H.B. 696
GENERAL ASSEMBLY OF NORTH CAROLINA
Apr 27, 2021
SESSION 2021 HOUSE PRINCIPAL CLERK
H D
HOUSE BILL DRH30289-MVf-8
Short Title: Various Changes to Nonprofit Corporations Act. (Public)
Sponsors: Representative Lofton.
Referred to:
1 A BILL TO BE ENTITLED
2 AN ACT TO MAKE VARIOUS CHANGES TO THE NORTH CAROLINA NONPROFIT
3 CORPORATIONS ACT.
4 The General Assembly of North Carolina enacts:
5
6 PART I. MODIFY LIMITATIONS ON MERGERS AND SALES OF ASSETS
7 SECTION 1.(a) G.S. 55A-11-02 reads as rewritten:
8 "§ 55A-11-02. Limitations on mergers by charitable or religious corporations.
9 (a) Without the prior approval of the superior court in a proceeding in which the Attorney
10 General has been given written notice, a charitable or religious corporation may merge only with
11 any of the following:
12 …
13 (5) A limited liability company that satisfies both of the following conditions:
14 a. Its sole member is a domestic or foreign corporation that is exempt
15 from income tax under section 501(c)(3) of the Internal Revenue Code
16 of 1986 or any successor section.
17 b. It is disregarded for income tax purposes but would be eligible for an
18 exemption under section 501(c)(3) of the Internal Revenue Code of
19 1986 or any successor section if it were not disregarded for income tax
20 purposes.
21 …."
22 SECTION 1.(b) G.S. 55A-11-09 reads as rewritten:
23 "§ 55A-11-09. Merger with unincorporated entity.
24 (a) As used in this section, "business entity" means a (i) domestic business corporation
25 (including corporation, including a professional corporation as defined in G.S. 55B-2), a
26 G.S. 55B-2, (ii) foreign business corporation (including corporation, including a foreign
27 professional corporation as defined in G.S. 55B-16), a G.S. 55B-16, (iii) domestic or foreign
28 nonprofit corporation, a (iv) domestic or foreign limited liability company, a (v) domestic or
29 foreign limited partnership, a (vi) registered limited liability partnership or foreign limited
30 liability partnership as defined in G.S. 59-32, or any other partnership as defined in G.S. 59-36
31 whether or not formed under the laws of this State.State, or (vii) a nonprofit association as defined
32 in G.S. 59B-2 whether or not formed under the laws of this State.
33 (b) One or more domestic nonprofit corporations may merge with one or more
34 unincorporated entities and, if desired, one or more foreign nonprofit corporations, domestic
35 business corporations, or foreign business corporations if:if all of the following apply:
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1 (1) The merger is permitted by the laws of the state or country governing the
2 organization and internal affairs of each of the other merging business
3 entities;entities.
4 (2) Each merging domestic nonprofit corporation and each other merging
5 business entity comply with the requirements of this section and, to the extent
6 applicable, the laws referred to in subdivision (1) of this subsection;
7 andsubsection.
8 (3) The merger complies with G.S. 55A-11-02, if applicable.
9 …
10 (c3) In the case of a merging domestic nonprofit corporation, approval of the plan of
11 merger requires that the plan of merger be adopted as provided in G.S. 55A-11-03. If any member
12 of a merging domestic nonprofit corporation has or will have personal liability for any existing
13 or future obligation of the surviving business entity solely as a result of holding an interest in the
14 surviving business entity, then in addition to the requirements of G.S. 55A-11-03, approval of
15 the plan of merger by the domestic nonprofit corporation shall require the affirmative vote or
16 written consent of the member. In the case of each other merging business entity, the plan of
17 merger must shall be approved in accordance with the laws of the state or country governing the
18 organization and internal affairs of such merging business entity.
19 …
20 (d) After a plan of merger has been approved by each merging domestic nonprofit
21 corporation and each other merging business entity as provided in subsection (c) of this section,
22 the surviving business entity shall deliver articles of merger to the Secretary of State for filing.
23 The articles of merger shall set forth:forth all of the following:
24 …
25 (e) A merger takes effect when the articles of merger become effective. When a merger
26 takes effect:effect, all of the following apply:
27 (1) Each other merging business entity merges into the surviving business entity
28 and the separate existence of each merging business entity except the
29 surviving business entity ceases;ceases.
30 (2) The title to all real estate and other property owned by each merging business
31 entity is vested in the surviving business entity without reversion or
32 impairment;impairment.
33 (3) The surviving business entity has all liabilities of each merging business
34 entity;entity.
35 (4) A proceeding pending by or against any merging business entity may be
36 continued as if the merger did not occur, or the surviving business entity may
37 be substituted in the proceeding for a merging business entity whose separate
38 existence ceases in the merger;merger.
39 (5) If a domestic nonprofit corporation is the surviving business entity, its articles
40 of incorporation shall be amended to the extent provided in the articles of
41 merger;merger.
42 (6) The interests in each merging business entity that are to be converted into
43 interests, obligations, or securities of the surviving business entity or into the
44 right to receive cash or other property are thereupon so converted, and the
45 former holders of the interests are entitled only to the rights provided to them
46 in the plan of merger or, in the case of former holders of shares in a domestic
47 business corporation, any rights they may have under Article 13 of Chapter
48 55 of the General Statutes; andStatutes.
49 …
50 (e1) If the surviving business entity is not a domestic limited liability company, a domestic
51 business corporation, a domestic nonprofit corporation, or a domestic limited partnership, when
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1 the merger takes effect the surviving business entity is deemed:deemed to have done all of the
2 following:
3 (1) To agree Agreed that it may be served with process in this State in any
4 proceeding for enforcement of (i) any obligation of any merging domestic
5 limited liability company, domestic business corporation, domestic nonprofit
6 corporation, domestic limited partnership, or other partnership as defined in
7 G.S. 59-36 that is formed under the laws of this State, or nonprofit association
8 as defined in G.S. 59B-2 that is formed under the laws of this State, (ii) the
9 appraisal rights of shareholders of any merging domestic business corporation
10 under Article 13 of Chapter 55 of the General Statutes, and (iii) any obligation
11 of the surviving business entity arising from the merger; andmerger.
12 (2) To have appointed Appointed the Secretary of State as its agent for service of
13 process in any such the proceeding. Service on the Secretary of State of any
14 such process shall be made by delivering to and leaving with the Secretary of
15 State, or with any clerk authorized by the Secretary of State to accept service
16 of process, duplicate copies of such the process and the fee required by
17 G.S. 55A-1-22(b). Upon receipt of service of process on behalf of a surviving
18 business entity in the manner provided for in this section, the Secretary of
19 State shall immediately mail a copy of the process by registered or certified
20 mail, return receipt requested, to the surviving business entity. If the surviving
21 business entity is authorized to transact business or conduct affairs in this
22 State, the address for mailing shall be its principal office designated in the
23 latest document filed with the Secretary of State that is authorized by law to
24 designate the principal office or, if there is no principal office on file, its
25 registered office. If the surviving business entity is not authorized to transact
26 business or conduct affairs in this State, the address for mailing shall be the
27 mailing address designated pursuant to subdivision (3) of subsection (d) of
28 this section.
29 (f) This section does not apply to a merger that does not include a merging
30 unincorporated entity."
31 SECTION 1.(c) G.S. 55A-12-02 reads as rewritten:
32 "§ 55A-12-02. Sale of assets other than in regular course of activities.
33 …
34 (b) Unless this Chapter, the articles of incorporation, bylaws, or the board of directors or
35 members (acting pursuant to subsection (d) of this section) require a greater vote or voting by
36 class, the proposed transaction to be authorized shall be approved:approved by all of the
37 following:
38 (1) By the board;The board.
39 (2) By theThe members entitled to vote thereon by two-thirds of the votes cast or
40 a majority of the votes entitled to be cast on the proposed transaction,
41 whichever is less; andless.
42 (3) In writing by any person or persons whose approval is required by a provision
43 of the articles of incorporation authorized by G.S. 55A-10-30 for an
44 amendment to the articles of incorporation or bylaws.
45 (c) If the corporation does not have members entitled to vote thereon, the transaction
46 shall be approved by a vote of a majority of the directors then in office. The corporation shall
47 provide at least five days' written notice of any directors' meeting at which such the approval will
48 be considered. The notice shall state that the purpose, or one of the purposes, of the meeting is to
49 consider the sale, lease, exchange, or other disposition of all, or substantially all, of the property
50 or assets of the corporation and contain or be accompanied by a description of the transaction.
51 …
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1 (g) A Other than dispositions to a charitable or religious corporation authorized under a
2 plan of dissolution adopted pursuant to Article 14 of this Chapter, a charitable or religious
3 corporation shall give written notice to the Attorney General 30 days before it sells, leases,
4 exchanges, or otherwise disposes of all, or a majority of, its property if the transaction is not in
5 the usual and regular course of its activities unless the Attorney General has given the corporation
6 a written waiver of this subsection. This notice shall include all the information the Attorney
7 General determines is required for a complete review of the proposed transaction. The Attorney
8 General may require an additional 30-day period to review the proposed transaction by providing
9 written notice to the charitable or religious corporation prior to the expiration of the initial notice
10 period. During this 30-day period, the transaction may not be finalized.
11 (h) After a sale, lease, exchange, or other disposition of property is authorized, the
12 transaction may be abandoned (subject abandoned, subject to any contractual rights), rights,
13 without further action by the members or any other person who approved the transaction, in
14 accordance with the procedure set forth in the resolution proposing the transaction or, if none is
15 set forth, in the manner determined by the board of directors."
16 SECTION 1.(d) This section becomes effective October 1, 2021, and applies to
17 plans of mergers adopted on or after that date.
18
19 PART II. REQUIRE ANNUAL REPORTS TO THE SECRETARY OF STATE
20 SECTION 2.(a) Article 16 of Chapter 55A of the General Statutes is amended by
21 adding a new section to read:
22 "§ 55A-16-22.1. Annual report to the Secretary of State.
23 (a) Each domestic corporation and each foreign corporation authorized to conduct affairs
24 in this State shall submit an annual report to the Secretary of State, in electronic form as
25 prescribed by the Secretary of State, that sets forth all of the following:
26 (1) The name of the corporation and the state or country under whose law it is
27 incorporated.
28 (2) The street address, and the mailing address if different from the street address,
29 of the registered office in this State, the county in which the registered office
30 is located, the name and email address of its registered agent at that office, and
31 a statement of any change of the registered office or registered agent.
32 (3) The address and telephone number of its principal office.
33 (4) The names, titles, and business street addresses of its principal officers and
34 the name, mailing address, email address, and telephone number of an
35 individual who is authorized to provide information regarding persons with
36 the authority to bind the corporation.
37 (5) A brief description of the nature of its activities.
38 (6) An email address for the corporation, if different from the email address
39 provided under subdivision (2) of this subsection.
40 (b) The information in the annual report shall be current as of the date the annual report
41 is submitted on behalf of the corporation.
42 (c) The corporation shall submit an annual report to the Secretary of State by November
43 15 of each year following (i) in the case of a domestic corporation, the calendar year in which
44 the corporation was formed or (ii) in the case a foreign corporation, the calendar year in which
45 the Secretary of State issued to the foreign corporation a certificate of authority to conduct affairs
46 in this State. An annual report is due each year until (i) in the case of a domestic corporation, the
47 effective date of a voluntary or judicial dissolution or (ii) in the case of a foreign corporation, the
48 effective date of a certificate of withdrawal or revocation of a certificate of authority.
49 (d) If an annual report does not contain the information required by this section, the
50 Secretary of State shall promptly notify the reporting corporation in writing and return the report
51 to it for correction. If the report is corrected to contain the information required by this section
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1 and submitted to the Secretary of State within 30 days after the notice, the report shall be deemed
2 to be timely submitted.
3 (e) Amendments to any previously filed annual report may be submitted for filing to the
4 Secretary of State at any time for the purpose of correcting, updating, or augmenting the
5 information contained in the annual report.
6 (f) If the Secretary of State does not receive an annual report within 60 days after the
7 date the report is due, the Secretary of State may presume that the annual report is delinquent.
8 This presumption may be rebutted by evidence of submission presented by the filing corporation.
9 (g) The Secretary of State may provide by email any notice or form required under this
10 section if the submitting domestic or foreign corporation to be notified has consented to receiving
11 notices and forms via email and has provided the Secretary of State an email address for receiving
12 the notices or forms. Any email address provided by a submitting corporation in accordance wi