STAND. COM. REP. 1186

Honolulu, Hawaii

, 2003

RE: S.B. No. 1589

S.D. 1

H.D. 1

 

 

Honorable Calvin K.Y. Say

Speaker, House of Representatives

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Consumer Protection and Commerce, to which was referred S.B. No. 1589, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO NONPROFIT CORPORATIONS,"

begs leave to report as follows:

The purpose of this bill is to:

(1) Establish procedures for the termination of all or any class of members, or the redemption or cancellation of all or any class of memberships of a nonprofit corporation;

(2) Authorize members of a nonprofit corporation, not including members of condominium associations or planned community associations, to resign at any time; and

(3) Authorize a nonprofit corporation to obligate itself in its bylaws, articles of incorporation, or a board resolution or contract, to indemnify its officers and directors and advance funds for reimbursement of their expenses.

Unity House, Neely & Anderson LLP, and three concerned individuals submitted testimony in support of this bill. The Community Associations Institute opposed section 2 of the bill and requested an amendment.

Your Committee finds that the provisions of this bill that allow members to resign at any time, exclude members of an association of apartment owners established under chapter 514A, Hawaii Revised Statutes (HRS), and members of planned community associations governed by chapter 421J, HRS. These associations rely on their members to share in the payment of association common expenses. Allowing members of these associations to voluntarily resign could lead to litigation between associations and apartment owners who do not wish to pay their fair share of common expenses.

Your Committee has been informed that some very early condominium associations are not governed by chapter 514A, HRS. Instead, they are governed by the original condominium property act, Act 180, Session Laws of Hawaii, 1961, as amended. Your Committee finds that the resignation provisions of this bill should not apply to these condominiums.

Your Committee also finds that this measure allows for only one statement of opposition to be included in the notice to members proposing an articles or bylaws amendment that would terminate all or any class of members, which creates the problem of selecting from among multiple statements of opposition.

Upon consideration, your Committee has amended this measure by:

    1. Deleting the provision allowing for voluntary member resignation;
    2. Requiring any number of statements of opposition to be included in the notice proposing an articles or bylaw amendment that would terminate all or any class of members;
    3. Changing the effective date from July 1, 2003, to upon approval; and
    4. Making technical, nonsubstantive amendments for purposes of clarity and consistency.

As affirmed by the record of votes of the members of your Committee on Consumer Protection and Commerce that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1589, S.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1589, S.D. 1, H.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Consumer Protection and Commerce,

 

____________________________

KENNETH T. HIRAKI, Chair