HOUSE OF REPRESENTATIVES

H.B. NO.

136

THIRTY-FIRST LEGISLATURE, 2021

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

relating to liquor licenses.

 

 

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

 


SECTION 1. Section 281-41, Hawaii Revised Statutes, is amended to read as follows:

"281-41 Transfer of licenses; notice of change in officers, directors, and stockholders of corporate licenses, partners of a partnership license, and members or managers of a limited liability company license; penalty. (a) No license issued under this chapter to an original applicant or to any transferee shall be transferable or be transferred within one year of the issuance or transfer, except for good cause shown to the satisfaction of the liquor commission. A transfer of license shall be for the same class, kind, and category of license. No license issued under this chapter shall be transferable or be transferred except upon written application to the commission by the proposed transferee, and after prior inspection of the premises, reference to, and report by an inspector, and a public hearing held by the commission not less than fourteen days after one publication of notice thereof, but without sending notice of the hearing by mail to persons being the owners or lessees of real estate situated within the vicinity of the premises and without the right to the owners or lessees to protest the transfer of a license. Exceptions are class 5 and 11 licensees who shall comply with the requirements as set forth in sections 281-57 to 281-60. Notwithstanding any provision of this chapter to the contrary, a class 2 license shall be transferrable; provided that the transferee certifies that the transferee intends to and shall derive no less than thirty per cent of the establishment's gross revenue from the sale of foods.

(b) A county may increase the requirements for transfers of class 5, category (1)(B) and (D), and class 11 licenses by ordinance designating one or more areas within the county as special liquor districts and specifying the requirements applicable to transfers of any of these licenses within each district.

(c) For the purpose of this section, "special liquor district" means an area designated by a county for restoration, reservation, historic preservation, redevelopment, rejuvenation, or residential protection, in which development is guided to protect or enhance the physical and visual aspects of the area for the benefit of the community as a whole.

(d) Where a license is held by a partnership, the commission may, notwithstanding any other provision of this section, approve the transfer of the partnership interest, without publication of notice at a public hearing, to any remaining partner or partners, upon the death or withdrawal of a partner of the partnership, or to a trust of which the partner is the trustee.

(e) Where a license is held by a partnership, limited partnership, or limited liability partnership, [or a limited liability company,] the admission or withdrawal of a partner, limited partner, or partner of a limited liability partnership[, member of a member-managed limited liability company, or manager of a manager-managed limited liability company] shall not be deemed a transfer of the license; provided that the licensee shall, within thirty days from the date of the admission or withdrawal, so notify the commission in writing, stating the name of the partner, [member, or manager,] limited partner, or partner of a limited liability partnership who has been admitted or withdrawn, and any other information as may be required by the commission. If the commission finds that the partner or limited partner for whom notification is required as specified in this subsection is an unfit or improper person to hold a license in the partner's or limited partner's own right pursuant to section 281-45, it may in its discretion revoke the license or suspend the license until the unfit or improper partner or limited partner is removed or replaced by a fit and proper person pursuant to section 281-45.

(f) Except as otherwise provided in this section, the same procedure shall be followed in regard to the transfer of a license as is prescribed by this chapter for obtaining a license. Sections 281-51 to 281-60, except where inconsistent with this section, are applicable to the transfers. The word "applicant", as used in sections 281-51 to 281-60, shall include each proposed transferee, and the words, "application for a license or for the renewal of a license", as used in those sections, shall include an application for the transfer of a license.

(g) Upon the hearing, the commission shall consider the application and any objections to the granting thereof and hear the parties in interest. It shall inquire into the propriety of each transfer and determine whether the proposed transferee is a fit person to hold the license. It may approve a transfer or refuse to approve a transfer and the refusal by the commission to approve a transfer shall be final and conclusive, unless an appeal is taken as provided in chapter 91.

(h) If any licensee without prior approval, approval of a temporary license, or approval of a management agreement transfers to any other person the licensee's business for which the licensee's license was issued, either openly or under any undisclosed arrangement, whereby any person, other than the licensee, comes into exclusive possession or control of the business or takes in any partner or associate who would be unfit or improper to hold a license pursuant to section 281-45, the commission may in its discretion suspend or cancel the license. For purposes of this subsection, "management agreement" means a written agreement under which a licensee allows a manager to manage and operate the licensee's business on behalf of the licensee.

(i) If the licensee is a corporation[,] or limited liability company, a change in ownership of any outstanding capital stock or membership interest shall not be deemed a transfer of a license; provided that in the case of a change in ownership of twenty-five per cent or more of the voting capital stock or membership interest or in the case of change in ownership of any number of shares of the stock or membership interest that results in the transferee thereof becoming the owner of twenty-five per cent or more of the outstanding voting capital stock[,] or membership interest, the corporate or limited liability company licensee shall, within thirty days of the date of the transfer, apply for the approval of the transfer from the commission in writing. If the commission finds that the transferee is an unfit or improper person to hold a license in the transferee's own right pursuant to section 281-45, it shall not approve the transfer. If any transfer is made without the approval of the commission, the commission may in its discretion revoke or suspend the license until it determines that the transferee is a fit and proper person, and if the commission finds that the transferee is not a fit and proper person, until a retransfer or new transfer of the capital stock or membership interest is made to a fit and proper person pursuant to section 281-45. In addition, the corporate or limited liability company licensee, if not a publicly-traded company, or an entity ultimately solely owned by a publicly-traded company, shall, within thirty days from the date of election or admission of any officer [or], director, manager, or member, notify the commission in writing of the name, age, and place of residence of the officer [or], director[.], manager, or member, and any other information as may be required by the commission. A publicly-traded corporation or limited liability company, or [an entity] a corporation or limited liability company ultimately solely owned by a publicly-traded company, shall, within thirty days from the date of election or admission of any replacement of an officer, director, manager, or member designated as a primary decision-maker regarding the purchase and sale of liquor, notify the commission in writing of the name, age, and place of residence of the officer[.], director, manager, or member. If the commission finds that the [transferee,] officer, [or] director, manager, or member for whom notification is required to be given as specified in this subsection, is an unfit or improper person to hold a license in the [transferee's,] officer's, [or] director's, manager's, or member's own right pursuant to section 281-45, it may in its discretion revoke the license or suspend the license until [a retransfer or new transfer of the capital stock is effected to a fit or proper person pursuant to section 281-45 or until] the unfit or improper [transferee,] officer, [or] director, manager, or member is removed or replaced by a fit and proper person pursuant to section 281-45.

(j) If a licensee closes out the business for which the license is held, during the term for which the license was issued, the licensee shall, within five days from the date of closing the same, give the commission written notice thereof and surrender the licensee's license for cancellation, unless the licensee obtains prior approval from the commission to place its license with the commission for safekeeping. For the purposes of this subsection, "safekeeping" means the holding of a liquor license at the commission office while the licensee is not operating.

(k) The conversion of an entity into any other form of entity or the merger of any entity with any other entity shall not be deemed a transfer of the license; provided that the licensee, [prior to the date] within thirty days of the conversion or merger, shall apply for and secure the approval of the commission without any requirement for publication of notice. The foregoing shall not preclude compliance with subsection (e) upon a change in any of the partners [or members,] or with subsection (i) upon change of any shareholders, officers, [or] directors, managers, or members of any entity occurring concurrently with a conversion or merger.

As used in this subsection, "entity" means a corporation, partnership, limited partnership, limited liability partnership, or limited liability company.

(l) Any officer [or], director, partner, limited partner, manager, or member not designated as a primary decision-maker shall be prohibited from coercing, pressuring, or otherwise unduly influencing the decision of a designated primary decision-maker to engage in any unlawful activity relating to the purchase and sale of liquor. If the commission finds that coercion, pressure, or other undue influence has been placed on a primary decision-maker by any officer [or], director, manager, or member who is not a designated primary decision-maker, the commission may in its discretion suspend or cancel the license."

SECTION 2. Section 281-45, Hawaii Revised Statutes, is amended to read as follows:

"281-45 No license issued, when. No license shall be issued under this chapter:

(1) To any minor or to any person who has been convicted of a felony and not pardoned, or to any other person not deemed by the commission to be a fit and proper person to have a license; provided that the commission may grant a license under this chapter to a corporation or limited liability company that has been convicted of a felony where the commission finds that the corporation's officers [and], directors, and shareholders of twenty-five per cent or more of outstanding stock or a limited liability company's managers and members holding twenty-five per cent or more of the membership interests are fit and proper persons to have a license;

(2) To a corporation the officers and directors of which, or any of them, would be disqualified under paragraph (1) from obtaining the license individually, or a stockholder of which, owning or controlling twenty-five per cent or more of the outstanding capital stock, or to a general partnership, limited partnership, limited liability partnership, or limited liability company whose partner or member holding twenty-five per cent or more interest of which, or any of them would be disqualified under paragraph (1) from obtaining the license individually; provided that for publicly-traded corporations and limited liability companies or [entities] corporations or limited liability companies ultimately solely owned by a publicly-traded company, only the officers [and], directors, managers, or members designated as primary decision-makers shall be considered to determine disqualification under paragraph (1);

(3) Unless the applicant for a license or a renewal of a license, or in the case of a transfer of a license, both the transferor and the transferee, present to the issuing agency a tax clearance certificate from the department of taxation showing that the applicant or the transferor and transferee do not owe the state government any delinquent taxes, penalties, or interest; or that the applicant, or in the case of a transfer of a license, the transferor or transferee, has entered into an installment plan agreement with the department of taxation for the payment of delinquent taxes in installments and that the applicant is or the transferor or transferee is, in the case of a transfer of a license, complying with the installment plan agreement; provided that when the applicant or the transferor or transferee, in the case of a transfer of a license, is validly challenging a tax assessment, penalty, or other proceeding that prevents the issuance of a signed certificate from the appropriate federal or state tax agency, the commission shall issue a license that is valid for the period of time necessary to resolve the challenge;

(4) To an applicant for a class 2, class 4 except for convenience minimarts, class 5, class 6, class 11, class 12, class 13, class 14, class 15, class 17, or class 18 license unless the applicant for issuance of a license or renewal of a license, or in the case of a transfer of a license, both the transferor and the transferee, present to the issuing agency proof of liquor liability insurance coverage in an amount of $1,000,000; or

(5) To any applicant who has had any liquor license revoked less than two years previous to the date of the application for any like or other license under this chapter."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

 

INTRODUCED BY:

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Report Title:

Liquor Licensing; Transfer of Licenses; Limited Liability Companies

 

Description:

Applies liquor licensing provisions related to the transfer of licenses and the denial of licenses to limited liability companies.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.