S.B. 84

This document includes Senate 2^nd Reading Floor Amendments incorporated into the bill on Mon, Feb 20, 2006 at 4:56 PM by rday. --> This document includes House Floor Amendments incorporated into the bill on Mon, Feb 27, 2006 at 3:21 PM by ddonat. --> 1

NONPROFIT ENTITY AMENDMENTS
2 2006 GENERAL SESSION
3 STATE OF UTAH
4 Chief Sponsor: Lyle W. Hillyard
5 House Sponsor: Fred R. Hunsaker
6
7 LONG TITLE
8 General Description:
9 This bill makes changes to Title 16, Chapter 6a, Utah Revised Nonprofit Corporation
10 Act.
11 Highlighted Provisions:
12 This bill:
13 . defines terms;
14 . addresses the prosecution of a derivative suit by a member or director of a nonprofit
15 corporation;
16 . requires an annual meeting be held by a nonprofit corporation unless the bylaws
17 eliminate the requirement;
18 . describes the effect of failure to hold an annual meeting;
19 . prescribes notice requirements for an annual meeting;
20 . provides that a director or officer of a nonprofit corporation is liable for a breach of
21 duty if the director or officer is grossly negligent;
22 . allows a nonprofit corporation to avoid indemnification of a director if the nonprofit
23 corporation's bylaws limit indemnification;
24 . addresses the effect of conversion of a nonprofit corporation to another form;
25 . addresses the amendment of a nonprofit corporation's bylaws;
26 . addresses the requirements for a merger of multiple entities into a domestic
27 nonprofit corporation;

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- 2 - 28 . allows distributions of assets upon dissolution to another nonprofit corporation or a
29 mutual benefit corporation;
30 . requires that distribution of a nonprofit corporation's assets comply with the Internal
31 Revenue Code; and
32 . makes technical changes.
33 Monies Appropriated in this Bill:
34 None
35 Other Special Clauses:
36 None
37 Utah Code Sections Affected:
38 AMENDS:
39 16-6a-102, as last amended by Chapter 131, Laws of Utah 2003
40 16-6a-612, as enacted by Chapter 300, Laws of Utah 2000
41 16-6a-812, as enacted by Chapter 300, Laws of Utah 2000
42 16-6a-814, as enacted by Chapter 300, Laws of Utah 2000
43 16-6a-815, as enacted by Chapter 300, Laws of Utah 2000
44 16-6a-822, as enacted by Chapter 300, Laws of Utah 2000
45 16-6a-903, as enacted by Chapter 300, Laws of Utah 2000
46 16-6a-905, as enacted by Chapter 300, Laws of Utah 2000
47 16-6a-1008, as enacted by Chapter 300, Laws of Utah 2000
48 16-6a-1008.7, as enacted by Chapter 193, Laws of Utah 2002
49 16-6a-1010, as enacted by Chapter 300, Laws of Utah 2000
50 16-6a-1101, as enacted by Chapter 300, Laws of Utah 2000
51 16-6a-1102, as enacted by Chapter 300, Laws of Utah 2000
52 16-6a-1103, as enacted by Chapter 300, Laws of Utah 2000
53 16-6a-1104, as enacted by Chapter 300, Laws of Utah 2000
54 16-6a-1302, as enacted by Chapter 300, Laws of Utah 2000
55 16-6a-1405, as last amended by Chapter 127, Laws of Utah 2001
56 42-2-6.6, as last amended by Chapters 197 and 222, Laws of Utah 2002
57
58 Be it enacted by the Legislature of the state of Utah:

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- 3 - 59 Section 1. Section 16-6a-102 is amended to read:
60 16-6a-102. Definitions.
61 As used in this chapter:
62 (1) (a) "Address" means a location where mail can be delivered by the United States
63 Postal Service.
64 (b) "Address" includes:
65 (i) a post office box number;
66 (ii) a rural free delivery route number; and
67 (iii) a street name and number.
68 (2) "Affiliate" means a person that directly or indirectly through one or more
69 intermediaries controls, or is controlled by, or is under common control with, the person
70 specified.
71 (3) "Articles of incorporation" include:
72 (a) amended articles of incorporation;
73 (b) restated articles of incorporation;
74 (c) articles of merger; and
75 (d) a document of a similar import to the documents described in Subsections (3)(a)
76 through (c).
77 (4) "Assumed corporate name" means the name assumed for use in this state:
78 (a) by a:
79 (i) foreign corporation pursuant to Section 16-10a-1506 ; or
80 (ii) a foreign nonprofit corporation pursuant to Section 16-6a-1506 ; and
81 (b) because the corporate name of the foreign corporation described in Subsection
82 (4)(a) is not available for use in this state.
83 (5) (a) Except as provided in Subsection (5)(b), "board of directors" means the body
84 authorized to manage the affairs of the domestic or foreign nonprofit corporation.
85 (b) Notwithstanding Subsection (5)(a), a person may not be considered a member of
86 the board of directors because of powers delegated to that person pursuant to Subsection
87 16-6a-801 (2).
88 (6) (a) "Bylaws" means the one or more codes of rules, other than the articles of
89 incorporation, adopted pursuant to this chapter for the regulation or management of the affairs

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91 the codes of rules are designated.
92 (b) "Bylaws" includes:
93 (i) amended bylaws; and
94 (ii) restated bylaws.
95 (7) (a) "Cash" or "money" means:
96 (i) legal tender;
97 (ii) a negotiable instrument; or
98 (iii) other cash equivalent readily convertible into legal tender.
99 (b) "Cash" and "money" are used interchangeably in this chapter.
100 (8) (a) "Class" refers to a group of memberships that have the same rights with respect
101 to voting, dissolution, redemption, transfer, or other characteristics.
102 (b) For purposes of Subsection (8)(a), rights are considered the same if they are
103 determined by a formula applied uniformly to a group of memberships.
104 (9) (a) "Conspicuous" means so written that a reasonable person against whom the
105 writing is to operate should have noticed the writing.
106 (b) "Conspicuous" includes printing or typing in:
107 (i) italics;
108 (ii) boldface;
109 (iii) contrasting color;
110 (iv) capitals; or
111 (v) underlining.
112 (10) "Control" or a "controlling interest" means the direct or indirect possession of the
113 power to direct or cause the direction of the management and policies of an entity by:
114 (a) the ownership of voting shares;
115 (b) contract; or
116 (c) means other than those specified in Subsection (10)(a) or (b).
117 (11) Subject to Section 16-6a-207 , "cooperative nonprofit corporation" or "cooperative"
118 means a nonprofit corporation organized or existing under this chapter.
119 (12) "Corporate name" means:
120 (a) the name of a domestic corporation as stated in the domestic corporation's articles

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122 (b) the name of a domestic nonprofit corporation as stated in the domestic nonprofit
123 corporation's articles of incorporation;
124 (c) the name of a foreign corporation as stated in the foreign corporation's:
125 (i) articles of incorporation; or
126 (ii) document of similar import to articles of incorporation; or
127 (d) the name of a foreign nonprofit corporation as stated in the foreign nonprofit
128 corporation's:
129 (i) articles of incorporation; or
130 (ii) document of similar import to articles of incorporation.
131 (13) "Corporation" or "domestic corporation" means a corporation for profit, which is
132 not a foreign corporation, incorporated under or subject to Chapter 10a, Utah Revised Business
133 Corporation Act.
134 (14) "Delegate" means any person elected or appointed to vote in a representative
135 assembly:
136 (a) for the election of a director; or
137 (b) on matters other than the election of a director.
138 (15) "Deliver" includes delivery by mail and any other means of transmission
139 authorized by Section 16-6a-103 , except that delivery to the division means actual receipt by
140 the division.
141 (16) "Director" means a member of the board of directors.
142 (17) (a) "Distribution" means the payment of a dividend or any part of the income or
143 profit of a nonprofit corporation to the nonprofit corporation's:
144 (i) members;
145 (ii) directors; or
146 (iii) officers.
147 (b) "Distribution" does not include fair-value payments for:
148 (i) goods sold; or
149 (ii) services received.
150 (18) "Division" means the Division of Corporations and Commercial Code.
151 (19) "Effective date," when referring to a document filed by the division, means the

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153 (20) "Effective date of notice" means the date notice is effective as provided in Section
154 16-6a-103 .
155 (21) (a) "Employee" includes an officer of a nonprofit corporation.
156 (b) (i) Except as provided in Subsection (21)(b)(ii), "employee" does not include a
157 director of a nonprofit corporation.
158 (ii) Notwithstanding Subsection (21)(b)(i), a director may accept duties that make that
159 director an employee of a nonprofit corporation.
160 (22) "Executive director" means the executive director of the Department of
161 Commerce.
162 (23) "Entity" includes:
163 (a) a domestic or foreign corporation;
164 (b) a domestic or foreign nonprofit corporation;
165 (c) a limited liability company;
166 (d) a profit or nonprofit unincorporated association;
167 (e) a business trust;
168 (f) an estate;
169 (g) a partnership;
170 (h) a trust;
171 (i) two or more persons having a joint or common economic interest;
172 (j) a state;
173 (k) the United States; or
174 (l) a foreign government.
175 (24) "Foreign corporation" means a corporation for profit incorporated under a law
176 other than the laws of this state.
177 (25) "Foreign nonprofit corporation" means an entity:
178 (a) incorporated under a law other than the laws of this state; and
179 (b) that would be a nonprofit corporation if formed under the laws of this state.
180 (26) "Governmental subdivision" means:
181 (a) a county;
182 (b) a city;

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(c) a town; or
184 (d) any other type of governmental subdivision authorized by the laws of this state.
185 (27) "Individual" means:
186 (a) a natural person;
187 (b) the estate of an incompetent individual; or
188 (c) the estate of a deceased individual.
189 (28) "Internal Revenue Code" means the federal "Internal Revenue Code of 1986," as
190 amended from time to time, or to corresponding provisions of subsequent internal revenue laws
191 of the United States of America.
192 (29) (a) "Mail," "mailed," or "mailing" means deposit, deposited, or depositing in the
193 United States mail, properly addressed, first-class postage prepaid.
194 (b) "Mail," "mailed," or "mailing" includes registered or certified mail for which the
195 proper fee has been paid.
196 (30) (a) "Member" means one or more persons identified or otherwise appointed as a
197 member of a domestic or foreign nonprofit corporation as provided:
198 (i) in the articles of incorporation;
199 (ii) in the bylaws;
200 (iii) by a resolution of the board of directors; or
201 (iv) by a resolution of the members of the nonprofit corporation.
202 (b) "Member" includes "voting member."
203 (31) "Membership" refers to the rights and obligations of a member or members.
204 (32) "Mutual benefit corporation" means a nonprofit corporation all of whose assets are
205 contributed or earned by or for the members of the nonprofit corporation to serve the
205a S. [ collective ] mutual .S
206 purposes of the members.
207 [(32)] (33) "Nonprofit corporation" or "domestic nonprofit corporation" means an
208 entity, which is not a foreign nonprofit corporation, incorporated under or subject to the
209 provisions of this chapter.
210 [(33)] (34) "Notice" is as provided in Section 16-6a-103 .
211 [(34)] (35) "Party related to a director" means:
212 (a) the spouse of the director;
213 (b) a child of the director;

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215 (d) a sibling of the director;
216 (e) a parent of the director;
217 (f) the spouse of an individual described in Subsections [(34)] (35)(b) through (e);
218 (g) an individual having the same home as the director;
219 (h) a trust or estate of which the director or any other individual specified in this
220 Subsection [(34)] (35) is a substantial beneficiary; or
221 (i) any of the following of which the director is a fiduciary:
222 (i) a trust;
223 (ii) an estate;
224 (iii) an incompetent;
225 (iv) a conservatee; or
226 (v) a minor.
227 [(35)] (36) "Person" means an:
228 (a) individual; or
229 (b) entity.
230 [(36)] (37) "Principal office" means:
231 (a) the office, in or out of this state, designated by a domestic or foreign nonprofit
232 corporation as its principal office in the most recent document on file with the division
233 providing that information, including:
234 (i) an annual report;
235 (ii) an application for a certificate of authority; or
236 (iii) a notice of change of principal office; or
237 (b) if no principal office can be determined, a domestic or foreign nonprofit
238 corporation's registered office.
239 [(37)] (38) "Proceeding" includes:
240 (a) a civil suit;
241 (b) arbitration;
242 (c) mediation;
243 (d) a criminal action;
244 (e) an administrative action; or

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246 [(38)] (39) "Receive," when used in reference to receipt of a writing or other document
247 by a domestic or foreign nonprofit corporation, means the writing or other document is actually
248 received:
249 (a) by the domestic or foreign nonprofit corporation at:
250 (i) its registered office in this state; or
251 (ii) its principal office;
252 (b) by the secretary of the domestic or foreign nonprofit corporation, wherever the
253 secretary is found; or
254 (c) by any other person authorized by the bylaws or the board of directors to receive the
255 writing or other document, wherever that person is found.
256 [(39)] (40) (a) "Record date" means the date established under Part 6, Members or 7,
257 Member Meetings and Voting on which a nonprofit corporation determines the identity of the
258 nonprofit corporation's members.
259 (b) The determination described in Subsection [(39)] (40)(a) shall be made as of the
260 close of business on the record date unless another time for doing so is specified when the
261 record date is fixed.
262 [(40)] (41) "Registered agent" means the registered agent of:
263 (a) a domestic nonprofit corporation required to be maintained pursuant to Subsection
264 16-6a-501 (1)(b); or
265 (b) a foreign nonprofit corporation required to be maintained pursuant to Subsection
266 16-6a-1508 (1)(b).
267 [(41)] (42) "Registered office" means the office within this state designated by a
268 domestic or foreign nonprofit corporation as its registered office in the most recent document
269 on file with the division providing that information, including:
270 (a) articles of incorporation;
271 (b) an application for a certificate of authority; or
272 (c) a notice of change of registered office.
273 [(42)] (43) "Secretary" means the corporate officer to whom the bylaws or the board of
274 directors has delegated responsibility under Subsection 16-6a-818 (3) for:
275 (a) the preparation and maintenance of:

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(i) minutes of the meetings of:
277 (A) the board of directors; or
278 (B) the members; and
279 (ii) the other records and information required to be kept by the nonprofit corporation
280 pursuant to Section 16-6a-1601 ; and
281 (b) authenticating records of the nonprofit corporation.
282 [(43)] (44) S. "Shareholder" means the person in whose name a share is registered in
282a the records of a nonprofit corporation.
282b (45) "Share" means a unit of interest in a nonprofit corporation.
282c (46) .S "State," when referring to a part of the United States, includes:
283 (a) a state;
284 (b) a commonwealth;
285 (c) the District of Columbia;
286 (d) an agency or governmental and political subdivision of a state, commonwealth, or
287 District of Columbia;
288 (e) territory or insular possession of the United States; or
289 (f) an agency or governmental and political subdivision of a territory or insular
290 possession of the United States.
291 [(44)] S. [ (45) ] (47) .S "Street address" means:
292 (a) (i) street name and number;
293 (ii) city or town; and
294 (iii) United States post office zip code designation; or
295 (b) if, by reason of rural location or otherwise, a street name, number, city, or town
296 does not exist, an appropriate description other than that described in Subsection [(44)] (45)(a)
297 fixing as nearly as possible the actual physical location but only if the information includes:
298 (i) the rural free delivery route;
299 (ii) the county; and
300 (iii) the United States post office zip code designation.
301 [(45)] S. [ (46) ] (48) .S "United States" includes any district, authority, office, bureau,
301a commission,
302 department, and any other agency of the United States of America.
303 [(46)] S. [ (47) ] (49) .S "Vote" includes authorization by:
304 (a) written ballot; and
305 (b) written consent.
306 [(47)] S. [ (48) ] (50) .S (a) "Voting group" means all the members of one or more classes of

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308 entitled to vote and be counted together collectively on a matter.
309 (b) All members or directors entitled by this chapter, the articles of incorporation, or
310 the bylaws to vote generally on a matter are for that purpose a single voting group.
311 [(48)] (49) (a) "Voting member" means a person entitled to vote for all matters
312 required or permitted under this chapter to be submitted to a vote of the members, except as
313 otherwise provided in the articles of incorporation or bylaws.
314 (b) A person is not a voting member solely because of:
315 (i) a right the person has as a delegate;
316 (ii) a right the person has to designate a director; or
317 (iii) a right the person has as a director.
318 (c) Except as the bylaws may otherwise provide, "voting member" includes a
319 "shareholder" if the nonprofit corporation has shareholders.
320 Section 2. Section 16-6a-612 is amended to read:
321 16-6a-612. Derivative suits.
322 (1) Without affecting the right of a member or director to bring a proceeding against a
323 nonprofit corporation or its directors or officers, a proceeding may be brought in the right of a
324 nonprofit corporation to procure a judgment in its favor by a complainant who is:
325 (a) a voting member; or
326 (b) a director in a nonprofit corporation that does not have voting members.
327 [(2) In a proceeding described in Subsection (1), each complainant shall be a voting
328 member or director at the time of bringing the proceeding.]
329 [(3) (a) A complaint in a proceeding brought in the right of a nonprofit corporation
330 shall be verified and allege with particularity:]
331 [(i) the demand made, if any, to obtain action by the directors; and]
332 [(ii) (A) why the complainant could not obtain the action; or]
333 [(B) why the complainant did not make the demand.]
334 [(b) If a demand for action was made and the nonprofit corporation's investigation of
335 the demand is in progress when the proceeding is filed, the court may stay the suit until the
336 investigation is completed.]
337 [(4) (a) (i) In any action instituted in the right of a nonprofit corporation by one or more

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voting members, the court having jurisdiction over the matter may, at any time before final
339 judgment, require the plaintiff to give security for the costs and reasonable expenses that may
340 be:]
341 [(A) directly attributable to and incurred by the nonprofit corporation in the defense of
342 the action; or]
343 [(B) incurred by other parties named as defendant for which the nonprofit corporation
344 may become legally liable.]
345 [(ii) Notwithstanding Subsection (4)(a)(i), the security for the costs and reasonable
346 expenses may not include fees of attorneys.]
347 [(b) The amount of the security permitted under this Subsection (4) may from time to
348 time be increased or decreased, in the discretion of the court, upon showing that the security
349 provided has or may become inadequate or excessive.]
350 [(c) If the court finds that the action was commenced without reasonable cause, the
351 nonprofit corporation shall have recourse to the security permitted under this Subsection (4) in
352 the amount the court shall determine upon the termination of the action.]
353 [(5) A procedure pursuant to this section shall comply with the applicable rules set
354 forth in the Utah Rules of Civil Procedure, as amended from time to time.]
355 [(6) An action may not be commenced in this state by a member of a foreign nonprofit
356 corporation in the right of a foreign nonprofit corporation unless the action is permitted by the
357 laws of the state under which the foreign nonprofit corporation is incorporated.]
358 (2) A complainant may not commence or maintain a derivative proceeding unless the
359 complainant:
360 (a) S. [ was once ] is .S a voting member S. , .S or a director in a nonprofit corporation
360a that S. [ no longer
361 has ] does not have .S voting members S. , .S at the time the proceeding is brought; and
362 (b) fairly and adequately represents the nonprofit corporation's interests in enforcing
363 the nonprofit corporation's right.
364 (3) (a) A complainant may not commence a derivative proceeding until:
365 (i) a written demand is made upon the nonprofit corporation to take suitable action; and
366 (ii) 90 days have expired from the date the demand described in Subsection (3)(a)(i) is
367 made, unless:
368 (A) the complainant is notified before the 90-day period expires that the demand is

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370 (B) irreparable injury to the nonprofit corporation would result by waiting for the
371 90-day period's expiration.
372 (b) A complaint in a derivative proceeding shall be:
373 (i) verified; and
374 (ii) allege with particularity the demand made to obtain action by the board of
375 directors.
376 (c) A derivative proceeding shall comply with the procedures of Utah Rules of Civil
377 Procedure, Rule 23.1.
378 (d) The court shall stay any derivative proceeding until the inquiry is completed and for
379 an additional period as the court considers appropriate if:
380 (i) the nonprofit corporation commences an inquiry into the allegations made in the
381 demand or complaint; and
382 (ii) a person or group described in Subsection (4) is conducting an active review of the
383 allegations in good faith.
384 (e) If a nonprofit corporation proposes to dismiss a derivative proceeding pursuant to
385 Subsection (4)(a), discovery by a complainant in the derivative proceeding:
386 (i) is limited to facts relating to:
387 (A) whether the person or group conducting the inquiry is independent and
388 disinterested;
389 (B) the good faith of the inquiry; and
390 (C) the reasonableness of the procedures followed by the person or group conducting
391 the inquiry; and
392 (ii) may not extend to any facts or substantive issues with respect to the act, omission,
393 or other matter that is the subject matter of the derivative proceeding.
394 (4) (a) A derivative proceeding shall be dismissed by the court on motion by the
395 corporation if a person or group specified in Subsection (4)(b) or (4)(f) determines in good
396 faith, after conducting a reasonable inquiry upon which the person's or group's conclusions are
397 based, that the maintenance of the derivative proceeding is not in the best interest of the
398 nonprofit corporation.
399 (b) Unless a panel is appointed pursuant to Subsection (4)(f), the determination in

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401 (i) a majority vote of independent directors present at a meeting of the board of
402 directors, if the independent directors constitute a quorum; or
403 (ii) a majority vote of a committee consisting of two or more independent directors
404 appointed by a majority vote of independent directors present at a meeting of the board of
405 directors, whether or not the independent directors appointing the committee constituted a
406 quorum.
407 (c) None of the following by itself causes a director to be considered not independent
408 for purposes of this section:
409 (i) the nomination or election of the director by persons:
410 (A) who are defendants in the derivative proceeding; or
411 (B) against whom action is demanded;
412 (ii) the naming of the director as:
413 (A) a defendant in the derivative proceeding; or
414 (B) a person against whom action is demanded; or
415 (iii) the approval by the director of the act being challenged in the derivative
416 proceeding or demand if the act resulted in no personal benefit to the director.
417 (d) If a derivative proceeding is commenced after a determination is made rejecting a
418 demand by a complainant, the complaint shall allege with particularity facts establishing either:
419 (i) that a majority of the board of directors did not consist of independent directors at
420 the time the determination was made; or
421 (ii) that the requirements of Subsection (4)(a) are not met.
422 (e) (i) If a majority of the board of directors does not consist of independent directors at
423 the time the determination is made to reject a demand by a shareholder, the corporation has the
424 burden of proving that the requirements of Subsection (4)(a) are met.
425 (ii) If a majority of the board of directors consists of independent directors at the time
426 the determination is made to reject a demand by a complainant, the plaintiff has the burden of
427 proving that the requirements of Subsection (4)(a) are not met.
428 (f) (i) The court may appoint a panel of one or more independent persons upon motion
429 by the corporation to make a determination whether the maintenance of the derivative
430 proceeding is in the best interest of the corporation.

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432 of proving that the requirements of Subsection (4)(a) are not met.
433 (g) A person may appeal an interlocutory order of a court that grants or denies a motion
434 to dismiss brought pursuant to Subsection (4)(a).
435 (5) On termination of a derivative proceeding the court may order:
436 (a) the nonprofit corporation to pay the plaintiff's reasonable expenses, including
437 attorney fees, incurred in the proceeding, if it finds that the proceeding results in a substantial
438 benefit to the nonprofit corporation;
439 (b) the plaintiff to pay a defendant's reasonable expenses, including attorney fees,
440 incurred in defending the proceeding, if it finds that the proceeding was commenced or
441 maintained:
442 (i) without reasonable cause; or
443 (ii) for an improper purpose; or
444 (c) a party to pay an opposing party's reasonable expenses, including attorney fees,
445 incurred because of the filing of a pleading, motion, or other paper, if the court finds that the
446 pleading, motion, or other paper was:
447 (i) (A) not well grounded in fact, after reasonable inquiry; or
448 (B) not warranted by existing law or a good faith argument for the extension,
449 modification, or reversal of existing law; and
450 (ii) interposed for an improper purpose, such as to:
451 (A) harass;
452 (B) cause unnecessary delay; or
453 (C) cause needless increase in the cost of litigation.
454 Section 3. Section 16-6a-812 is amended to read:
455 16-6a-812. Meetings.
456 (1) Unless the bylaws eliminate the requirement for holding an annual meeting, a
457 nonprofit corporation that does not have voting members shall hold a meeting of the directors
458 annually:
459 (a) at a time and date stated in or fixed in accordance with the bylaws; or
460 (b) if a time and date is not stated in or fixed in accordance with the bylaws, at a time
461 and date stated in or fixed in accordance with a resolution of the board of directors.

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[(1)] (2) The board of directors may hold regular or special meetings in or out of this
463 state.
464 [(2)] (3) (a) Unless otherwise provided in the bylaws, the board of directors may permit
465 any director to participate in a [regular or special] meeting by, or conduct the meeting through
466 the use of, any means of communication by which all directors participating may hear each
467 other during the meeting.
468 (b) A director participating in a meeting by a means permitted under Subsection [(1)]
469 (2) is considered to be present in person at the meeting.
470 (4) The failure to hold an annual or regular meeting at the time and date determined
471 pursuant to Subsection (1) or (2) does not:
472 (a) affect the validity of any corporate action; or
473 (b) result in forfeiture or dissolution of the nonprofit corporation.
474 Section 4. Section 16-6a-814 is amended to read:
475 16-6a-814. Notice of meeting.
476 (1) (a) A nonprofit corporation shall give to each director entitled to vote at an annual
477 meeting notice S. of the annual meeting consistent with the nonprofit corporation's bylaws .S
477a in a fair and reasonable manner.
478 (b) S. [ Except as otherwise provided in the bylaws, "fair and reasonable," as used in
479 Subsection (1)(a), has the same meaning as set forth in Subsection 16-6a-704 (3)(a), as the
480 context permits. ] Notice under Subsection (1)(a) is fair and reasonable if:
480a (a) the nonprofit corporation notifies each director of the place, date, and time of the
480b annual meeting:
480c (i) no fewer than ten days before the meeting H. , unless otherwise provided by
480d1 the bylaws .H ;
480d (ii) if notice is mailed by other than first-class or registered mail, no fewer than 30
480e days, nor more than 60 days before the meeting date; and
480f (iii) if notice is given by newspaper as provided in Subsection 16-6a-103(2), by
480g publication three separate times with:
480h (A) the first of the publications no more than 60 days before the meeting date; and
480i (B) the last of the publications no fewer than ten days before the meeting date. .S
481 [(1)] (2) Unless otherwise provided in this chapter or in the bylaws, regular meetings of
482 the board of directors may be held without notice of the date, time, place, or purpose of the
483 meeting.
484 [(2)] (3) (a) Unless the bylaws provide for a longer or shorter period, special meetings
485 of the board of directors shall be preceded by at least two days notice of the date, time, and

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place of the meeting.
487 (b) The notice required by Subsection [(2)] (3)(a) need not describe the purpose of the
488 special meeting unless otherwise required by this chapter or the bylaws.
489 Section 5. Section 16-6a-815 is amended to read:
490 16-6a-815. Waiver of notice.
491 (1) (a) A director may waive any notice of a meeting before or after the time and date
492 of the meeting stated in the notice.

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494 (i) be in writing;
495 (ii) signed by the director entitled to the notice; and
496 (iii) be delivered to the nonprofit corporation for filing with the corporate records.
497 (c) The delivery and filing required by Subsection (1)(b) may not be conditions of the
498 effectiveness of the waiver.
499 (2) A director's attendance at or participation in a meeting waives any required notice
500 to that director of the meeting unless:
501 (a) (i) at the beginning of the meeting or promptly upon the director's later arrival, the
502 director objects to holding the meeting or transacting business at the meeting because of lack of
503 notice or defective notice; and
504 (ii) after objecting, the director does not vote for or assent to action taken at the
505 meeting; or
506 (b) if special notice was required of a particular purpose pursuant to Subsection
507 [ 16-6a-814 (2)] 16-6a-814 (3):
508 (i) the director objects to transacting business with respect to the purpose for which the
509 special notice was required; and
510 (ii) after objecting, the director does not vote for or assent to action taken at the
511 meeting with respect to the purpose.
512 Section 6. Section 16-6a-822 is amended to read:
513 16-6a-822. General standards of conduct for directors and officers.
514 (1) (a) A director shall discharge the director's duties as a director, including the
515 director's duties as a member of a committee of the board, in accordance with Subsection (2).
516 (b) An officer with discretionary authority shall discharge the officer's duties under that
517 authority in accordance with Subsection (2).
518 (2) A director or an officer described in Subsection (1) shall discharge the director or
519 officer's duties:
520 (a) in good faith;
521 (b) with the care an ordinarily prudent person in a like position would exercise under
522 similar circumstances; and
523 (c) in a manner the director or officer reasonably believes to be in the best interests of

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the nonprofit corporation.
525 (3) In discharging duties, a director or officer is entitled to rely on information,
526 opinions, reports, or statements, including financial statements and other financial data, if
527 prepared or presented by:
528 (a) one or more officers or employees of the nonprofit corporation whom the director
529 or officer reasonably believes to be reliable and competent in the matters presented;
530 (b) legal counsel, a public accountant, or another person as to matters the director or
531 officer reasonably believes are within the person's professional or expert competence;
532 (c) religious authorities or ministers, priests, rabbis, or other persons:
533 (i) whose position or duties in the nonprofit corporation, or in a religious organization
534 with which the nonprofit corporation is affiliated, the director or officer believes justify
535 reliance and confidence; and
536 (ii) who the director or officer believes to be reliable and competent in the matters
537 presented; or
538 (d) in the case of a director, a committee of the board of directors of which the director
539 is not a member if the director reasonably believes the committee merits confidence.
540 (4) A director or officer is not acting in good faith if the director or officer has
541 knowledge concerning the matter in question that makes reliance otherwise permitted by
542 Subsection (3) unwarranted.
543 (5) A director, regardless of title, may not be considered to be a trustee with respect to
544 any property held or administered by the nonprofit corporation including property that may be
545 subject to restrictions imposed by the donor or transferor of the property.
546 (6) A director or officer is not liable to the nonprofit corporation, its members, or any
547 conservator or receiver, or any assignee or successor-in-interest of the nonprofit corporation or
548 member, for any action taken, or any failure to take any action, as an officer or director, as the
549 case may be, unless:
550 (a) the director or officer has breached or failed to perform the duties of the office as
551 set forth in this section; and
552 S. [ [ ] (b) the breach or failure to perform constitutes: [ ] ]
553 [ [ ] (i) willful misconduct; .S [ or ] S.[ ] ]
554 [ [ ] (ii) intentional infliction of harm on: [ ] ] .S

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S. [ [ ] (A) the nonprofit corporation; or [ ] ]
556 [ [ ] (B) the members of the nonprofit corporation [ .] ] ; or
557 [ (b) ] iii .S the breach or failure to perform constitutes gross negligence.
558 Section 7. Section 16-6a-903 is amended to read:
559 16-6a-903. Mandatory indemnification of directors.
560 (1) Unless limited by its [articles of incorporation] bylaws, a nonprofit corporation
561 shall indemnify a director described in Subsection (2) against reasonable expenses incurred by
562 the director in connection with the proceeding or claim with respect to which the director has
563 been successful.
564 (2) Subsection (1) applies to a director who was successful, on the merits or otherwise,
565 in the defense of:
566 (a) any proceeding to which the director was a party because the director is or was a
567 director of the nonprofit corporation; or
568 (b) any claim, issue, or matter in the proceeding, to which the director was a party
569 because the director is or was a director of the nonprofit corporation.
570 Section 8. Section 16-6a-905 is amended to read:
571 16-6a-905. Court-ordered indemnification of directors.
572 (1) Unless a nonprofit corporation's [articles of incorporation] bylaws provide
573 otherwise, a director of the nonprofit corporation who is or was a party to a proceeding may
574 apply for indemnification to:
575 (a) the court conducting the proceeding; or
576 (b) another court of competent jurisdiction.
577 (2) On receipt of an application described in Subsection (1), the court, after giving any
578 notice the court considers necessary, may order indemnification in the following manner:
579 (a) if the court determines that the director is entitled to mandatory indemnification
580 under Section 16-6a-903 , the court shall:
581 (i) order indemnification; and
582 (ii) order the nonprofit corporation to pay the director's reasonable expenses incurred to
583 obtain court-ordered indemnification; and
584 (b) if the court determines that the director is fairly and reasonably entitled to
585 indemnification in view of all the relevant circumstances, whether or not the director met the

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587 described in Subsection 16-6a-902 (4), the court may order indemnification as the court
588 determines to be proper, except that the indemnification with respect to any proceeding in
589 which liability has been adjudged in the circumstances described in Subsection 16-6a-902 (4) is
590 limited to reasonable expenses incurred.
591 Section 9. Section 16-6a-1008 is amended to read:
592 16-6a-1008. Conversion to a corporation.
593 (1) (a) A domestic nonprofit corporation may convert to a corporation subject to Title
594 16, Chapter 10a, Utah Revised Business Corporation Act, by filing an amendment of its articles
595 of incorporation with the division pursuant to this section.
596 (b) The day on which a nonprofit domestic corporation files an amendment under this
597 section, the domestic nonprofit corporation becomes a corporation subject to Title 16, Chapter
598 10a, Utah Revised Business Corporation Act.
599 (2) The amendment of the articles of incorporation to convert to a corporation shall:
600 (a) revise the statement of purpose;
601 (b) delete:
602 (i) the authorization for members; and
603 (ii) any other provisions relating to memberships;
604 (c) authorize shares:
605 (i) stating the number of shares; and
606 (ii) including the information required by Section 16-10a-601 with respect to each class
607 of shares the corporation is to be authorized to issue;
608 (d) make such other changes as may be necessary or desired; and
609 (e) if the corporation has any members, provide for:
610 (i) the cancellation of the memberships; or
611 (ii) the conversion of the memberships to shares of the corporation.
612 (3) If the nonprofit corporation has any voting members, an amendment to convert to a
613 corporation shall be approved by all of the members regardless of limitations or restrictions on
614 the voting rights of the members.
615 (4) If an amendment to the articles of incorporation filed pursuant to this section is
616 included in a merger agreement, this section applies, except that any provisions for cancellation

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618 (a) shall be in the merger agreement; and
619 (b) may not be in the amendment of the articles of incorporation.
620 (5) A conversion under this section may not result in a violation, directly or indirectly,
621 of:
622 (a) Section 16-6a-1301 ; or
623 (b) any other provision of this chapter.
624 Section 10. Section 16-6a-1008.7 is amended to read:
625 16-6a-1008.7. Conversion to or from a domestic limited liability company.
626 (1) (a) A domestic nonprofit corporation may convert to a domestic limited liability
627 company subject to Title 48, Chapter 2c, Utah Revised Limited Liability Company Act, by
628 complying with:
629 (i) this Subsection (1); and
630 (ii) Section 48-2c-1401 .
631 (b) If a domestic nonprofit corporation converts to a domestic limited liability company
632 in accordance with this Subsection (1), the articles of conversion shall:
633 (i) comply with Section 48-2c-1402 ; and
634 (ii) if the corporation has any members, provide for:
635 (A) the cancellation of any membership; or
636 (B) the conversion of any membership in the domestic nonprofit corporation to a
637 membership interest in the domestic limited liability company.
638 (c) In accordance with Section 48-2c-1404 , before articles of conversion may be filed
639 with the division, the conversion shall be approved:
640 (i) in the manner provided for the articles of incorporation or bylaws of the domestic
641 nonprofit corporation; or
642 (ii) if the articles of incorporation or bylaws of the domestic nonprofit corporation do
643 not provide the method for approval:
644 (A) if the domestic nonprofit corporation has voting members, by all of the members of
645 the domestic nonprofit corporation regardless of limitations or restrictions on the voting rights
646 of the members; or
647 (B) if the nonprofit domestic corporation does not have voting members, by a majority

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649 (I) the directors in office at the time the conversion is approved by the board of
650 directors; or
651 (II) if directors have not been appointed or elected, the incorporators.
652 (2) A domestic limited liability company may convert to a domestic nonprofit
653 corporation subject to this chapter by:
654 (a) filing articles of incorporation in accordance with this chapter; and
655 (b) complying with Section 48-2c-1406 .
656 (3) Any conversion under this section may not result in a violation, directly or
657 indirectly, of:
658 (a) Section 16-6a-1301 ; or
659 (b) any other provision of this chapter.
660 Section 11. Section 16-6a-1010 is amended to read:
661 16-6a-1010. Amendment of bylaws by board of directors or members.
662 (1) The board of directors may amend the bylaws at any time to add, change, or delete
663 a provision, unless:
664 (a) this chapter or the articles of incorporation or bylaws:
665 (i) reserve the power exclusively to the members in whole or part; or
666 (ii) otherwise prohibit the board of directors from amending the bylaws to add, change,
667 or delete a provision; or
668 (b) it would result in a change of the rights, privileges, preferences, restrictions, or
669 conditions of a membership class as to voting, dissolution, redemption, or transfer by changing
670 the rights, privileges, preferences, restrictions, or conditions of another class.
671 (2) (a) [The] Unless otherwise provided by the bylaws, the members may amend the
672 bylaws even though the bylaws may also be amended by the board of directors.
673 (b) Amendments to the bylaws by members shall be made in accordance with Sections
674 16-6a-1003 and 16-6a-1004 as if each reference in Sections 16-6a-1003 and 16-6a-1004 to the
675 article of incorporation was a reference to the bylaws.
676 Section 12. Section 16-6a-1101 is amended to read:
677 16-6a-1101. Merger.
678 (1) One or more [nonprofit corporations] domestic corporations, foreign corporations,

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domestic nonprofit corporations, or foreign nonprofit corporations may merge into S. [ another ] a .S
680 nonprofit corporation:
681 (a) if the board of directors of each [nonprofit corporation] domestic corporation,
682 foreign corporation, domestic nonprofit corporation, or foreign nonprofit corporation party to
683 the merger adopts a plan of merger; [and]
684 (b) if [required by Section 16-6a-1102 ,] the members of [the] each domestic nonprofit
685 corporation entitled to vote on the plan of merger, approve the plan of merger[.] if required by
686 Section 16-6a-1102 ;
687 (c) if the shareholders of each domestic corporation entitled to vote on the plan of
688 merger, approve the plan of merger, if required by Section 16-10a-1103 ;
689 (d) if the merger is permitted by and consistent with the laws of the state or country
690 under whose law each foreign corporation or foreign nonprofit corporation party to the merger
691 is incorporated;
692 (e) if the shareholders of each such foreign corporation approve the plan of merger and
693 as required by applicable law of the states or countries under whose law each foreign
694 corporation party to the merger is incorporated; and
695 (f) if the members of each such foreign nonprofit corporation approve the plan of
696 merger and as required by applicable law of the states or countries under whose law each
697 foreign nonprofit corporation party to the merger is incorporated.
698 (2) The plan of merger required by Subsection (1) shall set forth:
699 (a) the name of each [nonprofit corporation] party to the merger planning to merge;
700 (b) the name of the surviving domestic nonprofit corporation into which each
701 [nonprofit corporation] party to the merger plans to merge;
702 (c) the terms and conditions of the merger;
703 (d) the manner and basis of converting in whole or part the shares or memberships [of
704 each nonprofit corporation, if any,] if any, of each party to the merger into S. shares, .S
704a memberships,
705 obligations, or other interests of:
706 (i) the surviving domestic nonprofit corporation;
707 (ii) any other entity; or
708 (iii) into money or other property; and
709 (e) any amendments to the articles of incorporation of the surviving domestic nonprofit

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Senate 2^nd Reading Amendments 2-20-2006 rd/crp 710

corporation to be effected by the merger.
711 (3) In addition to the provisions required by Subsection (2), the plan of merger may set
712 forth other provisions relating to the merger.
712a S. (4) One or more domestic corporations may merge into a domestic nonprofit corporation if:
712b (a) the board of directors of each participating domestic corporation adopts the plan of
712c merger;
712d (b) the shareholders of each participating domestic corporation adopt the plan of
712e merger in accordance with Section 16-10a-1103; and
712f (c) the merger is effected in compliance with Chapter 6a, Part 11, Merger. .S
713 Section 13. Section 16-6a-1102 is amended to read:
714 16-6a-1102. Action on plan of merger.
715 (1) After adopting the plan of merger, the board of directors of each domestic nonprofit
716 corporation that is a party to the merger shall submit the plan of merger to its members, if any
717 are entitled to vote on the plan of merger, for approval.
718 (2) If the domestic nonprofit corporation has members entitled to vote with respect to
719 the approval of a plan of merger, a plan of merger is approved by the members if:
720 (a) (i) the board of directors recommends the plan of merger to the members entitled to
721 vote on the plan of merger; or
722 (ii) (A) the board of directors determines that, because of conflict of interest or other
723 special circumstances, it should make no recommendation; and
724 (B) communicates the basis for its determination to the members with the plan; and
725 (b) the members entitled to vote on the plan of merger approve the plan as provided in
726 Subsection (7).
727 (3) After adopting the plan of merger, the board of directors of each domestic nonprofit
728 corporation party to the merger shall submit the plan of merger for written approval by any
729 person or persons:
730 (a) whose approval is required by the articles of incorporation of the domestic
731 nonprofit corporation; and
732 (b) as required by Section 16-6a-1013 for an amendment to the articles of
733 incorporation or bylaws.
734 (4) (a) If the domestic nonprofit corporation does not have members entitled to vote on
735 a merger, the merger shall be approved and adopted by a majority of the directors elected and
736 in office at the time the plan of merger is considered by the board of directors.

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(b) The domestic nonprofit corporation shall provide notice of any meeting of the
738 board of directors at which the approval described in Subsection (4)(a) is to be obtained in
739 accordance with Section 16-6a-814 .
740 (c) The notice required by Subsection (4)(b) shall state that the purpose, or one of the

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742 (5) The board of directors may condition the effectiveness of the plan of merger on any
743 basis.
744 (6) (a) The domestic nonprofit corporation shall give notice, in accordance with
745 Section 16-6a-704 , to each member entitled to vote on the plan of merger of the members'
746 meeting at which the plan will be voted on.
747 (b) The notice required by Subsection (6)(a) shall:
748 (i) state that the purpose, or one of the purposes, of the meeting is to consider the plan
749 of merger; and
750 (ii) contain or be accompanied by a copy of the plan of merger or a summary of the
751 plan of merger.
752 (7) The plan of merger shall be approved by the votes required by Sections 16-6a-714
753 and 16-6a-715 by every voting group entitled to vote on the plan of merger unless a greater
754 vote is required by:
755 (a) this chapter;
756 (b) the articles of incorporation;
757 (c) bylaws adopted by the members; or
758 (d) the board of directors acting pursuant to Subsection (5).
759 (8) Separate voting by voting groups is required on a plan of merger if the plan
760 contains a provision that, if contained in an amendment to the articles of incorporation, would
761 require action by one or more separate voting groups on the amendment.
762 Section 14. Section 16-6a-1103 is amended to read:
763 16-6a-1103. Articles of merger.
764 (1) After a plan of merger is approved, pursuant to Section 16-6a-1102 , the surviving
765 domestic nonprofit corporation shall deliver to the division for filing articles of merger setting
766 forth:
767 (a) the plan of merger;
768 (b) if shareholder or member approval was not required of any party to the merger:
769 (i) a statement to the effect that [member] approval was not required; and
770 (ii) a statement that the plan of merger was approved by a sufficient vote of the board
771 of directors of [the nonprofit corporation] each party to the merger;

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773 domestic corporation, foreign corporation, domestic nonprofit corporation, or foreign nonprofit
774 corporation party to the merger was required, a statement that the number of votes cast for the
775 plan by each voting group entitled to vote separately on the merger was sufficient for approval
776 by that voting group; and
777 (d) if approval of the plan by some person or persons other than the shareholders,
778 members, or the board of directors is required pursuant to Subsection 16-6a-1102 (3), or other
779 applicable law, a statement that the approval was obtained.
780 (2) A merger takes effect upon the effective date stated in the articles of merger, which
781 may not be prior to the date the articles of merger are filed.
782 (3) Articles of merger shall be executed by each party to the merger.
783 Section 15. Section 16-6a-1104 is amended to read:
784 16-6a-1104. Effect of merger.
785 (1) When a merger takes effect:
786 (a) every [other nonprofit corporation] domestic corporation, foreign corporation,
787 domestic nonprofit corporation, or foreign nonprofit corporation party to the merger merges
788 into the surviving domestic nonprofit corporation;
789 (b) the separate existence of every [nonprofit corporation] domestic corporation,
790 foreign corporation, domestic nonprofit corporation, or foreign nonprofit corporation party to
791 the merger except the surviving domestic nonprofit corporation ceases;
792 (c) the title to all real estate and other property owned by every [other nonprofit
793 corporation] domestic corporation, foreign corporation, domestic nonprofit corporation, or
794 foreign nonprofit corporation party to the merger is transferred to and vested in the surviving
795 domestic nonprofit corporation without reversion or impairment;
796 (d) the surviving domestic nonprofit corporation has all liabilities of each [nonprofit
797 corporation] domestic corporation, foreign corporation, domestic nonprofit corporation, or
798 foreign nonprofit corporation party to the merger;
799 (e) (i) a proceeding pending by or against any [nonprofit corporation] party to the
800 merger may be continued as if the merger did not occur; or
801 (ii) the surviving domestic nonprofit corporation may be substituted in the proceeding
802 for the [nonprofit corporation] party to the merger whose existence ceased;

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803

(f) the articles of incorporation of the surviving domestic nonprofit corporation are
804 amended to the extent provided in the plan of merger; and
805 (g) the share or memberships of each [nonprofit corporation] domestic corporation,
806 foreign corporation, domestic nonprofit corporation, or foreign nonprofit corporation party to
807 the merger that are to be converted into S. shares, .S memberships, obligations, or other
807a interests of the
808 surviving domestic nonprofit corporation or into money or other property are converted, and
809 the former holders of the shares and memberships are entitled only to the rights provided in the
810 articles of merger.
811 (2) (a) A transfer to and vesting in the surviving domestic nonprofit corporation
812 described in Subsection (1)(c) occurs by operation of law.
813 (b) Consent or approval of any other person may not be required in connection with
814 any transfer or vesting unless the consent or approval is specifically required in the event of
815 merger by:
816 (i) law; or
817 (ii) express provision in any contract, agreement, decree, order, or other instrument to
818 which any of the [nonprofit corporations] domestic corporations, foreign corporations,
819 domestic nonprofit corporations, or foreign nonprofit corporations so merged is a party or by
820 which it is bound.
821 Section 16. Section 16-6a-1302 is amended to read:
822 16-6a-1302. Authorized distributions.
823 (1) A nonprofit corporation may:
824 (a) make distributions [of its income] or distribute the nonprofit corporation's assets to
825 a member that is a domestic or foreign nonprofit corporation;
826 (b) pay compensation in a reasonable amount to its members, directors, or officers for
827 services rendered;
828 (c) if a cooperative nonprofit corporation, make distributions consistent with its
829 purposes; and
830 (d) confer benefits upon its members in conformity with its purposes.
831 [(2) A nonprofit corporation may make distributions upon dissolution in conformity
832 with this chapter.]
833 (2) A nonprofit corporation may make distributions upon dissolution:

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S. [ (a) in conformity with this chapter;
835 (b) ] (a) .S to a member that is a domestic or foreign nonprofit corporation; S. [ and
836 (c) ] (b) .S to its members if it is a mutual benefit corporation S. [ . ] ; and
836a (c) otherwise in conformity to this chapter.
836b (3) A mutual benefit corporation may purchase a member's membership in
836c conformity with Section 16-6a-610 if, after the purchase is completed:
836d (a) the mutual benefit corporation would be able to pay its debts as they become due in
836e the usual course of its activities; and
836f (b) the mutual benefit corporation's total assets would at least equal the sum of its total
836g liabilities. .S
837 Section 17. Section 16-6a-1405 is amended to read:
838 16-6a-1405. Effect of dissolution.
839 (1) A dissolved nonprofit corporation continues its corporate existence but may not
840 carry on any activities except as is appropriate to wind up and liquidate its affairs, including:
841 (a) collecting its assets;
842 (b) returning, transferring, or conveying assets held by the nonprofit corporation upon a
843 condition requiring return, transfer, or conveyance, which condition occurs by reason of the
844 dissolution, in accordance with the condition;
845 (c) transferring, subject to any contractual or legal requirements, its assets as provided
846 in or authorized by its articles of incorporation or bylaws;
847 (d) discharging or making provision for discharging its liabilities; and
848 (e) doing every other act necessary to wind up and liquidate its assets and affairs.
849 [(2) (a) Upon dissolution of a nonprofit corporation described under Section 501(c)(3),
850 Internal Revenue Code, and exempt from tax under Section 501(a), Internal Revenue Code, or
851 the corresponding section of any future federal tax code, the assets of the nonprofit corporation
852 shall be distributed:]
853 [(i) for one or more exempt purposes under Section 501(c)(3), Internal Revenue Code;]
854 [(ii) to the federal government for a public purpose; or]
855 [(iii) to a state or local government, for a public purpose.]
856 [(b) Any assets not disposed of under Subsection (2)(a) shall be disposed of by the
857 district court for the county in which the principal office of the nonprofit corporation is then
858 located, exclusively as determined by the court:]
859 [(i) for one or more exempt purposes under Section 501(c)(3), Internal Revenue Code;
860 or]
861 [(ii) to organizations that are organized and operated exclusively for exempt or public
862 purposes.]
863 [(c) The conversion to a corporation under Section 16-6a-1008 of a nonprofit
864 corporation described under Section 501(c)(3), Internal Revenue Code, and exempt from tax

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866 code, shall be considered to be a dissolution of that nonprofit corporation for purposes of this
867 Subsection (2).]
868 (2) Notwithstanding any other provision of this chapter, the distribution of assets of a
869 nonprofit corporation upon its dissolution shall be consistent with all applicable requirements
870 and limitations set forth in the Internal Revenue Code.
871 (3) Dissolution of a nonprofit corporation does not:
872 (a) transfer title to the nonprofit corporation's property;
873 (b) subject its directors or officers to standards of conduct different from those
874 prescribed in this chapter;
875 (c) change quorum or voting requirements for its board of directors or members;
876 (d) change provisions for selection, resignation, or removal of its directors or officers,
877 or both;
878 (e) change provisions for amending its bylaws or its articles of incorporation;
879 (f) prevent commencement of a proceeding by or against the nonprofit corporation in
880 its corporate name; or
881 (g) abate or suspend a proceeding pending by or against the nonprofit corporation on
882 the effective date of dissolution.
883 Section 18. Section 42-2-6.6 is amended to read:
884 42-2-6.6. Assumed name.
885 (1) The assumed name:
886 (a) may not contain any word or phrase that indicates or implies that the business is
887 organized for any purpose other than one or more of the purposes contained in its application;
888 (b) shall be distinguishable from any registered name or trademark of record in the
889 offices of the Division of Corporations and Commercial Code, as defined in Subsection
890 16-10a-401 (5), except as authorized by the Division of Corporations and Commercial Code
891 pursuant to Subsection (2);
892 (c) without the written consent of the United States Olympic Committee, may not
893 contain the words:
894 (i) "Olympic";
895 (ii) "Olympiad"; or

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897 (d) without the written consent of the Division of Consumer Protection issued in
898 accordance with Section 13-34-114 , may not contain the words:
899 (i) "university";
900 (ii) "college"; or
901 (iii) "institute"; and
902 (e) an assumed name authorized for use in this state on or after May 1, 2000, may not
903 contain the words:
904 (i) "incorporated";
905 (ii) "inc."; or
906 (iii) a variation of "incorporated" or "inc."
907 (2) Notwithstanding Subsection (1)(e), an assumed name may contain a word listed in
908 Subsection (1)(e) if the Division of Corporations and Commercial Code authorizes the use of
909 the name by a corporation as defined in:
910 (a) Subsection 16-6a-102 (25);
911 (b) Subsection 16-6a-102 [(32)](33);
912 (c) Subsection 16-10a-102 (11); or
913 (d) Subsection 16-10a-102 (20).
914 (3) The Division of Corporations and Commercial Code shall authorize the use of the
915 name applied for if:
916 (a) the name is distinguishable from one or more of the names and trademarks that are
917 on the division's records; or
918 (b) the applicant delivers to the division a certified copy of the final judgment of a
919 court of competent jurisdiction establishing the applicant's right to use the name applied for in
920 this state.
921 (4) The assumed name, for purposes of recordation, shall be either translated into
922 English or transliterated into letters of the English alphabet if it is not in English.
923 (5) The Division of Corporations and Commercial Code may not approve an
924 application for an assumed name to any person violating this section.
925 (6) The director of the Division of Corporations and Commercial Code shall have the
926 power and authority reasonably necessary to interpret and efficiently administer this section

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- 31 - 927 and to perform the duties imposed on the division by this section.
928 (7) A name that implies by any word in the name that it is an agency of the state or of
929 any of its political subdivisions, if it is not actually such a legally established agency, may not
930 be approved for filing by the Division of Corporations and Commercial Code.
931 (8) Section 16-10a-403 applies to this chapter.
932 (9) (a) The requirements of Subsection (1)(d) do not apply to a person who filed a
933 certificate of assumed and of true name with the Division of Corporations and Commercial
934 Code on or before May 4, 1998, until December 31, 1998.
935 (b) On or after January 1, 1999, any person who carries on, conducts, or transacts
936 business in this state under an assumed name shall comply with the requirements of Subsection
937 (1)(d).

Legislative Review Note
as of 2-1-06 10:26 AM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel