STAND. COM. REP. NO. 2765

Honolulu, Hawaii

RE: S.B. No. 2747

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Twenty-Ninth State Legislature

Regular Session of 2018

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 2747, 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 update the Hawaii Nonprofit Corporations Act.

Specifically, this measure:

(1) Clarifies that a public benefit corporation may not purchase its memberships;

(2) Clarifies that the term "director" only includes those who have the authority to vote as a member of the board;

(3) Clarifies that a corporation with members may provide for appointment by some other person, or designation, of some of its directors; and

(4) Provides the Attorney General with more time to review a proposed sale or other disposition of substantially all of the assets of a corporation, other than in the regular course of its activities.

Your Committee received written comments in support of this measure from the Department of the Attorney General.

Your Committee finds that this measure expressly prohibits a public benefit corporation from using its charitable assets to purchase its memberships, an action that is effectively a distribution to the corporation's members and is not consistent with a public benefit corporation's charitable purpose.

Your Committee has amended this measure by:

(1) Clarifying that a corporation with members may appoint directors by designation, if provided by the corporation's articles of incorporation or bylaws; and

(2) Making a technical nonsubstantive change for the purpose of style.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 2747, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 2747, S.D. 2.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

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DONOVAN M. DELA CRUZ, Chair