HLS 24RS-1483 ORIGINAL
2024 Regular Session
HOUSE BILL NO. 892
BY REPRESENTATIVE WRIGHT
COMMERCIAL REGULATIONS: Provides relative to the formation and administration
of decentralized unincorporated nonprofit associations
1 AN ACT
2To enact Chapter 5-A of Title 12 of the Louisiana Revised Statutes of 1950, to be comprised
3 of R.S. 12:531 through 560, relative to unincorporated nonprofit associations; to
4 create uniform decentralized unincorporated nonprofit associations; to provide for
5 a short title; to provide for definitions; to provide for supplemental general
6 principles; to provide for governing jurisdictions; to prohibit certain distributions and
7 dividends; to provide for compensation; to establish certain property rights of the
8 nonprofit association; to provide for liability; to provide for certain actions,
9 proceedings, and procedures; to provide for filings with the secretary of state's office;
10 to provide for judgments and orders; to provide for agency; to provide for the
11 existence, dissolution, and termination of a nonprofit association; to provide for
12 disciplinary action and resignation of members; to provide for certain duties and
13 powers of members; to provide for the use of distributed ledger technology; to
14 require validation of records and procedures for conducting operations; to provide
15 for the rights and duties of administrators; to provide for record inspection; to
16 provide for indemnification; to provide for mergers and the conversion of entities;
17 to provide for severability; and to provide for related matters.
18Be it enacted by the Legislature of Louisiana:
19 Section 1. Chapter 5-A of Title 12 of the Louisiana Revised Statutes of 1950,
20comprised of R.S. 12:531 through 560, is hereby enacted to read as follows:
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1 CHAPTER 5-A. LOUISIANA DECENTRALIZED UNINCORPORATED
2 NONPROFIT ASSOCIATION ACT
3 §531. Short title
4 This Chapter may be cited as the "Louisiana Decentralized Unincorporated
5 Nonprofit Association Act".
6 §532. Definitions
7 As used in this Chapter:
8 (1) "Administrator" means a member authorized by vote of the membership
9 to fulfill administrative or operational tasks.
10 (2) "Decentralized unincorporated nonprofit association" or "nonprofit
11 association" means an entity that meets all of the following requirements:
12 (a) Consists of at least one hundred members joined by mutual consent
13 pursuant to an agreement that may be in writing or inferred from conduct for a
14 common nonprofit purpose.
15 (b) Has elected to be formed in accordance with this Chapter.
16 (c) Is not formed in accordance with any other provisions of law governing
17 organization or operation of the nonprofit association.
18 (3) "Digital asset" means virtual currency, cryptocurrencies, native electronic
19 assets, including stablecoins and non-fungible tokens or NFTs, and other digital-only
20 assets that confer economic, proprietary, or access rights or powers.
21 (4) "Distributed ledger technology" means a computational process protocol
22 and supporting infrastructure, including blockchain, that uses a distributed, shared
23 and replicated ledger, whether it is public or private or permissioned or
24 permissionless, and that may include the use of digital assets as a medium of
25 electronic exchange.
26 (5) "Distributed ledger protocol" means a computational process that governs
27 the rules, operation, and communication between intersection and connection points
28 in a telecommunication network.
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1 (6) "Distribution" means the payment of a dividend or any part of the income
2 or profit of a decentralized unincorporated nonprofit association to its members or
3 administrators.
4 (7) "Established practices" means the methods and operations used by a
5 decentralized unincorporated nonprofit association without material change during
6 the most recent five years of existence of the nonprofit association, or if the nonprofit
7 association has existed for less than five years, during the entire existence of the
8 nonprofit association.
9 (8) "Governing principles" means all agreements and any amendment or
10 restatement of those agreements including any decentralized unincorporated
11 nonprofit association agreements, consensus formation algorithms, smart contracts
12 or, enacted governance proposals that govern the purpose or operation of a
13 decentralized unincorporated nonprofit association and the rights and obligations of
14 the members and administrators. Governing principles may be contained in a record,
15 implied from the established practices of the nonprofit association, or both.
16 (9) "Member" means a person who, pursuant to the governing principles of
17 a decentralized unincorporated nonprofit association, may participate in the selection
18 of the nonprofit association's administrators or the development of the policies and
19 activities of the nonprofit association.
20 (10) "Membership interest" means a voting right of a member in a
21 decentralized unincorporated nonprofit association determined by the governing
22 principles and includes interests ascertained from decentralized ledger technology
23 on which the nonprofit association relies to determine the voting right of a member.
24 (11) "Person" means an individual, corporation, business trust, estate, trust,
25 partnership, association, agency, joint venture, government, governmental
26 subdivision or instrumentality, or any other legal commercial entity.
27 (12) "Smart contract" means a computational process that executes on
28 distributed ledger technology used to automate transactions and includes but is not
29 limited to any of the following:
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1 (a) Facilitating or instructing transfers of assets.
2 (b) Creating and transmitting digital assets.
3 (c) Synchronizing information.
4 (d) Authenticating user rights and conveying access to software applications.
5 (e) Effectuating membership votes within an organization.
6 §533. Supplemental general principles of law; relation to other law
7 A. The provisions of the Louisiana Revised Statutes of 1950, and other
8 principles of law supplement this Chapter unless displaced by a particular provision
9 of this Chapter.
10 B. This Chapter shall not repeal or modify a provision of law or rule for
11 organizations that do not elect to become decentralized unincorporated nonprofit
12 associations.
13 §534. Governing law; jurisdiction
14 A. The law of this state governs any decentralized unincorporated nonprofit
15 association that is formed in this state.
16 B. The governing principles of a decentralized unincorporated nonprofit
17 association shall identify the jurisdiction in which the decentralized unincorporated
18 association is formed.
19 §535. Profits; prohibitions on distributions and dividends; compensation and other
20 permitted payments
21 A. A decentralized unincorporated nonprofit association may engage in
22 profit-making activities, but profits from any activities shall be used in furtherance
23 of or set aside for the common nonprofit purpose of the association.
24 B. Except as provided in Subsection C of this Section, a decentralized
25 unincorporated nonprofit association may not make distributions to its members or
26 administrators.
27 C. A decentralized unincorporated nonprofit association may do all of the
28 following:
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1 (1) Pay reasonable compensation or reimburse reasonable expenses to its
2 members, administrators, and persons outside the organization for services rendered,
3 including with respect to the administration and operation of the decentralized
4 unincorporated nonprofit association, which may include the provisions of collateral
5 for the self-insurance of the decentralized unincorporated nonprofit association,
6 voting, or participation in the operations and activities of the association.
7 (2) Confer benefits on its members and administrators in conformity with its
8 common nonprofit purpose.
9 (3) Repurchase membership interests to the extent authorized by its
10 governing principles.
11 (4) Make distributions of property to members upon winding up and
12 termination of the decentralized unincorporated nonprofit association to the extent
13 permitted in accordance with R.S. 12:557.
14 §536. Immovable and movable property; decentralized unincorporated nonprofit
15 association as legatee, devisee, or beneficiary
16 A. A decentralized unincorporated nonprofit association is a legal entity
17 separate from its members for the purposes of acquiring, holding, encumbering,
18 donating, and otherwise transferring immovable and movable property.
19 B. A decentralized unincorporated nonprofit association may, in its name,
20 acquire, hold, mortgage, hypothecate, encumber, donate, or otherwise transfer its
21 interest in immovable or movable property.
22 C. A decentralized unincorporated nonprofit association may be a
23 beneficiary of a trust and has the capacity to receive donations inter vivos and mortis
24 causa.
25 §537. Statement of authority as to immovable property
26 A. A decentralized unincorporated nonprofit association may execute and
27 file a statement of authority in it own name to mortgage, hypothecate, encumber,
28 donate, or otherwise transfer an interest in immovable property.
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1 B. An interest in immovable property held in the name of a decentralized
2 unincorporated nonprofit association may be mortgaged, hypothecated, encumbered,
3 donated, or otherwise transferred by a person, so authorized in a statement of
4 authority filed in the conveyance records in the parish in which the immovable
5 property is situated.
6 C. A statement of authority shall include all of the following:
7 (1) The name of the decentralized unincorporated nonprofit association.
8 (2) The federal tax identification number, if any, of the decentralized
9 unincorporated nonprofit association.
10 (3) The address in this state, including the street address, if any, of the
11 decentralized unincorporated nonprofit association, or if the nonprofit association
12 does not have an address in this state, its out-of-state address.
13 (4) A statement or attestation that it is a decentralized unincorporated
14 nonprofit association.
15 (5) The name or title of the person authorized to transfer an estate or interest
16 in real property held in the name of the decentralized unincorporated nonprofit
17 association.
18 (6) A written attestation or confirmation that the transaction was duly
19 authorized by membership vote in accordance with R.S. 12:551 or otherwise in
20 conformity with the governing principles of the decentralized unincorporated
21 nonprofit association.
22 D. A statement of authority shall be in the form of an authentic act and shall
23 be executed by a person who is not the person authorized to transfer the interest in
24 immovable property.
25 E. The filing officer may collect a fee for collecting and recording the
26 statement of authority in the amount authorized for recording a transfer of
27 immovable property.
28 F. An amendment of a statement of authority, including a cancellation, shall
29 meet the form requirements and be filed in the same manner as an original statement.
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1 Unless canceled earlier, a filed statement of authority or its most recent amendments
2 is canceled by operation of law five years after the most recent filing.
3 G. If the title to immovable property is in the name of a decentralized
4 unincorporated nonprofit association and the statement of authority is filed in the
5 conveyance records in the parish in which the immovable property is situated, the
6 authority of the person named in a statement of authority to transfer is conclusive in
7 favor of a person who gives value without notice that the person lacks authority.
8 §538. Liability in tort or contract
9 A. A decentralized unincorporated nonprofit association is a legal entity
10 separate from its members for the purposes of determining and enforcing rights,
11 duties, and liabilities in contract and tort.
12 B. A person shall not be liable for any of the following acts or omissions
13 merely because the person is a member, administrator, authorized to participate in
14 the management of the affairs of the nonprofit association, considered as a member
15 by the nonprofit association or made the contract or incurred the obligation on behalf
16 of the nonprofit association:
17 (1) A breach of a contract if the fact that the person was acting for the
18 nonprofit association was disclosed to, known by the other party to the contract or
19 to the party owed performance.
20 (2) A tortious act or omission for which a decentralized unincorporated
21 nonprofit association is not liable.
22 (3) A tortious act or omission of a member, administrator, or other person
23 for which a decentralized unincorporated nonprofit association is liable.
24 C. A member, administrator, person authorized to participate in the
25 management of the affairs of the nonprofit association, or person considered as a
26 member by the nonprofit association may assert a claim against the decentralized
27 unincorporated nonprofit association. A decentralized unincorporated nonprofit
28 association may assert a claim against a member, administrator, person authorized
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1 to participate in the management of the affairs of the nonprofit association, or person
2 considered as a member by the nonprofit association.
3 §539. Capacity to assert and defend; standing
4 A. A decentralized unincorporated nonprofit association, in its name, may
5 institute, defend, intervene, or participate in a judicial, administrative, or other
6 governmental proceedings or in an arbitration, mediation, or any other form of
7 alternative dispute resolution.
8 B. A decentralized unincorporated nonprofit association may assert a claim
9 on behalf of its members when all of the following are satisfied:
10 (1) One or more members of the nonprofit association have standing to assert
11 a claim in their own right.
12 (2) The interests the nonprofit association seek to protect are germane to its
13 purposes.
14 (3) Neither the claim asserted, nor the relief requested requires the
15 participation of a member.
16 §540. Effect of judgment or order
17 A judgment or order against a decentralized unincorporated nonprofit
18 association is not by itself a judgment or order against a member or administrator of
19 the nonprofit association.
20 §541. Appointment of agent to receive service of process
21 A. A decentralized unincorporated nonprofit association may file in the
22 office of the secretary of state a statement appointing an agent authorized to receive
23 service of process.
24 B. A statement appointing an agent shall include all of the following:
25 (1) The name of the decentralized unincorporated nonprofit association.
26 (2) The federal tax identification number, if any, of the decentralized
27 unincorporated nonprofit association.
28 (3) The address in this state, including the street address, if any, of the
29 decentralized unincorporated nonprofit association. If the nonprofit association does
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1 not have an address in this state, the nonprofit association shall provide its out-of-
2 state address.
3 (4) The name and address of the person in this state who is authorized to
4 receive service of process.
5 C. A statement appointing an agent shall be signed and acknowledged by a
6 person authorized to administer the affairs of the decentralized unincorporated
7 nonprofit association. The statement shall also be signed and acknowledged by the
8 person who is appointed agent and accepts the appointment.
9 D. A filing officer may collect a fee when a nonprofit association files any
10 of the following:
11 (1) A statement appointing an agent to receive service of process.
12 (2) An amendment.
13 (3) A resignation.
14 E. An amendment to a statement appointing an agent to receive service of
15 process shall meet the requirements for execution of an original statement.
16 §542. Summons and complaint; service
17 In an action or proceeding against a decentralized unincorporated nonprofit
18 association, a summons and complaint shall be served on an agent authorized by
19 appointment to receive service of process or a person authorized to administer the
20 affairs of the nonprofit association. If no agent or authorized person is designated
21 for service of process, service may be made on a member of the nonprofit
22 association.
23 §543. Claim not abated by change of members or administrators
24 A claim for relief against a decentralized unincorporated nonprofit
25 association shall not abate merely because of a change in its members or persons
26 authorized to administer the affairs of the nonprofit association.
27 §544. Venue
28 A. For purposes of venue, a decentralized unincorporated nonprofit
29 association is a resident of either of the following:
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1 (1) The parish in which the nonprofit association has an office.
2 (2) The parish in which the agent resides who is authorized to receive service
3 of process pursuant to R.S. 12:541.
4 §545. Perpetual existence, dissolution, continuation of existence
5 A. A decentralized unincorporated nonprofit association shall have perpetual
6 duration unless its governing principles specify otherwise.
7 B. A decentralized unincorporated nonprofit association may be dissolved
8 in accordance with any of the following methods:
9 (1) If the governing principles of the nonprofit association provide a time or
10 method for dissolution.
11 (2) If the governing principles of the nonprofit association do not provide a
12 method for dissolution, by approval of its members in accordance with R.S. 12:551.
13 (3) If membership in the decentralized unincorporated nonprofit association
14 falls below one hundred members and the nonprofit association does not meet the
15 requirements of an unincorporated nonprofit association pursuant to this Chapter.
16 (4) By court order.
17 C. After dissolution, a decentralized unincorporated nonprofit association
18 continues in existence until its activities have been wound up and terminated
19 pursuant to R.S. 12:557.
20 D. If the nonprofit association meets the requirements of an unincorporated
21 nonprofit association pursuant to this Chapter, the entity automatically converts to
22 an unincorporated nonprofit association unless the governing principles specify
23 otherwise.
24 §546. Admission, suspension, dismissal, or expulsion of members
25 A. A person becomes a member of a decentralized unincorporated nonprofit
26 association in accordance with the governing principles of the nonprofit association.
27 If there are no applicable governing principles, a person shall be considered a
28 member upon purchase or assumption of ownership of a membership interest and
29 continue as a member absent the suspension, dismissal, or expulsion of the person
30 pursuant to Subsection B of this Section, resignation pursuant to R.S.12:547, or the
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1 dissolution and wind-up of the nonprofit association pursuant to R.S. 12:545 and
2 557.
3 B. Pursuant to the governing principles, a member may be suspended,
4 dismissed, or expelled from a decentralized unincorporated nonprofit association.
5 If there are no applicable governing principles, a member may be suspended,
6 dismissed, by approval of the members of the nonprofit association in accordance
7 with R.S. 12:551.
8 C. Unless otherwise provided for in the governing principles, suspension,
9 dismissal, or expulsion of a member shall not relieve the member of any obligation
10 incurred, or commitment made by the member, before the suspension, dismissal, or
11 expulsion.
12 §547. Member resignation
13 A. A member may resign from a decentralized unincorporated nonprofit
14 association in accordance with the governing principles of the nonprofit association.
15 In the absence of applicable governing principles, a member shall be deemed to have
16 resigned as a member upon the voluntary or involuntary disposal of all membership
17 interests, other property, or instruments that confer upon the person a voting right
18 within the nonprofit association.
19 B. Unless otherwise provided for in the governing principles, resignation of
20 a member shall not relieve the member of any obligation incurred, or commitment
21 made by the member, before the resignation.
22 §548. Duties of members
23 A. Unless otherwise provided for in the governing principles, a member shall
24 not have any fiduciary duty to a decentralized unincorporated nonprofit association
25 or to any other member of the nonprofit association by merely being a member.
26 B. All members shall be subject to the implied contractual covenant of good
27 faith and fair dealing.
28 §549. Prohibition of agency powers of members
29 A. A member shall not be considered an agent of a decentralized
30 unincorporated nonprofit association merely by reason of being a member.
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1 B. Liability may be imposed on a decentralized unincorporated nonprofit
2 association as a result of a member's conduct. A person's status as a member shall
3 not prevent or restrict any liability on the nonprofit association.
4 §550. Transferable member interests
5 Except as otherwise provided in the governing principles of the decentralized
6 unincorporated nonprofit association, a member interest, or any right is freely
7 transferable to another person through conveyance of the membership interest within
8 the nonprofit association.
9 §551. Approval by members
10 A. Except as otherwise provided in the governing principles, a decentralized
11 unincorporated nonprofit association shall have the approval of the majority of
12 membership interests participating in a vote to do each of the following:
13 (1) Suspend, dismiss, or expel a member.
14 (2) Select or dismiss an administrator.
15 (3) Adopt, amend, or repeal the governing principles.
16 (4) Sell, lease, exchange, or otherwise dispose of the property of a nonprofit
17 association.
18 (5) Dissolve the association pursuant to R.S. 12:545.
19 (6) Undertake any other act outside the ordinary course of activities of the
20 nonprofit association.
21 (7) Determine the policy and purpose of the nonprofit association.
22 B. A decentralized unincorporated nonprofit association shall have the
23 approval of its members in accordance with its governing principles to perform any
24 acts or exercise a right that the governing principles require to be approved by
25 members.
26 C. Unless otherwise provided for in the governing principles, membership
27 interest in a decentralized unincorporated nonprofit association shall be calculated
28 in proportion to the voting rights of a member within the nonprofit association.
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1 §552. Utilization of distributed ledger technology
2 A. A decentralized unincorporated nonprofit association may provide for its
3 governance, in whole or in part, through distributed ledger technology, including
4 smart contracts.
5 B. The governing principles for a decentralized unincorporated nonprofit
6 association may do both of the following:
7 (1) Specify whether any distributed ledger technology utilized or enabled by
8 the decentralized unincorporated nonprofit association will be fully immutable or
9 subject to change by the nonprofit association and whether any such ledger will be
10 fully or partially public or private, including the extent of a member's access to
11 information.
12 (2) Adopt voting procedures, which may include smart contracts deployed
13 to distributed ledger technology that provide for all of the following:
14 (a) Proposals from members or administrators in the decentralized
15 unincorporated nonprofit association for upgrades, modifications, or additions to
16 software systems or protocols.
17 (b) Other proposed changes to the governing principles.
18 (c) Any other matters of governance or activities within the purpose of the
19 decentralized unincorporated nonprofit association.
20 §553. Consensus formation algorithms and governance process
21 A. In accordance with its governing principles, a decentralized
22 unincorporated nonprofit association may carry out both of the following:
23 (1) Adopt any reasonable algorithmic means for establishing consensus for
24 the validation of records, as well as for establishing requirements, processes, and
25 procedures for conducting operations or making organizational decisions with
26 respect to the distributed ledger technology used by the decentralized unincorporated
27 nonprofit association.
28 (2) In accordance with any procedure specified pursuant to R.S. 12:551,
29 modify the consensus mechanism, as well as the requirements, processes, and
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1 procedures or substitute a new consensus mechanism, requirements, processes or
2 procedures that comply with state law and the governing principles of the
3 decentralized unincorporated nonprofit association.
4 §554. Selection of administrators; rights and duties of administrators
5 A. Unless otherwise provided for in the governing principles, the members
6 of an association may select administrators in accordance with R.S. 12:551.
7 B. If no administrators are selected, none of the members would be
8 considered administrators for the decentralized unincorporated nonprofit association.
9 C. No decentralized unincorporated nonprofit association shall be required
10 to have an administrator, and the rights and duties of all administrators shall be
11 established as part of the authorization of authority to act as an administrator.
12 D. If in a record, the governing principles of a decentralized unincorporated
13 nonprofit association may limit or eliminate the liability of an administrator or its
14 members for money damages for an action or inaction except for any of the
15 following:
16 (1) The amount of financial benefit improperly received by an administrator.
17 (2) An intentional infliction of harm on the association or its members.
18 (3) An intentional violation of criminal law.
19 (4) Breach of the duty of loyalty unless, following full disclosure of all
20 material facts to the nonprofit association members, the specific act or transaction
21 that would otherwise violate the duty of loyalty is authorized or ratified by approval
22 of the disinterested members pursuant to R.S. 12:551.
23 (5) Improper distributions.
24 §555. Right to inspect records
25 A. Except as provided by Subsection B of this Section, on reasonable notice,
26 a member or administrator of a decentralized unincorporated nonprofit association
27 is entitled to an electronic record of any record maintained by the association
28 regarding the association's activities, financial condition and other circumstances, to
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1 the extent the information is material to the rights and duties of a member or
2 administrator pursuant to the governing principles or this Chapter.
3 B. A decentralized unincorporated nonprofit association shall not be
4 obligated to provide records requested from a member or administrator if access to
5 the information is contained in a record available to the member or administrator on
6 decentralized ledger technology.
7 C. A decentralized unincorporated nonprofit association may impose
8 reasonable restrictions on access to and use of information that may be provided
9 pursuant to this Section, including by designating the information confidential and
10 imposing nondisclosure or other safeguarding obligations on the recipient of the
11 information. In a dispute concerning the reasonableness of a restriction pursuant to
12 this Subsection, the nonprofit association shall have the burden of proving
13 reasonableness.
14 D. A former member or administrator may have access to information to
15 which the member or administrator is entitled when all of the following are satisfied:
16 (1) The information relates to the period of time during which the person was
17 a member or administrator.
18 (2) The former member or administrator seeks the information in good faith.
19 (3) The former member or administrator satisfies the requirements of
20 Subsections A through C of this Section with respect to the information.
21 E. A decentralized unincorporated nonprofit association shall not be
22 obligated to collect and maintain a list of members or individual member
23 information, including the names or addresses of its members.
24 §556. Indemnification; advancement of expenses
25 A. Unless otherwise provided in its governing principles, a decentralized
26 unincorporated nonprofit association may reimburse a member or administrator for
27 authorized expenses reasonably incurred on behalf of the nonprofit association.
28 B. A decentralized unincorporated nonprofit association may indemnify a
29 member or administrator for any debt, obligation, or other liability incurred in the
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1 course of activities of the member or administrator on behalf of the nonprofit
2 association. To be eligible for indemnification, an administrator shall have complied
3 with the duties stated in R.S. 12:554. If in a record, the governing principles may
4 broaden or limit this right of indemnification.
5 C. If a person is made, or threatened to be made, a party in a proceeding
6 based on that person's conduct of the affairs of a decentralized unincorporated
7 nonprofit association, that person is entitled, upon written request to the nonprofit
8 association, including through decentralized ledger technology, to receive payment
9 of or reimbursement by the nonprofit association, of reasonable expenses, including
10 attorney's fees and disbursements, incurred by that person in advance of the final
11 disposition of the proceeding. To be entitled to these payments or advances, the
12 person making the request shall make a written affirmation that the person has a
13 good faith belief that the criteria for indemnification in Subsection A of this Section
14 have been satisfied and that the person shall repay the amounts paid or reimbursed
15 if it is determined that the criteria for reimbursement are not satisfied.
16 D. A decentralized unincorporated nonprofit association may purchase and
17 maintain insurance on behalf of a member or administrator for liability asserted
18 against or incurred by the member or administrator in that capacity, whether or not
19 the nonprofit association would have the power to indemnify or advance expenses
20 to the member or administrator against the same liability pursuant to this Section.
21 E. These rights of reimbursement, indemnification, and advancement of
22 expense shall apply to former members or administrators for activities undertaken
23 on behalf of the decentralized unincorporated nonprofit association while they were
24 members or administrators.
25 §557. Windup up; termination
26 A. A dissolved decentralized unincorporated association shall wind up its
27 operations and the nonprofit association continues after dissolution only for the
28 purpose of winding up.
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1 B.(1) In winding up a decentralized unincorporated nonprofit association, the
2 members shall discharge debts, obligations, and other liabilities, settle and close the
3 nonprofit association's business, and marshal and distribute any remaining property
4 to either of the following:
5 (a) Another entity or person with similar nonprofit purposes, if required by
6 any other provision of law.
7 (b) The current members of the nonprofit association in proportion to their
8 membership interests in accordance with the governing principles and in the absence
9 of applicable governing principles.
10 (2) If neither Subparagraph (1)(a) or (b) of this Subsection applies, members
11 shall apply the law of unclaimed property to discharge debts, obligations, and other
12 liabilities, settle and close the nonprofit association's business, and marshal and
13 distribute any remaining property.
14 (3) Members may also do any of the following:
15 (a) Authorize an administrator to wind up the decentralized unincorporated
16 nonprofit association in accordance with R.S. 12:551. Any administrator or
17 administrators so authorized shall owe the nonprofit association a duty of care in the
18 conduct or winding up of the nonprofit to refrain from grossly negligent or reckless
19 conduct, willful or intentional misconduct or a knowing violation of the law.
20 (b) Preserve the nonprofit association's operations and property as a going
21 concern for a reasonable time.
22 (c) Prosecute and defend actions and proceedings, whether civil, criminal,
23 or administrative.
24 (d) Transfer the decentralized unincorporated nonprofit association's
25 property.
26 (e) Settle disputes by mediation or arbitration.
27 (f) Transfer the decentralized unincorporated nonprofit association's
28 property.
29 (g) Perform other acts necessary or appropriate to the winding up.
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1 (4) If the members of a decentralized unincorporated nonprofit association
2 do not appoint an administrator or administrators to wind up the nonprofit
3 association, the members would owe the association a duty of care in the conduct or
4 winding up of the nonprofit association's operations to refrain from engaging in
5 grossly negligent or reckless conduct, willful or intentional misconduct or a knowing
6 violation of the law.
7 §558. Mergers
8 A. As used in this Section:
9 (1) "Charitable purpose" means any purpose of an organization that has
10 attained exemption pursuant to Section 501(c)(3) of the Internal Revenue Code or
11 any successor section, or that upon dissolution shall distribute its assets to a public
12 benefit corporation, the United States, or a state or a person that is recognized as
13 exempt pursuant to Section 501(c)(3) of the Internal Revenue Code or any successor
14 section.
15 (2) "Constituent organization" means an organization that is merged with
16 one or more other organizations and includes the surviving organization.
17 (3) "Disappearing organization" means a constituent organization that is not
18 the surviving organization.
19 (4) "Governing statute" means any provision of law that governs the internal
20 affairs of an organization.
21 (5) "Organization" means a decentralized unincorporated nonprofit
22 association, unincorporated nonprofit association, a general partnership, including
23 a limited liability partnership, limited partnership, including a limited liability
24 limited partnership, limited liability company, business or statutory trust, corporation
25 or any other legal or commercial person having a governing statute. The term
26 includes a domestic or foreign organization regardless of whether organized for
27 profit.
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1 (6) "Organizational document" means the basic records that create the
2 organization and determine its internal governance and the relations among the
3 persons that own it, have an interest in it or are members of it.
4 (7) "Surviving organization" means an organization into which one or more
5 other organizations are merged.
6 B. A decentralized unincorporated association may merge with any
7 organization that is not expressly prohibited by the law.
8 C. A merger involving a decentralized unincorporated nonprofit association
9 is subject to all of the following requirements:
10 (1) Each of the constituent merging organizations shall comply with its
11 governing law.
12 (2) Each party to the merger shall approve a plan of merger in accordance
13 with its governing principles. The plan, which shall be in a record, shall include each
14 of the following provisions:
15 (a) The name and form of each organization that is party to the merger.
16 (b) The name and form of the surviving organization and, if the surviving
17 organization is to be created by the merger, a statement to that effect.
18 (c) The terms and conditions of the merger, including the manner and basis
19 for converting the interests in each constituent organization into any combination of
20 money, interests in the surviving organization or other considerations.
21 (d) If the surviving organization is to be created by the merger, the surviving
22 organization's organizational documents that are proposed to be in a record.
23 (e) If the surviving organization is not to be created by the merger, any
24 amendments to be made by the merger to the surviving organization's organizational
25 documents that are, or are proposed to be, in a record.
26 (3) The plan of merger shall be approved by the members of each
27 decentralized unincorporated nonprofit association that is a constituent organization
28 in the merger subject to R.S. 12:551. If a member of an association that is party to
29 a merger will have personal liability with respect to an obligation of a constituent or
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1 surviving organization, the consent in a record of that member to the plan of merger
2 shall also be obtained.
3 (4) Subject to the contractual rights of third parties, after a plan of merger
4 is approved and at any time before the merger is effective, a constituent organization
5 may amend the plan or abandon the merger as provided in the plan, or except as
6 otherwise prohibited in the plan, with the same consent as was required to approve
7 the plan.
8 (5) Following approval of the plan, a merger pursuant to this Section shall
9 be effective if either of the following occurs:
10 (a) A constituent organization is required to give notice to or obtain the
11 approval of a governmental agency or officer in order to be a party to a merger, the
12 notice has been given and the approval has been obtained; and the surviving
13 organization is a decentralized unincorporated nonprofit association, as specified in
14 the plan of merger and upon compliance by any constituent organization that is not
15 a nonprofit association with any requirements, including any required filings in the
16 office of the secretary of state, of the organization's governing statute.
17 (b) The surviving organization is not a decentralized unincorporated
18 nonprofit association pursuant to state law governing the surviving organization.
19 D. When a merger becomes effective all of the following are accomplished:
20 (1) The surviving organization continues or comes into existence.
21 (2) Each constituent organization that merges into the surviving organization
22 ceases to exist as a separate entity.
23 (3) All property owned by each constituent organization that ceases to exist
24 vests in the surviving organization.
25 (4) All debts, obligation, or other liabilities of each constituent organization
26 that ceases to exist continue as debts, obligations, or other liabilities of the surviving
27 organization.
28 (5) An action or proceeding pending by or against any constituent
29 organization that ceases to exist may be continued as if the merger had not occurred.
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1 (6) Except as prohibited by other provisions of law, all of the rights,
2 privileges, immunities, powers, and purposes of each constituent organization that
3 ceases to exist vest in the surviving organization.
4 (7) Except as otherwise provided in the plan of merger, the terms and
5 conditions of the plan of merger take effect.
6 (8) The merger shall not affect the personal liability, if any, of a member,
7 administrator or manager of a constituent association for a debt, liability or
8 obligation of the nonprofit association incurred before the merger is effective.
9 (9) A surviving organization that is a foreign organization consents to the
10 jurisdiction of the courts of this state to enforce any debt, obligation, or other liability
11 owed by a constituent organization, if before the merger the constituent organization
12 was subject to suit in this state on the debt, obligation, or other liability. A surviving
13 organization that is a foreign organization and not authorized to transact business in
14 this state appoints the secretary of state as agent for service of process for the
15 purpose of enforcing a debt, obligation, or other liability pursuant to this Subsection.
16 E. Property held for a charitable purpose by a domestic or foreign
17 organization in accordance with the provisions of law of this state and immediately
18 before a merger pursuant to this Section becomes effective may not, as a result of the
19 merger, be diverted from the objects for which it was donated, granted or devised,
20 unless, to the extent required by or pursuant to the provisions of law of this state
21 concerning nondiversion of charitable assets, the organization obtains an appropriate
22 order of the attorney general or of the district court in a proceeding for which the
23 attorney general has been given notice specifying the disposition of the property.
24 F. A bequest, devise, gift, grant or promise contained in a will or other
25 instrument of donation, subscription, or conveyance that is made to a disappearing
26 organization and that takes effect or remains payable after the merger inures to the
27 benefit of the surviving organization. A trust obligation that would govern property
28 if transferred to the disappearing entity applies to property that is instead transferred
29 to the surviving organization pursuant to this Section.
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1 §559. Conversion of entities
2 A. As used in this Section:
3 (1) "Conversion" means a transaction authorized in accordance with the
4 Section to which an entity of one type is converted into an entity of another type.
5 (2) "Converted entity" means the entity that results from a conversion.
6 (3) "Converting entity" means the entity that becomes the converted entity
7 through a conversion.
8 B. A decentralized unincorporated nonprofit association may convert to any
9 entity form that is authorized by state law to affect a conversion from a decentralized
10 unincorporated nonprofit association.
11 C. A conversion involving a decentralized unincorporated nonprofit
12 association is subject to all of following requirements:
13 (1) Each of the constituent converting organizations complies with its
14 governing law.
15 (2) The decentralized unincorporated organization, as a converting entity,
16 shall approve a plan of conversion in accordance with its governing principles. The
17 plan, which shall be in a record, shall include all of the following provisions:
18 (a) The name of the converting decentralized unincorporated nonprofit
19 association.
20 (b) The name, jurisdiction of formation, and type of entity of the converted
21 entity.
22 (c) The manner of converting the interest in the converting decentralized
23 unincorporated nonprofit association into interests, securities, obligations, money,
24 other property, rights to acquire interests or securities, or any combination of the
25 foregoing.
26 (d) If the converted entity requires a record that is filed publicly to form,
27 organize, incorporate, or otherwise create an entity, the converted entity's
28 organizational documents that are proposed to be in a record.
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1 (e) If the converted entity does not require a record that is filed publicly to
2 form, organize, incorporate, or otherwise create an entity, a record of the converted
3 entities governing principles to the extent they exist.
4 (f) The other terms and conditions of the conversion.
5 (g) Any other provision required by the law of this state or the governing
6 principles of the converting decentralized unincorporated nonprofit association.
7 (3) The plan of conversion shall be approved by the members of the
8 converting decentralized unincorporated in accordance with its governing principles.
9 If a member of an association that is a party to a conversion will have personal
10 liability with respect to an obligation of a converted entity or converting entity, the
11 consent in a record of that member to the plan of conversion shall also be obtained.
12 (4) Subject to the contractual rights of third parties, after a plan of
13 conversion is approved and at any time before the conversion is effective, a
14 converting entity may amend the plan or abandon the conversion as provided in the
15 plan, or except as otherwise prohibited in the plan, with the same consent as was
16 required to approve the plan.
17 (5) Following approval of the plan, a conversion pursuant to this Section is
18 effective when both of the following occur:
19 (a) If a converted entity is required to give notice to or obtain the approval
20 of a governmental agency or officer in order to form an entity, the notice has been
21 given and the approval has been obtained.
22 (b) If a converted entity is not required to give notice or obtain the approval
23 of a governmental agency or officer in order to form an entity, as provided by the
24 statute governing the converted entity.
25 D. A conversion becomes effective when the converted entity comes into
26 existence.
27 E. When a conversion becomes effective, each of the following occurs:
28 (1) The converted entity is considered both of the following:
29 (a) Organized pursuant to and subject to the laws of the converted entity.
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1 (b) The same entity without interruption as the converting entity.
2 (2) All property of the converting entity continues to be vested in the
3 converted entity without transfer, reversion, or impairment.
4 (3) All debts, obligations, and other liabilities of the converting entity
5 continue as debts, obligations, and other liabilities of the converted entity.
6 (4) The name of the converted entity may be substituted for the name of the
7 converting entity in any pending action or proceeding.
8 F. A conversion does not require the entity to wind up its affairs and shall
9 not constitute or cause the dissolution of the entity.
10 §560. Severability
11 If any provision of this Chapter or its application to any person or
12 circumstance is held invalid, the invalidity shall not affect any other provisions or
13 applications of this Chapter which may be given effect without the invalid provision
14 or application, and to this end the provisions of this Chapter are severable.
DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 892 Original 2024 Regular Session Wright
Abstract: Provides for the formation and administration of decentralized unincorporated
nonprofit associations.
Proposed law (R.S. 12:531) provides that proposed law may be cited as the "Louisiana
Decentralized Unincorporated Nonprofit Association Act".
Proposed law (R.S. 12:532) provides for a short title and defines "administrator",
"decentralized unincorporated nonprofit association", "digital asset", "distributed ledger
technology", "distributed ledger protocol", "distribution", "established practices", "governing
principles", "member", "membership interest", "person", and "smart contract".
Proposed law (R.S. 12:533) provides that proposed law shall not repeal or modify present
law for organizations that do not elect to become decentralized unincorporated nonprofit
associations.
Proposed law (R.S. 12:534) provides that the governing principles of a nonprofit association
shall identify the jurisdiction in which the decentralized unincorporated association is
formed.
Proposed law permits a nonprofit association to do all of the following:
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(1)Engage in profit-making activities, pay reasonable compensation confer benefits on
its members and administrators repurchase membership interests, and make certain
property distributions. (R.S. 12:535)
(2)Acquire, hold, mortgage, hypothecate, encumber, donate, or otherwise transfer its
interest in immovable or movable property in its name. (R.S. 12:536)
(3)Become beneficiary of a trust and to receive donations inter vivos and mortis causa.
(R.S. 12:536)
(4)Execute and file a statement of authority to mortgage, hypothecate, encumber,
donate, or otherwise transfer an interest in immovable property. (R.S. 12:537)
(5)Institute, defend, intervene, or participate in a judicial, administrative or other
proceeding. (R.S. 12:539)
(6)File with secretary of state a statement appointing an agent authorized to receive
service of process. (R.S. 12:541)
(7)Suspend, dismiss, or expel a member subject to its governing principles or by
approval of its active members. (R.S. 12:546)
(8)Provide for its governance, in whole or in part, through distributed ledger
technology. (R.S. 12:552)
(9)Select administrators in accordance with its governance principles or pursuant to
proposed law. (R.S. 12:554)
(10)Reimburse a member or administrator for authorized expenses reasonably incurred
on behalf of the nonprofit association. (R.S. 12:556)
(11)Merge with any organization when the merger is not expressly prohibited by present
law. (R.S. 12:558)
(12)Convert to any entity form that is authorized to affect a conversion from a
decentralized unincorporated nonprofit association. (R.S. 12:559)
Proposed law (R.S. 12:538) provides that a nonprofit association is a legal entity separate
from its members for the purposes of determining and enforcing rights, duties, and liabilities
in contract and tort. Proposed law further provides for certain rights, duties, and liabilities
of members and administrators.
Proposed law (R.S. 12:540) provides that a judgment or order against a decentralized
unincorporated nonprofit association is not by itself a judgment or order against a member
or administrator.
Proposed law (R.S. 12:542) requires a person or entity to serve a summons and complaint
on an agent or member in an action or proceeding against a nonprofit association.
Proposed law (R.S. 12:543) provides that claims against a nonprofit association are not
abated by change of members or administrators.
Proposed law (R.S. 12:544) provides for venue of nonprofit associations.
Proposed law (R.S. 12:545 and 557) provides for the dissolution, continuation of existence,
and termination of a nonprofit association.
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Proposed law (R.S. 12:546) provides that a person becomes a member in accordance with
the nonprofit association's governing principles, or a person shall be considered a member
upon purchase or assumption of ownership of a membership interest.
Proposed law (R.S. 12:547) permits a member to resign as a member in accordance with the
governing principles of a nonprofit association or in accordance with proposed law.
Proposed law (R.S. 12:548) a member shall not have any fiduciary duty to a nonprofit
association or to any other member unless otherwise provided for in the governing
principles, but all members shall be subject to the implied contractual covenant of good faith
and fair dealing.
Proposed law (R.S. 12:549) prohibits members from acting as an agent of the nonprofit
association under certain circumstances.
Proposed law (R.S. 12:550) permits a member to transfer his interests in the nonprofit
association unless the governing principles provide otherwise.
Proposed law (R.S. 12:551) requires approval by a majority of membership interests to do
each of the following:
(1)Suspend, dismiss, or expel a member.
(2)Select or dismiss an administrator.
(3)Adopt, amend, or repeal the governing principles.
(4)Sell, lease, exchange, or otherwise dispose of the nonprofit association's property.
(5)Dissolve the association.
(6)Undertake any other act outside the ordinary course of activities.
(7)Determine the policy and purpose of the nonprofit association.
Proposed law (R.S. 12:553) provides for consensus formation algorithms and governance
processes.
Proposed law (R.S. 12:555) permits a member or administrator to inspect the records of a
nonprofit association on reasonable notice and under certain circumstances.
Proposed law (R.S. 12:560) provides that if proposed law is held invalid, the invalidity shall
not affect any other provisions proposed law.
(Adds R.S. 12:531-560)
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