Report Title:

Corporations; Repeat Environmental Offenders

Description:

Prohibits incorporation and requires dissolution of corporate repeat environmental offenders; prohibits issuance and requires revocation of certificate of authority of foreign corporate repeat environmental offender; requires attorney general and director of commerce and consumer affairs to act.

HOUSE OF REPRESENTATIVES

H.B. NO.

2189

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO CORPORATIONS.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that, while corporate environmental crime and other corporate environmental violations are more costly to the public than crime by individuals, individual crime is punished more severely than corporate crime. Some corporations repeatedly violate environmental laws and, if caught, pay relatively insignificant amounts that they pass on to the public as a cost of doing business. This practice is a gross injustice both to the public and to law-abiding corporations and also undermines a healthy economy. Threats of imprisonment are meaningless when directed at corporations as distinct entities. While the law has created the fiction that corporations are persons, there is no way to imprison a fictional person. The courts have also long held, however, that corporations are mere artificial creatures of law and may be dissolved or denied permission to do business if they violate the law. The laws of Hawaii provide these remedies, but public authorities rarely use them.

The purpose of this Act is to protect the people of Hawaii by requiring enforcement of these existing remedies against corporate repeat environmental offenders and by preventing evasion of these remedies by directors and officers of corporate repeat environmental offenders.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

corporate repeat offenders

§ -A Repeat environmental offenders not to incorporate or transact business in Hawaii. (a) A corporation that commits three or more major violations of environmental law within a ten-year period shall be declared a "corporate repeat offender". For purposes of this chapter:

(1) "Environmental law" means any provision of chapters 342B to 342P, and rules adopted thereunder, and laws and rules of any federal, state, or county jurisdiction that are substantially equivalent; and

(2) "Corporation" means a corporation for profit incorporated under chapter 414 or incorporated in another state and required to obtain a certificate of authority under section 414-431.

(b) A corporate repeat offender shall not be permitted to incorporate or to transact business in Hawaii.

(c) A corporation shall not be permitted to incorporate or to transact business in Hawaii if a majority of its directors or officers have ever been directors or officers of a corporate repeat offender as determined by the director of commerce and consumer affairs after notice to the corporation and an opportunity for the corporation to respond.

(d) A corporation shall not be permitted to incorporate or to transact business in the State if it is legally controlled by a corporation a majority of whose directors or officers have ever been directors or officers of a corporate repeat offender, as determined by the director of commerce and consumer affairs after notice to the corporation and an opportunity for the corporation to respond.

§ -B Major violation of environmental law defined; evidence; report. (a) For purposes of this part, "major violation of environmental law" means the intentional, knowing, reckless, or negligent violation of any environmental law that causes the death of a person or results in the imposition against the corporation of a fine, a civil penalty, restitution, damages, or other monetary payment of at least $1,000,000. Fines, civil penalties, restitution, damages, or other monetary payments for separate violations arising out of the same facts and circumstances shall be aggregated and shall constitute one major violation of law if the aggregated amount totals at least $1,000,000. Multiple major violations arising out of the same facts and circumstances shall be considered as only one major violation of law.

(b) For purposes of this chapter, any of the following shall be conclusive evidence that a corporation has committed a major violation of environmental law:

(1) A final criminal or civil judgment against a corporation by a court or a final adjudication against the corporation by a public agency, if the judgment or adjudication finds an intentional, knowing, reckless, or negligent violation of law that caused a person's death;

(2) A final criminal or civil judgment against the corporation by a court or a final adjudication against the corporation by a public agency, if the judgment or adjudication finds an intentional, knowing, reckless, or negligent violation of law pursuant to which the corporation is required to make a payment that meets or exceeds the monetary threshold in subsection (a); or

(3) A settlement, consent decree, plea-bargain, or similar arrangement in a criminal, civil, or administrative case in which the corporation has been charged with an intentional, knowing, reckless, or negligent violation of law pursuant to which the corporation is required to make a payment that meets or exceeds the monetary threshold in subsection (a), irrespective of whether the corporation admits or denies liability.

(c) Every corporation formed under the laws of this State or qualified to transact business in this State shall file annually with the director of commerce and consumer affairs a statement of those items specified in subsection (b) that were applicable to the corporation during the previous year. The director of commerce and consumer affairs shall prescribe an electronic form for submission of these items and shall make the statement available to the public in a timely fashion through its Internet web site.

§ -C Judicial dissolution; revocation of certificate of authority. (a) If a corporate repeat offender is a corporation formed under the laws of Hawaii, the attorney general shall bring an action under section 414-411 to dissolve the corporation. The court shall follow the provisions established in this chapter for those judicial dissolutions, including the provisions permitting the court to appoint a receiver or custodian pursuant to section 414-413.

(b) If a corporate repeat offender is a corporation formed under the laws of a jurisdiction other than Hawaii that is subject to section 414-431, the director of commerce and consumer affairs, in compliance with section 414-462, shall revoke the certification of qualification required by section 414-431.

§ -D Action by attorney general and director non-discretionary. Neither the attorney general nor the director of commerce and consumer affairs shall have discretion to refuse to perform their respective duties under this part. Any person may petition the attorney general or the director of commerce and consumer affairs to enforce this part against a corporate repeat offender. If the attorney general or the director of commerce and consumer affairs rejects the petition, or fails to act within one hundred eighty days of the submission of the petition, a person may bring an action for a writ of mandate to compel enforcement of this chapter. That person shall be entitled to an award of costs and reasonable attorney's fees if the person is the prevailing party in the action."

SECTION 3. Section 414-411, Hawaii Revised Statutes, is amended to read as follows:

"[[]§414-411[]] Grounds for judicial dissolution. The circuit court may dissolve a corporation:

(1) In a proceeding by the attorney general if it is established that:

(A) The corporation obtained its articles of incorporation through fraud; [or]

(B) The corporation has continued to exceed or abuse the authority conferred upon it by law; or

(C) The corporation is a corporate repeat offender as provided in section    -A.

(2) In a proceeding by a shareholder if it is established that:

(A) The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered, or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally, because of the deadlock;

(B) The directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;

(C) The shareholders are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired; or

(D) The corporate assets are being misapplied or wasted;

(3) In a proceeding by a creditor if it is established that:

(A) The creditor's claim has been reduced to judgment, the execution on the judgment returned unsatisfied, and the corporation is insolvent; or

(B) The corporation has admitted in writing that the creditor's claim is due and owing and the corporation is insolvent; [or]

(4) In a proceeding by the corporation to have its voluntary dissolution continued under court supervision[.];

(5) In a proceeding by a person pursuant to section    -D and it is established that the corporation is a corporate repeat offender as provided in section    -A."

SECTION 4. Section 414-461, Hawaii Revised Statutes, is amended to read as follows:

"§414-461 Grounds for revocation. The department director may commence a proceeding under section 414-462 to revoke the certificate of authority of a foreign corporation authorized to transact business in this State if:

(1) The corporation fails to:

(A) Pay any fees prescribed by law;

(B) File its annual report for a period of two years;

(C) Appoint and maintain an agent for service of process as required; or

(D) File a statement of a change in the name or business address of the agent as required; [or]

(2) A misrepresentation has been made of any material matter in any application, report, affidavit, or other record or document submitted by the corporation[.]; or

(3) The corporation is a corporate repeat offender as provided in section    -A."

SECTION 5. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 6. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect upon its approval.

INTRODUCED BY:

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