UNIFORM ENTITY CONTACTS ACT

SECTION 1. SHORT TITLE . This [act] may be cited as the Uniform Entity Contacts Act.

(1) “Appropriate request” means:

(A) a civil or criminal subpoena or summons from a local, state, or federal law enforcement authority, State agency, Federal agency, or committee or subcommittee of the United States Congress or a State legislature; or

(B) a request in the form of a record made by a Federal agency on behalf of another country under an international treaty, agreement, or convention, or under 28 U.S. C. § 1782.

(2) “Designated contact” means an individual who, directly or indirectly, participates in the control or management of an entity or, in the case of an entity to be formed, will participate in the control or management of the entity.

(3) “Domestic” with respect to an entity, means an entity whose internal affairs are governed by the law of this state.

(4) “Domestic filing entity” means:

(A) a domestic business corporation;

(B) a domestic nonprofit corporation;

(D) a domestic limited partnership, including a limited liability limited partnership;

(E) a domestic limited liability company;

(F) a domestic statutory trust entity; [or]

(G) a domestic limited cooperative association; [or]

[(H) list other types of entities authorized by the law of the state].

Legislative Note: The entities referred to in this definition are illustrative only and include simply those types of entities that may be incorporated, organized or otherwise formed under the various model and uniform entity laws. An enacting state should revise this definition so that (i) the entities are referred to in the manner they are referred to in the state’s other laws and (ii) the definition includes all of the types of non-governmental entities that may be created under the state’s laws where a filing must be made with the Secretary of State for the entity to have the status listed.

If a type of entity described in subparagraph (B) of the definition of “unregulated privately-owned entity” is formed under a law that only applies to that type of entity, for example a banking corporation act or insurance company act, that type of entity may be omitted from this definition because the term “domestic entity” does not need to include that type of entity for any purpose under this act.

(5) “Entity contacts statement” means an initial or amended statement as described in Sections 4(a) or (c).

(6) “Formation agent” means the individual who signs the initial public organic record of a domestic filing entity as required by Section 3(a).

(7) “Governance interest” means the right under the organic law or organic rules of an unincorporated entity, other than as a governor, agent, assignee, or proxy, to:

(A) receive or demand access to information concerning, or the books and records of, the entity;

(B) vote for the election of the governors of the entity; or

(8) “Governor” means:

(A) a director of a business corporation [or a shareholder of a close corporation that is managed by its shareholders instead of a board of directors];

(B) a director [or member of a designated body] of a nonprofit corporation;

(D) a general partner of a limited partnership;

(E) a manager of a limited liability company or other person that materially participates in the management of a limited liability company pursuant to its organic law and organic rules;

(F) a director of a limited cooperative association; [or]

(G) a trustee of a statutory trust entity; [or]

[(H) list governors of other types of entities authorized by the law of the state].

Legislative Note: An enacting state should revise this definition so that it refers to the appropriate persons with respect to each type of entity listed in the definition of “domestic filing entity.” If an enacting state authorizes a business corporation with a limited number of shareholders to dispense with a board of directors in favor of management by its shareholders, the optional phrase at the end of subparagraph (A) should be included with appropriate changes to conform to the terminology used in the enacting state.

The Model Nonprofit Corporation Act permits a nonprofit corporation to give some of the responsibilities and obligations of the board of directors to another group of persons known as a “designated body.” If the law of an enacting state permits that type of governance structure, the optional phrase in subparagraph (B) should be included with appropriate changes to conform to the terminology used in the enacting state.

(9) “Interest” means:

(A) a governance interest;

(B) a transferable interest;

(D) a membership in a nonprofit corporation; or

(E) a similar type of equity ownership in a person incorporated, organized or otherwise formed under the laws of a jurisdiction other than the United States or a state.

(10) “Interest holder” of an entity means:

(A) a shareholder of a business corporation;

(B) a member of a nonprofit corporation;

(D) a general partner of a limited partnership;

(E) a limited partner of a limited partnership;

(F) a member of a limited liability company;

(G) a member of a limited cooperative association;

(H) a beneficiary of a statutory trust entity; [or]

(I) [list similar persons in other types of entities authorized by the law of the state; or

(J)] a direct or record holder of a similar type of equity ownership in or right to vote with respect to some or all of the internal affairs of a person incorporated, organized, or otherwise formed under the laws of a jurisdiction other than the United States or a state.

Legislative Note: An enacting state should revise this definition so that it includes references to the appropriate persons with respect to each type of entity listed in the definition of “domestic filing entity.” Unlike the definition of “governor,” however, this definition is used with respect to entities beyond just domestic filing entities, and thus needs to be phrased more broadly. As a result, it is important that enacting states include paragraph (J).

(11) “Organic law” means the statutes of an entity’s jurisdiction of incorporation, organization, or other formation which govern the internal affairs of the entity.

(12) “Organic rules” means the public organic record and private organic rules of an entity.

(13) “Person” means an individual, corporation, estate, trust, partnership, limited liability company, business or similar trust, cooperative, association, joint venture, public corporation, government or governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.

(14) “Private organic rules” means:

(A) the bylaws of a business corporation;

(B) the bylaws of a nonprofit corporation;

(D) the partnership agreement of a limited partnership;

(E) the operating agreement of a limited liability company;

(F) the bylaws of a limited cooperative association;

(G) the trust instrument of a statutory trust entity; [and]

[(H) list similar documents for other types of entities authorized by the law of the state]; and

(I) any other rules, whether or not in a record, that govern the internal affairs of an entity, are binding on all of its interest holders, and are not part of its public organic record, if any.

Legislative Note: An enacting state should revise this definition so that it refers to the appropriate item with respect to each type of entity listed in the definition of “domestic filing entity.”

(15) “Public organic record” means:

(A) the articles of incorporation of a business corporation;

(B) the articles of incorporation of a nonprofit corporation;

(D) the certificate of limited partnership of a limited partnership;

(E) the certificate of organization of a limited liability company;

(F) the articles of incorporation of a limited cooperative association; [and]

(G) the certificate of trust of a statutory trust entity; [and]

[(H) list similar documents for other types of entities authorized by the law of the state].

Legislative Note: An enacting state should revise this definition so that it refers to the appropriate document with respect to each type of entity listed in the definition of “domestic filing entity.”

(16) “Record,” used as a noun, means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(17) “Records contact” means the individual described in Section 8(a).

(18) “Sign” means, with present intent to authenticate or adopt a record:

(A) to execute or adopt a tangible symbol; or

(B) to attach to or logically associate with the record an electronic sound, symbol, or process.

(19) “Transferable interest” means the right under an unincorporated entity’s organic law to receive distributions from the entity.

(20) “Transferee” means a person to which all or part of a transferable interest has been transferred without a governance interest, whether or not the transferee is an interest holder.

(21) “Unregulated privately-owned entity” means a domestic filing entity that has no more than 50 interest holders and:

(A) in which one or more domestic or foreign entities with more than 50 interest holders do not hold, directly or indirectly, more than 25% of the outstanding interests;

(B) that is not subject to regulation as a bank or other depository institution, insurance company, public utility, or securities or commodities broker or dealer;

(D) that is not registered as an “investment advisor” under the Investment Advisors Act of 1940 or the law of any state;

(E) in which one or more domestic or foreign entities of the types described in subparagraph (B), (C), or (D) do not hold, directly or indirectly, a majority or more of the outstanding interests; and

(F) that does not own a majority of the outstanding interests in a domestic or foreign entity of a type described in subparagraph (B), (C), or (D).

Comment

“Appropriate request.” This definition is patterned after Section 2009(a)(1)(D) of the Homeland Security Act of 2002 (6 U.S.C. § 601 et seq.), as proposed to be added by S. 2956).

“Designated contact.” A designated contact may be an individual who is a governor of the entity, an agent of another person, an agent or officer of the entity itself, or who meets the requirements of this definition because of ownership of an interest in the entity or other factors. To qualify s the designated contact, what is required is that the individual participate in the control or management of the entity. A designated contact may have sole responsibility for the management of the entity or may share that responsibility with others. The term has been created for use in this act and is not intended to change the law with respect to the governance of any form of entity.

“Governor.” The second clause of subparagraph (E) of this definition, which refers to persons who are not managers of a limited liability company but participate materially in its management, is patterned after 6 Del. Code § 18-109(a). It is not intended that the power to elect or otherwise select or to participate in the election or selection of a person to be a manager of a limited liability company will, by itself, constitute participation in the management of the company.

“Interest holder.” Whether a person is a member of a nonprofit corporation will be determined under a state’s nonprofit corporation law. Many nonprofit corporations refer to their contributors as “members” as a fund-raising technique even though those contributors do not have the status of true members under the organic law of the corporation.

SECTION 3. FORMATION OF ENTITIES.

(a) The initial public organic record of a domestic filing entity must be signed by an individual, either as or on behalf of the incorporator, organizer, or other similar person authorized to deliver the filing to the [Secretary of State].

(b) When the initial public organic record of a domestic filing entity that is an unregulated privately-owned entity is delivered to the [Secretary of State] for filing, it must be accompanied by an initial entity contacts statement.

(c) The public organic record of a domestic filing entity must include, in addition to any other information required by its organic law, a statement as to whether the entity is an unregulated privately-owned entity.

(d) If the statement required by subsection (c) becomes incorrect, the entity must promptly deliver to the [Secretary of State] for filing an amendment of its public organic record correcting the statement. An amendment pursuant to this subsection does not need to be approved by the governors or interest holders. The [Secretary of State] shall not charge a fee for filing an amendment pursuant to this subsection.

(e) An amendment filed under subsection (d) indicating that an entity has become an unregulated privately-owned entity must be accompanied by an initial entity contacts statement.

(f) Subsections (a) and (b) do not apply to an initial public organic record delivered to the [Secretary of State] before [the effective date of this act]. Subsections (c), (d), and (e) do not apply to a domestic filing entity that is in existence on [the effective date of this act] until the second anniversary of the effective date of this act as provided in Section 13.

Comment

The same individual may serve as the formation agent, records contact, and designated contact for an entity. When an entity needs to be formed on a rush basis, for example, or when a records contact or designated contact has not yet been determined for an entity, a formation agent may serve as an accommodation in those other capacities. Regardless of the reason why the formation agent is also shown as the records contact or designated contact, so long as the formation agent is named in those capacities the formation agent will have the responsibilities attendant on those positions under this act.

SECTION 4. ENTITY CONTACTS STATEMENT.

(a) An initial entity contacts statement must set forth:

(1) the name of the entity;

(2) the name and a business or residential street address of the entity’s records contact; and

(3) the name and a business or residential street address of the entity’s designated contact.

(b) An entity contacts statement must be signed as follows:

(1) an initial statement must be signed by:

(A) the formation agent; and

(B) both the records contact and the designated contact named in the statement; and

(2) an amended statement must be signed:

(A) on behalf of the entity; and

(B) by any new records contact or new designated contact named in the amended statement.

(c) If any of the information in a filed entity contacts statement changes or becomes incorrect or incomplete, the entity must promptly deliver to the [Secretary of State] for filing an amended entity contacts statement that is correct as of the date of its delivery to the [Secretary of State] and that includes all of the information required by subsection (a).

(d) A records contact or designated contact may change his or her address or resign by delivering to the [Secretary of State] for filing a statement of change signed by the records contact or designated contact that sets forth:

(1) the name of the entity; and

(2) either:

(A) the new address; or

(B) a statement that the records contact or designated contact resigns.

(e) A records contact or designated contact who files a statement of change pursuant to subsection (d) must promptly furnish the entity with notice in a record of the filing of the statement of change and a copy of the statement.

(f) An amended entity contacts statement filed under subsection (c) or a statement of change filed under this subsection (d) takes effect upon filing.

Comment

Because subsection (c) requires an amended entity contacts statement to include all of the information required by subsection (a), a domestic filing entity must always have a records contact and designated contact identified in the records of the Secretary of State. But see the transitional provisions in Section 13.

SECTION 5. CONFIDENTIALITY. The initial entity contacts statement of a domestic filing entity and any amended statement or statement of change shall be kept confidential by the [Secretary of State] and may not be disclosed except to:

(1) an authorized agent of a local, state, or federal law enforcement agency, state agency, federal agency or committee or subcommittee of the United State Congress or a state legislature, or a request made by a federal agency on behalf of another country under an international treaty, agreement or convention under 28 U.S.C. section 1782, upon the request of the agent in a signed record; or

(2) an individual who is shown in the records of the [Secretary of State] as a current records contact, designated contact, governor, or officer of the entity upon the request of the individual in a signed record.

Comment

This section does not require that the request of a law enforcement agency for access to an entity contacts statement must be an “appropriate request” as defined in Section 2. Any request in a record should be honored by the Secretary of State after verifying that the request comes from an authorized law enforcement agent.

Any request delivered pursuant to Section 5 will not be subject to Section 11(a) as it is not delivered for filing. However, it is anticipated the Secretary of State will maintain a record of any requests received pursuant to Section 5.

SECTION 6. PROHIBITION OF BEARER INTERESTS. A domestic filing entity may not issue a certificate in bearer form evidencing either a whole or fractional interest.

SECTION 7. INTEREST HOLDERS FROM OUTSIDE UNITED STATES.

(a) Except as provided in subsection (d), when a person incorporated, organized or otherwise formed under the laws of a jurisdiction other than the United States or a state first becomes, after [the effective date of this act], an interest holder or transferee, in an unregulated privately-owned entity, whether by transfer, issuance of an interest, or admission as an interest holder, the interest holder or transferee must provide the entity with a certification signed under the penalties of perjury stating the name and a business or residential street address of a designated contact for the interest holder or transferee.

(b) If any of the information in a certification provided under subsection (a) becomes incorrect or incomplete, the interest holder or transferee must promptly provide the unregulated privately-owned entity with a corrected certification.

(c) A certification provided under subsection (a) or (b) that is incorrect or incomplete, or the failure of an unregulated privately-owned entity to obtain a required certification, does not affect the existence of the unregulated privately-owned entity, the validity of any acts of the entity, the interest of any interest holder, or the status of any interest holder as such.

(d) Subsections (a) and (b) only apply to an interest holder or transferee that would be an unregulated privately-owned entity if the interest holder or transferee were a domestic filing entity.

Comment

This section is patterned in part after Section 2009(a)(2) of the Homeland Security Act of 2002 (6 U.S.C. § 601 et seq.), as proposed to be added by S. 2956.

Section 7 is not intended to require the entity to track transfers of interest before the entity has notice of a transfer. It is the obligation of a transferee to provide the certifications required by this section.

SECTION 8. RECORDS OF UNREGULATED PRIVATELY-OWNED ENTITIES.

(a) An unregulated privately-owned entity shall at all times have an individual whose principal residence is in the United States who has access to and can produce within the United States on a timely basis upon appropriate request information in a record that:

(1) includes the name and last known address of each current transferee of which the entity has actual knowledge, each current interest holder in the entity, and any other person to whom the entity has been instructed to send distributions;

(2) indicates for each current transferee of which the entity has actual knowledge or current interest holder in the entity that is a person incorporated or formed by a public filing, whether within or outside the United States, the jurisdiction under whose laws the transferee or interest holder is incorporated, organized, or otherwise formed;

(3) includes the name and a residential or business address for each governor of the entity;

(4) includes a copy of a passport, driver’s license, or other government-issued photo identification document for each governor of the entity who is an individual and whose principal residence at the time the individual became a governor was outside the United States;

(5) includes a copy of a passport, driver’s license, or other government-issued photo identification document for the designated contact of the entity of the principal residence of the designated contact at the time the individual became the designated contact was outside the United States;

(6) includes any records maintained by the entity regarding the process by which the governors of the entity are elected or otherwise designated;

(7) indicates the voting power in the entity held by each of its interest holders or describe the manner in which each interest holder’s voting power in the entity is determined;

(8) identifies the individuals responsible for preparing the information supplied under this subsection; and

(9) includes the certifications required by section 7(a) and (b).

(b) When information is produced pursuant to subsection (a) it must include a certification by the entity, signed under the penalties of perjury, that the information produced accurately reflects the current records of the entity.

(c) A records contact, as such, does not have an obligation to verify the accuracy of information described in subsection (a) that is supplied to the records contact by the unregulated privately-owned entity.

Comment

If a records contact fails to respond to an appropriate request for information under subsection (a), the consequences of that failure and possible sanctions will depend on the nature of the request. Failure of a records contact to respond to a subpoena, for example, will have the same consequences and sanctions as any other failure to respond to a subpoena under the applicable federal or state law.

The requirement in subsection (a) that information be produced on a “timely basis” is intended to satisfy the requirements of Recommendation 33 of the Financial Action Task Force. In the case of a subpoena, what will be a timely response will be controlled by the response date in the subpoena. A response date in a request made under a treaty, however, does not have the force of law and will not necessarily be binding.

A non U.S. resident is not required to supply a photo identification document as a condition to becoming a governor under subsection (a)(4). That subsection simply requires that when an appropriate request is made the entity must be able to supply the required document. The entity may obtain the document at that time, but many entities will choose to obtain the document earlier because they otherwise run the risk of being unable to obtain the document on a timely basis once an appropriate request has been made.

The obligation to provide information under subsection (a)(7) about voting power in the entity may be satisfied by supplying a copy of the operative documents that determine that voting power. Those documents will often be simply the public organic record or private organic rules of the entity, such as the articles of incorporation of a corporation or the operating agreement of a limited liability company; but may include other documents such as shareholder agreements, voting agreements, investor rights agreements, etc.

Subsection (c) only applies to a records contact in the individual’s capacity as a records contact. If the individual also maintains the records required to be produced under subsection (b) in another capacity, for example as a corporate secretary, the individual will have the obligations associated with serving in that capacity.

SECTION 9. FEES.

(a) The [Secretary of State] shall adopt rules[, in accordance with the state’s administrative procedure act] setting the fee for filing an initial entity contacts statement. The fee shall be set at an amount such that the total amount of fees collected during a year is not less than the annual costs incurred by the [Secretary of State] in administering this [act].

(b) The [Secretary of State] shall not charge a fee for filing an amended entity contacts statement or statement of change.

(c) The fees collected under subsection (a) shall be deposited into a restricted account within the General Fund. Funds in the restricted account shall be used only for the administration of this [act].

Legislative Note: Subsection (c) should be revised to conform to the enacting state’s practice in establishing special purpose funds.

Comment

Subsection (b) provides that a fee will not be charged for a filing that updates the records of the Secretary of State with respect to the records contact or designated contact for an entity as a way of encouraging filings that will keep those records current.

SECTION 10. ADMINISTRATIVE DISSOLUTION.

(a) The [Secretary of State] shall administratively dissolve:

(1) an unregulated privately-owned entity if the records of the [Secretary of State] do not show a current records contact or current designated contact for the entity for a period of 60 consecutive days; and

(2) a domestic filing entity if its public organic record does not contain the statement required by Section 3(c).

(b) If the [Secretary of State] determines that a ground exists for administratively dissolving an entity under subsection (a), the [Secretary of State] shall file a record of the determination and serve the entity with a copy of the filed record.

(c) If within 60 days after service of the copy pursuant to subsection (b) the entity does not correct each ground for dissolution, the [Secretary of State] shall dissolve the entity administratively by preparing, signing, and filing a declaration of dissolution that states the grounds for dissolution. The [Secretary of State] shall serve the entity with a copy of the filed declaration.

(d) An entity that has been administratively dissolved continues in existence but, subject to subsection (h), may carry on only activities necessary to wind up its activities.

(e) The administrative dissolution of an entity under this section does not terminate the authority of its agent for service of process or the responsibilities of a records contact or designated contact shown in the records of the [Secretary of State] at the time of dissolution.

(f) An entity that has been administratively dissolved under this section may apply to the [Secretary of State] for reinstatement by delivering to the [Secretary of State] for filing an application signed by the entity that states:

(1) the name of the entity and the effective date of its dissolution;

(2) either:

(A) both:

(i) the name and a business or residential street address of the entity’s records contact; and

(ii) the name and a business or residential street address of the entity’s designated contact; or

(B) that the entity is not an unregulated privately-owned entity; and

(3) if the entity’s name is no longer available, a new name that satisfies the requirements of the entity’s organic law.

(g) If the [Secretary of State] determines that an application under subsection (f) contains the required information, the [Secretary of State] shall prepare a declaration of reinstatement that states this determination, sign and file the original of the declaration of reinstatement, and serve the unregulated privately-owned entity with a copy.

(h) When a reinstatement under subsection (g) becomes effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the unregulated privately-owned entity may resume its activities as if the dissolution had not occurred.

(i) This section does not apply to a domestic filing entity in existence on [the effective date of this act] until [the second anniversary of this act].

Legislative Note: If an enacting state has existing administrative dissolution procedures, the detailed procedures in this section may be omitted, but subsection (a) will need to be retained as an additional trigger for administrative dissolution. Some state administrative dissolution statutes may include a time limit on reinstatement, unlike this section which does not impose a time limit on reinstatement. States should decide whether they wish to impose such a limit under this section.

SECTION 11. PENALTIES OF PERJURY; NOTARIZATION.

(a) Every document that is delivered to the [Secretary of State] for filing under this [act] must be signed under the penalties of perjury.

(b) Every signature of a records contact or designated contact on a document delivered to the [Secretary of State] for filing under this [act] must be notarized.

SECTION 12. EXCLUSION OF LIABILITIES.

(a) Except as provided in a contract for the provision of the services of a records contact, a records contact is not liable for:

(1) producing upon an appropriate request the information described in Section 8(a); or

(2) any inaccuracy in or omission from the information described in Section 8(a), except that this paragraph does not limit the liability of a records contact for intentional misconduct or criminal conduct.

(b) A formation agent, records contact, or designated contact is not liable under law other than this [act] because of being identified as a formation agent, records contact, or designated contact in the records of the [Secretary of State].

(c) Compliance or noncompliance by a domestic filing entity with the requirements of this [act] is not a ground for imposing liability on its interest holders, beneficial owners, or governors for the debts, obligations, or other liabilities of the entity.

Comment

Subsection (c) makes clear that the failure of a domestic filing entity to comply with the requirements of this act is not a basis for piercing the veil of any entity. That subsection also makes clear that complying with this act is not a basis for imposing liability on the interest holders or governors of an entity on the basis of an alter ego theory.

SECTION 13. TRANSITIONAL PROVISION.

(a) On or before the date provided in subsection (b), a domestic filing entity in existence on [the effective date of this act] must deliver to the [Secretary of State] for filing:

(1) an amendment of its public organic record that contains the statement required by Section 3(c); and

(2) if it is an unregulated privately-owned entity, an initial entity contacts statement.

(b) A domestic filing entity must comply with subsection (a) by the earlier of:

(1) [the second anniversary of the effective date of this act]; or

(2) the date the entity first delivers to the [Secretary of State] for filing any other document.

(c) The amendment required by subsection (a)(1) does not need to be approved by the governors or interest holders of a domestic filing entity.

(d) The [Secretary of State] shall, not earlier than [the first anniversary of the effective date of this act], mail to every domestic filing entity that has not delivered to the [Secretary of State] an entity contacts statement for filing before that date a notice advising the entity of the requirement to deliver to the [Secretary of State] for filing the documents described in subsection (a). Failure by the [Secretary of State] to provide the notice to any entity, or failure by any person to receive the notice, shall not relieve an entity of the obligation to comply with subsection (a).

Comment

The intention of this act is that all entities will be in compliance within two years after the effective date of the act. Subsection (d) requires the Secretary of State to send out a reminder notice one year after the effective date to facilitate compliance. That notice or lack thereof does not modify or affect the requirement that all entities must comply with subsection (a) within two years after the effective date of the act.

SECTION 14. UNIFORMITY OF APPLICATION AND CONSTRUCTION. In applying and construing this uniform act, consideration must be given to the need to promote uniformity of the law with respect to its subject matter among states that enact it.

SECTION 15. RELATION TO ELECTRONIC SIGNATURES IN GLOBAL AND NATIONAL COMMERCE ACT. This [act] modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).

SECTION 16. REPEALS. The following acts and parts of acts are repealed:

(1)

Legislative Note: The state’s open records or similar law must be amended or repealed to the extent it would require that an entity contacts statement or statement of change not be kept confidential as provided in this act.

SECTION 17. EFFECTIVE DATE. This [act] takes effect on . . . .