STAND. COM. REP. 2950

Honolulu, Hawaii

, 2004

RE: H.B. No. 2363

H.D. 1

S.D. 1

 

 

Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2004

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection and Housing, to which was referred H.B. No. 2363, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO PUBLIC BENEFIT CORPORATIONS,"

begs leave to report as follows:

The purpose of this measure is to establish the Attorney General's authority to oversee and supervise public benefit corporations.

The State Attorney General testified in support of this measure. St Francis Healthcare System of Hawaii opposed the measure.

In 2001, Hawaii adopted the Revised Model Nonprofit Corporation Act (Model Act), but the Model Act's provisions relating to oversight of nonprofit corporations organized for charitable or educational purposes, also known as "public benefit corporations", were not included. This measure adopts those provisions, providing the Attorney General with statutory authority to supervise and, where necessary, enforce the law against the approximately 3,500 public benefit corporations organized in Hawaii.

Among other things, this measure:

(1) Requires notice to the Attorney General of judicial proceedings, mergers, intent to dissolve, and the sale of substantially all of a public benefit corporation's assets;

(2) Establishes requirements for a merger of public benefit corporations;

(3) Allows the Attorney General to challenge a public benefit corporation's power to act in a proceeding brought against a director, office, or employee;

(4) Allows the Attorney General to seek the removal of a corporate director for breach of fiduciary duty, fraud, gross abuse of authority, and on other grounds;

(5) Establishes guidelines for the post-dissolution distribution of a public benefit corporation's assets in the absence of requirements in the corporation's articles or bylaw; and

(6) Permits the approval of a transaction in which a director has a conflict of interest if the transaction is approved by the Attorney General prior to or after its consummation.

Your Committee finds that this measure will provide the Attorney General with the necessary authority and tools to ensure that the charitable assets of public benefit corporations are being appropriately used and applied.

Your Committee has amended this measure:

(1) To allow a dissolved corporation that is not a public benefit corporation and whose articles or bylaws do not provide for the distribution of its assets on dissolution, to transfer its assets to its members, if any, or to persons the corporation serves or benefits;

(2) By deleting the amendment that proposed to require the Director of Commerce and Consumer Affairs to provide written notification to the Attorney General when the Director dissolved a public benefit corporation; and

(3) By making technical, nonsubstantive amendments to reflect preferred drafting style.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection and Housing that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2363, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2363, H.D. 1, S.D. 1, and be referred to the Committee on Judiciary and Hawaiian Affairs.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection and Housing,

____________________________

RON MENOR, Chair