STAND. COM. REP. NO. 3449

Honolulu, Hawaii

RE: H.B. No. 2563

H.D. 1

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirtieth State Legislature

Regular Session of 2020

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Health, to which was referred H.B. No. 2563, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO PLANNED COMMUNITY ASSOCIATIONS,"

begs leave to report as follows:

The purpose and intent of this measure is to exempt planned community associations from certain requirements regarding cumulative voting for and the removal of directors under the Hawaii Nonprofit Corporations Act.

Your Committee received testimony in support of this measure from the Hawai‘i State Association of Parliamentarians; Hawaii Chapter of the Community Associations Institute; Associa; Law Offices of Mark K. McKeller, LLLC; and six individuals.

Your Committee finds that the cumulative voting provisions under the Hawaii Nonprofit Corporations Act may be manipulated by planned community association boards of directors to prevent minority groups from attaining representation by simply omitting cumulative voting from meeting notices. This measure will clarify that the cumulative voting provisions under the Hawaii Nonprofit Corporations Act do not apply to planned community associations governed under the State's planned community association laws.

Your Committee notes that stakeholders have had an opportunity to discuss potential amendments to clarify the cumulative voting procedures for planned community associations, similar to those found in the statutes governing condominium associations. Accordingly, amendments to this measure are necessary to incorporate this consensus language.

Your Committee has amended this measure by:

(1) Inserting language that establishes cumulative voting requirements for directors; provided that the articles of incorporation, declaration, or bylaws provide for cumulative voting by members;

(2) Inserting language that establishes removal procedures for directors elected by members or directors, and the notice requirements for meetings at which removal of a director is proposed;

(3) Clarifying that if the board of directors does not intend to use association funds to distribute proxies that include the election of directors, the board shall post notice in prominent locations within the project of its intent to distribute written notice of an association meeting; and

(4) 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 Commerce, Consumer Protection, and Health that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2563, H.D. 1, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 2563, H.D. 1, S.D. 1, and be referred to your Committee on Judiciary.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Health,

________________________________

ROSALYN H. BAKER, Chair