Read first time 01/21/11.   Referred to Committee on Financial Institutions, Housing & Insurance.

     AN ACT Relating to the department of financial institutions' regulation of trust companies; and amending RCW 30.08.025.

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

Sec. 1   RCW 30.08.025 and 2006 c 48 s 2 are each amended to read as follows:
     (1) Notwithstanding any other provision of this title, if the conditions of this section are met, a bank, a trust company, or a holding company of a bank or a trust company, may be organized as, or convert to, a limited liability company under the Washington limited liability company act, chapter 25.15 RCW. As used in this section, "bank" includes an applicant to become a bank or holding company of a bank, "trust company" includes an applicant to become a trust company, and "holding company" means a holding company of a bank or trust company.
     (2)(a) Before a bank, trust company, or holding company may organize as, or convert to, a limited liability company, the bank, trust company, or holding company must obtain approval of the director.
     (b)(i) To obtain approval under this section from the director, the bank, trust company, or holding company must file a request for approval with the director at least ninety days before the day on which the bank, trust company, or holding company becomes a limited liability company.
     (ii) If the director does not disapprove the request for approval within ninety days from the day on which the director receives the request, the request is considered approved.
     (iii) When taking action on a request for approval filed under this section, the director may:
     (A) Approve the request;
     (B) Approve the request subject to terms and conditions the director considers necessary; or
     (C) Disapprove the request.
     (3) To approve a request for approval, the director must find that the bank, trust company, or holding company:
     (a) Will operate in a safe and sound manner; and
     (b) Has the following characteristics:
     (i) The certificate of formation and limited liability company require or set forth that the duration of the limited liability company is perpetual;
     (ii) The bank, trust company, or holding company is not otherwise subject to automatic termination, dissolution, or suspension upon the happening of some event other than the passage of time;
     (iii) The exclusive authority to manage the bank, trust company, or holding company is vested in a board of managers or directors that:
     (A) Is elected or appointed by the owners;
     (B) Is not required to have owners of the bank, trust company, or holding company included on the board;
     (C) Possesses adequate independence and authority to supervise the operation of the bank, trust company, or holding company; and
     (D) Operates with substantially the same rights, powers, privileges, duties, and responsibilities as the board of directors of a corporation;
     (iv) Neither state law, nor the bank's, trust company's, or holding company's operating agreement, bylaws, or other organizational documents provide that an owner of the bank, trust company, or holding company is liable for the debts, liabilities, and obligations of the bank, trust company, or holding company in excess of the amount of the owner's investment;
     (v) Neither state law, nor the bank's, trust company's, or holding company's operating agreement, bylaws, or other organizational documents require the consent of any other owner of the bank, trust company, or holding company in order for any owner to transfer an ownership interest in the bank, trust company, or holding company, including voting rights;
     (vi) The bank, trust company, or holding company is able to obtain new investment funding if needed to maintain adequate capital;
     (vii) The bank, trust company, or holding company is able to comply with all legal and regulatory requirements for a federally insured depository bank, trust company, or holding company of a federally insured depository bank, under applicable federal and state law; and
     (viii) A bank, trust company, or holding company that is organized as a limited liability company shall maintain the characteristics listed in this subsection (3)(b) during such time as it is authorized to conduct business under this title as a limited liability company.
     (4)(a) All rights, privileges, powers, duties, and obligations of a bank, trust company, or holding company, that is organized as a limited liability company, and its members and managers are governed by the Washington limited liability company act, chapter 25.15 RCW, except:
     (i) To the extent chapter 25.15 RCW is in conflict with federal law or regulation respecting the organization of a federally insured depository institution as a limited liability company, such federal law or regulation supersedes the conflicting provisions contained in chapter 25.15 RCW in relation to a bank, trust company, or holding company organized as a limited liability company pursuant to this section; and
     (ii) Without limitation, the following are inapplicable to a bank, trust company, or holding company organized as a limited liability company:
     (A) Permitting automatic dissolution or suspension of a limited liability company as set forth in RCW 25.15.270(1), pursuant to a statement of limited duration which, though impermissible under subsection (3)(b)(i) of this section, has been provided for in a certificate of formation;
     (B) Permitting automatic dissolution or suspension of a limited liability company, pursuant to the limited liability company agreement, as set forth in RCW 25.15.270(2);
     (C) Permitting dissolution of the limited liability company agreement based upon agreement of all the members, as set forth in RCW 25.l5.270(3);
     (D) Permitting dissociation of all the members of the limited liability company, as set forth in RCW 25.l5.270(4); and
     (E) Permitting automatic dissolution or suspension of a limited liability company, pursuant to operation of law, as otherwise set forth in chapter 25.15 RCW.
     (b) Notwithstanding (a) of this subsection:
     (i) For purposes of transferring a member's interests in the bank, trust company, or holding company, a member's interest in the bank, trust company, or holding company is treated like a share of stock in a corporation; and
     (ii) If a member's interest in the bank, trust company, or holding company is transferred voluntarily or involuntarily to another person, the person who receives the member's interest obtains the member's entire rights associated with the member's interest in the bank, trust company, or holding company including((,)) all economic rights and all voting rights.
     (c) A bank, trust company, or holding company may not by agreement or otherwise change the application of (a) of this subsection to the bank, trust company, or holding company.
     (5)(a) Notwithstanding any provision of chapter 25.15 RCW or this section to the contrary, all voting members remain liable and responsible as fiduciaries of a bank, trust company, or holding company organized as a limited liability company, regardless of resignation, dissociation, or disqualification, to the same extent that directors of a bank, trust company, or holding company organized as a corporation would be or remain liable or responsible to the department and applicable federal banking regulators; and
     (b) If death, incapacity, or disqualification of all members of the limited liability company would result in a complete dissociation of all members, then the bank ((or)), trust company, holding company, or ((both)) all three, as applicable is deemed nonetheless to remain in existence for purposes of the department or an applicable federal regulator, or both, having standing under RCW 30.44.270 or applicable federal law, or both, to exercise the powers and authorities of a receiver for the bank, trust company, or holding company.
     (6) For the purposes of this section, and unless the context clearly requires otherwise, for the purpose of applying chapter 25.15 RCW to a bank, trust company, or holding company organized as a limited liability company:
     (a) "Articles of incorporation" includes a limited liability company's certificate of formation, as that term is used in RCW 25.15.005(1) and 25.15.070, and a limited liability company agreement as that term is used in RCW 25.15.005(5);
     (b) "Board of directors" includes one or more persons who have, with respect to a bank, trust company, or holding company described in subsection (1) of this section, authority that is substantially similar to that of a board of directors of a corporation;
     (c) "Bylaws" includes a limited liability company agreement as that term is defined in RCW 25.15.005(5);
     (d) "Corporation" includes a limited liability company organized under chapter 25.15 RCW;
     (e) "Director" includes any of the following of a limited liability company:
     (i) A manager;
     (ii) A director; or
     (iii) Other person who has, with respect to the bank, trust company, or holding company described in subsection (1) of this section, authority substantially similar to that of a director of a corporation;
     (f) "Dividend" includes distributions made by a limited liability company under RCW 25.15.215;
     (g) "Incorporator" includes the person or persons executing the certificate of formation as provided in RCW 25.15.085(1);
     (h) "Officer" includes any of the following of a bank, trust company, or holding company:
     (i) An officer; or
     (ii) Other person who has, with respect to the bank, trust company, or holding company, authority substantially similar to that of an officer of a corporation;
     (i) "Security," "shares," or "stock" of a corporation includes a membership interest in a limited liability company and any certificate or other evidence of an ownership interest in a limited liability company; and
     (j) "Stockholder" or "shareholder" includes an owner of an equity interest in a bank, trust company, or holding company, including a member as defined in RCW 25.15.005(8) and 25.15.115.