STAND. COM. REP. NO. 1466

Honolulu, Hawaii

RE:    H.B. No. 1027

       H.D. 1

       S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2017

State of Hawaii

Sir:

     Your Committee on Judiciary and Labor, to which was referred H.B. No. 1027, H.D. 1, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO NONPROFIT CORPORATIONS,"

begs leave to report as follows:

     The purpose and intent of this measure is to amend the nonprofit corporations law to:

     (1)  Restore procedures that allow nonprofit corporations to convert into and out of domestic nonprofit corporations;

     (2)  Impose a duty of loyalty on directors and officers of nonprofit corporations; and

     (3)  Increase the length of time the Attorney General has to review proposed dissolutions of public benefit corporations.

     Your Committee received testimony in support of this measure from the Department of the Attorney General, Association of Fundraising Professionals Aloha Chapter, Hawai‘i Alliance of Nonprofit Organizations, and one individual.

     Your Committee finds that Act 37, Session Laws of Hawaii 2012 (Act 37), repealed a provision in the Hawaii Revised Statutes that allowed a domestic nonprofit corporation to convert to a foreign corporation or any other business entity.  In hindsight, Act 37 went too far, as it effectively prevented domestic nonprofit corporations from converting to foreign nonprofit corporations.  This measure restores the provision that allows nonprofit corporations to convert into and out of domestic nonprofit corporations, establishes the procedure for conversion, and specifies the effects of a conversion.

     Your Committee further finds that although directors of nonprofit corporations have a duty of loyalty at common law, existing statute does not expressly recognize such a duty of loyalty.  Accordingly, this measure establishes a duty of loyalty for directors and officers of nonprofit corporations.

     Your Committee has amended this measure by making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Judiciary and Labor that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1027, H.D. 1, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 1027, H.D. 1, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Judiciary and Labor,

________________________________

GILBERT S.C. KEITH-AGARAN, Chair