Texas 2025 - 89th Regular

Texas House Bill HB4518 Compare Versions

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1	1	89R8264 SRA-D
2	2	By: Cook H.B. No. 4518
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7	7	A BILL TO BE ENTITLED
8	8	AN ACT
9	9	relating to the formation of decentralized unincorporated
10	10	nonprofit associations and the use of distributed ledger or
11	11	blockchain technology for certain business purposes; authorizing
12	12	fees.
13	13	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
14	14	SECTION 1. Title 6, Business Organizations Code, is amended
15	15	by adding Chapter 253 to read as follows:
16	16	CHAPTER 253. DECENTRALIZED UNINCORPORATED NONPROFIT ASSOCIATIONS
17	17	Sec. 253.001. DEFINITIONS. In this chapter:
18	18	(1) "Administrator" means a member authorized by vote
19	19	of the membership to fulfill administrative or operational tasks.
20	20	(2) "Decentralized unincorporated nonprofit
21	21	association" means an unincorporated association:
22	22	(A) consisting of at least 100 members joined by
23	23	mutual consent under an agreement, that may be in writing or
24	24	inferred from conduct, for a common nonprofit purpose;
25	25	(B) that has elected to be formed under this
26	26	chapter; and
27	27	(C) that is not formed under any other law
28	28	governing the association's organization and operation.
29	29	(3) "Distributed ledger technology" means a software
30	30	protocol that:
31	31	(A) governs the rules, operations, and
32	32	communication between intersection and connection points in a
33	33	telecommunications network and supporting infrastructure;
34	34	(B) includes the computer software or hardware or
35	35	collections of computer software or hardware that use or enable a
36	36	distributed ledger, including blockchain; and
37	37	(C) uses a distributed, shared, and replicated
38	38	ledger, which may:
39	39	(i) be public or private;
40	40	(ii) be permissioned or permissionless; and
41	41	(iii) include the use of a digital asset as
42	42	a medium of electronic exchange.
43	43	(4) "Established practices" means the practices used
44	44	by a decentralized unincorporated nonprofit association without
45	45	material change during:
46	46	(A) the most recent five years of the
47	47	association's existence; or
48	48	(B) the association's entire existence, if the
49	49	association has existed for less than five years.
50	50	(5) "Governing principles" means all agreements and
51	51	any amendment or restatement of those agreements, including any
52	52	association agreements, consensus formation algorithms, or enacted
53	53	governance proposals, that govern the purpose or operation of a
54	54	decentralized unincorporated nonprofit association and the rights
55	55	and obligations of the association's members and administrators,
56	56	whether contained in a record, implied from the association's
57	57	established practices, or both.
58	58	(6) "Member" means a person that, under the governing
59	59	principles of a decentralized unincorporated nonprofit
60	60	association, may participate in:
61	61	(A) the development of the policies and
62	62	activities of the association; and
63	63	(B) the selection of the association's
64	64	administrators.
65	65	(7) "Membership interest" means a member's voting
66	66	right in a decentralized unincorporated nonprofit association as
67	67	determined by the association's governing principles.
68	68	(8) "Record" means information that is inscribed on a
69	69	tangible medium or that is stored in an electronic or other medium
70	70	and is retrievable in a perceivable form, including information
71	71	inscribed on blockchain or distributed ledger technology.
72	72	(9) "Smart contract" means a computational process
73	73	that executes on distributed ledger technology used to automate a
74	74	transaction, including a transaction that:
75	75	(A) takes custody over and instructs transfer of
76	76	assets on that ledger;
77	77	(B) creates and transmits digital assets;
78	78	(C) synchronizes information; or
79	79	(D) authenticates user rights and conveys access
80	80	to software applications.
81	81	Sec. 253.0015. APPLICABILITY OF CODE TO ASSOCIATIONS.
82	82	Except as provided by Sections 253.024(e) and 253.025, the only
83	83	provisions of this code that apply to or govern a decentralized
84	84	unincorporated nonprofit association are:
85	85	(1) this chapter;
86	86	(2) Chapters 1, 2, 4, and 10; and
87	87	(3) if a decentralized unincorporated nonprofit
88	88	association designates an agent for service of process, Subchapter
89	89	E, Chapter 5.
90	90	Sec. 253.002. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW AND
91	91	EQUITY. (a) Principles of law and equity supplement this chapter
92	92	unless displaced by a particular provision of this chapter.
93	93	(b) This chapter may not be interpreted to repeal or modify
94	94	a statute or rule for an entity that does not elect to be formed as a
95	95	decentralized unincorporated nonprofit association.
96	96	Sec. 253.003. GOVERNING LAW; TERRITORIAL APPLICATION. (a)
97	97	The law of this state governs any decentralized unincorporated
98	98	nonprofit association that is formed in this state.
99	99	(b) A decentralized unincorporated nonprofit association's
100	100	governing principles must identify the jurisdiction in which the
101	101	decentralized unincorporated nonprofit association is formed.
102	102	Sec. 253.004. DISTRIBUTION TO MEMBERS PROHIBITED;
103	103	COMPENSATION AND OTHER PERMITTED PAYMENTS. (a) A decentralized
104	104	unincorporated nonprofit association may carry on any business
105	105	activity in which the association may lawfully engage and apply any
106	106	profit that results from the business activity toward the
107	107	association's common nonprofit purpose in accordance with
108	108	Subsection (c).
109	109	(b) Except as provided by Subsection (c), a decentralized
110	110	unincorporated nonprofit association may not pay dividends or
111	111	distribute any part of the association's income or profit to the
112	112	association's members or administrators.
113	113	(c) A decentralized unincorporated nonprofit association
114	114	may:
115	115	(1) pay reasonable compensation or reimburse
116	116	reasonable expenses to the association's members, administrators,
117	117	or persons outside the association for services rendered to or for
118	118	the benefit of the association, including for the administration
119	119	and operation of the association, including for:
120	120	(A) the provision of collateral for the
121	121	self-insurance of the association;
122	122	(B) voting; and
123	123	(C) participation;
124	124	(2) confer benefits on the association's members or
125	125	administrators in conformity with the association's common
126	126	nonprofit purpose or purposes;
127	127	(3) repurchase membership interests to the extent
128	128	authorized by the association's governing principles; and
129	129	(4) make distributions of property to members on
130	130	winding up and termination to the extent provided by Section
131	131	253.027.
132	132	Sec. 253.005. LEGAL ENTITY; PERPETUAL EXISTENCE. (a) A
133	133	decentralized unincorporated nonprofit association is a legal
134	134	entity distinct from the association's members and administrators.
135	135	(b) A decentralized unincorporated nonprofit association
136	136	has perpetual duration unless the association's governing
137	137	principles otherwise specify.
138	138	Sec. 253.006. REAL AND PERSONAL PROPERTY; DECENTRALIZED
139	139	UNINCORPORATED NONPROFIT ASSOCIATION AS BENEFICIARY, LEGATEE, OR
140	140	DEVISEE. (a) A decentralized unincorporated nonprofit association
141	141	may, in the name of the association, acquire, hold, encumber, or
142	142	transfer an estate or interest in real or personal property.
143	143	(b) A decentralized unincorporated nonprofit association
144	144	may be a beneficiary of a trust or contract, legatee, or devisee.
145	145	Sec. 253.007. STATEMENT OF AUTHORITY AS TO REAL PROPERTY.
146	146	(a) A decentralized unincorporated nonprofit association shall
147	147	execute and record a statement of authority to transfer an estate or
148	148	interest in real property in the name of the association.
149	149	(b) An estate or interest in real property in the name of a
150	150	decentralized unincorporated nonprofit association may be
151	151	transferred by a person authorized in a statement of authority
152	152	recorded in the office of the county clerk in which a transfer of
153	153	the property would be recorded.
154	154	(c) A statement of authority must contain:
155	155	(1) the legal description and address in this state,
156	156	including the street address, if any, of the real property;
157	157	(2) the name of the decentralized unincorporated
158	158	nonprofit association;
159	159	(3) the address in this state, including the street
160	160	address, if any, of the association, or, if the association does not
161	161	have an address in this state, the association's address out of
162	162	state;
163	163	(4) the name or title of the person authorized to
164	164	transfer an estate or interest in real property held in the name of
165	165	the association; and
166	166	(5) the action, procedure, or vote of the association
167	167	that authorizes the person to transfer the real property of the
168	168	association and to execute the statement of authority.
169	169	(d) A statement of authority must be executed in the same
170	170	manner as a deed. The person who executes the statement of
171	171	authority may not be the person named in the statement of authority
172	172	as authorized to transfer the estate or interest.
173	173	(e) The county clerk may collect a fee for recording the
174	174	statement of authority in the amount authorized for recording a
175	175	transfer of real property.
176	176	(f) An amendment, including a cancellation, of a statement
177	177	of authority must meet the requirements for execution and recording
178	178	of an original statement. Unless canceled earlier, a recorded
179	179	statement of authority or the most recent amendment to the
180	180	statement is canceled by operation of law on the fifth anniversary
181	181	of the date of the most recent recording.
182	182	(g) If the record title to real property is in the name of a
183	183	decentralized unincorporated nonprofit association and the
184	184	statement of authority is recorded in the office of the county clerk
185	185	in which a transfer of real property would be recorded, the
186	186	authority of the person named in a statement of authority is
187	187	conclusive in favor of a transferee who gives value without notice
188	188	that the person named in the statement of authority lacks
189	189	authority.
190	190	Sec. 253.008. LIABILITY. (a) Except as otherwise provided
191	191	by this chapter, the debts, obligations, and liabilities of a
192	192	decentralized unincorporated nonprofit association, whether
193	193	arising in contract, tort, or otherwise, are solely the debts,
194	194	obligations, and liabilities of the association. A member or
195	195	administrator of a decentralized unincorporated nonprofit
196	196	association may not be obligated personally for any debt,
197	197	obligation, or liability of the association solely by reason of
198	198	being a member or acting as an administrator of the association.
199	199	(b) Notwithstanding Subsection (a), a member or
200	200	administrator of a decentralized unincorporated nonprofit
201	201	association may, under the governing principles of the association
202	202	or under another agreement, agree to be obligated personally for
203	203	any or all of the debts, obligations, and liabilities of the
204	204	association.
205	205	(c) The failure of a decentralized unincorporated nonprofit
206	206	association to observe formalities relating to the exercise of the
207	207	association's powers or administration of the association's
208	208	activities and affairs may not be considered a ground for imposing
209	209	liability on a member or administrator of the association for a
210	210	debt, obligation, or other liability of the association.
211	211	Sec. 253.009. CAPACITY TO ASSERT AND DEFEND; STANDING. (a)
212	212	A decentralized unincorporated nonprofit association, in the
213	213	association's name, may institute, defend, intervene, or
214	214	participate in a judicial, administrative, or other governmental
215	215	proceeding or in an arbitration, mediation, or any other form of
216	216	alternative dispute resolution.
217	217	(b) A member or administrator may assert a claim the member
218	218	or administrator has against the decentralized unincorporated
219	219	nonprofit association. An association may assert a claim the
220	220	association has against a member or administrator.
221	221	Sec. 253.010. EFFECT OF JUDGMENT OR ORDER. A judgment or
222	222	order against a decentralized unincorporated nonprofit association
223	223	is not by itself a judgment or order against a member or
224	224	administrator of the association.
225	225	Sec. 253.011. APPOINTMENT OF AGENT TO RECEIVE SERVICE OF
226	226	PROCESS. (a) A decentralized unincorporated nonprofit association
227	227	may file in the office of the secretary of state a statement
228	228	appointing an agent authorized to receive service of process.
229	229	(b) A statement appointing an agent must contain:
230	230	(1) the name of the decentralized unincorporated
231	231	nonprofit association;
232	232	(2) if applicable, the employer identification number
233	233	of the decentralized unincorporated nonprofit association;
234	234	(3) the address in this state, including the street
235	235	address, if any, of the decentralized unincorporated nonprofit
236	236	association, or, if the association does not have an address in this
237	237	state, the association's address out of state; and
238	238	(4) the name of the person in this state authorized to
239	239	receive service of process and the person's address, including the
240	240	street address, in this state.
241	241	(c) A statement appointing an agent must be signed and
242	242	acknowledged by a person authorized to manage the affairs of the
243	243	decentralized unincorporated nonprofit association. The statement
244	244	must also be signed and acknowledged by the person appointed agent,
245	245	who by signing accepts the appointment. The appointed agent may
246	246	resign by filing a resignation in the office of the secretary of
247	247	state and giving notice to the decentralized unincorporated
248	248	nonprofit association.
249	249	(d) The secretary of state may collect a fee for filing a
250	250	statement appointing an agent to receive service of process, an
251	251	amendment, or a resignation under this section.
252	252	(e) An amendment to a statement appointing an agent to
253	253	receive service of process must meet the requirements for execution
254	254	of an original statement.
255	255	(f) If the secretary of state refuses to file a statement
256	256	appointing an agent, the secretary of state shall return it to the
257	257	decentralized unincorporated nonprofit association or the
258	258	association's representative not later than the 30th day after the
259	259	date the statement was delivered and include a brief explanation in
260	260	writing of the reason for the refusal.
261	261	Sec. 253.012. SERVICE OF PROCESS. In an action or
262	262	proceeding against a decentralized unincorporated nonprofit
263	263	association, a summons and complaint or other process shall be
264	264	served on:
265	265	(1) an agent authorized by appointment to receive
266	266	service of process;
267	267	(2) an appointed administrator of the association; or
268	268	(3) a member, but only if the agent or administrator
269	269	described by Subdivisions (1) and (2) cannot be served.
270	270	Sec. 253.013. CLAIM NOT ABATED BY CHANGE OF MEMBERS OR
271	271	ADMINISTRATORS. A claim for relief against a decentralized
272	272	unincorporated nonprofit association does not abate merely because
273	273	of a change in the members or administrators of the association.
274	274	Sec. 253.014. VENUE. Unless provided otherwise by other
275	275	law, venue of an action against a decentralized unincorporated
276	276	nonprofit association brought in this state is determined in
277	277	accordance with the law applicable to an action brought in the
278	278	county in which the association has appointed an agent for service
279	279	of process under Section 253.011.
280	280	Sec. 253.015. MEMBER NOT AN AGENT. A member of a
281	281	decentralized unincorporated nonprofit association is not an agent
282	282	of the association solely by reason of being a member.
283	283	Sec. 253.016. APPROVAL BY MEMBERS. (a) Except as otherwise
284	284	provided by a decentralized unincorporated nonprofit association's
285	285	governing principles, the association must have the approval of the
286	286	association's members, attained in accordance with its governing
287	287	principles, to:
288	288	(1) suspend, dismiss, or expel a member;
289	289	(2) select or dismiss an administrator;
290	290	(3) adopt, amend, or repeal the governing principles;
291	291	(4) sell, lease, exchange, or otherwise dispose of
292	292	all, or substantially all, of the association's property outside
293	293	the ordinary course of the association's activities, regardless of
294	294	the association's goodwill;
295	295	(5) dissolve the association under Section 253.026;
296	296	(6) merge or convert the association as provided by
297	297	Section 253.028;
298	298	(7) undertake any act outside the ordinary course of
299	299	the association's activities; or
300	300	(8) determine the policy or purpose of the
301	301	association.
302	302	(b) A decentralized unincorporated nonprofit association
303	303	must have the approval of the members in accordance with its
304	304	governing principles to act or exercise a right for which the
305	305	association's governing principles require member approval.
306	306	(c) Unless otherwise provided for in a decentralized
307	307	unincorporated nonprofit association's governing principles,
308	308	membership interest in a decentralized unincorporated nonprofit
309	309	association is calculated in proportion to the person's membership
310	310	interest or other property that confers onto the person a voting
311	311	right in the association.
312	312	Sec. 253.017. USE OF DISTRIBUTED LEDGER TECHNOLOGY. (a) A
313	313	decentralized unincorporated nonprofit association may provide for
314	314	the association's governance, wholly or partly, through
315	315	distributed ledger technology, including through a smart contract.
316	316	(b) The governing principles for a decentralized
317	317	unincorporated nonprofit association may:
318	318	(1) specify whether any distributed ledger technology
319	319	used or enabled by the association is:
320	320	(A) immutable or subject to change by the
321	321	association; and
322	322	(B) fully or partially public or private,
323	323	including the extent of members' access to information; and
324	324	(2) adopt voting procedures, which may include a smart
325	325	contract deployed to distributed ledger technology, that provides
326	326	for:
327	327	(A) proposals from members or administrators in
328	328	the decentralized unincorporated nonprofit association for
329	329	upgrades, modifications, or additions to software systems or
330	330	protocols;
331	331	(B) proposed changes to the decentralized
332	332	unincorporated nonprofit association's governing principles; and
333	333	(C) any other matter of governance or relating to
334	334	the activities of the association that is within the purpose of the
335	335	association.
336	336	Sec. 253.018. CONSENSUS FORMATION ALGORITHMS AND
337	337	GOVERNANCE PROCESS. In accordance with the association's governing
338	338	principles, a decentralized unincorporated nonprofit association
339	339	may:
340	340	(1) adopt a reasonable algorithmic means for
341	341	establishing consensus for:
342	342	(A) the validation of records;
343	343	(B) the establishment of requirements,
344	344	processes, and procedures for conducting operations; and
345	345	(C) making organizational decisions with respect
346	346	to the distributed ledger technology used by the association; and
347	347	(2) in accordance with a procedure adopted by the
348	348	association under Section 253.017, if any, and in compliance with
349	349	the requirements of law and the governing principles of the
350	350	decentralized unincorporated nonprofit association:
351	351	(A) modify the consensus mechanism, including
352	352	the requirements, processes, and procedures for that mechanism; or
353	353	(B) substitute a new consensus mechanism,
354	354	including the requirements, processes, or procedures for that
355	355	mechanism.
356	356	Sec. 253.019. DUTIES OF MEMBERS. (a) A member of a
357	357	decentralized unincorporated nonprofit association does not owe a
358	358	fiduciary duty to the association or to any another member of the
359	359	association solely by virtue of the person's membership in the
360	360	association.
361	361	(b) A member of a decentralized unincorporated nonprofit
362	362	association shall discharge the duties and obligations under this
363	363	chapter or under the governing principles of the association and
364	364	exercise the member's rights in a manner consistent with the
365	365	contractual obligation of good faith and fair dealing.
366	366	Sec. 253.020. ADMISSION, SUSPENSION, DISMISSAL, OR
367	367	EXPULSION OF MEMBERS. (a) A person becomes a member of a
368	368	decentralized unincorporated nonprofit association in accordance
369	369	with the governing principles of the association. If there are no
370	370	applicable governing principles, a person:
371	371	(1) is considered a member on the purchase or
372	372	assumption of a right of ownership of a membership interest or other
373	373	property or instrument that confers on the person a voting right in
374	374	the association; and
375	375	(2) continues as a member of the association until the
376	376	earlier of the member's:
377	377	(A) resignation under Section 253.021; or
378	378	(B) suspension, dismissal, or expulsion under
379	379	Subsection (b).
380	380	(b) A member may be suspended, dismissed, or expelled in
381	381	accordance with the governing principles of the decentralized
382	382	unincorporated nonprofit association. If there are no applicable
383	383	governing principles, the member may be suspended, dismissed, or
384	384	expelled from an association only by a majority vote of the
385	385	association's members.
386	386	(c) Unless the governing principles of a decentralized
387	387	unincorporated nonprofit association provide otherwise, the
388	388	suspension, dismissal, or expulsion of a member does not relieve
389	389	the member from any obligation incurred or commitment made by the
390	390	member in connection with membership in the association before the
391	391	member's suspension, dismissal, or expulsion.
392	392	Sec. 253.021. RESIGNATION OF MEMBER. (a) A member may
393	393	resign as a member of a decentralized unincorporated nonprofit
394	394	association in accordance with the governing principles of the
395	395	association. In the absence of applicable governing principles, a
396	396	member is considered to have resigned on the voluntary or
397	397	involuntary disposal of all membership interest or other property
398	398	or instruments that confer on the person a voting right in the
399	399	association.
400	400	(b) Unless a decentralized unincorporated nonprofit
401	401	association's governing principles provide otherwise, resignation
402	402	of a member does not relieve the member of any obligation incurred
403	403	or commitment made by the member before the member's resignation.
404	404	Sec. 253.022. MEMBERSHIP INTEREST TRANSFERABLE. Except as
405	405	otherwise provided in the decentralized unincorporated nonprofit
406	406	association's governing principles, a member's interest or a right
407	407	conferred in the association is freely transferable to another
408	408	person through conveyance of the membership interest or other
409	409	property that confers on a person a voting right in the association.
410	410	Sec. 253.023. SELECTION OF ADMINISTRATORS; RIGHTS AND
411	411	DUTIES OF ADMINISTRATORS. (a) Except as otherwise provided by this
412	412	chapter or a decentralized unincorporated nonprofit association's
413	413	governing principles, the members of an association may select the
414	414	association's administrators in accordance with Section 253.016.
415	415	(b) If no administrators are selected, no member of the
416	416	decentralized unincorporated nonprofit association is an
417	417	administrator.
418	418	(c) A decentralized unincorporated nonprofit association is
419	419	not required to have an administrator. There are no default
420	420	obligations of an administrator of a decentralized unincorporated
421	421	nonprofit association. The rights and duties of an administrator
422	422	of a decentralized unincorporated nonprofit association must be
423	423	established as part of the selection process for an administrator
424	424	or administrators of the association.
425	425	(d) An administrator of a decentralized unincorporated
426	426	nonprofit association does not have the authority to act on behalf
427	427	of the association beyond the specific authority granted in the
428	428	selection process of the administrator established under
429	429	Subsection (c).
430	430	(e) The governing principles of a decentralized
431	431	unincorporated nonprofit association may, in a record, limit or
432	432	eliminate the liability of an administrator to the association or
433	433	the association's members for money damages for an action taken, or
434	434	for failure to take an action, as an administrator, except
435	435	liability for:
436	436	(1) the amount of a financial benefit improperly
437	437	received by an administrator;
438	438	(2) an intentional infliction of harm on the
439	439	association or the association's members;
440	440	(3) an intentional violation of criminal law;
441	441	(4) a breach of the duty of loyalty should one exist,
442	442	unless a full disclosure of all material facts, a specific act, or a
443	443	transaction that would otherwise violate the duty of loyalty by an
444	444	agent is authorized or ratified by approval of the disinterested
445	445	members in accordance with Section 253.016; or
446	446	(5) an improper distribution.
447	447	Sec. 253.024. RECORDS. (a) Except as provided by
448	448	Subsection (b), on reasonable notice, a member or administrator of
449	449	a decentralized unincorporated nonprofit association is entitled
450	450	to an electronic record of any record maintained by the association
451	451	regarding the association's activities, financial condition, or
452	452	other circumstances to the extent the information contained in the
453	453	record is material to the member's or administrator's rights and
454	454	duties under the association's governing principles or this
455	455	chapter.
456	456	(b) A decentralized unincorporated nonprofit association is
457	457	not obligated to provide a record maintained by the association for
458	458	record requests made through distributed ledger technology,
459	459	including through a smart contract, to a member or administrator if
460	460	the member or administrator has access to the information contained
461	461	in the record in a record made available to the member or
462	462	administrator on distributed ledger technology.
463	463	(c) A decentralized unincorporated nonprofit association
464	464	may impose reasonable restrictions on access to and use of
465	465	information that may be provided under this section, including by
466	466	designating the information confidential and imposing
467	467	nondisclosure or other safeguarding obligations on the recipient of
468	468	the information.
469	469	(d) A former member or administrator may have access to
470	470	information to which the member or administrator was entitled as a
471	471	member or administrator if:
472	472	(1) the information relates to the period of time
473	473	during which the person was a member or administrator;
474	474	(2) the former member or administrator seeks the
475	475	information in good faith; and
476	476	(3) the former member or administrator satisfies the
477	477	requirements of Subsections (a), (b), and (c) with respect to the
478	478	information.
479	479	(e) Sections 12.151 through 12.154 apply to a decentralized
480	480	unincorporated nonprofit association.
481	481	(f) A decentralized unincorporated nonprofit association
482	482	has no obligation to collect and maintain a list of members or
483	483	member information, including the names or addresses of members.
484	484	Sec. 253.025. INDEMNIFICATION; ADVANCEMENT OF EXPENSES. A
485	485	decentralized unincorporated nonprofit association is an
486	486	enterprise, as that term is defined by Section 8.001, for purposes
487	487	of the requirements related to indemnification and advancement of
488	488	expenses under Chapter 8.
489	489	Sec. 253.026. DISSOLUTION; CONTINUATION OF EXISTENCE. (a)
490	490	A decentralized unincorporated nonprofit association may be
491	491	dissolved by any of the following methods:
492	492	(1) at a time or by a method for dissolution specified
493	493	by the governing principles of the association, if any;
494	494	(2) if the governing principles of the association do
495	495	not provide a method for dissolution, with the approval of the
496	496	members of the association in accordance with Section 253.016;
497	497	(3) if the number of members of the association is
498	498	fewer than 100 and the association is not able to use a merger or
499	499	conversion to form another valid entity under Chapter 10; or
500	500	(4) by court order to dissolve.
501	501	(b) After dissolution, a decentralized unincorporated
502	502	nonprofit association continues in existence until the
503	503	association's activities are wound up and the association is
504	504	terminated under Section 253.027.
505	505	Sec. 253.027. WINDING UP AND TERMINATION. (a) A dissolved
506	506	decentralized unincorporated nonprofit association shall wind up
507	507	the association's business. The association continues in existence
508	508	after dissolution only for the purpose of winding up under this
509	509	section.
510	510	(b) In winding up a decentralized unincorporated nonprofit
511	511	association, the members:
512	512	(1) shall discharge the association's debts,
513	513	obligations, and other liabilities, settle and close the
514	514	association's business, and marshal and distribute any remaining
515	515	property:
516	516	(A) in a manner required by law, other than this
517	517	chapter, that requires assets of an association to be distributed
518	518	to another entity or person with similar nonprofit purposes, if
519	519	applicable to the association;
520	520	(B) in accordance with the association's
521	521	governing principles, and in the absence of applicable governing
522	522	principles, to the current members of the association in proportion
523	523	to their membership interests; or
524	524	(C) if property cannot be distributed under
525	525	Paragraph (A) or (B), under the laws governing unclaimed property
526	526	for this state; and
527	527	(2) may:
528	528	(A) appoint and authorize an administrator to
529	529	wind up the association in accordance with Section 253.017;
530	530	(B) preserve the association operations and
531	531	property as a going concern for a reasonable time;
532	532	(C) prosecute and defend civil, criminal, or
533	533	administrative actions and proceedings involving the association;
534	534	(D) transfer the association's property;
535	535	(E) settle disputes involving the association by
536	536	mediation or arbitration;
537	537	(F) receive reasonable compensation for services
538	538	rendered to the association in winding up the association; and
539	539	(G) perform other acts necessary or appropriate
540	540	to effect the winding up.
541	541	(c) If the members of a decentralized unincorporated
542	542	nonprofit association do not appoint an administrator to wind up
543	543	the association's business, the members shall owe the association a
544	544	duty of care in the conduct or winding up of the association
545	545	operations to refrain from engaging in:
546	546	(1) grossly negligent or reckless conduct;
547	547	(2) wilful or intentional misconduct; or
548	548	(3) a knowing violation of the law.
549	549	Sec. 253.028. MERGERS AND CONVERSIONS. A decentralized
550	550	unincorporated nonprofit association may effect a merger or
551	551	conversion by complying with the applicable provisions of Chapter
552	552	10 and the association's governing principles.
553	553	SECTION 2. This Act takes effect September 1, 2025.