Legislature(2015 - 2016)BARNES 124

03/26/2015 08:00 AM House COMMUNITY & REGIONAL AFFAIRS

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Heard & Held
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Heard & Held
              HB 149-NATIVE CORP. ART. AMENDMENTS                                                                           
9:16:32 AM                                                                                                                    
VICE  CHAIR SEATON  announced  that the  final  order of  business                                                              
would be HOUSE BILL  NO. 149, "An Act relating to  an amendment of                                                              
the articles  of incorporation of  certain Native  corporations to                                                              
establish a lower quorum requirement for shareholder meetings."                                                                 
9:16:48 AM                                                                                                                    
REPRESENTATIVE  LANCE PRUITT, Alaska  State Legislature,  speaking                                                              
as the sponsor of  HB 149, informed the committee  that HB 149 was                                                              
introduced at  the request of  the Native corporations  in Alaska.                                                              
He explained  that a  two-thirds vote  of the corporation  members                                                              
in  the  affirmative  is  required   to  change  the  articles  of                                                              
incorporation  for corporations  formed  prior to  1989, which  is                                                              
the case for most  of the Alaska Native corporations.   However, a                                                              
vote of 50  percent in the  affirmative is required to  change the                                                              
articles  of incorporation  for  those corporations  formed  after                                                              
1989.  Further,  current statute includes a provision  that allows                                                              
a quorum requirement  to be as low as one-third.   Over the course                                                              
of   the  last   40  years,   Alaska   Native  corporations   have                                                              
experienced an  increase in the  number shareholders as  newer and                                                              
younger  shareholders have  joined while  at the  same time  there                                                              
has been a  demographic shift of individuals leaving  the villages                                                              
and  even Alaska  such  that they  aren't  able  to attend  annual                                                              
corporation  meetings.  Therefore,  there has  been a  decrease in                                                              
the numbers of a  quorum.  He clarified that  currently the Alaska                                                              
Native  corporations are  meeting  quorum  requirements, but  they                                                              
recognize  the  aforementioned  trends  and  want  to  address  it                                                              
before  it  becomes  a  problem.     However,  the  Alaska  Native                                                              
corporations  feel that  there's virtually  no way  they can  meet                                                              
the   two-thirds   requirement    to   amend   the   articles   of                                                              
incorporation.    The  aforementioned  is why  the  Alaska  Native                                                              
corporations   have    requested   changing   the    articles   of                                                              
incorporation  vote requirement  to 50  percent so  that they  can                                                              
reduce the quorum  requirement for a meeting to  one-third [of the                                                              
shareholders entitled to vote at a meeting].                                                                                    
9:20:35 AM                                                                                                                    
REPRESENTATIVE  NAGEAK, speaking  as  a shareholder  of an  Alaska                                                              
Native   corporation,   related   that   he   has   observed   the                                                              
difficulties  of obtaining  a quorum  first hand.   Therefore,  he                                                              
viewed   HB  149   as  an   opportunity  to   adjust  the   quorum                                                              
9:21:29 AM                                                                                                                    
VICE CHAIR SEATON opened public testimony.                                                                                      
9:21:56 AM                                                                                                                    
NICHOLA  RUEDY,   Director,  Alaska  Native   Village  Corporation                                                              
Association (ANVCA),  began by informing the committee  that ANVCA                                                              
is a  nonprofit organization  with a  mission to provide  services                                                              
that  will improve  the efficiency,  profitability, and  stability                                                              
of  its  member  village  corporations  to provide  a  network  of                                                              
support  and  technical  assistance.       Currently,  60  village                                                              
corporations belong  to ANVCA.  The ANVCA membership  is comprised                                                              
of  representatives  from  the village  corporations,  which  work                                                              
collaboratively  on issues they  have in  common to contribute  to                                                              
the  future  health  of these  groups  by  sharing  knowledge  and                                                              
resources.   Ms.  Ruedy  then related  support  for HB  149 as  it                                                              
could be  used as  a tool  to change the  quorum requirements  for                                                              
village  corporations,  which  also  face  similar  challenges  as                                                              
regional corporations  in terms of voter turnout.   In response to                                                              
Vice  Chair Seaton,  Ms.  Ruedy explained  that  the village  CEOs                                                              
didn't pass  a resolution on this  matter, but the board  voted to                                                              
support this issue.   The board, which is comprised  of nine board                                                              
members  all of  which  are CEOs  of village  corporations,  voted                                                              
unanimously to support HB 149.                                                                                                  
9:23:53 AM                                                                                                                    
VICE CHAIR  SEATON mentioned  that it would  be helpful to  have a                                                              
written statement from ANVCA to include in the bill packet.                                                                     
9:24:27 AM                                                                                                                    
KIM  REITMEIER, President,  ANCSA  Regional Association,  informed                                                              
the committee that  the mission of the ANCSA  Regional Association                                                              
is  to  promote  and foster  the  continued  growth  and  economic                                                              
strength of the  Alaska Native Regional Corporations  on behalf of                                                              
the  shareholders.     She  explained  that  the   ANCSA  Regional                                                              
Association  represents  the chief  executive  officer  of the  12                                                              
land-based  regional Alaska  Native  corporations as  well as  the                                                              
president  of the  Alaska  Federation of  Natives  (AFN).   Alaska                                                              
Native  corporations are  owned  by 116,000  Alaska Native  people                                                              
and  when measured  against  the  top 49  Alaska-owned  companies,                                                              
they account for  73 percent of the revenue earned,  66 percent of                                                              
Alaskan jobs,  84 percent  of the  worldwide employment,  and make                                                              
up 22 of the  top 49 Alaskan-owned companies.   The ANCSA Regional                                                              
Corporations have  grown into an  economic engine of Alaska.   Ms.                                                              
Reitmeier  then  related  support   for  HB  149.    As  mentioned                                                              
earlier, there  has been  a marked  trend amongst shareholders  in                                                              
which there has  been a decline in voter turnout.   She noted that                                                              
while  shares  in  Alaska  Native   corporations  are  limited  in                                                              
nature, the  shareholder  base of these  corporations are  growing                                                              
through   inheritance  of   shares   and  broadening   eligibility                                                              
requirements.   Trend analysis  relate that  respected elders  are                                                              
always willing  to turn  out and  vote, particularly those  living                                                              
within  the  region.   However,  younger  shareholders  and  those                                                              
living  outside   the  state,  the  demographics   for  which  are                                                              
growing, are less  likely to turnout to vote.  In  response to the                                                              
aforementioned,   Alaska   Native   Regional   Corporations   have                                                              
initiated   voter   turnout  initiatives   including   shareholder                                                              
surveys  and   implemented  incentives   for  voting.     However,                                                              
increases   in   prizes   have  only   resulted   in   incremental                                                              
improvements  in voter  turnout.   This  legislation provides  the                                                              
opportunity  to address  what  could become  a  problem before  it                                                              
arises.   The State of Alaska  Corporation Code  Section 10.06.415                                                              
sets  the  quorum  requirements  to hold  an  annual  meeting  for                                                              
Alaska  Native  corporations at  50  percent  plus one  of  shares                                                              
eligible to vote.   If an Alaska Native corporation  fails to meet                                                              
the aforementioned  quorum,  business at  an annual meeting  can't                                                              
be  conducted and  directors  can't be  elected.   Therefore,  the                                                              
current directors would  remain in place until an  election can be                                                              
held.     Under   current  law,   a   corporation's  articles   of                                                              
incorporation  can  be  amended   to  lower  quorum  requirements.                                                              
However, current  statute for corporations created  prior to 1989,                                                              
which includes nearly  all Alaska Native corporations,  requires a                                                              
two-thirds vote  of eligible shares in  favor of the change.   The                                                              
legislation, HB  149, before the  committee amends the  statute to                                                              
reduce the percentage  of votes required to amend  the articles of                                                              
incorporation  of  corporations   established  prior  to  1989  to                                                              
change  the quorum  requirement.   The  articles of  incorporation                                                              
change would  be limited  to a change  in the quorum  requirements                                                              
and no  other change would be  allowed under this  statute change.                                                              
Ms. Reitmeier  explained that  HB 149  would allow  a change  in a                                                              
corporation's  articles of incorporation,  for those  corporations                                                              
established prior to  1989, such that a majority of  the quorum is                                                              
at least 50 percent  plus one of the shares eligible  to vote.  In                                                              
closing,  Ms.  Reitmeier  summarized   that  HB  149  changes  the                                                              
standard for the  number of votes required to  consider changes to                                                              
a corporation's  articles of incorporation, which  would allow for                                                              
changes in  quorum requirements.   If the proposed HB  149 passes,                                                              
shareholders   must  still   vote   to  amend   the  articles   of                                                              
incorporation  and  shareholders must  still  vote  to change  the                                                              
quorum requirements.   The  ANCSA Regional Association  membership                                                              
has reviewed  the proposed  change embodied in  HB 149 and  all 12                                                              
regional CEOs  unanimously support HB  149 and letters  in support                                                              
of HB 149 have been submitted to the sponsor.                                                                                   
9:29:43 AM                                                                                                                    
REPRESENTATIVE  REINBOLD  emphasized  the  importance  of  getting                                                              
younger  people   involved,  but  opined  that  she   wasn't  sure                                                              
lowering  the quorum requirement  is the  answer.   Representative                                                              
Reinbold  clarified   that  she   wouldn't  oppose  HB   149,  but                                                              
maintained  concern with the  direction of  HB 149 and  reiterated                                                              
the  need to  involve  young  people.   She  then  inquired as  to                                                              
whether  all other  options, such  as voting  by proxy, have  been                                                              
exhausted in an attempt to attract younger voters.                                                                              
MS.  REITMEIER assured  Representative  Reinbold  that there  have                                                              
been  discussions  regarding  strategies  of voter  engagement  at                                                              
various levels.   In fact,  the [ANCSA Regional  Association] runs                                                              
the Get Out the  Native Vote campaign.  The proposal  in HB 149 is                                                              
merely one avenue to address the issue.                                                                                         
9:31:17 AM                                                                                                                    
REPRESENTATIVE  REINBOLD   indicated  the  possibility   of  tying                                                              
corporate  dividends   to  voting  in  order  to   increase  youth                                                              
REPRESENTATIVE  PRUITT noted that  he has  examples of  how Doyon,                                                              
Limited, has specifically tried to address the issue.                                                                           
REPRESENTATIVE REINBOLD  said she has that information  and opined                                                              
that what Doyon, Limited, is doing isn't working.                                                                               
9:32:38 AM                                                                                                                    
REPRESENTATIVE  NAGEAK  emphasized  the  need  to  understand  the                                                              
population  dynamics of  rural Alaska  villages  and cities  where                                                              
the  population is  very young.   In  fact, in  some rural  Alaska                                                              
villages and cities  over 60 percent of the population  is "young"                                                              
in  comparison  to  his generation.    Furthermore,  the  original                                                              
shareholders are  dying off and  their shares are being  passed on                                                              
to others.                                                                                                                      
9:34:25 AM                                                                                                                    
VICE  CHAIR  SEATON  referred  to flow  charts  in  the  committee                                                              
packet. The  flow chart  for quorum  requirements says  that under                                                              
HB  149 the  vote  to change  the  quorum requirements  for  ANCSA                                                              
corporations would  change from the existing majority  of eligible                                                              
shareholders  in  person or  by  proxy  to one-third  of  eligible                                                              
shareholders in person  or by proxy.  The flow  chart for amending                                                              
articles  of corporation,  on  the other  hand,  shows that  under                                                              
HB 149   ANCSA  corporations   would   move   from  the   existing                                                              
requirement of  two-thirds of eligible  shareholders in  person or                                                              
by proxy to the majority of eligible shareholders present.                                                                      
MS. REITMEIER deferred to Mr. Schutt.                                                                                           
9:35:27 AM                                                                                                                    
AARON  SCHUTT, Doyon,  Limited, noting  that he  doesn't have  the                                                              
flow charts,  related that the intent  [with HB 149] is  to change                                                              
to  a  vote  requirement  of 50  percent  plus  one  [of  eligible                                                              
shareholders]  in person or  by proxy.   He  related that  for the                                                              
last  20 years  Doyon,  Limited,  has regularly  experienced  well                                                              
over 90  percent of  the votes cast  in corporate elections  being                                                              
cast by proxy.                                                                                                                  
9:35:57 AM                                                                                                                    
VICE CHAIR  SEATON  requested that  prior to  the next meeting  on                                                              
HB 149,  the sponsor  work out  the differences  between the  flow                                                              
charts for the  default provisions for quorum  requirements versus                                                              
for  the   default  provisions   for  amending  the   articles  of                                                              
9:36:40 AM                                                                                                                    
REPRESENTATIVE HUGHES  questioned whether the flow  chart entitled                                                              
"Default Provisions  for Amending  Articles of Corporation"  would                                                              
be better  if it  reflected that  the legislation is  specifically                                                              
for  amending the  quorum of  the  articles of  corporation.   She                                                              
related  her understanding  that  the  legislation  refers to  the                                                              
majority of eligible  shareholders present is only  for making the                                                              
one change, [the quorum change].                                                                                                
REPRESENTATIVE  PRUITT  replied yes,  and  clarified  that HB  149                                                              
specifically  relates  to  changing the  quorum  requirements  not                                                              
other  aspects   of  the  articles   of  corporation   [for  ANCSA                                                              
corporations].   An  affirmative  two-thirds vote  would still  be                                                              
required to change other pieces of the articles of corporation.                                                                 
9:38:35 AM                                                                                                                    
REPRESENTATIVE  HUGHES,  referring  to  the  flow  chart  entitled                                                              
"Default  Provisions   for  Quorum   Requirements,"  related   her                                                              
understanding  that HB 149  merely makes  ANCSA corporations  have                                                              
the  same quorum  requirements  as other  corporations,  including                                                              
non-Native corporations, formed after 1989.                                                                                     
REPRESENTATIVE PRUITT answered yes.                                                                                             
9:39:19 AM                                                                                                                    
REPRESENTATIVE  HUGHES surmised  that  there will  continue to  be                                                              
challenges going  forward as the  younger generation  becomes more                                                              
mobile,  regardless of  whether  he/she is  from a  village or  an                                                              
urban   area.     Therefore,  she   opined   that  the   [changing                                                              
demographics] may  apply outside of Alaska Native  corporations as                                                              
REPRESENTATIVE  PRUITT  noted  his agreement,  pointing  out  that                                                              
voting trends  illustrate the lack  of engagement by youth  or the                                                              
utilization of  other means to vote.   He highlighted  that Alaska                                                              
Native  youth have  a unique  opportunity/responsibility  to be  a                                                              
part of a  corporation, which is  an extra burden that  most youth                                                              
don't  have.   Therefore,  one can  understand  why a  corporation                                                              
isn't  the first  thing on  the mind  of an  Alaska Native  youth.                                                              
However,  as [the  shareholders] age,  they are  likely to  become                                                              
more engaged.                                                                                                                   
9:41:34 AM                                                                                                                    
REPRESENTATIVE  HUGHES characterized  the movement  and travel  of                                                              
her  own children  since  high school  as  incredible compared  to                                                              
9:41:59 AM                                                                                                                    
REPRESENTATIVE  DRUMMOND inquired  as  to whether  HB 149  applies                                                              
only to  the Alaska Native Regional  corporations or does  it also                                                              
apply to the Alaska Native Village corporations as well.                                                                        
REPRESENTATIVE  PRUITT clarified  that  AS 10.06.960  specifically                                                              
relates to  Alaska Native  corporations,  which includes  both the                                                              
regional and village corporations.                                                                                              
9:43:23 AM                                                                                                                    
REPRESENTATIVE  DRUMMOND  related  her understanding  that  Alaska                                                              
Native  Village corporations  are  much smaller  in  terms of  the                                                              
numbers of shareholders.                                                                                                        
REPRESENTATIVE  PRUITT  responded yes,  adding  that  some of  the                                                              
smaller  village   corporations  wouldn't   be  able   to  perform                                                              
marketing  campaigns,   such  as   that  by  Doyon,   Limited,  to                                                              
encourage attendance and participation.                                                                                         
9:44:12 AM                                                                                                                    
REPRESENTATIVE  DRUMMOND  asked  if  all 12  corporations  of  the                                                              
ANCSA Regional  Association and  AFN agree with  the need  for the                                                              
proposed change in the quorum requirements.                                                                                     
MS.  REITMEIER   replied  yes,  reiterating  that   the  vote  was                                                              
unanimously in support.                                                                                                         
9:44:47 AM                                                                                                                    
REPRESENTATIVE  HUGHES,  referring  to  the  flow  chart  entitled                                                              
"Default  Provision for  Quorum Requirements,"  asked whether  any                                                              
non-Native corporations  formed prior  to 1989 would  benefit from                                                              
this proposed quorum  change in HB 149.  If so,  she asked whether                                                              
the proposed  quorum change  in HB 149  should be allowed  for all                                                              
corporations formed prior to 1989.                                                                                              
REPRESENTATIVE   PRUITT   characterized   extending   the   change                                                              
embodied  in  HB  149  to  non-Native  corporations  as  a  policy                                                              
question.   He  noted  that although  he  hasn't  heard from  such                                                              
corporations,   he  hasn't   sought   responses  from   non-Native                                                              
corporations  formed  prior  to  1989.    Therefore,  he  said  he                                                              
couldn't  speak to  the  ramifications of  extending  this to  all                                                              
corporations  formed prior to  1989 since he  didn't know  if they                                                              
face  the same  challenges as  Alaska  Native corporations  formed                                                              
prior to 1989.                                                                                                                  
9:47:20 AM                                                                                                                    
REPRESENTATIVE   HUGHES  offered  that   she  would  be   open  to                                                              
expanding  the  legislation  to   non-Native  corporations  formed                                                              
prior  to 1989,  if  they  were interested  in  the  option.   She                                                              
inquired   as  to   whether  the   sponsor   would  consider   the                                                              
REPRESENTATIVE  PRUITT  answered that  he  doesn't  have an  issue                                                              
with offering  the same for  non-Native corporations  formed prior                                                              
to 1989.   However, the  legislation would  need to be  changed as                                                              
currently it  amends statute that  specifically relates  to Alaska                                                              
Native  corporations.    Although Representative  Pruitt  felt  it                                                              
would be  acceptable to  apply the  proposed change to  non-Native                                                              
corporations  formed  prior to  1989,  he emphasized  that  Alaska                                                              
Native  corporations  have  a  unique  challenge  in  which  youth                                                              
automatically  become shareholders,  which is  unlikely to  be the                                                              
case in non-Native corporations formed prior to 1989.                                                                           
9:49:08 AM                                                                                                                    
REPRESENTATIVE  NAGEAK  pointed out  that  there  is a  difference                                                              
between  publicly owned  corporations  and regional  corporations.                                                              
For  instance,   shares  of   publicly  traded  corporations   are                                                              
different in  that they are  purchased rather than  transferred as                                                              
is the  case in  regional Native  corporations.   He informed  the                                                              
committee  that in  regional corporations  those  born after  1974                                                              
have  100  shares,  but the  original  shareholders  can  transfer                                                              
their shares to others.                                                                                                         
9:50:45 AM                                                                                                                    
REPRESENTATIVE HUGHES  commented that she  is of the  mindset that                                                              
if  the  quorum requirements  for  non-Native  corporations  isn't                                                              
problematic,  then it's  not necessary  to address  it.  She  also                                                              
said  she  understood  the  unique   situation  of  Alaska  Native                                                              
9:51:22 AM                                                                                                                    
VICE CHAIR SEATON  remarked that expanding the proposal  in HB 149                                                              
to corporations  beyond Alaska  Native corporations  without input                                                              
would   be   difficult.      Furthermore,   including   non-Native                                                              
corporations  in  HB 149  would  require  more  time in  terms  of                                                              
obtaining  agreement  from  all   corporations  throughout  Alaska                                                              
whereas  all  Alaska Native  corporation  heads  have  unanimously                                                              
supported HB 149.                                                                                                               
9:52:44 AM                                                                                                                    
REPRESENTATIVE  DRUMMOND related  her personal  experience as  the                                                              
president of  a board of a  homeowners' association that  runs the                                                              
water delivery system  in her neighborhood.  That  association has                                                              
the   ability  to   change  its   own  bylaws   and  articles   of                                                              
corporation,  as she was  sure most  corporations in Alaska  have.                                                              
In fact,  the association  had to  change its quorum  requirements                                                              
last year  because it  was unable to  obtain enough  homeowners to                                                              
conduct business.   Representative  Drummond  said she was  fairly                                                              
confident that  most non-Native  corporations have the  ability to                                                              
alter   their   own  articles   of   incorporation   and   bylaws.                                                              
Therefore,  she noted her  agreement with  Vice Chair  Seaton that                                                              
the committee should  just address HB 149 as it  relates to Alaska                                                              
Native corporations.                                                                                                            
9:54:14 AM                                                                                                                    
REPRESENTATIVE PRUITT  offered to  perform due diligence  in terms                                                              
of reaching  out to non-Native  corporations established  prior to                                                              
1989, although he surmised that they are totally different.                                                                     
9:54:53 AM                                                                                                                    
VICE CHAIR SEATON  reiterated his request for revised  flow charts                                                              
for the next meeting on HB 149.                                                                                                 

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HCS HB 118 (ENE) Sectional Analysis.pdf HCRA 3/26/2015 8:00:00 AM
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HCS HB 118 (ENE) Hearing Request Letter.pdf HCRA 3/26/2015 8:00:00 AM
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HB0118B.PDF HCRA 3/26/2015 8:00:00 AM
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HB0118-1-2-021815-CED-N.PDF HCRA 3/26/2015 8:00:00 AM
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15 3 4_IGU Supports PACE Act.pdf HCRA 3/26/2015 8:00:00 AM
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HB 118, PACE HCRA 03 26 15.pdf HCRA 3/26/2015 8:00:00 AM
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HB 118, Supporting Document - Alaska Bankers Association.pdf HCRA 3/26/2015 8:00:00 AM
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Mayor Eberhart CIty of Fairbanks.pdf HCRA 3/26/2015 8:00:00 AM
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REAP Support PACE Financing, HB 118.pdf HCRA 3/26/2015 8:00:00 AM
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Mayor Hopkins FNSB.pdf HCRA 3/26/2015 8:00:00 AM
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HB 149, Supporting Document - Flow Chart, Quorum Requirements.pdf HCRA 3/26/2015 8:00:00 AM
HB 149
HB 149 Sponsor Statement.pdf HCRA 3/26/2015 8:00:00 AM
HB 149
HB 149 Sectional Analysis.pdf HCRA 3/26/2015 8:00:00 AM
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HB149-DCCED-CBPL-03-20-15.pdf HCRA 3/26/2015 8:00:00 AM
HB 149