89R8264 SRA-D
By: Cook H.B. No. 4518
A BILL TO BE ENTITLED
AN ACT
relating to the formation of decentralized unincorporated
nonprofit associations and the use of distributed ledger or
blockchain technology for certain business purposes; authorizing
fees.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Title 6, Business Organizations Code, is amended
by adding Chapter 253 to read as follows:
CHAPTER 253. DECENTRALIZED UNINCORPORATED NONPROFIT ASSOCIATIONS
Sec. 253.001. DEFINITIONS. In this chapter:
(1) "Administrator" means a member authorized by vote
of the membership to fulfill administrative or operational tasks.
(2) "Decentralized unincorporated nonprofit
association" means an unincorporated association:
(A) consisting of at least 100 members joined by
mutual consent under an agreement, that may be in writing or
inferred from conduct, for a common nonprofit purpose;
(B) that has elected to be formed under this
chapter; and
(C) that is not formed under any other law
governing the association's organization and operation.
(3) "Distributed ledger technology" means a software
protocol that:
(A) governs the rules, operations, and
communication between intersection and connection points in a
telecommunications network and supporting infrastructure;
(B) includes the computer software or hardware or
collections of computer software or hardware that use or enable a
distributed ledger, including blockchain; and
(C) uses a distributed, shared, and replicated
ledger, which may:
(i) be public or private;
(ii) be permissioned or permissionless; and
(iii) include the use of a digital asset as
a medium of electronic exchange.
(4) "Established practices" means the practices used
by a decentralized unincorporated nonprofit association without
material change during:
(A) the most recent five years of the
association's existence; or
(B) the association's entire existence, if the
association has existed for less than five years.
(5) "Governing principles" means all agreements and
any amendment or restatement of those agreements, including any
association agreements, consensus formation algorithms, or enacted
governance proposals, that govern the purpose or operation of a
decentralized unincorporated nonprofit association and the rights
and obligations of the association's members and administrators,
whether contained in a record, implied from the association's
established practices, or both.
(6) "Member" means a person that, under the governing
principles of a decentralized unincorporated nonprofit
association, may participate in:
(A) the development of the policies and
activities of the association; and
(B) the selection of the association's
administrators.
(7) "Membership interest" means a member's voting
right in a decentralized unincorporated nonprofit association as
determined by the association's governing principles.
(8) "Record" means information that is inscribed on a
tangible medium or that is stored in an electronic or other medium
and is retrievable in a perceivable form, including information
inscribed on blockchain or distributed ledger technology.
(9) "Smart contract" means a computational process
that executes on distributed ledger technology used to automate a
transaction, including a transaction that:
(A) takes custody over and instructs transfer of
assets on that ledger;
(B) creates and transmits digital assets;
(C) synchronizes information; or
(D) authenticates user rights and conveys access
to software applications.
Sec. 253.0015. APPLICABILITY OF CODE TO ASSOCIATIONS.
Except as provided by Sections 253.024(e) and 253.025, the only
provisions of this code that apply to or govern a decentralized
unincorporated nonprofit association are:
(1) this chapter;
(2) Chapters 1, 2, 4, and 10; and
(3) if a decentralized unincorporated nonprofit
association designates an agent for service of process, Subchapter
E, Chapter 5.
Sec. 253.002. SUPPLEMENTARY GENERAL PRINCIPLES OF LAW AND
EQUITY. (a) Principles of law and equity supplement this chapter
unless displaced by a particular provision of this chapter.
(b) This chapter may not be interpreted to repeal or modify
a statute or rule for an entity that does not elect to be formed as a
decentralized unincorporated nonprofit association.
Sec. 253.003. GOVERNING LAW; TERRITORIAL APPLICATION. (a)
The law of this state governs any decentralized unincorporated
nonprofit association that is formed in this state.
(b) A decentralized unincorporated nonprofit association's
governing principles must identify the jurisdiction in which the
decentralized unincorporated nonprofit association is formed.
Sec. 253.004. DISTRIBUTION TO MEMBERS PROHIBITED;
COMPENSATION AND OTHER PERMITTED PAYMENTS. (a) A decentralized
unincorporated nonprofit association may carry on any business
activity in which the association may lawfully engage and apply any
profit that results from the business activity toward the
association's common nonprofit purpose in accordance with
Subsection (c).
(b) Except as provided by Subsection (c), a decentralized
unincorporated nonprofit association may not pay dividends or
distribute any part of the association's income or profit to the
association's members or administrators.
(c) A decentralized unincorporated nonprofit association
may:
(1) pay reasonable compensation or reimburse
reasonable expenses to the association's members, administrators,
or persons outside the association for services rendered to or for
the benefit of the association, including for the administration
and operation of the association, including for:
(A) the provision of collateral for the
self-insurance of the association;
(B) voting; and
(C) participation;
(2) confer benefits on the association's members or
administrators in conformity with the association's common
nonprofit purpose or purposes;
(3) repurchase membership interests to the extent
authorized by the association's governing principles; and
(4) make distributions of property to members on
winding up and termination to the extent provided by Section
253.027.
Sec. 253.005. LEGAL ENTITY; PERPETUAL EXISTENCE. (a) A
decentralized unincorporated nonprofit association is a legal
entity distinct from the association's members and administrators.
(b) A decentralized unincorporated nonprofit association
has perpetual duration unless the association's governing
principles otherwise specify.
Sec. 253.006. REAL AND PERSONAL PROPERTY; DECENTRALIZED
UNINCORPORATED NONPROFIT ASSOCIATION AS BENEFICIARY, LEGATEE, OR
DEVISEE. (a) A decentralized unincorporated nonprofit association
may, in the name of the association, acquire, hold, encumber, or
transfer an estate or interest in real or personal property.
(b) A decentralized unincorporated nonprofit association
may be a beneficiary of a trust or contract, legatee, or devisee.
Sec. 253.007. STATEMENT OF AUTHORITY AS TO REAL PROPERTY.
(a) A decentralized unincorporated nonprofit association shall
execute and record a statement of authority to transfer an estate or
interest in real property in the name of the association.
(b) An estate or interest in real property in the name of a
decentralized unincorporated nonprofit association may be
transferred by a person authorized in a statement of authority
recorded in the office of the county clerk in which a transfer of
the property would be recorded.
(c) A statement of authority must contain:
(1) the legal description and address in this state,
including the street address, if any, of the real property;
(2) the name of the decentralized unincorporated
nonprofit association;
(3) the address in this state, including the street
address, if any, of the association, or, if the association does not
have an address in this state, the association's address out of
state;
(4) the name or title of the person authorized to
transfer an estate or interest in real property held in the name of
the association; and
(5) the action, procedure, or vote of the association
that authorizes the person to transfer the real property of the
association and to execute the statement of authority.
(d) A statement of authority must be executed in the same
manner as a deed. The person who executes the statement of
authority may not be the person named in the statement of authority
as authorized to transfer the estate or interest.
(e) The county clerk may collect a fee for recording the
statement of authority in the amount authorized for recording a
transfer of real property.
(f) An amendment, including a cancellation, of a statement
of authority must meet the requirements for execution and recording
of an original statement. Unless canceled earlier, a recorded
statement of authority or the most recent amendment to the
statement is canceled by operation of law on the fifth anniversary
of the date of the most recent recording.
(g) If the record title to real property is in the name of a
decentralized unincorporated nonprofit association and the
statement of authority is recorded in the office of the county clerk
in which a transfer of real property would be recorded, the
authority of the person named in a statement of authority is
conclusive in favor of a transferee who gives value without notice
that the person named in the statement of authority lacks
authority.
Sec. 253.008. LIABILITY. (a) Except as otherwise provided
by this chapter, the debts, obligations, and liabilities of a
decentralized unincorporated nonprofit association, whether
arising in contract, tort, or otherwise, are solely the debts,
obligations, and liabilities of the association. A member or
administrator of a decentralized unincorporated nonprofit
association may not be obligated personally for any debt,
obligation, or liability of the association solely by reason of
being a member or acting as an administrator of the association.
(b) Notwithstanding Subsection (a), a member or
administrator of a decentralized unincorporated nonprofit
association may, under the governing principles of the association
or under another agreement, agree to be obligated personally for
any or all of the debts, obligations, and liabilities of the
association.
(c) The failure of a decentralized unincorporated nonprofit
association to observe formalities relating to the exercise of the
association's powers or administration of the association's
activities and affairs may not be considered a ground for imposing
liability on a member or administrator of the association for a
debt, obligation, or other liability of the association.
Sec. 253.009. CAPACITY TO ASSERT AND DEFEND; STANDING. (a)
A decentralized unincorporated nonprofit association, in the
association's name, may institute, defend, intervene, or
participate in a judicial, administrative, or other governmental
proceeding or in an arbitration, mediation, or any other form of
alternative dispute resolution.
(b) A member or administrator may assert a claim the member
or administrator has against the decentralized unincorporated
nonprofit association. An association may assert a claim the
association has against a member or administrator.
Sec. 253.010. EFFECT OF JUDGMENT OR ORDER. A judgment or
order against a decentralized unincorporated nonprofit association
is not by itself a judgment or order against a member or
administrator of the association.
Sec. 253.011. APPOINTMENT OF AGENT TO RECEIVE SERVICE OF
PROCESS. (a) A decentralized unincorporated nonprofit association
may file in the office of the secretary of state a statement
appointing an agent authorized to receive service of process.
(b) A statement appointing an agent must contain:
(1) the name of the decentralized unincorporated
nonprofit association;
(2) if applicable, the employer identification number
of the decentralized unincorporated nonprofit association;
(3) the address in this state, including the street
address, if any, of the decentralized unincorporated nonprofit
association, or, if the association does not have an address in this
state, the association's address out of state; and
(4) the name of the person in this state authorized to
receive service of process and the person's address, including the
street address, in this state.
(c) A statement appointing an agent must be signed and
acknowledged by a person authorized to manage the affairs of the
decentralized unincorporated nonprofit association. The statement
must also be signed and acknowledged by the person appointed agent,
who by signing accepts the appointment. The appointed agent may
resign by filing a resignation in the office of the secretary of
state and giving notice to the decentralized unincorporated
nonprofit association.
(d) The secretary of state may collect a fee for filing a
statement appointing an agent to receive service of process, an
amendment, or a resignation under this section.
(e) An amendment to a statement appointing an agent to
receive service of process must meet the requirements for execution
of an original statement.
(f) If the secretary of state refuses to file a statement
appointing an agent, the secretary of state shall return it to the
decentralized unincorporated nonprofit association or the
association's representative not later than the 30th day after the
date the statement was delivered and include a brief explanation in
writing of the reason for the refusal.
Sec. 253.012. SERVICE OF PROCESS. In an action or
proceeding against a decentralized unincorporated nonprofit
association, a summons and complaint or other process shall be
served on:
(1) an agent authorized by appointment to receive
service of process;
(2) an appointed administrator of the association; or
(3) a member, but only if the agent or administrator
described by Subdivisions (1) and (2) cannot be served.
Sec. 253.013. CLAIM NOT ABATED BY CHANGE OF MEMBERS OR
ADMINISTRATORS. A claim for relief against a decentralized
unincorporated nonprofit association does not abate merely because
of a change in the members or administrators of the association.
Sec. 253.014. VENUE. Unless provided otherwise by other
law, venue of an action against a decentralized unincorporated
nonprofit association brought in this state is determined in
accordance with the law applicable to an action brought in the
county in which the association has appointed an agent for service
of process under Section 253.011.
Sec. 253.015. MEMBER NOT AN AGENT. A member of a
decentralized unincorporated nonprofit association is not an agent
of the association solely by reason of being a member.
Sec. 253.016. APPROVAL BY MEMBERS. (a) Except as otherwise
provided by a decentralized unincorporated nonprofit association's
governing principles, the association must have the approval of the
association's members, attained in accordance with its governing
principles, to:
(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
all, or substantially all, of the association's property outside
the ordinary course of the association's activities, regardless of
the association's goodwill;
(5) dissolve the association under Section 253.026;
(6) merge or convert the association as provided by
Section 253.028;
(7) undertake any act outside the ordinary course of
the association's activities; or
(8) determine the policy or purpose of the
association.
(b) A decentralized unincorporated nonprofit association
must have the approval of the members in accordance with its
governing principles to act or exercise a right for which the
association's governing principles require member approval.
(c) Unless otherwise provided for in a decentralized
unincorporated nonprofit association's governing principles,
membership interest in a decentralized unincorporated nonprofit
association is calculated in proportion to the person's membership
interest or other property that confers onto the person a voting
right in the association.
Sec. 253.017. USE OF DISTRIBUTED LEDGER TECHNOLOGY. (a) A
decentralized unincorporated nonprofit association may provide for
the association's governance, wholly or partly, through
distributed ledger technology, including through a smart contract.
(b) The governing principles for a decentralized
unincorporated nonprofit association may:
(1) specify whether any distributed ledger technology
used or enabled by the association is:
(A) immutable or subject to change by the
association; and
(B) fully or partially public or private,
including the extent of members' access to information; and
(2) adopt voting procedures, which may include a smart
contract deployed to distributed ledger technology, that provides
for:
(A) proposals from members or administrators in
the decentralized unincorporated nonprofit association for
upgrades, modifications, or additions to software systems or
protocols;
(B) proposed changes to the decentralized
unincorporated nonprofit association's governing principles; and
(C) any other matter of governance or relating to
the activities of the association that is within the purpose of the
association.
Sec. 253.018. CONSENSUS FORMATION ALGORITHMS AND
GOVERNANCE PROCESS. In accordance with the association's governing
principles, a decentralized unincorporated nonprofit association
may:
(1) adopt a reasonable algorithmic means for
establishing consensus for:
(A) the validation of records;
(B) the establishment of requirements,
processes, and procedures for conducting operations; and
(C) making organizational decisions with respect
to the distributed ledger technology used by the association; and
(2) in accordance with a procedure adopted by the
association under Section 253.017, if any, and in compliance with
the requirements of law and the governing principles of the
decentralized unincorporated nonprofit association:
(A) modify the consensus mechanism, including
the requirements, processes, and procedures for that mechanism; or
(B) substitute a new consensus mechanism,
including the requirements, processes, or procedures for that
mechanism.
Sec. 253.019. DUTIES OF MEMBERS. (a) A member of a
decentralized unincorporated nonprofit association does not owe a
fiduciary duty to the association or to any another member of the
association solely by virtue of the person's membership in the
association.
(b) A member of a decentralized unincorporated nonprofit
association shall discharge the duties and obligations under this
chapter or under the governing principles of the association and
exercise the member's rights in a manner consistent with the
contractual obligation of good faith and fair dealing.
Sec. 253.020. ADMISSION, SUSPENSION, DISMISSAL, OR
EXPULSION OF MEMBERS. (a) A person becomes a member of a
decentralized unincorporated nonprofit association in accordance
with the governing principles of the association. If there are no
applicable governing principles, a person:
(1) is considered a member on the purchase or
assumption of a right of ownership of a membership interest or other
property or instrument that confers on the person a voting right in
the association; and
(2) continues as a member of the association until the
earlier of the member's:
(A) resignation under Section 253.021; or
(B) suspension, dismissal, or expulsion under
Subsection (b).
(b) A member may be suspended, dismissed, or expelled in
accordance with the governing principles of the decentralized
unincorporated nonprofit association. If there are no applicable
governing principles, the member may be suspended, dismissed, or
expelled from an association only by a majority vote of the
association's members.
(c) Unless the governing principles of a decentralized
unincorporated nonprofit association provide otherwise, the
suspension, dismissal, or expulsion of a member does not relieve
the member from any obligation incurred or commitment made by the
member in connection with membership in the association before the
member's suspension, dismissal, or expulsion.
Sec. 253.021. RESIGNATION OF MEMBER. (a) A member may
resign as a member of a decentralized unincorporated nonprofit
association in accordance with the governing principles of the
association. In the absence of applicable governing principles, a
member is considered to have resigned on the voluntary or
involuntary disposal of all membership interest or other property
or instruments that confer on the person a voting right in the
association.
(b) Unless a decentralized unincorporated nonprofit
association's governing principles provide otherwise, resignation
of a member does not relieve the member of any obligation incurred
or commitment made by the member before the member's resignation.
Sec. 253.022. MEMBERSHIP INTEREST TRANSFERABLE. Except as
otherwise provided in the decentralized unincorporated nonprofit
association's governing principles, a member's interest or a right
conferred in the association is freely transferable to another
person through conveyance of the membership interest or other
property that confers on a person a voting right in the association.
Sec. 253.023. SELECTION OF ADMINISTRATORS; RIGHTS AND
DUTIES OF ADMINISTRATORS. (a) Except as otherwise provided by this
chapter or a decentralized unincorporated nonprofit association's
governing principles, the members of an association may select the
association's administrators in accordance with Section 253.016.
(b) If no administrators are selected, no member of the
decentralized unincorporated nonprofit association is an
administrator.
(c) A decentralized unincorporated nonprofit association is
not required to have an administrator. There are no default
obligations of an administrator of a decentralized unincorporated
nonprofit association. The rights and duties of an administrator
of a decentralized unincorporated nonprofit association must be
established as part of the selection process for an administrator
or administrators of the association.
(d) An administrator of a decentralized unincorporated
nonprofit association does not have the authority to act on behalf
of the association beyond the specific authority granted in the
selection process of the administrator established under
Subsection (c).
(e) The governing principles of a decentralized
unincorporated nonprofit association may, in a record, limit or
eliminate the liability of an administrator to the association or
the association's members for money damages for an action taken, or
for failure to take an action, as an administrator, except
liability for:
(1) the amount of a financial benefit improperly
received by an administrator;
(2) an intentional infliction of harm on the
association or the association's members;
(3) an intentional violation of criminal law;
(4) a breach of the duty of loyalty should one exist,
unless a full disclosure of all material facts, a specific act, or a
transaction that would otherwise violate the duty of loyalty by an
agent is authorized or ratified by approval of the disinterested
members in accordance with Section 253.016; or
(5) an improper distribution.
Sec. 253.024. RECORDS. (a) Except as provided by
Subsection (b), on reasonable notice, a member or administrator of
a decentralized unincorporated nonprofit association is 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 contained in the
record is material to the member's or administrator's rights and
duties under the association's governing principles or this
chapter.
(b) A decentralized unincorporated nonprofit association is
not obligated to provide a record maintained by the association for
record requests made through distributed ledger technology,
including through a smart contract, to a member or administrator if
the member or administrator has access to the information contained
in the record in a record made available to the member or
administrator on distributed ledger technology.
(c) A decentralized unincorporated nonprofit association
may impose reasonable restrictions on access to and use of
information that may be provided under this section, including by
designating the information confidential and imposing
nondisclosure or other safeguarding obligations on the recipient of
the information.
(d) A former member or administrator may have access to
information to which the member or administrator was entitled as a
member or administrator if:
(1) the information relates to the period of time
during which the person was a member or administrator;
(2) the former member or administrator seeks the
information in good faith; and
(3) the former member or administrator satisfies the
requirements of Subsections (a), (b), and (c) with respect to the
information.
(e) Sections 12.151 through 12.154 apply to a decentralized
unincorporated nonprofit association.
(f) A decentralized unincorporated nonprofit association
has no obligation to collect and maintain a list of members or
member information, including the names or addresses of members.
Sec. 253.025. INDEMNIFICATION; ADVANCEMENT OF EXPENSES. A
decentralized unincorporated nonprofit association is an
enterprise, as that term is defined by Section 8.001, for purposes
of the requirements related to indemnification and advancement of
expenses under Chapter 8.
Sec. 253.026. DISSOLUTION; CONTINUATION OF EXISTENCE. (a)
A decentralized unincorporated nonprofit association may be
dissolved by any of the following methods:
(1) at a time or by a method for dissolution specified
by the governing principles of the association, if any;
(2) if the governing principles of the association do
not provide a method for dissolution, with the approval of the
members of the association in accordance with Section 253.016;
(3) if the number of members of the association is
fewer than 100 and the association is not able to use a merger or
conversion to form another valid entity under Chapter 10; or
(4) by court order to dissolve.
(b) After dissolution, a decentralized unincorporated
nonprofit association continues in existence until the
association's activities are wound up and the association is
terminated under Section 253.027.
Sec. 253.027. WINDING UP AND TERMINATION. (a) A dissolved
decentralized unincorporated nonprofit association shall wind up
the association's business. The association continues in existence
after dissolution only for the purpose of winding up under this
section.
(b) In winding up a decentralized unincorporated nonprofit
association, the members:
(1) shall discharge the association's debts,
obligations, and other liabilities, settle and close the
association's business, and marshal and distribute any remaining
property:
(A) in a manner required by law, other than this
chapter, that requires assets of an association to be distributed
to another entity or person with similar nonprofit purposes, if
applicable to the association;
(B) in accordance with the association's
governing principles, and in the absence of applicable governing
principles, to the current members of the association in proportion
to their membership interests; or
(C) if property cannot be distributed under
Paragraph (A) or (B), under the laws governing unclaimed property
for this state; and
(2) may:
(A) appoint and authorize an administrator to
wind up the association in accordance with Section 253.017;
(B) preserve the association operations and
property as a going concern for a reasonable time;
(C) prosecute and defend civil, criminal, or
administrative actions and proceedings involving the association;
(D) transfer the association's property;
(E) settle disputes involving the association by
mediation or arbitration;
(F) receive reasonable compensation for services
rendered to the association in winding up the association; and
(G) perform other acts necessary or appropriate
to effect the winding up.
(c) If the members of a decentralized unincorporated
nonprofit association do not appoint an administrator to wind up
the association's business, the members shall owe the association a
duty of care in the conduct or winding up of the association
operations to refrain from engaging in:
(1) grossly negligent or reckless conduct;
(2) wilful or intentional misconduct; or
(3) a knowing violation of the law.
Sec. 253.028. MERGERS AND CONVERSIONS. A decentralized
unincorporated nonprofit association may effect a merger or
conversion by complying with the applicable provisions of Chapter
10 and the association's governing principles.
SECTION 2. This Act takes effect September 1, 2025.