CHAMPS: NEWS

Quick Jump:

• Feb 14: Mardi Gras on H Street, NE (02.12.10)
•  Winter City Weekend on Barracks Row (02.11.10)
•  Diapers for Haiti - Collection on Feb 27 (02.04.10) 
• Vendor Day for 11th Street Bridge Project (02.01.10)
• Lower 8th Street Visioning Update (02.01.10)
• Tommy Wells Calls for Nominations for Pedestrian Advisory Council (02.01.10)
• Marines Seek Community Partnership in Future Development (02.01.10)
• ANC6B03 Commissioner Norm Metzger on the Marines Development (02.01.10)
• DC Council Considers Revamp of Business Laws (01.25.10)
• An Overview of the Proposed Changes (in Bill B18-500) to the Business Laws (01.25.10)
• Why Changes to DC Business Laws are needed (01.25.10)
• Full Text of Bill B18-500 (01.25.10)

02.12.10>

Feb 14: The First Annual Mardi Gras Celebration on H Street!
from H Street Great Street
Music, food, floats, beads, King Cake, and Second Line up and down H St on Sunday, February 12, from 2 - 6pm.

The party will get started at 12th & H Street in the lot on the south side of the street. Celebrity Chef and H Street's own Teddy Folkman of Dr. Granville Moore's, Throwndown with Bobby Flay, and Next Food Network Star fame will prepare an enormous King Cake. Proceeds from each piece of cake will be donated to the Haiti Relief Fund. Those whose piece of cake includes a small plastic baby can pull a prize from the prize jar, which will feature gift certificates contributed by various popular H Street merchants. Adults, families, and children of all ages are welcome to come for 5 minutes or 5 hours as admission is free.

Yamomanem, the well-regarded New Orleans Jazz Band who has performed at the White House, the Kennedy Center (where they will perform for Fat Tuesday) and other notable venues, will perform their signature calypso/reggae-style jazz and will march through the H Street entertainment district doing Second Line.

Among the varied H Street food vendors who will be on site are: nearly open Dangerously Delicious Pies, Smokey of Smokey's Barbershop with his famous BBQ ribs, Aaron McGovern of the soon-to-open Biergarten Haus offering german sausages, and Taste of Jamaica.

H Street merchants will be offering a variety of specials that day, including free golf for children at H Street Country Club, shows all day starting at 11 am at Rock and Roll Hotel, a full menu all day at the Argonaut, expected to feature shrimp boil and possibly crawfish, and more.

Gallery O will be open at showcasing New Orleans Art.

Float participants are being solicited, so if you are interested in decorating your pickup or have another suitable vehicle for the celebration, contact event organizer and neighborhood resident Margaret Holwill at mgholwill@gmail.com

Winter City Weekend on Barracks Row: 2/12 - 2/14

Check out the complete event listing for all of the great things happening on Barracks Row this weekend!

Friday February 12, 2010 All events FREE unless indicated

10am to 11 am : Tales for Twos and Threes (Ages 2-3) at SE Public Library
12 to 8pm: Art Show: Empty Time at The Fridge, 516 8th St. SE Rear Alley
1 to 2 pm: Picturing America: Freedom and Equality at SE Public Library
3 to 5 pm: Art Show: Giovanni Art Group of Cap Hill at Fusion Grill, 515 8th St. SE
6 to 8 pm: Happy Hour/Photos by Nestor Hernandez at Long & Foster, 8th & D St. SE
6 to 9 pm: Grand Re-opening Open House at Capitol Hill Bikes, 719 8th St. SE
8 pm: La Rinascita Theatre: The Fugitives at CHAW, 545 7th St. SE

Saturday February 13, 2010 All events FREE unless indicated

Sunday February 14, 2010 All events FREE unless indicated

02.04.10>

Saturday, February 27, 2010 - 10am-5pm

Eastern Market/Port City Java, corner of 7th and North Carolina, SE

Moms on the Hill (MOTH) is coordinating a diaper drive for the children of Haiti (see flyer below). Sanitary conditions are deteriorating and diapers would greatly help keep young children healthy (money doesn’t work because they are very expensive over there). MOTH has identified an organization (Love A Child, Inc.) that has the capacity to ship the diapers to Haiti. They have arranged a truck at Eastern Market for Feb 27^th to collect the items

02.01.10 >  

11th Street Bridge Project Vendor Day

Thursday, February 18, 2010

9:30 a.m. - 12:30 p.m.

(Registration begins at 9:00 a.m.)

Matthews Memorial Baptist Church

2616 Martin Luther King, Jr. Avenue, SE

Washington, DC 20020

REGISTRATION FORM

Metrorail accessible via the Anacostia Metro Station on the Green Line. Metrobus accessible via A8 Livingston Road/South Capitol Street

Qualified Firms are Sought for the Following Business Opportunities:

Bridge/Highway Related Activities:

Drainage and Structures

Geotechnical Instrumentation

Geotextiles

Geoweb Walls

Site Prep- Excavation/Demolition/Grading

Erosion & Sediment Control

Engineering Services

Formwork

Maintenance of Traffic

Steel H-Piles

Subbase and Aggregates

Supplies: Electrical/Miscellaneous Steel

General Condition Items:

Dumpster Service

Janitorial Service

Office Supplies/Coffee Service/Blueprint & Copy

Photography Service

Portable Toilets

Project Signage

Registration is required. Complete the Registration Form and Return by Thursday, February 11, 2010 by email to Turnesha.Cook@dc.gov or fax to (202) 645-0366. For more information, contact Linda Fennell or Turnesha Cook at 202-645-8620.

Lower 8th Street Vision Process Update
From the Capitol Riverfront BID
After four well-attended and successful community input meetings, an additional set of community meetings has been added to the Lower 8th Street, SE Vision Process to discuss potential scenarios in greater detail.  At the most recent round of meetings on January 19th, previous meeting topics were reviewed such as the mix of uses, density and best practices from regional examples, before delving deeper into discussions on the proposed mix of uses.  Attendees broke into smaller work groups to discuss land use, density/height, and circulation/parking in the study area.  Presentations and meeting notes, as well places to comment, are available on the blog at www.lower8th.blogspot.com.
The next and final round of community input meetings will be on February 23rd at 8:30 am and 7:00 pm at the Peoples' Church, 535 8th Street, SE.

• 88,500 sq ft for housing (175 modules, each with one or two marines, depending on rank, etc.)
• 14,100 sq ft for administrative space
• 70,100 sq ft for "other functions (Enlisted Club, Training Center, Gym, Eating Facilities, etc.)

• The "standoff requirements" for protection of military barracks are 82 feet from roadways and parking.  Building 20 is 25 feet from the SW/SE Freeway.
• The sizes of the current modules in Building 20 are substantially (94 sq ft/module) below the standard.
• There is a dog's breakfast of structural and maintenance problems (leaks, exposed steel beams, inadequate space for thrash and receiving, inadequate windows, etc.)

01.25.10 >

DC Council Considers Revamp of Business Laws
The District’s business organization laws have changed very little over the decades since they were first codified. As a result, many sections are greatly outdated, incomplete and haphazard -- hindering the District’s ability to draw and keep businesses. Most of DC Code Titles 29 and 33, where the business organization laws are found, were codified between 1870 and 1962 and are out of sync with current business practices. For example, current laws do not contemplate the extensive use of electronic commerce. There is no statute authorizing general entity transactions such as mergers, conversions interest changes and domestications.  Nor is there a statute regulating limited cooperative associations or business trusts.  According to the Small Business and Entrepreneurship Council, the District ranks as the worst place in the country for small businesses.

Development of new laws began in 2007. A group of attorneys and business representatives have worked over the last couple of years to propose new District code on uniform and a model acts developed by of the National Conference of Commissioners on Uniform State Laws (NCCUSL) and the American Bar Association (ABA). Their goal is to have a business code in the District that is state-of-the-art and would make the District the preferred place to incorporate.  The proposal is not focused on changing fees or taxes for existing businesses, but rather, is focused on the administrative and organizational hurdles that need to be addressed. Anyone interested in the changes is strongly encouraged to review the proposed law B18-500 posted online here.

Interested parties are also encouraged to attend the hearing scheduled for February 11, 2010 at 3:00 in the Council Chamber.  To sign up to testify or submit written testimony, please contact Committee Clerk Spencer Maguire at smaguire@dccouncil.us.

More background on B18-500 - Re-writing the Business Laws
Bill number B18-500 is 398 pages long. However, Councilmember Bowser's office has prepared two documents that give an overview of proposed changes to DC business laws and and overview of why these changes are necessary. View the proposed changes here and the reasons behind those changes here.

THE DISTRICT OF COLUMBIA BUSINESS ORGANIZATIONS CODE IMPROVEMENTS OVER CURRENT DISTRICT LAW

A.  Introduction

            The “District of Columbia Official Code Title 29 (Business Organizations) Enactment Act of 2009” is a comprehensive, up-to-date, and well-organized Business Organizations Code.  There is great need for this legislation.  The District’s current laws concerning business organizations, codified in Titles 29 and 33 of the D.C. Code, are sorely out of date.  With few exceptions, they were enacted between 1870 and 1962.  These laws are not consistent or coordinated as a result of being enacted separately over a century.   The District’s laws are not in tune with modern business practices. The antiquated state of the District’s laws has a negative effect on the District’s ability to attract and maintain the businesses.

            The Business Organizations Code (the “Code”) would replace these outdated laws with an enacted Title 29 of the D.C. Code that is comprehensive, up to date, and efficiently organized.  The Code will encourage businesses to form in and remain in the District and will help make the District a national center for business. 

B.  Overview

            The Code consists of 12 chapters.  Ten chapters are based on up-to-date uniform or model acts developed by the Uniform Law Commission (“ULC”), the American Bar Association (“ABA”), or both organizations working jointly.  These are Chapter 1 (General Provisions); Chapter 2 (Entity Transactions); Chapter 3 (Business Corporations); Chapter 4 (Nonprofit Corporations); Chapter 6 (General Partnerships); Chapter 7 (Limited Partnerships); Chapter 8 (Limited Liability Companies); Chapter 10 (Limited Cooperative Associations); Chapter Unincorporated Nonprofit Associations); and Chapter 12 (Statutory Trusts).  The other two chapters, Chapter 5 (Professional Corporations) and Chapter 9 (General Cooperatives), retain current District law because there are no corresponding uniform or model acts.

            The process by which these 10 uniform and model acts were developed was thorough and painstaking.  It involved participation from practitioners, judges, consumers, and other stakeholders at the national level.  These acts embody the best practices of the country in entity laws.  Most of these acts are revisions of earlier versions of the acts based on developments in the law and the experience with these acts in the numerous states in which they have been enacted.

            Uniformity and consistency among the laws of the jurisdictions in the United States is particularly important for business laws because many businesses operate in multiple jurisdictions.  Moreover, these acts have been, or will be shortly, enacted widely throughout the country.  Thus, appellate decisions in other states on particular issues arising from these acts will provide guidance to the District of Columbia Courts if there are no local decisions on point.  District lawyers, judges, and business owners and operators will benefit from the practical experience, judicial decisions, scholarly treatises and articles, and educational courses – all at the national level.

            One of the distinct advantages of using uniform and model acts drafted by the ULC or ABA is that each section of each act is accompanied by detailed, official comments, which explain the need for and significance of the section and how the section interrelates with other sections of the act, other relevant laws, and business practices.  In order to facilitate use of these official comments, parallel reference tables have been prepared, which match each provision of the Code with the corresponding section of each source uniform or model act.

            In addition, because the Code is based on uniform and model acts, it will be easy for the Council to keep it up to date.  The ULC and ABA have standing committees of experts that routinely develop amendments to respond to new business practices, changes in federal laws, and other significant legal developments.  The District does not have the resources to develop such revisions by itself.  Therefore, the Council will be able to maintain the Code with minimal burden by adopting amendments officially proposed by the ULC and ABA.

            Finally, the fact that the Code will be an enacted title of the D.C. Code, will make it easy for the Council to maintain on the administrative level.  Current Titles 29 and 33, which are not enacted into law, can be amended only by amending the corresponding provisions of underlying statutes, many of which are old and have undergone numerous revisions and additions, such as the 1901 Code.  Having an enacted title makes the amendment process simple, clear, and certain.

C.  The “Hub and Spoke” Structure

            The Code is based on a “hub and spoke” structure, in which provisions common to all entities are placed in the first chapter (the “hub”) and the provisions applicable only to particular entities are placed in separate chapters (the “spokes”).  The hub of the Code is Chapter 1 (General Provisions), which is based on the ABA/ULC Business Organizations Act, which was finalized in 2009.  The hub-and-spoke structure has been successfully utilized in other business laws, notably the Uniform Commercial Code (“UCC”), which has been enacted by all states. Chapter 1 of the UCC contains general provisions applicable to all types of commercial transactions.  See D.C. Code § 28:1-101 et seq. (2001).

            Chapter 1 of the Code contains groups of provisions applicable to all entities namely:

            (1) Definitions of 50 generally applicable terms.

            (2) Administrative filing requirements.

            (3) Registration and reservation of entity names.

            (4) Registered agents

            (5) Foreign entities

            (6) Administrative dissolution

            Placing these common provisions in one chapter avoids the need to repeat them in the chapters pertaining to individual entities.  The hub-and-spoke structure results in a streamlined, consistent, user-friendly, and easily maintainable body of laws.

            The “hub and spoke” approach is clearly the best practice for a comprehensive revision of a jurisdiction’s entity laws.  Those states that have recently revised their business entity laws, or are in the process of doing so, use the same “hub and spoke” approach.  Texas was the first to enact such a Code and was followed by Alabama, which on May 14, 2009, enacted a Business and Nonprofit Entities Act.  Similar efforts are underway in Pennsylvania and Colorado.

            Many provisions of Chapter 1 resulted from the active participation in the drafting process of the International Association of Commercial Administrators (“IACA”), a professional association for government administrators of business entity record systems, which includes the Department of Consumer and Regulatory Affairs (“DCRA”).  Among the improvements directly resulting from IACA’s participation are:

            (1) Standard requirements for a biennial report to be filed by all filing entities.

            (2) A standard set of provisions applicable to all forms of entities that are required to designate in a public filing an agent for service of process.

            (3) Elimination of provisions designating the Mayor as the default agent for service of process.  These provisions impose imposes burdens on the District and rarely result in actual receipt of service, which is fundamental unfair.  The Code substitutes the modern approach for serving entities in the federal and local rules of civil procedure, which permits service not only on an agent but any officer or manager of the entity.  See Fed.R.Civ.P. 4(h); Super.Ct.Civ.R. 4(a).  The recipient of the service is likely to have the knowledge to whom the service should be passed on and the motivation to do so.

            Another very useful provision, proposed D.C. Code § 29-102.09, makes the signing of a record the equivalent of an affirmation under oath, analogous to a declaration under penalties of perjury under 28 U.S.C. D.C. Code § 1746.  This obviates the cumbersome requirement of notarization and enhances the efficiency of the filing process.

            In addition, the requirement of a “registered office” has been eliminated as obsolete because the common practice today is for entities to use as their registered agents businesses whose principal activity is the provision of registered agent services, and thus the address of the registered agent has become divorced from any real connection with the business activities of the represented entity.  Moreover, the Code expressly permits all entities, including nonfiling entities such as partnerships and unincorporated nonprofit associations, to appoint either a “commercial registered agent,” or a “noncommercial registered agent,” who may be simply an officer of the entity, like its general counsel, to receive any process, notice, or demand served on the entity.

D.  Entity Transactions - Flexibility in Restructuring

            Chapter 2 (Entity Transactions) authorizes mergers, conversions, interest exchanges, and domestications involving all entities in the Code.  This permits entities to restructure, which may be critical for the entities’ survival.  Current District law permits only some of these transactions by some of these entities.  Without such authority, restructuring transactions often must be completed in two or three indirect steps, rather than directly in a single transaction, or may not be feasible at all.

            Chapter 2 applies to all “cross-type” transactions, such as the merger of a corporation and a limited liability company, or a conversion from one entity to another, but leaves intact provisions in the “spokes” permitting “same-type” transactions – i.e., a merger or interest exchange between two corporations, unless the law relating to the individual entity lacks such provisions, in which case Chapter 2 applies.  Flexibility in entity transactions facilitates the restructuring of businesses respond to changing economic conditions.

E.  Business Corporations 

            The District’s current business corporation act is antiquated.  The act, codified in D.C. Code § 29-101.01 et seq. (2001), was enacted in 1954, and is based on the 1950 ABA Model Business Corporations Act (“MBCA”). There have been a few amendments to the act over the years to address discrete issues.  However, although the ABA has revised the MBCA laws several times, the District did not adopt any of these revisions.  The most recent revision was completed by the ABA in 2008.  Thirty-three states have adopted a more recent version of the MBCA than the 1950 MBCA, on which the District’s current law is based.

            Chapter 3 (Business Corporations) would enact the 2008 MBCA and integrate it into a hub-and-spoke structure.  The improvements over the District’s current business corporations law are numerous.  Among the provisions updated are those related to:

            (1) liability for unlawful distributions;

            (2) directors’ conflicting interest transactions;

            (3) directors liability limitation;

            (4) derivative proceedings;

            (5) non-public corporations;

            (6) indemnification;

            (7) shareholder meetings and voting;

            (6) electronic filings;

            (7) standards of conduct and liability for directors;

            (8) standards of conduct for officers;

            (9) inspection rights and notices;

            (10) appraisal rights;

            (11) requirements for fundamental changes;

            (12) corporate governance;

            (13) dissolution;

            (14) extrinsic facts and terms of shares and options;

            (15) domestication;

            (16) the role and responsibilities of directors, including qualified directors;

            (17) the functions of officers;

            (18) director’s conflicting interest transactions; and

            (19) business opportunities.

            Whereas current District corporation law was drafted before the age of computers, the Code brings the law with respect to corporations and other entities law up to date with the e-mail and the Internet.  It broadly validates the use of electronic technology, and uses current terminology consistent with the Uniform Electronic Transactions Act, which the District adopted recently, D.C. Code §§ 28-4901 to 28-4918 (Supp. 2009).

            Updating the District’s business corporation law, will also update the District’s laws governing two specialized types of corporations – professional corporations, D.C. Code § 29-401 et seq. (2001) (included in Chapter 5 of the Code), and general cooperative associations, D.C. Code § 29-901 et seq. (2001) (included in Chapter 9 of the Code).  The District’s laws pertaining to these entities are built on the foundation of the general business corporations law and contain a relatively small number of provisions pertinent to these specific types of corporations.  The Code integrates the District’s existing laws pertaining to these two subtypes of entities into the hub-and-spoke format.

F.  Nonprofit Corporations 

            The District’s nonprofit corporations act, D.C. Code § 29-301.01 et seq. (2001), is similarly antiquated.  It was enacted in 1962, and is based on the 1952 ABA Model Nonprofit Corporations Act (“MNCA”).  In addition, the District has three specialized nonprofit corporation laws, enacted originally in 1870, and codified in the 1901 Code, on institutes of learning; religious societies; and charitable, educational, and religious associations.  D.C. Code § 29-601 et seq., 29-701, et seq., 29-801, et seq. (2001).

            The ABA has updated the MNCA twice, most recently in 2008.  Twenty-four states have adopted a more recent version of the MNCA that the1952 Act, which is the current law of the District.  Among the improvements in Chapter 4 are the following:

            (1) It provides a comprehensive treatment of charitable corporations.

            (2) It has special provisions on religious nonprofit corporations.  It recognizes the role of canon law (§ 29-401.20).  Directors and officers may rely on religious authorities (§§ 29-406.30(f)(4), 29-406.42(c)(3)).  A receiver may not be appointed for corporation engaged in religious activity (§ 29-412.22(f)).  A corporation engaged in religious activity may limit rights of members to demand financial information (§ 29-414.10(a))

            (3)  It permits the establishment of “designated bodies,” which are defined as “a person or group, other than a committee of the board of directors, that has been vested by the articles of incorporation or bylaws with powers that, if not vested by the articles or bylaws in that person or group, would be required by this chapter to be exercised by the board or the members.”  § 29-401.02(8).   Some, but less than all, the powers, authority or functions of the board may be vested in a designated body; and if that is done:  (1) laws relating to the board of directors apply to the designated body; (2) the directors are relieved from their duties and liabilities to the extent they have been replaced by a designated body; and (3) members of the designated body are entitled to indemnification and exoneration from liability.  (§ 29-406.12).  Permitting nonprofit corporations to create designated bodies gives them considerable flexibility to provide alternative governance arrangements and to delegate responsibilities within the corporation.

            (4) It eliminates cumulative voting because it is unnecessary for nonprofits and potential disruptive, but grandfathers in existing provisions in bylaws.

            (5) It provides comprehensive and modern provisions concerning liability of directors, including an automatic liability shield for directors of charitable corporations and an optional liability shield available for directors of other corporations, and indemnification provisions following the MBCA.

            (6) It broadly validates the use of electronic technology for operations and transactions..

            In addition, Chapter 4 incorporates the recent revisions in Nonprofit Organizations Oversight Improvement Amendment Act of 2007 to the extent that it does not already contain similar provisions.

            Three additional sections will be proposed to Chapter 4 at the hearing – one to add a section that was inadvertently omitted and two to retain useful provisions of existing law enacted by the Council.

            (1) A new § 29-401.05 (Restrictions and required approvals) is based on § 9.03 of the MNCA.  It provides that a nonprofit corporation may not sell its assets without approval of the Attorney General or other pertinent District official or agency and provides that property dedicated to a charitable purpose may not be diverted from its purpose without an appropriate order of the Superior Court specifying the disposition of the property to the extent required by and pursuant to the law of this state on cy pres (a doctrine under which charitable property that can no longer be applied to its original purpose may be applied to a similar charitable purpose) or otherwise dealing with the nondiversion of charitable assets. 

            (2) A new Subpart H (Limitations on Liability of Volunteers and Employees), including § 29-406.80 (Immunity from civil liability for a volunteer of the corporation) and § 29-406.81 (Limited liability for an employee of the corporation), continues current law.  D.C. Code §§ 29-301.113, 29-301.114 (2001). These sections were added to the District’s nonprofit corporations act by the Council in 1993 (D.C. Law 9-222).  They are common additions to the MNCA in other state nonprofit corporation statutes.

G.  Partnerships - General and Limited

            Current District laws pertaining to unincorporated entities are out of date, with the sole exception of the laws pertaining to general partnerships.  The District’s partnership law, an enactment of the Revised Uniform Partnership Act, D.C. Code § 33-101.01 et seq. (2001), is integrated into the hub-and-spoke format of the Code, as Chapter 6 (General Partnerships), without substantive change.

            Chapter 7 (Limited Partnerships) updates the District’ law in this area with the Revised Uniform Limited Partnership Act.  Currently, the District has the original 1985 Uniform Limited Partnership (ULPA), D.C. Code § 33-201.01 et seq. (2001).  RULPA was completed by NCCUSL in 2001 to update ULPA in light of modern business practices and current IRS rulings.  RULPA does not change the basic structure of limited partnerships as defined in ULPA but provides limited partnerships with more flexibility and serves the interests of partners and third parties conducting business with the partnership.  RULPA includes provisions to meet the needs of sophisticated, manager-entrenched commercial deals whose participants commit for the long term, and also addresses the modern needs of estate planning arrangements, so-called “family limited partnerships.”

            Whereas ULPA depends on the Uniform Partnership Act, RULPA is self-contained, providing comprehensive rules for limited partnerships.  A fundamental change from ULPA involves the liability of limited partners and general partners for the partnership debts.  Under ULPA a limited partner could be held liable for the entity’s debts if the limited partner participated in the control of the business and the third-party transacted business with the partnership with the reasonable belief that the limited partner was a general partner.  Under RULPA, a limited partner cannot be held liable for the partnership debts even if the limited partner participates in the management and control of the limited partnership.  Concerning general partners, under ULPA, liability was complete, automatic, and formally inescapable.  Under RULPA, limited liability limited partnership status is expressly available to provide a full liability shield to all general partners.

H.  Limited Liability Companies

            More limited liability companies (LLCs) are now being formed each year in the country than corporations.  As LCCs have increased in economic importance, the law in this area has rapidly evolved.  The District’s LLC law, D.C. Code § 29-1001 et seq. (2001), enacted 15 years ago, is now considerably out of date. 

            Chapter 8 (Limited Liability Companies) replaces the District’s LLC law with a fourth-generation LLC act.  Among the improvements are the following:

            (1) It better delineates the extent to which the LLC’s operating agreement may define or alter aspects of fiduciary duty and authorizes it to relieve members and managers from liability for damages arising from breach of duty, subject to specific limitations.

            (2) It permits formation of LLCs by nonprofit organizations, which desire to use LLCs to hold real property, but which are not permitted to do so under current law.  This is an extremely important practical benefit to nonprofits in the District.

            (3) It rejects statutory apparent authority by position, under which a member may bind a member-managed – but not manager-managed – LLC because the management structure is not apparent from the LLC’s name and because the rule is unsuitable to the needed flexibility of an LLC, and, instead, deals directly with the power of the LLC’s participants to bind it.

            (4) It retains the manager-managed and member-managed structures as options for members to use in configuring their inter se relationship and the operating agreement as the vehicle by which the members chose the management structure.

            (5) It continues the charging order mechanism, in which a creditor can satisfy a judgment with an income stream from a member of an LLC, but clarifies the statutory language, including its protections against outside interference in an LLC’s activities.

            (6) It permits a member to seek a court order dissolving the LCC for oppressive or harmful conduct, but does not permit a transferee to do so.

            (7) It includes provisions for special litigation committees, including provisions for judicial review.

            (8)  It includes a provision authorizing “series LLCs,” which permits a single LLC to offer a number of different investment opportunities.

I.  Unincorporated Nonprofit Associations

            An unincorporated nonprofit association (UNA), like a general partnership, is a “non-filing entity,” whereas all other entities are “filing entities.”  A filing entity may be formed only by filing the appropriate documents with the appropriate governmental office, in the District’s case, DCRA’s Corporations Division, and paying the requisite fees.  A nonfiling entity, however, is formed by the agreement or conduct of the members to engage in an activity – the general partners or the members of a UNA.  The only difference between a partnership and a UNA IS that the latter is nonprofit and the former is for-profit.

            Chapter 11 (Unincorporated Nonprofit Associations) updates the District’s law in this area with the 2008 Revised Uniform Nonprofit Associations Act.  Currently, the District has the original Uniform Unincorporated Nonprofit Association Act, D.C. Code §§ 29-971.01 et seq. (2001).  There are hundreds of thousands of UNAs in the United States including unincorporated nonprofit philanthropic, educational, scientific and literary clubs, sporting organizations, unions, trade associations, political organizations, churches, hospitals, and condominium and neighborhood associations. The District’s current statute deals with only a limited number of issues.  Chapter 11 updates the original uniform act with respect to the following issues:

            (1) definition of the types of organizations covered;

            (2) the relation of the principles to other existing laws;

            (3) the recognition that a UNA is a legal entity and the legal implications flowing from this status, including the ability of a UNA to own and dispose of property and to sue and be sued in its own name;

            (4) the contract and tort liability of a UNA and its members and managers;

            (5) internal governance, fiduciary duties, and agency authority; and

            (6) dissolution and merger. 

J.  Filling Voids in the District’s Entity Laws

            The District’s law pertaining to entities is not only out of date; it is incomplete.  In addition to updating the laws pertaining to entities recognized by existing District law, the Code authorizes formation of two new unincorporated entities, which are utilized in other states for various commercial enterprises, but which are not recognized by current District law – limited cooperative associations and statutory trusts.

1.  Limited Cooperative Associations

            Chapter 10 (Limited Cooperatives) enacts the 2007 Uniform Limited Cooperative Association Act and integrates it into the hub-and-spoke structure.  This chapter authorizes the creation in the District of a new type of business entity, which is used by a variety of enterprises in other states.  A limited cooperative association is a statutorily-defined entity that combines traditional cooperative values with modern financing mechanisms.  A limited cooperative association may be organized to pursue any lawful purpose.  ULCAA combines the cooperative value of individuals getting together to democratically own, run, and share in the benefit of their business with modern financing techniques.

            Chapter 10 builds on traditional law governing cooperatives, but recognizes a growing trend toward the “new generation cooperative,” which may include combinations of features not readily available under traditional law, such as legally binding delivery contracts or the opportunity for outside equity investment.  It is more flexible than most current law, and provides a default template that encourages planners to utilize tested cooperative principles for a broad range of entities and purposes.  It would permit formation of various types of limited cooperative associations, including marketing, advertising, bargaining, processing, purchasing, real estate, and worker-owned cooperatives.

2.  Statutory Trusts

            Chapter 12 (Statutory Trusts) enacts the 2009 Uniform Statutory Trust Entity Act and integrates it into the hub-and-spoke structure.  This chapter permits the creation in the District of a new type of business entity, which is the entity of choice for several categories of business transactions – namely, organization of mutual funds, asset securitization, and tax-advantaged real estate transactions. At least 30 states have statutes permitting such trusts. Currently, business trusts may be formed under the common-law.  However, their use is limited because such a trust is not a juridical entity.  It must sue, be sued, and transact in the name of an individual trustee in the trustee’s capacity as such.  Under the Code, a statutory trust is a juridical entity separate from its trustees and beneficial owners, with the capacity to sue, be sued, and transact in its own name.

            Chapter 12 contains detailed provisions for the formation of statutory trust entities, their powers, the duties and responsibilities of the trustees, the rights of beneficiaries of the trust, and the dissolution and winding up of a statutory trust entity.  In addition, the chapter authorizes the creation of “series” statutory trust entities, which permits the creation of a single statutory trust entity with a number of different investment opportunities.

CONCLUSION

            In conclusion, the Code will replace the District’s antiquated and incomplete hodgepodge of business entity laws with a state-of-the art Code, which will bring this critical body of the District’s laws into the 21st Century to the benefit of District businesses and residents.

                                                                                                                                    01/14/10

WHY THE D.C. BUSINESS ORGANIZATIONS CODE IS NEEDED

            The D.C. Business Organizations Code is needed in order to bring the District of Columbia’s antiquated business entity laws up to date and to provide a solid legal framework for businesses in the District to meet the challenges of the 21st Century.  Current District law is out of date, incomplete, and unorganized.  These inadequacies have discouraged businesses from forming in the District, with an adverse impact on the District’s economy.  The D.C. Business Organizations Code is up to date, comprehensive, efficiently organized, and easily maintainable and is based on widely enacted uniform and model acts.  The Code provides rules attuned to modern business practices and requirements.  Its enactment will encourage businesses to form in and remain in the District and will help make the District a national center for business. 

Ï  INADEQUACIES OF CURRENT DISTRICT BUSINESS ENTITY LAWS

            Ï  The laws are out of date.

            The District’s current business entity laws are severely out of date.  The business and nonprofit corporation laws are based on statutes enacted by Congress between 1870 and 1971.  The District effectively has missed out on every single innovation and modern practice in corporation law since before Home Rule, including in such important areas as corporate finance, director and officer liability, and rights of shareholders.  The laws governing unincorporated entities, with the sole exception of partnerships, are also badly out of date.  The District’s laws are not in tune with modern business practices, including the pervasive use of electronic commerce, and globalization of commerce.

            Ï  The laws are incomplete.

            There are large gaps in the District’s business entity laws.  In addition to major omissions in existing business entity statutes, the District has no statutes in the following areas:

                        Ï    No general entity transaction statute.  The District has no general statute authorizing entity transactions – i.e., mergers, conversions, interest exchanges, and domestications.  Only a few provisions in some entity statutes authorize some of these transactions but only between entities of the same type.  These laws do not adequately meet the needs of businesses to restructure to remain competitive during difficult economic times.

                        Ï    No limited cooperative association statute.  The District has no statute authorizing creation of a limited cooperative associations, a relatively new type of entity of growing popularity that combines traditional cooperative values with modern financing mechanisms.  Limited cooperative associations are extremely flexible, and have been utilized in other states for numerous types of enterprises.

                        Ï    No statutory business trust statute.  The District has no statute authorizing creation of statutory business trusts, although about 30 states have such statutes.  Since the 1980s, statutory business trusts have thrived in a variety of business areas, particularly in the organization of mutual funds, structured financing, and asset securitization.

            Ï  The laws are badly organized and difficult to update.

            The District’s business entity laws were enacted piecemeal over a period of about 125 years. They are largely independent of each other and not coordinated.  The statutes pertaining to individual entities have their own, often different, definitions of the same terms, and different provisions relating to administrative filing requirements, registration and reservation of entity names, registered agents, foreign entities, and administrative dissolution.  These differences require businesses using different forms of entities, business lawyers, and judges to master each set of laws separately.  These laws are divided between Titles 29 (Corporations) and 33 (Partnerships).  Neither title has been enacted; hence, amendments must be to the original statutes, which makes them difficult to update.

Ï  ADVANTAGES OF THE D.C. BUSINESS ORGANIZATION CODE

            Ï  The Code is efficiently organized

            The D.C. Business Organizations Code uses a “hub and spoke” approach similar to that used by the Uniform Commercial Code.  Chapter 1 of the Code (General Provisions), which is based on the 2009 Business Organizations Act drafted by the Uniform Law Commission (“ULC”) and the American Bar Association (“ABA”), contains provisions applicable to all entities – namely, (1) definitions of common terms, (2) administrative filing requirements, (3) registration and reservation of entity names, (4) registered agents, (5) foreign entities, and (6) administrative dissolution.  Chapter 2 of the Code (Entity Transactions) contains general provisions for mergers, interest exchanges, conversions, and domestications.  The other 10 chapters are “spokes” providing substantive laws for particular entities without duplicating the common provisions in Chapters 1 and 2.  Consolidating all business entity laws in a single title of the D.C. Code, results in a clear, comprehensive, and easily accessible body of laws.

            Ï  The Code is complete.

            The D.C. Business Organizations Code covers all major business entity laws.  It fills serious gaps in current District law.  Three chapters provide important additions to the law:

                        Ï    Entity Transactions.  Chapter 2 of the Code is based on the 2007 Model Entity Transactions Act, prepared by the ULC and ABA.  Described as a “junction box,” it simplifies and expands the ability of businesses to restructure, which is often necessary to respond to economic changes.  Four types of entity transactions are facilitated – mergers, interest exchanges, conversions, and domestications.  Cross-type transactions, as well as same-type transactions, are authorized.

                        Ï    Limited Cooperative Associations.  Chapter 10 of the Code is based on the 2007 Uniform Limited Cooperative Association Act.  It authorizes a new type of business entity that combines traditional cooperative values with modern financing mechanisms, such as permitting outside equity investment.  It permits formation of various types of limited cooperative associations, for numerous purposes including marketing, advertising, bargaining, processing, purchasing, real estate, and worker-owned cooperatives.

                        Ï    Statutory Business Trusts.  Chapter 12 of the Code is based on the 2009 Uniform Statutory Trust Entity Act.  It authorizes creation of statutory business trusts, which is the entity of choice for organizing mutual funds, asset securitization, and tax-advantaged real estate transactions.  In addition, it authorizes the creation of “series trusts,” permitting a single statutory business trust to offer a variety of investment opportunities.

            Ï  The Code is up to date

            The D.C. Business Organizations Code is based on uniform and model acts developed by the ULC, ABA, or both organizations jointly.  These acts were recently completed and, hence, are very much up to date.  In addition to the uniform or model acts mentioned above:

                        Ï  The 2007 ABA Model Business Corporation Act (Chapter 3) updates the District’s business corporations act, which is based on the original 1950 ABA Model Act.  This also updates the District’s laws relating to professional corporations (Chapter 5) and general cooperative associations (Chapter 9), which provide a few entity-specific rules but, for the most part, depend on the business corporation act, which these chapters incorporate by reference.

                        Ï  The 2008 ABA Model Nonprofit Corporation Act (Chapter 4) updates the District’s nonprofit corporation act, which is based on the original 1952 ABA Model Act.

                        Ï  The 2001 Revised Uniform Limited Partnership Act (Chapter 7) updates the District’s law in this area, which is based on the original 1985 Uniform Act.

                        Ï  The 2006  Revised Uniform Limited Liability Company Act (Chapter 8) replaces the District’s 1994, first-generation statute, which is incomplete and inadequate, with an up-to-date, comprehensive fourth-generation limited liability company act.

                        Ï  The 2008 Revised Uniform Unincorporated Nonprofit Association Act (Chapter 9) updates the District’s law in this area, which is based on the original 1996 Uniform Act.

                        Ï  The 1997 Revised Uniform Partnership Act (Chapter 6), the only entity law that is not out of date, is incorporated into the Code’s hub-and-spoke structure, without substantive change.

            Ï  The Code is easy to maintain

            The D.C. Business Organizations Code is easy to maintain both on the substantive and administrative levels.

                        Ï  On the substantive level, the Code will be easy to update because it is comprised of uniform and model acts drafted by the ULC and ABA, which routinely develop amendments to respond to new business practices, changes in federal law, and other legal developments.  The District does not have the resources to develop such revisions by itself.  The District will be able to maintain the Code with minimal burden to the Council by adopting amendments officially proposed by the ULC and ABA.

                        Ï  On the administrative level, the D.C. Business Organizations Code will be easy to maintain because it will be an enacted title of the D.C. Code, which the Council may amend directly.  Current Titles 29 and 33, which are not enacted into law, can be amended only by amending the corresponding provisions of underlying statutes, many of which are old and have undergone numerous revisions and additions, such as the 1901 Code.  Having an enacted title makes the amendment process simple, clear, and certain.

            Ï  The Code is based on uniform and model acts.

            One of the distinct advantages of the D.C. Business Organizations Code is that it is based on uniform and model acts drafted by the ULC, the ABA, or both organizations.  Uniformity and consistency among the laws of the jurisdictions in the United States is particularly important for business laws because many businesses operate in multiple jurisdictions.  Each section of each uniform or model act drafted by the ULC or ABA is accompanied by detailed, official comments, which explain the need for and significance of the section and how the section interrelates with other sections of the act, other relevant laws, and business practices.  Moreover, these acts have been, or will be shortly, enacted widely throughout the country.  Thus, appellate decisions in other states on particular issues arising from these acts will provide guidance to the District of Columbia Courts if there are no local decisions on point.  District lawyers, judges, and business owners and operators will benefit from the practical experience, judicial decisions, scholarly treatises and articles, and educational courses – all at the national level.

            In sum, enactment of the D.C. Business Organizations Code will replace the District’s antiquated business entity laws with a state-of-the art Code, which will bring this critical body of the District’s laws into the 21st Century to the benefit of District businesses and residents.

    12/28/09