VARIOUS CHANGES TO NONPROFIT CORPORATIONS ACT.

View NCGA Bill Details2021
House Bill 696 (Public) Filed Tuesday, April 27, 2021
AN ACT TO MAKE VARIOUS CHANGES TO THE NORTH CAROLINA NONPROFIT CORPORATIONS ACT.
Intro. by Lofton, Howard, Reives, Moffitt.

Status: Serial Referral To Rules, Calendar, and Operations of the House Added (House action) (Jun 16 2021)
H 696

Bill Summaries:

  • Summary date: Jun 16 2021 - More information

    House committee substitute to the 1st edition makes the following changes.

    Part I.

    Eliminates the proposed changes to subsection (g) of GS 55A-12-02, which excluded dispositions to a charitable or religious corporation authorized under a plan of dissolution from the requirement to give written notice to the Attorney General before it sells, leases, exchanges, or otherwise disposes of its property if the transaction is not in the usual and regular course of its activities. Makes conforming changes to the heading given to Part I. of the act.


  • Summary date: Apr 27 2021 - More information

    Identical to S 540, filed 4/5/21.

    Part I.

    Amends GS 55A-11-02 to allow a charitable or religious corporation to merge, without prior approval of the superior court, with a limited liability company if (1) its sole member is a domestic or foreign corporation exempt from income tax; and (2) it is disregarded for income tax purposes but would be eligible for an exemption under the specified provision of the Internal Revenue Code if it were not disregarded.

    Amends GS 55A-11-09, concerning merger with unincorporated entities, as follows. Expands upon the definition of a business entity to also include a nonprofit association, whether or not it was formed under this State's laws. Provides that if the surviving business entity is not a domestic limited liability company, a domestic business corporation, a domestic nonprofit corporation, or a domestic limited partnership, when the merger takes effect,  the surviving business entity is deemed to have agreed that it may be served with process in this State in any proceeding for enforcement of any obligation of any merging nonprofit association that is formed under the laws of this State. Makes additional technical and clarifying changes.

    Amends GS 55A-12-02 by excluding dispositions to a charitable or religious corporation authorized under a plan of dissolution from the requirement to give written notice to the Attorney General before it sells, leases, exchanges, or otherwise disposes of its property if the transaction is not in the usual and regular course of its activities. Makes additional clarifying and technical changes.

    Effective October 1, 2021.

    Part II.

    Enacts new GS 55A-16-22.1 requiring domestic and foreign corporations authorized to conduct affairs in the State to submit annual reports electronically to the Secretary of State that include the six specified items, including its principal office address and telephone number, brief description of the nature of its activities, and specified types of contact information. Requires corporations to also submit annual reports with due date varying based on the type of corporation. Sets out the process for filing late reports and for amending previously filed reports. Sets out actions a corporation may take under which it is deemed to have filed the required annual report.

    Amends GS 55A-1-22 by providing that there is no fee for filing the annual report.

    Amends GS 55A-14-20 to allow the Secretary of State to commence a proceeding to dissolve administratively a corporation for being delinquent in submitting its annual report. Makes additional technical changes.

    Amends GS 55A-14-22 by amending the actions that must be taken before the Secretary of State will cancel a certificate of dissolution and prepare a certificate of reinstatement, to also require the payment of any penalties and payments due. Makes additional clarifying changes. 

    Allows the Secretary of State, to waive the fee to be paid by a corporation seeking reinstatement following administrative dissolution for delinquent filing of the annual report, until January 1, 2023.

    Applies to annual reports due on or after January 1, 2023.

    Part III.

    Adds new Article 11B, Domestication, to GS Chapter 55A, providing as follows. 

    Allows a foreign nonprofit corporation to become a domestic nonprofit corporation by complying with the Article, so long as domestication is allowed by the laws in the foreign corporation's jurisdiction. Also allows a domestic nonprofit corporation to become a foreign nonprofit corporation by complying with the Article, under a plan of domestication, so long as the domestication is allowed by the laws of the jurisdiction of the foreign corporation. Provides that a charitable or religious corporation may only become a foreign nonprofit corporation in accordance with the statutory requirements for mergers involving charitable or religious corporations, and requires the domesticated corporation to meet the same requirements as the survivor in a merger. Provides that any devise, gift, grant, or promise contained in a will or other instrument made to a domesticating corporation that takes effect or remains payable after the domestication becomes effective, inures to the domesticated corporation unless the will or other instrument provides otherwise.

    Allows a domestic nonprofit corporation to become a foreign nonprofit corporation by approving a plan of domestication; sets out items that must be included in the plan. Allows the plan's terms concerning the manner and basis of converting the memberships of the domesticating corporation into memberships, obligations, rights to acquire memberships, cash, or other property, to be made dependent upon facts objectionably ascertainable outside the plan.

    Sets out the process under which the plan of domestication is to be adopted when the domestic nonprofit corporation is to be the domesticating corporation. Allows a plan of domestication of a domestic nonprofit corporation to be amended before articles of domestication have taken effect. Sets out the procedures that can be used by a domestic nonprofit corporation in approving an amendment of a plan of domestication. Allows a plan of domestication to be abandoned, as provided for in the plan, after it is approved but before articles of domestication have become effective. Sets out the process for abandonment and requires specified information to be included in the articles of abandonment. 

    Sets out what must be included in the articles of domestication, and requires the articles to be signed by the domesticating corporation and filed with the Secretary of State. Sets out provisions governing when the domestication becomes effective. Sets out six provisions that apply once the domestication becomes effective, including that all debts, obligations, and other liabilities of the domesticating corporation remain the responsibility of the domesticated corporation, allows the name of the domesticated corporation to be substituted for the name of the domesticating corporation in any pending proceeding, and the articles of incorporation and bylaws of the domesticated corporation become effective. Sets out provisions governing the interest holder liability of a member in a foreign corporation that is domesticated into this State who had interest holder liability in respect of the domesticating corporation before the domestication becomes effective. Provides that a member who becomes subject to interest holder liability in respect of the domesticated corporation as a result of the domestication has interest holder liability only in respect of interest holder liabilities that arise after the domestication becomes effective. Specifies that a domestication does not constitute or cause the dissolution of the domesticating corporation.

    Amends GS 55A-1-22, by setting a $25 fee for filing articles of domestication and a $10 fee for filing articles of abandonment of domestication. 

    Amends GS 55A-1-60 to allow a judicial order requiring a meeting of a corporation to be held or that requires a method be used to obtain a vote, to also authorize obtaining votes or approvals necessary for domestication. Makes additional clarifying changes.

    Amends GS 55A-8-25 to prohibit a committee of the board from recommending to members or approving domestication.

    The above provisions are effective October 1, 2021.

    Provides that if a protected agreement of a domestic domesticating nonprofit corporation in effect immediately before the domestication becomes effective contains a provision that applies to a merger of the corporation and the agreement does not refer to domestication, then the provision applies to a domestication as if the domestication were a merger until the provision is first amended after October 1, 2021. Sets forth four items that are considered a protected agreement if in effect immediately before October 1, 2021.

    Part IV.

    Amends GS 55A-1-50, concerning private foundations, by adding that a private foundation's board of directors consists of one or more natural persons, with the number specified in or fixed in accordance with the articles of incorporation or bylaws.

    Amends GS 55A-8-03 to require a board of directors of a nonprofit corporation to have three or more persons (was, one or more); makes conforming and clarifying changes. Amends GS 55A-8-11 to allow a board of directors to have fewer than three members due to vacancies until the vacancies are filled.

    Effective October 1, 2021.

    Part V.

    Amends GS 55A-1-70 to allow a nonprofit corporation to conduct a transaction by electronic means, except as limited by its articles of incorporation or bylaws or its board of directors. Requires agreement from the member, delegate, officer, or director of the corporation before conducting the transaction electronically and requires informing the person of how to revoke the agreement. Makes conforming changes.

    Amends GS 55A-7-04, to make conforming changes by allowing a member's consent to action taken without a meeting to be in electronic form and delivered electronically, except as limited by the articles of incorporation or bylaws (was, allowed only to the extent the corporation agreed). Makes clarifying changes.

    Amends GS 55A-8-21 to allow action required or permitted by GS Chapter 55A to be taken at a board of directors' meeting to be taken without a meeting if the action is taken by all members of the board, except to the extent that the articles of incorporation or bylaws require that action by the board of directors be taken at a meeting. Also allows a director's consent to action taken without meeting to be in an electronic form and delivered electronically, except as limited by the articles of incorporation or bylaws. 

    Effective October 1, 2021.

    Part VI.

    Amends GS 55A-8-25 by providing that the number required to approve the creation of a committee of the board and the appointment of its members applies unless the articles of incorporation or bylaws provide otherwise. Effective October 1, 2021.


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