Bill Summary – FastDemocracy

H.B. 346
                          GENERAL ASSEMBLY OF NORTH CAROLINA
                                                                                              Mar 9, 2023
                                      SESSION 2023                                      HOUSE PRINCIPAL CLERK
     H                                                                                                 D
                                   HOUSE BILL DRH50018-NE-75B
     Short Title:   Reorganization & Economic Development Act.                                   (Public)
     Sponsors:      Representative Bradford.
     Referred to:
                                     A BILL TO BE ENTITLED
 AN ACT TO ESTABLISH A PROCEDURE FOR A HOSPITAL SERVICE CORPORATION
     TO REORGANIZE BY CREATING A NONPROFIT HOLDING CORPORATION.
 The General Assembly of North Carolina enacts:
            SECTION 1. Article 65 of Chapter 58 of the General Statutes is amended by adding
 a new Part to read:
                              "Part 3. Nonprofit Holding Corporations.
 "§ 58-65-175. Definitions.
     The following definitions apply in this Part:
            (1)      Affiliate. – As defined in G.S. 58-19-5.
            (2)      Executive officer. – As defined in G.S. 58-19-5.
            (3)      Nonprofit holding corporation. – A domestic corporation formed in
                     connection with a reorganization and operating under Chapter 55A of the
                     General Statutes that directly or indirectly holds all the membership interests
                     in a hospital service corporation and is the ultimate controlling person of the
                     hospital service corporation. A nonprofit holding corporation is not (i) a
                     "company," "insurance company," or "insurer," as those terms are defined in
                     G.S. 58-1-5, or (ii) a "hospital service corporation," as defined in
                     G.S. 58-65-1.1.
            (4)      Reorganization. – A transaction or series of transactions in which a nonprofit
                     holding corporation is created by or on behalf of a hospital service corporation
                     to hold, directly or indirectly, membership interests in the hospital service
                     corporation and becomes the ultimate controlling person of the hospital
                     service corporation.
            (5)      Subsidiary. – As defined in G.S. 58-19-5.
            (6)      Ultimate controlling person. – As defined in G.S. 58-19-5.
 "§ 58-65-177. Reorganization.
     (a)    Permissible Activities. – A reorganization may include transfers, by dividend or
 otherwise, of property, assets, rights, liabilities, equity or ownership interests in subsidiaries or
 other owned business entities, and other interests between the hospital service corporation and
 the nonprofit holding corporation and any other subsidiaries of the nonprofit holding corporation,
 and other related transactions.
     (b)    Hospital Service Corporation to be Held by Nonprofit Holding Corporation. –
 Notwithstanding any other provision of this Article, a hospital service corporation may have a
 nonprofit holding corporation as its ultimate controlling person.
                                   *DRH50018-NE-75B*
     General Assembly Of North Carolina                                                      Session 2023
     (c)      Reorganization Not a Change of Control. – A reorganization shall be considered an
 internal restructuring that does not have the effect of changing or influencing the control of the
 hospital service corporation. A reorganization shall not be considered a change of control of the
 hospital service corporation and shall not be subject to the provisions of G.S. 58-19-15. For
 purposes of this subsection, "control" is defined by G.S. 58-19-5.
     (d)      Transfers in Connection with Reorganization. – Notwithstanding any other provision
 of this Article, as part of a reorganization, a hospital service corporation may transfer, by dividend
 or otherwise, of property, assets, rights, liabilities, equity or ownership interests in subsidiaries
 or other owned business entities, and other interests between the hospital service corporation and
 the nonprofit holding corporation and any other subsidiaries of the nonprofit holding corporation,
 and other related transactions. Compliance with G.S. 58-19-30 and this Part shall be the exclusive
 means of approval to permit a reorganization, and the provisions of G.S. 58-19-10(b), 58-65-131,
 58-65-132, and 58-65-133 shall not apply to a reorganization.
     (e)      Compensation. – A director, officer, or employee of the hospital service corporation
 shall not receive any fee, commission, additional compensation, or other valuable consideration
 for aiding, promoting, or assisting in a reorganization. This subsection does not apply to
 compensation paid in the ordinary course of business.
 "§ 58-65-179. Charter amendments.
     (a)      Notwithstanding (i) any law of this State to the contrary or (ii) anything to the contrary
 in the bylaws or articles of incorporation of the hospital service corporation, a hospital service
 corporation may, by action of its governing board, authorize a reorganization and propose
 corresponding amendments to its charter. Proposed amendments shall be submitted to the
 Commissioner for approval, and the Commissioner shall approve the proposed amendments no
 later than 30 days after receiving the application unless the proposed amendments do not comply
 with this Article or Chapter 55A of the General Statutes.
     (b)      Any provision of this Article relating to the procedure for amending a charter, other
 than the provisions of this Part, is inapplicable.
 "§ 58-65-181. Operation of nonprofit holding corporation and subsidiaries.
     (a)      Except as provided in this Part, a nonprofit holding corporation shall not be subject
 to this Article or Article 66 of this Chapter.
     (b)      Both of the following shall apply to a nonprofit holding corporation upon and after a
 reorganization:
              (1)      The nonprofit holding corporation shall remain a nonprofit corporation under
                       G.S. 55A-1-40. The nonprofit holding corporation shall remain the ultimate
                       controlling person of the hospital service corporation. This subsection shall
                       not apply if a plan of conversion of the hospital service corporation is
                       approved pursuant to G.S. 58-65-131, 58-65-132, or 58-65-133.
              (2)      The nonprofit holding corporation and its direct or indirect subsidiaries that
                       are not hospital service corporations or subsidiaries of hospital service
                       corporations are not subject to G.S. 58-65-131, 58-65-132, or 58-65-133, and
                       the actions of the nonprofit holding corporation and such subsidiaries will not
                       constitute or require a conversion of the hospital service corporation under
                       those sections or any other law of this State.
     (c)      No equity or ownership interest in the nonprofit holding corporation or any of its
 subsidiaries shall be granted to any executive officer or any member of the governing board of
 the nonprofit holding corporation or the hospital service corporation.
 "§ 58-65-183. Hospital service corporation to maintain legal status.
     (a)      A reorganization does not change (i) the legal form of the hospital service corporation
 or (ii) the hospital service corporation's license to do business in North Carolina. Any subscribers'
 contracts and certificates issued by the hospital service corporation shall remain in full force and
 effect.
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     General Assembly Of North Carolina                                                    Session 2023
    (b)      The hospital service corporation shall continue to be subject to this Article and Article
 66 of this Chapter, except for the following:
             (1)    A reorganization shall not constitute or require a conversion of the hospital
                    service corporation pursuant to G.S. 58-65-131, 58-65-132, and 58-65-133 or
                    any other law of this State.
             (2)    A reorganization shall not require the nonprofit holding corporation, hospital
                    service corporation, or any affiliate of either to make any distribution or
                    payment to any person or entity. This subdivision shall not apply to
                    distributions or payments between a nonprofit holding corporation or hospital
                    service corporation and any of its affiliates.
             (3)    The hospital service corporation may make and pay direct or indirect
                    dividends or distributions to the nonprofit holding corporation, and
                    G.S. 58-19-10(b), 58-65-131, 58-65-132, and 58-65-133 shall not apply to
                    such dividends or distributions, provided that such dividends or distributions
                    comply with G.S. 55A-13-02, 58-7-130, 58-19-25(d), and 58-19-30.
             (4)    If the hospital service corporation undertakes a conversion pursuant to
                    G.S. 58-65-131, 58-65-132, and 58-65-133 at any time following a
                    reorganization, then, for the purposes of that conversion, the references in
                    G.S. 58-65-131, 58-65-132, and 58-65-133 to "fair market value of the
                    corporation" or "value of the corporation" shall mean the fair market value of
                    the nonprofit holding corporation."
             SECTION 2. This act is effective when it becomes law.
     DRH50018-NE-75B                                                                              Page 3