Senate Bills 422 and 738 (Enrolled)

Contact: Office of Policy and Legislative Affairs

Agency: Licensing and Regulatory Affairs

Analysis

Topic: Corporations
Sponsor: Senator Bullard
Date Introduced: April 25, 2001 (Senate Bill 422) / October 17, 2001 (Senate Bill 738)
Date Ordered Enrolled: May 30, 2002
Date of Analysis: May 31, 2002

Position: The Department of Consumer and Industry Services supports the bill.

Background: The Business Corporation Act governs the manner in which corporations must be organized, operated, and dissolved. Several sections of the act overlap sections of the Revised Judicature Act. Section 2021 relates to foreign corporations. Section 3520 relates to corporations with expired charters. Section 3615 relates to insolvent corporations. Initially, Senate Bill 422 was introduced to repeal these three sections. Subsequently, Senate Bill 738 was introduced to merely clarify Section 2021. Apparently, there was concern that this section may still be needed for corporations that are not organized under the Business Corporation Act or the Nonprofit Corporation Act. The later bill merely eliminates the duplication between the RJA and the general corporation laws, assuring that foreign corporations are subject to one or the other but not both.

Bill Content: Senate Bill 422 repeals sections 3520 and 3615 of the Revised Judicature Act of 1961. Senate Bill 738 amends Section 2021 of the Revised Judicature Act of 1961 to clarify that the prohibition against a foreign corporation maintaining an action based on performance of an act because it is not expressly authorized by law does not apply to a foreign corporation subject to the general corporation laws. Section 1051 of the Business Corporation Act provides that a foreign corporation transacting business without a certificate of authority may not maintain an action or proceeding in a court until the corporation has obtained a certificate of authority.

Arguments For: The bills eliminate duplication between the Revised Judicature Act and various sections of the Business Corporation Act. The conflict between these acts creates confusion and leads to problems when corporation law issues reach the courts.

Arguments Against: There is a concern that Senate Bill 738 is too broad. Under the bill a corporation organized under the general corporation laws would be permitted to legally bring and maintain an action in court once it has its certificate of authority whether the statute on which the action is based requires that the action be expressly authorized by Michigan law or not. This could be problematic.

Response: In discussing this issue with the director of the Corporations Division it was not possible to identify specific situations where this would be problematic. This problem is more theoretical than real. The inclusion of Senate Bill 738 addressed the most significant problem posed by the original bill, repeal of Section 2021 in its entirety.

Positions: The Business Law Section of the Michigan Bar sought these changes. There was no opposition.

Fiscal Impact: There will be no fiscal impact on the department.

Administrative Rule Impact: No new or revised administrative rules will be required as a result of the bill.