BILL REQ. #:  S-4700.1 

READ FIRST TIME 02/05/10.   

     AN ACT Relating to dissolving the assets and affairs of a nonprofit corporation; adding new sections to chapter 24.03 RCW; creating a new section; repealing RCW 24.03.265, 24.03.270, and 24.03.290; and declaring an emergency.

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

NEW SECTION.  Sec. 1   A new section is added to chapter 24.03 RCW to read as follows:
     Superior courts may dissolve a nonprofit corporation:
     (1) 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, by one or more directors, or by the attorney general if it is established that:
     (a) The directors are deadlocked in the management of the corporate affairs, the members, if any, are unable to break the deadlock, and irreparable injury to the corporation or its mission is threatened or being suffered because of the deadlock;
     (b) The directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;
     (c) 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
     (e) The corporation has insufficient assets to continue its activities and it is no longer able to assemble a quorum of directors or members;
     (2) In a proceeding by a creditor, if it is established that:
     (a) The creditor's claim has been reduced to judgment, the execution on the judgment returned unsatisfied, and the corporation is insolvent; or
     (b) The corporation has admitted in a record that the creditor's claim is due and owing and the corporation is insolvent; or
     (3) In a proceeding by the corporation to have its voluntary dissolution continued under court supervision.

NEW SECTION.  Sec. 2   A new section is added to chapter 24.03 RCW to read as follows:
     (1) Venue for a proceeding brought by the attorney general to dissolve a corporation pursuant to section 1(1) of this act lies in the court specified in RCW 24.03.260. Venue for a proceeding brought by any other party named in section 1(1) of this act 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 nonprofit corporation unless relief is sought against them individually.
     (3) A court in a proceeding brought to dissolve a nonprofit corporation may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the corporate assets wherever located, and carry on the activities of the corporation until a full hearing can be held.
     (4) A court in a judicial proceeding brought to dissolve a nonprofit 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:
     (i) May 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) May 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, 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, if any, 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:
     (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;
     (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;
     (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;
     (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;
     (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.

NEW SECTION.  Sec. 3   A new section is added to chapter 24.03 RCW to read as follows:
     (1) If after a hearing the court determines that one or more grounds for judicial dissolution described in section 1 of this act exist, it may enter a decree dissolving the nonprofit 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 nonprofit corporation's affairs in accordance with this chapter.

NEW SECTION.  Sec. 4   The following acts or parts of acts are each repealed:
     (1) RCW 24.03.265 (Jurisdiction of court to liquidate assets and affairs of corporation) and 1986 c 240 s 39 & 1967 c 235 s 54;
     (2) RCW 24.03.270 (Procedure in liquidation of corporation by court) and 1967 c 235 s 55; and
     (3) RCW 24.03.290 (Decree of involuntary dissolution) and 1967 c 235 s 59.

NEW SECTION.  Sec. 5   This act is prospective and applies only to actions or proceedings commenced on or after the effective date of this act.

NEW SECTION.  Sec. 6   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.