LRB-4031/3
CTS&JK:lmk:pg
2005 - 2006 LEGISLATURE
March 14, 2006 - Introduced by Representatives McCormick, Lamb, Hahn,
Hundertmark, Albers, Townsend and Strachota, cosponsored by Senators
Kanavas, Grothman and Leibham. Referred to Committee on Financial
Institutions.
AB1112,2,5
1An Act to repeal 180.0825 (2) (a), 180.0825 (5) (a) to (h) and 180.1105 (1) (a) and
2(b);
to renumber 180.1105 (1) (c) and (d);
to renumber and amend 180.0602
3(3);
to consolidate, renumber and amend 180.0825 (2) (intro.) and (b);
to
4amend 179.02 (1), 179.76 (4) (c), 179.77 (6) (c), 180.0121 (1) (a) 4., 180.0121 (2),
5180.0502 (3), 180.0706 (title), 180.0824 (3), 180.0825 (1), 180.1103 (1), 180.1104
6(1), 180.1106 (1) (b), 180.1130 (3) (a) (intro.), 180.1140 (11), 180.1150 (2),
7180.1161 (4) (c), 180.1201 (title), 180.1201 (2), 180.1302 (4), 181.0121 (1) (a) 4.,
8181.0121 (2), 181.1106 (2), 181.1161 (4) (c), 183.0109 (1) (a) 5., 183.0109 (2),
9183.1202 (1), 183.1205 (2) and 183.1207 (4) (c);
to repeal and recreate
10180.1130 (14); and
to create 73.13, 179.76 (5) (bm), 179.76 (5m), 179.77 (5)
11(bm), 179.77 (5r), 180.0602 (3) (b), 180.0706 (3), 180.0708, 180.0825 (5) (am) and
12(bm), 180.11045, 180.1105 (1) (bm), (cm), (dm) and (e) to (h), 180.1161 (5) (bm),
13180.1201 (1) (d), 180.1302 (1) (a) 3., 181.1105 (1m), 181.1161 (5) (bm), 183.1204
14(1) (cm) and 183.1207 (5) (bm) of the statutes;
relating to: mergers,
1conversions, and other business combinations; merger and conversion reports;
2the authority of the boards of directors of business corporations and corporate
3committees; corporate shareholder notices and meetings; the transfer of
4corporate property to certain affiliates; naming limited partnerships; and
5providing penalties.
Analysis by the Legislative Reference Bureau
This bill makes numerous changes to the laws governing business corporations.
It also makes changes to the laws governing limited partnerships, nonstock
corporations, and limited liability companies.
Business corporations
Mergers with certain wholly owned subsidiaries
Current law generally permits a business corporation organized under the laws
of this state to reorganize as a holding company that owns the stock of one or more
separately incorporated business operations. Under current law, such a
reorganization may be accomplished through a transaction involving the original
corporation (parent corporation), an entity created and owned by the original
corporation (wholly owned subsidiary), and a third entity created and owned by the
wholly owned subsidiary (indirect wholly owned subsidiary). Generally, the
transaction culminates in the merger of the parent corporation with the indirect
wholly owned subsidiary. The parent corporation survives the merger, and its
shareholders trade their shares for shares in the wholly owned subsidiary. The
wholly owned subsidiary, which owns all of the interests in the parent corporation,
becomes the holding company.
With certain exceptions, current law permits a corporation to merge with or into
another business entity only if, among other requirements, the corporation's
shareholders approve a plan of merger adopted by the corporation's board of directors
(board). With certain exceptions, this bill permits a parent corporation to merge with
an indirect wholly owned subsidiary, including a corporation or limited liability
company, without shareholder approval, if the following conditions are satisfied:
1. Every share in the parent corporation is converted into a share in the holding
company, subject to the same rights and limitations that applied to the share prior
to conversion.
2. The entity surviving the merger becomes a wholly owned subsidiary of the
holding company.
3. The directors of the parent corporation become the directors of the holding
company.
4. The provisions of the holding company's articles of incorporation and bylaws
(or, if the holding company is a limited liability company, its operating agreement)
are generally identical to those of the parent corporation's.
5. The provisions of the surviving entity's articles of incorporation and bylaws
or operating agreement are generally identical to those of the parent corporation's.
6. If the surviving entity is a limited liability company, its operating agreement
contains provisions that grant members certain rights enjoyed by shareholders of the
parent corporation under current law or under the parent company's articles of
incorporation or bylaws.
7. The parent corporation's board determines that the merger will not result
in any gain or loss for federal income tax purposes.
Other changes related to mergers, share exchanges, and business
combinations
Currently, when a corporation approves a merger or share exchange, it must file
articles of merger or share exchange with the Department of Financial Institutions
(department). Among other things, the articles of merger or share exchange must
include the plan of merger or share exchange. This bill deletes this requirement and,
instead, requires the articles of merger to state that a plan of merger or share
exchange has been approved and adopted as required by law, that the plan is on file
at the principle place of business of the surviving corporation, and that the surviving
corporation will provide a copy of the plan, upon request and without cost, to any
shareholder or, upon payment of the cost of producing the copy, to any other
interested person. The bill also specifies other information that must be included in
the articles of merger or share exchange.
Currently, a business combination (including certain mergers) must be
approved by a specified supermajority of shareholders, unless the shareholders
receive a minimum price for their shares, computed under a specified formula. This
bill redefines a component of the formula, the valuation date, as the day before the
first public announcement of the proposed business combination.
With certain exceptions, the voting power of a person owning greater than 20
percent of a corporation's stock is currently limited to 10 percent of the full voting
power of those shares, unless the corporation's articles of incorporation provide
otherwise or unless regular voting power is restored by vote of the shareholders. This
bill permits the board of directors to specify that regular voting power will apply.
Under current law, if a shareholder dissents from certain mergers, share
exchanges, or other business combinations, the shareholder may obtain payment of
the fair value of his or her shares. Under current law, a dissenting shareholder is
entitled to receive fair value if either of the following apply: 1) the corporation that
issued the stock held by the dissenting shareholder (issuing corporation) is a party
to a merger for which shareholder approval is required under certain provisions in
current law or under the issuing corporation's articles of incorporation; or 2) the
corporation is a subsidiary corporation that is merging with a parent corporation.
Under the bill, a dissenting shareholder may also obtain fair value if the issuing
corporation is a parent corporation that is merging with a subsidiary, unless the
merger satisfies certain conditions specified in the bill relating to the effect of the
merger on the rights of shareholders.
Currently, the fair value is determined pursuant to several specified criteria.
With limited exceptions, this bill provides an exemption from these dissenter's rights
if the applicable shares are registered on a national securities exchange or quoted in
the National Association of Securities Dealers, Inc. This exemption is identical to
the exemption that applies generally to other dissenter's rights provisions.
Currently, a parent corporation that owns at least 90 percent of the outstanding
interests of a subsidiary business entity may merge with the subsidiary without the
approval of the parent's shareholders or the owners of the interests in the subsidiary.
Under the bill, such a merger requires the approval of the parent's shareholders
unless certain conditions relating to the rights of the parent's shareholders are
satisfied.
Classes or series of stock
Under current law, a corporation's articles of incorporation may authorize the
board to determine the relative rights of a class or series of shares of stock. Generally,
the board may set the terms of a class or series without shareholder approval. The
board may revise the terms by resolution, as long as no shares have been issued. The
board may revise the terms of shares that have already been issued only by
amendment to the articles of incorporation.
Under this bill, at any time after filing articles of amendment creating a class
or series of shares, the board may: 1) decrease the number shares of a class or series,
but not below the number of outstanding shares of the class or series; 2) eliminate
a class or series, if no shares of the class or series are outstanding; or 3) increase the
number of shares of a class or series, but not beyond the number of shares authorized
by the articles of incorporation.
Shareholder notices and meetings
Current law requires a corporation to notify shareholders of certain events and
information. This bill exempts a corporation from all such notice requirements as
to an individual shareholder if a specified number of notices or dividend payments
sent to the shareholder are returned to the corporation as undeliverable. A
shareholder may reinstate the notice requirements by delivering to the corporation
the shareholder's current address.
Transfer of property to certain affiliates and other changes related to
business corporations
Current law also prescribes the conditions under which a board may transfer
the corporation's property. This bill permits a board to transfer the corporation's
assets to other entities that are wholly owned by the corporation, except in
connection with a plan that involves a transfer of all or substantially all of the
corporation's assets and that requires shareholder approval.
This bill also permits a corporation to specify in its articles of incorporation or
bylaws the rules for conducting shareholder meetings, and sets default rules for
corporations that do not adopt their own rules. The bill also makes changes to
current law regarding the formation and membership of a committee created by a
board, and the bill deletes certain restrictions on the power of such committees.
Further, the bill makes changes to current law relating to identifying a registered
agent.
Other changes
Under current law, when a limited partnership, business corporation, nonstock
corporation, or limited liability company merges with or converts to another entity
(or when a business corporation enters into a share exchange), title to all personal
property transfers, by operation of law, to the surviving entity. Title to real estate
generally must be transferred by deed, which must be recorded in the appropriate
office of the register of deeds. This bill deletes the requirement that a deed be
executed and recorded. Under the bill, if a limited partnership, business corporation,
nonstock corporation, or limited liability company merges with or converts to
another entity, the articles of merger or certificate of conversion filed with
department must indicate whether a business entity that does not survive the
merger or conversion has a fee simple ownership interest in real estate in this state.
Currently, the name of a limited partnership must contain the words "limited
partnership" without abbreviation. This bill allows the name to include abbreviated
versions of those words.
The bill requires that the surviving entity of a merger or conversion file a report
with the Department of Revenue (DOR) that specifies the effective date of the merger
or conversion, the name and address of each business entity that is a party to the
merger or conversion, the name of any person at the surviving entity that DOR may
contact with regard to submitting the report and the information contained in the
report, the parcel identification number and location of all fee simple ownership
interests in real estate located in this state acquired by the surviving entity in the
merger or conversion, a certified copy of the document providing evidence of the
merger or conversion, and, in the case of a conversion, a sworn statement that the
ownership interests in the surviving entity are identical with the ownership
interests in the original entity immediately preceding the conversion. Under the bill,
forms prescribed by the department of financial institutions for articles of merger
and certificates of conversion must contain a notice of the real estate reporting
requirement.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB1112, s. 1
1Section
1. 73.13 of the statutes is created to read:
AB1112,6,3
273.13 Merger and conversion real estate reports. (1) If an acquired
3business entity in a merger or the converted business entity in a conversion owned
4a fee simple ownership interest in any Wisconsin real estate immediately prior to the
5merger or conversion, the surviving business entity shall submit a report to the
1department of revenue, on a form prescribed by the department, no later than 60
2days after the effective date of the merger or conversion that provides the following
3information:
AB1112,6,44
(a) The effective date of the merger or conversion.
AB1112,6,65
(b) The name, address, and federal employer identification number of each
6business entity that is a party to the merger or conversion.
AB1112,6,117
(c) The name, telephone number, and address of any person at the surviving
8business entity that the department of revenue may contact with regard to
9submitting the report and the information contained in the report and the address
10to which tax bills should be sent, if different from the address for the contact person
11described in this paragraph.
AB1112,6,1412
(d) The parcel identification number of each fee simple ownership interest in
13Wisconsin real estate owned by the acquired business entity in a merger or by the
14converted entity in a conversion and municipality in which such interest is located.
AB1112,6,1715
(e) In the case of a conversion, a sworn statement that, after the conversion, the
16ownership interests in the surviving entity are identical with the ownership
17interests in the original entity immediately preceding the conversion.
AB1112,6,2118
(f) A certified copy of the document providing evidence of the merger or
19conversion, as filed with the state in which the surviving entity is organized and a
20copy of any merger or conversion plan, regardless of whether the plan is required to
21be filed with the state in which the surviving entity is organized.
AB1112,7,2
22(2) (a) If a surviving entity required to submit a report under sub. (1), fails to
23file the report within the time provided under sub. (1), the surviving entity is subject
24to a penalty in an amount equal to $200 for each day that the report is late, but not
25to exceed $7,500, except that no penalty shall be imposed under this paragraph if the
1surviving entity can show good cause for submitting a late report and if submitting
2a late report is not the result of the surviving entity's intentional act or omission.
AB1112,7,113
(b) If a surviving entity required to submit a report under sub. (1), fails to
4specify in the report each municipality in which a fee simple ownership interest in
5Wisconsin real estate owned by the acquired business entity in a merger, or by the
6converted business entity in a conversion, is located, the surviving entity is subject
7to a penalty in an amount equal to $1,500 for each municipality not specified in the
8report and in which such ownership interest in located, except that no penalty shall
9be imposed under this paragraph if the surviving entity can show good cause for the
10failure to specify each municipality as described under sub. (1) (d) and if such failure
11is not the result of the surviving entity's intentional act or omission.
AB1112,7,14
12(3) The reports submitted under this section are confidential information,
13except that the department of revenue may disclose the reports and information from
14the reports for the sole purpose of administering and enforcing this subchapter.
AB1112, s. 2
15Section
2. 179.02 (1) of the statutes is amended to read:
AB1112,7,1716
179.02
(1) Shall contain
, with or without abbreviation
, the words "limited
17partnership".
AB1112, s. 3
18Section
3. 179.76 (4) (c) of the statutes is amended to read:
AB1112,8,219
179.76
(4) (c) The business entity continues to be vested with title to all
20property owned by the business entity that was converted without reversion or
21impairment
, provided that, if the converting business entity has an interest in real
22estate in Wisconsin on the date of the conversion, the converting business entity shall
23transfer that interest to the business entity surviving the conversion and shall
24execute any real estate transfer return required under s. 77.22. The business entity
25surviving the conversion shall promptly record the instrument of conveyance under
1s. 59.43 in the office of the register of deeds for each county in which the real estate
2is located.
AB1112, s. 4
3Section
4. 179.76 (5) (bm) of the statutes is created to read:
AB1112,8,54
179.76
(5) (bm) A statement indicating whether the business entity that is to
5be converted has a fee simple ownership interest in any Wisconsin real estate.
AB1112, s. 5
6Section
5. 179.76 (5m) of the statutes is created to read:
AB1112,8,107
179.76
(5m) If the department prescribes a form for the certificate of
8conversion under sub. (5), the form shall indicate that if the business entity that is
9to be converted has a fee simple ownership interest in Wisconsin real estate, the
10entity is required to file a report with the department of revenue under s. 73.13.
AB1112, s. 6
11Section
6. 179.77 (5) (bm) of the statutes is created to read:
AB1112,8,1412
179.77
(5) (bm) A statement indicating whether a business entity that merged
13with or into the surviving entity in the merger has a fee simple ownership interest
14in any Wisconsin real estate.
AB1112, s. 7
15Section
7. 179.77 (5r) of the statutes is created to read:
AB1112,8,2016
179.77
(5r) If the department prescribes a form for the articles of merger under
17sub. (5), the form shall indicate that if a business entity that is acquired in the merger
18has a fee simple ownership interest in Wisconsin real estate, the business entity that
19survives the merger is required to file a report with the department of revenue under
20s. 73.13.
AB1112, s. 8
21Section
8. 179.77 (6) (c) of the statutes is amended to read: