Legislature(1995 - 1996)
04/12/1995 03:12 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 251 - NATIVE CORPORATIONS CHAIRMAN told the committee they would continue with the sectional analysis of HB 251, beginning with Section 3. Representative Kim Elton joined the meeting directly after the call to order. TERRY BANNISTER, ATTORNEY, LEGISLATIVE LEGAL SERVICES DIVISION, LEGISLATIVE AFFAIRS AGENCY, stated Section 3 authorizes the Administrator, which is basically the Department of Commerce and Economic Development, to issue an order imposing a civil penalty against a person who violates the new filing provisions under the required for Alaska Native Claims Settlement Act (ANCSA) corporations under the corporations code. Because of the new definition of "proxy," it also pulls ANCSA corporations into being subject to an order under violations of 44.55.139 and 44.55.160. The definition is at the end of the bill, but effects several other provisions. CHAIRMAN KOTT noted they were using the work draft Version G. Number 052 MS. BANNISTER said Section 4 addresses the notice and hearing requirements for orders issued under 45.55.920. It makes the changes in Section 5, subject to the notice in hearing requirements as they're required by AS 45.55.920(d). She said it is a conforming amendment to bring the Section 5 requirements into these provisions about orders as to what notice and hearing opportunities are to be allowed. REPRESENTATIVE NORMAN ROKEBERG joined the meeting at 3:15 p.m. CHAIRMAN KOTT asked if any members on the panel had questions on Sections 3 or 4. Number 077 JOAN MANTEI, SHAREHOLDER, SEALASKA NATIVE CORPORATION; AND GOLDBELT NATIVE CORPORATION, said this was a break off of Section 2(l). The whole bill seems to rotate around Section 2(l). Ms. Mantei said she has a bad feeling about jail time. Chapter 10 should not be opened up and given to corporations at all. She said this was very harsh and wondered why they felt the need to do this to the Indian people. In referring to a document she said Representative Elton had handed out regarding dialogue between shareholders and corporations and said she agreed with parts of it, but felt the jail terms are wrong. Number 109 JOE WILSON, SHAREHOLDER, SEALASKA NATIVE CORPORATION; AND GOLDBELT NATIVE CORPORATION, said the provisions regarding penalties in Section 3, and any following Sections should be omitted. He referred to people who may be in the process of filing a petition or a proxy with the Division of Banking, Securities and Corporations, and said they are monitored in a manner to allow change. These provisions are not included for non-Native corporations under state law. Number 143 DOROTHY ZURA, SHAREHOLDER, SEALASKA NATIVE CORPORATION; AND GOLDBELT NATIVE CORPORATION, said she would also like to make a statement against this portion of the bill. She asked who decides what was misleading and not misleading. She said their own board of directors has sent out misleading information; however, they can't take them to court because of the monetary aspect. Shareholders don't have the money to defend themselves. She asked where the hearings would take place and who would be on the panel. Ms. Zura said this isolates Alaskan Natives. Number 177 REPRESENTATIVE KIM ELTON asked Mr. Kirkpatrick if under the changes in this legislation, it appeared they were applying a rule for a law that is applied to other corporations, and if so, what would be the difference between a proxy and a petition. Number 191 WILLIS KIRKPATRICK, DIRECTOR, DIVISION OF BANKING, SECURITIES AND CORPORATIONS, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT said under the way the Alaska Securities Act is currently administered, the only corporations the division has any involvement with, as far as proxy and proxy solicitations, are those ANSCA corporations having over 500 shareholders or $1 million in assets. Under the FCC rules those would be called "reporting corporations." He said a large majority of corporations would not fall under either FCC or state purview. It would be on the bases of private right of action. In a small corporation, if you had a problem with management, directors or if anything was false or misleading, it would fall upon the private right of action to address that. MR. KIRKPATRICK said Section 3 forward pulls into the Alaska Securities Act (ASA) the provisions that are generally reserved in the administration of the ASA for white collar crime where somebody is soliciting funds from another, on a disguise of an investment or security definition, it would be false or misleading. Mr. Kirkpatrick said the ASA is for the protection of investors. He informed the committee that he was opposed to Section 3 because it makes the ASA somehow a regulator or an administrator of corporate actions outside the intent to protect investors. The department attempted to come up with a fiscal note, because Section 3 requires an administrative action. Most administrative actions are done with consent decrees and through the negotiation of fines and penalties. He feels this would require an administrative law judge to decide how this plays in relationship to corporate matters under Title 10. Number 250 REPRESENTATIVE ELTON asked if HB 251 passed, would those sections also apply to corporations with under 500 shareholders and having assets less than $1 million. Number 251 MR. KIRKPATRICK said his interpretation was that all ANSCA corporations falling under Section 960 of Title 10, would be brought into the ASA as far as that section is concerned. CHAIRMAN KOTT acknowledged that Bobbie Oskolkoff and Mark Kroloff were on teleconference. Number 267 REPRESENTATIVE BRIAN PORTER asked who Section 3 applies to as it currently appears in statute. Number 272 MR. KIRKPATRICK responded broker dealers, registration of securities, security salesman. Those fall under the investment provisions. It also relates to any materiality in relationship to a reporting company, which would be an ANSCA corporation having over 500 shareholder or over $1 million in assets. Number 282 REPRESENTATIVE PORTER said that by adding 10.07.960(m), in effect would add ANSCA corporations under 500 shareholders. MR. KIRKPATRICK said this was his interpretation. Number 287 REPRESENTATIVE BEVERLY MASEK said that under Section 3 (2), it allows the commissioner of the Department of Commerce and Economic Development to issue orders for violations of the proposed special meeting requirements. She asked if this was true. Number 300 MR. KIRKPATRICK said this would bring AS 10.07.960(m) within the ASA. REPRESENTATIVE MASEK asked if the administrator would be the commissioner of the Department of Commerce. MR. KIRKPATRICK replied that Commissioner William Hensley would be the administrator. Number 303 MS. BANNISTER continued with Section 5. She said this was a new provision. This makes it mandatory for the administrator to take actions if the administrator is informed that a person has engage in or is about to engage in a violation. The violation would be with the new filing provisions under the corporations code in Sections 139 and 160. Number 316 REPRESENTATIVE MASEK referred to Sections 4 and 5 regarding the enforcement provisions and asked if the notice and hearings would be done by the administrator's order. She asked if that would be Commissioner Hensley. Number 321 MS. BANNISTER explained that when they say "the administrator," it is basically the Department of Commerce and Economic Development. Number 334 REPRESENTATIVE ELTON asked Ms. Bannister about the language on line 25 which says, "a person has engaged or is about to engage in." He asked if we would have prior restraint problems? Number 334 MS. BANNISTER replied that as far as she could tell, there wouldn't prior restraint problems regarding the issuance of orders against misleading documents or advertising. There could be problems with prior restraint when you get into the issuance of injunctions on future violations on all of the filing reforms. Number 345 REPRESENTATIVE MASEK asked if Section 5 represents a change to the state securities law. Number 349 MS. BANNISTER responded yes. It's mandatory, the other provisions are discretionary with the department. She said the provision is tied only to regular or special meetings of ANSCA corporations. Number 353 REPRESENTATIVE JERRY SANDERS asked who informs the administrator that someone is "engaged or is about to engage in a practice that is a violation." MS. BANNISTER replied that it is not clear. It could be anyone. It hasn't been limited in the wording of this section. REPRESENTATIVE SANDERS said there could be court cases from this. He asked who informs the department if someone was lying. MS. BANNISTER said it could be someone on staff, a third person, or someone having good or bad information. REPRESENTATIVE SANDERS asked why their word would be better than the other persons. Number 372 MR. KIRKPATRICK interjected that under white collar crime, you usually have to have an informant. A concerned individual has to come forward and say that there is a possibility that someone has or will be taken. The department then acts on this information. He said in relationship to ANCSA corporations, as he mentioned the day before, the petitions must be prefiled with the corporation. The corporation then would have information available to them rather than addressing that information with the person who filed it. They could inform the administrator that if this was disseminated, it would be false and misleading. Under this provision, the administrator shall take action, issue an order and void any proxies. The informant would be the public or anyone having information about a possible wrong doing. Number 393 REPRESENTATIVE SANDERS asked if these actions would be taken without any investigation. MR. KIRKPATRICK said that was the way he reads it. Number 395 REPRESENTATIVE ELTON commented that you couldn't look at Section 5 without looking at Section 2(m), which requires the filing of the intent to petition as well as all materials used in connection with the solicitation. Under that provision, most contacts with administrator might be from the corporation. Representative Elton said it says "shall" rather than "may," so their is no discretion for the administrator to make an independent judgement of whether or not the materials are accurate. Number 408 REPRESENTATIVE NORMAN ROKEBERG asked if there are normal procedures before issuing any orders. Number 412 MR. KIRKPATRICK replied that in all proxy battles there is the charge and counter charge of false and misleading information, which is a subjective area. They have to focus on materiality, "Is the statement material?" The court case, which happened to be a Cook Inlet Region, Incorporated (CIRI) court case, Brown V. Ward set up the standards followed for materiality. It is loosely defined as those statements made or not made would have an effect on voter's ballots. Immediate action from the department isn't taken; the department refers the complaint to the person who made the statement and they ask for a response. He said that it would appear that whoever drafted this was disenchanted by the department's lack of action when they file complaints and want immediate action. The immediate action would result in administrative action rather than a negotiated action which would get into administrative law. Mr. Kirkpatrick said this occurs on both sides of the proxy battle. He said the ultimate is that if violations under the ASA are not corrected, they void proxies. Number 457 REPRESENTATIVE PORTER said he has interpreted this to say if the administrator is informed that a person is or has engaged in a violation of one of these three sections, he has to make a judgement that the person has or hasn't engaged in a violation of those sections. Then and only then do these other activities come into play. Number 471 REPRESENTATIVE ELTON noted that he interpreted this to say that if the administrator is informed and if that information is that someone has or is about to engage in something that violates that... REPRESENTATIVE PORTER interjected that it doesn't say he is informed that "he may have violated," it says "he has violated." REPRESENTATIVE ELTON said the way he reads it is if he went to the administrator and said that, "Shareholder `Y' is violating or is about to engage in a violation of this, then the `shall' kicks in." Number 482 MARK KROLOFF, VICE PRESIDENT AND GENERAL COUNSEL, COOK INLET REGION, INCORPORATED, testifying via teleconference from Anchorage. Mr. Kroloff said he read the language as Representative Porter had. He said that probably the "shall" should be changed to "may." He said he never thought the statute was intended to, or could require the administrator to adopt the view of a complaining party. This language was designed to encourage the division, having made the determination there was a problem, to act. The corporation's view is the decision the division would take would be in the best interest of the thousands who would receive the information. Number 510 MS. BANNISTER added that if this was in fact the intent, it should be clearly stated. Number 515 REPRESENTATIVE ELTON asked if the 90 day time limit would be suspended while the division makes their determination. Number 523 MR. KIRKPATRICK said in his opinion, those are two separate items. He assumed the 90 days would follow through as stated in Title 10. In Title 45, Chapter 55, they would take what ever investigations are required. REPRESENTATIVE ELTON said, "So the clock would keep going." MR. KIRKPATRICK said his opinion is that it would keep going. Number 531 MS. ZURA said the one thing the shareholders have in ANCSA corporations is the board. The other thing they have are timber sales. She said she has no concept of this portion other than its already in Alaska statute. She explained that one of the shareholders wrote a statement on some figures because they have to file everything with the division. She said they were just guessing on the figures because going to the corporation and asking for information was worse than going through legislation. When they made a misleading statement on numbers, the shareholder wrote back and asked for corrections, they never responded. She said they have been following rules and regulations for 25 years and this provision makes no sense. Number 555 MS. MANTEI noted the 1968 Indian Civil Rights Act said the Indians were to be treated equally, fair, and with due process. This legislation would take it out of due process. She said she's worried about the bill, and it seems they are all worlds apart on it. Number 561 MR. WILSON stated the current provisions for the monitoring of false and misleading statements are working satisfactory. The purpose of calling special meetings might be for business purposes. However, the corporations never receive the requests objectively. They continually have their attorneys working to find the petitions false and misleading. If this prohibits an action of the shareholders for a business purpose and the business fails because the administrator made a decision in favor of the corporation, then who will be liable. He said he thinks there are some liability issues if the administrator is going to make a decision over a business purpose. Number 578 MS. MANTEI said she had received a document containing inaccuracies. The Division of Banking, Securities and Corporations contacted the lady who had distributed the documents and told her to stop. The lady told them she hadn't written it. "Larry Carrol told her, `I don't care you're the one that's handing it out.'" She said they do get involved. Number 585 MR. WILSON said the provision dealing with the administrator bringing an action in superior court was too harsh. Number 592 BOBBIE OSKOLKOFF, SHAREHOLDER, COOK INLET REGION, INCORPORATED, testifying via teleconference, said the laws are not clear enough. The current laws need to be rewritten as to avoid false and misleading statements because they would understand what they dare not do. The Division of Banking, Securities and Corporations can't help because they're not the attorneys for the shareholders. Number 601 MS. BANNISTER said Section 6 was the criminal penalty provision which adds the provision of willfully violating AS 10.07.960(m). Number 609 REPRESENTATIVE SANDERS commented that if this section applied to the Anchorage Daily News, they'd all be in prison for life. Number 611 REPRESENTATIVE PORTER asked if it was the chair's intention to go through the bill before they take any action on sections. CHAIRMAN KOTT said yes. MS. BANNISTER continued that Section 7 provides for new civil action specific to the regular or special meetings of ANCSA corporations. It allows an ANSCA corporation, shareholders or both, to bring an action in court against someone who violates those provisions, if they are related to a special or regular ANCSA corporation meeting. It would cover damages, void a proxy, etc. Number 619 REPRESENTATIVE ELTON asked if a person means a person or does a person also mean a corporation. Number 627 MS. BANNISTER responded, a "person" has a broad meaning, and could mean just about anyone or any entity. Number 623 MR. WILSON asked if the person or corporation was prohibited from taking civil action if the provision wasn't added. MS. BANNISTER replied there isn't a provision giving them the right at this time. MR. WILSON said they currently have these protections under the law. The corporation attorneys constantly threaten shareholders... (END OF TAPE) TAPE 95-39, SIDE B, Number 000 MS. BANNISTER continued, "...holding special meetings because of the definition of proxies. It has gone beyond what's usually in 45.55. Under 45.55 the department, depending on it's interpretation of what proxy is, it sounds like it is an expensive one, could bring an action against a person who violates 139 or 160." She said she would have to review other legal remedies in the corporations code to see if they would cover this particular situation. Number 028 CHAIRMAN KOTT asked if a person is innocently distributing a petition, and did not know about a violation, could he/she be found guilty of a crime. Number 030 MS. BANNISTER replied, in Section 6 it states, "A willful violation." She would have to check the definition of "willful" in the criminal section of the code. Number 037 MS. MANTEI asked the committee to remember that the Natives are not known for being able to "grab legal counsel" like a corporation does. Their errors are unintentional and there was a lack of education. For instance, how could they expect elders in rural areas to stop a law from taking place when they don't even understand it. She asked who is representing those people. Number 055 MS. ZURA asked what was going to happen with shareholders living out of state who violate this statute. "Are you going to bring them to Alaska to convict them when they make misleading and (indisc.) statements?" HB 251 is making laws regarding ANCSA shareholders living out of state. She asked if the state would accept the burden of bringing charges against the out of state shareholders. Number 075 MS. BANNISTER replied that the state would always have to have jurisdiction over the criminal act and there are limitations. Just because it says anyone who willfully violates doesn't mean the state has the ability to go after everyone. Number 081 MS. ZURA interjected, "This says Alaska Native shareholders." MS. BANNISTER replied the state still has to have appropriate criminal jurisdiction. MS. ZURA said she could move to Seattle and "blow them up about their lies." She asked if they can get away with it down there. MS. BANNISTER said she wasn't an expert on criminal jurisdiction, but she would think if shareholders limited their activities only to the Seattle area, she isn't sure just how much jurisdiction they would have. However, if they started contacting people in the state, that might be a different matter. Number 092 REPRESENTATIVE ROKEBERG asked Ms. Bannister to explain the last sentence in the section. Number 096 MS. BANNISTER said derivative action is a different type of action to clarify whether or not they could use the derivative action approach. Derivative action is when a shareholder feels there is some damage being done to the corporation and the directors aren't taking action on it, and they want to protect the corporation so they go to court and say, "We're suing on behalf of the corporation because it is going to be damaged by someone's actions. This is instead of suing just for their own interests. Number 109 REPRESENTATIVE ROKEBERG asked what the citation was. MS. BANNISTER responded that the citation would govern derivative actions. Number 112 MS. BANNISTER referred to Section 8 and explained that frequently with legislation, there is a lot in definitions. They don't put real substance into the definitions such as who can do what. However, by defining what's in covered, you can greatly expand or contract the application of a statute. On page 5, line 1, (15), the definition of proxy is defined to include a petition related to a special meeting of shareholder under AS 10.06.960(m). She said 45.55 has limitations as to which corporations will be covered. By adding the definition of proxy, more ANCSA corporations are covered. Number 143 MS. ZURA asked if this provision was currently in state statute. Number 149 MR. KIRKPATRICK said he wasn't able to answer that question. REPRESENTATIVE ROKEBERG said the question was, "Are petitions considered proxies under Alaska statute." MS. BANNISTER said there was a real question on whether they are. She thought she'd heard Mr. Kirkpatrick say that the way he interpreted it they were. Number 156 MR. KIRKPATRICK responded that the division interprets petitions to be a proxy as far as a proxy statement precursors (indisc.). MS. ZURA said "only the statement." MR. KIRKPATRICK said the question was, "Does proxy and petitions occur in Title 10 now." He didn't know. MS. ZURA said she didn't think so. MS. BANNISTER said there were regulations about proxies but didn't think there was the definition of proxy included. REPRESENTATIVE ROKEBERG asked if they were making a distinction with proxy statement. MR. KIRKPATRICK said a "proxy statement" was a general term used by the Security and Exchange Commission that puts forth the reasons why a person would vote for the contents of a proxy. REPRESENTATIVE ROKEBERG commented that the materiality was in the statement not in the proxy. CHAIRMAN KOTT asked Mr. Kirkpatrick if he had suggestions for the work draft version G. Number 177 REPRESENTATIVE PORTER said Section 3 has a high standard before any fines could be levied. The concerns about not being able to get the right information and putting something out that is later determined to be misleading, he believes wouldn't be covered under this sanction. The individual distributing that information would have to know this was misleading or false. He said he has concerns about Section 6 that within this context, felony crimes were not appropriate although it is a standard of willfully. REPRESENTATIVE PORTER suggested that Amendment 1 be the deletion of Section 6 from the bill, page 4, line 7 through 19. Number 200 CHAIRMAN KOTT asked if there was and objection. Hearing none, Amendment 1 was adopted. Chairman Kott said the remaining section should be renumbered. Number 207 REPRESENTATIVE ELTON agreed with Representative Porter on Section 3, concerning the civil sanctions. However, he wasn't comfortable with the Division of Banking, Securities and Corporation's comments which adds a new subset to the corporations code. That being Native corporations of 500 or less or with assets less than $1 million. His second concern with Section 3 was that it makes the Securities Act apply to people outside of investors. Number 227 MS. BANNISTER wished to clarify her definition of proxy. She said except with the provision of (e) in Section 5, it expands the definition of proxy for the corporation that are covered by 139 and 160. Number 237 MR. KIRKPATRICK referred to Section 2 and said there were three things that may be viewed by some as inappropriate actions by shareholders. It requires that any petition have one quarter of all shares within a 90 day time period. It continues to say that in any event, the action created by that shall not remove directors unless the removal is for cause. In the final part of subsection (o) it states the shareholders can't repeat this for two years. MR. KIRKPATRICK recommended that in Section 2, subsection (l) be amended for those corporations having over 500 shareholders. They should be required to have 15 percent of shareholders which would increase it from the present 10 percent. For those corporations under 500 shareholders, because of the geographical locations and closeness of family, would remain at 25 percent. Under subsection (n), the filing requirement for those shareholders who do not presently file with the Department of Commerce, or those under 500 shareholders, notify the corporation that a petition exists. Rather than saddle them with 90 days, he would change this from 120 to 160 days. Number 303 REPRESENTATIVE PORTER asked if he was suggesting it be something between 120 and 160 or should it be specifically written that way. Number 306 MR. KIRKPATRICK answered, "Specifically written 120." Number 307 REPRESENTATIVE ELTON asked what are the public notice requirements for a special shareholder's meeting. MR. KIRKPATRICK said they would file with the corporation that a petition effort has started. He said his proposal is that they would have 120 days to complete that process. After this process, if it is successful, the corporation is required to post a special meeting which cannot be less than 20 days or more than 60 days. Number 320 REPRESENTATIVE ELTON said if the petition drive didn't begin until six months prior to a required annual meeting, it wouldn't make sense to even allow a petition. Number 324 MR. KIRKPATRICK responded it wasn't uncommon to have a special meeting in conjunction with an annual meeting. REPRESENTATIVE ELTON observed that it would add an issue to the agenda. MR. KIRKPATRICK continued with subsection (n) on page 3. The removal of the board of directors should be for cause. He suggested that cause for the removal of the board would have to be stated. There are annual elections for board of directors. Mr. Kirkpatrick referred to subsection (o) and said he would suggest wording to say annually or preceding 2 years. This would allow agendas or resolutions to be set at the annual meeting. He suggested that Sections 3, 4, 5, 6, etc., be deleted. Number 374 REPRESENTATIVE ROKEBERG asked if he suggested a change in Section 2, subsection (n). MR. KIRKPATRICK said no. REPRESENTATIVE ROKEBERG commented they were leaving it alone because they would have to have cause. He asked if subsection (o) was being changed to one year. MR. KIRKPATRICK said once a year. Number 374 CHAIRMAN KOTT asked if he suggested deletion of Section 3 through 6. MR. KIRKPATRICK replied all remaining sections, 3 through 8. Number 386 CHAIRMAN KOTT noted they had already deleted Section 6 and renumbered Section 7 to Section 6; and Section 8 to Section 7. Number 386 REPRESENTATIVE PORTER asked if he was suggesting deleting the definition section also. Number 388 MR. KIRKPATRICK said he would have no problem with leaving the definition section in. It may assist the department as far as judicial actions. Number 395 CHAIRMAN KOTT restated Mr. Kirkpatrick's recommendation to delete Sections 3, 4, 5 and 6 as amended. The old section 6 is gone, the old section 7 is now 6, the old Section 8 is now 7. MR. KIRKPATRICK amended his recommendation to leave the new Section 7 in. Number 402 CHAIRMAN KOTT said Sections 3 and 4 on page 3, line 10 through 31. Page 4, line 1 through 28. Number 401 REPRESENTATIVE ELTON referring to (n) in Section 2, asked if there was a definition of "cause" elsewhere; or would they be better off defining it in this bill. Number 411 MR. KIRKPATRICK commented there was a large body of law, as far as corporate law is concerned, that would assist in determining that. Number 414 MS. MANTEI said subsection (m) on line 30 should be amended to read "12 months" due to hardships the present group is going through. She said 120 or 160 days was not sufficient. Trying to get someone elected was next to impossible. She said her cousin was paid to go out and get discretionary votes. She passed the committee an article from the Juneau Empire regarding the recall of Goldbelt. She said removal of the board, with cause, should not be changed as it may not match your corporate causes. Land and money for Indians was promised them from the ANCSA. She said there is hardly any Natives in Southeast Alaska that have land from the Alaska Native Claims Act Settlement. There are bills being introduced for Native rights for subsistence. She said she believes part of the ANCSA lands were to go to the Native way of life and subsistence. How do you write that into corporate law? She referred to the two year provision and asked what if they are selling our land. She said that corporation every right to sell the land without the shareholder's permission and the shareholders file a petition that they find it arbitrary or capricious. They have to wait two years in which time the land will be gone. Number 451 REPRESENTATIVE ROKEBERG referred to page 2, subsection (m), and said in terms of the time, Mr. Kirkpatrick was talking about the 120 days. He said he drew a distinction between the over 500 and the under 500. He asked if a distinction should be made. MR. KIRKPATRICK said not in the 120 days. He referred to subsection (m) and said as far as any reporting requirement on line 25 it says, "shall be filed with the corporation." He said he feels it might be appropriate for those collecting petitions to notify the corporation that the process has been (indisc.) He said he doesn't know if it would be appropriate for them to try and file all the materials involved with that. Mr. Kirkpatrick said he previously commented that corporations over 500 shareholders already file that with the department. He said he is recommending that the filing be noticed with the corporation in that a petition effort has been started. REPRESENTATIVE ROKEBERG it should also be filed with the Division of Banking, Securities and Corporations. MR. KIRKPATRICK said if the corporation has 500 shareholders or more, they currently file the documentation with the Division of Banking, Securities and Corporations. It would be a double filing. He referred to those corporations with over 500 shareholders and suggested a petition would have to be noticed with the corporation but only filed with the department if there are over 500 shareholders. Number 482 REPRESENTATIVE ROKEBERG said you'd strike "file" and put "notice" there if they are over 500 shareholders. REPRESENTATIVE ELTON said we are getting beyond concept and into issues. Because of that, it may be easier for the committee to make the final decisions on these issues if there is a committee substitute (CS) that incorporates the concepts discussed by Mr. Kirkpatrick. The committee should make sure a copy of that committee substitute goes to other people who may be interested. The committee could then work directly from something. He said he believes it would be easier for the committee to react from something on paper and consider changes to that. CHAIRMAN KOTT agreed and said that is what he believes Representative Rokeberg was trying to get at. Number 494 MS. ZURA said she would like to clarify something. She said, "You guys are asking the Banking and Securities for high recommendations, and here is three of the shareholders here that have the same right as recommendations. And if you're going to take his word solely, then what was the whole point of us sitting here -- Because our recommendations are really tough too." REPRESENTATIVE ELTON said that is why he was sure to mention that a copy of the committee substitute go to the bill sponsor and to the people who participated. MS. ZURA said, "But I'm still saying you made recommendations here and yet you wouldn't let us have a say so into these recommendations too." CHAIRMAN KOTT said, "That's not really correct. All we're doing is hearing recommendations by the department. We've also written down your comments as well." MS. ZURA said, "Right, is that policies that follow line of any of the Alaska bills, is that you bring Banking and Securities here every time when there is a change, and have them do the recommendations for you?" CHAIRMAN KOTT said, "We definitely bring in the department and ask their recommendations. This is totally unusual to have members from the public make recommendations. I will tell you that. Generally, the public is sitting over there. There is no comment. But we are considering all the recommendations - every comment that has been brought forward. We will incorporate those based on a final analysis of which direction we should take." Number 519 REPRESENTATIVE PORTER said he thinks there has been an abundance of recommendations made throughout the bill. He said he would be a little hesitant to incorporate all of the recommendations into a CS at this point because some are reasonable and some are not. Representative Porter said he would like to hear from people representing management on the recommendations and would also like to hear from the shareholders. Then if the committee thinks there is enough substance to any of the recommendations to proceed, they may want to deal with them section by section. He said he would resist a total CS at this stage. MS. ZURA said, "The reason why I say that, Mr. Chairman I'm sorry, was because here again the Banking and Securities divided our people up again over the 500 above and 500 below as far as recommendations. There we go again, there is another division of how we're getting treated." REPRESENTATIVE ROKEBERG commented, "As Mr. Kott said here, you've been invited here and it is a very unusual thing. We're trying to work through this stuff. If you'd try to follow procedure a little more, I think we'd all appreciate it because you're really talking out of order. And it's kind of disruptive but we want to hear you, don't misunderstand. What we're trying to do is go through this process in a timely fashion. Please don't take offense of (indisc.), but we're trying to get -- move along here and reach something." REPRESENTATIVE ROKEBERG said he agrees with Representative Porter. He said he doesn't think the committee is ready for a CS as they haven't heard enough input from everybody else to start a with another draft. Number 534 REPRESENTATIVE ELTON said he understands the positions of both previous speakers, but if the committee is going to come to a closure on this process, we need to get beyond the concept stage so that corporate management and shareholders can review and make recommendations. If this is kept off of paper, it will make the dialogue go back and forth between what is good and bad. REPRESENTATIVE PORTER said the suggestion was to eliminate half of the bill and they won't have something to look at if half of the bill is gone. REPRESENTATIVE ROKEBERG suggested Mr. Kirkpatrick present written amendments. Number 548 CHAIRMAN KOTT referred to Section 1 of the bill and said as he recalls there were no major problems. He asked if there were any problems with Section 1. Number 550 MS. MANTEI said, "My only problem is that it incorporates that section (l) into it. Section 1 (1) that the presence of that section (l) that seems to be at an impasse. That's my problem with the presence of that in there. It's not totally clean, it's not totally just sighting it word for word - the Alaska Statute." REPRESENTATIVE ROKEBERG said the reason it is there is it is the only change from law. CHAIRMAN KOTT referred to Section 2 and said the major changes seem to deal with corporations above and below 500 shareholders. Corporations over 500 require 15 percent of the shareholders to sign a petition. For corporations under 500, it would be 25 percent. He said he believes that was based on those shareholders being confined to a small areas or village, it would be a lot easier to acquire those signatures. REPRESENTATIVE MASEK referred to the title, "An Act relating to the meetings, shareholder proposals, and removal of directors of Native corporations," and said there are two different types of Native corporations. There is regional and village. She said she believes the amendment is going overboard as it deals with the regional corporations. Representative Masek said nowhere in the bill does it talk about village corporations. She noted there are 12 regional corporations and there are the village corporations that go under the regional corporations. The bill seems to relate to the regional corporations. She said doesn't believe the amendment falls into the intent of the bill. Representative Masek said she objects. REPRESENTATIVE ROKEBERG asked Representative Masek if she is referring to the conceptual amendment. REPRESENTATIVE MASEK indicated she was. REPRESENTATIVE ROKEBERG said he would support the amendment if the committee could qualify it by saying, "The number of people that voted in the last election as a base line." REPRESENTATIVE MASEK said she thinks it is getting way out of order. We are talking about regional corporations. She asked if that could be clarified. REPRESENTATIVE ELTON said his understanding from the beginning was that it covered all of them. It covered Goldbelt, for example, which is a sub regional corporation as well as Sealaska. He said he thinks that was the intent of the sponsor. Representative Elton said his understanding was that the clarification was based on what the department now does. REPRESENTATIVE MASEK asked if the sponsor was in attendance. Number 598 TIM BENINTENDI, Legislative Assistant to Representative Carl Moses, indicated he was in attendance on behalf of Representative Moses. He asked Representative Masek to repeat the question. REPRESENTATIVE MASEK referred to the title of the bill and asked for a clarification. She said nowhere in the bill does it discuss regional corporations or village corporations. Based on the proposed amendments by Mr. Kirkpatrick, he is summarizing it to the village and regional levels. She said she has a real problem with it as it isn't stated in the bill. MR. BENINTENDI said the provisions of the bill were meant to apply to all corporations regardless of locality. REPRESENTATIVE MASEK said a problem she has is with the regional corporations is it is very hard to go out and gather the required number of votes. She said she doesn't believe that increasing the numbers will do any good for anybody. CHAIRMAN KOTT referred to regional corporations and asked if there are more than 500 members. REPRESENTATIVE MASEK said there are more. The regional corporations serve all the villages below them. CHAIRMAN KOTT said as he understands under the current provisions of the bill, the regional corporations would be required to have 10 percent. The suggestion is to increase the number to 15 percent. He asked Representative Masek if her recommendation is to retain it at 10 percent. REPRESENTATIVE MASEK said yes, only because geographically it is really hard for the people to do anything. They don't have the background or financing to put forth their opinions on what they would like to see done. She said she has experienced it and understands it very well. REPRESENTATIVE ROKEBERG said he is suggesting an amendment to the amendment to use a baseline of the number of voters in the prior annual election. Therefore, it would lower the operative percentage slightly to the favor of the shareholders. He said he thinks the recommendation of Mr. Kirkpatrick is a compromise that goes a long ways towards the position of the shareholders. Number 628 CHAIRMAN KOTT asked if he was suggesting that the figure be 15 percent of the shareholders that participated in the previous annual election. REPRESENTATIVE ROKEBERG said yes. TAPE 95-40, SIDE A Number 000 MR. WILSON said he thinks that would be a fair compromise. He referred to whatever percentage was used such as 10 percent or 15 percent and asked if it would be applied to the shareholders that voted in that previous election. He said before you have a valid meeting, a quorum has to be established. If you don't have a quorum, there would be no meeting unless a quorum were present. Every meeting that is called to order has to have 50 percent plus 1 of all the outstanding shares. In most instances, the percentage could run anywhere from 52 percent to what it currently runs which is about 70 percent. You'd apply the 25 percent to those that voted in the last election. CHAIRMAN KOTT said this would include the people voting by proxy. Number 033 REPRESENTATIVE ELTON said the committee needs more data. He said if there is a corporation of 10,000 shareholder and we say, "O.K., were going to compromise at 15 percent." Under that scenario, you'd need 1,500 signatures for the petition to be valid. He said, "Lets say that this corporation's last annual meeting had 60 percent turnout or 6,000 people. So now we incorporate Representative Rokeberg's amendment and it is 15 percent of 6,000. All of a sudden you need 900 signatures which is less than you needed under the old 10 percent deal." He said things are complicated. It would be different from year to year and from corporation to corporation. CHAIRMAN KOTT said this is complicating. It is going to vary from corporation to corporation and it may be hard to determine the numbers. Number 059 REPRESENTATIVE ROKEBERG suggested using the 25 percent figure for both under and over 500 because of the prior election. It would, as a practical matter, balance itself. He said what he is hearing is there is a feeling that there may be some difficulty in verifying the exact number. He asked Mr. Kirkpatrick if his agency has knowledge of the (indisc.--coughing) votes. MR. KIRKPATRICK said as a practice, they don't maintain records of the votes, but as a practical proceeding, the election judge informs the agency as to what is going on in an election for those corporations of over 500 shareholders. CHAIRMAN KOTT said for the corporations of less than 500, we don't know the numbers. Those numbers would be a moving target. Number 081 REPRESENTATIVE MASEK informed the committee that the Doyon Corporation, which she belongs to, is holding their annual election. They offer door prizes to people as an incentive to attend the meeting. She referred to proxies and said it is really a complex issue if you can't read and understand them and the measures of how to go about voting. Representative Masek said she doesn't know what the turn out will be at the meeting. For about ten years, the majority of the members that serve on the board have been on the board. They have never been voted out. She said at one time she was a candidate and wasn't chosen under the management slate to go on the executive board's nominee list. It is really a difficult process and if we're going to continue with recommendations, there is a need to gather more data to understand the process better. She suggested reviewing previous elections. Number 115 MS. MANTEI informed the committee Sealaska had 9,500 people who voted at the last meeting out of 15,700. Number 121 REPRESENTATIVE ROKEBERG moved to adopt the conceptual amendment, Amendment 1, as proposed by Chairman Kott. CHAIRMAN KOTT noted Amendment 1 has already been adopted. He offered Amendment 2. He said he doesn't particularly care for the percentage. He said he would entertain the notion of the corporations which have 500 shareholders and above to have 10 percent of the signatures, and corporations that have 499 shareholder and below to be at 25 percent. Number 130 REPRESENTATIVE ROKEBERG said he will vote against the amendment. He said he thinks the number should be 15 percent. CHAIRMAN KOTT moved Amendment 2. REPRESENTATIVE MASEK objected. Number 183 CHAIRMAN KOTT asked Mr. Kroloff if he heard the proposed amendment and continued to explain it to him. Number 178 MR. KROLOFF said he would oppose that amendment because it doesn't address (indisc.) legislation was design to solve (indisc.) Most of the corporation (indisc.) amendment are corporations in support of the legislation and are corporations with more than 500 shareholders. He said the right number should be 25 percent or at least the 10 percent number should be increased. CHAIRMAN KOTT said later in the meeting he will also address the time frame that will be used to collect those signatures. Number 209 MR. BENINTENDI said initially the bill called for 25 percent for the corporations with 500 shareholders or more. Representative Moses is prepared to modify the percentage to 20 percent for corporations of 500 or more shareholders. Mr. Benintendi said Representative Moses agrees with the 25 percent (indisc.) for 499 shareholders or less. REPRESENTATIVE MASEK said she still objects to the motion. She said she will support the 10 percent figure. CHAIRMAN KOTT said the motion he made was to retain 10 percent for corporations with 500 shareholders and above. For corporations with 499 shareholders and below, it would increase to 25 percent. He said that is Amendment 2. CHAIRMAN KOTT said there is objection by Representative Masek and asked the committee secretary to call the roll. REPRESENTATIVE MASEK asked Chairman Kott to review the amendment one more time for the record. CHAIRMAN KOTT said, "For the record, Amendment Number 2 requires corporations 500 and above, to the number of shareholders, it would be required to have 10 percent for their petition. Corporations 400 or -- less than 500 - 499 or below or less would require 25 percent of the shareholders to sign the petition." REPRESENTATIVE SANDERS said his understanding of the reason for this is that in the larger corporations, the 10 percent is fine. In some of the smaller corporations, they're a lot closer to home, they're usually in a village and it is a lot easier to get the 25 percent. He said he supports the amendment. Number 250 A roll call vote was taken. Voting in favor of Amendment 2 were Representatives Sanders, Masek and Kott. Voting against Amendment 2 was Representative Porter. Amendment 2 was adopted. REPRESENTATIVE KOTT referred to page 2, line 30, which discusses the number of days and said in the existing CS it is 90 days. He asked if there was discussion. Number 276 REPRESENTATIVE MASEK asked what the deadline was before the bill was introduced. MR. KIRKPATRICK indicated that there wasn't a deadline. Number 289 CHAIRMAN KOTT referred to page 3, line 9, subsection (o), which says, "A corporation that is organized under the act is not required to consider or to submit to a vote of the shareholders a shareholder proposal that deals substantially with the same subject matter as a proposal that was submitted to a vote of the shareholders within the preceding two years." He asked if there was discussion. CHAIRMAN KOTT referred to the testimony by Mr. Kirkpatrick and said he would move that the "two years" be changed to "one year." REPRESENTATIVE PORTER asked Mr. Kirkpatrick if there was an issue that had been taken through the petition process but was obviously not adopted, would the language in the bill preclude that from coming up at the next annual meeting in addition to two years by special petition. He asked if it precludes another special petition within two years. MR. KIRKPATRICK said he believes that management could bring up any subject that they wanted to at any annual meeting, which may address something that was being petitioned. He noted as he reads the bill, it would prohibit a shareholder proposal that was submitted only be submitted every other year. Number 342 CHAIRMAN KOTT said the amendment was the recommendation of the department. He said it would be Amendment 3 and it reduces the time span from two years to one year within the previous year. He again noted it was on page 3, line 9. He asked if there was an objection to Amendment 3. Hearing none, the amendment was adopted. Number 345 REPRESENTATIVE MASEK asked to discuss Section 2(m). She said it is her understanding that the section establishes special requirements for shareholders to request special shareholder meetings. Currently, there is no counterpart for these requirements in the for profit corporation code under AS 10.06. She said she would like to make a motion to delete Section 2(m), on page 2, line 22. CHAIRMAN KOTT said there is a motion, which is a conceptual amendment, to delete page 2, line 22 through page 3, line 1. He said he would object. Chairman Kott asked Mr. Kirkpatrick what the impact would be if the section is eliminated. MR. KIRKPATRICK said as he reads (m), it is a new section and without it would be status quo, as it is today, in collecting petitions with the exception of (l) which has been adopted. MS. BANNISTER confirmed Mr. Kirkpatrick's comment. she said it would be status quo for the procedures. Number 385 REPRESENTATIVE MASEK said she would like to put forth an amendment that the 90 day filing should be decreased to 35 days after the filing. It is on page 2, line 30, under Section 2(n). CHAIRMAN KOTT said he doesn't really think Representative Masek would want to do that. REPRESENTATIVE MASEK said she was worried about the wording, "...this section shall be filed with the corporation before a person solicits support for the petition or request." She inquired if the person currently has to file with the corporation. REPRESENTATIVE SANDERS asked if the was a motion to eliminate (m). There was a response from an unidentified speaker that there was a motion to eliminate (m). Representative Sanders said if the committee deals with that motion, then the committee wouldn't have to deal with the 90 days. Number 398 CHAIRMAN KOTT said there is a motion to delete subsection (m) and he said he would object. A roll call vote was taken. Representatives Sanders and Masek voted in favor of Amendment 4. Representative Kott and Porter voted against the amendment. Amendment 4 failed. Number 414 REPRESENTATIVE MASEK said she would like to put forth another amendment which would increase the 90 days to 130 days on page 2, line 30. CHAIRMAN KOTT asked if there was an objection to Amendment 5. He then objected. He said he thinks that since the percentage has been retained at a reasonable number in Section 2, to counter and to offer some balance, the 90 day period is probably sufficient base time. REPRESENTATIVE MASEK said prior to the bill being introduced, there wasn't a deadline. She said she believes it would be in the best interest to put it at 130 and maybe even increase it to 150. CHAIRMAN KOTT said there has been testimony that if the people are earnest and willing to get out and collect petitions, they can do it in a very short period of time. REPRESENTATIVE SANDERS said in some of the corporations, the villages are widely scattered. It is hard to get to these people and some of them don't read English. Some of them don't understand the legalese in some of the petitions. They have to contact people to interpret it for them. He said he wouldn't have a problem with giving a little more time. REPRESENTATIVE MASEK noted that a lot of people may be out fishing, hunting, etc. Raising the amount of time would give the shareholders adequate time to talk about the issue. Number 450 REPRESENTATIVE PORTER said "I believe not raising the level for major corporations is a significant hinderance to the intent of the bill in the first place, and I would agree that the 90 day period is three months and we don't have any seasons that go that long. So I think somebody is going to be available during that period of time. The period is from the date of the filing and if there is an organized petition drive desired within a major corporation, I think that you can be pretty well geared up and have your petitions ready to go and file and mail to all the villages that you need to mail to and have the person lined up to receive and offer it. So I would agree that in the spirit of balance, if we're going to leave it at 10 percent, the 90 days is appropriate." Number 460 A roll call vote was taken. Representative Sanders and Masek voted in favor of the amendment Representatives Porter and Kott voted against the amendment. So Amendment 5 failed. CHAIRMAN KOTT asked if there were additional amendments. REPRESENTATIVE MASEK asked for an at ease. CHAIRMAN KOTT called an at ease. CHAIRMAN KOTT called the committee meeting back to order for the purpose of adjournment.