Digest of Bills - 1997

CORPORATIONS AND ASSOCIATIONS

S.B. 97-91 Colorado Revised Nonprofit Corporation Act. Effective July 1, 1998, repeals the "Colorado Nonprofit Corporation Act". Specifies that nonprofit corporations that were dissolved or otherwise suspended by operation of law are deemed to be nonprofit associations unless the nonprofit corporation reinstates itself. Prohibits private foundations from engaging in self-dealing, retaining excess business holdings, or making taxable expenditures as defined by federal law. Conforms procedures for filing documents by the secretary of state to the provisions for for-profit corporations in the "Colorado Business Corporation Act". Allows a court to call meetings when it is otherwise impractical or impossible for the corporation to do so.

        Conforms procedures for incorporation of nonprofit corporations to the sections for for-profit corporations set forth in the "Colorado Business Corporation Act". Conforms sections relating to the general powers and emergency powers of nonprofit corporations to similar sections for for-profit corporations set forth in the "Colorado Business Corporation Act". Allows any civil action to be brought against any nonprofit corporation and subjects assets held by a nonprofit corporation to levy and execution to the extent that the nonprofit corporation would be reimbursed by liability insurance.

        Conforms procedures for the establishment and exclusive use of a reserved name to the similar procedures for for-profit corporations set forth in the "Colorado Business Corporation Act".

        Requires nonprofit corporations to maintain a registered office and agent and to notify the secretary of state of any changes of such registered office or agent. Conforms requirements for maintaining a registered office and agent to those requirements governing for-profit corporations set forth in the "Colorado Business Corporation Act".

        Specifies that nonprofit corporations are not required to have members. Allows bylaws to establish criteria for admission and membership. Stipulates that directors, officers, employees, and members are not, as such, personally liable for debts or actions of the nonprofit corporation. Permits the board of directors to fix consideration for memberships. Allows a member to resign at any time. Specifies standing requirements and procedures for derivative suits.

        Requires nonprofit corporations with voting members to have an annual meeting, unless otherwise specified in the bylaws. Conforms the notice, waiver of notice, voting by proxy, and determination of record date requirements for nonprofit corporations to similar requirements for for-profit corporations set forth in the "Colorado Business Corporation Act". Allows actions without meetings if the members entitled to vote on the action unanimously agree in writing to take such action. Allows for action by written ballot in lieu of a meeting. Sets quorum and voting requirements for voting groups. Fixes procedures for action by single and multiple voting groups. Allows for cumulative voting for directors. Permits the election of directors on the basis of chapter, region, or preferential voting.

        In the absence of contrary provisions, specifies that a nonprofit corporation acts through its board of directors. Conforms the required qualifications and election, appointment, designation, resignation, and removal procedures for directors of nonprofit corporations to those of for-profit corporations. Conforms procedures and requirements for board meetings, actions without meetings, meeting notice and the waiver thereof, and quorum of the board of directors for nonprofit corporations to those of for-profit corporations.

        Specifies titles for officers for nonprofit corporations. Conforms procedures for the appointment or designation of officers to that of for-profit corporations. Limits certain personal liabilities of and allows indemnification for directors and officers. Describes the standards of conduct for directors and officers. Defines "conflicting interest transactions" and specifies procedures for dealing with them.

        Conforms procedures for amendments to the articles of incorporation and bylaws by the incorporators, directors, and members to those for for-profit corporations. Allows the bylaws to specify that amendments may only be made after ratification by a 3rd party.

        Authorizes nonprofit corporations to merge with domestic and foreign nonprofit corporations. Specifies voting requirements for approval of such merger. Specifies the information required to be included in a merger plan.

        In the absence of other authority, stipulates the procedure for the authorization and subsequent sale of the nonprofit corporation's property in and outside of the regular course of business. Forbids distributions by nonprofit corporations except for distributions to members that are nonprofit corporations, reasonable compensation for services rendered, or benefits conferred on members in conformity with its purposes.

        Sets forth the procedures for voluntary dissolution. Requires the adoption of a plan of dissolution that upon approval becomes the articles of dissolution. Allows revocation of such articles within 120 days.

        Allows the secretary of state to administratively dissolve a nonprofit corporation in the same manner as with a for-profit corporation. Permits reinstatement following administrative dissolution. Conforms the grounds and procedure for judicial dissolution with those of a for-profit corporation.

        Conforms requirements for foreign nonprofit corporations to engage in activities to the requirements imposed on foreign for-profit corporations. Sets forth procedures for withdrawal of, and service of process on, a foreign nonprofit corporation from this state. Sets forth grounds for, procedures for, and the effect of revocation of a certificate of authority by the secretary of state. Allows appeal from a revocation.

        Conforms record-keeping, maintenance, and inspection requirements to similar requirements imposed on for-profit corporations. In the absence of consent from the board of directors, limits the use of membership lists for purposes unrelated to the member's interest as a member. Requires the nonprofit corporation to mail financial statements to members upon request. Authorizes the secretary of state to propound interrogatories to any nonprofit corporation to determine whether such corporation is complying with the new act.

        Specifies that all corporations subject to the prior "Colorado Nonprofit Corporation Act" are governed by the new "Colorado Revised Nonprofit Corporation Act". Requires pre-1968 corporate entities to comply with certain provisions of the new act. Sets forth procedures for pre-1968 corporations to elect to come under the provisions of the new act. Requires the statement of election that comes under the provisions of the new act to include certain information. Specifies that such statement be filed with the secretary of state. Specifies that the repeal of the prior Act does not affect any rights, remedies, or violations of the prior act taken before its repeal.

APPROVED by Governor May 1, 1997
EFFECTIVE July 1, 1998

S.B. 97-233 Colorado Corporations and Associations Act - filing of documents. Enacts the "Colorado Corporations and Associations Act". Modifies the rules for conversion of entities from one organizational form to another to respond to new federal tax rules classifying business organizations. Creates a standard procedure for mergers that apply to all forms of business or nonprofit entities recognized by Colorado law. Sets forth the procedure for the approval and filing of documents to confirm the merger or conversion. Specifies that the method of conversion and merger set forth in the "Colorado Corporations and Associations Act" is not exclusive and that any requirements that bind a particular form of entity continue to bind the entity.

        Specifies procedures for filing documents required to be filed by entities with the secretary of state. Permits all documents required to be filed by this act to be filed with the secretary of state in the same manner as for limited liability companies and limited liability partnerships.

        Increases the choice of the words or initials that limited partnerships and limited liability limited partnerships must include in the name of the entity. Allows a limited partnership to use the name of a limited partner in the name of the partnership without subjecting the limited partner to individual liability.

        Specifies that a limited liability company or a limited partnership will not automatically dissolve on the dissociation of a member or the general partner unless the partnership files an election that states otherwise. Allows a limited liability company to continue on the dissociation of a member. For a limited partnership, sets forth a procedure for the designation of a new general partner upon the withdrawal of the last remaining general partner. Confirms that a limited liability company must have at least one member at the time it is formed. Specifies that a limited liability company with one member may have an "operating agreement". Allows limited liability companies to be served by registered mail instead of through the secretary of state.

        Allows accounting firms organized as limited liability companies, limited liability partnerships, or professional corporations to provide segregated moneys in the form of cash, bank certificates of deposit, United States treasury obligations, or letters of credit as substitute alternative security for professional liability insurance.

APPROVED by Governor June 3, 1997
EFFECTIVE June 3, 1997

H.B. 97-1237 Colorado Uniform Partnership Act (1997). Adopts the "Colorado Uniform Partnership Act (1997)", a revision of the "Uniform Partnership Act of 1914" ("UPA") adopted in Colorado as the "Uniform Partnership Law". Modifies the Uniform Act to establish that a partnership is a separate entity instead of following the UPA's formulation of a partnership as an entity as well as an aggregate of the individual partners. Recognizes the primacy of a partnership agreement over statute, with the exception of certain statutory provisions that are nonwaivable such as the requirements for execution of statements, restrictions on access to partners books and records, and the relationship between partners.

        Sets forth the requirements for filing, amending, and canceling optional authorized partnership statements with the secretary of state. Includes statements of partnership authority, denial of partnership authority, dissociation, dissolution, and merger as authorized statements. Allows such statements to act as notice to 3rd parties. Specifies that the law of the state where the partnership is formed governs relations between the partners.

        Specifies that the property of a partnership is not co-owned by the individual partners. Eliminates the "tenant in partnership" concept contained in the UPA. Specifies that each partner is an agent of the partnership and that an act of a partner for apparently carrying on the partnership business, or business of the kind carried on by the partnership, binds the partnership. Repeals the list of events requiring unanimous consent of the partners for approval. Expands the UPA requirements for conveyance of real property to include all property, instead of merely real property. Allows filing of a statement of partnership authority to facilitate transfers of property from a partnership. Specifies that, if such statement is properly filed, it is conclusive with respect to bona fide purchasers.

        Clarifies that a partner may recover for a tort committed by the partnership or another partner acting as an agent for the partnership. Allows all liquidating partners to receive compensation for services performed in "winding up" instead of merely allowing compensation to the surviving partner. Clarifies that amendments to the partnership agreement shall be approved by unanimous consent of the partners.

        Specifies that a partner's attorneys and agent have the same rights as the partner to inspect books and records and allows access to records by former partners for the period in which they were partners. Allows the imposition of a reasonable copying charge for books and records. Obliges partners to provide, without demand, information required for a partner's exercise of the partner's rights and duties.

        In addition to other duties established elsewhere in the new act, imposes duties with regard to other partners and the partnership, a duty of loyalty, a duty of care in the conduct or liquidation of a partnership, and a duty to comply with the provisions of the partnership agreement. Imposes an obligation of good faith and fair dealing with the other partners and the partnership in discharging the partner's duties. Gives a partnership a cause of action against a partner for breach of the partnership agreement or duty owed to it.

        States that a transferring partner remains a partner for management and liability purposes. Allows a partnership to refuse to make distributions or recognize the rights of a transferee until after receiving notice of the transfer. Invalidates transfers in violation of a restriction on transfers as to transferees with notice of the restrictions. Authorizes a judgment creditor of a partner's transferee, as well as a judgment creditor of a partner, to obtain a charging order against a partner's interest in distributions from the partnership. Specifies that a charging order is a lien on the debtor's partner's right to distribution that may be foreclosed upon.

        Specifies that dissolution and liquidation occur only if a partnership is not continued, bringing dissolution pursuant to the new act into line with the same concept in the corporation statutes. Allows withdrawal of a partner from a partnership without triggering dissolution. Allows expulsion of a corporate partner if such partner has had its charter revoked or its right to conduct business suspended. Defines "death of a partner" for partners that are also entities. Repeals all of the events that relate to termination of the partnership, as opposed to withdrawal of a partner from a partnership.

        Limits the apparent authority of a dissociated partner whose interest is purchased to a duration of 2 years, but allows that time to be terminated by actual notice to a creditor or 90 days after the filing of a statement of dissociation. Specifies that a dissociated partner whose interest is purchased is not personally liable for post-dissolution liabilities unless such partner's wrongful acts are responsible for the debt. Terminates the apparent authority of the dissociated partner 90 days after filing a statement of dissociation.

        Sets forth the events causing dissolution and provides for the winding up of partnership business. Allows a partnership to continue in business as the same partnership instead of requiring dissolution. Allows a partnership to continue in circumstances that would, under the UPA, cause unavoidable dissolution, if a majority so agrees.

        Allows all of the partners to agree to revoke a dissolution and, if so agreed, continues the partnership business as if dissolution never occurred. Authorizes the liquidating partners to engage in activities to preserve the partnership's business as a going concern for a reasonable time. Allows a partnership to be bound by any acts by the partners that are appropriate for liquidation and for any obligations. Allows a statement of dissolution to be filed that provides constructive notice, terminates apparent authority of a partner, and terminates authority to convey partnership real estate pursuant to a statement of partnership authority.

        Instead of using the UPA's differing classifications, provides one rule for how the partners share liabilities incurred during the liquidation process. Sets forth the rules for liquidating distribution to the partners and the rules for contributions by partners necessary to wipe out a negative capital account and to pay partnership obligations in excess of its assets. Treats partners who are creditors of the partnership the same as other creditors, rather than subordinate to outside creditors. Repeals the distinction between capital and profits. Repeals the rule giving creditors of a partner priority over creditors of a partnership in the assets of a bankrupt partner.

        Authorizes a safe harbor method of converting a general partnership into a limited partnership and vice versa. Authorizes a safe harbor method of merging a general partnership with one or more general or limited partnerships. Sets forth the effects of a merger. Allows the filing of a statement of merger. Clarifies that the procedures for converting and merging are not exclusive, and that these entities can convert or merge in any other manner authorized by law.

        Allows a partnership to register as a limited liability partnership without a unanimous vote only if the partnership agreement expressly considers obligations to contribute to the partnership. Changes "statement of registration" to "statement of qualification".

APPROVED by Governor May 21, 1997
EFFECTIVE January 1, 1998
NOTE: This act was passed without a safety clause. The act establishes an effective date of January 1, 1998. It shall take effect on that date unless a referendum petition is filed during the ninety-day period after final adjournment of the general assembly that is allowed for submitting a referendum petition pursuant to article V, section 1 (3) of the state constitution. If such a referendum petition is filed against this act or an item, section, or part of this act within such period, then the act, item, section, or part, if approved by the people, shall take effect on the date of the official declaration of the vote thereon by proclamation of the governor.

 

Session Laws of Colorado Digest of Bills General Assembly State of Colorado


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