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HOUSE BILL 363
57
TH LEGISLATURE
-
STATE
OF
NEW
MEXICO
-
FIRST SESSION
,
2025
INTRODUCED BY
Meredith A. Dixon and Joshua N. Hernandez
AN ACT
RELATING TO NONPROFIT ASSOCIATIONS; CREATING THE DECENTRALIZED
UNINCORPORATED NONPROFIT ASSOCIATION ACT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be
cited as the "Decentralized Unincorporated Nonprofit
Association Act".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the
Decentralized Unincorporated Nonprofit Association Act:
A. "administrator" means a person authorized by the
members of a decentralized unincorporated nonprofit association
to perform administrative and operational tasks at the
direction of the membership;
B. "agreement" means the agreement among the
members of an association, including any amendments thereto,
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that govern the purpose and operation of the association and
the rights and obligations of the association's members and
administrators;
C. "automated transaction" means a transaction
conducted or performed, in whole or in part, by electronic
means or electronic records, in which the acts or records of
one or both parties are not reviewed by an individual in the
ordinary course in forming a contract, performing under an
existing contract or fulfilling an obligation required by the
transaction;
D. "blockchain" means a system in which a record of
transactions, including those made in a cryptocurrency, is
maintained across computers that are linked in a peer-to-peer
network;
E. "decentralized unincorporated nonprofit
association" or "association" means an unincorporated
association that meets all of the following criteria:
(1) consists of at least two or more members
joined by mutual consent under a written agreement for a common
purpose permitted by the Decentralized Unincorporated Nonprofit
Association Act;
(2) has elected to be formed under that act;
and
(3) is not formed under any other law
governing the association's organization or operation;
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F. "digital asset" means a representation of
economic, proprietary or access rights that is stored in a
computer-readable format and is either a digital consumer
asset, digital security or virtual currency;
G. "digital consumer asset" means a digital asset
that is used or bought primarily for consumptive, personal or
household purposes and includes an open blockchain token
constituting intangible personal property, but does not include
digital securities or virtual currencies;
H. "digital security" means a digital asset that
constitutes a security, but shall exclude digital consumer
assets and virtual currency;
I. "distributed ledger technology" means a
distributed ledger protocol and supporting infrastructure,
including blockchain, that uses a distributed, shared and
replicated ledger, whether public or private, permissioned or
permissionless, and that may include the use of digital assets
as a medium of exchange;
J. "member" means a person who, under the terms of
the agreement of an association, may participate in the
selection of the association's administrators or the
development of the policies and activities of the association;
K. "membership interest" means a member's voting
right in an association determined by the association's
agreement, including as ascertained from decentralized ledger
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technology on which the association relies to determine a
member's voting rights;
L. "peer-to-peer network" means a decentralized
network that allows participating computers to share resources,
data and information among the computers without requiring a
central server;
M. "person" means an individual, a corporation, a
business trust, an estate, a trust, a partnership, an
association, an agency, a joint venture or any other legal
commercial entity;
N. "smart contract" means an automated transaction,
or any substantially similar analogue or code, script or
programming language relying on distributed ledger technology,
including blockchain, which may include facilitating and
instructing transfer of an asset, administrating membership
interest votes with respect to a decentralized unincorporated
nonprofit association or issuing executable instructions for
these actions based on the occurrence or non-occurrence of
specified conditions; and
O. "virtual currency" means a digital asset that
is:
(1) used as a medium of exchange, unit of
account or store of value; and
(2) not recognized as legal tender by the
United States government.
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SECTION 3. [NEW MATERIAL] PURPOSE OF ASSOCIATION.--A
decentralized unincorporated nonprofit association may be
formed for any lawful purpose, including charitable,
benevolent, eleemosynary, educational, civic, patriotic,
political, religious, social, fraternal, literary, cultural,
scientific, professional, commercial, industrial or trade
purposes; provided that the association is not formed for the
individual profit of the members of the association.
SECTION 4. [NEW MATERIAL] FORMATION--FILING STATEMENT AND
ASSOCIATION FORMATION AGREEMENT WITH SECRETARY OF STATE.--
Persons desiring to form a decentralized unincorporated
nonprofit association shall file a statement with the office of
the secretary of state containing the name of the association,
the names and residences of the persons forming such
association and a copy of the written agreement of the persons
forming the association that contains the rules or regulations
governing the transaction of its objects and purposes and
prescribes the terms by which the members may establish,
maintain or cease the membership in the association.
SECTION 5. [NEW MATERIAL] GOVERNING LAW--TERRITORIAL
APPLICATION.--
A. The Decentralized Unincorporated Nonprofit
Association Act governs any decentralized unincorporated
nonprofit association that is formed in New Mexico.
B. A decentralized unincorporated nonprofit
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association's agreement shall identify the:
(1) jurisdiction in which the decentralized
unincorporated nonprofit association is formed; and
(2) initial administrator who will fulfill
administrative and operational tasks for the association for
the first year, until the administrator is replaced by the
members of the association.
SECTION 6. [NEW MATERIAL] DIVIDENDS PROHIBITED--
COMPENSATION AND OTHER PERMITTED PAYMENTS.--A dividend shall
not be paid, and no part of the income, profits or assets of a
decentralized unincorporated nonprofit association shall be
distributed to its members or administrators. A decentralized
unincorporated nonprofit association may provide compensation
in a reasonable amount to its members or administrators for
services rendered and may confer benefits on its members in
conformity with its purposes and upon dissolution or final
liquidation and may make distributions as permitted by its
agreement and the Decentralized Unincorporated Nonprofit
Association Act.
SECTION 7. [NEW MATERIAL] PROPERTY HOLDINGS--EFFECT OF
MEMBER'S DEATH OR TERMINATION OF MEMBERSHIP--MEMBER'S INTEREST
NOT SUBJECT TO EXECUTION.--
A. A decentralized unincorporated nonprofit
association may hold and acquire real or personal property by
deed, lease or otherwise, in the name of the association, and
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may acquire title to property by purchase or otherwise for its
objects and purposes. The property shall be deemed to be held
by the association for the use and benefit of the association
members.
B. Upon the decease of a member or the termination
of a membership, the interest of that member in the property of
the association shall cease and terminate, without right of
succession to heirs, executors or administrators of that
deceased member, or to the creditors or trustee in bankruptcy
or assignee of that member whose membership is terminated.
C. The interest of a member in the property of an
association shall not be subject to execution as and for the
member's debts or as the member's individual or special
property.
SECTION 8. [NEW MATERIAL] MORTGAGE OR SALE OF PROPERTY--
METHOD OF CONVEYANCE.--
A. The real and personal property or leasehold
interest of a decentralized unincorporated nonprofit
association may be mortgaged or sold at such time and upon such
terms as the members of the association may determine by vote
as prescribed in the association's formation agreement.
B. A deed signed by the administrator or a member
designated by resolution or other action of the members as
permitted by the agreement shall be deemed sufficient to convey
the fee simple title, or any title, to any property held or
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possessed by the association free and clear of any interest,
claim or title of any of the individual members of the
association, their heirs, executors and administrators, as
tenants in common or otherwise.
SECTION 9. [NEW MATERIAL] SUITS AGAINST OR BY
DECENTRALIZED UNINCORPORATED NONPROFIT ASSOCIATIONS--RECOVERY
OF JUDGMENTS.--
A. A decentralized unincorporated nonprofit
association may sue or be sued in its name for the purpose of
enforcing for or against it any substantive right. Suit may be
brought against a decentralized unincorporated nonprofit
association by a member of the association, and the
decentralized unincorporated nonprofit association may sue a
member of the association and its administrators.
B. A money judgment obtained against a
decentralized unincorporated nonprofit association shall only
bind the joint or common property of the association.
C. Members shall not be jointly and severally
liable for debts of the association.
D. In an action against a decentralized
unincorporated nonprofit association, process may be served by
delivering a copy of the summons and complaint or other
pleading to the administrator of the association.
SECTION 10. [NEW MATERIAL] SUITS AGAINST OR BY
DECENTRALIZED UNINCORPORATED NONPROFIT ASSOCIATIONS--ACTIONS
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AGAINST MEMBERS.--
A. A decentralized unincorporated nonprofit
association may sue or be sued in its name without the
individual members of the association being made parties to the
suit.
B. An association may sue a member as a defendant
in any matter arising out of the member's membership in the
association or the termination of the member's membership, and
may recover judgment, if necessary, for any dues or obligations
due and owing by the member to the association, whether the
member has ceased to be a member or not.
SECTION 11. [NEW MATERIAL] VENUE.--For purposes of venue,
a decentralized unincorporated nonprofit association is a
resident of a county where:
A. the association has an office; or
B. the place of business of the administrator of
the association is located.
SECTION 12. [NEW MATERIAL] TERM OF EXISTENCE--
DISSOLUTION--DISTRIBUTION OF PROCEEDS OR PROPERTY.--
A. Except as otherwise provided in the
association's formation agreement, a decentralized
unincorporated nonprofit association shall have perpetual
existence.
B. A decentralized unincorporated nonprofit
association may be dissolved:
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(1) at a time or method for dissolution
provided in the association's formation agreement; or
(2) if the association's formation agreement
does not provide a time or method for dissolution, by a two-
thirds' vote of the entire membership at any regular or special
meeting legally called or by any other process permitted by the
agreement for taking a vote of the members.
SECTION 13. [NEW MATERIAL] ADMISSION, SUSPENSION,
DISMISSAL OR EXPULSION OF MEMBERS.--
A. A person shall:
(1) be eligible for membership in a
decentralized unincorporated nonprofit association if it has
met the qualifications for eligibility stated in the
association's formation agreement;
(2) be deemed a member upon payment in full or
assumption of ownership of a membership interest or other
property or instrument that confers membership with the
association; and
(3) shall continue as a member absent
suspension, dismissal or expulsion pursuant to Subsection B of
this section, resignation or the association's dissolution and
wind-up.
B. A member may be expelled by the vote of a
majority of the members voting at a regular or special meeting,
or as otherwise permitted by the association's formation
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agreement.
C. Unless otherwise provided for in the
association's formation agreement, expulsion of a member does
not relieve the member of any obligation incurred or commitment
made by the member before the expulsion.
SECTION 14. [NEW MATERIAL] RESIGNATION.--
A. A member may resign as a member of a
decentralized unincorporated nonprofit association in
accordance with the association's formation agreement. If the
agreement does not provide for the resignation of a member, a
member shall be deemed to have resigned upon the disposal,
whether voluntary or involuntary, of all of the member's
interests, property or instruments that confer a voting right
on the person.
B. Unless otherwise provided for in the
association's formation agreement, expulsion of a member does
not relieve the member of any obligation incurred or commitment
made by the member before the expulsion.
SECTION 15. [NEW MATERIAL] MEMBER INTEREST
TRANSFERABLE.--Except as otherwise provided in the
decentralized unincorporated nonprofit association's formation
agreement, a member interest, property or other right of
membership in the association is freely transferable to another
person through conveyance of the membership interest, property
or right that confers upon a person a voting right in the
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association; provided that the person to whom the interest is
transferred meets the qualifications for eligibility stated in
the association's formation agreement.
SECTION 16. [NEW MATERIAL] APPROVAL BY MEMBERS.--
A. Except as otherwise provided in the
association's formation agreement, a decentralized
unincorporated nonprofit association shall require the approval
of the majority of membership interests participating in a vote
to:
(1) suspend, dismiss or expel a member;
(2) select or dismiss an administrator;
(3) amend or repeal the agreement;
(4) sell, lease, exchange or otherwise dispose
of the association's property;
(5) dissolve the association;
(6) undertake an act outside the ordinary
course of the association's activities; or
(7) determine the policy and purpose of the
association.
B. An association shall have the approval of the
majority of its members in accordance with the association's
formation agreement to perform any acts or exercise a right
that the agreement requires to be approved by members.
C. Unless otherwise provided for in the
association's formation agreement, membership interest in an
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association shall be calculated in proportion to a member's
voting rights within the association.
SECTION 17. [NEW MATERIAL] USE OF DISTRIBUTED LEDGER
TECHNOLOGY.--
A. A decentralized unincorporated nonprofit
association may provide for its governance, in whole or in
part, through distributed ledger technology, including smart
contracts.
B. An association's formation agreement may:
(1) specify whether a distributed ledger
technology used or enabled by the association will be fully
immutable or subject to change by the association and whether a
distributed ledger will be fully or partially public or
private, including the extent of a member's access to
information; and
(2) adopt voting procedures, which may include
smart contracts deployed to distributed ledger technology that
provide for:
(a) proposals for upgrades from members
or administrators in the association, modifications or
additions to software systems or protocols; and
(b) other proposed changes to the
association's formation agreement.
SECTION 18. [NEW MATERIAL] CONSENSUS FORMATION ALGORITHMS
AND GOVERNANCE PROCESS.--In accordance with a decentralized
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unincorporated nonprofit association's governing principles, an
association may:
A. adopt reasonable algorithmic means for
establishing consensus for the validation of records and for
establishing requirements, processes and procedures for
conducting operations or making organizational decisions with
respect to the distributed ledger technology used by the
association; and
B. in accordance with a procedure specified
pursuant to Section 17 of the Decentralized Unincorporated
Nonprofit Association Act, modify the consensus mechanism and
the requirements, processes and procedures or substitute a new
consensus mechanism and associated requirements, processes or
procedures that comply with that act.
SECTION 19. [NEW MATERIAL] SELECTION OF ADMINISTRATORS--
RIGHTS AND DUTIES OF ADMINISTRATORS.--
A. Unless otherwise provided for in an
association's formation agreement, the members of an
association may select the association's administrators
pursuant to Section 16 of the Decentralized Unincorporated
Nonprofit Association Act.
B. If no administrators are selected, no member
shall be considered an administrator for the association;
provided that the association's formation agreement shall
provide for an individual who may execute documents and perform
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other administrative tasks on behalf of the decentralized
nonprofit unincorporated association if no administrators are
selected.
C. An association shall not be required to have an
administrator, and the rights and duties of an administrator
shall be established as part of the authorization of authority
to act as an administrator.
D. The governing principles of an association may
limit or eliminate the liability of an administrator to the
association or its members for money damages for any action
taken, or failure to take any action, as an administrator,
except liability for:
(1) the amount of financial benefit improperly
received by the administrator;
(2) an intentional infliction of harm on the
association or its members;
(3) an intentional violation of criminal law;
(4) a breach of the duty of loyalty, should
one exist, unless, following full disclosure of all material
facts to the association members, the specific act or
transaction that would otherwise be a breach of the duty of
loyalty is authorized or ratified by approval of the
disinterested members pursuant to Section 16 of the
Decentralized Unincorporated Nonprofit Association Act; or
(5) making or receiving improper
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distributions.
SECTION 20. [NEW MATERIAL] RIGHT TO INSPECT RECORDS.--
A. Except as provided by Subsection B of this
section, on reasonable notice, a member or an administrator of
a decentralized unincorporated nonprofit association shall be
entitled to an electronic record of any record maintained by
the association regarding the association's activities,
financial condition or other circumstances, to the extent the
information is material to a member's or administrator's rights
and duties under the association's formation agreement or the
Decentralized Unincorporated Nonprofit Association Act.
B. An association shall not be obligated to provide
records requested from a member or administrator if access to
the information is contained in a record available to the
member or administrator on decentralized ledger technology.
C. An association may impose reasonable
restrictions on access to and use of information that may be
provided pursuant to this section, including by designating the
information confidential and imposing nondisclosure or other
safeguarding obligations on the recipient of the information.
In a dispute concerning the reasonableness of a restriction,
the association shall have the burden of proving
reasonableness.
D. A former member or administrator may have access
to information to which the former member or administrator was
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entitled as a member or an administrator if the:
(1) information relates to the period of time
during which the former member or administrator was a member or
an administrator;
(2) former member or former administrator
seeks the information in good faith; and
(3) former member or former administrator
satisfies the requirements of Subsections A through C of this
section with respect to the information.
SECTION 21. [NEW MATERIAL] EXPENSES--INDEMNIFICATION.--
A. Unless otherwise provided for in a decentralized
unincorporated nonprofit association's formation agreement, an
association may reimburse a member or an administrator for
authorized expenses reasonably incurred on behalf of the
association.
B. An association shall have the power to indemnify
a member or an administrator or a former member or
administrator of the association against reasonable expenses,
costs and attorney fees actually and reasonably incurred by the
member or administrator in connection with the defense of any
action, suit or proceeding, civil or criminal, in which the
member or administrator is made a party by reason of being or
having been a member or an administrator. The indemnification
may include any amounts paid to satisfy a judgment or to
compromise or settle a claim. The member or administrator
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shall not be indemnified if the member or administrator is
found to be liable on the basis that the member or
administrator has breached or failed to perform the duties of
the member's or administrator's position and the breach or
failure to perform constitutes willful misconduct or
recklessness. Advance indemnification may be allowed for
reasonable expenses to be incurred in connection with the
defense of the action, suit or proceeding; provided that the
member or administrator shall reimburse the association if it
is subsequently determined that the member or administrator was
not entitled to indemnification. An association may make any
other indemnification as authorized by the association's
formation agreement or by a resolution adopted after notice to
the members entitled to vote.
SECTION 22. [NEW MATERIAL] DISSOLUTION.--
A. A dissolved decentralized unincorporated
nonprofit association shall wind up its operations and the
association shall continue after dissolution only for the
purpose of winding up.
B. The assets of an association in the process of
dissolution shall be applied and distributed as follows:
(1) all liabilities and obligations of the
association shall be paid and discharged, or adequate provision
shall be made therefor;
(2) assets held by the association on
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condition requiring return, transfer or conveyance, which
condition occurs by reason of the dissolution, shall be
returned, transferred or conveyed in accordance with those
requirements;
(3) assets received and held by the
association subject to limitations permitting their use only
for charitable, religious, eleemosynary, benevolent,
educational or similar purposes, but not held upon a condition
requiring return, transfer or conveyance by reason of the
dissolution, shall be transferred or conveyed to one or more
nonprofit organizations engaged in activities substantially
similar to those of the dissolving association, pursuant to a
plan of distribution adopted by the members;
(4) other assets, if any, shall be distributed
in accordance with the provisions of the association's
formation agreement, but in no event shall a member, a former
member, an administrator or a former administrator receive
directly or indirectly a distribution or portion of a
distribution of any assets; and
(5) any remaining assets may be distributed to
such persons or organizations, whether for-profit or nonprofit,
as may be specified in a plan of distribution adopted by the
members.
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