| 1 | 1 | | House Study Bill 211 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON HOLT) A BILL FOR An Act providing for the conversion of partnerships into other 1 forms of domestic or foreign organizations, and providing 2 for fees. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1684YC (3) 91 da/jh |
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| 3 | 3 | | H.F. _____ Section 1. Section 486A.901, Code 2025, is amended by 1 striking the section and inserting in lieu thereof the 2 following: 3 486A.901 Definitions. 4 In this article: 5 1. Converted organization means the organization into 6 which a converting domestic partnership converts pursuant to 7 this article, and continues in existence after the conversion 8 takes effect. 9 2. Converting organization means a domestic partnership 10 that converts into another organization pursuant to this 11 article and does not continue in existence after the conversion 12 takes effect. 13 3. Domestic , with respect to an organization, means formed 14 and governed as to its internal affairs by a domestic governing 15 statute. 16 4. Domestic governing statute means a statute of this 17 state governing the formation and internal affairs of a 18 domestic organization, including this chapter governing a 19 partnership; chapter 488 governing a limited partnership, 20 including a limited liability limited partnership; chapter 489 21 governing a limited liability company; chapter 490 governing a 22 business corporation; chapter 504 governing a not-for-profit 23 corporation; or chapter 633A governing a business trust. 24 5. Foreign , with respect to an organization, means formed 25 and governed as to its internal affairs by the laws of another 26 jurisdiction. 27 6. Foreign governing statute means a statute of another 28 jurisdiction governing the formation and internal affairs of 29 a foreign organization. 30 7. General partner means a partner in a partnership and a 31 general partner in a limited partnership. 32 8. Governing statute means a domestic governing statute or 33 foreign governing statute, including any predecessor statute. 34 9. Limited partner means a limited partner in a limited 35 -1- LSB 1684YC (3) 91 da/jh 1/ 10 |
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| 5 | 5 | | H.F. _____ partnership. 1 10. Limited partnership means a limited partnership formed 2 under chapter 488. 3 11. Organization means a partnership; limited partnership, 4 including a limited liability limited partnership; limited 5 liability company; business corporation; nonprofit corporation; 6 or business trust formed if the organization is formed under a 7 domestic governing statute or foreign governing statute; or any 8 other foreign organization formed under a comparable foreign 9 governing statute. 10 12. a. Organizational document means a public organic 11 document and other document or record that determines an 12 organizations internal governance and the relations among the 13 persons that own the organization, have an interest in the 14 organization, or are members of the organization, as provided 15 in its governing statute, and includes any amendment to or 16 restatement of that document or record. 17 b. Organizational document includes but is not limited to 18 the following: 19 (1) For a domestic general partnership, its partnership 20 agreement as provided in its domestic governing statute; or 21 for a foreign general partnership, its partnership agreement 22 or a comparable document as provided in its foreign governing 23 statute. 24 (2) For a domestic limited partnership, its certificate 25 of limited partnership as provided in its domestic governing 26 statute; or for a foreign limited partnership, its certificate 27 of limited partnership or a comparable document as provided in 28 its foreign governing statute. 29 (3) For a domestic limited liability company, its 30 certificate of organization and operating agreement as provided 31 in its domestic governing statute; or for a foreign limited 32 liability company, its certificate of organization or articles 33 of organization, and operating agreement, or comparable records 34 as provided in its foreign governing statute. 35 -2- LSB 1684YC (3) 91 da/jh 2/ 10 |
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| 7 | 7 | | H.F. _____ (4) For a domestic business corporation, its articles 1 of incorporation, bylaws, and other agreements among its 2 shareholders authorized by its domestic governing statute, as 3 provided in its domestic governing statute; or for a foreign 4 business corporation, its articles of incorporation, bylaws, 5 other agreements among its shareholders authorized by its 6 foreign governing statute, or comparable documents as provided 7 in its foreign governing statute. 8 (5) For a domestic nonprofit corporation, its articles of 9 incorporation, bylaws, and other agreements among its members 10 authorized by its domestic governing statute, as provided in 11 its domestic governing statute; and for a foreign nonprofit 12 corporation, its articles of incorporation, bylaws, and 13 other agreements among its members authorized by its foreign 14 governing statute, or comparable records as provided in its 15 foreign governing statute. 16 (6) For a domestic business trust, its certificate of trust, 17 agreement of trust, or declaration of trust; and for a foreign 18 business trust, its certificate of trust, agreement of trust, 19 declaration of trust, or comparable records as provided in its 20 foreign governing statute. 21 13. Partner includes either a partner in a general 22 partnership or a general or limited partner in a limited 23 partnership. 24 14. a. Public organic document means a document or record 25 the filing of which by the secretary of state is required 26 to form an organization and includes any amendment to or 27 restatement of that document or record. 28 b. Public organic document includes but is not limited to 29 any of the following: 30 (1) For a domestic limited partnership, a certificate 31 of limited partnership as provided in its domestic governing 32 statute; or for a foreign limited partnership, its certificate 33 of limited partnership or a comparable document as provided in 34 its foreign governing statute. 35 -3- LSB 1684YC (3) 91 da/jh 3/ 10 |
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| 9 | 9 | | H.F. _____ (2) For a domestic limited partnership, its certificate 1 of limited partnership as provided in its domestic governing 2 statute; or for a foreign limited partnership, its certificate 3 of limited partnership or a comparable document as provided in 4 its foreign governing statute. 5 (3) For a domestic limited liability company, its 6 certificate of organization as provided in its domestic 7 governing statute; or for a foreign limited liability company, 8 its certificate of organization or articles of organization 9 or comparable records as provided in its foreign governing 10 statute. 11 (4) For a domestic business corporation, its articles 12 of incorporation as provided in its domestic governing 13 statute; or for a foreign business corporation, its articles 14 of incorporation or comparable documents as provided in its 15 foreign governing statute. 16 (5) For a domestic nonprofit corporation, its articles of 17 incorporation as provided in its domestic governing statute; 18 and for a foreign nonprofit corporation, its articles of 19 incorporation or comparable records as provided in its foreign 20 governing statute. 21 (6) For a domestic business trust, its certificate of trust, 22 agreement of trust, or declaration of trust; and for a foreign 23 business trust, its certificate of trust, agreement of trust, 24 declaration of trust, or comparable documents as provided in 25 its foreign governing statute. 26 Sec. 2. Section 486A.902, Code 2025, is amended by striking 27 the section and inserting in lieu thereof the following: 28 486A.902 Conversion of partnership to another type of 29 organization. 30 1. A domestic partnership may be converted to another type 31 of domestic or foreign organization pursuant to this section 32 if all of the following apply: 33 a. The other organizations governing statute authorizes the 34 conversion. 35 -4- LSB 1684YC (3) 91 da/jh 4/ 10 |
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| 11 | 11 | | H.F. _____ b. The conversion is not prohibited by the law of the 1 jurisdiction that enacted the other organizations governing 2 statute. 3 c. The other organization complies with its governing 4 statute in effecting the conversion. 5 2. A plan of conversion setting forth the terms and 6 conditions of the conversion of a domestic partnership to 7 another organization must be approved by all of the partners 8 or by a number or percentage specified for conversion in the 9 partnership agreement. 10 3. A plan of conversion must be in a document and must 11 include all of the following: 12 a. The name of the converting organization. 13 b. The name, type of organization, and jurisdiction of the 14 governing statute of the converted organization. 15 c. The terms and conditions of the conversion, including 16 the manner and basis for converting interests in the converting 17 organization into any combination of money, interests in the 18 converted organization, and other consideration. 19 d. The organizational documents of the converted 20 organization. 21 e. In addition to the requirements of paragraphs a through 22 d , a plan of conversion may contain any other provision not 23 prohibited by law. 24 4. After the plan of conversion is approved by the partners, 25 the partnership shall deliver to the secretary of state for 26 filing articles of conversion which must include all of the 27 following: 28 a. A statement that the partnership has been converted into 29 another type of organization. 30 b. The name, type of organization of the converting 31 organization, and the jurisdiction of the governing statute of 32 the converted organization. 33 c. The name, type of organization of the converted 34 organization, and the jurisdiction of the governing statute of 35 -5- LSB 1684YC (3) 91 da/jh 5/ 10 |
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| 13 | 13 | | H.F. _____ the converted organization. 1 d. The date the conversion is effective under the governing 2 statute of the converted organization. 3 e. A statement that the conversion was approved as required 4 by this chapter. 5 f. A statement that the conversion was approved as required 6 by the governing statute of the converted organization. 7 5. The conversion takes effect when the articles of 8 conversion and any public organic document required by the 9 converted organizations governing statute are filed or at any 10 later date specified in the filed articles of conversion. 11 6. After a conversion pursuant to this chapter, a general 12 partner of a converting general partnership remains liable as a 13 general partner for an obligation incurred by the partnership 14 before the conversion takes effect. A person not a partner is 15 deemed to have notice of a partnerships participation in a 16 conversion ninety days after the articles of conversion under 17 this section become effective. 18 Sec. 3. Section 486A.904, Code 2025, is amended by striking 19 the section and inserting in lieu thereof the following: 20 486A.904 Effect of conversion. 21 1. An organization that has been converted pursuant to this 22 article is for all purposes the same organization that existed 23 before the conversion. 24 2. When a conversion takes effect, all of the following 25 procedures apply: 26 a. All property owned by the converting organization remains 27 vested in the converted organization. 28 b. All debts, liabilities, and other obligations of 29 the converting organization continue as obligations of the 30 converted organization. 31 c. An action or proceeding pending by or against the 32 converting organization may be continued as if the conversion 33 had not occurred. 34 d. Except as prohibited by other law, all of the rights, 35 -6- LSB 1684YC (3) 91 da/jh 6/ 10 |
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| 15 | 15 | | H.F. _____ privileges, immunities, powers, and purposes of the converting 1 organization remain vested in the converted organization. 2 e. Except as otherwise provided in the plan of conversion, 3 the terms and conditions of the plan of conversion take effect. 4 f. Except as otherwise agreed, the conversion does not 5 dissolve a partnership for the purposes of article 8. 6 3. a. A converted foreign organization consents to the 7 jurisdiction of the courts of this state to enforce any 8 obligation owed by the converting organization, if before the 9 conversion the converting organization was subject to suit in 10 this state on the obligation. 11 b. A converted foreign organization that is not authorized 12 to transact business in this state shall appoint the secretary 13 of state as its agent for service of process for purposes of 14 enforcing an obligation under this subsection. 15 Sec. 4. Section 486A.1202, subsection 1, Code 2025, is 16 amended by adding the following new paragraph: 17 NEW PARAGRAPH . 0h. Articles of conversion . . . . . . . . . . . . $ 50 18 Sec. 5. Section 488.1101, subsection 9, paragraph c, Code 19 2025, is amended to read as follows: 20 c. For a domestic or foreign limited liability company, its 21 articles certificate of organization and operating agreement, 22 or comparable records as provided in its governing statute. 23 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanations substance by the members of the general assembly. 26 BACKGROUND GENERAL. This bill amends the Uniform 27 Partnership Act (Code chapter 486A) prepared and recommended 28 by the national conference of commissioners of uniform state 29 laws, and providing for partnership law in Iowa. A partnership 30 refers to a general partnership which involves an association 31 of individuals who assume co-ownership of business assets. 32 Generally, the general partners are responsible for collective 33 decisionmaking, taking an equal share of business profits, 34 and assuming full personal liability in case of a lawsuit or 35 -7- LSB 1684YC (3) 91 da/jh 7/ 10 |
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| 17 | 17 | | H.F. _____ creditor action. A partnership is governed by a partnership 1 agreement which is a type of private contract entered into 2 by the partners that describes the internal affairs of 3 the organization, and is not required to be filed with the 4 secretary of state. 5 TYPES OF ORGANIZATIONS. A partnership is often compared 6 with other types of organizations that limit the income earned 7 and liability incurred by investors based on their respective 8 contributions. The organization may delegate control over the 9 organizations affairs to one or more persons who serve in a 10 fiduciary capacity as one or more general partners of a limited 11 partnership (Code chapter 488), managers of a limited liability 12 company (Code chapter 489), or board members of a business 13 corporation (Code chapter 490) or nonprofit corporation 14 (Code chapter 504). These types of filing organizations 15 must be formed under what the bill refers to as a domestic 16 governing statute or foreign governing statute that controls 17 the organizations internal governance with certain tax 18 consequences. A foreign organization may also include other 19 types of organizations under a comparable foreign governing 20 statute. A public organic document required to be filed to 21 form a domestic organization includes a certificate of limited 22 partnership for a domestic limited partnership, a certificate 23 of organization for a domestic limited liability company, 24 articles of incorporation for a domestic business corporation 25 or not-for-profit corporation. An organizational document 26 includes a public organic document and other documents not 27 required to be filed, including a partnership agreement for a 28 domestic partnership, an operating agreement for a domestic 29 limited liability company, bylaws and shareholder agreements 30 for a domestic business corporation, and bylaws and other 31 member agreements for a nonprofit corporation. 32 BACKGROUND CONVERSION. The process of conversion allows 33 a domestic organization to become another type of domestic or 34 foreign organization. Under Code chapter 486A, the conversion 35 -8- LSB 1684YC (3) 91 da/jh 8/ 10 |
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| 19 | 19 | | H.F. _____ process is limited. A domestic partnership formed under 1 Code chapter 486A may only convert to a limited partnership 2 governed under Code chapter 488 and only pursuant to certain 3 requirements. The terms of the conversion must be approved 4 by the partners. After the conversion, the converted limited 5 partnership must file a certificate of limited partnership 6 with the secretary. A general partner which becomes a limited 7 partner of a converted limited partnership must remain liable 8 as a general partner for any liability for an obligation 9 incurred by the partnership. 10 BILLS PROVISIONS PROCESS OF CONVERSION. The bill 11 provides for the conversion of a domestic partnership to a 12 domestic limited partnership or any other type of domestic 13 or foreign organization, so long as the other organizations 14 governing statute authorizes the conversion, the conversion 15 is not prohibited by the other organizations governing 16 statute, and the other organization complies with its governing 17 statute. The terms of the conversion must be set out in 18 a plan of conversion for approval by all of the general 19 partnerships partners or a percentage specified in its 20 partnership agreement. The plan of conversion must include 21 organizational documents of the converted organization. After 22 the conversion is approved, the secretary of state must 23 file articles of conversion with the secretary of state that 24 includes information regarding the converting partnership and 25 converted organization. The conversion takes effect when 26 articles of conversion and any public organic record for the 27 converted organization are filed, or a later date as specified 28 in the filed articles. The bill retains a provision that holds 29 a general partner liable for any obligation incurred by the 30 partnership before the conversion takes effect. 31 BILLS PROVISIONS EFFECT OF CONVERSION. When a 32 conversion takes effect, property owned by the converting 33 organization becomes property of the converted organization. 34 Obligations, including debts, incurred by the converting 35 -9- LSB 1684YC (3) 91 da/jh 9/ 10 |
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| 21 | 21 | | H.F. _____ organization become obligations of the converted organization. 1 Any pending legal action brought by or against the converting 2 organization continues as if the conversion had not occurred. 3 The converted foreign organization consents to the jurisdiction 4 of the courts of this state to enforce any obligation owed by 5 the converting organization. A converted foreign organization 6 that is not authorized to transact business in this state must 7 appoint the secretary of state as its agent for service of 8 process. 9 -10- LSB 1684YC (3) 91 da/jh 10/ 10 |
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