Legislature(2015 - 2016)BARNES 124
04/13/2015 03:15 PM House LABOR & COMMERCE
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HB 122-CORPORATION/LLC/PARTNERSHIP REPORTS 4:43:11 PM CHAIR OLSON announced that the final order of business would be HOUSE BILL NO. 122, "An Act relating to the required reports, required fees, and other aspects of for-profit corporations, cooperative corporations, nonprofit corporations, corporations formed under AS 10.40, limited liability companies, and limited liability partnerships; and providing for an effective date." 4:43:48 PM REPRESENTATIVE COLVER, speaking as prime sponsor of HB 122, stated that this bill hopes to cut "red tape" by reducing cost and time for businesses and the state by reducing the corporate filing reports from two years to four years. Currently, if the corporation does not renew its certificate of authority, it will automatically lapse and dissolve. There would not be any fiscal change except to change the regulations. 4:45:59 PM DAVID SCOTT, Staff, Representative Jim Colver, on behalf of the prime sponsor, Representative Jim Colver, stated that HB 122 would amend two chapters, AS 10, related to corporation and AS 32, the Uniform Partnership Act. He related that the intent of the bill would be to change the reporting requirements from two years to four years for cooperative corporations, nonprofit corporations, religious corporations, LLCs and limited liability partnerships, businesses and professional corporations. He added that the changes are limited to the length of time for reporting from a biennial report to a status report every four years. 4:47:06 PM MR. SCOTT briefly reviewed the bill. He stated that Sections 1- 18 relate to the Alaska Corporations Code, Sections 19-25 relate to the Cooperative Corporations Act, Sections 26-36 relate to the Alaska Nonprofit Corporations Act, Sections 37-38 relate to religious corporations, Sections 39-45 relate to LLCs, Sections 46-49 relate to the Uniform Partnership Act, Section 50 provides transition provisions, Section 51 relates to regulation authority, and Sections 52-53 provide effective dates. MR. SCOTT directed attention to Section 6, which would change the reporting requirement from every two years to every four years. Section 12 would change the amount the filing fee, which has a net effect of not changing the overall fees. 4:48:20 PM MR. SCOTT referred to Sections 18, 25, 36, and 49 provide definitions and Section 50, provides the transition provisions and conversion from a two-year reporting requirement to four years. 4:48:40 PM REPRESENTATIVE JOSEPHSON asked whether there was anything the department might discern in a two year renewal cycle as opposed to the four year window. REPRESENTATIVE LEDOUX changed to status report since people may not know what quatra-annual report. MR. SCOTT answered that the bill drafter made the decision. 4:49:46 PM REPRESENTATIVE HUGHES expressed concern about cost of $72,000 listed in the fiscal note for operating expenditures and a loss of $3.1 million for fiscal year (FY) 16, and in FY 17 of 2,617. She asked for further clarification on the fiscal note. REPRESENTATIVE COLVER deferred to the department to respond. 4:51:13 PM REPRESENTATIVE HUGHES asked for further clarification on the cycle. REPRESENTATIVE COLVER suggested that it would be more appropriate for department to answer the mechanics. 4:52:33 PM REPRESENTATIVE JOSEPHSON asked for the type of things the department reviews when it inspects the biennial corporate reports and what might go missing if the reports were not reviewed every two years. SARA CHAMBERS, Operations Manager, Division of Corporations, Business, and Professional Licensing, Department of Commerce, Community, & Economic Development (DCCED), answered the department collects basic information. The division was most interested in the officers of the corporation, and the registered agent. She stated that the division becomes the repository for this information and many entities and private citizens who use the information. 4:53:34 PM CHAIR OLSON asked whether any information might be time sensitive and any impact of waiting four years for the data. MS. CHAMBERS reported that if HB 122 were to pass, Alaska would be the only state not collecting the information on an annual or biennial basis. She acknowledged that the information on file might be less accurate if it was only required to be reported every four years. She said the department was neutral on the bill. REPRESENTATIVE LEDOUX asked how the mechanism would work under the bill if the registered agent changed. She asked whether anyone else shared the concern. MS. CHAMBERS shared Representative LeDoux's concern. 4:55:35 PM REPRESENTATIVE HUGHES asked whether any other states have something similar. MS. CHAMBERS answered the program coordinator showed other states have an annual or biennial license renewal. 4:56:03 PM REPRESENTATIVE COLVER asked whether any states do not require reporting by corporations. MS. CHAMBERS said she was not aware of any jurisdictions without reporting requirements. REPRESENTATIVE COLVER offered that he has done some research and will distribute the results. 4:56:48 PM REPRESENTATIVE COLVER asked for any consequences to corporations for not filing the biennial registration form. MS. CHAMBERS answered that the department sends out courtesy notices to corporations if the department does not receive the form timely and if the corporation fails to respond, the corporation is involuntarily dissolved. 4:57:23 PM REPRESENTATIVE COLVER expressed concern that the corporation would be dissolved for failure to return the biennial form that restates corporate officers and registered agents - which can be changed at any time. He stated that corporations pay a $100 filing fee for their corporate license, but the entity still needs a business license, and any professional licenses. He was unsure if it was in the state's interest to dissolve corporations, which supports his desire to extend corporate licenses for four years. 4:58:15 PM MS. CHAMBERS, in response to Representative Hughes, stated that the division initiated the courtesy notice a few years ago and found many corporations appreciated the reminder. The division has seen the numbers of involuntary corporate dissolutions drop dramatically. She said the division will continue to send courtesy reminders. As a side benefit, any net effect; surplus for corporate fining fees is deposited into the general fund, which has been between $5 to 6 million. She stated that part of $72,000 in the fiscal note was to cover informational courtesy mailings. In further response to Representative Hughes, she explained that the courtesy reminders were sent out prior to the involuntary dissolution; however she hoped everyone would remember to file their biennial reports. 5:00:23 PM REPRESENTATIVE HUGHES asked how many corporations were involuntarily dissolved last year. MS. CHAMBERS said she was uncertain, but could compile that information. 5:00:49 PM REPRESENTATIVE HUGHES asked if corporations that are dissolved re-form their corporation. MS. CHAMBERS answered yes; but explained corporations dissolve for a variety of reasons, and some corporations come back as a different iteration. Others simply acknowledged that they had a glitch and failed to renew. In further response to Representative Hughes, she explained that the initially filing costs about $200 and the biennial report cycle would follow. 5:02:05 PM REPRESENTATIVE LEDOUX, with regard to registered agents, referred to page 1, lines 12-14, indicates that the corporation was dissolved if within 30 days it has failed to notify the commissioner of any changes to the registered agent. Thus, that would not really be a consideration with the four year cycle versus the two year cycle. MS. CHAMBERS answered that the division could involuntarily dissolve a corporation if the division was aware of any changes in registered agents. 5:03:01 PM REPRESENTATIVE LEDOUX said the only information filed in the biennial report was registered agent and the officers of the corporation. MS. CHAMBERS answered that some additional information is collected, such as shares of corporate ownership. 5:03:41 PM REPRESENTATIVE LEDOUX wondered if it makes sense to have no filing required, unless the corporation changes its officers or registered agents. REPRESENTATIVE COLVER agreed with Representative LeDoux's approach. 5:04:17 PM CHAIR OLSON asked if the division could generate a list of other jurisdictions in terms of annual and biennial corporate filings to ensure Alaska treats corporations similarly. 5:04:53 PM REPRESENTATIVE COLVER said the biennial report asks corporations to list their corporate officers, the number of outstanding shares and the shareholder interest of the corporate officers, or in other words, the number of share issued, the number of outstanding shares, and the number of shares held by corporate officers. REPRESENTATIVE COLVER offered his belief that involuntary dissolution of a company because of failure to fill out this short form seemed like a harsh penalty. He suggested one alternative to changing the cycle was to offer forgiveness since it is expensive to reinstate a corporation, which often requires legal assistance. 5:06:02 PM REPRESENTATIVE JOSEPHSON asked whether the impetus was the frustration over the threat of dissolution. REPRESENTATIVE COLVER answered that it was he has a bit of a "Libertarian" streak in him. He wasn't certain that government should tell its citizens to do something. He asked whether the state could get by with different reporting period was one question and achieve the same results. He suggested that corporations may receive the card in the mail, but the corporation must track when the biennial report is due. 5:08:01 PM [HB 122 was held over.]