VARIOUS CHANGES TO NONPROFIT CORPORATIONS ACT.

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View NCGA Bill Details2023-2024 Session
Senate Bill 529 (Public) Filed Monday, April 3, 2023
AN ACT TO MAKE VARIOUS CHANGES TO THE NORTH CAROLINA NONPROFIT CORPORATIONS ACT.
Intro. by Moffitt, Woodard, Alexander.

Status: Ref To Com On Rules and Operations of the Senate (Senate action) (Apr 4 2023)

Bill History:

S 529

Bill Summaries:

  • Summary date: Apr 4 2023 - View Summary

    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.

    Applies to plans of mergers adopted on or after October 1, 2023.

    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 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, as amended, 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, 2026.

    Applies to annual reports due on or after January 1, 2025.

    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, 2023.

    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, 2023. Sets forth four items that are considered a protected agreement if in effect immediately before October 1, 2023.

    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.

    Applies to corporations organized on or after October 1, 2023.

    Part V.

    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. Applies to committees created on or after October 1, 2023.

    Part VI.

    Adds new Part 1, Conversion to Nonprofit Corporation, in Article 11A of GS Chapter 55A, providing as follows.

    Allows a business entity that is not a domestic nonprofit, to convert to a domestic nonprofit if (1) the conversion is permitted by the laws of the state or country governing the organization and internal affairs of the converting business entity and (2) the converting business entity complies with the requirements of this Part 17 and, to the extent applicable, the laws referred to above. Defines business entity as a domestic business corporation, including a professional corporation, a foreign business corporation, including a foreign professional corporation, a domestic or foreign nonprofit corporation, a domestic or foreign limited liability company, a domestic or foreign limited partnership, a registered limited liability partnership or foreign limited liability partnership, or any other partnership whether or not formed under the laws of this State.

    Requires the converting business entity to approve a written plan of conversion that includes specified information, including the manner and basis for converting the interests in the converting business entity, if any, into any combination of eligible interests or other securities, rights to acquire interests or other securities, obligations, cash, or other property of the resulting domestic nonprofit corporation. Requires the plan to be approved in accordance with the laws of the state or county governing the organization and internal affairs of the converting business entity. Allows amending or abandoning the plan after it has been approved but before articles of incorporation for the resulting domestic nonprofit have become effective, to the extent legally allowed.

    Requires the converting business entity to deliver articles of conversion to the Secretary of State for filing after a plan of conversion has been approved. Sets out what must be included in the articles of incorporation. Sets out steps that must be taken when the plan is abandoned after the articles have been filed. Specifies that the conversion takes effect when the articles of incorporation become effective. Requires certificates of conversion to also be registered.

    Provides that when the conversion takes effect, then: (1) the converting business entity ceases its prior form of organization and continues in existence as the resulting domestic nonprofit; (2) the title to all real estate and other property owned by the converting business entity continues vested in the resulting domestic nonprofit without transfer, reversion, or impairment; (3) except as otherwise provided by law or by the plan of conversion, all rights, privileges, immunities, powers, and purposes of the converting business entity remain vested in the resulting domestic nonprofit; (4) all debts, obligations, and other liabilities of the converting business entity continue as debts, obligations, and other liabilities of the resulting domestic nonprofit; (5) a proceeding pending by or against the converting business entity may be continued as if the conversion did not occur and allows the name of the resulting domestic nonprofit to be substituted for the name of the converting business entity in any pending action or proceeding; (6) the interests and obligations in the converting business entity are converted to eligible interests or other securities, rights to acquire interests or other securities, obligations, cash, or other property of the resulting domestic corporation in accordance with the plan of conversion; and (7) all of the following apply to the resulting domestic nonprofit corporation: it is incorporated under and subject to GS Chapter 55A, it converts from the converting business entity into its new form of organization interruption, and it is deemed to have been incorporated on the date that the converting entity was originally incorporated or organized. Specifies that the conversion does not affect the liability or absence of liability of any holder of an interest in the converting business entity for any acts, omissions, or obligations of the converting business entity made or incurred prior to the effectiveness of the conversion. The cessation of the existence of the converting business entity in its prior form of organization does not constitute a dissolution or termination of the converting business entity.

    Amends Part 2 of Article 11A of GS Chapter 55A, by renaming the Part to Conversion of Nonprofit Corporation and making the following changes.

    Amends GS 55A-11A-10 to require that the plan of conversion of a charitable or religious corporation to a domestic limited liability company comply with the following. If the converting charitable or religious corporation does not have any members entitled to vote on the conversion, the plan must be approved by the board of directors of the converting charitable or religious corporation. If members are entitled to vote on the conversion, the plan must be approved first by the board of directors and then by the members entitled to vote; sets out additional requirements for the voting process. If, as a result of the conversion, one or more members of the converting entity would become subject to new member liability, approval of the plan of conversion requires that each of those members sign a separate record consenting to become subject to the new member liability. Also requires the plan of conversion to be approved by any person or group of persons whose approval is required under GS 55A-10-30 to amend the articles of incorporation or bylaws of the charitable or religious corporation.

    Applies to plans of conversion approved on or after October 1, 2023.


  • Summary date: Apr 3 2023 - View Summary

    To be summarized.