BILL REQ. #:  H-4962.1 

READ FIRST TIME 02/03/10.   

     AN ACT Relating to dissolving the assets and affairs of a nonprofit corporation; amending RCW 24.03.265, 24.03.270, and 24.03.290; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 24.03.265 and 1986 c 240 s 39 are each amended to read as follows:
     Superior courts ((shall have full power to liquidate the assets and affairs of)) may dissolve a corporation:
     (1) ((In an action by a member, director, or the attorney general when it is made to appear)) In a proceeding by the attorney general, if it is established that the corporation:
     (a) Obtained its articles of incorporation through fraud; or
     (b) Has exceeded or abused, and is continuing to exceed or abuse the authority conferred upon it by law.
     (2) Except as provided in the articles of incorporation or bylaws, in a proceeding by fifty members or members holding at least five percent of the voting power, whichever is less, or by a director or member of a designated body, if it is established that:
     (a) ((That)) The directors are deadlocked in the management of the corporate affairs, the members, if any, are unable to break the deadlock, and ((that)) irreparable injury to the corporation or its mission is ((being suffered or is)) threatened ((by reason thereof, and either that the members are unable to break the deadlock or there are no members having voting rights; or)) or being suffered because of the deadlock;
     (b) ((That the acts of)) The directors or those in control of the corporation ((are)) have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent; ((or))
     (c) ((That)) The members are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have, or otherwise would have, expired;
     (d) The corporate assets are being misapplied or wasted; or
     (((d) That)) (e) The corporation ((is unable to carry out its purposes)) has insufficient assets to continue its activities and it is no longer able to assemble a quorum of directors or members.
     (((2))) (3) In ((an action)) a proceeding by a creditor, if it is established that:
     (a) ((When the claim of the creditor)) The creditor's claim has been reduced to judgment ((and an)), the execution ((thereon has been)) on the judgment returned unsatisfied, and ((it is established that)) the corporation is insolvent; or
     (b) ((When)) The corporation has admitted in ((writing)) a record that the creditor's claim ((of the creditor)) is due and owing and ((it is established that)) the corporation is insolvent.
     (((3) Upon application by a)) (4) In a proceeding by the corporation to have its voluntary dissolution continued under ((the supervision of the)) court supervision.
     (((4) When an action has been filed by the attorney general to dissolve a corporation under the provisions of this chapter and it is established that liquidation of its affairs should precede the entry of a decree of dissolution.
     Proceedings under subsections (1), (2), or (3) of this section shall be brought in the county in which the registered office or the principal office of the corporation is situated.
     It shall not be necessary to make directors or members parties to any such action or proceedings unless relief is sought against them personally.))

Sec. 2   RCW 24.03.270 and 1967 c 235 s 55 are each amended to read as follows:
     ((In proceedings to liquidate the assets and affairs of a corporation the court shall have the power to)) (1) Venue for a proceeding brought by the attorney general to dissolve a corporation lies in the court specified in RCW 24.03.260. Venue for a proceeding brought by any other party named in RCW 24.03.265 lies in the county where a corporation's principal office or, if none in this state, its registered office is or was last located.
     (2) It is not necessary to make directors or members parties to a proceeding to dissolve a corporation unless relief is sought against them individually.
     (3) A court in a proceeding brought to dissolve a corporation may issue injunctions, ((to)) appoint a receiver or ((receivers)) custodian pendente lite((,)) with ((such)) all powers and duties as the court((, from time to time, may direct, and to take such other proceedings as may be requisite)) directs, take other action required to preserve the corporate assets wherever ((situated)) located, and carry on the affairs of the corporation until a full hearing can be ((had)) held.
     ((After a hearing had upon such notice as the court may direct to be given to all parties to the proceedings and to any other parties in interest designated by the court, the court may appoint a liquidating receiver or receivers with authority to collect the assets of the corporation. Such liquidating receiver or receivers shall have authority, subject to the order of the court, to sell, convey and dispose of all or any part of the assets of the corporation wherever situated, either at public or private sale. The order appointing such liquidating receiver or receivers shall state their powers and duties. Such powers and duties may be increased or diminished at any time during the proceedings.))
     (4) A court in a judicial proceeding brought to dissolve a corporation may appoint one or more receivers to wind up and liquidate, or one or more custodians to manage, the affairs of the corporation. The court shall hold a hearing, after giving notice to all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian. The court appointing a receiver or custodian has exclusive jurisdiction over the corporation and all of its property wherever located.
     (5) The court may require the receiver or custodian to post bond, with or without sureties, in an amount the court directs.
     (6) The court shall describe the powers and duties of the receiver or custodian in its appointing order, which may be amended from time to time. Among other powers:
     (a) The receiver may: (i) Dispose of all or any part of the assets of the nonprofit corporation wherever located, at a public or private sale, if authorized by the court; and (ii) sue and defend in his or her own name as receiver of the corporation in all courts of this state;
     (b) The custodian may exercise all of the powers of the corporation, through or in place of its board of directors and any designated body, to the extent necessary to manage the affairs of the corporation consistent with its mission and in the best interests of its members, if any, and creditors.
     (7) During a receivership, the court may redesignate the receiver a custodian, and during a custodianship may redesignate the custodian a receiver, if doing so is consistent with the mission of the nonprofit corporation and in the best interests of the corporation, its members, and creditors.
     (8) The court from time to time during the receivership or custodianship may order compensation paid and expense disbursements or reimbursements made to the receiver or custodian and counsel from the assets of the nonprofit corporation or proceeds from the sale of the assets.
     (9) The assets of the corporation or the proceeds resulting from the sale, conveyance, or other disposition thereof shall be applied and distributed as follows:
     (((1))) (a) All costs and expenses of the court proceedings and all liabilities and obligations of the corporation shall be paid, satisfied and discharged, or adequate provision shall be made therefor;
     (((2))) (b) Assets held by the corporation upon condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution or liquidation, shall be returned, transferred or conveyed in accordance with such requirements;
     (((3))) (c) Assets received and held by the corporation subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of the dissolution or liquidation, shall be transferred or conveyed to one or more domestic or foreign corporations, societies or organizations engaged in activities substantially similar to those of the dissolving or liquidating corporation as the court may direct;
     (((4))) (d) Other assets, if any, shall be distributed in accordance with the provisions of the articles of incorporation or the bylaws to the extent that the articles of incorporation or bylaws determine the distributive rights of members, or any class or classes of members, or provide for distribution to others;
     (((5))) (e) Any remaining assets may be distributed to such persons, societies, organizations or domestic or foreign corporations, whether for profit or not for profit, specified in the plan of distribution adopted as provided in this chapter, or where no plan of distribution has been adopted, as the court may direct.
     ((The court shall have power to allow, from time to time, as expenses of the liquidation compensation to the receiver or receivers and to attorneys in the proceeding, and to direct the payment thereof out of the assets of the corporation or the proceeds of any sale or disposition of such assets.
     A receiver of a corporation appointed under the provisions of this section shall have authority to sue and defend in all courts in his own name as receiver of such corporation. The court appointing such receiver shall have exclusive jurisdiction of the corporation and its property, wherever situated.))
     (10) Subsections (4) through (8) of this section do not apply to a corporation that is a religious organization.

Sec. 3   RCW 24.03.290 and 1967 c 235 s 59 are each amended to read as follows:
     ((In proceedings to liquidate the assets and affairs of a corporation, when the costs and expenses of such proceedings and all debts, obligations, and liabilities of the corporation shall have been paid and discharged and all of its remaining property and assets distributed in accordance with the provisions of this chapter, or in case its property and assets are not sufficient to satisfy and discharge such costs, expenses, debts, and obligations, and all the property and assets have been applied so far as they will go to their payment, the court shall enter a decree dissolving the corporation, whereupon the existence of the corporation shall cease.))
     (1) If after a hearing the court determines that one or more grounds for judicial dissolution under RCW 24.03.265 exist, the court may enter a decree dissolving the corporation and specifying the effective date of the dissolution, and the clerk of the court shall deliver a certified copy of the decree to the secretary of state, who shall file it.
     (2) After entering the decree of dissolution, the court shall direct the winding up and liquidation of the corporation's affairs in accordance with this chapter.

NEW SECTION.  Sec. 4   This act is prospective and applies only to actions or proceedings commenced on or after the effective date of this section.