PRINTER'S NO. 2039
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
1716
Session of
2023
INTRODUCED BY WARREN, MADDEN, SANCHEZ, M. JONES AND DELLOSO,
SEPTEMBER 26, 2023
REFERRED TO COMMITTEE ON COMMERCE, SEPTEMBER 26, 2023
AN ACT
Amending Title 15 (Corporations and Unincorporated Associations)
of the Pennsylvania Consolidated Statutes, in entity
transactions, further providing for nature of transactions
and for approval by limited liability company; in foreign
associations, further providing for foreign registration
statement; in general provisions, further providing for
definitions; in corporate powers, duties and safeguards,
further providing for certain specifically authorized debt
terms; in officers, directors and shareholders, further
providing for derivative action; in foreign business
corporations, further providing for application of article;
in general provisions, further providing for definitions; in
corporate powers, duties and safeguards, further providing
for certain specifically authorized debt terms; in officers,
directors and members, further providing for derivative
action; in general partnerships, further providing for
contents of partnership agreement; in limited partnerships,
further providing for contents of partnership agreement and
for derivative action; and, in limited liability companies,
further providing for contents of operating agreement and for
derivative action.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 315(a) of Title 15 of the Pennsylvania
Consolidated Statutes, amended November 3, 2022 (P.L.1791,
No.122), is amended to read:
§ 315. Nature of transactions.
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(a) General rule.--The fact that a sale or conversion of the
interests in or assets of an association or a transaction under
this chapter or other law produces a result that could be
accomplished in any other manner permitted by a different set of
provisions of this chapter or other law shall not be a basis for
recharacterizing the sale, conversion or transaction as a
different form of sale, conversion or transaction under this
chapter or other law.
* * *
Section 2. Section 325(d)(2)(iv) of Title 15 is amended to
read:
§ 325. Approval by limited liability company.
* * *
(d) Merger by action of managers only.--Unless otherwise
required by a provision of the organic rules in record form, a
plan of merger shall not require the approval of the members of
a manager-managed, domestic limited liability company and shall
be deemed adopted by the company when a resolution approving the
plan has been adopted by the managers pursuant to subsection (a)
if:
* * *
(2) The plan of merger provides for the merger of the
company (referred to in this paragraph as the "constituent
company") with or into a single indirect wholly owned
subsidiary (referred to in this paragraph as the "subsidiary
company") of the constituent company if all of the following
provisions are satisfied:
* * *
(iv) Immediately following the effectiveness of the
merger, the certificate of organization and operating
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agreement of the holding company are identical to the
certificate of organization and operating agreement of
the constituent company immediately before the
effectiveness of the merger, except for changes that
could be made without member approval pursuant to Chapter
[89] 88 (relating to limited liability companies).
* * *
Section 3. Section 412(b) of Title 15 is amended by adding a
paragraph to read:
§ 412. Foreign registration statement.
* * *
(b) Qualification or registration under former statutes.--
The effect of a foreign association qualifying or registering to
do business under prior provisions of law shall be as follows:
* * *
(6) A reference in the law of this Commonwealth to
qualification as a foreign association includes registration
under subsection (a) and deemed registration under this
subsection.
* * *
Section 4. The definition of "foreign business corporation"
in section 1103(a) of Title 15 is amended to read:
§ 1103. Definitions.
(a) General definitions.--Subject to additional definitions
contained in subsequent provisions of this subpart that are
applicable to specific provisions of this subpart, the following
words and phrases when used in Part I (relating to preliminary
provisions) or in this subpart shall have the meanings given to
them in this section unless the context clearly indicates
otherwise:
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* * *
"Foreign business corporation." A foreign corporation for
profit subject to Chapter 4 (relating to foreign associations),
whether or not required to [qualify] register thereunder.
* * *
Section 5. Section 1510(c) of Title 15 is amended to read:
§ 1510. Certain specifically authorized debt terms.
* * *
(c) Definitions.--As used in this section, the following
words shall have the meanings given to them in this subsection:
"Affiliate." An affiliate or associate as defined in
section [2552] 102 (relating to definitions).
"Obligation." Includes an installment sale contract.
* * *
Section 6. Section 1781(a)(1) of Title 15, amended November
3, 2022 (P.L.1791, No.122), is amended to read:
§ 1781. Derivative action.
(a) General rule.--Subject to section 1782 (relating to
eligible shareholder plaintiffs and security for costs) and
subsections (b) and (g), a plaintiff may maintain a derivative
action to enforce a right of a business corporation only if:
(1) the plaintiff first makes a demand on the
corporation or the board of directors requesting that the
corporation bring an action to enforce the right, and:
[(i) if a special litigation committee is not
appointed under section 1783 (relating to special
litigation committee), the board determines that:
(A) an action based on some or all of the claims
asserted in the demand not be brought by the
corporation but that the corporation not object to an
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action being brought by the party that made the
demand; or
(B) an action already commenced continue under
the control of the plaintiff; or]
(i.1) if a special litigation committee is not
appointed under section 1783 (relating to special
litigation committee):
(A) the board determines that:
(I) an action based on some or all of the
claims asserted in the demand not be brought by
the corporation but that the corporation not
object to an action being brought by the party
that made the demand; or
(II) an action already commenced continue
under the control of the plaintiff; or
(B) the board does not notify the party that
made the demand within 60 days after the demand was
made that the board has appointed a special
litigation committee or has made a determination
under clause (A); or
(ii) if a special litigation committee is appointed
under section 1783, a determination is made:
(A) under section 1783(e)(1) that the
corporation not object to the action; or
(B) under section 1783(e)(5)(i) that the
plaintiff continue the action;
* * *
Section 7. Section 4101 of Title 15 is amended to read:
§ 4101. Application of article.
(a) General rule.--Except as otherwise provided in this
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section or in subsequent provisions of this article, this
article shall apply to and the words "corporation" or "foreign
business corporation" in this article shall include every
foreign corporation for profit, including a corporation that, if
a domestic corporation for profit, would be a banking
institution[,] or credit union [or savings association].
(b) Domestic Federal financial institution exclusion.--
Except as permitted by act of Congress, this article shall not
apply to:
(1) Any of the following institutions or similar
federally chartered institutions engaged in this Commonwealth
in activities similar to those conducted by banking
institutions[, saving associations] or credit unions:
(i) National banking associations organized under
The National Bank Act (13 Stat. 99, 12 U.S.C. § 1 et
seq.).
(ii) Federal savings and loan associations and
Federal mutual savings banks organized under the Home
Owners' Loan Act of 1933 (48 Stat. 128, 12 U.S.C. § 1461
et seq.).
(iii) Federal credit unions organized under the
Federal Credit Union Act (48 Stat. 1216, 12 U.S.C. § 1751
et seq.).
(2) Any other Federal corporation intended by the
Congress to be treated for state law purposes as a domestic
corporation of this Commonwealth.
Section 8. Section 5103(b) of Title 15, amended November 3,
2022 (P.L.1791, No.122), is amended to read:
§ 5103. Definitions.
* * *
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(b) Index of other definitions.--The following is a
nonexclusive list of words and phrases which when used in this
subpart shall have the meanings given to them in section 102
(relating to definitions):
"Act" or "action."
"Charitable purposes."
"Conversion."
"Corporation for profit."
"Corporation not-for-profit."
"Court."
"Department."
"Division."
"Domestic corporation for profit."
"Domestic corporation not-for-profit."
"Domestication."
"Execute."
"Foreign corporation for profit."
"Foreign corporation not-for-profit."
"Interest exchange."
"Internal Revenue Code of 1986."
"Merger."
"Obligation."
"Officially publish."
"Record form."
"Representative."
"Sign."
Section 9. Section 5510(c) of Title 15 is amended to read:
§ 5510. Certain specifically authorized debt terms.
* * *
(c) Definitions.--As used in this section, the following
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words and phrases shall have the meanings given to them in this
subsection:
"Affiliate." An affiliate or associate as defined in section
[2552] 102 (relating to definitions).
"Obligation." Includes an installment sale contract.
* * *
Section 10. Section 5781(a)(1) of Title 15, amended November
3, 2022 (P.L.1791, No.122), is amended to read:
§ 5781. Derivative action.
(a) General rule.--Subject to section 5782 (relating to
eligible member plaintiffs and security for costs) and
subsection (b), a plaintiff may maintain a derivative action to
enforce a right of a nonprofit corporation only if:
(1) the plaintiff first makes a demand on the corporation
or the board of directors, requesting that the corporation
bring an action to enforce the right, and:
[(i) if a special litigation committee is not
appointed under section 5783 (relating to special
litigation committee), the board determines that:
(A) an action based on some or all of the claims
asserted in the demand not be brought by the
corporation but that the corporation not object to an
action being brought by the party that made the
demand; or
(B) an action already commenced continue under
the control of the plaintiff; or]
(i.1) if a special litigation committee is not
appointed under section 5783 (relating to special
litigation committee):
(A) the board determines that:
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(I) an action based on some or all of the
claims asserted in the demand not be brought by
the corporation but that the corporation not
object to an action being brought by the party
that made the demand; or
(II) an action already commenced continue
under the control of the plaintiff; or
(B) the board does not notify the party that
made the demand within 60 days after the demand was
made that the board has appointed a special
litigation committee or has made a determination
under clause (A); or
(ii) if a special litigation committee is appointed
under section 5783, a determination is made:
(A) under section 5783(e)(1) that the
corporation not object to the action; or
(B) under section 5783(e)(5)(i) that the
plaintiff continue the action;
* * *
Section 11. Sections 8415(c)(2) and 8615(c)(2) of Title 15
are amended to read:
§ 8415. Contents of partnership agreement.
* * *
(c) Limitations.--A partnership agreement may not do any of
the following:
* * *
(2) Vary the right of a partner to approve a merger,
interest exchange, conversion[,] or division [or
domestication] under section 333(a)(2) (relating to approval
of merger), 343(a)(2) (relating to approval of interest
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exchange), 353(a)(3) (relating to approval of conversion)[,]
or 363(a)(2) (relating to approval of division) [or 373(a)(2)
(relating to approval of domestication)].
* * *
§ 8615. Contents of partnership agreement.
* * *
(c) Limitations.--A partnership agreement may not do any of
the following:
* * *
(2) Vary the right of a partner to approve a merger,
interest exchange, conversion[,] or division [or
domestication] under section 333(a)(2) (relating to approval
of merger), 343(a)(2) (relating to approval of interest
exchange), 353(a)(3) (relating to approval of conversion)[,]
or 363(a)(2) (relating to approval of division) [or 373(a)(2)
(relating to approval of domestication)].
* * *
Section 12. Section 8692(a)(1) of Title 15, amended November
3, 2022 (P.L.1791, No.122), is amended to read:
§ 8692. Derivative action.
(a) General rule.--Subject to section 8693 (relating to
eligible partner plaintiffs and security for costs) and
subsection (b), a plaintiff may maintain a derivative action to
enforce a right of a limited partnership only if:
(1) the plaintiff first makes a demand on the limited
partnership or the general partners requesting that the
partnership bring an action to enforce the right, and:
[(i) if a special litigation committee is not
appointed under section 8694 (relating to special
litigation committee), the general partners determine
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that:
(A) an action based on some or all of the claims
asserted in the demand not be brought by the limited
partnership but that the partnership not object to an
action being brought by the party that made the
demand; or
(B) an action already commenced continue under
the control of the plaintiff; or]
(i.1) if a special litigation committee is not
appointed under section 8694 (relating to special
litigation committee):
(A) the general partners determine that:
(I) an action based on some or all of the
claims asserted in the demand not be brought by
the limited partnership but that the partnership
not object to an action being brought by the
party that made the demand; or
(II) an action already commenced continue
under the control of the plaintiff; or
(B) the general partners do not notify the party
that made the demand within 60 days after the demand
was made that the general partners have appointed a
special litigation committee or have made a
determination under clause (A); or
(ii) if a special litigation committee is appointed
under section 8694, a determination is made:
(A) under section 8694(e)(1) that the
partnership not object to the action; or
(B) under section 8694(e)(5)(i) that the
plaintiff continue the action;
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* * *
Section 13. Section 8815(c)(2) of Title 15 is amended to
read:
§ 8815. Contents of operating agreement.
* * *
(c) Limitations.--An operating agreement may not do any of
the following:
* * *
(2) Vary the right of a member to approve a merger,
interest exchange, conversion[,] or division [or
domestication] under section 333(a)(2) (relating to approval
of merger), 343(a)(2) (relating to approval of interest
exchange), 353(a)(3) (relating to approval of conversion)[,]
or 363(a)(2) (relating to approval of division) [or 373(a)
(2) (relating to approval of domestication)].
* * *
Section 14. Section 8882(a)(1) of Title 15, amended November
3, 2022 (P.L.1791, No.122), is amended to read:
§ 8882. Derivative action.
(a) General rule.--Subject to section 8883 (relating to
eligible plaintiffs and security for costs) and subsection (b),
a plaintiff may maintain a derivative action to enforce a right
of a limited liability company only if:
[(1) the plaintiff first makes a demand on the company
or the other members in a member-managed limited liability
company, or the managers of a manager-managed limited
liability company, requesting that the company bring an
action to enforce the right and:
(i) if a special litigation committee is not
appointed under section 8884 (relating to special
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litigation committee), the members in a member-managed
company or managers of a manager-managed company
determine that:
(A) an action based on some or all of the claims
asserted in the demand not be brought by the company
but that the company not object to an action being
brought by the party that made the demand; or
(B) an action already commenced continue under
the control of the plaintiff; or]
(i.1) if a special litigation committee is not
appointed under section 8884 (relating to special
litigation committee):
(A) the members in a member-managed company or
managers of a manager-managed company determine that:
(I) an action based on some or all of the
claims asserted in the demand not be brought by
the company but that the company not object to an
action being brought by the party that made the
demand; or
(II) an action already commenced continue
under the control of the plaintiff; or
(B) the members in a member-managed company or
managers of a manager-managed company do not notify
the party that made the demand within 60 days after
the demand was made that they have appointed a
special litigation committee or have made a
determination under clause (A); or
(ii) if a special litigation committee is appointed
under section 8884, a determination is made:
(A) under section 8884(e)(1) that the company
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not object to the action; or
(B) under section 8884(e)(5)(i) that the
plaintiff continue the action;
* * *
Section 15. This act shall take effect in 60 days.
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