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Vol. 71, No. 10,
October 1998
The New Nonstock Corporation Law
Basis of decisions. Section
181.0853 makes specific provision for consideration of interests in
addition to members' interests. In determining what he or she believes is
in the best interests of the corporation, a director or officer is specifically
authorized to consider effects of an action on employees, suppliers, customers,
and communities, and to consider any other factors the director or officer
considers pertinent. This is important to systems. It is also clear recognition
that nonstock corporations often serve important public interests, and that
officers and directors may need to consider factors which might be improper
in a business corporation.
| The new Nonstock Corporation law recognizes both worlds. It maintains
existing law as the default law for those nonstock corporations that do
not need, or want, to change. It removes the straitjacket for those corporations
that do need to change. |
Foreign corporations
Foreign corporations active within Wisconsin will be required to obtain
a certificate of authority. The procedure and requirements parallel Chapter 180
that applies to foreign business corporations. Foreign corporations that
do fundraising in Wisconsin, whether or not required to register, probably
have sufficient presence within Wisconsin to require a certificate of authority.
There are sufficient advantages available to Wisconsin nonstock corporations
under the new Nonstock Corporations Act that may influence some foreign
corporations to become Wisconsin corporations. By becoming Wisconsin corporations,
they can obtain the flexibility in governance, pooling of assets, intercorporate
transferability of assets, and ability to consider system and community
interests - not just corporate interests - available to Wisconsin
corporations (as discussed above) not available in their home states. They
can do business in their home states as foreign nonstock corporations without
affecting their business, and can even have happy bond counsel. Section 181.1533
allows a foreign corporation to become a domestic corporation by filing
articles of domestication. Articles of domestication include restated articles
of incorporation complying with Wisconsin requirements, a statement that
the corporation has adopted an election to domesticate, and a statement
that the corporation will file in its current home state the appropriate
documents to terminate its existence as a corporation of that state. The
election to domesticate is adopted in the same way as authorization for
a merger in the home state.
When articles of domestication are filed, the corporation becomes a Wisconsin
corporation on the effective date of the articles of domestication. The
date of incorporation in Wisconsin is retroactive to the original date of
incorporation. In effect, the nonstock corporation, like an individual,
moves into Wisconsin, declares it wants to be a Wisconsin corporation, and
is a Wisconsin corporation. Other than dissolving its "citizenship"
in its prior home state, that is it. The intent is to avoid the complexities
of creating a new Wisconsin corporation and merging the foreign corporation
into it, and to maintain uninterrupted the corporate existence of the corporation.
If the foreign nonstock is a nonprofit tax exempt corporation, it is
hoped the Exempt Organizations division of the Internal Revenue Service
will recognize the corporation as continuing its life without need for new
determination letters. Since this statute is unique, that question will
be one of first impression when presented to the IRS.
Conclusion
The new nonstock corporation law, effective Jan. 1, 1999, will not disturb
existing Wisconsin nonstock corporations. It is a leading edge statute for
those corporations that need the flexibility to adapt to an environment
that, for them, bears little resemblance to 1953.
Foreign corporations will be required to obtain certificates of authority
to do business in Wisconsin. If they decide that Wisconsin's Nonstock Corporation
Act is advantageous for them, they are provided a simplified way to become
Wisconsin corporations.
Garth Seehawer, U.W. 1961, has practiced corporate
law since 1961. He recently retired as senior vice president and general
counsel of Wheaton Franciscan Services, the parent of one of Wisconsin's
major health-care and housing systems.
Endnotes
1Wis.
Stat. § 180.0120 et seq.
2Wis.
Stat. § 181.1420.
3Wis.
Stat. § 181.1422(3).
4Wis.
Stat. § 181.0855 et seq.
5Wis.
Stat. § 181.0670(2)(c).
6Wis.
Stat. § 181.0670(3)2.
7Wis.
Stat. § 181.0821.
8Wis.
Stat. § 181.0708.
9Wis.
Stat. § 181.0704.
10Wis.
Stat. § 181.0801(3).
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