prosecuted 16 to judgment as if the merger or consolidation had not taken 17 place or the surviving or new corporation may be proceeded 18 against or substituted in its place. 19 * * * 20 § 1930. Dissenters rights. 21 * * * 22 (b) Plans adopted by directors only.--Except as otherwise 23 provided pursuant to section 1571(c) (relating to grant of 24 optional dissenters rights), Subchapter D of Chapter 15 shall 25 not apply to any of the shares of a corporation that is a party 26 to a merger or consolidation pursuant to section 1924(b)(1)(i) 27 or (4) (relating to adoption by board of directors). 28 * * * 29 § 1931. Share exchanges. 30 (a) General rule.--All the outstanding shares of one or more 19970S1157B2174 - 54 -
1 classes or series of a domestic business corporation, designated 2 in this section as the exchanging corporation, may, in the 3 manner provided in this section, be acquired by any person, 4 designated in this section as the acquiring person, through an 5 exchange of all the shares pursuant to a plan of exchange. The 6 plan of exchange may also provide for the conversion of any 7 other shares of the exchanging corporation into shares, other 8 securities or obligations of any person or cash, property or 9 rights. The procedure authorized by this section shall not be 10 deemed to limit the power of any person to acquire all or part 11 of the shares or other securities of any class or series of a 12 corporation through a voluntary exchange or otherwise by 13 agreement with the holders of the shares or other securities. 14 (b) Plan of exchange.--A plan of exchange shall be prepared, 15 setting forth: 16 (1) The terms and conditions of the exchange. 17 (2) The manner and basis of exchanging or converting the 18 shares of the exchanging corporation into shares or other 19 securities or obligations of the acquiring person, and, if 20 any of the shares of the exchanging corporation are not to be 21 exchanged or converted solely into shares or other securities 22 or obligations of the acquiring person, the shares or other 23 securities or obligations of any other person or cash, 24 property or rights that the holders of the shares of the 25 exchanging corporation are to receive in exchange for, or 26 upon conversion of, the shares and the surrender of any 27 certificates evidencing them, which securities or 28 obligations, if any, of any other person or cash, property 29 and rights may be in addition to or in lieu of the shares or 30 other securities or obligations of the acquiring person. 19970S1157B2174 - 55 -
1 (3) Any changes desired to be made in the articles of 2 the exchanging corporation, which may include a restatement 3 of the articles. 4 (4) Any provisions desired providing special treatment 5 of shares held by any shareholder or group of shareholders as 6 authorized by, and subject to the provisions of, section 1906 7 (relating to special treatment of holders of shares of same 8 class or series). Notwithstanding subsection (a), a plan that 9 provides special treatment may affect less than all of the 10 outstanding shares of a class or series. 11 (5) Such other provisions as are deemed desirable. 12 [Any of the terms of the plan may be made dependent upon facts 13 ascertainable outside of the plan if the manner in which the 14 facts will operate upon the terms of the plan is set forth in 15 the plan.] 16 (c) Proposal and adoption.--The plan of exchange shall be 17 proposed and adopted and may be amended after its adoption and 18 terminated by the exchanging corporation in the manner provided 19 by this subchapter for the proposal, adoption, amendment and 20 termination of a plan of merger except section 1924(b) (relating 21 to adoption by board of directors). There shall be included in, 22 or enclosed with, the notice of the meeting of shareholders to 23 act on the plan a copy or a summary of the plan and, if 24 Subchapter D of Chapter 15 (relating to dissenters rights) is 25 applicable, a copy of the subchapter and of subsection (d). The 26 holders of any class of shares to be [acquired] exchanged or 27 converted pursuant to the plan of exchange shall be entitled to 28 vote as a class on the plan if they would have been entitled to 29 vote on a plan of merger that affects the class in substantially 30 the same manner as the plan of exchange. 19970S1157B2174 - 56 -
1 (d) Dissenters rights in share exchanges.--Any holder of 2 shares that are to be [acquired] exchanged or converted pursuant 3 to a plan of exchange who objects to the plan and complies with 4 the provisions of Subchapter D of Chapter 15 shall be entitled 5 to the rights and remedies of dissenting shareholders therein 6 provided, if any. See section 1906(c) (relating to dissenter 7 rights upon special treatment). 8 (e) Articles of exchange.--Upon adoption of a plan of 9 exchange, as provided in this section, articles of exchange 10 shall be executed by the exchanging corporation and shall set 11 forth: 12 (1) The name and, subject to section 109 (relating to 13 name of commercial registered office provider in lieu of 14 registered address), the location of the registered office, 15 including street and number, if any, of the exchanging 16 corporation. 17 (2) If the plan is to be effective on a specified date, 18 the hour, if any, and the month, day and year of the 19 effective date. 20 (3) The manner in which the plan was adopted by the 21 exchanging corporation. 22 (4) Except as provided in section 1901 (relating to 23 omission of certain provisions from filed plans), the plan of 24 exchange. 25 The articles of exchange shall be filed in the Department of 26 State. See [section] sections 134 (relating to docketing 27 statement) and 135 (relating to requirements to be met by filed 28 documents. 29 * * * 30 (i) Reference to outside facts.--Any of the terms of a plan 19970S1157B2174 - 57 -
1 of exchange may be made dependent upon facts ascertainable 2 outside of the plan if the manner in which the facts will 3 operate upon the terms of the plan is set forth in the plan. 4 Such facts may include, without limitation, actions or events 5 within the control of or determinations made by a party to the 6 plan or a representative of a party to the plan. 7 § 1932. Voluntary transfer of corporate assets. 8 * * * 9 (b) Shareholder approval required.-- 10 (1) A sale, lease, exchange or other disposition of all, 11 or substantially all, the property and assets, with or 12 without the goodwill, of a business corporation, if not made 13 pursuant to subsection (a) or (d) or to section 1551 14 (relating to distributions to shareholders) or Subchapter D 15 (relating to division), may be made only pursuant to a plan 16 of asset transfer[.] in the manner provided in this 17 subsection. A corporation selling, leasing or otherwise 18 disposing of all, or substantially all, its property and 19 assets is referred to in this subsection and in subsection 20 (c) as the "transferring corporation." 21 (2) The property or assets of a direct or indirect 22 subsidiary corporation that is controlled by a parent 23 corporation shall also be deemed the property or assets of 24 the parent corporation for the purposes of this subsection 25 and of subsection (c). A merger or consolidation to which 26 such a subsidiary corporation is a party and in which a third 27 party acquires direct or indirect ownership of the property 28 or assets of the subsidiary corporation constitutes an "other 29 disposition" of the property or assets of the parent 30 corporation within the meaning of that term as used in this 19970S1157B2174 - 58 -
1 section. 2 (3) The plan of asset transfer shall set forth the terms 3 and conditions of the sale, lease, exchange or other 4 disposition or may authorize the board of directors to fix 5 any or all of the terms and conditions, including the 6 consideration to be received by the corporation therefor. The 7 plan may provide for the distribution to the shareholders of 8 some or all of the consideration to be received by the 9 corporation, including provisions for special treatment of 10 shares held by any shareholder or group of shareholders as 11 authorized by, and subject to the provisions of, section 1906 12 (relating to special treatment of holders of shares of same 13 class or series). It shall not be necessary for the person 14 acquiring the property or assets of the transferring 15 corporation to be a party to the plan. Any of the terms of 16 the plan may be made dependent upon facts ascertainable 17 outside of the plan if the manner in which the facts will 18 operate upon the terms of the plan is set forth in the plan. 19 Such facts may include, without limitation, actions or events 20 within the control of or determinations made by the 21 corporation or a representative of the corporation. 22 (4) The plan of asset transfer shall be proposed and 23 adopted, and may be amended after its adoption and 24 terminated, by [a business] the transferring corporation in 25 the manner provided in this subchapter for the proposal, 26 adoption, amendment and termination of a plan of merger, 27 except section 1924(b) (relating to adoption by board of 28 directors). The procedures of this subchapter shall not be 29 applicable to the person acquiring the property or assets of 30 the transferring corporation. There shall be included in, or 19970S1157B2174 - 59 -
1 enclosed with, the notice of the meeting of the shareholders 2 of the transferring corporation to act on the plan a copy or 3 a summary of the plan and, if Subchapter D of Chapter 15 4 (relating to dissenters rights) is applicable, a copy of the 5 subchapter and of subsection (c). 6 (5) In order to make effective the plan of asset 7 transfer so adopted, it shall not be necessary to file any 8 articles or other documents in the Department of State. 9 (c) Dissenters rights in asset transfers.-- 10 (1) If a shareholder of a transferring corporation that 11 adopts a plan of asset transfer objects to the plan and 12 complies with Subchapter D of Chapter 15, the shareholder 13 shall be entitled to the rights and remedies of dissenting 14 shareholders therein provided, if any. 15 (2) Paragraph (1) shall not apply to a sale pursuant to 16 an order of court having jurisdiction in the premises or a 17 sale [for money on terms requiring] pursuant to a plan of 18 asset transfer that requires that all or substantially all of 19 the net proceeds of sale be distributed to the shareholders 20 in accordance with their respective interests within one year 21 after the date of sale or to a liquidating trust. 22 * * * 23 § 1952. Proposal and adoption of plan of division. 24 (a) Preparation of plan.--A plan of division shall be 25 prepared, setting forth: 26 (1) The terms and conditions of the division, including 27 the manner and basis of: 28 (i) The reclassification of the shares of the 29 surviving corporation, if there be one, and, if any of 30 the shares of the dividing corporation are not to be 19970S1157B2174 - 60 -
1 converted solely into shares or other securities or 2 obligations of one or more of the resulting corporations, 3 the shares or other securities or obligations of any 4 other person, or cash, property or rights that the 5 holders of such shares are to receive in exchange for or 6 upon conversion of such shares, and the surrender of any 7 certificates evidencing them, which securities or 8 obligations, if any, of any other person or cash, 9 property or rights may be in addition to or in lieu of 10 shares or other securities or obligations of one or more 11 of the resulting corporations. 12 (ii) The disposition of the shares and other 13 securities or obligations, if any, of the new corporation 14 or corporations resulting from the division. 15 (2) A statement that the dividing corporation will, or 16 will not, survive the division. 17 (3) Any changes desired to be made in the articles of 18 the surviving corporation, if there be one, including a 19 restatement of the articles. 20 (4) The articles of incorporation required by subsection 21 (b). 22 (5) Any provisions desired providing special treatment 23 of shares held by any shareholder or group of shareholders as 24 authorized by, and subject to the provisions of, section 1906 25 (relating to special treatment of holders of shares of same 26 class or series). 27 (6) Such other provisions as are deemed desirable. 28 [Any of the terms of the plan 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 19970S1157B2174 - 61 -
1 the plan.] 2 * * * 3 (g) [Action by] Rights of holders of indebtedness.--[Unless 4 otherwise provided by an indenture or other contract by which 5 the dividing corporation is bound, a plan of division shall not 6 require the approval of the holders of any debt securities or 7 other obligations of the dividing corporation or of any 8 representative of the holders, if the transfer of assets 9 effected by the division, if effected by means of a sale, lease, 10 exchange or other disposition, and any related distribution, 11 would not require the approval of the holders or representatives 12 thereof.] If any debt securities, notes or similar evidences of 13 indebtedness for money borrowed, whether secured or unsecured, 14 indentures or other contracts were issued, incurred or executed 15 by the dividing corporation before (the Legislative Reference 16 Bureau shall insert here the effective date of the amendments of 17 this section) and have not been amended subsequent to that date, 18 the liability of the dividing corporation thereunder shall not 19 be affected by the division nor shall the rights of the obligees 20 thereunder be impaired by the division, and each of the 21 resulting corporations may be proceeded against or substituted 22 in place of the dividing corporation as joint and several 23 obligors on such liability, regardless of any provision of the 24 plan of division apportioning the liabilities of the dividing 25 corporations. 26 * * * 27 (i) Reference to outside facts.--Any of the terms of a plan 28 of division may be made dependent upon facts ascertainable 29 outside of the plan if the manner in which the facts will 30 operate upon the terms of the plan is set forth in the plan. 19970S1157B2174 - 62 -
1 Such facts may include, without limitation, actions or events 2 within the control of or determinations made by the dividing 3 corporation or a representative of the dividing corporation. 4 § 1953. Division without shareholder approval. 5 (a) General rule.--Unless otherwise restricted by its bylaws 6 or required by section 1952(f) (relating to action by holders of 7 preferred or special shares), a plan of division that does not 8 alter the state of incorporation of a business corporation, 9 provide for special treatment nor amend in any respect the 10 provisions of its articles (except amendments which under 11 section 1914(c) (relating to adoption by board of directors) may 12 be made without shareholder action) shall not require the 13 approval of the shareholders of the corporation if: 14 (1) the dividing corporation has only one class of 15 shares outstanding and the shares and other securities, if 16 any, of each corporation resulting from the plan are 17 distributed pro rata to the shareholders of the dividing 18 corporation; 19 (2) the dividing corporation survives the division and 20 all the shares and other securities and obligations, if any, 21 of all new corporations resulting from the plan are owned 22 solely by the surviving corporation; or 23 (3) the [transfers] allocation of assets among the 24 resulting corporations effected by the division, if effected 25 by means of a sale, lease, exchange or other disposition, 26 would not require the approval of shareholders under section 27 1932(b) (relating to shareholder approval required). 28 (b) Limitation.--A plan of division adopted by the board of 29 directors under this section without the approval of the 30 shareholders shall not, by itself, create or impair any rights 19970S1157B2174 - 63 -
1 or obligations on the part of any person under section 2538 2 (relating to approval of transactions with interested 3 shareholders) or under Subchapters E (relating to control 4 transactions), F (relating to business combinations), G 5 (relating to control-share acquisitions), H (relating to 6 disgorgement by certain controlling shareholders following 7 attempts to acquire control), I (relating to severance 8 compensation for employees terminated following certain control- 9 share acquisitions) and J (relating to business combination 10 transactions - labor contracts) of Chapter 25, nor shall it 11 change the standard of care applicable to the directors under 12 Subchapter B of Chapter 17 (relating to fiduciary duty). 13 § 1955. Filing of articles of division. 14 (a) General rule.--The articles of division, and the 15 certificates or statement, if any, required by section 139 16 (relating to tax clearance of certain fundamental transactions) 17 shall be filed in the Department of State. 18 (b) Cross [reference] references.--See [section] sections 19 134 (relating to docketing statement) and 135 (relating to 20 requirements to be met by filed documents). 21 § 1957. Effect of division. 22 * * * 23 (b) Property rights; allocations of assets and 24 liabilities.-- 25 (1) (i) All the property, real, personal and mixed, and 26 franchises of the dividing corporation, and all debts due 27 on whatever account to it, including subscriptions for 28 shares and other choses in action belonging to it, shall 29 (except as otherwise provided in paragraph (2)), to the 30 extent [transfers] allocations of assets are contemplated 19970S1157B2174 - 64 -
1 by the plan of division, be deemed without further action 2 to be [transferred] allocated to and vested in the 3 resulting corporations on such a manner and basis and 4 with such effect as is specified in the plan, or per 5 capita among the resulting corporations, as tenants in 6 common, if no specification is made in the plan, and the 7 title to any real estate, or interest therein, vested in 8 any of the corporations shall not revert or be in any way 9 impaired by reason of the division. 10 (ii) Upon the division becoming effective, the 11 resulting corporations shall each thenceforth be 12 responsible as separate and distinct corporations only 13 for such liabilities as each corporation may undertake or 14 incur in its own name but shall be liable for the 15 liabilities of the dividing corporation in the manner and 16 on the basis provided in subparagraphs (iv) and (v). 17 (iii) Liens upon the property of the dividing 18 corporation shall not be impaired by the division. 19 (iv) [One] To the extent allocations of liabilities 20 are contemplated by the plan of division, the liabilities 21 of the dividing corporation shall be deemed without 22 further action to be allocated to and become the 23 liabilities of the resulting corporations on such a 24 manner and basis and with such effect as is specified in 25 the plan; and one or more, but less than all, of the 26 resulting corporations shall be free of the liabilities 27 of the dividing corporation to the extent, if any, 28 specified in the plan, if in either case: 29 (A) no fraud [of corporate creditors, or of] on 30 minority shareholders or shareholders without voting 19970S1157B2174 - 65 -
1 rights or violation of law shall be effected thereby, 2 and [if applicable provisions of law are complied 3 with.] 4 (B) the plan does not constitute a fraudulent 5 transfer under 12 Pa.C.S. Ch. 51 (relating to 6 fraudulent transfers). 7 (v) If the conditions in subparagraph (iv) for 8 freeing one or more of the resulting corporations from 9 the liabilities of the dividing corporation, or for 10 allocating some or all of the liabilities of the dividing 11 corporation, are not satisfied, the liabilities of the 12 dividing corporation as to which those conditions are not 13 satisfied shall not be affected by the division nor shall 14 the rights of creditors [thereof or of any person dealing 15 with the corporation] thereunder be impaired by the 16 division and any claim existing or action or proceeding 17 pending by or against the corporation with respect to 18 those liabilities may be prosecuted to judgment as if the 19 division had not taken place, or the resulting 20 corporations may be proceeded against or substituted in 21 [its] place of the dividing corporation as joint and 22 several obligors on [such liability] those liabilities, 23 regardless of any provision of the plan of division 24 apportioning the liabilities of the dividing corporation. 25 (vi) The conditions in subparagraph (iv) for freeing 26 one or more of the resulting corporations from the 27 liabilities of the dividing corporation and for 28 allocating some or all of the liabilities of the dividing 29 corporation shall be conclusively deemed to have been 30 satisfied if the plan of division has been approved by 19970S1157B2174 - 66 -
1 the Department of Banking, the Insurance Department or 2 the Pennsylvania Public Utility Commission in a final 3 order issued after (the Legislative Reference Bureau 4 shall insert here the effective date of the amendments of 5 this section) that has become not subject to further 6 appeal. 7 (2) (i) The [transfer] allocation of any fee or 8 freehold interest or leasehold having a remaining term of 9 30 years or more in any tract or parcel of real property 10 situate in this Commonwealth owned by a dividing 11 corporation (including property owned by a foreign 12 business corporation dividing solely under the law of 13 another jurisdiction) to a new corporation resulting from 14 the division shall not be effective until one of the 15 following documents is filed in the office for the 16 recording of deeds of the county, or each of them, in 17 which the tract or parcel is situated: 18 (A) A deed, lease or other instrument of 19 confirmation describing the tract or parcel. 20 (B) A duly executed duplicate original copy of 21 the articles of division. 22 (C) A copy of the articles of division certified 23 by the Department of State. 24 (D) A declaration of acquisition setting forth 25 the value of real estate holdings in such county of 26 the corporation as an acquired company. 27 (ii) The provisions of 75 Pa.C.S. § 1114 (relating 28 to transfer of vehicle by operation of law) shall not be 29 applicable to [a transfer] an allocation of ownership of 30 any motor vehicle, trailer or semitrailer [from a 19970S1157B2174 - 67 -
1 dividing corporation] to a new corporation under this 2 section or under a similar law of any other jurisdiction 3 but any such [transfer] allocation shall be effective 4 only upon compliance with the requirements of 75 Pa.C.S. 5 § 1116 (relating to issuance of new certificate following 6 transfer). 7 (3) It shall not be necessary for a plan of division to 8 list each individual asset or liability of the dividing 9 corporation to be allocated to a new corporation so long as 10 those assets and liabilities are described in a reasonable 11 manner. 12 (4) 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 * * * 19 (h) Conflict of laws.--It is the intent of the General 20 Assembly that: 21 (1) The effect of a division of a domestic business 22 corporation shall be governed solely by the laws of this 23 Commonwealth and any other jurisdiction under the laws of 24 which any of the resulting corporations is incorporated. 25 (2) The effect of a division on the assets and 26 liabilities of the dividing corporation shall be governed 27 solely by the laws of this Commonwealth and any other 28 jurisdiction under the laws of which any of the resulting 29 corporations is incorporated. 30 (3) The validity of any allocations of assets or 19970S1157B2174 - 68 -
1 liabilities by a plan of division of a domestic business 2 corporation, regardless of whether or not any of the new 3 corporations is a foreign business corporation, shall be 4 governed solely by the laws of this Commonwealth. 5 (4) In addition to the express provisions of this 6 subsection, this subchapter shall otherwise generally be 7 granted the protection of full faith and credit under the 8 Constitution of the United States. 9 § 1962. Proposal and adoption of plan of conversion. 10 (a) Preparation of plan.--A plan of conversion shall be 11 prepared, setting forth: 12 (1) The terms and conditions of the conversion. 13 (2) A restatement of the articles of the resulting 14 corporation, which articles shall comply with the 15 requirements of this part relating to nonprofit corporations. 16 (3) Any provisions desired providing special treatment 17 of shares held by any shareholder or group of shareholders as 18 authorized by, and subject to the provisions of, section 1906 19 (relating to special treatment of holders of shares of same 20 class or series). 21 (4) Such other provisions as are deemed desirable. 22 [Any of the terms of the plan may be made dependent upon facts 23 ascertainable outside of the plan if the manner in which the 24 facts will operate upon the terms of the plan is set forth in 25 the plan.] 26 * * * 27 (d) Reference to outside facts.--Any of the terms of a plan 28 of conversion may be made dependent upon facts ascertainable 29 outside of the plan if the manner in which the facts will 30 operate upon the terms of the plan is set forth in the plan. 19970S1157B2174 - 69 -
1 Such facts may include, without limitation, actions or events 2 within the control of or determinations made by the corporation 3 or a representative of the corporation. 4 § 1972. Proposal of voluntary dissolution. 5 (a) General rule.--Any business corporation that has 6 commenced business may dissolve voluntarily in the manner 7 provided in this subchapter and wind up its affairs in the 8 manner provided in section 1975 (relating to predissolution 9 provision for liabilities) or Subchapter H (relating to 10 postdissolution provision for liabilities). Voluntary 11 dissolution shall be proposed by the adoption by the board of 12 directors of a resolution recommending that the corporation be 13 dissolved voluntarily. The resolution shall contain a statement 14 either that the dissolution shall proceed under section 1975 or 15 that the dissolution shall proceed under Subchapter H. The 16 resolution may set forth provisions for the distribution to 17 shareholders of any surplus remaining after paying or providing 18 for all liabilities of the corporation, including provisions for 19 special treatment of shares held by any shareholder or group of 20 shareholders as authorized by, and subject to the provisions of, 21 section 1906 (relating to special treatment of holders of shares 22 of same class or series). 23 (b) Submission to shareholders.--The board of directors 24 shall direct that the [question of] resolution recommending 25 dissolution be submitted to a vote of the shareholders of the 26 corporation entitled to vote thereon at a regular or special 27 meeting of the shareholders. 28 * * * 29 § 1973. Notice of meeting of shareholders. 30 (a) General rule.--Written notice of the meeting of 19970S1157B2174 - 70 -
1 shareholders that will consider the [advisability of voluntarily 2 dissolving a] resolution recommending dissolution of the 3 business corporation shall be given to each shareholder of 4 record entitled to vote thereon and the purpose shall be 5 included in the notice of the meeting. 6 * * * 7 § 1975. Predissolution provision for liabilities. 8 (a) Powers of board.--The board of directors of a business 9 corporation that has elected to proceed under this section shall 10 have full power to wind up and settle the affairs of [a 11 business] the corporation in accordance with this section prior 12 to filing articles of dissolution in accordance with section 13 1977 (relating to articles of dissolution). 14 (b) Notice to creditors and taxing authorities.--After the 15 approval by the shareholders of the [proposal] resolution 16 recommending that the corporation dissolve voluntarily, the 17 corporation shall immediately cause notice of the winding up 18 proceedings to be officially published and to be mailed by 19 certified or registered mail to each known creditor and claimant 20 and to each municipal corporation in which [its registered 21 office or principal] it has a place of business in this 22 Commonwealth [is located]. 23 (c) Winding up and distribution.--The corporation shall, as 24 speedily as possible, proceed to collect all sums due it, 25 convert into cash all corporate assets the conversion of which 26 into cash is required to discharge its liabilities and, out of 27 the assets of the corporation, discharge or make adequate 28 provision for the discharge of all liabilities of the 29 corporation, according to their respective priorities. Any 30 surplus remaining after paying or providing for all liabilities 19970S1157B2174 - 71 -
1 of the corporation shall be distributed to the shareholders 2 according to their respective rights and preferences. See 3 section 1972(a) (relating to proposal of voluntary dissolution). 4 § 1976. Judicial supervision of proceedings. 5 A business corporation that has elected to proceed under 6 section 1975 (relating to predissolution provision for 7 liabilities), at any time during the winding up proceedings, may 8 apply to the court to have the proceedings continued under the 9 supervision of the court and thereafter the proceedings shall 10 continue under the supervision of the court as provided in 11 Subchapter G (relating to involuntary liquidation and 12 dissolution). 13 § 1977. Articles of dissolution. 14 (a) General rule.--Articles of dissolution and the 15 certificates or statement required by section 139 (relating to 16 tax clearance of certain fundamental transactions) shall be 17 filed in the Department of State when: 18 (1) all liabilities of the business corporation have 19 been discharged, or adequate provision has been made 20 therefor, in accordance with section 1975 (relating to 21 predissolution provision for liabilities), and all of the 22 remaining assets of the corporation have been distributed as 23 provided in section 1975 (or in case its assets are not 24 sufficient to discharge its liabilities, when all the assets 25 have been fairly and equitably applied, as far as they will 26 go, to the payment of such liabilities); or 27 (2) an election to proceed under Subchapter H (relating 28 to postdissolution provision for liabilities) has been made. 29 [See section 134 (relating to docketing statement).] 30 (b) Contents of articles.--The articles of dissolution shall 19970S1157B2174 - 72 -
1 be executed by the corporation and shall set forth: 2 * * * 3 (5) A statement that: 4 (i) [that] all liabilities of the corporation have 5 been discharged or that adequate provision has been made 6 therefor; [or] 7 (ii) [that] the assets of the corporation are not 8 sufficient to discharge its liabilities, and that all the 9 assets of the corporation have been fairly and equitably 10 applied, as far as they will go, to the payment of such 11 liabilities[. An election by]; or 12 (iii) the corporation has elected to proceed under 13 Subchapter H [shall constitute the making of adequate 14 provision for the liabilities of the corporation, 15 including any judgment or decree that may be obtained 16 against the corporation in any pending action or 17 proceeding]. 18 * * * 19 (7) [A] In the case of a corporation that has not 20 elected to proceed under Subchapter H, a statement that no 21 actions or proceedings are pending against the corporation in 22 any court, or that adequate provision has been made for the 23 satisfaction of any judgment or decree that may be obtained 24 against the corporation in each pending action or proceeding. 25 (8) [A] In the case of a corporation that has not 26 elected to proceed under Subchapter H, a statement that 27 notice of the winding-up proceedings of the corporation was 28 mailed by certified or registered mail to each known creditor 29 and claimant and to each municipal corporation in which the 30 [registered office or principal place of business of the] 19970S1157B2174 - 73 -
1 corporation has a place of business in this Commonwealth [is 2 located]. 3 * * * 4 (d) Cross references.--See sections 134 (relating to 5 docketing statement) and 135 (relating to requirements to be met 6 by filed documents). 7 § 1978. Winding up of corporation after dissolution. 8 * * * 9 (b) Standard of care of directors and officers.--The 10 dissolution of the corporation shall not subject its directors 11 or officers to standards of conduct different from those 12 prescribed by or pursuant to Chapter 17 (relating to officers, 13 directors and shareholders). Directors of a dissolved 14 corporation who have complied with section 1975 (relating to 15 predissolution provision for liabilities) or Subchapter H 16 (relating to postdissolution provision for liabilities) shall 17 not be personally liable to the creditors of the dissolved 18 corporation. 19 § 1979. Survival of remedies and rights after dissolution. 20 (a) General rule.--The dissolution of a business 21 corporation, either under this subchapter or under Subchapter G 22 (relating to involuntary liquidation and dissolution) or by 23 expiration of its period of duration or otherwise, shall not 24 eliminate nor impair any remedy available to or against the 25 corporation or its directors, officers or shareholders for any 26 right or claim existing, or liability incurred, prior to the 27 dissolution, if an action or proceeding thereon is brought on 28 behalf of: 29 (1) the corporation within the time otherwise limited by 30 law; or 19970S1157B2174 - 74 -
1 (2) any other person before or within two years after 2 the date of the dissolution or within the time otherwise 3 limited by this subpart or other provision of law, whichever 4 is less. See sections 1987 (relating to proof of claims), 5 1993 (relating to acceptance or rejection of matured claims) 6 and 1994 (relating to disposition of unmatured claims). 7 [The actions or proceedings may be prosecuted against and 8 defended by the corporation in its corporate name.] 9 * * * 10 (e) Conduct of actions.--An action or proceeding may be 11 prosecuted against and defended by a dissolved corporation in 12 its corporate name. 13 § 1980. Dissolution by domestication. 14 Whenever a domestic business corporation has domesticated 15 itself under the laws of another jurisdiction by action similar 16 to that provided by section 4161 (relating to domestication) and 17 has authorized that action by the vote required by this 18 subchapter for the approval of a proposal that the corporation 19 dissolve voluntarily, the corporation may surrender its charter 20 under the laws of this Commonwealth by filing in the Department 21 of State articles of dissolution under this subchapter 22 containing the statement specified by section [1977(a)(1)] 23 1977(b)(1) through (4) (relating to [preparation of articles).] 24 articles of dissolution). If the corporation as domesticated in 25 the other jurisdiction qualifies to do business in this 26 Commonwealth either prior to or simultaneously with the filing 27 of the articles of dissolution under this section, the 28 corporation shall not be required to file with the articles of 29 dissolution the tax clearance certificates that would otherwise 30 be required by section 139 (relating to tax clearance of certain 19970S1157B2174 - 75 -
1 fundamental transactions). 2 § 1989. Articles of involuntary dissolution. 3 (a) General rule.--In a proceeding under this subchapter, 4 the court shall enter an order dissolving the business 5 corporation when the costs and expenses of the proceeding and 6 all liabilities of the corporation have been discharged, and all 7 of its remaining assets have been distributed to its 8 shareholders or, in case its assets are not sufficient to 9 discharge such costs, expenses and liabilities, when all the 10 assets have been applied, as far as they will go, to the payment 11 of such costs, expenses and liabilities. See section 139(b) 12 (relating to tax clearance in judicial proceedings). 13 (b) Filing.--After entry of an order of dissolution, the 14 office of the clerk of the court of common pleas shall prepare 15 and execute articles of dissolution substantially in the form 16 provided by section 1977 (relating to articles of dissolution), 17 attach thereto a certified copy of the order and transmit the 18 articles and attached order to the Department of State. [A 19 certificate or statement provided for by section 139 (relating 20 to tax clearance of certain fundamental transactions) shall not 21 be required, and the] The department shall not charge a fee in 22 connection with the filing of articles of dissolution under this 23 section. See [section] sections 134 (relating to docketing 24 statement) and 135 (relating to requirements to be met by filed 25 documents). 26 * * * 27 § 1991.1. Authority of board of directors. 28 (a) General rule.--The board of directors of a business 29 corporation that has elected to proceed under this subchapter 30 shall have full power to wind up and settle the affairs of the 19970S1157B2174 - 76 -
1 corporation in accordance with this subchapter both prior to and 2 after the filing of articles of dissolution in accordance with 3 section 1977 (relating to articles of 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 § 1992. Notice to claimants. 11 * * * 12 (c) Publication and service of notices.-- 13 (1) The notices required by this section shall be 14 officially published at least once a week for two consecutive 15 weeks and, in the case of a corporation having $10,000,000 or 16 more in total assets at the time of its dissolution, at least 17 once in all editions of a daily newspaper with a national 18 circulation. 19 (2) Concurrently with or preceding the publication, the 20 corporation or successor entity shall send a copy of the 21 notice by certified or registered mail, return receipt 22 requested, to each: 23 (i) known creditor or claimant; 24 (ii) holder of a claim described in subsection (b); 25 and 26 (iii) municipal corporation in which [the registered 27 office or principal] a place of business of the 28 corporation in this Commonwealth was located at the time 29 of filing the articles of dissolution in the department. 30 * * * 19970S1157B2174 - 77 -
1 § 1997. Payments and distributions. 2 * * * 3 (b) Disposition.--The claims and liabilities shall be paid 4 in full and any provision for payment shall be made in full if 5 there are sufficient assets. If there are insufficient assets, 6 the claims and liabilities shall be paid or provided for in 7 order of their priority, and, among claims of equal priority, 8 ratably to the extent of funds legally available therefor. Any 9 remaining assets shall be distributed to the shareholders of the 10 corporation according to their respective rights and 11 preferences, except that the distribution shall not be made less 12 than 60 days after the last notice of rejection, if any, was 13 given under section 1993 (relating to acceptance or rejection of 14 matured claims). See section 1972(a) (relating to proposal of 15 voluntary dissolution). 16 * * * 17 [(d) Liability of directors.--Directors of a dissolved 18 corporation or governing persons of a successor entity that has 19 complied with this section shall not be personally liable to the 20 claimants of the dissolved corporation.] 21 § 2524. CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. <-- 22 (A) GENERAL RULE.--AN ACTION MAY BE AUTHORIZED BY THE 23 SHAREHOLDERS OF A REGISTERED CORPORATION WITHOUT A MEETING BY 24 LESS THAN UNANIMOUS WRITTEN CONSENT ONLY IF ALL OF THE FOLLOWING 25 PARAGRAPHS APPLY: 26 (1) THE ACTION IS PERMITTED BY ITS ARTICLES. 27 (2) ANY OF THE FOLLOWING SUBPARAGRAPHS APPLY: 28 (I) THE ACTION HAS BEEN APPROVED BY THE BOARD OF 29 DIRECTORS. 30 (II) THERE IS NOT, AT THE TIME THE ACTION IS PENDING 19970S1157B2174 - 78 -
1 FOR AUTHORIZATION BY THE SHAREHOLDERS, A "CONTROLLING 2 PERSON OR GROUP," AS DEFINED IN SECTION 2573 (RELATING TO 3 DEFINITIONS), THAT IS POTENTIALLY SUBJECT TO PROFIT 4 RECOVERY UNDER SECTION 2575 (RELATING TO OWNERSHIP BY 5 CORPORATION OF PROFITS RESULTING FROM CERTAIN 6 TRANSACTIONS), REGARDLESS OF WHETHER THAT CONTROLLING 7 PERSON OR GROUP, AT THAT TIME, OWNS ANY EQUITY SECURITY 8 OF THE CORPORATION. 9 (III) THE ACTION WAS EFFECTIVE PRIOR TO SEPTEMBER 10 29, 1998. 11 THIS PARAGRAPH SHALL EXPIRE 12 MONTHS FROM THE DATE THIS 12 PARAGRAPH TAKES EFFECT. 13 * * * 14 § 2902. Definitions and index of definitions. 15 (a) Definitions.--The following words and phrases when used 16 in this chapter shall have the meanings given to them in this 17 section unless the context clearly indicates otherwise: 18 "Disqualified person." [A] The term "disqualified person" as 19 used in this chapter means a licensed person who for any reason 20 is or becomes legally disqualified (temporarily or permanently) 21 to render the same professional services that the particular 22 professional corporation of which he is an officer, director, 23 shareholder or employee is or was rendering. 24 ["Licensed person." Any natural person who is duly licensed 25 or admitted to practice his profession by a court, department, 26 board, commission or other agency of this Commonwealth or 27 another jurisdiction to render a professional service that is or 28 will be rendered by the professional corporation of which he is, 29 or intends to become, an officer, director, shareholder, 30 employee or agent. 19970S1157B2174 - 79 -
1 "Profession." Includes the performance of any type of 2 personal service to the public that requires as a condition 3 precedent to the performance of the service the obtaining of a 4 license or admission to practice or other legal authorization, 5 including all personal services that prior to the enactment of 6 the act of July 9, 1970 (P.L.461, No.160), known as the 7 Professional Corporation Law, could not lawfully be rendered by 8 means of a corporation. By way of example, and without limiting 9 the generality of the foregoing, the term includes for the 10 purposes of this chapter personal services rendered as an 11 architect, chiropractor, dentist, funeral director, osteopath, 12 podiatrist, physician, professional engineer, veterinarian, 13 certified public accountant or surgeon and, except as otherwise 14 prescribed by general rules, an attorney at law. Except as 15 otherwise expressly provided by law, the definition specified in 16 this paragraph shall be applicable to this chapter only and 17 shall not affect the interpretation of any other statute or any 18 local zoning ordinance or other official document heretofore or 19 hereafter enacted or promulgated. 20 "Professional services." Any type of services that may be 21 rendered by the member of any profession within the purview of 22 his profession.] 23 (b) Index of other definitions.--Other definitions applying 24 to this chapter and the sections in which they appear are: 25 "Licensed person." Section 102 (relating to definitions). 26 "Profession." Section 102. 27 "Professional services." Section 102. 28 § 2904. Election of an existing business corporation to become 29 a professional corporation. 30 * * * 19970S1157B2174 - 80 -
1 (b) Procedure.--The amendment shall be adopted in accordance 2 with the requirements of Subchapter B of Chapter 19 (relating to 3 amendment of articles) [except that the amendment must be 4 approved by the unanimous consent of all shareholders of the 5 corporation regardless of any limitations on voting rights 6 stated in the articles or bylaws]. If any shareholder of a 7 business corporation that proposes to amend its articles to 8 become a professional corporation objects to that amendment and 9 complies with the provisions of Subchapter D of Chapter 15 10 (relating to dissenters rights), the shareholder shall be 11 entitled to the rights and remedies of dissenting shareholders 12 therein provided, if any. 13 § 2922. Stated purposes. 14 * * * 15 (b) Additional powers.--A professional corporation may be [a 16 partner in or a shareholder] an equity owner of a partnership 17 [or], limited liability company, corporation or other 18 association engaged in the business of rendering the 19 professional service or services for which the professional 20 corporation was incorporated. 21 § 2923. Issuance and retention of shares. 22 (a) General rule.--Except as otherwise provided by a 23 statute, rule or regulation applicable to a particular 24 profession, all of the ultimate beneficial owners of shares in a 25 professional corporation [may be beneficially owned, directly or 26 indirectly, only by one or more] shall be licensed persons and 27 any issuance or transfer of shares in violation of this 28 restriction shall be void. A shareholder of a professional 29 corporation shall not enter into a voting trust, proxy or any 30 other arrangement vesting another person (other than [another 19970S1157B2174 - 81 -
1 licensed] a person who is qualified to be a direct or indirect 2 shareholder of the same corporation) with the authority to 3 exercise the voting power of any or all of his shares, and any 4 such purported voting trust, proxy or other arrangement shall be 5 void. 6 (b) Ownership by estate.--Unless a lesser period of time is 7 provided in a bylaw [of the corporation] adopted by the 8 shareholders or in a written agreement among the shareholders of 9 the corporation, the estate of a deceased shareholder may 10 continue to hold shares of the professional corporation for a 11 reasonable period of administration of the estate, but the 12 personal representative of the estate shall not by reason of the 13 retention of shares be authorized to participate in any 14 decisions concerning the rendering of professional service. 15 * * * 16 § 3133. Notice of meetings of members of mutual insurance 17 companies. 18 (a) General rule.--Unless otherwise restricted in the 19 bylaws, persons authorized or required to give notice of an 20 annual meeting of members of a mutual insurance company for the 21 election of directors or of a meeting of members of a mutual 22 insurance company called for the purpose of considering [an] 23 amendment of the articles or bylaws, or both, of the corporation 24 may, in lieu of any written notice of meeting of members 25 required to be given by this subpart, give notice of such 26 meeting by causing notice of such meeting to be officially 27 published. Such notice shall be published each week for at 28 least: 29 (1) Three successive weeks, in the case of an annual 30 meeting. 19970S1157B2174 - 82 -
1 (2) Four successive weeks, in the case of a meeting to 2 consider [an] amendment of the articles or bylaws, or both. 3 * * * 4 § 4123. Requirements for foreign corporation names. 5 * * * 6 (b) Exceptions.-- 7 (1) The provisions of section 1303(b) (relating to 8 duplicate use of names) shall not prevent the issuance of a 9 certificate of authority to a foreign business corporation 10 setting forth a name that is [confusingly similar to] not 11 distinguishable upon the records of the department from the 12 name of any other domestic or foreign corporation for profit 13 or corporation not-for-profit, [or of any domestic or foreign 14 limited partnership that has filed a certificate or qualified 15 under Chapter 85 (relating to limited partnerships) or 16 corresponding provisions of prior law,] or of any corporation 17 or other association then registered under 54 Pa.C.S. Ch. 5 18 (relating to corporate and other association names) or to any 19 name reserved or registered as provided in this part, if the 20 foreign business corporation applying for a certificate of 21 authority files in the department [one of the following: 22 (i) A] a resolution of its board of directors 23 adopting a fictitious name for use in transacting 24 business in this Commonwealth, which fictitious name is 25 [not confusingly similar to] distinguishable upon the 26 records of the department from the name of the other 27 corporation or other association or [to] from any name 28 reserved or registered as provided in this part and that 29 is otherwise available for use by a domestic business 30 corporation. 19970S1157B2174 - 83 -
1 [(ii) The written consent of the other corporation 2 or other association or holder of a reserved or 3 registered name to use the same or confusingly similar 4 name and one or more words are added to make the name 5 applied for distinguishable from the other name.] 6 * * * 7 § 4126. Amended certificate of authority. 8 (a) General rule.--After receiving a certificate of 9 authority, a qualified foreign business corporation may, subject 10 to the provisions of this subchapter, change [the name under 11 which it is authorized to transact business in this 12 Commonwealth] or correct any of the information set forth in its 13 application for a certificate of authority or previous filings 14 under this section by filing in the Department of State an 15 application for an amended certificate of authority. The 16 application shall be executed by the corporation and shall 17 state: 18 (1) The name under which the applicant corporation 19 currently holds a certificate of authority to do business in 20 this Commonwealth. 21 [(2) The name of the jurisdiction under the laws of 22 which the corporation is incorporated. 23 (3) The address, including street and number, if any, of 24 its principal office under the laws of the jurisdiction in 25 which it is incorporated. 26 (4)] (2) Subject to section 109 (relating to name of 27 commercial registered office provider in lieu of registered 28 address), the address, including street and number, if any, 29 of its registered office in this Commonwealth.[, which may 30 constitute a change in the address of its registered office. 19970S1157B2174 - 84 -
1 (5) The new name of the corporation and] 2 (3) The information to be changed or corrected. 3 (4) If the application reflects a change in the name of 4 the corporation, the application shall include a statement 5 that either: 6 (i) the change of name reflects a change effected in 7 the jurisdiction of incorporation; or 8 (ii) documents complying with section 4123(b) 9 (relating to exception; name) accompany the application. 10 (b) Issuance of amended certificate of authority.--Upon the 11 filing of the application, the applicant corporation shall be 12 deemed to hold an amended certificate of authority. 13 (c) Cross reference.--See section 134 (relating to docketing 14 statement). 15 § 4146. Provisions applicable to all foreign corporations. 16 The following provisions of this subpart shall, except as 17 otherwise provided in this section, be applicable to every 18 foreign corporation for profit, whether or not required to 19 procure a certificate of authority under this chapter: 20 Section 1503 (relating to defense of ultra vires), as to 21 contracts and conveyances [made in] governed by the laws of 22 this Commonwealth and conveyances affecting real property 23 situated in this Commonwealth. 24 Section 1506 (relating to form of execution of 25 instruments), as to instruments or other documents [made or 26 to be performed in] governed by the laws of this Commonwealth 27 or affecting real property situated in this Commonwealth. 28 Section 1510 (relating to certain specifically authorized 29 debt terms), as to obligations (as defined in the section) 30 [executed or effected in] governed by the laws of this 19970S1157B2174 - 85 -
1 Commonwealth or affecting real property situated in this 2 Commonwealth. 3 * * * 4 § 4161. Domestication. 5 * * * 6 (b) Articles of domestication.--The articles of 7 domestication shall be executed by the corporation and shall set 8 forth in the English language: 9 (1) The name of the corporation. If the name is in a 10 foreign language, it shall be set forth in Roman letters or 11 characters or Arabic or Roman numerals. If the name is one 12 that is rendered unavailable by any provision of section 13 1303(b) or (c) (relating to corporate name), the corporation 14 shall adopt, in accordance with any procedures for changing 15 the name of the corporation that are applicable prior to the 16 domestication of the corporation, and shall set forth in the 17 articles of domestication an available name. 18 * * * 19 (c) Cross [reference] references.--See [section] sections 20 134 (relating to docketing statement) and 135 (relating to 21 requirements to be met by filed documents). 22 § 4162. Effect of domestication. 23 (a) General rule.--As a domestic business corporation, the 24 domesticated corporation shall no longer be a foreign business 25 corporation for the purposes of this subpart and shall [have], 26 instead, be a domestic business corporation with all the powers 27 and privileges and [be subject to] all the duties and 28 limitations granted and imposed upon domestic business 29 corporations. [The property, franchises, debts, liens, estates, 30 taxes, penalties and public accounts due the Commonwealth shall 19970S1157B2174 - 86 -
1 continue to be vested in and imposed upon the corporation to the 2 same extent as if it were the successor by merger of the 3 domesticating corporation with and into a domestic business 4 corporation under Subchapter C of Chapter 19 (relating to 5 merger, consolidation, share exchanges and sale of assets).] In 6 all other respects, the domesticated corporation shall be deemed 7 to be the same corporation as it was prior to the domestication 8 without any change in or effect on its existence. Without 9 limiting the generality of the previous sentence, the 10 domestication shall not be deemed to have affected in any way: 11 (1) the right and title of the corporation in and to its 12 assets, property, franchises, estates and choses in action; 13 (2) the liability of the corporation for its debts, 14 obligations, penalties and public accounts due the 15 Commonwealth; 16 (3) any liens or other encumbrances on the property or 17 assets of the corporation; or 18 (4) any contract, license or other agreement to which 19 the corporation is a party or under which it has any rights 20 or obligations. 21 (b) Reclassification of shares.--The shares of the 22 domesticated corporation shall be unaffected by the 23 domestication except to the extent, if any, reclassified in the 24 articles of domestication. 25 § 5303. Corporate name. 26 * * * 27 (b) Duplicate use of names.--The corporate name shall [not 28 be the same as or confusingly similar to] be distinguishable 29 upon the records of the Department of State from: 30 (1) The name of any other domestic corporation for 19970S1157B2174 - 87 -
1 profit or not-for-profit which is either in existence or for 2 which articles of incorporation have been filed but have not 3 yet become effective, or of any foreign corporation for 4 profit or not-for-profit which is either authorized to do 5 business in this Commonwealth or for which an application for 6 a certificate of authority has been filed but which has not 7 yet become effective, [or of any domestic or foreign limited 8 partnership that has filed in the Department of State a 9 certificate or qualified under Chapter 85 (relating to 10 limited partnerships) or under corresponding provisions of 11 prior law,] or the name of any association registered at any 12 time under 54 Pa.C.S. Ch. 5 (relating to corporate and other 13 association names), unless[: 14 (i) where the name is the same or confusingly 15 similar,] the other association: 16 [(A)] (i) has stated that it is about to change 17 its name, or to cease to do business, or is being 18 wound up, or is a foreign association about to 19 withdraw from doing business in this Commonwealth, 20 and the statement and [the] a written consent [of the 21 other association] to the adoption of the name 22 executed by the other association is filed in the 23 Department of State; 24 [(B)] (ii) has filed with the Department of 25 Revenue a certificate of out of existence, or has 26 failed for a period of three successive years to file 27 with the Department of Revenue a report or return 28 required by law and the fact of such failure has been 29 certified by the Department of Revenue to the 30 Department of State; 19970S1157B2174 - 88 -
1 [(C)] (iii) has abandoned its name under the 2 laws of its jurisdiction of incorporation, by 3 amendment, merger, consolidation, division, 4 expiration, dissolution or otherwise, without its 5 name being adopted by a successor in a merger, 6 consolidation, division or otherwise, and an official 7 record of that fact, certified as provided by 42 8 Pa.C.S. § 5328 (relating to proof of official 9 records), is presented by any person to the 10 department; or 11 [(D)] (iv) has had the registration of its name 12 under 54 Pa.C.S. Ch. 5 terminated and, if the 13 termination was effected by operation of 54 Pa.C.S. § 14 504 (relating to effect of failure to make decennial 15 filings), the application for the use of the name is 16 accompanied by a verified statement stating that at 17 least 30 days' written notice of intention to 18 appropriate the name was given to the delinquent 19 association at its [registered office] last known 20 place of business and that, after diligent search by 21 the affiant, the affiant believes the association to 22 be out of existence.[; or 23 (ii) where the name is confusingly similar, the 24 consent of the other association to the adoption of the 25 name is filed in the Department of State. 26 The consent of the association shall be evidenced by a 27 statement to that effect executed by the association.] 28 * * * 29 (e) Remedies for violation of section.--The use of a name in 30 violation of this section shall not vitiate or otherwise affect 19970S1157B2174 - 89 -
1 the corporate existence but any court having jurisdiction may 2 enjoin the corporation from using or continuing to use a name in 3 violation of this section, upon the application of: 4 (1) the Attorney General, acting on his own motion or at 5 the instance of any administrative department, board or 6 commission of this Commonwealth; or 7 (2) any person adversely affected.[; 8 may enjoin the corporation from using or continuing to use a 9 name in violation of this section.] 10 (f) Cross references.--See sections 135(e) (relating to 11 distinguishable names) and 5106(b)(2) (relating to limited 12 uniform application of subpart). 13 § 5304. Required name changes by senior corporations. 14 (a) Adoption of new name upon reactivation.--Where a 15 corporate name is made available on the basis that the 16 corporation or [nonprofit unincorporated] other association 17 [which] that formerly registered [such] the name has failed to 18 file with the Department of Revenue [or in the Department of 19 State] a report or a return required by law or where the 20 corporation or [nonprofit unincorporated] other association has 21 filed with the Department of Revenue a certificate of out of 22 existence, [such] the corporation or other association shall 23 cease to have by virtue of its prior registration any right to 24 the use of [such] the name[, and such]. The corporation or other 25 association, upon withdrawal of the certificate of out of 26 existence or upon the removal of its delinquency in the filing 27 of the required reports or returns, shall make inquiry with the 28 Department of State with regard to the availability of its 29 name[,] and, if [such] the name has been made available to 30 another domestic or foreign corporation for profit or not-for- 19970S1157B2174 - 90 -
1 profit or other association by virtue of [the above] these 2 conditions, shall adopt a new name in accordance with law before 3 resuming its activities. 4 (b) Enforcement of undertaking to release name.--If a 5 corporation has used a name [the same as, or deceptively similar 6 to,] that is not distinguishable upon the records of the 7 Department of State from the name of another corporation or 8 [nonprofit unincorporated] other association as permitted by 9 section 5303(b)(1)[(i)] (relating to duplicate use of names) and 10 the other corporation or [nonprofit unincorporated] other 11 association continues to use its name in this Commonwealth and 12 does not change its name, cease to do business, be wound up, or 13 withdraw as it proposed to do in its consent or change its name 14 as required by subsection (a), any court [of competent] having 15 jurisdiction may enjoin the other corporation or other 16 association from continuing to use its name or a name that is 17 not distinguishable therefrom, upon the application of: 18 (1) the Attorney General, acting on his own motion or at 19 the instance of any administrative department, board or 20 commission of this Commonwealth[,]; or 21 (2) upon the application of any person adversely 22 affected[, may enjoin the other corporation or association 23 from continuing to use its name or a name deceptively similar 24 thereto]. 25 § 5311. Filing of statement of summary of record by certain 26 corporations. 27 (a) General rule.--Where any of the [valid] charter 28 documents of a nonprofit corporation are not on file in the 29 Department of State or there is an error in any such document as 30 transferred to the department pursuant to section 140 (relating 19970S1157B2174 - 91 -
1 to custody and management of orphan corporate and business 2 records), and the corporation desires to file any document in 3 the department under any other provision of this [article] 4 subpart or the corporation desires to secure from the department 5 any certificate to the effect that the corporation is a 6 corporation duly incorporated and existing under the laws of 7 this Commonwealth or a certified copy of the articles of the 8 corporation or the corporation desires to correct the text of 9 its charter documents as on file in the department, the 10 corporation shall file in the department a statement of summary 11 of record which shall be executed by the corporation and shall 12 set forth: 13 (1) The name of the corporation and, subject to section 14 109 (relating to name of commercial registered office 15 provides in lieu of registered address), the location, 16 including street and number, if any, of its registered 17 office. 18 (2) The statute by or under which the corporation was 19 incorporated. 20 (3) The name under which, the manner in which and the 21 date on which the corporation was originally incorporated, 22 including the date when and the place where the original 23 articles were recorded. 24 (4) The place or places, including volume and page 25 numbers or their equivalent, where the documents 26 [constituting the currently effective articles are] that are 27 not on file in the department or that require correction in 28 the records of the department were originally filed or 29 recorded, the date or dates of each [such] filing or 30 recording and the correct text of [such currently effective 19970S1157B2174 - 92 -
1 articles] the documents. The information specified in this 2 paragraph may be omitted in a statement of summary of record 3 that is delivered to the department contemporaneously with 4 amended and restated articles of the corporation filed under 5 this subpart. 6 [(5) Each name by which the corporation was known, if 7 any, other than its original name and its current name, and 8 the date or dates on which each change of name of the 9 corporation became effective. 10 A corporation shall be required to make only one filing under 11 this subsection.] 12 (b) Validation of prior defects in incorporation.--Upon the 13 filing of a statement by a corporation under this section or the 14 transfer to the department of the records relating to a 15 corporation pursuant to section 140, the corporation [named in 16 the statement] shall be deemed to be a validly subsisting 17 corporation to the same extent as if it had been duly 18 incorporated and was existing under this subpart and the 19 department shall so certify regardless of any absence of or 20 defect in the prior proceedings relating to incorporation. 21 (c) Cross [reference] references.--See [section] sections 22 134 (relating to docketing statement), 135 (relating to 23 requirements to be met by filed documents) and 5106(b)(2) 24 (relating to uniform application of subpart). 25 § 5503. Defense of ultra vires. 26 (a) General rule.--[No] A limitation upon the business, 27 [purpose or] purposes[,] or powers of a nonprofit corporation, 28 expressed or implied in its articles or bylaws or implied by 29 law, shall not be asserted in order to defend any action at law 30 or in equity between the corporation and a third person, or 19970S1157B2174 - 93 -
1 between a member and a third person, involving any contract to 2 which the corporation is a party or any right of property or any 3 alleged liability of [whatsoever] whatever nature[; but such], 4 but the limitation may be asserted: 5 (1) In an action by a member against the corporation to 6 enjoin the doing of unauthorized acts or the transaction or 7 continuation of unauthorized business. If the unauthorized 8 acts or business sought to be enjoined are being transacted 9 pursuant to any contract to which the corporation is a party, 10 the court may, if all of the parties to the contract are 11 parties to the action[,] and if it deems [such action] the 12 result to be equitable, set aside and enjoin the performance 13 of [such] the contract, and in so doing shall allow to the 14 corporation, or to the other parties to the contract, as the 15 case may be, such compensation as may be [equitable] 16 appropriate for the loss or damage sustained by any of them 17 from the action of the court in setting aside and enjoining 18 the performance of [such] the contract, but anticipated 19 profits to be derived from the performance of the contract 20 shall not be awarded by the court as a loss or damage 21 sustained. 22 (2) In any action by or in the right of the corporation 23 to procure a judgment in its favor against an incumbent or 24 former officer, director or member of an other body of the 25 corporation for loss or damage due to his unauthorized acts. 26 (3) In a proceeding by the Commonwealth under section 27 503 (relating to actions to revoke corporate franchises)[,] 28 or in a proceeding by the Commonwealth to enjoin the 29 corporation from the doing of unauthorized or unlawful 30 business. 19970S1157B2174 - 94 -
1 (b) Conveyances of property by or to a corporation.--[No] A 2 conveyance or transfer by or to a nonprofit corporation of 3 property, real or personal, of any kind or description, shall 4 not be invalid or fail because in making [such] the conveyance 5 or transfer, or in acquiring the property, real or personal, 6 [the board of directors or other body or any of the officers] 7 any representative of the corporation acting within the scope of 8 the actual or apparent authority given to [them] him by the 9 [board of directors or other body, have] corporation has 10 exceeded any of the purposes or powers of the corporation. 11 (c) [Nonqualified foreign corporations.--The provisions of 12 this section shall extend to contracts and conveyances made by 13 nonqualified foreign corporations in this Commonwealth and to 14 conveyances by nonqualified foreign corporations of real 15 property situated in this Commonwealth.] Cross reference.--See 16 section 6146 (relating to provisions applicable to all foreign 17 corporations). 18 § 5505. Persons bound by bylaws. 19 Except as otherwise provided by section 5713 (relating to 20 personal liability of directors) or any similar provision of 21 law, bylaws of a nonprofit corporation shall operate only as 22 regulations among the members, directors, members of an other 23 body and officers of the corporation, and shall not affect 24 contracts or other dealings with other persons, unless those 25 persons have actual knowledge of the bylaws. 26 § 5506. Form of execution of instruments. 27 (a) General rule.--Any form of execution provided in the 28 articles or bylaws to the contrary notwithstanding, any note, 29 mortgage, evidence of indebtedness, contract[,] or other 30 [instrument in writing] document, or any assignment or 19970S1157B2174 - 95 -
1 endorsement thereof, executed or entered into between any 2 nonprofit corporation and any other person, when signed by one 3 or more officers or agents having actual or apparent authority 4 to sign it, or by the president or vice-president and secretary 5 or assistant secretary or treasurer or assistant treasurer of 6 [such] the corporation, shall be held to have been properly 7 executed for and in behalf of the corporation. 8 (b) Seal unnecessary.--[Except as otherwise required by 9 statute, the] The affixation of the corporate seal shall not be 10 necessary to the valid execution, assignment or endorsement by a 11 corporation of any instrument [in writing] or other document. 12 (c) [Nonqualified foreign corporations.--The provisions of 13 this section shall extend to instruments in writing made or to 14 be performed in this Commonwealth by a nonqualified foreign 15 corporation and to instruments executed by nonqualified foreign 16 corporations affecting real property situated in this 17 Commonwealth.] Cross reference.--See section 6146 (relating to 18 provisions applicable to all foreign corporations). 19 § 5508. Corporate records; inspection by members. 20 (a) Required records.--Every nonprofit corporation shall 21 keep [an original or duplicate record] minutes of the 22 proceedings of the members [and], the directors[,] and [of] any 23 other body [exercising powers or performing duties which under 24 this article may be exercised or performed by such other body, 25 the original or a copy of its bylaws, including all amendments 26 thereto to date, certified by the secretary of the corporation], 27 and [an original or] a [duplicate] membership register, giving 28 the names [of the members, and showing their respective] and 29 addresses of all members and the class and other details of the 30 membership of each. [Every such] The corporation shall also keep 19970S1157B2174 - 96 -
1 appropriate, complete and accurate books or records of account. 2 The records provided for in this subsection shall be kept at 3 [either] any of the following locations: 4 (1) the registered office of the corporation in this 5 Commonwealth [or at its]; 6 (2) the principal place of business wherever 7 situated[.]; or 8 (3) any actual business office of the corporation. 9 (b) Right of inspection by a member.--Every member shall, 10 upon written verified demand [under oath] stating the purpose 11 thereof, have a right to examine, in person or by agent or 12 attorney, during the usual hours for business for any proper 13 purpose, the membership register, books and records of account, 14 and records of the proceedings of the members, directors and 15 [such] any other body, and to make copies or extracts therefrom. 16 A proper purpose shall mean a purpose reasonably related to the 17 interest of [such] the person as a member. In every instance 18 where an attorney or other agent [shall be] is the person who 19 seeks the right [to] of inspection, the demand [under oath] 20 shall be accompanied by a verified power of attorney or [such] 21 other writing [which] that authorizes the attorney or other 22 agent to so act on behalf of the member. The demand [under oath] 23 shall be directed to the corporation: 24 (1) at its registered office in this Commonwealth [or]; 25 (2) at its principal place of business wherever 26 situated[.]; or 27 (3) in care of the person in charge of an actual 28 business office of the corporation. 29 (c) Proceedings for the enforcement of inspection by a 30 member.--If the corporation, or an officer or agent thereof, 19970S1157B2174 - 97 -
1 refuses to permit an inspection sought by a member or attorney 2 or other agent acting for the member pursuant to subsection (b) 3 [of this section] or does not reply to the demand within five 4 business days after the demand has been made, the member may 5 apply to the court for an order to compel [such] the inspection. 6 The court shall determine whether or not the person seeking 7 inspection is entitled to the inspection sought. The court may 8 summarily order the corporation to permit the member to inspect 9 the membership register and the other books and records of the 10 corporation and to make copies or extracts therefrom; or the 11 court may order the corporation to furnish to the member a list 12 of its members as of a specific date on condition that the 13 member first pay to the corporation the reasonable cost of 14 obtaining and furnishing [such] the list and on such other 15 conditions as the court deems appropriate. Where the member 16 seeks to inspect the books and records of the corporation, other 17 than its membership register or list of members, he shall first 18 establish: 19 (1) that he has complied with the provisions of this 20 section respecting the form and manner of making demand for 21 inspection of such document; and 22 (2) that the inspection he seeks is for a proper 23 purpose. 24 Where the member seeks to inspect the membership register or 25 list of members of the corporation and he has complied with the 26 provisions of this section respecting the form and manner of 27 making demand for inspection of [such] the documents, the burden 28 of proof shall be upon the corporation to establish that the 29 inspection he seeks is for an improper purpose. The court may, 30 in its discretion, prescribe any limitations or conditions with 19970S1157B2174 - 98 -
1 reference to the inspection, or award such other or further 2 relief as the court [may deem] deems just and proper. The court 3 may order books, documents and records, pertinent extracts 4 therefrom, or duly authenticated copies thereof, to be brought 5 [within] into this Commonwealth and kept in this Commonwealth 6 upon such terms and conditions as the order may prescribe. 7 (d) Cross references.--See sections 107 (relating to form of 8 records) and 5512 (relating to informational rights of a 9 director). 10 § 5510. [(Reserved).] Certain specifically authorized debt 11 terms. 12 (a) Interest rates.--A nonprofit corporation shall not plead 13 or set up usury, or the taking of more than the lawful rate of 14 interest, or the taking of any finance, service or default 15 charge in excess of any maximum rate therefor provided or 16 prescribed by law, as a defense to any action or proceeding 17 brought against it to recover damages on, or to enforce payment 18 of, or to enforce any other remedy on, any obligation executed 19 or effected by the corporation. 20 (b) Yield maintenance premiums.--A prepayment premium 21 determined by reference to the approximate spread between the 22 yield at issuance, or at the date of amendment of any of the 23 terms, of an obligation of a corporation and the yield at or 24 about such date of an interest rate index of independent 25 significance and contingent upon a change in the ownership of or 26 memberships in the corporation or a default by or other change 27 in the condition or prospects of the corporation or any 28 affiliate of the corporation shall be deemed liquidated damages 29 and shall not constitute a penalty. 30 (c) Definitions.--As used in this section, the following 19970S1157B2174 - 99 -
1 words and phrases shall have the meanings given to them in this 2 subsection: 3 "Affiliate." An affiliate or associate as defined in section 4 2552 (relating to definitions). 5 "Obligation." Includes an installment sale contract. 6 (d) Cross reference.--See section 6146 (relating to 7 provisions applicable to all foreign corporations). 8 § 5512. Informational rights of a director. 9 (a) General rule.--To the extent reasonably related to the 10 performance of the duties of the director, including those 11 arising from service as a member of a committee of the board of 12 directors, a director of a nonprofit corporation is entitled: 13 (1) in person or by any attorney or other agent, at any 14 reasonable time, to inspect and copy corporate books, records 15 and documents and, in addition, to inspect, and receive 16 information regarding, the assets, liabilities and operations 17 of the corporation and any subsidiaries of the corporation 18 incorporated or otherwise organized or created under the laws 19 of this Commonwealth that are controlled directly or 20 indirectly by the corporation; and 21 (2) to demand that the corporation exercise whatever 22 rights it may have to obtain information regarding any other 23 subsidiaries of the corporation. 24 (b) Proceedings for the enforcement of inspection by a 25 director.--If the corporation, or an officer or agent thereof, 26 refuses to permit an inspection or obtain or provide information 27 sought by a director or attorney or other agent acting for the 28 director pursuant to subsection (a) or does not reply to the 29 request within two business days after the request has been 30 made, the director may apply to the court for an order to compel 19970S1157B2174 - 100 -
1 the inspection or the obtaining or providing of the information. 2 The court shall summarily order the corporation to permit the 3 requested inspection or to obtain the information unless the 4 corporation establishes that the information to be obtained by 5 the exercise of the right is not reasonably related to the 6 performance of the duties of the director or that the director 7 or the attorney or agent of the director is likely to use the 8 information in a manner that would violate the duty of the 9 director to the corporation. The order of the court may contain 10 provisions protecting the corporation from undue burden or 11 expense and prohibiting the director from using the information 12 in a manner that would violate the duty of the director to the 13 corporation. 14 (c) Cross references.--See sections 107 (relating to form of 15 records), 5508 (relating to corporate records; inspection by 16 members) and 42 Pa.C.S. § 2503(7) (relating to right of 17 participants to receive counsel fees). 18 § 5545. Income from corporate activities. 19 (a) General rule.--A nonprofit corporation whose lawful 20 activities involve among other things the charging of fees or 21 prices for its services or products, shall have the right to 22 receive [such] that income and, in so doing, may make [an 23 incidental] a profit. All [such incidental] profits shall be 24 applied to the maintenance and operation of the lawful 25 activities of the corporation, or any of its subordinate units 26 or of any not-for-profit association to which it is subordinate, 27 and [in no case] shall otherwise not be divided or distributed 28 in any manner whatsoever among the members, directors, members 29 of an other body or officers of the corporation. [As used in 30 this section the terms fees or prices do not include rates of 19970S1157B2174 - 101 -
1 contribution, fees or dues levied under an insurance certificate 2 issued by a fraternal benefit society, so long as the 3 distribution of profits arising from said fees or prices is 4 limited to the purposes set forth in this section and section 5 5551 (relating to dividends prohibited; compensation and certain 6 payments authorized).] 7 (b) Cross references.--See sections 5511 (relating to 8 establishment of subordinate units) and 5551(relating to 9 dividends prohibited; compensation and certain payments 10 authorized). 11 § 5546. Purchase, sale[, mortgage] and lease of [real] 12 property. 13 [Except for an industrial development corporation whose 14 articles or bylaws otherwise provide, no purchase of real 15 property shall be made by a nonprofit corporation and no 16 corporation shall sell, mortgage, lease away or otherwise 17 dispose of its real property, unless authorized by the vote of 18 two-thirds of the members in office of the board of directors or 19 other body, except that if there are 21 or more directors or 20 members of such other body, the vote of a majority of the 21 members in office shall be sufficient. No application to or 22 confirmation of any court shall be required and, unless 23 otherwise restricted in the bylaws, no vote or consent of the 24 members shall be required to make effective such action by the 25 board or other body. If the real property is subject to a trust 26 the conveyance away shall be free of trust and the trust shall 27 be impinged upon the proceeds of such conveyance.] Except as 28 otherwise provided in this subpart and unless otherwise provided 29 in the bylaws, no application to or confirmation of any court 30 shall be required for the purchase by or the sale, lease or 19970S1157B2174 - 102 -
1 other disposition of the real or personal property, or any part 2 thereof, of a nonprofit corporation, and, unless otherwise 3 restricted in section 5930 (relating to voluntary transfer of 4 corporate assets) or in the bylaws, no vote or consent of the 5 members shall be required to make effective such action by the 6 board or other body. If the property is subject to a trust, the 7 conveyance away shall be free of trust, and the trust shall be 8 impinged upon the proceeds of the conveyance. 9 § 5547. Authority to take and hold trust property. 10 (a) General rule.--Every nonprofit corporation incorporated 11 for a charitable purpose or purposes may take, receive and hold 12 such real and personal property as may be given, devised to[,] 13 or otherwise vested in [such] the corporation, in trust or 14 otherwise, for the purpose or purposes set forth in its 15 articles. 16 (b) Standard of conduct.--The board of directors or other 17 body of the corporation shall, as trustees of [such] trust 18 property, be held to the same degree of responsibility and 19 accountability as if not incorporated, unless: 20 (1) a less degree or a particular degree of 21 responsibility and accountability is prescribed in the trust 22 instrument, or [unless] 23 (2) the board of directors or such other body remain 24 under the control of the members of the corporation or third 25 persons who retain the right to direct, and do direct, the 26 actions of the board or other body as to the use of the trust 27 property from time to time. 28 [(b)] (c) Nondiversion of certain property.--[Property 29 committed to charitable purposes] Trust property shall not, by 30 any proceeding under Chapter 59 (relating to fundamental 19970S1157B2174 - 103 -
1 changes) or otherwise, be diverted from the objects to which it 2 was donated, granted or devised, unless and until the [board of 3 directors or other body] corporation obtains from the court an 4 order under 20 Pa.C.S. Ch. 61 (relating to estates) specifying 5 the disposition of the property. 6 § 5551. Dividends prohibited; compensation and certain payments 7 authorized. 8 (a) General rule.--[A] Except as provided in section 5545 9 (relating to income from corporate activities), a nonprofit 10 corporation shall not pay dividends or distribute any part of 11 its net income or profits to its members, directors, members of 12 an other body or officers. [Nothing herein contained shall 13 prohibit a fraternal benefit society operating under the 14 insurance laws of Pennsylvania from paying dividends or refunds 15 by whatever name known pursuant to the terms of its insurance 16 contracts.] A contribution by a corporation to a not-for-profit 17 association made on or after February 13, 1973, shall not be 18 deemed a dividend or distribution for purposes of this subpart. 19 (b) Reasonable compensation for services.--A [nonprofit] 20 corporation may pay compensation in a reasonable amount to 21 members, directors, members of an other body or officers for 22 services rendered. 23 (c) Certain payments authorized.--A [nonprofit] corporation 24 may confer monetary or other benefits upon members or nonmembers 25 in conformity with its purposes, may repay capital 26 contributions, and may redeem its [subvention certificates or 27 evidences of indebtedness] subventions or obligations, as 28 authorized by this [article, except when the corporation is 29 currently insolvent or would thereby be made insolvent or 30 rendered unable to carry on its corporate purposes, or when the 19970S1157B2174 - 104 -
1 fair value of the assets of the corporation remaining after such 2 conferring of benefits, payment or redemption would be 3 insufficient to meet its liabilities.] subpart unless, after 4 giving effect thereto, the corporation would be unable to pay 5 its debts as they become due in the usual course of its 6 business. A [nonprofit] corporation may make distributions of 7 cash or property to members upon dissolution or final 8 liquidation as permitted by this article. 9 § 5552. Liabilities of members. 10 (a) General rule.--[The members of a nonprofit corporation 11 shall not be personally liable for the debts, liabilities or 12 obligations of the corporation.] A member of a nonprofit 13 corporation shall not be liable, solely by reason of being a 14 member, under an order of a court or in any other manner for a 15 debt, obligation or liability of the corporation of any kind or 16 for the acts of any member or representative of the corporation. 17 (b) Obligations of member to corporation.--A member shall be 18 liable to the corporation only to the extent of any unpaid 19 portion of the capital contributions, membership dues or 20 assessments which the corporation may have lawfully imposed upon 21 him, or for any other indebtedness owed by him to the 22 corporation. No action shall be brought by any creditor of the 23 corporation to reach and apply any such liability to any debt of 24 the corporation until after: 25 (1) final judgment [shall have] has been rendered 26 against the corporation in favor of the creditor and 27 execution thereon returned unsatisfied[, or the corporation 28 shall have been adjudged bankrupt, or]; 29 (2) a case involving the corporation has been brought 30 under 11 U.S.C. Ch. 7 (relating to liquidation) and a 19970S1157B2174 - 105 -
1 distribution has been made and the case closed or a notice of 2 no assets has been issued; or 3 (3) a receiver [shall have] has been appointed with 4 power to collect debts, and [which] the receiver, on demand 5 of a creditor to bring an action thereon, has refused to sue 6 for [such] the unpaid amount, or the corporation [shall have] 7 has been dissolved or ceased its activities leaving debts 8 unpaid. 9 [No such] (c) Action by a creditor.--An action by a creditor 10 under subsection (b) shall not be brought more than three years 11 after the happening of [any one of such events.] the first to 12 occur of the events listed in subsection (b)(1) through (3). 13 § 5709. Conduct of members meeting. 14 (a) Presiding officer.--There shall be a presiding officer 15 at every meeting of the members. The presiding officer shall be 16 appointed in the manner provided in the bylaws or, in the 17 absence of such provision, by the board of directors. If the 18 bylaws are silent on the appointment of the presiding officer 19 and the board fails to designate a presiding officer, the 20 president shall be the presiding officer. 21 (b) Authority of the presiding officer.--Except as otherwise 22 provided in the bylaws, the presiding officer shall determine 23 the order of business and shall have the authority to establish 24 rules for the conduct of the meeting. 25 (c) Procedural standard.--Any action by the presiding 26 officer in adopting rules for, and in conducting, a meeting 27 shall be fair to the members. 28 (d) Closing of the polls.--The presiding officer shall 29 announce at the meeting when the polls close for each matter 30 voted upon. If no announcement is made, the polls shall be 19970S1157B2174 - 106 -
1 deemed to have closed upon the final adjournment of the meeting. 2 After the polls close, no ballots, proxies or votes, nor any 3 revocations or changes thereto, may be accepted. 4 § 5729. Voting rights of directors. 5 (a) General rule.--Unless otherwise provided in a bylaw 6 adopted by the members, every director of a nonprofit 7 corporation shall be entitled to one vote. Without limiting the 8 generality of the foregoing, a bylaw adopted by the members may 9 provide that a class or other defined group of directors shall 10 have multiple or fractional voting rights, or no right to vote, 11 either generally or under specified circumstances. 12 (b) [Multiple and fractional voting.--The requirement of 13 this article] Application of procedural requirements.--Any 14 requirement of this subpart for the presence of or vote or other 15 action by a specified percentage of directors shall be satisfied 16 by the presence of or vote or other action by directors entitled 17 to cast [such] the specified percentage of the votes [which all] 18 that all voting directors in office are entitled to cast. 19 § 5731. Executive and other committees of the board. 20 (a) Establishment and powers.--Unless otherwise restricted 21 in the bylaws: 22 (1) The board of directors may, by resolution adopted by 23 a majority of the directors in office, establish one or more 24 committees to consist of one or more directors of the 25 corporation. 26 (2) Any [such] committee, to the extent provided in the 27 resolution of the board of directors or in the bylaws, shall 28 have and may exercise all of the powers and authority of the 29 board of directors, except that [no such] a committee shall 30 not have any power or authority as to the following: 19970S1157B2174 - 107 -
1 (i) The submission to members of any action 2 requiring approval of members under this [article] 3 subpart. 4 (ii) The creation or filling of vacancies in the 5 board of directors. 6 (iii) The adoption, amendment or repeal of the 7 bylaws. 8 (iv) The amendment or repeal of any resolution of 9 the board that by its terms is amendable or repealable 10 only by the board. 11 (v) Action on matters committed by the bylaws or a 12 resolution of the board of directors exclusively to 13 another committee of the board. 14 [(2)] (3) The board may designate one or more directors 15 as alternate members of any committee, who may replace any 16 absent or disqualified member at any meeting of the 17 committee. In the absence or disqualification of a member of 18 a committee, the member or members thereof present at any 19 meeting and not disqualified from voting, whether or not he 20 or they constitute a quorum, may unanimously appoint another 21 director to act at the meeting in the place of any [such] 22 absent or disqualified member. 23 (b) Term.--Each committee of the board shall serve at the 24 pleasure of the board. 25 § 5745. Advancing expenses. 26 Expenses (including attorneys' fees) incurred in defending 27 any action or proceeding referred to in this subchapter may be 28 paid by a nonprofit corporation in advance of the final 29 disposition of the action or proceeding upon receipt of an 30 undertaking by or on behalf of the representative to repay the 19970S1157B2174 - 108 -
1 amount if it is ultimately determined that he is not entitled to 2 be indemnified by the corporation as authorized in this 3 subchapter or otherwise. Except as otherwise provided in the 4 bylaws, advancement of expenses shall be authorized by the board 5 of directors. Section 5728 (relating to interested members, 6 directors or officers; quorum) shall not be applicable to the 7 advancement of expenses under this section. 8 § 5748. Application to surviving or new corporations. 9 [For] (a) General rule.--Except as provided in subsection 10 (b), for the purposes of this subchapter, references to "the 11 corporation" include all constituent corporations absorbed in a 12 consolidation, merger or division, as well as the surviving or 13 new corporations surviving or resulting therefrom, so that any 14 person who is or was a representative of the constituent, 15 surviving or new corporation, or is or was serving at the 16 request of the constituent, surviving or new corporation as a 17 representative of another domestic or foreign corporation for 18 profit or not-for-profit, partnership, joint venture, trust or 19 other enterprise, shall stand in the same position under the 20 provisions of this subchapter with respect to the surviving or 21 new corporation as he would if he had served the surviving or 22 new corporation in the same capacity. 23 (b) Divisions.--Notwithstanding subsection (a), the 24 obligations of a dividing corporation to indemnify and advance 25 expenses of its representatives, whether arising under this 26 subchapter or otherwise, may be allocated in a division in the 27 same manner and with the same effect as any other liability of 28 the dividing corporation. 29 § 5758. Voting rights of members. 30 (a) General rule.--Unless otherwise provided in a bylaw 19970S1157B2174 - 109 -
1 adopted by the members, every member of a nonprofit corporation 2 shall be entitled to one vote. 3 (b) Procedures.--The manner of voting on any matter, 4 including changes in the articles or bylaws, may be by ballot, 5 mail or any reasonable means provided in a bylaw adopted by the 6 members. If a bylaw adopted by the members provides a fair and 7 reasonable procedure for the nomination of candidates for any 8 office, only candidates who have been duly nominated in 9 accordance therewith shall be eligible for election. Unless 10 otherwise provided in such a bylaw, in elections for directors, 11 voting shall be by ballot, and the candidates receiving the 12 highest number of votes from each class or group of classes, if 13 any, of members entitled to elect directors separately up to the 14 number of directors to be elected by such class or group of 15 classes shall be elected. If at any meeting of members directors 16 of more than one class are to be elected, each class of 17 directors shall be elected in a separate election. 18 (c) Cumulative voting.--[The members of a nonprofit 19 corporation shall have the right to cumulate their votes for the 20 election of directors only if and to the extent a bylaw adopted 21 by the members so provides.] If a bylaw adopted by the members 22 so provides, in each election of directors of a nonprofit 23 corporation every member entitled to vote shall have the right 24 to multiply the number of votes to which he may be entitled by 25 the total number of directors to be elected in the same election 26 by the members or the class of members to which he belongs and 27 he may cast the whole number of his votes for one candidate or 28 he may distribute them among any two or more candidates. 29 (d) Sale of votes.--No member shall sell his vote or issue a 30 proxy for money or anything of value. 19970S1157B2174 - 110 -
1 (e) Voting lists.--Upon request of a member, the books or 2 records of membership shall be produced at any regular or 3 special meeting of the corporation. If at any meeting the right 4 of a person to vote is challenged, the presiding officer shall 5 require [such] the books or records to be produced as evidence 6 of the right of the person challenged to vote, and all persons 7 who appear by [such] the books or records to be members entitled 8 to vote may vote. See section 6145 (relating to applicability of 9 certain safeguards to foreign corporations). 10 § 5782. Actions against directors, members of an other body and 11 officers. 12 (a) General rule.--Except as provided in subsection (b), in 13 any action or proceeding brought to enforce a secondary right on 14 the part of one or more members of a nonprofit corporation 15 against any present or former officer, director or member of an 16 other body of the corporation because the corporation refuses to 17 enforce rights that may properly be asserted by it, each 18 plaintiff must aver and it must be made to appear that each 19 plaintiff was a member of the corporation at the time of the 20 transaction of which he complains. 21 (b) Exception.--Any member who, except for the provisions of 22 subsection (a), would be entitled to maintain the action or 23 proceeding and who does not meet such requirements may, 24 nevertheless in the discretion of the court, be allowed to 25 maintain the action or proceeding on preliminary showing to the 26 court, by application and upon such verified statements and 27 depositions as may be required by the court, that there is a 28 strong prima facie case in favor of the claim asserted on behalf 29 of the corporation and that without the action serious injustice 30 will result. 19970S1157B2174 - 111 -
1 (c) Security for costs.--In any action or proceeding 2 instituted or maintained by less than the smaller of 50 members 3 of any class or 5% of the members of any class of the 4 corporation, the corporation in whose right the action or 5 proceeding is brought shall be entitled at any stage of the 6 proceedings to require the plaintiffs to give security for the 7 reasonable expenses, including attorney fees, that may be 8 incurred by it in connection therewith or for which it may 9 become liable pursuant to section 5743 (relating to mandatory 10 indemnification), but only insofar as relates to actions by or 11 in the right of the corporation, to which security the 12 corporation shall have recourse in such amount as the court 13 determines upon the termination of the action or proceeding. The 14 amount of security may, from time to time, be increased or 15 decreased in the discretion of the court upon showing that the 16 security provided has or may become inadequate or excessive. The 17 security may be denied or limited in the discretion of the court 18 upon preliminary showing to the court, by application and upon 19 such verified statements and depositions as may be required by 20 the court, establishing prima facie that the requirement of full 21 or partial security would impose undue hardship on plaintiffs 22 and serious injustice would result. 23 (d) Cross reference.--See section 6146 (relating to 24 provisions applicable to all foreign corporations). 25 § 5903. Bankruptcy or insolvency proceedings. 26 (a) General rule.--[Whenever] Unless otherwise provided in 27 the bylaws, whenever a nonprofit corporation is insolvent or in 28 financial difficulty, the board of directors may, by resolution 29 and without the consent of the members, authorize and designate 30 the officers of the corporation to execute a deed of assignment 19970S1157B2174 - 112 -
1 for the benefit of creditors, or file a voluntary petition in 2 bankruptcy, or file an answer consenting to the appointment of a 3 receiver upon a complaint in the nature of an equity action 4 filed by creditors or members, or, if insolvent, file an answer 5 to an involuntary petition in bankruptcy admitting the 6 insolvency of the corporation and its willingness to be adjudged 7 a debtor on that ground. 8 (b) Bankruptcy proceedings.--[A] If authorized pursuant to 9 subsection (a), a nonprofit corporation may participate in 10 proceedings under and in the manner provided by Title 11 of the 11 United States Code (relating to bankruptcy) notwithstanding any 12 contrary provision of its articles or bylaws or this subpart, 13 other than [section] sections 103 (relating to subordination of 14 title to regulatory laws) and 5107 (relating to subordination of 15 subpart to canon law). The corporation shall have full power and 16 authority to put into effect and carry out a plan of 17 reorganization or arrangement and the decrees and orders of the 18 court, or judge or referee relative thereto, and may take any 19 proceeding and do any act provided in the plan or arrangement or 20 directed by such decrees and orders, without further action by 21 its directors or members. Such power and authority may be 22 exercised, and such proceedings and acts may be taken, as may be 23 directed by such decrees or orders, by the trustees or receivers 24 of the corporation appointed in the bankruptcy proceedings, or a 25 majority thereof, or, if none be appointed and acting, by 26 designated officers of the corporation, or by a master or other 27 representative appointed by the court or judge or referee, with 28 the effect as if exercised and taken by unanimous action of the 29 directors and members of the corporation. Without limiting the 30 generality or effect of the foregoing, the corporation may: 19970S1157B2174 - 113 -
1 * * * 2 § 5912. Proposal of amendments. 3 (a) General rule.--Every amendment [to] of the articles of a 4 nonprofit corporation shall be proposed [by]: 5 (1) by the adoption by the board of directors or other 6 body of a resolution setting forth the proposed amendment; 7 (2) unless otherwise provided in the articles, by 8 petition of members entitled to cast at least 10% of the 9 votes [which] that all members are entitled to cast thereon, 10 setting forth the proposed amendment, which petition shall be 11 directed to the board of directors and filed with the 12 secretary of the corporation; or 13 (3) by such other method as may be provided in the 14 bylaws. 15 [The] (b) Submission to members.--Except where the approval 16 of the members is unnecessary under this subchapter, the board 17 of directors or other body [or the petitioning members] shall 18 direct that the proposed amendment be submitted to a vote of the 19 members entitled to vote thereon at a regular or special meeting 20 of the members. 21 [(b)] (c) Form of amendment.--[The resolution or petition 22 shall contain the language of the proposed amendment to the 23 articles by providing that the articles shall be amended so as 24 to read as therein set forth in full, or that any provision 25 thereof be amended so as to read as therein set forth in full, 26 or that the matter stated in the resolution or petition be added 27 to or stricken from the articles. The resolution or petition may 28 set forth the manner and basis of reclassifying the shares of 29 the corporation.] The resolution or petition shall contain the 30 language of the proposed amendment of the articles: 19970S1157B2174 - 114 -
1 (1) by setting forth the existing text of the articles 2 or the provision thereof that is proposed to be amended, with 3 brackets around language that is to be deleted and 4 underscoring under language that is to be added; or 5 (2) by providing that the articles shall be amended so 6 as to read as therein set forth in full, or that any 7 provision thereof be amended so as to read as therein set 8 forth in full, or that the matter stated in the resolution or 9 petition be added to or stricken from the articles. 10 (d) Terms of amendment.--The resolution or petition may set 11 forth the manner and basis of reclassifying the memberships in 12 or shares of the corporation. Any of the terms of a plan of 13 reclassification or other action contained in an amendment may 14 be made dependent upon facts ascertainable outside of the 15 amendment if the manner in which the facts will operate upon the 16 terms of the amendment is set forth in the amendment. Such facts 17 may include, without limitation, actions or events within the 18 control of or determinations made by the corporation or a 19 representative of the corporation. 20 § 5922. Plan of merger or consolidation. 21 (a) Preparation of plan.--A plan of merger or consolidation, 22 as the case may be, shall be prepared, setting forth: 23 (1) The terms and conditions of the merger or 24 consolidation. 25 [(2) The mode of carrying the merger or consolidation 26 into effect. 27 (3)] (2) If the surviving or new corporation is or is to 28 be a domestic nonprofit corporation: 29 (i) any changes desired to be made in the articles, 30 which may include a restatement of the articles in the 19970S1157B2174 - 115 -
1 case of a merger; or 2 (ii) in the case of a consolidation, all of the 3 statements required by this [article] subpart to be set 4 forth in restated articles. 5 [(4)] (3) Such other [details and] provisions as are 6 deemed desirable. 7 (b) Post-adoption amendment.--A plan of merger or 8 consolidation may contain a provision that the boards of 9 directors or other bodies of the constituent corporations may 10 amend the plan at any time prior to its effective date, except 11 that an amendment made subsequent to the adoption of the plan by 12 the members of any constituent corporation shall not change: 13 (1) The term of memberships or the amount or kind of 14 securities, obligations, cash, property or rights to be 15 received in exchange for or on conversion of all or any of 16 the memberships in the constituent corporation. 17 (2) Any term of the articles of the surviving or new 18 corporation to be effected by the merger or consolidation. 19 (3) Any of the terms and conditions of the plan if the 20 change would adversely affect the members of the constituent 21 corporation. 22 [(b)] (c) Proposal.--Every merger or consolidation shall be 23 proposed in the case of each domestic nonprofit corporation 24 [by]: 25 (1) by the adoption by the board of directors or other 26 body of a resolution approving the plan of merger or 27 consolidation; 28 (2) unless otherwise provided in the articles, by 29 petition of members entitled to cast at least 10% of the 30 votes [which] that all members are entitled to cast thereon, 19970S1157B2174 - 116 -
1 setting forth the proposed plan of merger or consolidation, 2 which petition shall be directed to the board of directors 3 and filed with the secretary of the corporation; or 4 (3) by such other method as may be provided in the 5 bylaws. 6 [The] (d) Submission to members.--Except where the 7 corporation has no members entitled to vote thereon, the board 8 of directors or other body [or the petitioning members] shall 9 direct that the plan be submitted to a vote of the members 10 entitled to vote thereon at a regular or special meeting of the 11 members. 12 (e) Party to plan or transaction.--A corporation, 13 partnership, business trust or other association that approves a 14 plan in its capacity as a member or creditor of a merging or 15 consolidating corporation, or that furnishes all or a part of 16 the consideration contemplated by a plan, does not thereby 17 become a party to the plan or the merger or consolidation for 18 the purposes of this subchapter. 19 (f) Reference to outside facts.--Any of the terms of a plan 20 of merger or consolidation may be made dependent upon facts 21 ascertainable outside of the plan if the manner in which the 22 facts will operate upon the terms of the plan is set forth in 23 the plan. Such facts may include, without limitation, actions or 24 events within the control of or determinations made by a party 25 to the plan or a representative of a party to the plan. 26 § 5923. Notice of meeting of members. 27 (a) General rule.--Written notice of the meeting of members 28 that will act on the proposed plan shall[, not less than ten 29 days before the meeting of members called for the purpose of 30 considering the proposed plan,] be given to each member of 19970S1157B2174 - 117 -
1 record, whether or not entitled to vote thereon, of each 2 domestic nonprofit corporation that is a party to the merger or 3 consolidation. There shall be included in, or enclosed with, 4 [such] the notice a copy of the proposed plan or a summary 5 thereof. The notice shall state that a copy of the bylaws of the 6 surviving or new corporation will be furnished to any member on 7 request and without cost. 8 (b) Cross reference.--See Subchapter A of Chapter 57 9 (relating to notice and meetings generally). 10 § 5929. Effect of merger or consolidation. 11 (a) Single surviving or new corporation.--Upon the merger or 12 consolidation becoming effective, the several corporations 13 parties to the [plan of] merger or consolidation shall be a 14 single corporation which, in the case of a merger, shall be 15 [that] the corporation designated in the plan of merger as the 16 surviving corporation[,] and, in the case of a consolidation, 17 shall be the new corporation provided for in the plan of 18 consolidation. The separate existence of all corporations 19 parties to the [plan of] merger or consolidation shall cease, 20 except that of the surviving corporation, in the case of a 21 merger. The surviving or new corporation, as the case may be, if 22 it is a domestic nonprofit corporation, shall not thereby 23 acquire authority to engage in any business or exercise any 24 right [which] that a corporation may not be incorporated under 25 this [article] subpart to engage in or exercise. 26 (b) Property rights.--Except as otherwise provided by order, 27 if any, obtained pursuant to section [5547(b)] 5547(c) (relating 28 to nondiversion of certain property), all the property, real, 29 personal[,] and mixed, and franchises of each of the 30 corporations parties to the [plan of] merger or consolidation, 19970S1157B2174 - 118 -
1 and all debts due on whatever account to any of them, including 2 subscriptions for membership and other choses in action 3 belonging to any of them, shall be [taken and] deemed to be 4 [transferred to and] vested in and shall belong to the surviving 5 or new corporation, as the case may be, without further [act or 6 deed] action, and the title to any real estate, or any interest 7 therein, vested in any of the corporations shall not revert or 8 be in any way impaired by reason of the merger or consolidation. 9 The surviving or new corporation shall thenceforth be 10 responsible for all the liabilities [and obligations] of each of 11 the corporations so merged or consolidated. [No liens] Liens 12 upon the property of the merging or consolidating corporations 13 shall not be impaired by [such] the merger or consolidation, and 14 any claim existing or action or proceeding pending by or against 15 any of [such] the corporations may be prosecuted to judgment as 16 if [such] the merger or consolidation had not taken place, or 17 the surviving or new corporation may be proceeded against or 18 substituted in its place. Any devise, gift or grant contained in 19 any will or other instrument, in trust or otherwise, made before 20 or after such merger or consolidation, to or for any of the 21 constituent corporations, shall inure to the surviving or new 22 corporation, as the case may be, subject to compliance with the 23 requirements of section 5550 (relating to devises, bequests and 24 gifts after certain fundamental changes). 25 (c) Taxes.--Any taxes, penalties and public accounts of the 26 Commonwealth, claimed against any of the merging or 27 consolidating corporations, but not settled, assessed or 28 determined prior to [such] the merger or consolidation, shall be 29 settled, assessed or determined against the surviving or new 30 corporation[,] and, together with interest thereon, shall be a 19970S1157B2174 - 119 -
1 lien against the franchises and property, both real and 2 personal, of the surviving or new corporation. 3 (d) Articles of incorporation.--In the case of a merger, the 4 articles of incorporation of the surviving domestic nonprofit 5 corporation, if any, shall be deemed to be amended to the 6 extent, if any, that changes in its articles are stated in the 7 plan of merger[; and in]. In the case of a consolidation into a 8 domestic nonprofit corporation, the statements [which] that are 9 set forth in the plan of consolidation, or articles of 10 incorporation set forth therein, shall be deemed to be the 11 articles of incorporation of the new corporation. 12 § 5952. Proposal and adoption of plan of division. 13 (a) Preparation of plan.--A plan of division shall be 14 prepared, setting forth: 15 (1) The terms and conditions of the division, including 16 the manner and basis of: 17 (i) [the] The reclassification of the membership 18 interests or shares [or obligations] of the surviving 19 corporation, if there be one[; and]. 20 (ii) [the] The disposition of the membership 21 interests or shares [and] or obligations, if any, of the 22 new corporation or corporations resulting from the 23 division. 24 [(2) The mode of carrying the division into effect. 25 (3)] (2) A statement that the dividing nonprofit 26 corporation will, or will not, survive the division. 27 [(4)] (3) Any changes desired to be made in the articles 28 of the surviving corporation, if there be one, including a 29 restatement of the articles. 30 [(5)] (4) The articles of incorporation required by 19970S1157B2174 - 120 -
1 subsection (b) [of this section]. 2 [(6)] (5) Such other [details and] provisions as are 3 deemed desirable. 4 (b) Articles of new corporations.--There shall be included 5 in or annexed to the plan of division: 6 (1) Articles of incorporation, which shall contain all 7 of the statements required by this [article] subpart to be 8 set forth in restated articles, for each of the new domestic 9 nonprofit corporations, if any, resulting from the division. 10 (2) Articles of incorporation, certificates of 11 incorporation[,] or other charter documents for each of the 12 new foreign nonprofit corporations [not-for-profit], if any, 13 resulting from the division. 14 (c) Proposal and adoption.--[The] Except as otherwise 15 provided in section 5953 (relating to division without member 16 approval), the plan of division shall be proposed and adopted, 17 and may be amended after its adoption and terminated, by a 18 domestic nonprofit corporation in the manner provided for the 19 proposal, adoption, amendment and termination of a plan of 20 merger in Subchapter C (relating to merger, consolidation and 21 sale of assets) or, if the dividing corporation is a foreign 22 nonprofit corporation [not-for-profit], in accordance with the 23 laws of the jurisdiction in which it is incorporated[.] and, in 24 the case of a foreign domiciliary corporation, the provisions of 25 this subpart to the extent provided by section 6145 (relating to 26 applicability of certain safeguards to foreign corporations). 27 There shall be included in or enclosed with the notice of the 28 meeting of members that will act on the plan a copy or summary 29 of the plan. 30 (d) Special requirements.--If any provision of the bylaws of 19970S1157B2174 - 121 -
1 a dividing domestic nonprofit corporation adopted before January 2 1, 1972 shall require for the adoption of a plan of merger or 3 consolidation or a plan involving the sale, lease or exchange of 4 all or substantially all of the property and assets of the 5 corporation a specific number or percentage of votes of 6 directors, members, or members of an other body or other special 7 procedures, the plan of division shall not be adopted without 8 such number or percentage of votes or compliance with such other 9 special procedures. 10 (e) Financial status of resulting corporations.--Unless the 11 plan of division provides that the dividing corporation shall 12 survive the division and that all membership interests or shares 13 or obligations, if any, of all new corporations resulting from 14 the plan shall be owned solely by the surviving corporation, no 15 plan of division may be made effective at a time when the 16 dividing corporation is insolvent or when the division would 17 render any of the resulting corporations insolvent. 18 (f) Rights of holders of indebtedness.--If any debt 19 securities, notes or similar evidences of indebtedness for money 20 borrowed, whether secured or unsecured, indentures or other 21 contracts were issued, incurred or executed by the dividing 22 corporation before January 1, 1972, and have not been amended 23 subsequent to that date, the liability of the dividing 24 corporation thereunder shall not be affected by the division nor 25 shall the rights of the obligees thereunder be impaired by the 26 division, and each of the resulting corporations may be 27 proceeded against or substituted in place of the dividing 28 corporation as joint and several obligors on such liability, 29 regardless of any provision of the plan of division apportioning 30 the liabilities of the dividing corporation. 19970S1157B2174 - 122 -
1 (g) Reference to outside facts.--Any of the terms of a plan 2 of division may be made dependent upon facts ascertainable 3 outside of the plan if the manner in which the facts will 4 operate upon the terms of the plan is set forth in the plan. 5 Such facts may include, without limitation, actions or events 6 within the control of or determinations made by the dividing 7 corporation or a representative of the dividing corporation. 8 § 5953. [(Reserved).] Division without member approval. 9 Unless otherwise required by its bylaws or by section 5952 10 (relating to proposal and adoption of plan of division), a plan 11 of division that does not alter the state of incorporation of a 12 nonprofit corporation nor amend in any respect the provisions of 13 its articles, except amendments that under section 5914(b) 14 (relating to adoption in absence of voting members) may be made 15 without member action, shall not require the approval of the 16 members of the corporation if the transfers of assets effected 17 by the division, if effected by means of a sale, lease, exchange 18 or other disposition, would not require the approval of members 19 under section 5930 (relating to voluntary transfer of corporate 20 assets). 21 § 5957. Effect of division. 22 (a) Multiple resulting corporations.--Upon the division 23 becoming effective, the dividing corporation shall be subdivided 24 into the distinct and independent resulting corporations named 25 in the plan of division and, if the dividing corporation is not 26 to survive the division, the existence of the dividing 27 corporation shall cease. The resulting corporations, if they are 28 domestic nonprofit corporations, shall not thereby acquire 29 authority to engage in any business or exercise any right 30 [which] that a corporation may not be incorporated under this 19970S1157B2174 - 123 -
1 [article] subpart to engage in or exercise. Any resulting 2 foreign nonprofit corporation [which] that is stated in the 3 articles of division to be a qualified foreign nonprofit 4 corporation shall be a qualified foreign nonprofit corporation 5 under [this subpart] Article C (relating to foreign nonprofit 6 corporations), and the articles of division shall be deemed to 7 be the application for a certificate of authority and the 8 certificate of authority issued thereon of [such] the 9 corporation. 10 (b) Property rights; allocations of assets and 11 liabilities.-- 12 (1) Except as otherwise provided by order, if any, 13 obtained pursuant to section [5547(b)] 5547(c) (relating to 14 nondiversion of certain property)[, all]: 15 (i) All the property, real, personal[,] and mixed, 16 and franchises of the dividing corporation, and all debts 17 due on whatever account to it, including subscriptions 18 for membership and other choses in action belonging to 19 it, shall, to the extent allocations of assets are 20 contemplated by the plan of division, be [taken and] 21 deemed without further [act or deed] action to be 22 [transferred] allocated to and vested in the resulting 23 corporations on such a manner and basis and with such 24 effect as is specified in the plan [of division], or per 25 capita among the resulting corporations, as tenants in 26 common, if no [such] specification is made in the plan[. 27 The], and the title to any real estate, or interest 28 therein, vested in any of the corporations shall not 29 revert or be in any way impaired by reason of the 30 division. 19970S1157B2174 - 124 -
1 (ii) Upon the division becoming effective, the 2 resulting corporations shall each thenceforth be 3 responsible as separate and distinct corporations only 4 for such liabilities [and obligations] as each 5 corporation may undertake or incur in its own name, but 6 shall be liable [inter se] for the [debts and] 7 liabilities of the dividing corporation in the manner and 8 on the basis [specified in the plan of division. No 9 liens] provided in paragraphs (4) and (5). 10 (iii) Liens upon the property of the dividing 11 corporation shall not be impaired by the division. 12 [One] (iv) To the extent allocations of liabilities 13 are contemplated by the plan of division, the liabilities 14 of the dividing corporation shall be deemed without 15 further action to be allocated to and become the 16 liabilities of the resulting corporations on such a 17 manner and basis and with such effect as is specified in 18 the plan; and one or more, but less than all, of the 19 resulting corporations shall be free of [all] the 20 liabilities [and obligations] of the dividing corporation 21 to the extent, if any, specified in the plan, if in 22 either case: 23 (A) no fraud [of corporate creditors or] on 24 members without voting rights [and if no] or 25 violation of law shall be effected thereby[,]; and 26 [if applicable provisions of law are complied with. 27 Otherwise, the liability] 28 (B) the plan does not constitute a fraudulent 29 transfer under 12 Pa.C.S. Ch. 51 (relating to 30 fraudulent transfers). 19970S1157B2174 - 125 -
1 (v) If the conditions in subparagraph (iv) for 2 freeing one or more of the resulting corporations from 3 the liabilities of the dividing corporation, or for 4 allocating some or all of the liabilities of the dividing 5 corporation, are not satisfied, the liabilities of the 6 dividing corporation[, or of its members, directors, or 7 officers,] as to which those conditions are not satisfied 8 shall not be affected by the division[,] nor shall the 9 rights of [the] creditors [thereof or of any person 10 dealing with such corporation] thereunder be impaired by 11 [such] the division[,] and[, except as otherwise provided 12 in this section,] any claim existing or action or 13 proceeding pending by or against [such] the corporation 14 with respect to those liabilities may be prosecuted to 15 judgment as if [such] the division had not taken place, 16 or the resulting corporations may be proceeded against or 17 substituted in [its] place of the dividing corporation as 18 joint and several obligors on [such liability] those 19 liabilities, regardless of any provision of the plan of 20 division apportioning the [debts and] liabilities of the 21 dividing corporation. 22 (2) It shall not be necessary for a plan of division to 23 list each individual asset or liability of the dividing 24 corporation to be allocated to a new corporation so long as 25 those assets and liabilities are described in a reasonable 26 manner. 27 (3) Each new corporation shall hold any assets and 28 liabilities allocated to it as the successor to the dividing 29 corporation, and those assets and liabilities shall not be 30 deemed to have been assigned to the new corporation in any 19970S1157B2174 - 126 -
1 manner, whether directly or indirectly or by operation of 2 law. 3 (c) Taxes.--Any taxes, penalties and public accounts of the 4 Commonwealth, claimed against the dividing corporation, but not 5 settled, assessed or determined prior to [such] the division, 6 shall be settled, assessed or determined against any of the 7 resulting corporations[,] and, together with interest thereon, 8 shall be a lien against the franchises and property, both real 9 and personal, of all [such] the corporations. [The] Upon the 10 application of the dividing corporation, the Department of 11 Revenue [may, upon the application of the dividing corporation], 12 with the concurrence of the Office of Employment Security of the 13 Department of Labor and Industry, shall release one or more, but 14 less than all, of the resulting corporations from liability and 15 liens for all taxes, penalties and public accounts of the 16 dividing corporation due the Commonwealth [or any other taxing 17 authority] for periods prior to the effective date of the 18 division, if [the Department of Revenue is] those departments 19 are satisfied that the public revenues will be adequately 20 secured. 21 (d) Articles of surviving corporation.--The articles of 22 incorporation of the surviving corporation, if there be one, 23 shall be deemed to be amended to the extent, if any, that 24 changes in its articles are stated in the plan of division. 25 (e) Articles of new corporations.--The statements [which] 26 that are set forth in the plan of division with respect to each 27 new domestic nonprofit corporation and [which] that are required 28 or permitted to be set forth in restated articles of 29 incorporation of corporations incorporated under this [article] 30 subpart, or the articles of incorporation of each new 19970S1157B2174 - 127 -
1 corporation set forth therein, shall be deemed to be the 2 articles of incorporation of each [such] new corporation. 3 (f) Directors and officers.--Unless otherwise provided in 4 the plan, the directors and officers of the dividing corporation 5 shall be the initial directors and officers of each of the 6 resulting corporations. 7 (g) Disposition of memberships.--Unless otherwise provided 8 in the plan, the memberships and other securities or 9 obligations, if any, of each new corporation resulting from the 10 division shall be distributable to: 11 (1) the surviving corporation, if the dividing 12 corporation survives the division; or 13 (2) the members of the dividing corporation pro rata, in 14 any other case. 15 (h) Conflict of laws.--It is the intent of the General 16 Assembly that: 17 (1) The effect of a division of a domestic business 18 corporation shall be governed solely by the laws of this 19 Commonwealth and any other jurisdiction under the laws of 20 which any of the resulting corporations is incorporated. 21 (2) The effect of a division on the assets and 22 liabilities of the dividing corporation shall be governed 23 solely by the laws of this Commonwealth and any other 24 jurisdiction under the laws of which any of the resulting 25 corporations is incorporated. 26 (3) The validity of any allocations of assets or 27 liabilities by a plan of division of a domestic business 28 corporation, regardless of whether or not any of the new 29 corporations is a foreign business corporation, shall be 30 governed solely by the laws of this Commonwealth. 19970S1157B2174 - 128 -
1 (4) In addition to the express provisions of this 2 subsection, this subchapter shall otherwise generally be 3 granted the protection of full faith and credit under the 4 Constitution of the United States. 5 § 5961. Conversion authorized. 6 (a) General rule.--Any nonprofit corporation may, in the 7 manner provided in this subchapter, be converted into a business 8 corporation, [hereinafter] designated in this subchapter as the 9 resulting corporation. 10 (b) Exceptions.-- 11 (1) This subchapter shall not authorize any conversion 12 involving: 13 [(i) A cooperative corporation. 14 (ii)] (i) Beneficial, benevolent, fraternal or 15 fraternal benefit societies having a lodge system and a 16 representative form of government, or transacting any 17 type of insurance whatsoever. 18 [(iii)] (ii) Any corporation [which] that by the 19 laws of this Commonwealth is subject to the supervision 20 of the Department of Banking, the Insurance Department or 21 the Pennsylvania Public Utility Commission, unless the 22 agency expressly approves the transaction in writing. 23 (2) [Paragraph (1) of this subsection] Subsection (a) 24 shall not be construed as repealing any statute [which] that 25 provides a procedure for the conversion of a nonprofit 26 corporation into an insurance corporation. 27 § 5962. Proposal and adoption of plan of conversion. 28 (a) Preparation of plan.--A plan of conversion shall be 29 prepared, setting forth: 30 (1) The terms and conditions of the conversion. 19970S1157B2174 - 129 -
1 [(2) The mode of carrying the conversion into effect. 2 (3)] (2) A restatement of the articles of the resulting 3 corporation, which articles shall comply with the 4 requirements of [Subpart B of Part II (relating to business 5 corporations)] this part relating to business corporations. 6 [(4)] (3) Such other [details and] provisions as are 7 deemed desirable. 8 (b) Proposal and adoption.--The plan of conversion shall be 9 proposed and adopted, and may be amended after its adoption and 10 terminated, by the nonprofit corporation in the manner provided 11 for the proposal, adoption, amendment and termination of a plan 12 of merger in Subchapter C (relating to merger, consolidation and 13 sale of assets). There shall be included in or enclosed with the 14 notice of meeting of members of the nonprofit corporation that 15 will act upon the plan a copy or a summary of the plan. 16 (c) Reference to outside facts.--Any of the terms of a plan 17 of conversion 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 corporation 22 or a representative of the corporation. 23 § 5964. Filing of articles of conversion. 24 (a) General rule.--The articles of conversion shall be filed 25 in the Department of State. 26 (b) Cross [reference.--See section] references.--See 27 sections 134 (relating to docketing statement) and 135 (relating 28 to requirements to be met by filed documents). 29 § 5965. Effective date of conversion. 30 Upon the filing of articles of conversion in the Department 19970S1157B2174 - 130 -
1 of State[,] or upon the effective date specified in the plan of 2 conversion, whichever is later, the conversion shall become 3 effective. 4 § 5966. Effect of conversion. 5 Upon the conversion becoming effective, the converting 6 nonprofit corporation shall be deemed to be a business 7 corporation subject to the provisions of this part relating to 8 business corporations for all purposes, shall cease to be a 9 nonprofit corporation[,] and may thereafter operate for a 10 purpose or purposes resulting in pecuniary profit, incidental or 11 otherwise, to its members or shareholders. [The] Unless the 12 shares of the corporation are to be uncertificated, the 13 corporation shall issue share certificates to each shareholder 14 entitled thereto. The corporation shall remain liable for all 15 existing obligations, public [and] or private, and taxes due the 16 Commonwealth or any other taxing authority for periods prior to 17 the effective date of the conversion, and, as [such] a business 18 corporation, it shall continue to be entitled to all assets 19 theretofore pertaining to it as a nonprofit corporation except 20 as otherwise provided by order, if any, obtained pursuant to 21 section 5547(b) (relating to nondiversion of certain property). 22 § 5975. Predissolution provision for liabilities. 23 (a) Powers of board.--The board of directors or other body 24 of a nonprofit corporation that has elected to proceed under 25 this section shall have full power to wind up and settle the 26 affairs of [a nonprofit] the corporation in accordance with this 27 section prior to filing articles of dissolution in accordance 28 with section 5977 (relating to articles of dissolution). 29 (b) Notice to creditors and taxing authorities.--After the 30 approval by the members or the board of directors or other body 19970S1157B2174 - 131 -
1 pursuant to section 5974(b) (relating to adoption in absence of 2 voting members) that the corporation dissolve voluntarily, the 3 corporation shall immediately cause notice of the winding up 4 proceedings to be officially published and to be mailed by 5 certified or registered mail to each known creditor and claimant 6 and to each municipal corporation in which [its registered 7 office or principal] it has a place of business in this 8 Commonwealth [is located]. 9 (c) Winding up and distribution.--The corporation shall, as 10 speedily as possible, proceed to collect all sums due it, 11 convert into cash all corporate assets the conversion of which 12 into cash is required to discharge its liabilities and, out of 13 the assets of the corporation, discharge or make adequate 14 provision for the discharge of all liabilities of the 15 corporation, according to their respective priorities. Except as 16 otherwise provided in a bylaw adopted by the members or in this 17 subpart or by any other provision of law, any surplus remaining 18 after paying or providing for all liabilities of the corporation 19 shall be distributed to the shareholders, if any, pro rata, or 20 if there be no shareholders, among the members per capita. See 21 section 1972(a) (relating to proposal of voluntary dissolution). 22 § 5976. Judicial supervision of proceedings. 23 (a) General rule.--A nonprofit corporation that has elected 24 to proceed under section 1975 (relating to predissolution 25 provision for liabilities), at any time during the winding up 26 proceedings, may apply to the court to have the proceedings 27 continued under the supervision of the court and thereafter the 28 proceedings shall continue under the supervision of the court as 29 provided in Subchapter G (relating to involuntary liquidation 30 and dissolution). 19970S1157B2174 - 132 -
1 * * * 2 § 5977. Articles of dissolution. 3 * * * 4 (b) Contents of articles.--The articles of dissolution shall 5 be executed by the corporation and shall set forth: 6 * * * 7 (5) A statement that: 8 (i) [that] all liabilities of the corporation have 9 been discharged or that adequate provision has been made 10 therefor; [or] 11 (ii) [that] the assets of the corporation are not 12 sufficient to discharge its liabilities, and that all the 13 assets of the corporation have been fairly and equitably 14 applied, as far as they will go, to the payment of such 15 liabilities[. An election by]; or 16 (iii) the corporation has elected to proceed under 17 Subchapter H [shall constitute the making of adequate 18 provision for the liabilities of the corporation, 19 including any judgment or decree that may be obtained 20 against the corporation in any pending action or 21 proceeding]. 22 * * * 23 (7) [A] In the case of a corporation that has not 24 elected to proceed under Subchapter H, a statement that no 25 actions or proceedings are pending against the corporation in 26 any court, or that adequate provision has been made for the 27 satisfaction of any judgment or decree that may be obtained 28 against the corporation in each pending action or proceeding. 29 (8) [A] In the case of a corporation that has not 30 elected to proceed under Subchapter H, a statement that 19970S1157B2174 - 133 -
1 notice of the winding-up proceedings of the corporation was 2 mailed by certified or registered mail to each known creditor 3 and claimant and to each municipal corporation in which the 4 [registered office or principal place of business of the] 5 corporation has a place of business in this Commonwealth [is 6 located]. 7 * * * 8 (d) Cross references.--See sections 134 (relating to 9 docketing statement) and 135 (relating to requirements to be met 10 by filed documents). 11 § 5989. Articles of involuntary dissolution. 12 (a) General rule.--In a proceeding under this subchapter, 13 the court shall enter an order dissolving the nonprofit 14 corporation when the order, if any, obtained pursuant to section 15 5547(b) (relating to nondiversion of certain property) has been 16 entered and when the costs and expenses of the proceeding, and 17 all liabilities of the corporation have been discharged, and all 18 of its remaining assets have been distributed to the persons 19 entitled thereto, or, in case its assets are not sufficient to 20 discharge such costs, expenses and liabilities, when all the 21 assets have been applied, as far as they will go, to the payment 22 of such costs, expenses and liabilities. See section 139(b) 23 (relating to tax clearance in judicial proceedings). 24 (b) Filing.--After entry of an order of dissolution, the 25 office of the clerk of the court of common pleas shall prepare 26 and execute articles of dissolution substantially in the form 27 provided by section 5977 (relating to articles of dissolution), 28 attach thereto a certified copy of the order and transmit the 29 articles and attached order to the Department of State. [A 30 certificate or statement provided for by section 139 (relating 19970S1157B2174 - 134 -
1 to tax clearance of certain fundamental transactions) shall not 2 be required, and the] The department shall not charge a fee in 3 connection with the filing of articles of dissolution under this 4 section. See [section] sections 134 (relating to docketing 5 statement) and 135 (relating to requirements to be met by filed 6 documents). 7 * * * 8 § 5991.1. Authority of board of directors. 9 (a) General rule.--The board of directors or other body of a 10 nonprofit corporation that has elected to proceed under this 11 subchapter shall have full power to wind up and settle the 12 affairs of the corporation in accordance with this subchapter 13 both prior to and after the filing of articles of dissolution in 14 accordance with section 5977 (relating to articles of 15 dissolution). 16 (b) Winding up.--The corporation shall, as speedily as 17 possible, proceed to comply with the requirements of this 18 subchapter while simultaneously collecting all sums due it and 19 converting into cash all corporate assets, the conversion of 20 which into cash is required to make adequate provision for its 21 liabilities. 22 § 6126. Amended certificate of authority. 23 (a) General rule.--After receiving a certificate of 24 authority, a qualified foreign nonprofit corporation may, 25 subject to the provisions of this subchapter, change [the name 26 under which it is authorized to transact business in this 27 Commonwealth] or correct any of the information set forth in its 28 application for a certificate of authority or previous filings 29 under this section by filing in the Department of State an 30 application for an amended certificate of authority. The 19970S1157B2174 - 135 -
1 application shall be executed by the corporation and shall 2 state: 3 (1) The name under which the applicant corporation 4 currently holds a certificate of authority to do business in 5 this Commonwealth. 6 [(2) The name of the jurisdiction under the laws of 7 which the corporation is incorporated. 8 (3) The address, including street and number, if any, of 9 its principal office under the laws of the jurisdiction in 10 which it is incorporated. 11 (4)] (2) Subject to section 109 (relating to name of 12 commercial registered office provider in lieu of registered 13 address), the address, including street and number, if any, 14 of its registered office in this Commonwealth. [which may 15 constitute a change in the address of its registered office. 16 (5) The new name of the corporation and] 17 (3) The information to be changed or corrected. 18 (4) If the application reflects a change in the name of 19 the corporation, the application shall include a statement 20 that either: 21 (i) the change of name reflects a change effected in 22 the jurisdiction of incorporation; or 23 (ii) documents complying with section 6123(b) 24 (relating to exceptions) accompany the application. 25 (b) Issuance of amended certificate of authority.--Upon the 26 filing of the application, the applicant corporation shall be 27 deemed to hold an amended certificate of authority. 28 (c) Cross reference.--See section 134 (relating to docketing 29 statement). 30 § 6146. Provisions applicable to all foreign corporations. 19970S1157B2174 - 136 -
1 The following provisions of this subpart shall, except as 2 otherwise provided in this section, be applicable to every 3 foreign corporation not-for-profit, whether or not required to 4 procure a certificate of authority under this chapter: 5 Section 5503 (relating to defense of ultra vires), as to 6 contracts and conveyances governed by the laws of this 7 Commonwealth and conveyances affecting real property situated 8 in this Commonwealth. 9 Section 5506 (relating to form of execution of 10 instruments), as to instruments or other documents governed 11 by the laws of this Commonwealth or affecting real property 12 situated in this Commonwealth. 13 Section 5510 (relating to certain specifically authorized 14 debt terms), as to obligations (as defined in the section) 15 governed by the laws of this Commonwealth or affecting real 16 property situated in this Commonwealth. 17 Section 5782 (relating to actions against directors, 18 members of an other body and officers), as to any action or 19 proceeding brought in a court of this Commonwealth. 20 § 8105. Ownership of certain professional partnerships. 21 Except as otherwise provided by statute, rule or regulation 22 applicable to a particular profession, all of the [partners in] 23 ultimate beneficial owners of the partnership interests in a 24 partnership that renders one or more restricted professional 25 services shall be licensed persons. As used in this section, 26 the term "restricted professional services" shall have the 27 meaning specified in section 8903 (relating to definitions and 28 index of definitions). 29 § 8201. Scope. 30 * * * 19970S1157B2174 - 137 -
1 (e) Prohibited termination.--A registration under this 2 subchapter may not be terminated while the partnership is a 3 bankrupt as that term is defined in section 8903 (relating to 4 definitions and index of definitions). See section 8221(f) 5 (relating to annual registration). 6 (f) Alternative procedure.--In lieu of filing a statement of 7 registration as provided in subsection (a), a limited 8 partnership may register as a registered limited liability 9 partnership by including in its certificate of limited 10 partnership, either originally or by amendment, the statements 11 required by subsection (a)(3) and (4). To terminate its 12 registration, a limited partnership that uses the procedure 13 authorized by this subsection shall amend its certificate of 14 limited partnership to delete the statements required by this 15 subsection. 16 (g) Constructive notice.--Filing under this section shall 17 constitute constructive notice that the partnership is a 18 registered limited liability partnership and that the partners 19 are entitled to the protections from liability provided by this 20 subchapter. 21 [(e)] (h) Cross references.--See sections 134 (relating to 22 docketing statement) and 135 (relating to requirements to be met 23 by filed documents). 24 § 8202. Definitions. 25 The following words and phrases when used in this chapter 26 shall have the meanings given to them in this section unless the 27 context clearly indicates otherwise: 28 * * * 29 "Partner." Includes a person who is or was a partner in a 30 registered limited liability partnership at any time while the 19970S1157B2174 - 138 -
1 registration of the partnership under this subchapter is or was 2 in effect. 3 * * * 4 § 8204. Limitation on liability of partners. 5 (a) General rule.--Except as provided in subsection (b), a 6 partner in a registered limited liability partnership shall not 7 be individually liable directly or indirectly, whether by way of 8 indemnification, contribution or otherwise, for debts and 9 obligations of, or chargeable to, the partnership, whether 10 sounding in contract or tort or otherwise, that arise from any 11 negligent or wrongful acts or misconduct committed by another 12 partner or other representative of the partnership while the 13 registration of the partnership under this subchapter is in 14 effect. 15 (b) Exceptions.-- 16 (1) [Subsection (a) shall not apply to any debt or 17 obligation with respect to which the partnership is not in 18 compliance with section 8206(a) (relating to insurance).] 19 (Repealed). 20 * * * 21 (3) Subsection (a) shall not affect in any way: 22 (i) the liability of the partnership itself for all 23 its debts and obligations; [or] 24 (ii) the availability of the entire assets of the 25 partnership to satisfy its debts and obligations; or 26 (iii) any obligation undertaken by a partner in 27 writing to individually indemnify another partner of the 28 partnership or to individually contribute toward a 29 liability of another partner. 30 * * * 19970S1157B2174 - 139 -
1 § 8205. Liability of withdrawing partner. 2 * * * 3 (b) Exceptions.--Subsection (a) shall not affect the 4 liability of a partner: 5 * * * 6 (7) For any obligation undertaken by a partner in 7 writing to individually indemnify another partner of the 8 partnership or to individually contribute toward a liability 9 of another partner. 10 * * * 11 (e) Permissive filing.--Filing under this section is 12 permissive, and failure to make a filing under this section by a 13 partner entitled to do so shall not affect the right of that 14 partner to the limitation on liability provided by section 8204 15 (relating to limitation on liability of partners). 16 (f) Constructive notice.--Filing under this section shall 17 constitute constructive notice that the partner has withdrawn 18 from the partnership and is entitled to the protection from 19 liability provided by this section. 20 (g) Variation of section.--A written provision of the 21 partnership agreement may restrict or condition the application 22 of this section to some or all of the partners of the 23 partnership. 24 (h) Application of section.--A partner in a foreign 25 registered limited liability partnership, regardless of whether 26 or not it has registered to do business in this Commonwealth 27 under section 8211 (relating to foreign registered limited 28 liability partnerships), shall not be entitled to make a filing 29 under this section with regard to that partnership. 30 [(e)] (i) Cross references.--See sections 134 (relating to 19970S1157B2174 - 140 -
1 docketing statement) and 135 (relating to requirements to be met 2 by filed documents). 3 § 8211. Foreign registered limited liability partnerships. 4 (a) Governing law.--Subject to the Constitution of 5 Pennsylvania: 6 (1) The laws of the jurisdiction under which a foreign 7 registered limited liability partnership is organized govern 8 its organization and internal affairs and the liability of 9 its partners, except as provided in subsection (c). 10 (2) A foreign registered limited liability partnership 11 may not be denied registration by reason of any difference 12 between those laws and the laws of this Commonwealth. 13 (b) Registration to do business.--A foreign registered 14 limited liability partnership, regardless of whether or not it 15 is also a foreign limited partnership, shall be subject to 16 Subchapter K of Chapter 85 (relating to foreign limited 17 partnerships) as if it were a foreign limited partnership, 18 except that [the]: 19 (1) Its application for registration shall state that it 20 is a registered limited liability partnership. 21 (2) The name under which [the foreign registered limited 22 liability partnership] it registers and conducts business in 23 this Commonwealth shall comply with the requirements of 24 section 8203 (relating to name). 25 (3) Section 8582(a)(5) and (6) (relating to 26 registration) shall not be applicable to the application for 27 registration of a foreign limited liability partnership that 28 is not a foreign limited partnership. 29 (c) Exception.--The liability of the partners in a foreign 30 registered limited liability partnership shall be governed by 19970S1157B2174 - 141 -
1 the laws of the jurisdiction under which it is organized, except 2 that the partners shall not be entitled to greater protection 3 from liability than is available to the partners in a domestic 4 registered limited liability partnership. 5 § 8221. Annual registration. 6 * * * 7 (e) [Annual fee to be lien] Failure to pay annual fee.-- 8 (1) Failure to [pay the annual registration fee imposed] 9 file the certificate of annual registration required by this 10 section [shall not affect the existence or] for five 11 consecutive years shall result in the automatic termination 12 of the status of the registered limited liability partnership 13 as such[, but the]. In addition, any annual registration fee 14 that is not paid when due shall be a lien in the manner 15 provided in this subsection from the time the annual 16 registration fee is due and payable [upon]. If a certificate 17 of annual registration is not filed within 30 days after the 18 date on which it is due, the department shall assess a 19 penalty of $500 against the partnership, which shall also be 20 a lien in the manner provided in this subsection. The 21 imposition of that penalty shall not be construed to relieve 22 the partnership from liability for any other penalty or 23 interest provided for under other applicable law. 24 (2) If the annual registration fee paid by a registered 25 limited liability partnership is subsequently determined to 26 be less than should have been paid because it was based on an 27 incorrect number of general partners or was otherwise 28 incorrectly computed, that fact shall not affect the 29 existence or status of the registered limited liability 30 partnership as such, but the amount of the additional annual 19970S1157B2174 - 142 -
1 registration fee that should have been paid shall be a lien 2 in the manner provided in this subsection from the time the 3 incorrect payment is discovered by the department. 4 (3) The annual registration fee shall bear simple 5 interest from the date that it becomes due and payable until 6 paid. The interest rate shall be that provided for in section 7 806 of the act of April 9, 1929 (P.L.343, No.176), known as 8 The Fiscal Code, with respect to unpaid taxes. The penalty 9 provided for in paragraph (1) shall not bear interest. The 10 payment of interest shall not relieve the registered limited 11 liability partnership from liability for any other penalty or 12 interest provided for under other applicable law. 13 (4) The lien created by this subsection shall attach to 14 all of the property and proceeds thereof of the registered 15 limited liability partnership in which a security interest 16 can be perfected in whole or in part by filing in the 17 department under 13 Pa.C.S. Div. 9 (relating to secured 18 transactions; sales of accounts, contract rights and chattel 19 paper), whether the property and proceeds are owned by the 20 partnership at the time the annual registration fee or any 21 penalty or interest becomes due and payable or whether the 22 property and proceeds are acquired thereafter. Except as 23 otherwise provided by statute, the lien created by this 24 subsection shall have priority over all other liens, security 25 interests or other charges, except liens for taxes or other 26 charges due the Commonwealth. The lien created by this 27 subsection shall be entered on the records of the department 28 and indexed in the same manner as a financing statement filed 29 under 13 Pa.C.S. Div. 9. At the time an annual registration 30 fee, penalty or interest that has resulted in the creation of 19970S1157B2174 - 143 -
1 a lien under this subsection is paid, the department shall 2 terminate the lien with respect to that annual registration 3 fee, penalty or interest without requiring a separate filing 4 by the partnership for that purpose. 5 (5) If the annual registration fee paid by a registered 6 limited liability partnership is subsequently determined to 7 be more than should have been paid for any reason, no refund 8 of the additional fee shall be made. 9 (6) Termination of the status of a registered limited 10 liability partnership as such, whether voluntarily or 11 involuntarily, shall not release it from the obligation to 12 pay any accrued fees, penalties and interest and shall not 13 release the lien created by this subsection. 14 (f) Exception for bankrupt partnerships.--A partnership that 15 would otherwise be required to pay the annual registration fee 16 set forth in subsection (b) shall not be required to pay that 17 fee with respect to any year during any part of which the 18 partnership is a bankrupt as defined in section 8903 (relating 19 to definitions and index of definitions). The partnership shall, 20 instead, indicate on its certificate of annual registration for 21 that year that it is exempt from payment of the annual 22 registration fee pursuant to this subsection. If the partnership 23 fails to file timely a certificate of annual registration, a 24 lien shall be entered on the records of the department pursuant 25 to subsection (e) which shall not be removed until the 26 partnership files a certificate of annual registration 27 indicating its entitlement to an exemption from payment of the 28 annual registration fee as provided in this subsection. See 29 section 8201(e) (relating to scope). 30 § 8359. Right to wind up affairs. 19970S1157B2174 - 144 -
1 Unless otherwise agreed, the partners who have not wrongfully 2 dissolved the partnership, or the legal representative of the 3 last surviving partner, not bankrupt, has the right to wind up 4 the partnership affairs except that any partner, his legal 5 representative or his assignee, upon cause shown, may obtain 6 winding up by the court. See section 139(b) (relating to tax 7 clearance in judicial proceedings). 8 § 8503. Definitions and index of definitions. 9 (a) Definitions.--The following words and phrases when used 10 in this chapter shall have the meanings given to them in this 11 section unless the context clearly indicates otherwise: 12 "Certificate of limited partnership." The certificate 13 referred to in section 8511 (relating to certificate of limited 14 partnership) and the certificate as amended. The term includes 15 any other statements or certificates permitted or required to be 16 filed in the Department of State by sections 108 (relating to 17 change in location or status of registered office provided by 18 agent) and 138 (relating to statement of correction) or this 19 part. If an amendment of the certificate of limited partnership 20 or a certificate of merger or division made in the manner 21 permitted by this chapter restates the certificate in its 22 entirety or if there is a certificate of consolidation, 23 thenceforth the "certificate of limited partnership" shall not 24 include any prior documents and any certificate issued by the 25 department with respect thereto shall so state. 26 * * * 27 "Court." Subject to any inconsistent general rule prescribed 28 by the Supreme Court of Pennsylvania: 29 (1) the court of common pleas of the judicial district 30 embracing the county where the registered office of the 19970S1157B2174 - 145 -
1 limited partnership is or is to be located; or
2 (2) where a limited partnership results from a merger,
3 consolidation, division or other transaction without
4 establishing a registered office in this Commonwealth or
5 withdraws as a foreign limited partnership, the court of
6 common pleas in which venue would have been laid immediately
7 prior to the transaction or withdrawal.
8 ["Department." The Department of State of the Commonwealth.]
9 * * *
10 "Partnership agreement." Any agreement, written or oral, of
11 the partners as to the affairs of a limited partnership and the
12 conduct of its business. [A written partnership agreement:
13 (1) May provide that a person shall be admitted as a
14 limited partner, or shall become an assignee of a partnership
15 interest or other rights or powers of a limited partner to
16 the extent assigned, and shall become bound by the
17 partnership agreement:
18 (i) if such person (or a representative authorized
19 by such person orally, in writing or by other action such
20 as payment for a partnership interest) executes the
21 partnership agreement or any other writing evidencing the
22 intent of such person to become a limited partner or
23 assignee; or
24 (ii) without such execution, if such person (or a
25 representative authorized by such person orally, in
26 writing or by other action such as payment for a
27 partnership interest) complies with the conditions for
28 becoming a limited partner or assignee as set forth in
29 the partnership agreement or any other writing and
30 requests (orally, in writing or by other action such as
19970S1157B2174 - 146 -
1 payment for a partnership interest) that the records of 2 the limited partnership reflect such admission or 3 assignment. 4 (2) Shall not be unenforceable by reason of its not 5 having been signed by a person being admitted as a limited 6 partner or becoming an assignee as provided in paragraph (1) 7 or by reason of its having been signed by a representative as 8 provided in section 8514(b) (relating to attorney-in-fact). 9 (3) May provide that, whenever a provision of this 10 chapter requires the vote or consent of a specified number or 11 percentage of partners or of a class of partners for the 12 taking of any action, a higher number or percentage of votes 13 or consents shall be required for the action. Except as 14 otherwise provided in the partnership agreement, whenever the 15 partnership agreement requires for the taking of any action 16 by the partners or a class of partners a specific number or 17 percentage of votes or consents, the provision of the 18 partnership agreement setting forth that requirement shall 19 not be amended or repealed by any lesser number or percentage 20 of votes or consents of the partners or the class of 21 partners.] 22 * * * 23 "Relax." When used with respect to a provision of the 24 certificate of limited partnership or partnership agreement, 25 means to provide lesser rights for an affected representative or 26 partner. 27 (b) Index of definitions.--Other definitions applying to 28 this chapter and the sections in which they appear are: 29 "Act" or "action." Section 102. 30 "Department." Section 102. 19970S1157B2174 - 147 -
1 "Licensed person." Section 102. 2 "Professional services." Section 102. 3 § 8510. Indemnification. 4 * * * 5 (b) When indemnification is not to be made.--Indemnification 6 pursuant to subsection (a) shall not be made in any case where 7 the act [or failure to act] giving rise to the claim for 8 indemnification is determined by a court to have constituted 9 willful misconduct or recklessness. The certificate of limited 10 partnership or partnership agreement may not provide for 11 indemnification in the case of willful misconduct or 12 recklessness. 13 * * * 14 (f) Mandatory indemnification.--Without regard to whether 15 indemnification or advancement of expenses is provided under 16 subsections (a) and (d), a limited partnership shall be subject 17 to section 8331(2) (relating to rules determining rights and 18 duties of partners). 19 SUBCHAPTER B 20 FORMATION[; CERTIFICATE OF LIMITED PARTNERSHIP] 21 § 8511. Certificate of limited partnership. 22 (a) General rule.--In order to form a limited partnership, a 23 certificate of limited partnership must be executed and filed in 24 the Department of State. The certificate shall set forth: 25 (1) The name of the limited partnership. 26 (2) Subject to section 109 (relating to name of 27 commercial registered office provider in lieu of registered 28 address), the address, including street and number, if any, 29 of its registered office. 30 (3) The name and business address of each general 19970S1157B2174 - 148 -
1 partner. 2 (4) If a partner's interest in the limited partnership 3 is to be evidenced by a certificate of partnership interest, 4 a statement to that effect. 5 (5) Any other [matters the partners determine to include 6 therein. A provision included in the certificate of limited 7 partnership pursuant to this paragraph shall be deemed to be 8 a provision of the partnership agreement for purposes of any 9 provision of this chapter that refers to a rule as set forth 10 in the partnership agreement.] provision, whether or not 11 specifically authorized by or in contravention of this 12 chapter, that the partners elect to set out in the 13 certificate of limited partnership for the regulation of the 14 internal affairs of the limited partnership, except where a 15 provision of this chapter expressly provides that the 16 certificate of limited partnership shall not relax or 17 contravene any provision on a specified subject. 18 (b) Effective date of formation.--A limited partnership is 19 formed at the time of the filing of the certificate of limited 20 partnership in the department or at any later time specified in 21 the certificate of limited partnership if, in either case, there 22 has been substantial compliance with the requirements of this 23 section or the corresponding provisions of prior law. 24 (c) [Duties of recorders of deeds.--Each recorder of deeds 25 shall continue to keep open for public inspection the record of 26 limited partnership certificates recorded under the statutes 27 supplied by this chapter and by prior law the custody of which 28 has not been transferred to the department pursuant to section 29 140 (relating to custody and management of orphan corporate and 30 business records).] (Repealed). 19970S1157B2174 - 149 -
1 (d) Transitional provision.--A limited partnership formed 2 under prior law shall not be required to set forth in its 3 certificate of limited partnership a registered office or the 4 business address of each general partner until such time as it 5 first amends its certificate of limited partnership under this 6 chapter. 7 (e) Effect of provisions.--A provision of the certificate of 8 limited partnership shall be deemed to be a provision of the 9 partnership agreement for purposes of any provision of this 10 chapter that refers to a rule as set forth in the partnership 11 agreement. 12 [(e)] (f) 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 § 8517. Notice. 17 The fact that a certificate of limited partnership is on file 18 in the Department of State is not notice of any fact other than: 19 (1) that the partnership is a limited partnership and 20 that all partners are limited partners except the persons 21 designated therein as general partners[, but it is not notice 22 of any other fact]; and 23 (2) if it is registered under Chapter 82 (relating to 24 registered limited liability partnerships), that it is also a 25 registered limited liability partnership. 26 § 8519. Filing of certificate of summary of record by limited 27 partnerships formed prior to 1976. 28 (a) General rule.--[Any limited partnership that was not 29 formed under this chapter, has never made any filing under this 30 section or corresponding provisions of prior law and] Where any 19970S1157B2174 - 150 -
1 of the organic documents of a limited partnership are not on 2 file in the Department of State or there is an error in any such 3 document as transferred to the department pursuant to section 4 140 (relating to custody and management of orphan corporate and 5 business records), and the limited partnership desires to file 6 any document in the [Department of State] department under any 7 other provision of this chapter or [that desires] to secure from 8 the department a certified copy of the certificate of limited 9 partnership or to correct the text of its organic documents as 10 on file in the department, the limited partnership shall file in 11 the department a certificate of summary of record which shall 12 set forth: 13 (1) The name of the limited partnership. 14 (2) Subject to section 109 (relating to name of 15 commercial registered office provider in lieu of registered 16 address), the address, including street and number, if any, 17 of its registered office. 18 (3) The statute under which the limited partnership was 19 formed. 20 (4) The name under which, and the date on which, the 21 limited partnership was originally formed, including the date 22 when and the place where the original certificate was 23 recorded. 24 (5) The place or places, including the volume and page 25 numbers or their equivalent, where the documents 26 [constituting the currently effective certificate are] that 27 are not on file in the department or that require correction 28 in the records of the department where originally recorded, 29 the date or dates of each recording and the correct text of 30 the [currently effective certificate] documents. The 19970S1157B2174 - 151 -
1 information specified in this paragraph may be omitted in a 2 certificate of summary of record that is delivered to the 3 department contemporaneously with an amended certificate 4 filed under this chapter that restates the certificate in its 5 entirety. 6 [(6) Each name by which the limited partnership was 7 known, if any, other than its original name and its current 8 name and the date or dates on which each change of name of 9 the partnership became effective.] 10 (b) Cross references.--See sections 134 (relating to 11 docketing statement), 135 (relating to requirements to be met by 12 filed documents) and 8514 (relating to execution of 13 certificates). 14 § 8520. Partnership agreement. 15 (a) Admission of limited partners.--A partnership agreement 16 may provide in writing that a person shall be admitted as a 17 limited partner, or shall become an assignee of a partnership 18 interest or other rights or powers of a limited partner to the 19 extent assigned, and shall become bound by the partnership 20 agreement: 21 (1) if such person (or a representative authorized by 22 such person orally, in writing or by other action such as 23 payment for a partnership interest) executes the partnership 24 agreement or any other writing evidencing the intent of such 25 person to become a limited partner or assignee; or 26 (2) without such execution, if such person (or a 27 representative authorized by such person orally, in writing 28 or by other action such as payment for a partnership 29 interest) complies with the conditions for becoming a limited 30 partner or assignee as set forth in the partnership agreement 19970S1157B2174 - 152 -
1 or any other writing and requests (orally, in writing or by 2 other action such as payment for a partnership interest) that 3 the records of the limited partnership reflect such admission 4 or assignment. 5 (b) Signature by limited partners.--A written partnership 6 agreement shall not be unenforceable by reason of its not having 7 been signed by a person being admitted as a limited partner or 8 becoming an assignee as provided in subsection (a) or by reason 9 of its having been signed by a representative as provided in 10 section 8514(b) (relating to attorney-in-fact). 11 (c) Voting requirements.--A partnership agreement may 12 provide in writing that, whenever a provision of this chapter 13 requires the vote or consent of a specified number or percentage 14 of partners or of a class of partners for the taking of any 15 action, a higher number or percentage of votes or consents shall 16 be required for the action. Except as otherwise provided in the 17 partnership agreement, whenever the partnership agreement 18 requires for the taking of any action by the partners or a class 19 of partners a specific number or percentage of votes or 20 consents, the provision of the partnership agreement setting 21 forth that requirement shall not be amended or repealed by any 22 lesser number or percentage of votes or consents of the partners 23 or the class of partners. 24 (d) Freedom of contract.--A written partnership agreement 25 may contain any provision for the regulation of the internal 26 affairs of the limited partnership agreed to by the partners, 27 whether or not specifically authorized by or in contravention of 28 this chapter, except where this chapter: 29 (1) refers only to a rule as set forth in the 30 certificate of limited partnership; or 19970S1157B2174 - 153 -
1 (2) expressly provides that the partnership agreement 2 shall not relax or contravene any provision on a specified 3 subject. 4 (e) Oral provisions.--A partnership agreement may provide in 5 writing that it cannot be amended or modified except in writing, 6 in which case an oral agreement, amendment or modification shall 7 not be enforceable. 8 (f) Cross reference.--See section 8511(a)(5) (relating to 9 certificate of limited partnership). 10 § 8523. Liability of limited partners to third parties. 11 (a) General rule.--A limited partner is not liable [for the 12 obligations of a limited partnership unless he is also a general 13 partner or, in addition to the exercise of his rights and powers 14 as a limited partner, he participates in the control of the 15 business. However, if the limited partner participates in the 16 control of the business, he is liable only to persons who 17 transact business with the limited partnership reasonably 18 believing, based upon the conduct of the limited partner, that 19 the limited partner is a general partner.], solely by reason of 20 being a limited partner, under an order of a court or in any 21 other manner, for a debt, obligation or liability of the limited 22 partnership of any kind or for the acts of any partner, agent or 23 employee of the limited partnership. 24 (b) [Activities compatible with limited partner status.--A 25 limited partner does not participate in the control of the 26 business within the meaning of subsection (a) solely by doing 27 one or more of the following: 28 (1) Being a contractor for, or an agent or employee of 29 the limited partnership or of a general partner, or being an 30 officer, director, trustee, partner or shareholder of a 19970S1157B2174 - 154 -
1 general partner. 2 (2) Consulting with and advising a general partner with 3 respect to any matter, including, without limitation, the 4 business of the limited partnership. 5 (3) (i) Acting as surety for the limited partnership, 6 or guaranteeing, endorsing or assuming one or more 7 specific obligations of the limited partnership, or a 8 general partner. 9 (ii) Borrowing money from the limited partnership or 10 a general partner. 11 (iii) Lending money to the limited partnership or a 12 general partner. 13 (iv) Providing collateral for the limited 14 partnership or a general partner. 15 (4) Taking any action required or permitted by law to 16 bring, pursue or settle or otherwise terminate a derivative 17 action in the right of the limited partnership. 18 (5) Requesting or attending a meeting of partners. 19 (6) Acting or causing the taking or refraining from the 20 taking of any action, including, without limitation, by 21 proposing, approving, consenting or disapproving, by voting 22 or otherwise, with respect to one or more of the following 23 matters: 24 (i) The dissolution and winding up of the limited 25 partnership, or an election to continue the limited 26 partnership or the business of the limited partnership. 27 (ii) The sale, exchange, lease, mortgage, pledge or 28 other transfer of, or the grant of a security interest 29 in, any asset or assets of the limited partnership. 30 (iii) The incurrence, renewal, refinancing or 19970S1157B2174 - 155 -
1 payment or other discharge of indebtedness by the limited 2 partnership. 3 (iv) A change in the nature of the business. 4 (v) The admission or removal of a general partner. 5 (vi) The admission or removal of a limited partner. 6 (vii) A transaction involving an actual or potential 7 conflict of interest between a general partner and the 8 limited partnership or the limited partners. 9 (viii) An amendment to the partnership agreement or 10 certificate of limited partnership. 11 (ix) The merger or consolidation of the limited 12 partnership. 13 (x) The indemnification of any partner or other 14 person. 15 (xi) Matters related to the business of the limited 16 partnership not otherwise enumerated in this subsection, 17 which the partnership agreement states in writing may be 18 subject to the approval or disapproval of limited 19 partners. 20 (7) Applying for dissolution of the partnership pursuant 21 to section 8572 (relating to judicial dissolution). 22 (8) Winding up the limited partnership pursuant to 23 section 8573 (relating to winding up). 24 (9) In the case of a registered investment company, 25 voting on one or more of the following matters: 26 (i) The approval or termination of investment 27 advisory or underwriting contracts. 28 (ii) The approval of auditors. 29 (iii) Any other matter that by reason of the 30 Investment Company Act of 1940 (54 Stat. 789, 15 U.S.C. § 19970S1157B2174 - 156 -
1 80a-1 et seq.) the general partners consider to be a 2 proper matter for the vote of the holders of voting 3 securities or beneficial interests in the limited 4 partnership. 5 (10) Serving on a committee of the limited partnership 6 or the limited partners. 7 (11) Exercising any right or power permitted to limited 8 partners under this chapter and not specifically enumerated 9 in this subsection. 10 (12) Exercising any other right or power stated in the 11 partnership agreement.] (Repealed). 12 (c) [Enumeration nonexclusive.--The enumeration in 13 subsection (b) does not mean that the possession or exercise of 14 any other powers, or having or acting in other capacities, by a 15 limited partner constitutes participation by him in the control 16 of the business of the limited partnership.] (Repealed). 17 (d) Use of name of limited partner.--A limited partner does 18 not [participate in the control of the business within the 19 meaning of subsection (a)] become liable for the obligations of 20 a limited partnership by reason of the fact that all or any part 21 of the name of the limited partner is included in the name of 22 the limited partnership. 23 (e) [Effect of section.--This section does not create rights 24 or powers of limited partners. Such rights and powers may be 25 created only by the certificate of limited partnership, 26 partnership agreement or any other agreement or other provisions 27 of this chapter.] (Repealed). 28 * * * 29 § 8546. Approval of merger or consolidation. 30 (a) Preparation of plan of merger or consolidation.--A plan 19970S1157B2174 - 157 -
1 of merger or consolidation, as the case may be, shall be
2 prepared, setting forth:
3 * * *
4 (3) The manner and basis of converting the partnership
5 interests of each limited partnership into partnership
6 interests, securities or obligations of the surviving or new
7 limited partnership, as the case may be, and, if any of the
8 partnership interests of any of the limited partnerships that
9 are parties to the [plan] merger or consolidation are not to
10 be converted solely into partnership interests, securities or
11 obligations of the surviving or new limited partnership, the
12 partnership interests, securities or obligations of any other
13 person or cash, property or rights that the holders of such
14 partnership interests are to receive in exchange for, or upon
15 conversion of, such partnership interests, and the surrender
16 of any certificates evidencing them, which securities or
17 obligations, if any, of any other person or cash, property or
18 rights may be in addition to or in lieu of the partnership
19 interests, securities or obligations of the surviving or new
20 limited partnership.
21 (4) Such other provisions as are deemed desirable.
22 [Any of the terms of the plan may be made dependent upon facts
23 ascertainable outside of the plan if the manner in which the
24 facts will operate upon the terms of the plan is set forth in
25 the plan.]
26 (b) Post-adoption amendment of plan of merger or
27 consolidation.--A plan of merger or consolidation may contain a
28 provision that the general partners of the constituent limited
29 partnerships may amend the plan at any time prior to its
30 effective date, except that an amendment made subsequent to any
19970S1157B2174 - 158 -
1 adoption of the plan by the limited partners of any constituent 2 domestic limited partnership shall not change: 3 (1) The amount or kind of partnership interests, 4 obligations, cash, property or rights to be received in 5 exchange for or on conversion of all or any of the 6 partnership interests of the constituent domestic limited 7 partnership adversely to the holders of those partnership 8 interests. 9 (2) Any term of the certificate of limited partnership 10 or partnership agreement of the surviving or new limited 11 partnership [to be effected by] as it is to be in effect 12 immediately following consummation of the merger or 13 consolidation except provisions that may be amended without 14 the approval of the limited partners. 15 (3) Any of the other terms and conditions of the plan if 16 the change would adversely affect the holders of any 17 partnership interests of the constituent domestic limited 18 partnership. 19 * * * 20 (d) Party to plan.--[A limited partnership] An association 21 that approves a plan in its capacity as a partner or creditor of 22 a merging or consolidating limited partnership, or that 23 furnishes all or a part of the consideration contemplated by a 24 plan, does not thereby become a party to the [plan] merger or 25 consolidation for the purposes of this subchapter. 26 (e) Notice of meeting of limited partners.--Notwithstanding 27 any other provision of the partnership agreement, written notice 28 of the meeting of limited partners called for the purpose of 29 considering the proposed plan shall be given to each limited 30 partner of record, whether or not entitled to vote thereon, of 19970S1157B2174 - 159 -
1 each domestic limited partnership that is a party to the [plan] 2 proposed merger or consolidation. There shall be included in, or 3 enclosed with, the notice a copy of the proposed plan or a 4 summary thereof. The provisions of this subsection may not be 5 relaxed by the certificate of limited partnership or partnership 6 agreement. 7 (f) Adoption of plan by limited partners.--The plan of 8 merger or consolidation shall be adopted upon receiving a 9 majority of the votes cast by all limited partners, if any, 10 entitled to vote thereon of each of the domestic limited 11 partnerships that is a party to the [plan] proposed merger or 12 consolidation and, if any class of limited partners is entitled 13 to vote thereon as a class, a majority of the votes cast in each 14 class vote. A proposed plan of merger or consolidation shall not 15 be deemed to have been adopted by the limited partnership unless 16 it has also been approved by the general partners, regardless of 17 the fact that the general partners have directed or suffered the 18 submission of the plan to the limited partners for action. 19 * * * 20 (h) Termination of plan.--Prior to the time when a merger or 21 consolidation becomes effective, the merger or consolidation may 22 be terminated pursuant to provisions therefor, if any, set forth 23 in the plan. If a certificate of merger or consolidation has 24 been filed in the department prior to the termination, a 25 certificate of termination executed by each limited partnership 26 that is a party to the [plan] merger or consolidation, unless 27 the plan permits termination by less than all of the limited 28 partnerships, in which case the certificate shall be executed on 29 behalf of the limited partnership exercising the right to 30 terminate, shall be filed in the department. The certificate of 19970S1157B2174 - 160 -
1 termination shall set forth: 2 (1) A copy of the certificate of merger or consolidation 3 relating to the plan that is terminated. 4 (2) A statement that the plan has been terminated in 5 accordance with the provisions therefor set forth therein. 6 See sections 134 (relating to docketing statement), 135 7 (relating to requirements to be met by filed documents), 138 8 (relating to statement of correction) and 8514 (relating to 9 execution of certificates). 10 * * * 11 (j) Reference to outside facts.--Any of the terms of a plan 12 of merger or consolidation may be made dependent upon facts 13 ascertainable outside of the plan if the manner in which the 14 facts will operate upon the terms of the plan is set forth in 15 the plan. Such facts may include, without limitation, actions or 16 events within the control of or determinations made by a party 17 to the plan or a representative of a party to the plan. 18 § 8553. Voluntary withdrawal of limited partner. 19 (a) General rule.--A limited partner may withdraw from a 20 limited partnership only at the time or upon the happening of 21 events specified in writing in the partnership agreement. [If 22 the partnership agreement does not specify in writing the time 23 or the events upon the happening of which a limited partner may 24 withdraw or a definite time for the dissolution and winding up 25 of the limited partnership, a limited partner may withdraw upon 26 not less than six months' prior written notice to each general 27 partner at his address on the books of the limited partnership.] 28 (b) [Prohibition of withdrawal.--The partnership agreement 29 may provide that a limited partner may not withdraw from the 30 limited partnership or assign a partnership interest in the 19970S1157B2174 - 161 -
1 limited partnership prior to the dissolution and winding up of 2 the limited partnership.] (Repealed). 3 (c) Transitional rule.--This section applies to all limited 4 partnerships formed on or after January 1, 1999. If the 5 partnership agreement of a limited partnership formed before 6 January 1, 1999, did not on December 31, 1998, specify in 7 writing the time or the events upon the happening of which a 8 limited partner could withdraw or a definite time for the 9 dissolution and winding up of the limited partnership, the 10 provisions of this section that were in effect prior to January 11 1, 1999, shall apply until such time, if any, as the partnership 12 agreement is amended in writing after January 1, 1999, to 13 specify: 14 (1) a time or the events upon the happening of which a 15 limited partner may withdraw; 16 (2) a definite time for the dissolution and winding up 17 of the limited partnership; or 18 (3) that this section as effective January 1, 1999, 19 shall apply to the limited partnership. 20 § 8557. [Limitations on distribution.] Distributions and 21 allocation of profits and losses. 22 [A partner may not receive a distribution from a limited 23 partnership to the extent that, after giving effect to the 24 distribution, all liabilities of the limited partnership, other 25 than liabilities to partners on account of their partnership 26 interests and liabilities as to which recourse of creditors is 27 limited to specified property of the limited partnership, exceed 28 the fair value of the partnership assets. The fair value of any 29 property that is subject to a liability as to which recourse of 30 creditors is so limited shall be included in the partnership 19970S1157B2174 - 162 -
1 assets only to the extent that the fair value of the property 2 exceeds that liability.] A limited partnership may from time to 3 time make distributions and allocate the profits and losses of 4 its business to the partners upon the basis stipulated in the 5 partnership agreement or, if not stipulated in the partnership 6 agreement, per capita. The allocation of losses pursuant to this 7 section shall not affect the limitation on liability of limited 8 partners as provided in section 8523 (relating to liability of 9 limited partners to third parties). 10 § 8558. Liability upon return of contribution. 11 * * * 12 (c) Determination of return of contribution.--A partner 13 receives a return of his contribution to the extent that a 14 distribution to him reduces his share of the fair value of the 15 net assets of the limited partnership[, as determined under 16 section 8557 (relating to limitations on distribution),] below 17 the value (as stated or determined in the manner provided in the 18 partnership agreement, if stated or provided for therein) of his 19 contribution (to the extent it has been received by the limited 20 partnership) that has not been distributed to him, and otherwise 21 to the extent of the fair value of the distribution. 22 (d) Fair value of net assets.--For purposes of computing the 23 fair value of the net assets of the limited partnership under 24 subsection (c): 25 (1) liabilities of the limited partnership to partners 26 on account of their partnership interests and liabilities as 27 to which recourse of creditors is limited to specified 28 property of the limited partnership shall not be considered; 29 and 30 (2) the fair value of property that is subject to a 19970S1157B2174 - 163 -
1 liability as to which recourse of creditors is so limited 2 shall be included in the partnership assets only to the 3 extent that the fair value of the property exceeds that 4 liability. 5 § 8571. Nonjudicial dissolution. 6 (a) General rule.--A limited partnership is dissolved and 7 its affairs shall be wound up upon the happening of the first to 8 occur of the following: 9 (1) At the time or upon the happening of events 10 specified in the certificate of limited partnership. 11 (2) At the time or upon the happening of events 12 specified in writing in the partnership agreement. 13 (3) Written consent of all partners. 14 (4) An event of withdrawal of a general partner unless 15 at the time there is at least one other general partner and 16 the written provisions of the partnership agreement permit 17 the business of the limited partnership to be carried on by 18 the remaining general partner and that partner does so. The 19 limited partnership is not dissolved and is not required to 20 be wound up by reason of any event of withdrawal if, within 21 180 days after the withdrawal, [all] a majority in interest, 22 or such greater number as shall be provided in writing in the 23 partnership agreement, of the partners agree in writing to 24 continue the business of the limited partnership or to the 25 appointment of one or more replacement general partners. 26 (5) Entry of an order of judicial dissolution under 27 section 8572 (relating to judicial dissolution). 28 * * * 29 (c) Dissolution by domestication.--Whenever a domestic 30 limited partnership has domesticated itself under the laws of 19970S1157B2174 - 164 -
1 another jurisdiction by action similar to that provided by 2 section 8590 (relating to domestication) and has authorized that 3 action in the manner required by this subchapter for the 4 approval of a proposal that the partnership dissolve 5 voluntarily, the partnership may surrender its certificate of 6 limited partnership under the laws of this Commonwealth by 7 filing in the department a certificate of cancellation under 8 section 8513 (relating to cancellation of certificate). If the 9 partnership, as domesticated in the other jurisdiction, 10 registers to do business in this Commonwealth either prior to or 11 simultaneously with the filing of the certificate of 12 cancellation under this subsection, the partnership shall not be 13 required to file with the certificate of cancellation the tax 14 clearance certificates that would otherwise be required by 15 section 139 (relating to tax clearance of certain fundamental 16 transactions). 17 [(c)] (d) Cross [references] reference.--See [sections 8103 18 (relating to continuation of certain limited partnerships) and] 19 section 8512(b) (relating to events requiring amendment). 20 § 8573. Winding up. 21 Except as otherwise provided in the partnership agreement, 22 the general partners who have not wrongfully dissolved a limited 23 partnership or, if none, the limited partners, or a person 24 approved by the limited partners or, if there is more than one 25 class or group of limited partners, by each class or group of 26 limited partners, in either case by a majority in interest of 27 the limited partners in each class or group, may wind up the 28 affairs of the limited partnership, but the court may wind up 29 the affairs of the limited partnership upon application of any 30 partner, his legal representative or assignee, and in connection 19970S1157B2174 - 165 -
1 therewith, may appoint a liquidating trustee. See section 139(b) 2 (relating to tax clearance in judicial proceedings). 3 § 8577. Proposal and adoption of plan of division. 4 * * * 5 (b) Reference to outside facts.--Any of the terms of the 6 plan may be made dependent upon facts ascertainable outside of 7 the plan if the manner in which the facts will operate upon the 8 terms of the plan is set forth in the plan. Such facts may 9 include, without limitation, actions or events within the 10 control of or determinations made by the dividing limited 11 partnership or a representative of the dividing limited 12 partnership. 13 * * * 14 (e) [Restrictions on certain distributions.--A plan of 15 division may not be made effective if the effect of the plan is 16 to make a distribution to the holders of any class or series of 17 partnership interests of the dividing limited partnership unless 18 the distribution is permitted by section 8557 (relating to 19 limitations on distribution.] (Repealed). 20 (f) [Action by] Rights of holders of indebtedness.--[Unless 21 otherwise provided by an indenture or other contract by which 22 the dividing limited partnership is bound, a plan of division 23 shall not require the approval of the holders of any debt 24 securities or other obligations of the dividing limited 25 partnership or of any representative of the holders if the 26 transfer of assets effected by the division, if effected by 27 means of a sale, lease, exchange or other disposition, and any 28 related distribution would not require the approval of the 29 holders or representatives thereof.] If any such debt 30 securities, notes, similar evidences of indebtedness, indentures 19970S1157B2174 - 166 -
1 or other contracts were issued, incurred or executed by the 2 dividing limited partnership before (the Legislative Reference 3 Bureau shall insert here the effective date of the amendments of 4 this section) and have not been amended subsequent to that date, 5 the liability of the dividing limited partnership thereunder 6 shall not be affected by the division nor shall the rights of 7 the obligees thereunder be impaired by the division, and each of 8 the resulting limited partnerships may be proceeded against or 9 substituted in place of the dividing limited partnership as 10 joint and several obligors on such liability, regardless of any 11 provision of the plan of division apportioning the liabilities 12 of the dividing limited partnership. 13 * * * 14 § 8580. Effect of division. 15 * * * 16 (b) Property rights; allocations of assets and 17 liabilities.-- 18 (1) (i) All the property, real, personal and mixed, of 19 the dividing limited partnership, and all debts due on 20 whatever account to it, including subscriptions for 21 partnership interests or other causes of action belonging 22 to it, shall, except as otherwise provided in paragraph 23 (2), to the extent [transfers] allocations of assets are 24 contemplated by the plan of division, be deemed without 25 further action to be [transferred] allocated to and 26 vested in the resulting limited partnerships on such a 27 manner and basis and with such effect as is specified in 28 the plan, or per capita among the resulting limited 29 partnerships, as tenants in common, if no specification 30 is made in the plan, and the title to any real estate or 19970S1157B2174 - 167 -
1 interest therein vested in any of the limited 2 partnerships shall not revert or be in any way impaired 3 by reason of the division. 4 (ii) Upon the division becoming effective, the 5 resulting limited partnerships shall each thenceforth be 6 responsible as separate and distinct limited partnerships 7 only for such liabilities as each limited partnership may 8 undertake or incur in its own name but shall be liable 9 for the liabilities of the dividing limited partnership 10 in the manner and on the basis provided in subparagraphs 11 (iv) and (v). 12 (iii) Liens upon the property of the dividing 13 limited partnership shall not be impaired by the 14 division. 15 (iv) [One] To the extent allocations of liabilities 16 are contemplated by the plan of division, the liabilities 17 of the dividing limited partnership shall be deemed 18 without further action to be allocated to and become the 19 liabilities of the resulting limited partnerships on such 20 a manner and basis and with such effect as is specified 21 in the plan; and one or more but less than all of the 22 resulting limited partnerships shall be free of the 23 liabilities of the dividing limited partnership to the 24 extent, if any, specified in the plan [if no fraud of 25 creditors or partners or violation of law shall be 26 effected thereby and if all applicable provisions of law 27 are complied with.], if in either case: 28 (A) no fraud of partners or violation of law 29 shall be effected thereby; and 30 (B) the plan does not constitute a fraudulent 19970S1157B2174 - 168 -
1 transfer under 12 Pa.C.S. Ch. 51 (relating to 2 fraudulent transfers). 3 (v) If the conditions in subparagraph (iv) for 4 freeing one or more of the resulting limited partnerships 5 from the liabilities of the dividing limited partnership, 6 or for allocating some or all of the liabilities of the 7 dividing limited partnership, are not satisfied, the 8 liabilities of the dividing limited partnership as to 9 which those conditions are not satisfied shall not be 10 affected by the division nor shall the rights of 11 creditors [thereof] thereunder or of any person dealing 12 with the limited partnership be impaired by the division, 13 and any claim existing or action or proceeding pending by 14 or against the limited partnership with respect to those 15 liabilities may be prosecuted to judgment as if the 16 division had not taken place, or the resulting limited 17 partnerships may be proceeded against or substituted in 18 [its] place of the dividing limited partnership as joint 19 and several obligors on [such liability] those 20 liabilities, regardless of any provision of the plan of 21 division apportioning the liabilities of the dividing 22 limited partnership. 23 (vi) The conditions in subparagraph (iv) for freeing 24 one or more of the resulting limited partnerships from 25 the liabilities of the dividing limited partnership and 26 for allocating some or all of the liabilities of the 27 dividing limited partnership shall be conclusively deemed 28 to have been satisfied if the plan of division has been 29 approved by the Pennsylvania Public Utility Commission in 30 a final order issued after (the Legislative Reference 19970S1157B2174 - 169 -
1 Bureau shall insert here the effective date of the 2 amendments of this section) that has become not subject 3 to further appeal. 4 (2) (i) The [transfer] allocation of any fee or 5 freehold interest or leasehold having a remaining term of 6 30 years or more in any tract or parcel of real property 7 situate in this Commonwealth owned by a dividing limited 8 partnership (including property owned by a foreign 9 limited partnership dividing solely under the law of 10 another jurisdiction) to a new limited partnership 11 resulting from the division shall not be effective until 12 one of the following documents is filed in the office for 13 the recording of deeds of the county, or each of them, in 14 which the tract or parcel is situated: 15 (A) A deed, lease or other instrument of 16 confirmation describing the tract or parcel. 17 (B) A duly executed duplicate original copy of 18 the certificate of division. 19 (C) A copy of the certificate of division 20 certified by the Department of State. 21 (D) A declaration of acquisition setting forth 22 the value of real estate holdings in the county of 23 the limited partnership as an acquired company. 24 (ii) The provisions of 75 Pa.C.S. § 1114 (relating 25 to transfer of vehicle by operation of law) shall not be 26 applicable to [a transfer] an allocation of ownership of 27 any motor vehicle, trailer or semitrailer [from a 28 dividing limited partnership] to a new limited 29 partnership under this section or under a similar law of 30 any other jurisdiction, but any such [transfer] 19970S1157B2174 - 170 -
1 allocation shall be effective only upon compliance with 2 the requirements of 75 Pa.C.S. § 1116 (relating to 3 issuance of new certificate following transfer). 4 (3) It shall not be necessary for a plan of division to 5 list each individual asset or liability of the dividing 6 limited partnership to be allocated to a new limited 7 partnership so long as those assets and liabilities are 8 described in a reasonable and customary manner. 9 (4) Each new limited partnership shall hold any assets 10 and liabilities allocated to it as the successor to the 11 dividing limited partnership, and those assets and 12 liabilities shall not be deemed to have been assigned to the 13 new limited partnership in any manner, whether directly or 14 indirectly or by operation of law. 15 * * * 16 (g) Conflict of laws.--It is the intent of the General 17 Assembly that: 18 (1) The effect of a division of a domestic limited 19 partnership shall be governed solely by the laws of this 20 Commonwealth and any other jurisdiction under the laws of 21 which any of the resulting limited partnerships is organized. 22 (2) The effect of a division on the assets and 23 liabilities of the dividing limited partnership shall be 24 governed solely by the laws of this Commonwealth and any 25 other jurisdiction under the laws of which any of the 26 resulting limited partnerships is organized. 27 (3) The validity of any allocations of assets or 28 liabilities by a plan of division of a domestic limited 29 partnership, regardless of whether or not any of the new 30 limited partnerships is a foreign limited partnership, shall 19970S1157B2174 - 171 -
1 be governed solely by the laws of this Commonwealth. 2 (4) In addition to the express provisions of this 3 subsection, this subchapter shall otherwise generally be 4 granted the protection of full faith and credit under the 5 Constitution of the United States. 6 § 8590. Domestication. 7 * * * 8 (b) Certificate of domestication.--The certificate of 9 domestication shall be executed by the limited partnership and 10 shall set forth in the English language: 11 (1) The name of the limited partnership. If the name is 12 in a foreign language, it shall be set forth in Roman letters 13 or characters or Arabic or Roman numerals. If the name is one 14 that is rendered unavailable for use by any provision of 15 section 8505 (relating to name), the limited partnership 16 shall adopt, in accordance with any procedures for changing 17 the name of the limited partnership that are applicable prior 18 to the domestication of the limited partnership, and shall 19 set forth in the certificate of domestication an available 20 name. 21 * * * 22 (c) Effect of domestication.-- 23 (1) As a domestic limited partnership, the domesticated 24 limited partnership shall no longer be a foreign limited 25 partnership for the purposes of this chapter and shall [have] 26 instead be a domestic limited partnership with all the powers 27 and privileges and [be subject to] all the duties and 28 limitations granted and imposed upon domestic limited 29 partnerships. [The property, debts, liens, estates, taxes, 30 penalties and public accounts due the Commonwealth shall 19970S1157B2174 - 172 -
1 continue to be vested in and imposed upon the limited 2 partnership to the same extent as if it were the successor by 3 merger of the domesticating limited partnership with and into 4 a domestic limited partnership under Subchapter F (relating 5 to merger and consolidation).] In all other respects, the 6 domesticated limited partnership shall be deemed to be the 7 same limited partnership as it was prior to the domestication 8 without any change in or affect on its existence. Without 9 limiting the generality of the previous sentence, the 10 domestication shall not be deemed to have dissolved the 11 limited partnership or to have affected in any way: 12 (i) the right and title of the limited partnership 13 in and to its assets, property, franchises, estates and 14 choses in action; 15 (ii) the liability of the limited partnership for 16 its debts, obligations, penalties and public accounts due 17 the Commonwealth; 18 (iii) any liens or other encumbrances on the 19 property or assets of the limited partnership; or 20 (iv) any contract, license or other agreement to 21 which the limited partnership is a party or under which 22 it has any rights or obligations. 23 (2) The partnership interests in the domesticated 24 limited partnership shall be unaffected by the domestication 25 except to the extent, if any, reclassified in the certificate 26 of domestication. 27 § 8903. Definitions and index of definitions. 28 (a) Definitions.--The following words and phrases when used 29 in this chapter shall have the meanings given to them in this 30 section unless the context clearly indicates otherwise: 19970S1157B2174 - 173 -
1 * * * 2 ["Department." The Department of State of the Commonwealth.] 3 * * * 4 "Event of dissociation." An event that causes a person to 5 cease to be a member of a limited liability company. See 6 section [8971(a)(4)] 8971(4) (relating to dissolution). 7 * * * 8 ["Licensed person." A natural person who is duly licensed or 9 admitted to practice his profession by a court, department, 10 board, commission or other agency of this Commonwealth or 11 another jurisdiction to render a professional service that is or 12 will be rendered by the professional company of which he is or 13 intends to become a manager, member, employee or agent.] 14 "Limited liability company," "domestic limited liability 15 company" or "company." An association that is a limited 16 liability company organized and existing under this chapter. 17 * * * 18 "Operating agreement." Any [agreement of the members as to] 19 rules or procedures adopted for the regulation and governance of 20 the affairs of a limited liability company and the conduct of 21 its business. [The operating agreement need not be in writing 22 except where this chapter refers to a written provision of the 23 operating agreement. The operating agreement may contain any 24 provision for the regulation of the internal affairs of the 25 company agreed to by the members, whether or not specifically 26 authorized by or in contravention of this chapter, except where 27 this chapter: 28 (1) refers only to a rule as set forth in the 29 certificate of organization; or 30 (2) expressly provides that the operating agreement 19970S1157B2174 - 174 -
1 shall not relax or contravene any provision on a specified 2 subject. See sections 8913(8) (relating to certificate of 3 organization) and 8915 (relating to modification by 4 agreement).] 5 * * * 6 ["Professional services." The term shall have the meaning 7 specified in section 2902 (relating to definitions).] 8 * * * 9 (b) Index of other definitions.--Other definitions applying 10 to this chapter and the sections in which they appear are: 11 "Act" or "action." Section 102. 12 "Department." Section 102. 13 "Licensed person." Section 102. 14 "Professional services." Section 102. 15 SUBCHAPTER B 16 ORGANIZATION[; CERTIFICATE OF ORGANIZATION] 17 § 8915. Modification by agreement. 18 The provisions of this chapter are intended to permit a 19 limited liability company to qualify for taxation as an entity 20 that is not an association taxable as a corporation under the 21 Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 22 et seq.). Notwithstanding the limitations in [the definition of 23 "operating agreement" in section 8903 (relating to definitions) 24 and the limitations in section] sections 8913(8) (relating to 25 certificate of organization) and 8916(b) (relating to operating 26 agreement), the certificate of organization and operating 27 agreement may effect any change in the form of organization of 28 the company, in addition to or in contravention of the 29 provisions of this chapter, that may be necessary to accomplish 30 that purpose. 19970S1157B2174 - 175 -
1 § 8916. Operating agreement. 2 (a) General rule.--The operating agreement of a limited 3 liability company need not be in writing except where this 4 chapter refers to a written provision of the operating 5 agreement. If a written operating agreement provides that it 6 cannot be amended or modified except in writing, an oral 7 agreement, amendment or modification shall not be enforceable. 8 (b) Freedom of contract.--An operating agreement may contain 9 any provision for the regulation of the internal affairs of a 10 limited liability company adopted by the members, whether or not 11 specifically authorized by or in contravention of this chapter, 12 except where this chapter: 13 (1) refers only to a rule as set forth in the 14 certificate of organization; or 15 (2) expressly provides that the operating agreement 16 shall not relax or contravene any provision on a specified 17 subject. 18 (c) Cross references.--See sections 8913(8) (relating to 19 certificate of organization) and 8915 (relating to modification 20 by agreement). 21 § 8922. Liability of members [and managers]. 22 (a) General rule.--[Neither] Except as provided in 23 subsection (e), the members of a limited liability company [nor 24 the managers of a company managed by one or more managers are] 25 shall not be liable, solely by reason of being a member [or a 26 manager], under an order of a court or in any other manner for a 27 debt, obligation or liability of the company of any kind or for 28 the acts [or omissions] of any [other] member, manager, agent or 29 employee of the company. 30 (b) Professional relationship unaffected.--Subsection (a) 19970S1157B2174 - 176 -
1 shall not afford members [and managers] of a professional 2 company with greater immunity than is available to the officers, 3 shareholders, employees or agents of a professional corporation. 4 See section 2925 (relating to professional relationship 5 retained). 6 * * * 7 (d) Conflict of laws.--The personal liability of a member of 8 a company to any person or in any action or proceeding for the 9 debts, obligations or liabilities of the company or for the acts 10 [or omissions] of other members, managers, employees or agents 11 of the company shall be governed solely and exclusively by this 12 chapter and the laws of this Commonwealth. Whenever a conflict 13 arises between the laws of this Commonwealth and the laws of any 14 other state with regard to the liability of members of a company 15 organized and existing under this chapter for the debts, 16 obligations and liabilities of the company or for the acts [or 17 omissions] of the other members, managers, employees or agents 18 of the company, the laws of this Commonwealth shall govern in 19 determining such liability. 20 (e) Expansion of liability.--The certificate of organization 21 may provide that some or all of the members shall be liable for 22 some or all of the debts, obligations and liabilities of the 23 company to the extent and under the circumstances provided in 24 the certificate. 25 (f) Medical professional liability.--A professional company 26 shall be deemed to be a partnership for purposes of section 811 27 of the act of October 15, 1975 (P.L.390, No.111), known as the 28 Health Care Services Malpractice Act. 29 [(e)] (g) Cross reference.--See section 8904(b) (relating to 30 rules for cases not provided for in this chapter). 19970S1157B2174 - 177 -
1 § 8924. Limited transferability of membership interest. 2 (a) General rule.--The interest of a member in a limited 3 liability company constitutes the personal estate of the member 4 and may be transferred or assigned as provided in writing in the 5 operating agreement. Unless otherwise provided in writing in 6 the operating agreement, if all of the other members of the 7 company other than the member proposing to dispose of his 8 interest do not approve of the proposed transfer or assignment 9 by unanimous vote or written consent, which approval may be 10 unreasonably withheld by any of the other members, the 11 transferee of the interest of the member shall have no right to 12 participate in the management of the business and affairs of the 13 company or to become a member. The transferee shall only be 14 entitled to receive the distributions and the return of 15 contributions to which that member would otherwise be entitled. 16 (b) Certificate of membership interest.--The certificate of 17 organization may provide that a member's interest in a company 18 may be evidenced by a certificate of membership interest issued 19 by the company [and]. If such provision is made for the issuance 20 of certificates of membership interest, the operating agreement 21 may [also] provide for the assignment or transfer of any 22 membership interest represented by such a certificate and make 23 other provisions with respect to such certificates. [See 13 24 Pa.C.S. § 8102 (relating to definitions and index of 25 definitions).] 26 § 8932. Distributions and allocation of profits and losses. 27 A limited liability company may from time to time [divide] 28 make distributions and allocate the profits and losses of its 29 business [and distribute the same] to [and allocate any losses 30 among] the members of the company upon the basis stipulated in 19970S1157B2174 - 178 -
1 the operating agreement or, if not stipulated in the operating 2 agreement, per capita. The allocation of losses pursuant to this 3 section shall not affect the limitation on liability of members 4 as provided in section 8922 (relating to liability of members). 5 § 8942. Voting. 6 * * * 7 (c) Exception.--An amendment of the certificate of 8 organization that: 9 (1) restates without change all of the operative 10 provisions of the certificate of organization as theretofore 11 in effect; 12 (2) changes the name or registered office of the 13 company; or 14 (3) accomplishes any combination of the foregoing 15 purposes; 16 is not an amendment of the certificate of organization for the 17 purposes of subsection (b). Unless otherwise provided in writing 18 in the operating agreement, an amendment described in this 19 subsection may be made by the affirmative vote of a majority of 20 the managers or, in the case of a company that is not managed by 21 one or more managers, of a majority of the members. 22 * * * 23 § 8943. Duties of managers and members. 24 * * * 25 (b) Companies with managers.--If the certificate of 26 organization provides that the company shall be managed by one 27 or more managers: 28 (1) [Unless otherwise provided in writing in the 29 operating agreement, the provisions of Subchapter B of 30 Chapter 17 (relating to officers, directors and 19970S1157B2174 - 179 -
1 shareholders)] Sections 1711 (relating to alternative 2 provisions) through 1717 (relating to limitation on standing) 3 shall be applicable to representatives of the company. A 4 written provision of the operating agreement may increase, 5 but not relax, the duties of representatives of the company 6 to its members under those sections. For purposes of applying 7 the provisions of those sections, references to the "articles 8 of incorporation," "bylaws," "directors" and "shareholders" 9 shall mean the certificate of organization, operating 10 agreement, managers and members, respectively. 11 (2) A member who is not a manager shall have no duties 12 to the company or to the other members solely by reason of 13 acting in his capacity as a member. 14 § 8944. [Classes of members.] Members. 15 (a) General rule.--A limited liability company may have one 16 or more members. 17 (b) Classes of members.--An operating agreement may provide 18 for: 19 (1) classes or groups of members having such relative 20 rights, powers and duties as the operating agreement may 21 provide; 22 (2) the future creation in the manner provided in the 23 operating agreement of additional classes or groups of 24 members having such relative rights, powers and duties as may 25 from time to time be established, including rights, powers 26 and duties senior to existing classes and groups of members; 27 and 28 (3) the taking of an action, including, without 29 limitation, amendment of the certificate of organization or 30 operating agreement or creation of a class or group of 19970S1157B2174 - 180 -
1 interests in the limited liability company that was not 2 previously outstanding, without the vote or approval of any 3 member or class or group of members. 4 [(b)] (c) Class voting.--The operating agreement may grant 5 to all or certain identified members or a specified class or 6 group of members the right to vote (on a per capita or other 7 basis), separately or with all or any class or group of members, 8 upon any matter. 9 § 8945. Indemnification. 10 * * * 11 (f) Mandatory indemnification.--Without regard to whether 12 indemnification or advancement of expenses is provided under 13 subsections (a) and (d), a limited liability company shall be 14 subject to section 8331(2) (relating to rules determining rights 15 and duties of partners) and both the members and the managers, 16 if any, shall be deemed to be general partners for purposes of 17 applying that section. 18 § 8948. [Dissociation of member limited.] Limitation on 19 dissociation or assignment of membership interest. 20 Notwithstanding anything to the contrary set forth in this 21 part, an operating agreement may provide that a member may not 22 voluntarily dissociate from the limited liability company or 23 assign his membership interest prior to the dissolution and 24 winding-up of the company, and an attempt by a member to 25 dissociate voluntarily from the company or to assign his 26 membership interest in violation of the operating agreement 27 shall be ineffective. 28 § 8957. Approval of merger or consolidation. 29 * * * 30 (b) Reference to outside facts.--Any of the terms of the 19970S1157B2174 - 181 -
1 plan may be made dependent upon facts ascertainable outside of 2 the plan if the manner in which the facts will operate upon the 3 terms of the plan is set forth in the plan. Such facts may 4 include, without limitation, actions or events within the 5 control of or determinations made by a party to the plan or a 6 representative of a party to the plan. 7 (c) [Postadoption] Post-adoption amendment of plan of merger 8 or consolidation.--A plan of merger or consolidation may contain 9 a provision that the managers, if any, of the constituent 10 companies may amend the plan at any time prior to its effective 11 date, except that an amendment made subsequent to any adoption 12 of the plan by the members of any constituent domestic company 13 shall not, without the approval of the members, change: 14 (1) The amount or kind of membership interests, 15 obligations, cash, property or rights to be received in 16 exchange for or on conversion of all or any of the membership 17 interests of the constituent domestic company adversely to 18 the holders of those membership interests. 19 (2) Any [term] provision of the certificate of 20 organization or operating agreement of the surviving or new 21 company [to be effected by] as it is to be in effect 22 immediately following consummation of the merger or 23 consolidation except provisions that may be amended without 24 the approval of the members. 25 (3) Any of the other terms and conditions of the plan if 26 the change would adversely affect the holders of any 27 membership interests of the constituent domestic company. 28 * * * 29 (e) Party to plan.--An association that approves a plan in 30 its capacity as a member or creditor of a merging or 19970S1157B2174 - 182 -
1 consolidating company or that furnishes all or a part of the 2 consideration contemplated by a plan does not thereby become a 3 party to the [plan or the] merger or consolidation for the 4 purposes of this subchapter. 5 * * * 6 (i) Termination of plan.--Prior to the time when a merger or 7 consolidation becomes effective, the merger or consolidation may 8 be terminated pursuant to provisions therefor, if any, set forth 9 in the plan. If a certificate of merger or consolidation has 10 been filed in the department prior to the termination, a 11 certificate of termination executed by each company that is a 12 party to the merger or consolidation, unless the plan permits 13 termination by less than all of the companies, in which case the 14 certificate shall be executed on behalf of the company 15 exercising the right to terminate, shall be filed in the 16 department. The certificate of termination shall set forth: 17 (1) A copy of the certificate of merger or consolidation 18 relating to the plan that is terminated. 19 (2) A statement that the plan has been terminated in 20 accordance with the provisions therefor set forth therein. 21 See sections 134 (relating to docketing statement), 135 22 (relating to requirements to be met by filed documents), 138 23 (relating to statement of correction) and 8907 (relating to 24 execution of documents). 25 * * * 26 § 8962. Proposal and adoption of plan of division. 27 * * * 28 (b) Reference to outside facts.--Any of the terms of the 29 plan may be made dependent upon facts ascertainable outside of 30 the plan if the manner in which the facts will operate upon the 19970S1157B2174 - 183 -
1 terms of the plan is set forth in the plan. Such facts may 2 include, without limitation, actions or events within the 3 control of or determinations made by the dividing limited 4 liability company or a representative of the dividing limited 5 liability company. 6 * * * 7 (e) [Action by holders of indebtedness.--Unless otherwise 8 provided by an indenture or other contract by which the dividing 9 limited liability company is bound, a plan of division shall not 10 require the approval of the holders of any debt securities or 11 other obligations of the dividing company or of any 12 representative of the holders if the transfer of assets effected 13 by the division, if effected by means of a sale, lease, exchange 14 or other disposition, and any related distribution would not 15 require the approval of the holders or representatives thereof.] 16 (Repealed). 17 § 8965. Effect of division. 18 * * * 19 (b) Property rights; allocations of assets and 20 liabilities.-- 21 (1) (i) All the property, real, personal and mixed, of 22 the dividing company and all debts due on whatever 23 account to it, including subscriptions for membership 24 interests and other causes of action belonging to it, 25 shall, except as otherwise provided in paragraph (2), to 26 the extent [transfers] allocations of assets are 27 contemplated by the plan of division, be deemed without 28 further action to be [transferred] allocated to and 29 vested in the resulting companies on such a manner and 30 basis and with such effect as is specified in the plan, 19970S1157B2174 - 184 -
1 or per capita among the resulting companies as tenants in 2 common if no specification is made in the plan, and the 3 title to any real estate or interest therein vested in 4 any of the companies shall not revert or be in any way 5 impaired by reason of the division. 6 (ii) Upon the division becoming effective, the 7 resulting companies shall each thenceforth be responsible 8 as separate and distinct companies only for such 9 liabilities as each company may undertake or incur in its 10 own name but shall be liable for the liabilities of the 11 dividing company in the manner and on the basis provided 12 in subparagraphs (iv) and (v). 13 (iii) Liens upon the property of the dividing 14 company shall not be impaired by the division. 15 (iv) [One] To the extent allocations of liabilities 16 are contemplated by the plan of division, the liabilities 17 of the dividing company shall be deemed without further 18 action to be allocated to and become the liabilities of 19 the resulting companies on such a manner and basis and 20 with such effect as is specified in the plan; and one or 21 more, but less than all, of the resulting companies shall 22 be free of the liabilities of the dividing company to the 23 extent, if any, specified in the plan [if no fraud of 24 creditors or members or violation of law shall be 25 effected thereby and if all applicable provisions of law 26 are complied with.], if in either case: 27 (A) no fraud on members or violation of law 28 shall be effected thereby; and 29 (B) the plan does not constitute a fraudulent 30 transfer under 12 Pa.C.S. Ch. 51 (relating to 19970S1157B2174 - 185 -
1 fraudulent transfers). 2 (v) If the conditions in subparagraph (iv) for 3 freeing one or more of the resulting companies from the 4 liabilities of the dividing company, or for allocating 5 some or all of the liabilities of the dividing company, 6 are not satisfied, the liabilities of the dividing 7 company as to which those conditions are not satisfied 8 shall not be affected by the division nor shall the 9 rights of creditors [thereof] thereunder or of any person 10 dealing with the company be impaired by the division, and 11 any claim existing or action or proceeding pending by or 12 against the company with respect to those liabilities may 13 be prosecuted to judgment as if the division had not 14 taken place, or the resulting companies may be proceeded 15 against or substituted in [its] place of the dividing 16 company as joint and several obligors on [such liability] 17 those liabilities, regardless of any provision of the 18 plan of division apportioning the liabilities of the 19 dividing company. 20 (vi) The conditions in subparagraph (iv) for freeing 21 one or more of the resulting companies from the 22 liabilities of the dividing company and for allocating 23 some or all of the liabilities of the dividing company 24 shall be conclusively deemed to have been satisfied if 25 the plan of division has been approved by the 26 Pennsylvania Public Utility Commission in a final order 27 issued after (the Legislative Reference Bureau shall 28 insert here the effective date of the amendments of this 29 section) that has become not subject to further appeal. 30 (2) (i) The [transfer] allocation of any fee or 19970S1157B2174 - 186 -
1 freehold interest or leasehold having a remaining term of 2 30 years or more in any tract or parcel of real property 3 situate in this Commonwealth owned by a dividing company 4 (including property owned by a foreign limited liability 5 company dividing solely under the law of another 6 jurisdiction) to a new company resulting from the 7 division shall not be effective until one of the 8 following documents is filed in the office for the 9 recording of deeds of the county, or each of them, in 10 which the tract or parcel is situated: 11 (A) A deed, lease or other instrument of 12 confirmation describing the tract or parcel. 13 (B) A duly executed duplicate original copy of 14 the certificate of division. 15 (C) A copy of the certificate of division 16 certified by the Department of State. 17 (D) A declaration of acquisition setting forth 18 the value of real estate holdings in such county of 19 the company as an acquired company. 20 (ii) The provisions of 75 Pa.C.S. § 1114 (relating 21 to transfer of vehicle by operation of law) shall not be 22 applicable to [a transfer] an allocation of ownership of 23 any motor vehicle, trailer or semitrailer [from a 24 dividing company] to a new company under this section or 25 under a similar law of any other jurisdiction but any 26 such [transfer] allocation shall be effective only upon 27 compliance with the requirements of 75 Pa.C.S. § 1116 28 (relating to issuance of new certificate following 29 transfer). 30 (3) It shall not be necessary for a plan of division to 19970S1157B2174 - 187 -
1 list each individual asset or liability of the dividing 2 company to be allocated to a new company so long as those 3 assets and liabilities are described in a reasonable and 4 customary manner. 5 (4) Each new company shall hold any assets and 6 liabilities allocated to it as the successor to the dividing 7 company, and those assets and liabilities shall not be deemed 8 to have been assigned to the new company in any manner, 9 whether directly or indirectly or by operation of law. 10 * * * 11 (h) Conflict of laws.--It is the intent of the General 12 Assembly that: 13 (1) The effect of a division of a domestic limited 14 liability company shall be governed by the laws of this 15 Commonwealth and any other jurisdiction under the laws of 16 which any of the resulting companies is organized. 17 (2) The effect of a division on the assets and 18 liabilities of the dividing company shall be governed solely 19 by the laws of this Commonwealth and any other jurisdiction 20 under the laws of which any of the resulting companies is 21 organized. 22 (3) The validity of any allocation of assets or 23 liabilities by a plan of division of a domestic limited 24 liability company, regardless of whether or not any of the 25 new companies is a foreign limited liability company, shall 26 be governed solely by the laws of this Commonwealth. 27 (4) In addition to the express provisions of this 28 subsection, this subchapter shall otherwise generally be 29 granted the protection of full faith and credit under the 30 Constitution of the United States. 19970S1157B2174 - 188 -
1 § 8971. Dissolution. 2 [(a) General rule.--]A limited liability company is 3 dissolved and its affairs shall be wound up upon the happening 4 of the first to occur of the following events: 5 (1) At the time or upon the happening of events 6 specified in the certificate of organization. 7 (2) At the time or upon the happening of events 8 specified in writing in the operating agreement. 9 (3) By the unanimous written agreement or consent of all 10 members. 11 (4) [Upon] Except as otherwise provided in writing in 12 the operating agreement, upon a member becoming a bankrupt or 13 executing an assignment for the benefit of creditors or the 14 death, retirement, insanity, resignation, expulsion or 15 dissolution of a member or the occurrence of any other event 16 that terminates the continued membership of a member in the 17 company unless the business of the company is continued by 18 the vote or consent of [all] a majority in interest, or such 19 greater number as shall be provided in writing in the 20 operating agreement, of the remaining members given within 21 [90] 180 days following such event [or under a right to do so 22 stated in the operating agreement]. 23 (5) Entry of an order of judicial dissolution under 24 section 8972 (relating to judicial dissolution). 25 [(b) Cross reference.--See section 8103 (relating to 26 continuation of certain limited partnerships and limited 27 liability companies).] 28 § 8973. Winding up. 29 * * * 30 (b) Judicial supervision.--The court may wind up the affairs 19970S1157B2174 - 189 -
1 of the company upon application of any member, his legal 2 representative or assignee and, in connection therewith, may 3 appoint a liquidating trustee. See section 139(b) (relating to 4 tax clearance in judicial proceedings). 5 § 8974. Distribution of assets upon dissolution. 6 (a) General rule.--In settling accounts after dissolution, 7 the liabilities of the limited liability company shall be 8 entitled to payment in the following order: 9 (1) Those to creditors, including members or managers 10 who are creditors, in the order of priority as provided by 11 law, in satisfaction of the liabilities of the company, 12 whether by payment or the making of reasonable provision for 13 payment thereof, other than liabilities for distributions to 14 members under section 8932 (relating to distributions and 15 allocation of profits and losses) or 8933 (relating to 16 distributions upon an event of dissociation). 17 (2) Unless otherwise provided in the operating 18 agreement, to members and former members in satisfaction of 19 liabilities for distributions under section 8932 or 8933. 20 (3) Unless otherwise provided in the operating 21 agreement, to members in respect of: 22 (i) Their contributions to capital. 23 (ii) Their share of the profits and other 24 compensation by way of income on their contributions. 25 * * * 26 § 8978. Dissolution by domestication. 27 Whenever a domestic limited liability company has 28 domesticated itself under the laws of another jurisdiction by 29 action similar to that provided by section 8982 (relating to 30 domestication) and has authorized that action by the vote 19970S1157B2174 - 190 -
1 required by this subchapter for the approval of a proposal that 2 the company dissolve voluntarily, the company may surrender its 3 certificate of organization under the laws of this Commonwealth 4 by filing in the Department of State a certificate of 5 dissolution under section 8975 (relating to certificate of 6 dissolution). In lieu of the statements required by section 7 8975(a)(2) through (4), the certificate of dissolution shall set 8 forth a statement that the company has domesticated itself under 9 the laws of another jurisdiction. If the company, as 10 domesticated in the other jurisdiction, registers to do business 11 in this Commonwealth either prior to or simultaneously with the 12 filing of the certificate of dissolution under this section, the 13 company shall not be required to file with the certificate of 14 dissolution the tax clearance certificates that would otherwise 15 be required by section 139 (relating to tax clearance of certain 16 fundamental transactions). 17 § 8982. Domestication. 18 * * * 19 (b) Certificate of domestication.--The certificate of 20 domestication shall be executed by the company and shall set 21 forth in the English language: 22 (1) The name of the company. If the name is in a foreign 23 language, it shall be set forth in Roman letters or 24 characters or Arabic or Roman numerals. If the name is one 25 that is rendered unavailable for use by any provision of 26 section 8905 (relating to name), the company shall adopt, in 27 accordance with any procedures for changing the name of the 28 company that are applicable prior to the domestication of the 29 company, and shall set forth in the certificate of 30 domestication, an available name. 19970S1157B2174 - 191 -
1 * * * 2 (c) Effect of domestication.-- 3 (1) As a domestic limited liability company, the 4 domesticated company shall no longer be a foreign limited 5 liability company for the purposes of this chapter and shall 6 [have] instead be a domestic limited liability company with 7 all the powers and privileges and [be subject to] all the 8 duties and limitations granted and imposed upon domestic 9 limited liability companies. [The property, debts, liens, 10 estates, taxes, penalties and public accounts due the 11 Commonwealth shall continue to be vested in and imposed upon 12 the company to the same extent as if it were the successor by 13 merger of the domesticating company with and into a domestic 14 limited liability company under Subchapter G (relating to 15 mergers and consolidations).] In all other respects, the 16 domesticated limited liability company shall be deemed to be 17 the same limited liability company as it was prior to the 18 domestication without any change in or affect on its 19 existence. Without limiting the generality of the previous 20 sentence, the domestication shall not be deemed to have 21 dissolved the company or to have affected in any way: 22 (i) the right and title of the company in and to its 23 assets, property, franchises, estates and choses in 24 action; 25 (ii) the liability of the company for its debts, 26 obligations, penalties and public accounts due the 27 Commonwealth; 28 (iii) any liens or other encumbrances on the 29 property or assets of the company; or 30 (iv) any contract, license or other agreement to 19970S1157B2174 - 192 -
1 which the company is a party or under which it has any 2 rights or obligations. 3 (2) The [shares of] membership interests in the 4 domesticated company shall be unaffected by the domestication 5 except to the extent, if any, reclassified in the certificate 6 of domestication. 7 § 8996. Restrictions. 8 * * * 9 (b) Ownership and governance of restricted professional 10 companies.--Except as otherwise provided by a statute, rule or 11 regulation applicable to a particular profession, all of the 12 [members] ultimate beneficial owners of membership interests in 13 and all of the managers, if any, of a restricted professional 14 company shall be licensed persons. 15 * * * 16 (d) Application.--For purposes of applying subsection (a): 17 * * * 18 (3) The practice of the restricted professional service 19 of law shall be deemed to include: 20 (i) serving as an attorney-in-fact, guardian, 21 custodian, executor, personal representative, trustee or 22 fiduciary; 23 (ii) serving as a director or trustee of a 24 corporation for profit or not-for-profit, manager of a 25 limited liability company or a similar position with any 26 other form of association; 27 (iii) testifying, teaching, lecturing or writing 28 about any topic related to the law; 29 (iv) serving as a master, receiver, arbitrator or 30 similar official; 19970S1157B2174 - 193 -
1 (v) providing actuarial, insurance, investment, 2 estate and trust administration, tax return preparation, 3 financial and other similar services and advice; 4 (vi) conducting intellectual property and other real 5 and personal property title searches and providing other 6 title insurance agency services; and 7 (vii) engaging in any activity incidental to any of 8 the foregoing. 9 § 8998. Annual registration. 10 * * * 11 (f) Annual fee to be lien.-- 12 (1) Failure to [pay the annual registration fee imposed] 13 file the certificate of annual registration required by this 14 section shall not affect the existence or status of the 15 restricted professional company as such, but the annual 16 registration fee that would have been payable shall be a lien 17 in the manner provided in this subsection from the time the 18 annual registration fee is due and payable [upon]. If a 19 certificate of annual registration is not filed within 30 20 days after the date on which it is due, the department shall 21 assess a penalty of $500 against the company, which shall 22 also be a lien in the manner provided in this subsection. The 23 imposition of that penalty shall not be construed to relieve 24 the company from liability for any other penalty or interest 25 provided for under other applicable law. 26 (2) If the annual registration fee paid by a restricted 27 professional company is subsequently determined to be less 28 than should have been paid because it was based on an 29 incorrect number of members or was otherwise incorrectly 30 computed, that fact shall not affect the existence or status 19970S1157B2174 - 194 -
1 of the restricted professional company as such, but the 2 amount of the additional annual registration fee that should 3 have been paid shall be a lien in the manner provided in this 4 subsection from the time the incorrect payment is discovered 5 by the department. 6 (3) The annual registration fee shall bear simple 7 interest from the date that it becomes due and payable until 8 paid. The interest rate shall be that provided for in section 9 806 of the act of April 9, 1929 (P.L.343, No.176), known as 10 The Fiscal Code, with respect to unpaid taxes. The penalty 11 provided for in paragraph (1) shall not bear interest. The 12 payment of interest shall not relieve the restricted 13 professional company from liability for any other penalty or 14 interest provided for under other applicable law. 15 (4) The lien created by this subsection shall attach to 16 all of the property and proceeds thereof of the restricted 17 professional company in which a security interest can be 18 perfected, in whole or in part, by filing in the department 19 under 13 Pa.C.S. Div. 9 (relating to secured transactions; 20 sales of accounts, contract rights and chattel paper), 21 whether the property and proceeds are owned by the company at 22 the time the annual registration fee or any penalty or 23 interest becomes due and payable or whether the property and 24 proceeds are acquired thereafter. Except as otherwise 25 provided by statute, the lien created by this subsection 26 shall have priority over all other liens, security interests 27 or other charges, except liens for taxes or other charges due 28 the Commonwealth. The lien created by this subsection shall 29 be entered on the records of the department and indexed in 30 the same manner as a financing statement filed under 13 19970S1157B2174 - 195 -
1 Pa.C.S. Div. 9. At the time an annual registration fee, 2 penalty or interest that has resulted in the creation of 3 [the] a lien under this subsection is paid, the department 4 shall terminate the lien with respect to that annual 5 registration fee, penalty or interest without requiring a 6 separate filing by the company for that purpose. 7 (5) If the annual registration fee paid by a restricted 8 professional company is subsequently determined to be more 9 than should have been paid for any reason, no refund of the 10 additional fee shall be made. 11 * * * 12 § 9502. Creation, status and termination of business trusts. 13 (a) Creation.--A business trust may be created in real or 14 personal property, or both, with power in the trustee [or a 15 majority of the trustees]: 16 (1) To receive title to, hold, buy, sell, exchange, 17 transfer and convey real and personal property for the use of 18 the business trust. 19 (2) To take, receive, invest or disburse the receipts, 20 earnings, rents, profits or returns from the trust estate. 21 (3) To carry on and conduct any lawful business 22 designated in the deed or other instrument of trust, and 23 generally to do any lawful act in relation to such trust 24 property that any individual owning the same absolutely might 25 do. 26 (4) To merge with another business trust or other 27 association, to divide or to engage in any other fundamental 28 or other transaction contemplated by the deed or other 29 instrument of trust. 30 (b) Term.--Except as otherwise provided in the instrument, a 19970S1157B2174 - 196 -
1 business trust shall have perpetual existence. 2 (c) Separate entity.--A business trust is a separate legal 3 entity. Except as otherwise provided in the instrument, title to 4 real and personal property may be held in the name of the trust, 5 without in any manner diminishing the rights, powers and duties 6 of the trustees as provided in subsection (a). 7 (d) Termination.--Except as otherwise provided in the 8 instrument: 9 (1) The business trust may not be terminated, dissolved 10 or revoked by a beneficial owner or other person. 11 (2) The death, incapacity, dissolution, termination or 12 bankruptcy of a beneficial owner or a trustee shall not 13 result in the termination, dissolution or revocation of the 14 business trust. 15 (e) Contents of instrument.--The instrument may contain any 16 provision for the regulation of the internal affairs of the 17 business trust included in the instrument by the settlor, the 18 trustee or the beneficiaries in accordance with the applicable 19 procedures for the adoption or amendment of the instrument. 20 § 9503. Documentation of trust. 21 (a) General rule.--A business trust shall not be valid 22 unless created by deed of trust or other written instrument 23 subscribed by one or more individuals, associations or other 24 entities. The trustees of a business trust shall promptly cause 25 the instrument or any amendment thereof, except an amendment 26 solely effecting or reflecting the substitution of or other 27 change in the trustees, to be filed in the Department of State. 28 [The failure to effect the filing shall not affect the validity 29 of a business trust. A trustee who violates the requirements of 30 this subsection shall be liable for a civil penalty in the 19970S1157B2174 - 197 -
1 amount of $1,000 payable to the department.] 2 * * * 3 § 9505. [Succession of trustees.] Trustees. 4 (a) Succession of trustees.--An instrument may provide for 5 the succession of title to [the] any trust property not titled 6 in the name of the trust to a successor trustee, in case of the 7 death, resignation, removal or incapacity of any trustee. In the 8 case of any such succession, the title to [the] such trust 9 property shall at once vest in the succeeding trustee. 10 (b) Nature of service.--Service as the trustee of a business 11 trust by an association that is not a banking institution shall 12 not be deemed to constitute acting as a fiduciary for purposes 13 of the act of November 30, 1965 (P.L.847, No.356), known as the 14 Banking Code of 1965. 15 § 9506. Liability of trustees and beneficiaries. 16 (a) General rule.--[Liability to third parties for any act, 17 omission or obligation of a trustee of a business trust when 18 acting in such capacity shall extend to so much of the trust 19 estate as may be necessary to discharge such liability, but 20 personal liability shall not attach to the trustee or the 21 beneficiaries of the trust for any such act, omission or 22 liability.] 23 (1) Except as otherwise provided in the instrument, the 24 beneficiaries of a business trust shall be entitled to the 25 same limitation of personal liability as is extended to 26 shareholders in a domestic business corporation. 27 (2) Except as otherwise provided in the instrument, the 28 trustees of a trust, when acting in that capacity, shall not 29 be personally liable to any person other than the trust or a 30 beneficiary for any act or obligation of the trust or any 19970S1157B2174 - 198 -
1 trustee. 2 (3) An obligation of a trust based upon a writing may be 3 limited to a specific fund or other identified pool or group 4 of assets of the trust. 5 * * * 6 (f) Permissible beneficiaries.--Except as otherwise provided 7 by a statute, rule or regulation applicable to a particular 8 profession, all of the [beneficiaries of] ultimate beneficial 9 owners of interests in a business trust that renders one or more 10 restricted professional services shall be licensed persons. As 11 used in this subsection, the term "restricted professional 12 services" shall have the meaning specified in section 8903 13 (relating to definitions and index of definitions). 14 * * * 15 (h) Medical professional liability.--A business trust shall 16 be deemed to be a professional corporation for purposes of 17 section 811 of the act of October 15, 1975 (P.L.390, No.111), 18 known as the Health Care Services Malpractice Act. 19 Section 3. Amendment of Title 54. 20 As much of Title 54 as is hereinafter set forth is amended or 21 added to read: 22 § 302. Definitions. 23 The following words and phrases when used in this chapter 24 shall have, unless the context clearly indicates otherwise, the 25 meanings given to them in this section: 26 "Business." Any commercial or professional activity. 27 "Entity." Any individual[,] or any corporation, association, 28 partnership, joint-stock company, business trust, syndicate, 29 joint adventureship or other combination or group of persons, 30 regardless of whether it is organized or formed under the laws 19970S1157B2174 - 199 -
1 of this Commonwealth or any other jurisdiction. 2 "Fictitious name." Any assumed or fictitious name, style or 3 designation other than the proper name of the entity using such 4 name. The term includes [the], without limitation, any name [of 5 any association,] assumed by any general partnership, [business 6 trust,] syndicate, joint adventureship or similar combination or 7 group of persons. 8 "Proper name." When used with respect to an entity of a type 9 listed in the following paragraphs, the term means the name set 10 forth in: 11 (1) the articles of incorporation, if it is a 12 corporation; 13 (2) the statement of registration, if it is a limited 14 liability partnership; 15 (3) the certificate of limited partnership, if it is a 16 limited partnership; 17 (4) the statement of election, if it is an electing 18 partnership; 19 (5) the certificate of organization, if it is a limited 20 liability company; 21 (6) the articles of association, if it is a professional 22 association; 23 (7) the deed of trust or other instrument, if it is a 24 business trust; or 25 (8) a publicly filed document of a type listed in any of 26 the foregoing paragraphs even though the document is referred 27 to by a different title under the laws of any other 28 jurisdiction. 29 § 303. Scope of chapter. 30 * * * 19970S1157B2174 - 200 -
1 (b) Mandatory registration.-- 2 * * * 3 (2) Paragraph (1) shall not apply to any: 4 (i) Nonprofit or professional activities. 5 (ii) Activities [which] that are expressly or 6 impliedly prohibited by law from being carried on under a 7 fictitious name. 8 (iii) [Limited partnership which is registered in 9 the department pursuant to 15 Pa.C.S. Ch. 85 (relating to 10 limited partnerships) or under corresponding provisions 11 of prior law. The preceding sentence shall not apply to 12 any entity which includes the limited partnership as a 13 participant unless the entity is itself such a limited 14 partnership.] (Repealed). 15 (iv) Unincorporated nonprofit association. 16 (v) [Electing partnership existing under 15 Pa.C.S. 17 Ch. 87 (relating to electing partnerships).] (Repealed). 18 (vi) [Limited liability company which is registered 19 in the department pursuant to 15 Pa.C.S. Ch. 89 (relating 20 to limited liability companies).] (Repealed). 21 (vii) [Registered limited liability partnership 22 which is registered in the department pursuant to 15 23 Pa.C.S. Ch. 82 (relating to registered limited liability 24 partnerships).] (Repealed). 25 (viii) [Business trust which is registered in the 26 department pursuant to 15 Pa.C.S. Ch. 95 (relating to 27 business trusts).] (Repealed). 28 * * * 29 § 311. Registration. 30 * * * 19970S1157B2174 - 201 -
1 (e) Duplicate use of names.--The fictitious name shall not 2 be the same as or confusingly similar to: 3 (1) The name of any domestic corporation, or any foreign 4 corporation authorized to do business in this Commonwealth, 5 or the name of any corporation or other association 6 registered at any time under Chapter 5 (relating to corporate 7 and other association names) unless such name is available or 8 is made available for use under the provisions or procedures 9 of 15 Pa.C.S. § [5303(b)(1)(i) or (ii)] 5303(b)(1) (relating 10 to duplicate use of names) or the equivalent. 11 (2) [The name of any limited partnership organized under 12 15 Pa.C.S. Ch. 85 (relating to limited partnerships).] 13 (Repealed). 14 (3) The name of any administrative department, board or 15 commission or other agency of this Commonwealth. 16 (4) A name the exclusive right to which is at the time 17 reserved by any other person whatsoever in the manner 18 provided by statute. 19 * * * 20 § 502. Certain additions to register. 21 * * * 22 (c) Limitation on names which may be registered.-- 23 Notwithstanding subsections (a) and (b), no new name shall be 24 registered or deemed to be registered under this section [which 25 is the same as or confusingly similar to] that is not 26 distinguishable upon the records of the department from any 27 other name then registered or deemed to be registered under this 28 chapter, without the consent of the senior registrant. 29 * * * 30 Section 4. Repeals. 19970S1157B2174 - 202 -
1 The following acts and parts of acts are repealed:
2 Section 32 of the act of June 1, 1889 (P.L.420, No.332),
3 entitled "A further supplement to an act entitled 'An act to
4 provide revenue by taxation,' approved the seventh day of June,
5 Anno Domini one thousand eight hundred and seventy-nine," to the
6 extent that it applies to the judicial dissolution of an
7 association under 15 Pa.C.S.
8 As much as reads ", and act as the attorney-in-fact and
9 authorized agent of such corporations for the service of process
10 thereon" in section 806 of the act of April 9, 1929 (P.L.177,
11 No.175), known as The Administrative Code of 1929.
12 Section 404(b) of the act of December 19, 1990 (P.L.834,
13 No.198), known as the GAA Amendments Act of 1990, insofar as it
14 applies to 15 Pa.C.S. §§ 1745 and 5745.
15 15 Pa.C.S. §§ 5543.1, 5546.1, 5764.1, 8103 and 8206.
16 Section 5. Effective date.
17 This act shall take effect in 60 days. <--
18 THIS ACT SHALL TAKE EFFECT AS FOLLOWS: <--
19 (1) THE ADDITION OF 15 PA.C.S. § 524 SHALL TAKE EFFECT
20 IMMEDIATELY.
21 (2) THIS SECTION SHALL TAKE EFFECT IMMEDIATELY.
22 (3) THE REMAINDER OF THIS ACT SHALL TAKE EFFECT IN 60
23 DAYS.
I8L15WMB/19970S1157B2174 - 203 -