HB-5681, As Passed Senate, June 27, 2008

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5681

     A bill to amend 1982 PA 162, entitled

"Nonprofit corporation act,"

by amending sections 106, 404, 505, 548, 611, 901, and 922 (MCL

450.2106, 450.2404, 450.2505, 450.2548, 450.2611, 450.2901, and

450.2922), sections 106, 404, and 901 as amended by 2008 PA 9 and

section 611 as amended by 1984 PA 209.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

     Sec. 106. (1) "Charitable purpose corporation" means a

nonprofit corporation that meets any of the following:

     (a) Is exempt or qualifies for exemption under section

501(c)(3) of the internal revenue code, 26 USC 501.

     (b) Is a corporation whose purposes, structure, or activities

are exclusively those that are described in section 501(c)(3) of

the internal revenue code, 26 USC 501.

     (c) Is a corporation organized or held out to be organized

exclusively for 1 or more charitable purposes.

     (2) (1) "Corporation" or "domestic corporation" means a

nonprofit corporation.

(3) (2) "Director" means an individual who is a member of the

board of a corporation. The term is synonymous with "trustee" of a

corporation or other similar designation.

(4) (3) "Electronic transmission" or "electronically

transmitted" means any form of communication that meets all of the

following:

     (a) It does not directly involve the physical transmission of

paper.

     (b) It creates a record that may be retained and retrieved by

the recipient.

     (c) It may be directly reproduced in paper form by the

recipient through an automated process.

     Sec. 404. (1) Except as otherwise provided in this act, notice

of the time, place, if any, and purposes of a meeting of

shareholders or members shall be given in any of the following

manners:

     (a) By written notice, given personally, by mail, or by

electronic transmission, not less than 10 nor more than 60 days

before the date of the meeting to each shareholder or member of

record entitled to vote at the meeting.

     (b) By including the notice, prominently displayed, in a

newspaper or other periodical regularly published at least

semiannually by or in behalf of the corporation and addressed and

mailed, postage prepaid, to a member or shareholder entitled to

vote at the meeting not less than 10 nor more than 60 days before

the meeting.

     (2) If a meeting of the shareholders or members is adjourned

to another time or place, it is not necessary, unless the bylaws

otherwise provide, to give notice of the adjourned meeting if the

time and place to which the meeting is adjourned are announced at

the meeting at which the adjournment is taken. At the adjourned

meeting, only business that might have been transacted at the

original meeting may be transacted if a notice of the adjourned

meeting is not given. If after the adjournment the board fixes a

new record date for the adjourned meeting, a notice of the

adjourned meeting shall be given to each shareholder or member of

record on the new record date entitled to notice under subsection

(1).

     (3) If a meeting of shareholders or members is adjourned under

subsection (2), only business that might have been transacted at

the original meeting may be transacted at the adjourned meeting if

a notice of the adjourned meeting is not given.

(4) (3) Attendance of a person at a meeting of shareholders or

members, in person or by proxy, constitutes a waiver of objection

to lack of notice or defective notice of the meeting, unless the

shareholder or member at the beginning of the meeting objects to

holding the meeting or transacting business at the meeting.

(5) (4) If a shareholder or member is permitted to participate

in and vote at a meeting by remote communication under section 405,

the notice described in subsection (1) shall include a description

of the means of remote communication by which a shareholder or

member may participate.

     Sec. 505. (1) The Except as provided in subsection (5), the

board shall consist of 1 3 or more directors. The bylaws shall fix

the number of directors shall be fixed by or in the manner provided

in the bylaws or establish the manner for fixing the number, unless

the articles of incorporation fix the number.

     (2) The articles of incorporation or a bylaw adopted by the

shareholders, or members, or incorporators of a corporation

organized upon on a stock or membership basis may specify the term

of office and the manner of election or appointment of directors.

If the articles of incorporation or bylaws do not so specify the

term of office or manner of election or appointment of directors,

the first board of directors shall hold office until the first

annual meeting of shareholders or members. , and at At the first

annual meeting of shareholders or members and at each subsequent

annual meeting thereafter the shareholders or members shall elect

directors to hold office until the succeeding annual meeting,

except in case of the classification of directors as permitted by

under this act.

     (3) The articles of incorporation or a bylaw of a corporation

organized upon on a directorship basis shall specify the term of

office and the manner of election or appointment of directors.

     (4) A director shall hold office for the term for which the

director he or she is elected or appointed and until a his or her

successor is elected or appointed and qualified, or until the his

or her resignation or removal. A director may resign by written

notice to the corporation. The A resignation of a director is

effective upon its receipt when it is received by the corporation

or a subsequent later time as if set forth in the notice of

resignation.

     (5) Beginning 180 days after the effective date of the

amendatory act that added this subsection, the board of a

corporation that is in existence on the effective date of the

amendatory act that added this subsection shall consist of 3 or

more directors.

     Sec. 548. (1) Unless Except as provided in subsection (4) and

unless otherwise prohibited by law, a corporation may lend money

to, or guarantee an obligation of, or otherwise assist an officer

or employee of the corporation or of its a subsidiary, including an

officer or employee who is a director of the corporation or its

subsidiary, when, if in the judgment of the board, the loan,

guaranty, or assistance may is reasonably be expected to benefit

the corporation. The

     (2) A loan, guaranty, or assistance described in subsection

(1) may be with or without interest, and may be unsecured, or

secured in such a manner as that the board approves. Nothing in

this section shall be deemed to

     (3) This section does not deny, limit, or restrict the powers

of guaranty or warranty of a corporation at common law or under any

statute.

     (4) If a corporation is a charitable purpose corporation, the

corporation shall not provide loans to or guarantee an obligation

of an officer or director of the corporation or a subsidiary of a

corporation, unless the officer or director is also a client of the

corporation and the loan or guaranty is necessary to carry out the

corporation's charitable purposes.

     Sec. 611. (1) Before the first meeting of the board, the

incorporators may amend the articles of incorporation by complying

with section 631(1).

     (2) Other amendments of the articles of incorporation, except

as otherwise provided in this act, shall be approved by the

shareholders or members entitled to vote thereon. In the case of a

corporation organized upon a directorship basis, such amendments

shall be approved by the directors, as provided in this section,

except as otherwise provided in this act or the articles of

incorporation. Except for an amendment described in subsection (1)

and except as otherwise provided in this act, a corporation must

adopt any amendment to the articles of incorporation in 1 of the

following manners as provided in this section:

     (a) If the corporation is organized on a membership basis, by

a vote of the members entitled to vote on the amendment.

     (b) If the corporation is organized on a stock basis, by a

vote of the shareholders entitled to vote on the amendment.

     (c) If the corporation is organized on a directorship basis,

unless the articles of incorporation specify a different manner, by

a vote of the directors.

     (3) Notice of a meeting, setting forth the proposed amendment

or a summary of the changes to be effected thereby shall be given

to each shareholder or member of record or director entitled to

vote thereon A corporation shall give notice of a meeting to

consider an amendment to the articles of incorporation to each

member, shareholder, or director entitled to vote on the amendment,

as applicable. The notice shall contain the proposed amendment or a

summary of the changes that will occur if the amendment is adopted.

The corporation shall provide the notice within the time and in the

manner provided in this act for the giving of notice of meetings of

shareholders, members, or directors, provided except that the

corporation shall give notice of the meeting is given to each

director then in office not less than 10 days before the meeting.

     (4) At the a meeting to consider an amendment to the articles

of incorporation, a vote of shareholders, members, or directors

entitled to vote thereon shall be taken on the proposed amendment.

The proposed amendment shall be adopted upon receiving is adopted

if it receives the affirmative vote of a majority of the

outstanding shares or members entitled to vote thereon on the

proposed amendment or a majority of the directors then in office. ,

and in addition, if If any class of shares or members is entitled

to vote thereon on the proposed amendment as a class, the

affirmative vote of a majority of the outstanding shares or members

of each such that class is also required to adopt the amendment.

The voting requirements of this section are subject to greater

requirements as prescribed by this act for specific amendments, or

as may be provided by in the articles of incorporation or bylaws.

In addition, unless a greater vote is required in the articles of

incorporation, or in a bylaw adopted by the shareholders, or

members, or directors, the proposed amendment shall be adopted upon

receiving is adopted if it receives an affirmative vote of a

majority of members or shares of shareholders present in person, or

by proxy, or by electronic transmission at such the meeting if due

notice of the time, place, and object of the meeting was given by

mail, at the last known address, to each shareholder, or member, or

director entitled to vote thereon at least 20 days prior to before

the date of the meeting or by publication in a publication

distributed by the corporation to its shareholders or members at

least 20 days prior to before the date of the meeting.

     (5) Any The shareholders, members, or directors may act on any

number of amendments may be acted upon at 1 meeting.

     (6) Upon adoption, If an amendment to the articles of

incorporation is adopted, the corporation shall file a certificate

of amendment shall be filed as provided in section 631.

     Sec. 901. (1) Each domestic corporation at least once in each

year shall cause a report of the corporation for the preceding

fiscal year to be made and distributed to each shareholder or

member thereof or presented at the annual meeting of shareholders

or members, or, if the corporation is organized upon a directorship

basis, at the annual meeting of the board. The report shall include

the corporation's year-end statement of assets and liabilities,

including trust funds, and the principal change in assets and

liabilities during the year preceding the date of the report and,

if prepared by the corporation, its source and application of funds

and any other information required by this act.

     (2) A corporation may distribute the financial report required

under subsection (1) electronically, either by electronic

transmission of the report or by making the report available for

electronic transmission. If the report is distributed

electronically under this subsection, the corporation shall provide

the report in written form to a shareholder, or member, or director

on request.

     Sec. 922. (1) If a domestic corporation neglects or refuses

for 2 consecutive years to file the annual reports or pay the

annual filing fee required by law, the corporation shall be

automatically dissolved. The administrator shall notify the

corporation of the impending dissolution not later than 90 days

before the 2 years has expired. Until a corporation has been

dissolved, it is entitled to issuance by the administrator, upon

request, of a certificate of good standing setting forth that it

has been validly incorporated as a domestic corporation and that it

is validly in existence under the laws of this state.

(2) A charitable purpose corporation that is dissolved under

subsection (1) shall provide notice of the dissolution to the

attorney general within 60 days after the date of the dissolution

and shall not dispose of any of its assets without written approval

of the attorney general.

     (3) (2) If a foreign corporation neglects or refuses for 1

year to file the annual report or pay the annual filing fee

required by law, its certificate of authority is subject to

revocation in accordance with section 1042. Until revocation of its

certificate of authority or its withdrawal from this state or

termination of its existence, the foreign corporation is entitled

to issuance by the administrator, upon request, of a certificate of

good standing setting forth that it has been validly authorized to

transact business in this state and that it holds a valid

certificate of authority to transact business in this state.