Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Housing, to which was referred S.B. No. 1798 entitled:

begs leave to report as follows:

The purpose of this measure is to exempt condominium associations from the requirements governing cumulative voting by members of nonprofit corporations.

Testimony in support of this measure was submitted by an individual. The Hawaii Independent Condominium and Cooperative Owners presented comments on the measure.

Condominium associations that are incorporated as nonprofit corporations are subject to the nonprofit corporations law codified in chapter 414D, Hawaii Revised Statutes (Chapter 414D). Chapter 414D establishes requirements for cumulative voting to elect or remove directors. However, many condominium associations have bylaws that establish their own procedures for cumulative voting.

Your Committee finds that having dual sets of requirements for cumulative voting has resulted in problems when the statutory requirements are invoked in order to preclude the use of cumulative voting that would have otherwise been permitted under an association's bylaws or to establish requirements for removal greater than that contained in an association's bylaws.

This measure addresses the potential conflict and uncertainty created by the dual requirements by providing that the nonprofit corporation laws governing cumulative voting do not apply to incorporated condominium associations. Your Committee further finds that this exemption is consistent with the principle of condominium self-governance.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1798 and recommends that it pass Second Reading and be placed on the calendar for Third Reading.