BILL ANALYSIS
C.S.H.B. 1661
By: Turner, Sylvester
4-4-95
Committee Report (Substituted)
BACKGROUND
This bill adopts the Uniform Unincorporated Nonprofit
Association Act (the "Uniform Act") drafted and approved by the
National Conference of Commissioners on Uniform State Laws in 1992.
The Uniform Act seeks to statutorily reform the common law
concerning unincorporated, nonprofit associations in three basic
areas: authority to acquire, hold, and transfer property,
especially real property; authority to sue and be sued as an
entity; and contract and tort liability of officers and members of
the association.
PURPOSE
To give to unincorporated, non-profit associations which are
typically churches or property owners' groups, the legal authority
to acquire, hold and transfer property; to sue and to be sued; and
to conduct their business affairs without subjecting the membership
to legal responsibility of the association or others of its
members.
RULEMAKING AUTHORITY
Rulemaking authority may be granted under Section 11, Subsection
(b), granting the Attorney General the authority to take copies of
nonprofit association's books, records, and other documents deemed
necessary, if a violation of any Texas law has occurred.
Rulemaking authority may be granted under Section 12, Subsection
(d), granting the Secretary of State the authority to collect a fee
for filing an appointing statement, an amendment, a cancellation,
or a resignation.
Rulemaking authority may be granted under Section 12, Subsection
(g), granting the Secretary of State the authority to promulgate
forms and adopt procedural rules on filing documents under section
12.
SECTION BY SECTION ANALYSIS
SECTION 1. SHORT TITLE. Provides a short title.
SECTION 2. DEFINITIONS. Defines "Member", "Nonprofit
Association", "Person", and "State".
SECTION 3. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW AND
EQUITY. Provides that principles of law and equity supplement the
Act.
SECTION 4. TERRITORIAL APPLICATION. Provides that a
Nonprofit Association may acquire, hold, encumber, and transfer
real and personal property located in Texas so long as the property
is situated in Texas.
SECTION 5. REAL AND PERSONAL PROPERTY; NONPROFIT ASSOCIATION
AS BENEFICIARY. (a) Provides that a Nonprofit Association may
acquire, hold, encumber, or transfer an estate or interest in real
or personal property.
(b) A nonprofit association may be a beneficiary of a trust,
contract, or will.
SECTION 6. STATEMENT OF AUTHORITY AS TO REAL PROPERTY. (a)
Provides that a Nonprofit Association may execute and record a
statement of authority to transfer an estate or interest in real
property.
(b) An estate or interest in real property in the name of a
nonprofit association may be transferred by an authorized person in
a statement of authority recorded in the county clerk's office.
(c) A statement of authority must contain:
(1) name of the nonprofit association;
(2) address of the nonprofit association, whether in
Texas or out of state; and
(3) name or title of the authorized person to transfer
an estate or interest in real property.
(d) Requires someone other than the person authorized to deal
with the real property to execute the statement of authority on
behalf of the Nonprofit Association.
(e) A fee may be collected by the county clerk for recording
a statement of authority.
(f) Any changes or cancellations of a statement of authority
must meet the requirements for execution and recording of an
original statement.
(g) The authority of the person named in a statement of
authority is conclusive in favor of a person who gives value
without notice that the person lacks authority.
SECTION 7. LIABILITY IN TORT AND CONTRACT. (A) Provides that
a Nonprofit Association is a legal entity separate from its members
which can be liable for and enforce its rights under contract and
tort principles of law.
(b) Relieves the members of a Nonprofit Association from
vicarious liability for breaches of contract by the Nonprofit
Association and Subsection.
(c) Relieves members from vicarious liability for torts for
which the Nonprofit Association is liable. Of course, liabilities
for members resulting from their own acts or the acts of others in
not affected.
(d) Provides that the negligence of an employee of an
association is not imputed to its members.
(e) Codifies that a member may sue the unincorporated,
nonprofit association of which the person is a member. The
nonprofit association may sue the member, as well.
SECTION 8. CAPACITY TO ASSERT AND DEFEND; STANDING. (a)
Provides that a nonprofit association may participate as an entity
in judicial, administrative, and governmental proceedings, and in
arbitration and mediation on behalf of it and its members.
(b) The nonprofit association may sue and be sued.
SECTION 9. EFFECT OF JUDGMENT OR ORDER. Provides that a
judgment for or against a nonprofit association has the same effect
with respect to the association and its members as a judgment for
or against a corporation and that a judgment against a Nonprofit
Association may not be satisfied against a member unless there is
also a judgment against the member.
SECTION 10. DISPOSITION OF PERSONAL PROPERTY OF INACTIVE
NONPROFIT ASSOCIATION. Provides that an inactive Nonprofit
Association, as defined, may have its personal property transferred
by a person in possession or control of it:
(1) to a person of entity specified by the association;
or
(2) to a similar Nonprofit Association, Nonprofit
Corporation, a government or governmental subdivision,
agency, or instrumentality.
(3) to obtain federal Section 501(c)(3) tax
classification as a charitable organization, an
unincorporated Nonprofit Association must specify a
distribution of assets on dissolution that satisfies the
Internal Revenue Code. If there is no bylaw or other
controlling document, the person may transfer the
personal property to another nonprofit association or
nonprofit corporation with similar charitable,
religious, or educational purposes.
SECTION 11. BOOKS AND RECORDS. (a) Provides that a Nonprofit
Association shall keep books and records of its accounts for a
minimum of three years after the end of each fiscal year.
(b) The attorney general may inspect, take copies of the books
and records, and investigate, if it is determined that a violation
of any Texas law has occurred.
SECTION 12. APPOINTMENT OF AGENT TO RECEIVE SERVICE OF
PROCESS. (a) Provides that a Nonprofit Association may file a
statement authorizing an agent to receive service of process on its
behalf.
(b) The authorizing statement must contain:
(1) the name of the nonprofit association;
(2) the federal tax identification number of the
nonprofit association;
(3) the address of the nonprofit association; and
(4) the name and address of the person authorized to
receive service of process.
(c) A statement appointing an agent signed by both the
authorized person and the appoint agent.
(d) A fee may be collected by the secretary of state for
filing an appointing statement, an amendment, a cancellation, or a
resignation.
(e) An amendment must meet the requirements for execution of
an original statement.
(f) An appointment statement may be canceled by filing with
the secretary of state a written notice of cancellation executed by
the authorized person. The notice must contain the name of the
nonprofit association, the federal tax identification number, the
date of the filing of the appointing statement, and a current
street address of the nonprofit association.
(g) Under this section, the secretary of state may promulgate
forms and adopt procedural rules on filing documents under this
section.
SECTION 13. CLAIM NOT ABATED BY CHANGE. Provides that claims
against a Nonprofit Association do not abate merely because of a
membership change in the association.
SECTION 14. SUMMONS AND COMPLAINT; SERVICE ON WHOM. Provides
that the laws of Texas governing service of a summons and complaint
apply to service upon a Nonprofit Association.
SECTION 15. UNIFORMITY OF APPLICATION AND CONSTRUCTION.
Provides for uniformity.
SECTION 16. TRANSITION CONCERNING REAL AND PERSONAL PROPERTY.
Provides that transfers of real or personal property to a Nonprofit
Association shall be effective on or after the effective date of
this Act.
SECTION 17. SAVINGS CLAUSE. Provides that the Act shall not
be retroactively applied to actions or proceedings commenced prior
to its adoption.
SECTION 18. EFFECT ON OTHER LAW. Provides that the Act shall
replace existing law.
SECTION 19. EFFECTIVE DATE. Effective September 1, 1995.
SECTION 20. EMERGENCY. Emergency clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
SECTION 10. The substitute adds the phrase "the custody of" to
confirm that the disposition of the personal property of an
inactive nonprofit association relates to ownership of the
property. The substitute also adds a new subsection (3) to Section
10. This confirms that if a nonprofit association is classified
under the Internal Revenue Code as or holds itself out to be a
charitable, religious, or educational association, then any
distribution under this section must be made to another nonprofit
association or nonprofit corporation with similar purposes.
SECTION 11. (a) The substitute amends Section 11, regarding books
and records by adding a phrase beginning with the words "for at" to
confirm that a nonprofit association shall keep its books and
records for at least three years and make them available for public
inspection.
(b) The substitute adds language to confirm that the Attorney
General may take copies of a nonprofit association's books and
records as well as inspecting and examining the records.
SECTION 12. (b)(2) The substitute adds a new subsection requiring
that a nonprofit association set forth its federal tax
identification number, if applicable, on a statement appointing an
agent filed with the Secretary of State.
(d) The substitute adds the phrase "a cancellation".
(f) The substitute adds this new subsection, authorizing a
nonprofit association to file a written notice of cancellation with
the Secretary of State, canceling its previous statement appointing
an agent.
(g) The substitute adds this new subsection, authorizing the
Secretary of State to promulgate forms and adopt procedural rules
for the filing of documents.
SECTION 14. The substitute adds language requiring a nonprofit
association, within 10 days after a request by the Attorney
General, to provide the Attorney General's office with information
as to the agents authorized to receive service of process on behalf
of the nonprofit association and the officers, managing or general
agents, or other managers of the affairs of the nonprofit
association.
SUMMARY OF COMMITTEE ACTION
The Business and Industry Committee considered H.B. 1661 in a
public hearing on March 7, 1995. The following persons testified
for H.B. 1661: Millard H. Ruud, representing himself; and Alan
Bromberg, representing Texas Business Law Foundation. The
committee considered 4 (four) amendments to H.B. 1661. All 4
(four) amendments were adopted without objection. The bill was
left as pending before the committee. H.B. 1661, as amended, was
reconsidered in a public hearing on April 4, 1995. The committee
considered a complete committee substitute to H.B. 1661, as
amended. One (1) amendment was offered to the substitute.
Amendment #1 was adopted without objection. The substitute, as
amended, was adopted without objection. The chair directed the
staff to incorporate the amendments into the substitute. H.B.
1661, as substituted, was reported favorably with the
recommendation that it do pass and be printed, by a record vote 8
(eight) ayes, 0 (zero) nays, 0 (zero) present-not-voting, 1 (one)
absent.