AB923: Bill Text

8. The bill defines shareholder, for purposes of shareholder inspection of corpo rate records, to include beneficial owners whose shares are held in a voting trust or by a nominee on the beneficial owner's behalf.

9. The bill deletes the requirement that an LLC have 2 or more members.

10. The bill allows articles of organization of an LLC to include a delayed effec tive date and time.

11. The bill deletes a requirement that LLCs maintain, at their principal place of business, executed copies of any powers of attorney used for executing articles of organization and amendments to them.

12. The bill allows an LLC to be licensed as a real estate broker or salesperson and specifies how the license application requirements are to be applied to LLCs.

13. The bill changes the situations in which a member's interest in an LLC is either not a "security" or is presumed to be a "security".

14. The bill eliminates the ability of managers of an LLC to bring a derivative suit.

15. The bill adds a definition of liabilities to the indemnification provisions and allows indemnification of the LLC of liabilities of members in certain circumstances.

This bill repeals a number of provisions that relate to actions and proceedings by and against corporations. These provisions are located outside of the general busi ness corporations chapter of the statutes and, in certain cases, they conflict with the provisions contained in that chapter. The provisions that are repealed by this bill include the following:

1. Certain provisions relating to injunctions against corporations. These provi sions allow a court to restrain a corporation from assuming or exercising a corporate right or from transacting business not authorized by its charter. The provisions also impose certain requirements on a court in granting an injunction to suspend the gen eral and ordinary business of a corporation. The bill does not repeal the provisions in the business corporations chapter of the statutes that permit a court to enjoin un lawful corporate acts in certain cases and to order the dissolution of a corporation.

2. Certain provisions regarding injunctions and suits against corporations with banking powers. These provisions permit an injunction to be issued by the Wisconsin supreme court whenever a banking corporation becomes insolvent, neglects or re fuses to pay its debts or violates any law. These provisions do not specifically address the powers of the banking commissioner or the role of federal bank regulators. Provi sions in the banking chapter of the statutes, not repealed by the bill, permit the com missioner of banking to bring an action in circuit court to enjoin banks to enforce com pliance with the law and with rules and orders of the commissioner.

3. Certain procedural provisions relating to actions by creditors against corpo rations and their officers, directors and stockholders. Separate provisions in the business corporations chapter of the statutes, not repealed by the bill, specifically ad dress the substantive liability of these parties and special procedures for derivative actions by shareholders.

4. A general provision providing that, after final judgement against a corpora tion or against a corporation's directors, trustees, officers or stockholders, the court must cause the just and fair distribution of the corporation's property. The bill does not repeal any of the specific provisions in the business corporations chapter of the statutes that govern the process of winding up and liquidating a domestic corpora tion's business and affairs.

5. General provisions granting courts "jurisdiction" over certain causes of ac tion against directors, managers, trustees and other officers of corporations. The causes of action covered by these provisions include actions to suspend or remove any director, trustee or other officer from exercising their office; and to direct new elec tions of a corporate board. The provisions also authorize the governor to fill vacan cies on corporate boards if all members of the board are removed by a court. The pro visions appear to conflict in certain ways with specific provisions contained in the business corporations chapter of the statutes, not repealed by the bill.

6. Certain procedural and substantive provisions dealing with the dissolution of a corporation and with vacating or annulling an act of incorporation or a corpora tion's charter. Under these provisions, a judgment that a corporation has forfeited its corporate rights, privileges and franchises results in the dissolution of the corpo ration. These provide for a specific order of priority in distributing the assets of the corporations, the payment of the attorney general's costs in bringing dissolution ac tions, and the filing of judgements dissolving a corporation. The business corpora tion chapter contains specific provisions that govern the judicial dissolution of corpo rations, although these provisions do not provide for a specific order of priority in distributing the assets of the dissolved corporation.

7. A specific provision allowing courts to compel discovery with respect to a cor poration and its officers, agents and stockholders.

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:

AB923, s. 1 Section 1. 20.575 (1) (gb) of the statutes is amended to read:

AB923,5,13 20.575 (1) (gb) Expedited service and telephone application for reservation of name. The amounts in the schedule for processing of a document, request for in formation or certification in an expeditious manner under s. 14.38 (9), 179.16 (5), 180.0122 (4), 181.68 (1) (k), 183.0114 (1) (u) or 185.83 (1) (h) and for taking telephone applications to reserve a name under s. 179.03 (2), 180.0402, 181.07 (2), 183.0104 or 185.045. All expedited service fees collected under ss. 14.38 (9), 179.16 (5), 180.0122 (4), 181.68 (1) (k), 183.0114 (1) (u) and 185.83 (1) (h) and all fees for telephone applica tion to reserve a name collected under s. 179.03 (2), 180.0122 (1) (e) or (f), 181.68 (1) (g), 183.0114 (1) (e) or (f) or 185.045 shall be credited to this appropriation. Notwith standing s. 20.001 (3) (a), any unencumbered balance at the close of a fiscal year ex ceeding 10% of the previous fiscal year's expenditures under this appropriation shall lapse to the general fund.

AB923, s. 2 Section 2. 20.865 (1) (a) of the statutes is amended to read:

AB923,6,2 20.865 (1) (a) Judgments and legal expenses. A sum sufficient to pay for legal expenses under ss. s. 59.31 and 776.43, for costs under ss. 227.485 and 814.245 and for the costs of judgments, orders and settlements of actions, appeals and complaints under subch. II of ch. 111 or subch. II or III of ch. 230, and those judgments, awards, orders and settlements under ss. 21.13, 165.25 (6), 775.04 and 895.46 that are not otherwise reimbursable as liability costs under par. (fm). Release of moneys under this paragraph pursuant to any settlement agreement, whether or not incorporated into an order, is subject to approval of the attorney general.

AB923, s. 3 Section 3. 20.865 (1) (g) of the statutes is amended to read:

AB923,6,12 20.865 (1) (g) Judgments and legal expenses; program revenues. From the ap propriate program revenue and program revenue-service accounts, a sum sufficient to pay for legal expenses under ss. s. 59.31 and 776.43, for costs under ss. 227.485 and 814.245 and for the cost of judgments, orders and settlements of actions, appeals and complaints under subch. II of ch. 111 or subch. II or III of ch. 230, and those judg ments, awards, orders and settlements under ss. 21.13, 165.25 (6), 775.04 and 895.46 that are not otherwise reimbursable as liability costs under par. (fm). Release of mo neys under this paragraph pursuant to any settlement agreement, whether or not incorporated into an order, is subject to approval of the attorney general.

AB923, s. 4 Section 4. 20.865 (1) (q) of the statutes is amended to read:

AB923,6,22 20.865 (1) (q) Judgments and legal expenses; segregated revenues. From the appropriate segregated funds, a sum sufficient to pay for legal expenses under ss. s. 59.31 and 776.43, for costs under ss. 227.485 and 814.245 and for the cost of judg ments, orders and settlements of actions, appeals and complaints under subch. II of ch. 111 or subch. II or III of ch. 230, and those judgments, awards, orders and settle ments under ss. 21.13, 165.25 (6), 775.04 and 895.46 that are not otherwise reim bursable as liability costs under par. (fm). Release of moneys under this paragraph pursuant to any settlement agreement, whether or not incorporated into an order, is subject to approval of the attorney general.

AB923, s. 5 Section 5. 71.07 (7) (b) of the statutes is amended to read:

AB923,7,12 71.07 (7) (b) If a resident individual, estate or trust pays a net income tax to another state, that resident individual, estate or trust may credit the net tax paid to that other state on that income against the net income tax otherwise payable to the state on income of the same year. The credit may not be allowed unless the income taxed by the other state is also considered income for Wisconsin tax purposes. The credit may not be allowed unless claimed within the time provided in s. 71.75 (2), but s. 71.75 (4) does not apply to those credits. For purposes of this paragraph, amounts declared and paid pursuant to the income tax law of another state shall be deemed a net income tax paid to that other state only in the year in which the income tax re turn for that state was required to be filed. Income and franchise taxes paid to anoth er state by a tax-option corporation or limited liability company may be claimed as a credit under this paragraph by that corporation's shareholders or that limited li ability company's members who are residents of this state and who otherwise qualify under this paragraph.

AB923, s. 6 Section 6. 77.25 (15w) of the statutes is created to read:

AB923,7,18 77.25 (15w) Between a partnership and a limited liability company if all of the members of the limited liability company are partners of the partnership and all of the partners of the partnership are members of the limited liability company and if the transfer is for no consideration other than the assumption of debt or an interest in the limited liability company or the partnership.

AB923, s. 7 Section 7. 93.06 (4) of the statutes is amended to read:

AB923,7,23 93.06 (4) Law enforcement. At the request of the attorney general or of any district attorney, assist in the enforcement of any of the following statutes relating to trade: ss. 133.03 to 133.07, 133.10, 133.12 to 133.15, 133.17, 134.01, 185.94, 776.32, 776.36, 784.04 and 939.31.

AB923, s. 8 Section 8. 133.12 of the statutes is amended to read:

AB923,8,12 133.12 Domestic and foreign corporations and limited liability compa nies; cancellation of charters or certificates of authority for restraining trade; affidavit. Any corporation or limited liability company organized under the laws of this state or foreign corporation or foreign limited liability company autho rized to transact business in this state pursuant to a certificate of authority from the secretary of state which violates any provision of this chapter, may, upon proof there of, in any circuit court have its charter or authority to transact business in this state suspended, canceled or annulled. Every corporation or limited liability company shall, in its annual report filed with the secretary of state, show whether it has en tered into any contract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce. The department of justice shall enforce this sec tion.

AB923, s. 9 Section 9. 180.0640 (6) of the statutes is amended to read:

AB923,8,19 180.0640 (6) A corporation's indebtedness to a shareholder incurred because of a distribution made in accordance with this section is at parity with the corpora tion's indebtedness to its general, unsecured creditors except to the extent subordi nated by agreement. This subsection does not affect the validity or priority of a secu rity interest in corporation property created to secure indebtedness incurred because of a distribution.

AB923, s. 10 Section 10. 180.0706 (1) of the statutes is amended to read:

AB923,9,2 180.0706 (1) A shareholder may waive any notice required by this chapter, the articles of incorporation or the bylaws before or after the date and time stated in the notice at any time. The waiver shall be in writing and signed by the shareholder en titled to the notice, contain the same information that would have been required in the notice under any applicable provisions of this chapter, except that the time and place of meeting need not be stated, and be delivered to the corporation for inclusion in the corporate records.

AB923, s. 11 Section 11. 180.1602 (1) of the statutes is renumbered 180.1602 (1m).

AB923, s. 12 Section 12. 180.1602 (1) of the statutes is created to read:

AB923,9,6 180.1602 (1) In this section, "shareholder" includes a beneficial owner whose shares are held in a voting trust or by a nominee on the beneficial owner's behalf.

AB923, s. 13 Section 13. 180.1604 (1) of the statutes is amended to read:

AB923,9,13 180.1604 (1) If a corporation does not within a reasonable time allow a share holder to inspect and copy any record described in s. 180.1602 (1) or (2), the share holder who complies with s. 180.1602 (1) (1m) or (2), as applicable, may apply to the circuit court for the county where the corporation's principal office or, if none in this state, its registered office is located for an order to permit inspection and copying of the records demanded.

AB923, s. 14 Section 14. 180.1915 of the statutes is renumbered 180.1915 (intro.) and amended to read:

AB923,9,25 180.1915 (title) Contract and tort Professional relationships preserved and liability. (intro.) Sections Except as provided in this section, ss. 180.1901 to 180.1921 do not alter any contract, tort or other legal relationship between a person receiving professional services and one or more persons who are licensed, certified or registered to render those professional services and who are shareholders, direc tors, officers or employes in the same service corporation. Any legal liability which may arise out of the professional service shall be joint and several among those share holders of the same service corporation. A shareholder, director, officer or employe of a service corporation is not personally liable for the debts or other contractual ob ligations of the service corporation nor for the omissions, negligence, wrongful acts, misconduct and malpractice of any person who is not under his or her actual supervi sion and control in the specific activity in which the omissions, negligence, wrongful acts, misconduct and malpractice occurred. A service corporation may charge for the services of its shareholders, directors, officers, employes or agents, may collect such charges and may compensate those who render such personal services. Nothing in this section shall affect any of the following:

AB923, s. 15 Section 15. 180.1915 (1) and (2) of the statutes are created to read:

AB923,10,11 180.1915 (1) The liability of a service corporation for the omissions, negligence, wrongful acts, misconduct and malpractice of a shareholder, director, officer or em ploye while the person, on behalf of the service corporation, provides professional ser vices.

AB923,10,17 (2) The personal liability of a shareholder, director, officer or employe of a ser vice corporation for his or her own omissions, negligence, wrongful acts, misconduct and malpractice and for the omissions, negligence, wrongful acts, misconduct and malpractice of any person acting under his or her actual supervision and control in the specific activity in which the omissions, negligence, wrongful acts, misconduct and malpractice occurred.

AB923, s. 16 Section 16. 183.0105 (3) (intro.) of the statutes is amended to read:

AB923,10,20 183.0105 (3) (intro.) Except as provided in sub. (4), a A statement of change de livered under sub. (2) (a) shall include all of the following information:

AB923, s. 17 Section 17. 183.0107 (1) (intro.) and (a) of the statutes are consolidated, re numbered 183.0107 (1) and amended to read:

AB923,11,2 183.0107 (1) Except as provided in this chapter, any document required or per mitted by this chapter to be delivered for filing to the secretary of state shall be exe cuted by any of the following: (a) Any a manager, if management of the limited liabil ity company is vested in a manager or managers, or by a any member, if management of the limited liability company is reserved to the members.

AB923, s. 18 Section 18. 183.0107 (1) (b) of the statutes is repealed.

AB923, s. 19 Section 19. 183.0201 of the statutes is amended to read:

AB923,11,9 183.0201 Organization. One or more persons may organize a limited liability company by signing and delivering articles of organization to the secretary of state for filing. The organizer or organizers need not be members of the limited liability company at the time of organization or thereafter. A limited liability company shall have 2 or more members.

AB923, s. 20 Section 20. 183.0202 (6) of the statutes is created to read:

AB923,11,12 183.0202 (6) If applicable, the delayed effective date and time of the articles of organization permitted under s. 183.0111 (2).

AB923, s. 21 Section 21. 183.0301 (1) (b) of the statutes is amended to read:

AB923,11,20 183.0301 (1) (b) The act of any member, including the execution in the name of the limited liability company of any instrument, for apparently carrying on in the ordinary course of business the business of the limited liability company, binds the limited liability company unless the member has, in fact, no authority to act for the limited liability company in the particular matter, and the person with whom the member is dealing has knowledge that the member has no authority to act in the matter.

AB923, s. 22 Section 22. 183.0301 (2) (b) of the statutes is amended to read:

AB923,12,4 183.0301 (2) (b) Each manager is an agent of the limited liability company, but not of the members or any of them, for the purpose of its business. The act of any manager, including the execution in the name of the limited liability company of any instrument, for apparently carrying on in the ordinary course of business the busi ness of the limited liability company, binds the limited liability company unless the manager has, in fact, no authority to act for the limited liability company in the par ticular matter, and the person with whom the manager is dealing has knowledge that the manager has no authority to act in the matter.

AB923, s. 23 Section 23. 183.0304 (2) of the statutes is amended to read:

AB923,12,10 183.0304 (2) Notwithstanding sub. (1), nothing in this chapter shall preclude a court from ignoring the limited liability company entity under principles of com mon law of this state that are similar to those applicable to business corporations and shareholders in this state and under circumstances that are not inconsistent with the purposes of this chapter.

AB923, s. 24 Section 24. 183.0401 (2) (c) of the statutes is amended to read:

AB923,12,14 183.0401 (2) (c) Unless earlier removed or earlier resigned, shall Shall hold of fice until a successor is elected and qualified, or until prior death, resignation or re moval.

AB923, s. 25 Section 25. 183.0402 (3) of the statutes is amended to read:

AB923,12,18 183.0402 (3) An operating agreement may impose duties on its members and managers that are in addition to, but not in abrogation of, those provided under sub. (1).

AB923, s. 26 Section 26. 183.0403 (1) of the statutes is renumbered 183.0403 (1) (intro.) and amended to read:

AB923,12,21 183.0403 (1) (intro.) In this section, "expenses":

AB923,12,22 (a) "Expenses" has the meaning given in s. 180.0850 (3).

AB923, s. 27 Section 27. 183.0403 (1) (b) of the statutes is created to read:

AB923,13,3 183.0403 (1) (b) "Liabilities" include the obligation to pay a judgment, settle ment, penalty, assessment, forfeiture or fine, including an excise tax assessed with respect to an employe benefit plan.

AB923, s. 28 Section 28. 183.0403 (2) of the statutes is amended to read:

AB923,13,9 183.0403 (2) A limited liability company shall indemnify or allow reasonable expenses to and pay liabilities of each member and, if management of the limited li ability company is vested in one or more managers, of each manager for all reason able expenses, incurred with respect to a proceeding if that member or manager was a party to the proceeding in the capacity of a member or manager.

AB923, s. 29 Section 29. 183.0403 (3) of the statutes is amended to read:

AB923,13,12 183.0403 (3) An operating agreement may alter or provide additional rights to indemnification of liabilities or allowance of expenses to members and managers.

AB923, s. 30 Section 30. 183.0403 (4) of the statutes is amended to read:

AB923,13,20 183.0403 (4) Notwithstanding subs. (2) and (3), a limited liability company may not indemnify a member or manager for liabilities or permit a member or man ager to retain any allowance for expenses provided under those subsections unless it is determined by or on behalf of the limited liability company that the member or manager did not the liabilities or expenses did not result from the member's or man ager's breach or fail failure to perform a duty to the limited liability company as pro vided in s. 183.0402.

AB923, s. 31 Section 31. 183.0403 (5) (b) of the statutes is amended to read:

AB923,14,3 183.0403 (5) (b) In situations not described in par. (a), the determination of whether a member or manager, who is a party to a proceeding because the person is a member or manager, has breached or failed to perform a duty to the limited liability company, or whether the liability or expenses resulted from the breach or failure, shall be made by the vote of the members that meets the requirements under s. 183.0404 (1) (a), except that the vote of any member who is a party to the same or a related proceeding shall be excluded unless all members are parties.

AB923, s. 32 Section 32. 183.0405 (1) (b) of the statutes is amended to read:

AB923,14,7 183.0405 (1) (b) A copy of the articles of organization and all amendments to the articles, together with executed copies of any powers of attorney under which any articles have been executed.

AB923, s. 33 Section 33. 183.0405 (1) (e) (intro.) of the statutes is amended to read:

AB923,14,10 183.0405 (1) (e) (intro.) Unless already set forth in an operating agreement, a writing written records containing all of the following information:

AB923, s. 34 Section 34. 183.0405 (1) (e) 4. of the statutes is amended to read:

AB923,14,13 183.0405 (1) (e) 4. Other writings prepared under a requirement, if any, in as required by an operating agreement.

AB923, s. 35 Section 35. 183.0601 of the statutes is amended to read:

AB923,14,21 183.0601 Interim distributions. Except as provided in this subchapter, a member is entitled to receive distributions from a limited liability company, before the member's dissociation from the limited liability company and before its dissolu tion and winding up, to the extent and at the times or upon the events specified in an operating agreement, or, if not otherwise provided in an operating agreement, to the extent and at the times determined by the members or managers under s. 183.0404 (1).