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Legislative Review Director Reports

March 3, 2005

    I. PUBLIC ACTS

    Public Act 131 of 2003. Revises the reference in the Tax Tribunal Act from "homestead exemption" to "principal residence exemption." Effective January 1, 2004. See also Public Act 140 of 2003 which revises the General Property Tax Act to replace the term "homestead" with the term "principal residence." Various other statutes have been/may be amended to revise the definition of "homestead exemption" to "principal residence exemption." Effective January 1, 2004.

    Public Act 215 of 2003: Repeals Public Act 285 of 1925 and creates the "Credit Union Act" to provide for the regulation of credit unions. Effective June 1, 2004

    Public Act 265 of 2003: Amends the Michigan Broadband Development Authority Act to require that priority be given to the application of any broadband developer who applied to develop broadband capability within a "recovery zone" designated in the Michigan Renaissance Zone Act. Effective January 5, 2004.

    Public Acts 266 and 273 of 2003: Amends various statutes to permit the designation of up to 20 tool and die renaissance recovery zones, allows certain tool and die, machine tool and molding companies to claim a single business tax credit of up to $4,000 for the costs of training an apprentice, allows a taxpayer who purchased personal property from a qualified tool and die business to claim an SBT credit equal to the amount paid for the property, provides grants for broadband infrastructure, expands personal property tax exemption for special tools, provides that the depreciation of personal property used to develop tool and die products could not be less than allowed under the Internal Revenue Code, exempts from the use tax a construction contractor's labor cost to manufacture, fabricate, or assemble personal property before affixing it to real property, and gives skilled trade associations access to school facilities to provide information about apprenticeship programs. Effective January 5, 2004 and January 8, 2004, respectively.

    Public Act 277 of 2003: Amends the Brownfield Redevelopment Financing Act to revise the Act's definition of "initial taxable value." The bill would refer to the taxable value of eligible property identified in a brownfield plan as shown either by the most recent assessment roll (as currently provided) or, if provided by the brownfield plan, by the next assessment roll for which equalization would be completed following the date the resolution adding the property in the plan was adopted. Effective January 8, 2004.

    Public Act 295 of 2003: Amends the Income Tax Act to allow an income tax credit, for tax years beginning after 2009 and before 2020, for a "claimant" or for a taxpayer to whom a certificate and remaining single business tax (SBT) credit amount had been transferred under the SBT Act. Effective January 8, 2004.

    Public Act 296 of 2003: Creates the "Michigan Early Stage Venture Capital Investment Act" to require that, within one year after the bill's effective date, the "Michigan Early Stage Venture Capital Investment Corporation" be established, a fund manager be hired, an investment plan be established, and funds be solicited and available for investment consistent with that plan. The Corporation would have to create the "Michigan Early Stage Venture Capital Investment Fund." Money in the Fund could be invested in venture capital companies to promote investment in qualified businesses. Also amends the Single Business Tax Act to specify that, for tax years beginning after 2008 and before 2020, a taxpayer that was an investor could claim an SBT credit equal to the amount determined and certified under Senate Bill 834. For tax years beginning after 2009, if a credit against the SBT or a successor tax were not allowed, the taxpayer could transfer the credit to a person who could claim an income tax credit. The total amount of all certified SBT credits for all taxpayers for all years could not exceed $150 million. The total amount of all credits authorized for any one year could not exceed $30 million. In addition, the Income Tax Act is amended to provide that, for tax years beginning after 2009 and before 2020, a taxpayer to whom a certificate and remaining SBT credit amount had been transferred could claim that credit against the income tax. Effective January 8, 2004.

    Public Act 126 of 2004: Adds section 31a to the Single Business Tax Act, and states that a taxpayer that is a qualified start-up business that does not have a profit under a tax year may claim a credit against the tax imposed under the Act for that tax year and any of the four immediately following tax years. Effective May 28, 2004.

    Public Act 212 of 2004: Amends Section 9-501 of the Uniform Commercial Code (MCL 440.9501), requiring that the Secretary of State provide written notice of the filing of financing statements. Allows debtors named in fraudulent financing statements to bring actions against those filing such statements. It also makes the filing of fraudulent financing statements a misdemeanor punishable by imprisonment, fines, or both. Effective July 14, 2004.

    Public Act 251 of 2004: Amends the Obsolete Property Rehabilitation Act to provide that, upon application for an exemption from the obsolete properties tax by a qualified start-up business, the governing body of a local tax collecting unit could adopt a resolution to exempt a rehabilitated facility of the business from the collection of the tax in the same manner and under the same terms and conditions as provided for the exemption in PA 252 of 2004. Effective July 23, 2004.

    Public Act 461 of 2004: Amends the Michigan Consumer Protection Act to prohibit issuing or delivering to a consumer a receipt that displayed any part of a credit or debit card's expiration date or more than the last four digits of the consumer's account number, if a credit card or debit card were used for payment in a consumer transaction. Effective March 1, 2005.

    Public Act 462 of 2004: Amends the Michigan Consumer Protection Act, making it unlawful to require a consumer to disclose his or her Social Security number as a condition of sale, unless the transaction involved an extension of credit or disclosure was required or authorized by law. Effective March 1, 2005.

    Public Act 471 of 2004: Amends the Credit Union Act to require domestic credit unions to follow generally accepted accounting principles, extend certain requirements regarding credit union directors and supervisory or credit committee members to members of other credit union committees, reduce the minimum base fee used to determine a credit union's annual operating fee, require consideration of certain factors in establishing interest rates on loans, extend prohibitions against more favorable loan rates or terms for credit union officials to people who had business relationships with credit union officials, limit the amount a credit union can loan a borrower or its affiliates, revise notice requirements for a credit union's conversion to another type of financial institution. Effective December 28, 2004.

    Public Act 558 of 2004: Amends PA 236 of 1961 ((MCL 600.934), to permit non-residents of the United States to become members of the Michigan State Bar. Effective January 3, 2005.

    II. NEW BILLS AND STATUS OF PENDING BILLS

    Senate Bill 14 of 2005: Would amend the income tax act to provide a $1,000 tax credit to taxpayers purchasing alternative energy vehicles. The Bill was referred to the Committee on Finance on January 12, 2005.

    Senate Bill 16 of 2005: Would introduce the "Check Cashing Licensing Act," requiring any person or entity, with the exception of certain banks, credit unions, and governmental entities, to obtain a license under the Act before engaging in the business of check cashing. The Bill was referred to the Committee on Banking and Financial Institutions on January 12, 2005.

    Senate Bill 114–115 of 2005: Would add provisions to the Business Corporation Act and Michigan Limited Liability Act with regard to converting business entities, including the transfer of any unexpired certificate of assumed name held by the converting entity. Referred to the Committee on Commerce and Labor on February 1, 2005.

    Senate Bill 127 of 2005: Would introduce the "Michigan Telecommunications Act," which would preclude cellular or mobile telecommunication service providers from providing, selling or including customer numbers with directory assistance without obtaining customer consent. Referred to the Committee on Technology and Energy on February 1, 2005.

    Senate Bill 176: Would introduce the "Money Transmission Services Act", which regulates money transmission service businesses and requires licensing of persons engaged in providing money transmission services. Referred to Committee on Banking and Financial Institutions on February 9, 2005.

    House Bill 4052 of 2005: Would prohibit the sale of cellular telephones and pagers to certain minors without written parental consent and prescribes civil sanctions. Referred to Committee on Judiciary on January 27, 2005.

    House Bill 4087 of 2005: Would enact the "Liquidation Sale Licensing Act," which would require one who intends to conduct a regulated sale or advertises, represents or holds out that a sale of goods is an insurance, bankruptcy, mortgage, insolvency, assignee's, executor's, administrator's, receiver's, trustee's, removal, or going-out-of-business sale or a sale of damaged goods, to first obtain a license from the county clerk. Referred to Committee on Regulatory Reform on February 1, 2005.

    House Bill 4128 of 2005: Would amend the Single Business Tax Act so that, for a period of three consecutive tax years beginning with the first year of operation, qualified businesses shall have no tax liability for tax years beginning after December 31, 2005. Referred to Committee on Tax Policy on February 1, 2005.

    House Bill 4343 of 2005: Would amend the Consumer Mortgage Protection Act to change its name to the "Home Loan Protection Act" and impose new restrictions on home loans. Referred to Committee on Banking and Financial Services on February 17, 2005.

    Respectfully submitted,

    Eric I. Lark
    Kerr, Russell and Weber, PLC

December 4, 2004

    I. PUBLIC ACTS

    Public Acts 23-25 of 2003: Public Act 23 amends Section 27a of the Revenue Act (MCLA 205.27(a)) to provide that controlling, supervising, or responsible officers, members, managers, or partners of a corporation, limited liability company, limited liability partnership, partnership, or limited partnership liable for taxes may be held personally liable for failure to file required returns, notwithstanding dissolution of the business entity. Public Acts 24 and 25 delete language in the General Sales Tax Act (MCL 205.27(a)) and Use Tax Act (MCL 205.96) which is substantially similar to the provision added to the Revenue Act. Effective June 24, 2003.

    Public Act 42 of 2003: Provides for the regulation of the transmission of electronic mail advertisements. Effective September 1, 2003.

    Public Act 44 of 2003: This Act provides for the enforcement of a security interest or lien on a mobile home by real property foreclosure where the owner of a mobile home has an ownership interest in the real property. Ownership interest is generally defined as having title to the property or being a lessee of a ground lease of twenty years or more. Effective July 14, 2003.

    Public Act 45 of 2003: Amends the Income Tax Act to define "flow-through entity," "member" of a flow-through entity and "nonresident member" of a flow-through entity. Effective October 1, 2003.

    Public Act 46 of 2003: Requires all business entities authorized to transact business in the state submitting a certificate of dissolution or requesting a certificate of withdrawal, to request a certificate from the Michigan Treasury Department stating that taxes are not due. Effective October 1, 2003.

    Public Act 52 of 2003: Expands the definition of "business income" under Section 4 of the Income Tax Act of 1967. Effective July 14, 2003

    Public Act 53 of 2003: Amends the Administrative Procedures Act to require the Office of Regulatory Reform to publish the Michigan Administrative Code, the annual supplement to the Michigan Administrative Code, and the Michigan Register, in Electronic Format. Effective July 14, 2003.

    Public Act 81 of 2003: Amends Section 1101 of the Michigan Limited Liability Act to reflect changes pertaining to filing fees. Effective July 23, 2003.

    Public Act 106 of 2003: Amends the Michigan Business Corporation Act to reflect changes pertaining to filing fees. Effective July 24, 2003.

    Public Act 107 of 2003: Amends the Michigan Nonprofit Corporation Act to reflect changes pertaining to filing fees. Effective July 24, 2003.

    Public Act 131 of 2003: Revises the reference in the Tax Tribunal Act from "homestead exemption" to "principal residence exemption." Effective January 1, 2004. See also Public Act 140 of 2003 which revises the General Property Tax Act to replace the term "homestead" with the term "principal residence." Various other statutes have been/may be amended to revise the definition of "homestead exemption" to "principal residence exemption." Effective January 1, 2004.

    Public Act 150 of 2003: Effective August 8, 2003, this Act contains revisions to the filing fees under the Uniform Securities Act.

    Public Act 174 of 2003: Amends the Michigan Employment Security Act to allow the payment of additional temporary extended unemployment compensation based upon the State's average rate of total unemployment. Effective August 14, 2003.

    Public Act 181 of 2003: Amends Section 791 of the Michigan Business Corporation Act to expressly state that formation of a group does not constitute a control share acquisition of shares of an issuing public corporation held by members of the group. Also adds Section 798a which states that shares without voting rights because of the formation of a group shall have the same voting rights as were accorded the shares before formation of the group. Effective October 7, 2003.

    Public Act 215 of 2003: Repeals Public Act 285 of 1925 and creates the "Credit Union Act" to provide for the regulation of credit unions. Effective June 1, 2004

    Public Acts 216-218 of 2003: Amends various laws to replace references to Public Act 285 of 1925 with references to the Credit Union Act. The bills also refer to a "domestic credit union" rather than a "credit union" or "state-charter credit union," and updates references to the Banking Code and the Savings and Loan Act. PA 216 amends the Michigan Consumer Protection Act; PA 217 amends the Michigan Penal Code; PA 218 amends Public Act 43 of 1973, which permits associations, institutions and credit unions to process or handle food stamps. Effective December 2, 2003.

    Public Act 220 of 2003: Amends Public Act 322 of 1978, which authorizes financial institutions to make electronic funds transfer terminals available to consumers. Effective December 2, 2003.

    Public Act 239 of 2003: Amends the Michigan Income Tax Act to delay the scheduled income tax rate reduction from January 1, 2004 to July 1, 2004. Under the Act, the rate in 2003 was 4% and was to be 3.9% on January 1, 2004 and thereafter. Effective December 29, 2003.

    Public Act 265 of 2003: Amends the Michigan Broadband Development Authority Act to require that priority be given to the application of any broadband developer who applied to develop broadband capability within a "recovery zone" designated in the Michigan Renaissance Zone Act. Effective January 5, 2004.

    Public Acts 266 and 273 of 2003: Amends various statutes to permit the designation of up to 20 tool and die renaissance recovery zones, allows certain tool and die, machine tool and molding companies to claim a single business tax credit of up to $4,000 for the costs of training an apprentice, allows a taxpayer who purchased personal property from a qualified tool and die business to claim an SBT credit equal to the amount paid for the property, provides grants for broadband infrastructure, expands personal property tax exemption for special tools, provides that the depreciation of personal property used to develop tool and die products could not be less than allowed under the Internal Revenue Code, exempts from the use tax a construction contractor's labor cost to manufacture, fabricate, or assemble personal property before affixing it to real property, and gives skilled trade associations access to school facilities to provide information about apprenticeship programs. Effective January 5, 2004 and January 8, 2004, respectively.

    Public Act 277 of 2003: Amends the Brownfield Redevelopment Financing Act to revise the Act's definition of "initial taxable value." The bill would refer to the taxable value of eligible property identified in a brownfield plan as shown either by the most recent assessment roll (as currently provided) or, if provided by the brownfield plan, by the next assessment roll for which equalization would be completed following the date the resolution adding the property in the plan was adopted. Effective January 8, 2003.

    Public Act 295 of 2003: Amends the Income Tax Act to allow an income tax credit, for tax years beginning after 2009 and before 2020, for a "claimant" or for a taxpayer to whom a certificate and remaining single business tax (SBT) credit amount had been transferred under the SBT Act. Effective January 8, 2004.

    Public Act 296 of 2003: Creates the "Michigan Early Stage Venture Capital Investment Act" to require that, within one year after the bill's effective date, the "Michigan Early Stage Venture Capital Investment Corporation" be established, a fund manager be hired, an investment plan be established, and funds be solicited and available for investment consistent with that plan. The Corporation would have to create the "Michigan Early Stage Venture Capital Investment Fund." Money in the Fund could be invested in venture capital companies to promote investment in qualified businesses. Also amends the Single Business Tax Act to specify that, for tax years beginning after 2008 and before 2020, a taxpayer that was an investor could claim an SBT credit equal to the amount determined and certified under Senate Bill 834. For tax years beginning after 2009, if a credit against the SBT or a successor tax were not allowed, the taxpayer could transfer the credit to a person who could claim an income tax credit. The total amount of all certified SBT credits for all taxpayers for all years could not exceed $150 million. The total amount of all credits authorized for any one year could not exceed $30 million. In addition, the Income Tax Act is amended to provide that, for tax years beginning after 2009 and before 2020, a taxpayer to whom a certificate and remaining SBT credit amount had been transferred could claim that credit against the income tax. Effective January 8, 2004.

    Public Act 126 of 2004: Adds section 31a to the Single Business Tax Act, and states that a taxpayer that is a qualified start-up business that does not have a profit under a tax year may claim a credit against the tax imposed under the Act for that tax year and any of the four immediately following tax years. Effective May 28, 2004.

    Public Act 212 of 2004: Amends Section 9-501 of the Uniform Commercial Code (MCL 440.9501), requiring that the Secretary of State provide written notice of the filing of financing statements. Allows debtors named in fraudulent financing statements to bring actions against those filing such statements. It also makes the filing of fraudulent financing statements a misdemeanor punishable by imprisonment, fines, or both. Effective July 14, 2004.

    Public Act 251 of 2004: Amends the Obsolete Property Rehabilitation Act to provide that, upon application for an exemption from the obsolete properties tax by a qualified start-up business, the governing body of a local tax collecting unit could adopt a resolution to exempt a rehabilitated facility of the business from the collection of the tax in the same manner and under the same terms and conditions as provided for the exemption in PA 252 of 2004. Effective July 23, 2004.

    Public Act 252 of 2004: Amends the General Property Tax Act to exempt the real and personal property of a qualified start-up business from taxes levied under the Act after December 31, 2004, for up to five years, if the business applied for the exemption and the governing body of the local tax collection unit or, for taxes levied by the county, the County Board of Commissioners, adopted a resolution approving the exemption. Effective July 23, 2004.

    Public Acts 302 and 301 of 2004: Allows a taxpayer to claim a credit against its SBT Tax in an amount equal to 50% of the fair market value of an automobile donated by the taxpayer to a qualified organization that intends to provide the automobile to a qualified recipient. Effective July 23, 2004.

    Public Acts 312 and 313 of 2004: Allows a taxpayer to claim a credit against income tax in an amount equal to 50% of the fair market value of an automobile donated to a qualified organization that intends to provide the automobile to a qualified recipient. Effective August 27, 2004.

    Public Acts 321-324 of 2004: The Acts were part of a package of bills exempting qualified start-up businesses from certain taxes, with local approval. PA 321 amends the Technology Park Development Act to provide for an exemption from the technology park facilities tax, which is levied upon every owner and every user or occupant, if known, of a facility to which a certificate is issued under the Act. PA 322 amends the City Utility Users Tax Act to exempt a qualified start-up business from the tax imposed by the City of Detroit on intrastate telephone communications services, electrical energy, steam and natural and artificial gas provided by a public utility or a resale customer. PA 323 amends the Plant Rehabilitation and Industrial Development Act to create an exemption from the industrial facilities tax for a speculative building, new facility or replacement facility owned or operated by a qualified start-up business. PA 324 amends PA 189 of 1983 to allow an exemption, for taxes levied after December 31, 2004, for real and personal property of a qualified start-up business from the lessee-user tax if the business applies for an exemption and the governing body of the local tax collecting unit adopts a resolution approving the exemption. Effective August 27, 2004.

    II. NEW BILLS AND STATUS OF PENDING BILLS

    Senate Bill 21 of 2003—Would create a new Act for the regulation of deferred deposit loan transactions. Referred to the Committee on Banking and Financial Institutions on January 21, 2003.

    Senate Bill 61 of 2003—Would create the Check Cashing Licensing Act, which requires check-cashing businesses to first obtain a license. Referred to Committee on Banking and Financial Institutions on January 23, 2003.

    Senate Bill 113-114 of 2003—This Bill proposes certain amendments to the Non-Profit Corporation Act and the Limited Liability Company Act, respectively, to eliminate the annual fee if the non-profit corporation or limited liability company is recording no changes in officers and directors and is not changing its resident agent or registered office address. Referred to the Committee on Economic Development, Small Business and Reg. Reform on January 29, 2003.

    Senate Bill 167 of 2003—Similar to Senate Bills 113 and 114 of 2003, except applies to profit corporations under the MBCA. Referred to the Committee on Economic Development, Small Business and Reg. Reform on February 11, 2003.

    Senate Bill 172 of 2003—Would create a new Act to require the seller of real property to make disclosures regarding toxic mold. The Bill was referred to the Committee on Economic Development, Small Business and Reg. Reform on February 11, 2003.

    Senate Bill 208 of 2003—For tax years beginning after December 31, 2002, would allow a deduction for the cost of the purchase of a hybrid fuel vehicle for income tax purposes. This Bill was referred to the Committee on Finance on February 25, 2003.

    Senate Bill 220 of 2003—Would amend the Michigan Consumer Protection Act to prohibit issuing or delivering to a consumer a receipt that displayed any part of a credit or debit card's expiration date or more than the last four digits of the consumer's account number, if a credit card or debit card were used for payment in a consumer transaction. This bill has passed the Senate and the House. It was laid over one day under the rules on November 10, 2004.

    Senate Bill 415 of 2003—Would require out-of-state affiliates to be subject to taxation. The Bill was referred to the Committee on Finance on April 29, 2003. See also House Bill 4571 of 2003.

    Senate Bill 474 of 2003—Would create the Deferred Presentment Services Act, which would preclude conducting such a business without first obtaining a license from the Commissioner of the Office of Financial and Insurance Services (OFIS). Vetoed by the governor on January 9, 2004.

    Senate Bill 490—495 of 2003– Would amend various laws to replace references to Public Act 285 of 1925 with references to the "Credit Union Act." The bills also would refer to a "domestic credit union" rather than a "credit union" or "state-chartered credit union," and would update references to the Banking Code and the Savings and Loan Act. SB 490 would amend PA 156 of 1851, which defines the powers and duties of county boards of commissioners; SB 491 would amend PA 322 of 1978, which authorizes financial institutions to make electronic funds transfer terminals available to consumers; SB 492 would amend the Motor Vehicle Safety Act. SB 490-492 passed Senate; referred to Committee on Commerce on October 16, 2003. SB 493-495 was passed into law, see PA 216-218 of 2003.

    Senate Bill 657 of 2003—Would amend the Michigan Consumer Protection Act, making it unlawful to require a consumer to disclose his or her Social Security number as a condition of sale, unless the transaction involved an extension of credit or disclosure was required or authorized by law. The bill would take effect on March 31, 2004. This bill has passed the Senate and the House. It was laid over one day under the rules on November 10, 2004.

    Senate Bill 675 of 2003—Called the Employee Communications Monitoring Act, this bill would prohibit certain employers from monitoring employee communications unless a monitoring policy is established and disclosed to the employees. Referred to Committee on Commerce and Labor on September 16, 2003.

    Senate Bill 745—746 of 2003—Would amend the Michigan Limited Liability Act and Business Corporation Act to permit converting entities to transfer certificates of assumed names. The Bill would also specify the requirements for a plan of conversion for converting entities. Referred to Committee on Commerce and Labor on September 30, 2003.

    Senate Bill 747 of 2003—Would amend the Professional Service Corporation Act to expressly require that limited liability companies converting to a corporation may not convert into a professional corporation unless members who will become shareholders are licensed persons who may be shareholders under the Act. Referred to Committee on Commerce and Labor on September 30, 2003.

    Senate Bill 775—776 of 2003—Would amend the Single Business Tax Act and Income Tax Act to permit taxpayers to claim a $1,000 credit for each alternative energy vehicle purchased or leased as a fleet car. Referred to Committee on Finance on October 14, 2003.

    Senate Bill 862 of 2003—Would amend the Single Business Tax Act to create a single business tax (SBT) credit for a taxpayer that was a qualified start-up business that did not have net income for two consecutive tax years, for tax years beginning after December 31, 2003.Reassigned to the Committee on Tax Policy on February 12, 2004.

    Senate Bill 863 through 873 and 875 of 2003—Would amend various statutes to provide qualified start-up businesses with specific tax and development advantages.SB 863, 865, 867, 869, 872, 875 vetoed by Governor on May 28, 2004; SB 864, 866 (see below), 868, 870, 871 reassigned to the Committee on Tax Policy on February 12, 2004; SB 873 referred to Committee on Economic Development, Small Business and Regulatory Reform on December 2, 2003.

    Senate Bill 866 of 2003—Would amend the City Income Tax Act to allow a qualified start-up business to claim a credit against the city income tax. If the city income tax credit and any unused carryforward exceeded the taxpayer's tax liability for the tax year, the excess could not be refunded but could be carried forward as an offset to the tax liability in subsequent tax years, for 10 tax years or until the excess credit was used up, whichever occurred first. Reassigned to Committee on Tax Policy on February 12, 2004.

    Senate Bill 1012 of 2004—Would amend section 39e of 1975 PA 228 (MCL 208.39e) so that, for tax years beginning after December 31, 2004, a person engaged in the person's first or second year of business and the person's allocated gross receipts are less than $500,000 for the tax year, the person need not file a return to pay the tax provided under the Act. Referred to the Committee on Finance on February 25, 2004.

    Senate Bill 1115 of 2004: Would amend the Charitable Organization and Solicitations Act, requiring charitable organizations and professional-fund raisers to register with the attorney general, and provide for the registration of vendors. Would require registration fees and late fees, and would require charitable organizations and professional fund-raisers to include financial information and information about directors, officers, and employees. Passed by the Senate and referred to the Committee on Commerce on July 7, 2004.

    Senate Bill 1117 of 2004: Would amend 1855 PA 105, by adding Section 2g (MCL 21.141 to 21.147) so that the State Treasurer would be able to invest surplus funds under the State Treasurer's control in certificates of deposit or other instruments of a financial institution qualified under the Act to receive deposits or investments of surplus funds for the purpose of facilitating qualified business loans. The State Treasurer would make all such qualified business loans available in all geographic regions of the state. The State Treasurer, in consultation with the Michigan Economic Development Corporation, would enter into investment agreements with financial institutions to provide for the investment under this subsection. Referred to Committee on Economic Development, Small Business and Regulatory Reform on March 18, 2004.

    Senate Bill 1118 of 2004: Would amend the General Property Tax Act, 1893 PA 206, by adding Section 9j, which would exempt $10,000 of the aggregate taxable value of the personal property of a qualified small business from collection of taxes under the Act as provided in this subsection, for taxes levied after December 31, 2004. Referred to Committee on Finance on March 18, 2004.

    Senate Bill 1366 of 2004—Would amend PA 236 of 1961 ((MCL 600.934), to permit non-residents of the United States to become members of the Michigan State Bar. Referred to Committee on Judiciary on September 8, 2004. Passed the Senate. Referred to House Committee on Judiciary on November 4, 2004.

    Senate Bill 1393 -1395—Would create the "Money Transmission Services Act" to do all of the following: prohibit a person from providing "money transmission services" without a license issued under the proposed Act, except as otherwise provided; specify requirements for applying for a money transmission services license; require the Commissioner of the Office of Financial and Insurance Services (OFIS) to establish a fee schedule for applicants and licensees; authorize the Commissioner to examine and investigate a licensee or any of its "authorized delegates"; specify various filing, notice, reporting, and record-keeping requirements of a licensee; require a licensee to maintain a certain amount of permissible investments; regulate a licensee's authorized delegates; provide for various criminal, civil, and administrative sanctions against a licensee; provide for the confidentiality of information obtained by OFIS and its employees; authorize the Commissioner to promulgate rules to implement and enforce the proposed Act; repeal the Sale of Checks Act (MCL 487.901-487.916). Referred to Committee on Banking and Financial Institutions on September 15, 2004.

    Senate Bill 1394—Would amend the Code of Criminal Procedure to include in the sentencing guidelines felony offenses proposed by Senate Bill 1393. Intentionally making a false statement, misrepresentation, or certification in a record or document, and criminal fraud in the conduct of a money transmission services business each would be a Class E felony against the public trust, with a statutory maximum sentence of five years' imprisonment. Referred to Committee on Banking and Financial Institutions on September 15, 2004.

    Senate Bill 1395—Would amend the Consumer Financial Services Act to include the Money Transmission Services Act in the definition of "financial licensing acts". Referred to Committee on Banking and Financial Institutions on September 15, 2004.

    House Bill 4220 of 2003—Would exempt non-profit charitable institutions from special assessments, revising MCLA 211.7(o). Referred to the Committee on Tax Policy on February 13, 2003.

    House Bill 4346 of 2003—Would amend the Michigan Liquor Control Code of 1998 to allow for the importation of alcoholic liquor containing less than 21% alcohol by volume, for personal use and only up to 24 bottles per month, from a state determined to allow reciprocal sales. Allows reciprocal shipping for wine producers. This Bill was referred to the Committee on Regulatory Reform on March 13, 2003. See also Heald v. Engler (Electronic citation: 2003 FED App. 0308P 6 th CIR August 28, 2003).

    House Bill 4571 of 2003—Would require out-of-state affiliates to be subject to taxation. The Bill was referred to the Committee on Tax Policy on April 10, 2003. See also Senate Bill 415 of 2003.

    House Bill 4863 of 2003—Would amend the General Sales Tax Act so that a nonprofit organization with aggregate retail sales in a calendar year of less than $5,000 is not required to charge sales tax when making sales for fundraising purposes. The bill would increase the threshold to $75,000. Referred to second reading on December 16, 2003.

    House Bill 4882 of 2003—Would eliminate the Use Tax on manufactured home sales, except for new manufactured homes purchased out of state and brought into the state for initial use. On June 24, 2003, the Bill was referred to the Committee on Commerce. It was reported with recommendation for referral to the Committee on Local Government and Urban Policy on September 30, 2003. Reported with recommendation with substitute H-2, referred to second reading, and laid over one day under the rules on May 20, 2004.

    House Bill 5010 of 2003—Would provide for revisions to the General Property Tax Act, including providing for a one time summer property tax collection. Referred to the Committee on Tax Policy on August 13, 2003.

    House Bill 5075 of 2003—Would amend Section 4110 of the Uniform Commercial Code (MCL 440.4110) so that an agreement for electronic presentment shall provide a procedure that prohibits presentment by transmission of an image of an item or presentment notice if the drawer of the item requests that electronic presentment not be used for the drawer's items and requires written notice to each drawer of his or her right to make that request. Referred to Committee on Commerce on September 25, 2003.

    House Bill 5249 of 2003—Would amend the Single Business Tax Act (MCL 208.37e) to permit a taxpayer purchasing tangible personal property from a qualified tool and die business to claim a credit against the SBT equal to the amount actually paid for tangible personal property. The bill applies to tax years beginning January 1, 2004. Referred to Committee on Commerce on November 4, 2003.

    House Bill 5295 of 2003: Called the Public Auction Licensing Act, this bill would bar the sale at public auction within the state without first obtaining a license under the Act. Referred to Committee on Regulatory Reform on November 13, 2003.

    House Bill 5296 of 2003: Called the Liquidation Sale Licensing Act, this bill would bar the sale or advertisement of sale as an insurance, bankruptcy, mortgage, insolvency, assignee's, executor's, administrator's, receiver's, trustee's, removal, or going out of business sale, or a sale of damaged goods, without first obtaining a license. Referred to Committee on Regulatory Reform on November 13, 2003.

    House Bill 6175 of 2004—Would amend the Michigan Consumer Protection Act, PA 331 of 1976 (MCL 445.903), to expand the definition of deceptive and unfair trade practices. Passed the House. Referred to Senate Committee on Judiciary on September 30, 2004.

    Respectfully submitted,
    Eric I. Lark
    Kerr, Russell and Weber, PLC

September 23, 2004

    I. PUBLIC ACTS

    Public Acts 23-25 of 2003: Public Act 23 amends Section 27a of the Revenue Act (MCLA 205.27(a)) to provide that controlling, supervising, or responsible officers, members, managers, or partners of a corporation, limited liability company, limited liability partnership, partnership, or limited partnership liable for taxes may be held personally liable for failure to file required returns, notwithstanding dissolution of the business entity. Public Acts 24 and 25 delete language in the General Sales Tax Act (MCL 205.27(a)) and Use Tax Act (MCL 205.96) which is substantially similar to the provision added to the Revenue Act. These Acts became effective June 24, 2003.

    Public Act 42 of 2003: Provides for the regulation of the transmission of electronic mail advertisements. This Act became effective September 1, 2003.

    Public Act 44 of 2003: This Act provides for the enforcement of a security interest or lien on a mobile home by real property foreclosure where the owner of a mobile home has an ownership interest in the real property. Ownership interest is generally defined as having title to the property or being a lessee of a ground lease of twenty years or more. This Act became effective July 14, 2003.

    Public Act 45 of 2003: Amends the Income Tax Act to define "flow-through entity", "member" of a flow-through entity and "nonresident member" of a flow-through entity. Effective October 1, 2003.

    Public Act 46 of 2003: Requires all business entities authorized to transact business in the state submitting a certificate of dissolution or requesting a certificate of withdrawal, to request a certificate from the Michigan Treasury Department stating that taxes are not due. Effective October 1, 2003.

    Public Act 52 of 2003: Expands the definition of "business income" under Section 4 of the Income Tax Act of 1967. Effective July 14, 2003

    Public Act 53 of 2003: Amends the Administrative Procedures Act to require the Office of Regulatory Reform to publish the Michigan Administrative Code, the annual supplement to the Michigan Administrative Code, and the Michigan Register, in Electronic Format. Effective July 14, 2003.

    Public Act 81 of 2003: Amends Section 1101 of the Michigan Limited Liability Act to reflect changes pertaining to filing fees. Effective July 23, 2003.

    Public Act 106 of 2003: Amends the Michigan Business Corporation Act to reflect changes pertaining to filing fees. Effective July 24, 2003.

    Public Act 107 of 2003: Amends the Michigan Nonprofit Corporation Act to reflect changes pertaining to filing fees. Effective July 24, 2003.

    Public Act 131 of 2003 . Revises the reference in the Tax Tribunal Act from "homestead exemption" to "principal residence exemption." Effective January 1, 2004. See also Public Act 140 of 2003 which revises the General Property Tax Act to replace the term "homestead" with the term "principal residence." Various other statutes have been/may be amended to revise the definition of "homestead exemption" to "principal residence exemption." Effective January 1, 2004.

    Public Act 150 of 2003: Effective August 8, 2003, this Act contains revisions to the filing fees under the Uniform Securities Act.

    Public Act 174 of 2003: Amends the Michigan Employment Security Act to allow the payment of additional temporary extended unemployment compensation based upon the State's average rate of total unemployment. Effective August 14, 2003.

    Public Act 296 of 2003: Creates the "Michigan Early Stage Venture Capital Investment Act" to require that, within one year after the bill's effective date, the "Michigan Early Stage Venture Capital Investment Corporation" be established, a fund manager be hired, an investment plan be established, and funds be solicited and available for investment consistent with that plan. The Corporation would have to create the "Michigan Early Stage Venture Capital Investment Fund." Money in the Fund could be invested in venture capital companies to promote investment in qualified businesses. Also amends the Single Business Tax Act to specify that, for tax years beginning after 2008 and before 2020, a taxpayer that was an investor could claim an SBT credit equal to the amount determined and certified under Senate Bill 834. For tax years beginning after 2009, if a credit against the SBT or a successor tax were not allowed, the taxpayer could transfer the credit to a person who could claim an income tax credit. The total amount of all certified SBT credits for all taxpayers for all years could not exceed $150 million. The total amount of all credits authorized for any one year could not exceed $30 million. In addition, the Income Tax Act is amended to provide that, for tax years beginning after 2009 and before 2020, a taxpayer to whom a certificate and remaining SBT credit amount had been transferred could claim that credit against the income tax. Effective January 8, 2004.

    Public Act 126 of 2004: Adds section 31a to the Single Business Tax Act, and states that a taxpayer that is a qualified start-up business that does not have a profit under a tax year may claim a credit against the tax imposed under the Act for that tax year and any of the four immediately following tax years. Effective May 28, 2004.

    Public Act 212 of 2004: Amends Section 9-501 of the Uniform Commercial Code (MCL 440.9501), requiring that the Secretary of State provide written notice of the filing of financing statements. Allows debtors named in fraudulent financing statements to bring actions against those filing such statements. It also makes the filing of fraudulent financing statements a misdemeanor punishable by imprisonment, fines, or both. Effective July 14, 2004.

    Public Act 251 of 2004: Amends the Obsolete Property Rehabilitation Act to provide that, upon application for an exemption from the obsolete properties tax by a qualified start-up business, the governing body of a local tax collecting unit could adopt a resolution to exempt a rehabilitated facility of the business from the collection of the tax in the same manner and under the same terms and conditions as provided for the exemption in PA 252 of 2004. Effective July 23, 2004.

    Public Act 252 of 2004: Amends the General Property Tax Act to exempt the real and personal property of a qualified start-up business from taxes levied under the Act after December 31, 2004, for up to five years, if the business applied for the exemption and the governing body of the local tax collection unit or, for taxes levied by the county, the County Board of Commissioners, adopted a resolution approving the exemption. Effective July 23, 2004.

    Public Acts 302 and 301 of 2004: Allows a taxpayer to claim a credit against its SBT Tax in an amount equal to 50% of the fair market value of an automobile donated by the taxpayer to a qualified organization that intends to provide the automobile to a qualified recipient. Effective July 23, 2004.

    Public Acts 312 and 313 of 2004: Allows a taxpayer to claim a credit against income tax in an amount equal to 50% of the fair market value of an automobile donated to a qualified organization that intends to provide the automobile to a qualified recipient. Effective August 27, 2004.

    Public Acts 321-324 of 2004: The Acts were part of a package of bills exempting qualified start-up businesses from certain taxes, with local approval. PA 321 amends the Technology Park Development Act to provide for an exemption from the technology park facilities tax, which is levied upon every owner and every user or occupant, if known, of a facility to which a certificate is issued under the Act. PA 322 amends the City Utility Users Tax Act to exempt a qualified start-up business from the tax imposed by the City of Detroit on intrastate telephone communications services, electrical energy, steam and natural and artificial gas provided by a public utility or a resale customer. PA 323 amends the Plant Rehabilitation and Industrial Development Act to create an exemption from the industrial facilities tax for a speculative building, new facility or replacement facility owned or operated by a qualified start-up business. PA 324 amends PA 189 of 1983 to allow an exemption, for taxes levied after December 31, 2004, for real and personal property of a qualified start-up business from the lessee-user tax if the business applies for an exemption and the governing body of the local tax collecting unit adopts a resolution approving the exemption. Effective August 27, 2004.

    II. NEW BILLS AND STATUS OF PENDING BILLS

    Senate Bill 21 of 2003—would create a new Act for the regulation of deferred deposit loan transactions. Referred to the Committee on Banking and Financial Institutions on January 21, 2003.

    Senate Bill 61 of 2003—would create the Check Cashing Licensing Act, which requires check-cashing businesses to first obtain a license. Referred to Committee on Banking and Financial Institutions on January 23, 2003.

    Senate Bill 113-114 of 2003—This Bill proposes certain amendments to the Non-Profit Corporation Act and the Limited Liability Company Act, respectively, to eliminate the annual fee if the non-profit corporation or limited liability company is recording no changes in officers and directors and is not changing its resident agent or registered office address. Referred to the Committee on Economic Development, Small Business and Reg. Reform on January 29, 2003.

    Senate Bill 167 of 2003—Similar to Senate Bills 113 and 114 of 2003, except applies to profit corporations under the MBCA. Referred to the Committee on Economic Development, Small Business and Reg. Reform on February 11, 2003.

    Senate Bill 172 of 2003—would create a new Act to require the seller of real property to make disclosures regarding toxic mold. The Bill was referred to the Committee on Economic Development, Small Business and Reg. Reform on February 11, 2003.

    Senate Bill 208 of 2003—For tax years beginning after December 31, 2002, would allow a deduction for the cost of the purchase of a hybrid fuel vehicle for income tax purposes. This Bill was referred to the Committee on Finance on February 25, 2003.

    Senate Bill 220 of 2003—would amend the Michigan Consumer Protection Act to prohibit issuing or delivering to a consumer a receipt that displayed any part of a credit or debit card's expiration date or more than the last four digits of the consumer's account number, if a credit card or debit card were used for payment in a consumer transaction. This bill has passed the Senate.

    Senate Bill 415 of 2003—would require out-of-state affiliates to be subject to taxation. The Bill was referred to the Committee on Finance on April 29, 2003. See also House Bill 4571 of 2003.

    Senate Bill 474 of 2003—would create the Deferred Presentment Services Act, which would preclude conducting such a business without first obtaining a license from the Commissioner of the Office of Financial and Insurance Services (OFIS). Vetoed by the governor on January 9, 2004.

    Senate Bill 490—495 of 2003—would amend various laws to replace references to Public Act 285 of 1925 with references to the "Credit Union Act." The bills also would refer to a "domestic credit union" rather than a "credit union" or "state-chartered credit union," and would update references to the Banking Code and the Savings and Loan Act. SB 490 would amend PA 156 of 1851, which defines the powers and duties of county boards of commissioners; SB 491 would amend PA 322 of 1978, which authorizes financial institutions to make electronic funds transfer terminals available to consumers; SB 492 would amend the Motor Vehicle Safety Act. SB 490-493 passed Senate; referred to Committee on Commerce on October 16, 2003. SB 493-495 was passed into law, see PA 216-218 of 2003.

    Senate Bill 657 of 2003—would amend the Michigan Consumer Protection Act, making it unlawful to require a consumer to disclose his or her Social Security number as a condition of sale, unless the transaction involved an extension of credit or disclosure was required or authorized by law. The bill would take effect on March 31, 2004. This bill has passed the Senate.

    Senate Bill 675 of 2003—Called the Employee Communications Monitoring Act, this bill would prohibit certain employers from monitoring employee communications unless a monitoring policy is established and disclosed to the employees. Referred to Committee on Commerce and Labor on September 16, 2003.

    Senate Bill 745—746 of 2003—would amend the Michigan Limited Liability Act and Business Corporation Act to permit converting entities to transfer certificates of assumed names. The Bill would also specify the requirements for a plan of conversion for converting entities. Referred to Committee on Commerce and Labor on September 30, 2003.

    Senate Bill 747 of 2003—would amend the Professional Service Corporation Act to expressly require that limited liability companies converting to a corporation may not convert into a professional corporation unless members who will become shareholders are licensed persons who may be shareholders under the Act. Referred to Committee on Commerce and Labor on September 30, 2003.

    Senate Bill 775—776 of 2003—would amend the Single Business Tax Act and Income Tax Act to permit taxpayers to claim a $1,000 credit for each alternative energy vehicle purchased or leased as a fleet car. Referred to Committee on Finance on October 14, 2003.

    Senate Bill 862—875 of 2003—would amend various statutes to provide qualified start-up businesses with specific tax and development advantages. Reassigned to the Committee on Tax Policy on February 12, 2004.

    Senate Bill 866 of 2003—would amend the City Income Tax Act to allow a qualified start-up business to claim a credit against the city income tax. If the city income tax credit and any unused carryforward exceeded the taxpayer's tax liability for the tax year, the excess could not be refunded but could be carried forward as an offset to the tax liability in subsequent tax years, for 10 tax years or until the excess credit was used up, whichever occurred first. Reassigned to Committee on Tax Policy on February 12, 2004.

    Senate Bill 1115 of 2004: Would amend the Charitable Organization and Solicitations Act, requiring charitable organizations and professional-fund raisers to register with the attorney general, and provide for the registration of vendors. Would require registration fees and late fees, and would require charitable organizations and professional fund-raisers to include financial information and information about directors, officers, and employees. Passed by the Senate and referred to the Committee on Commerce on July 7, 2004.

    Senate Bill 1117 of 2004: Would amend 1855 PA 105, by adding Section 2g (MCL 21.141 to 21.147) so that the State Treasurer would be able to invest surplus funds under the State Treasurer's control in certificates of deposit or other instruments of a financial institution qualified under the Act to receive deposits or investments of surplus funds for the purpose of facilitating qualified business loans. The State Treasurer would make all such qualified business loans available in all geographic regions of the state. The State Treasurer, in consultation with the Michigan Economic Development Corporation, would enter into investment agreements with financial institutions to provide for the investment under this subsection. Referred to Committee on Economic Development, Small Business and Regulatory Reform on March 18, 2004.

    Senate Bill 1118 of 2004: Would amend the General Property Tax Act, 1893 PA 206, by adding Section 9j, which would exempt $10,000 of the aggregate taxable value of the personal property of a qualified small business from collection of taxes under the Act as provided in this subsection, for taxes levied after December 31, 2004. Referred to Committee on Finance on March 18, 2004.

    Senate Bill 1012 of 2004—would amend section 39e of 1975 PA 228 (MCL 208.39e) so that, for tax years beginning after December 31, 2004, a person engaged in the person's first or second year of business and the person's allocated gross receipts are less than $500,000 for the tax year, the person need not file a return to pay the tax provided under the Act. Referred to the Committee on Finance on February 25, 2004.

    House Bill 4220 of 2003—would exempt non-profit charitable institutions from special assessments, revising MCLA 211.7(o). Referred to the Committee on Tax Policy on February 13, 2003.

    House Bill 4346 of 2003—would amend the Michigan Liquor Control Code of 1998 to allow for the importation of alcoholic liquor containing less than 21% alcohol by volume, for personal use and only up to 24 bottles per month, from a state determined to allow reciprocal sales. Allows reciprocal shipping for wine producers. This Bill was referred to the Committee on Regulatory Reform on March 13, 2003. See also Heald v. Engler (Electronic citation: 2003 FED App. 0308P 6 th CIR August 28, 2003).

    House Bill 4571 of 2003—would require out-of-state affiliates to be subject to taxation. The Bill was referred to the Committee on Tax Policy on April 10, 2003. See also Senate Bill 415 of 2003.

    House Bill 4863 of 2003—would amend the General Sales Tax Act so that a nonprofit organization with aggregate retail sales in a calendar year of less than $5,000 is not required to charge sales tax when making sales for fundraising purposes. The bill would increase the threshold to $75,000. Referred to second reading on December 16, 2003.

    House Bill 4882 of 2003—would eliminate the Use Tax on manufactured home sales, except for new manufactured homes purchased out of state and brought into the state for initial use. On June 24, 2003, the Bill was referred to the Committee on Commerce. It was reported with recommendation for referral to the Committee on Local Government and Urban Policy on September 30, 2003. Reported with recommendation with substitute H-2, referred to second reading, and laid over one day under the rules on May 20, 2004.

    House Bill 5249 of 2003—would amend the Single Business Tax Act (MCL 208.37e) to permit a taxpayer purchasing tangible personal property from a qualified tool and die business to claim a credit against the SBT equal to the amount actually paid for tangible personal property. The bill applies to tax years beginning January 1, 2004. Referred to Committee on Commerce on November 4, 2003.

    House Bill 5295 of 2003: Called the Public Auction Licensing Act, this bill would bar the sale at public auction within the state without first obtaining a license under the Act. Referred to Committee on Regulatory Reform on November 13, 2003.

    House Bill 5296 of 2003: Called the Liquidation Sale Licensing Act, this bill would bar the sale or advertisement of sale as an insurance, bankruptcy, mortgage, insolvency, assignee's, executor's, administrator's, receiver's, trustee's, removal, or going out of business sale, or a sale of damaged goods, without first obtaining a license. Referred to Committee on Regulatory Reform on November 13, 2003.

    House Bill 5323 of 2003—would amend section 36 of the Single Business Tax Act to preclude professional employer organizations that are not captive providers from claiming the credit allowed under the section. Referred to Committee on Tax Policy on December 2, 2003. Reported with recommendation with substitute H-2, referred to second reading, and laid over one day under the rules on May 5, 2004.

    House Bill 5330 of 2003—would amend section 12 of the Technology Park Development Act to provide that a facility owned or operated by a qualified start-up business is exempt from the technology park facilities tax levied under the Act. Referred to Committee on Tax Policy on December 2, 2003.

    House Bill 5335 of 2003—would amend section 9 of the Neighborhood Enterprise Zone Act to state that a new or rehabilitated facility owned or operated by a qualified start-up business is exempt from neighborhood enterprise zone tax. Vetoed on May 28, 2004.

    House Bill 5341 of 2003—would add section 7gg to the General Property Tax Act which exempts real and personal property of qualified start-up business from tax for a period of five years. Vetoed on May 28, 2004.

    House Bill 5342 of 2003—would amend section 21c of the Enterprise Zone Act to exempt facilities owned or operated by qualified start-up businesses for a period of five years. Vetoed on May 28, 2004.

    House Bill 5343 of 2003—would amend section 10 of the Obsolete Property Rehabilitation Act so that rehabilitated facilities owned or operated by qualified start-up businesses are exempt from the obsolete properties tax levied by the Act. Vetoed on May 28, 2004.

    House Bill 5345 of 2003—would add section 635a to the City Income Tax Act which states that a qualified start-up business may claim a credit against the tax imposed by the Act each tax year equal to the taxpayer's tax liability for the tax year for five consecutive tax years. Vetoed on May 28, 2004.

    House Bill 5346 of 2003—would add section 51f to the Income Tax Act of 1967 so that qualified start-up businesses may claim a credit against the tax imposed by the Act equal to the taxpayer's liability for five consecutive tax years. Referred to Committee on Tax Policy on December 3, 2003.

    House Bill 5348 of 2003—would amend section 11 of 1974 PA 198 to state that a speculative building, new facility, or replacement facility owned or operated by a qualified start-up business is exempt from the industrial facility tax levied under the Act for five consecutive years. Referred to the Committee on Tax Policy on December 3, 2003.

    House Bill 5350 of 2003—would amend the City Utility Users Act to provide that qualified start-up businesses are exempt from tax for the five consecutive tax years. Referred to the Committee on Tax Policy on December 4, 2003.

    House Bill 5599 of 2004—would amend 1978 PA 390 to permit employers to pay employees using direct deposit or electronic transfer. Referred to Committee on Employment Relations, Training and Safety on February 26, 2004. Reported with recommendation with amendment(s), referred to second reading and laid over one day under the rules on April 22, 2004.

    House Bills 5746-5761 of 2004—would create the new Uniform Securities Act. It would repeal the existing Uniform Securities Act, Public Act 265 of 1964. The new act would take effect 180 days after enactment. The House Bills would each amend a separate act to update references to make them apply to the new Uniform Securities Act. Referred to the Committee on Commerce on April 1, 2004.

    House Bill 5819 of 2004—would provide for the State Treasurer to create a fund for the purposes of establishing and administering a program for awarding grants to attract, retain, and expand businesses. Referred to Committee on April 22, 2004.

    House Bill 5831 of 2004—would amend the General Usury Act, to specify that the parties to a loan, land contract, or other extension of credit could agree in writing to a late payment charge, a prepayment fee or increased interest on unpaid principal balance after the maturity date, and for the purposes of these provisions such charges would not constitute a penalty. The bill further provides for adding accrued interest to the unpaid principal balance, which such amount will accrue interest when the obligor fails to pay interest on time. Referred to Committee on Commerce on April 29, 2004.

    House Bill 5833 of 2004—would amend the Common Trust Fund Act, PA 174 of 1941 (MCL 555.101 et. al.), to allow financial institutions to establish and invest in collective investment funds. Unless otherwise specified, the provisions of the Act would apply to both common trust funds and collective investment funds. Referred to the Committee on Commerce on April 29, 2004. Reported with recommendation with substitute H-1, Referred to second reading and laid over one day under the rules on May 4, 2004.

    House Bill 6153 of 2004—would provide a tax credit against income tax for the purchase during the tax year of a new, alternative energy vehicle for personal use and not for resale. Referred to Committee on tax policy on September 9, 2004.

    House Bill 6175 of 2004—would amend the Michigan Consumer Protection Act, PA 331 of 1976 (MCL 445.903), to expand the definition of deceptive and unfair trade practices.

    Senate Bill 1366 of 2004—would amend PA 236 of 1961 ((MCL 600.934), to permit non-residents of the United States to become members of the Michigan State Bar. Referred to Committee on Judiciary on September 8, 2004.

    Respectfully submitted,

    Eric I. Lark

May 22, 2004

    I. Introduction

    A. Coverage Period The following summary is intended to highlight significant legislation in the business context taking place in 2003 session through April 25, 2004.

    B. How To Stay Current

    The State Bar of Michigan publishes its e-Journal, which is a helpful way to stay apprised of new and pending legislation. Subscription to the "e-Journal" is available at the State Bar of Michigan's website. Similarly, the Institute of Continuing Legal Education (ICLE) publishes its weekly News Alert..

    II. New Laws

    A. The New Michigan Notary Public Act

    The new Michigan Notary Public Act (Public Act 238 of 2003) took effect on April 1, 2004.

    After approving an application, the Secretary of State must mail to the applicant a certificate of appointment as a notary public. Each certificate identifies the person as a notary public of the State and specifies the term of his or her commission. Under the former law, the commission was received at the county clerk's office.

    A notary public can reside in, move to, and perform notarial acts anywhere in the State from the date of appointment until the notary's birthday that occurs between six and seven years after the date of appointment, unless it is canceled, suspended, or revoked by the Secretary or by law. (Formerly, a notary's appointment remained in effect until the notary's birthday that occurs between four and five years after the date of the appointment.)

    The Act prohibits the Secretary from appointing as a notary a person who was serving a term of imprisonment in a State correctional facility or jail in Michigan or another state, or in a Federal correctional facility. Under the new law, background checks are allowed.

    The Secretary must automatically cancel the commission of any person who made, drew, uttered, or delivered any check, draft, or order for the payment of a service charge under the bill that was not honored by the bank, financial institution, or other depository expected to pay the check, draft, or order for payment upon its first presentation.

    The amendments require the Secretary, monthly, to notify a county clerk's office of notary appointments.

    Reappointment/Corrected Appointment

    The Secretary will not automatically reappoint a notary, but a person who desires another appointment can apply to the Secretary for an original appointment as a notary. The person cannot apply more than 60 days before his or her current notary public commission expires. Also, a notary public must apply for a corrected commission if there is a change in the person's name or address, or if there was an error in the notary's personal information.

    If a notary public's certificate of appointment becomes lost, mutilated, or illegible, the notary public must apply promptly to the Secretary for the issuance of a duplicate certificate. The application must be accompanied by a $10 fee. One dollar of each fee will be deposited into the Notary Education and Training Fund.

    Surety Bond/Oath/Fee

    Within 90 days before applying for a notary public appointment, a person must file a proper surety bond with the county clerk of the county where he or she lives or expects to live, and take the prescribed oath. The bond must be in the sum of $10,000, and issued by a surety licensed to do business in the State. The county clerk may not accept the personal assets of an applicant as security for a surety bond. The bond must be conditioned upon indemnifying or reimbursing a person, financial agency, or governmental agency for monetary loss caused through the official misconduct of the notary public in the performance of a notarial act. The surety must be required to indemnify or reimburse only after a court has entered against the notary a judgment based on official misconduct. The aggregate liability of the may not exceed the sum of the bond. The surety on the bond could cancel it 60 days after notifying the notary, the Secretary, and the county clerk of the cancellation. The surety would not be liable for a breach of a condition occurring after the effective date of the cancellation.

    Each person who files an oath and bond with a county clerk must pay a $10 filing fee to the clerk. Upon receiving the fee, the clerk must give a bond and oath certificate of filing to the person. A charter county with a population over 2 million can by ordinance charge a fee for the county clerk's services different that the $10 fee. Two dollars of each fee collected by a county clerk must be deposited into the Notary Education and Training Fund on a schedule determined by the Secretary.

    Funds

    The amendments create the Notary Education and Training Fund in the State Treasury, and requires that money from certain fees be deposited in the Fund. (As noted above, this would include $1 of the $10 application fee, $2 of the $10 oath and bond filing fee, and $1 of the $10 fee for a duplicate certificate of appointment.) The State Treasurer can receive money or other assets from any source for deposit into the Fund, and must direct the investment of the Fund and credit to it interest and earnings from Fund investments. Up to $85,000 can remain in the Fund at the close of each fiscal year and not lapse to the General Fund. Any amount in excess of $85,000 will lapse to the General Fund.

    The Secretary must spend money from the Fund in the form of grants, upon appropriation, for the purposes of providing education and training programs for county clerks and their staffs, including notary responsibilities, election worker training, and election processes. The Secretary must consult with the president of the Michigan Association of County Clerks, or his or her designee, when approving grant applications.

    The Secretary annually must file a report regarding the balance of the Fund at the time of the report and a detailed account of the expenditures in the preceding fiscal year. This report must be sent to the Speaker of the House of Representatives, the Majority Leader of the Senate, and the Minority Leaders of the House and Senate.

    The bill also creates the Notary Fees Fund in the State Treasury. Except for money deposited in the Notary Education and Training Fund from the application fee and the fee for a duplicate certificate of appointment, an application fee, duplicate certificate of appointment fee, certification service charge, copying service charge, reimbursement costs, or administrative fine collected under the bill by the Secretary, must be deposited by the State Treasurer in the Notary Fees Fund. Money in this Fund must be appropriated to defray the costs incurred by the Secretary in administering the proposed Act. Any money remaining at the end of the fiscal year, in excess of $85,000, lapses to the General Fund.

    Notarial Acts

    The fee charged by a notary for performing a notarial act may not be more than $10 for any individual transaction or notarial act. (Under the former law, for notarizing an acknowledgment or jurat a notary could not charge more than $2. A notary also is entitled to various fees, which do not exceed 50 cents, for copying and serving.) The bill requires a notary either to display a sign conspicuously or expressly to advise a person concerning the fee amount to be charged for a notarial act before the notary performs the act. Before the notary travels in order to perform a notarial act, he or she and the client can agree concerning a separate travel fee to be charged by the notary.

    A county clerk can collect a service charge fee of $10 for certifying a notarial act of a notary.

    A notary can refuse to perform a notarial act.

    Prohibited Acts

    A notary who is not a licensed attorney and who advertised notarial services in a language other than English would have to include in the document, advertisement, stationery, letterhead, business card, or other comparable written material, prominently displayed in the same language, the fees for notarial acts and the statement: "I am not an attorney and have no authority to give advice on immigration or other legal matters." A notary cannot use the term "notario publico" or any equivalent non-English term in any business card, advertisement, notice, or sign.

    A notary cannot perform a notarial act for a spouse, domestic partner, descendant, or sibling including an in-law, step, or half-relative.

    Records/Misconduct/Investigations

    For any official misconduct of a notary, the notary and the sureties on the notary's surety bond will be liable in a civil action for the damages sustained by the persons injured. ("Official misconduct" means the exercise of power or the performance of a duty that was unauthorized, unlawful, abusive, negligent, reckless, or injurious; and/or the charging of a fee that exceeds the maximum amount authorized by law.) Under the new law, an employer of a notary also is liable if the notary were acting within the actual or apparent scope of his or her employment, and the employer knew of and consented to or permitted the official misconduct. A notary and the notary's sureties are not liable for the truth, form, or correctness of the contents of a record upon which the notary performed a notarial act.

    Repealed

    The new Act repeals the following:

    • Chapter 14 of the Revised Statutes of 1846, which provides for the appointment and regulation of notaries public.
    • Public Act 18 of 1903, which requires notaries to affix to each instrument signed notarially their commissioned name, the county of authorization, and the date of expiration of their commission.
    • Public Act 18 of 1909, which places certain restrictions on notaries who are stockholders, directors, officers, or employees of banks or other corporations.
    • Section 2564 of the Revised Judicature Act, which allows notaries to charge certain fees for various services.
    • Executive Reorganization Order No. 1980-2, which transferred to the Department of State all powers, duties, and functions of the Governor with respect to notaries.

    B. Unpaid Taxes of Dissolving Businesses

    Public Act No. 23 of 2003 took effect June 24, 2003. This Act states that if a person liable for a tax administered under the Act sells out his or her business, or its stock of goods, or quits the business, the person must make a final return within 15 days after the date of selling or quitting the business. The purchaser or succeeding purchasers, if any, who purchase an ongoing or closed business or its stock of goods, must escrow sufficient money to cover the amount of taxes, interest, and penalties as may be due and unpaid until the former owner produces a receipt from the state treasurer or the state treasurer's designated representative showing that the taxes due are paid, or a certificate stating that taxes are not due. Upon the owner's written waiver of confidentiality, the Department of Treasury may release, to a purchaser, a business's known tax liability for the purposes of establishing an escrow account for the payment of taxes. If the purchaser or succeeding purchasers of a business or its stock of goods fail to comply with the escrow requirements of this subsection, the purchaser is personally liable for the payment of the taxes, interest, and penalties accrued and unpaid by the business of the former owner. The purchaser's or succeeding purchaser's personal liability is limited to the fair market value of the business less the amount of any proceeds that are applied to balances due on secured interests that are superior to the lien provided for in Section 29(1).

    Furthermore, a deficiency, interest, or penalty may not be assessed after the expiration of 4 years after the date set for the filing of the required return or after the date the return was filed, whichever is later. The taxpayer may not claim a refund of any amount paid to the Department after the expiration of 4 years after the date set for the filing of the original return. A person who has failed to file a return is liable for all taxes due for the entire period for which the person would be subject to the taxes. If a person subject to tax fraudulently conceals any liability for the tax or a part of the tax, or fails to notify the Department of any alteration in or modification of federal tax liability, the Department, within 2 years after discovery of the fraud or the failure to notify, must assess the tax with penalties and interest as provided by the Act, computed from the date on which the tax liability originally accrued. The tax, penalties, and interest are due and payable after notice and hearing as provided by the Act.

    The running of the statute of limitations is suspended only as to those items that were the subject of the audit, conference, hearing, or litigation for federal income tax or a tax administered by the Department.

    The Act also states that if a corporation, limited liability company, limited liability partnership, partnership, or limited partnership liable for taxes administered under the Act fails for any reason to file the required returns or to pay the tax due, any of its officers, members, managers, or partners who the Department determines, based on either an audit or an investigation, have control or supervision of, or responsibility for, making the returns or payments is personally liable for the failure. The signature of any corporate officers, members, managers, or partners on returns or negotiable instruments submitted in payment of taxes is prima facie evidence of their responsibility for making the returns and payments. The dissolution of a corporation, limited liability company, limited liability partnership, partnership, or limited partnership does not discharge an officer's, member's, manager's, or partner's liability for a prior failure of the corporation, limited liability company, limited liability partnership, partnership, or limited partnership to make a return or remit the tax due. The sum due for a liability may be assessed and collected under the related sections of the Act.

    C. Amendments to the Use Tax Act

    Effective June 24, 2003, Public Act 24 of 2003 amended the Use Tax Act to provide that every person storing, using, or consuming tangible personal property or services, the storage, use, or consumption of which is subject to the tax imposed by the Act when the tax was not paid to a seller, and every seller collecting the tax from the purchaser, unless otherwise prescribed by the Department under the provisions of Subsection (2), (3), or (4) of the Act, on or before the fifteenth day of each calendar month must file with the revenue division of the Department of treasury a return for the preceding calendar month, in a form prescribed by the Department, showing the price of each purchase of tangible personal property or services during the preceding month, and other information the Department considers necessary for the proper administration of the Act. At the same time, each person must pay to the revenue division of the Department of treasury the amount of tax imposed by the Act with respect to the purchases covered by the return. A return must be signed by the person liable for the tax or his or her duly authorized agent. If the return is prepared by a person other than the taxpayer, the return must also be signed by that person and show his or her address.

    Before January 1, 1999, each seller that had a total tax liability after subtracting the tax payments made to the Secretary of State under the Act or the Sales Tax Act, 1933 PA 167, MCL 205.51 to 205.78, or after subtracting the tax credits available under Section 6a of the General Sales Tax Act, 1933 PA 167, MCL 205.56a, in the immediately preceding calendar year of $720,000 or more on or before the eighteenth of each month must remit to the Department, by an electronic funds transfer method approved by the Commissioner of Revenue, an amount equal to 95% of the taxpayer's liability under the Act for the same month in the immediately preceding calendar year, or 95% of the actual liability for the current month being reported, plus a reconciliation payment equal to the difference between the tax liability determined for the immediately preceding month minus the amount of tax previously paid for that month.

    Beginning January 1, 1999, each seller that had a total tax liability after subtracting the tax payments made to the Secretary of State under the Act or the Sales Tax Act, 1933 PA 167, MCL 205.51 to 205.78, or after subtracting the tax credits available under Section 6a of the general Sales Tax Act, 1933 PA 167, MCL 205.56a, in the immediately preceding calendar year of $720,000 or more must remit to the Department, by an electronic funds transfer method approved by the Commissioner of Revenue on or before the fifteenth day of the month, an amount equal to 50% of the taxpayer's liability under this Act for the same month in the immediately preceding calendar year, or 50% of the actual liability for the month being reported, whichever is less, plus a reconciliation payment equal to the difference between the tax liability determined for the immediately preceding month minus the amount of tax previously paid for that month. Additionally, the seller must remit to the Department, by an electronic funds transfer method approved by the Commissioner of Revenue on or before the last day of the month, an amount equal to 50% of the taxpayer's liability under this Act for the same month in the immediately preceding calendar year, or 50% of the actual liability for the month being reported, whichever is less.

    If considered necessary to insure payment of the tax or to provide a more efficient administration, the Revenue Commissioner may require and prescribe the filing of returns and payment of the tax for other than monthly periods. The tax imposed under the Act must accrue to the state on the last day of each calendar month.

    D. Amendment to the General Sales Tax Act

    Effective June 24, 2003, Public Act No. 25 of 2003 states that a domestic corporation, a foreign corporation, or other business entity authorized to transact business in this state that submits a certificate of dissolution or requests a certificate of withdrawal from this state must request a certificate from the Department stating that taxes are not due under Section 27a of 1941 PA 122, MCL 205.27a, not more than 60 days after submitting the certificate of dissolution or requesting the certificate of withdrawal. A corporation or other business entity that does not request a certificate stating that taxes are not due is subject to the same penalties under Section 24 of 1941 PA 122, MCL 205.24, that a taxpayer would be subject to for failure to file a return.

    E. Dissolving Business Entities—Certificates Stating that Taxes Are Not Due

    Effective October 1, 2003, Public Act No. 46 of 2003 amends the Income Tax Act to provide that a domestic corporation, a foreign corporation, or other business entity authorized to transact business in this state that submits a certificate of dissolution or requests a certificate of withdrawal from this state must request a certificate from the revenue division of the Department if treasury stating that taxes are not due under Section 27a of 1941 PA 122, MCL 205.27a, not more than 60 days after submitting the certificate of dissolution or requesting the certificate of withdrawal. A corporation or other business entity that does not request a certificate stating that taxes are not due is subject to the same penalties under Section 24 of 1941 PA 122, MCL 205.24, that a taxpayer would be subject to for failure to file a return.

    F. Withholding Taxes on Winnings

    Effective October 1, 2003, Public Act No. 47 of 2003 amended the Income Tax Act to provide that every employer, flow-through entity, casino licensee, and race meeting licensee and track licensee required by the Act to deduct and withhold taxes for a tax year on compensation, share of income available for distribution, winnings, or payoff on a winning ticket must furnish to each employee, nonresident member, or person with winnings or a payoff on a winning ticket subject to withholding under this Act on or before January 31 of the succeeding year a statement in duplicate of the total compensation, share of income available for distribution, winnings, or payoff on a winning ticket paid during the tax year and the amount deducted or withheld. However, if employment is terminated before the close of a calendar year by an employer who goes out of business or permanently ceases to be an employer in this state, or a flow-through entity, casino licensee, race meeting licensee, or track licensee goes out of business or permanently ceases to be a flow-through entity, casino licensee, race meeting licensee, or track licensee before the close of a calendar year, then the statement required by this subsection must be issued within 30 days after the last compensation, share of income available for distribution, winnings, or payoff of a winning ticket is paid.

    A duplicate of a statement made pursuant to this section and an annual reconciliation return, MI-W3, must be filed with the Department by February 28 of the succeeding year except that an employer, flow-through entity, casino licensee, and race meeting licensee and track licensee who goes out of business or permanently ceases to be an employer, flow-through entity, casino licensee, and race meeting licensee and track licensee must file the statement and the annual reconciliation return within 30 days after going out of business or permanently ceasing to be an employer, flow-through entity, casino licensee, and race meeting licensee and track licensee.

    Further, every employer, flow-through entity, casino licensee, and race meeting licensee and track licensee required by the Act to deduct or withhold taxes from compensation, share of income available for distribution, winnings, or payoff on a winning ticket must make a return or report in form and content and at times as prescribed by the Department.

    Lastly, every employee, nonresident member, or person with winnings or a payoff on a winning ticket subject to withholding under the Act must furnish to his or her employer, flow-through entity, casino licensee, and race meeting licensee and track licensee information required for the employer, flow-through entity, casino licensee, and race meeting licensee and track licensee to make an accurate withholding. An employee, nonresident member, or person with winnings or a payoff on a winning ticket subject to withholding under the Act must file with his or her employer, flow-through entity, casino licensee, and race meeting licensee and track licensee revised information within 10 days after a decrease in the number of exemptions or a change in status from a nonresident to a resident. An employee must file revised information with his or her employer within 10 days after the employee completes the residency requirements under Section 31(11)(d), and when a change of status occurs from resident of a Renaissance Zone to nonresident of a Renaissance Zone. Within 10 days after an employer receives revised information from an employee who completes the residency requirements under Section 31(11)(d), the employer must forward a copy of that revised information to the revenue division of the Department of Treasury. The employee, nonresident member, or person with winnings or a payoff on a winning ticket subject to withholding under this Act may file revised information when the number of exemptions increases or when a change in status occurs from that of a resident of this state to a nonresident of this state. Revised information will not be given retroactive effect for withholding purposes. An employer, flow-through entity, casino licensee, and race meeting licensee and track licensee must rely on this information for withholding purposes unless directed by the Department to withhold on some other basis. If an employee, nonresident member, or person with winnings or a payoff on a winning ticket subject to withholding under this Act fails or refuses to furnish information, the employer, flow-through entity, casino licensee, and race meeting licensee and track licensee must withhold the full rate of tax from the employee's total compensation, the nonresident member's share of income available for distribution, or the winnings of a person with winnings or a payoff on a winning ticket subject to withholding under this Act. As used in the subsection, "Renaissance Zone" means a Renaissance Zone designated pursuant to the Michigan Renaissance Zone Act, 1996 PA 376, MCL §125.2681 to §125.2696.

    Also effective October 1, 2003, Public Act No. 48 of 2003 provides that all provisions relating to the administration, collection, and enforcement of the Act apply to the employer, flow-through entity, casino licensee, or race meeting licensee or track licensee required to withhold taxes and to the taxes required to be withheld. If the revenue division of the Department of Treasury has reasonable grounds to believe that an employer, flow-through entity, casino licensee, or race meeting licensee or track licensee will not pay taxes withheld to the state as prescribed by this Act, or to provide a more efficient administration, the Department may require the employer, flow-through entity, casino licensee, or race meeting licensee or track licensee to make the return and pay to the Department the tax deducted and withheld at other than monthly periods, or from time to time, or require the employer, flow-through entity, casino licensee, or race meeting licensee or track licensee to deposit the tax in a bank approved by the Department in a separate account, in trust for the Department and payable to the Department, and to keep the amount of the taxes in the account until payment over to the Department.

    Moreover, every publicly traded partnership as that term is defined under Section 7704 of the internal revenue code that has equity securities registered with the securities and exchange commission under Section 12 of title I of the securities and exchange act of 1934, chapter 404, 48 Stat. 881, 15 U.S.C. 78l, must file on or before each August 31st all unit holder information from the publicly traded partnership's schedule K-1 for the immediately preceding calendar year by paper or electronic format on a form prescribed by the Department.

    G. Control Share Acquisitions

    Effective October, 7, 2003, Public Act No. 181 of 2003 amended the Business Corporation Act to define "control share acquisition" as "the acquisition, directly or indirectly, by any person of ownership of, or the power to direct the exercise voting power with respect to, issued and outstanding control shares." Shares or the power to direct the exercise of voting power acquired within a 90-day period, or shares or the power to direct the exercise of voting power acquired pursuant to a plan to make a control share acquisition are considered to have been acquired in the same acquisition.

    Moreover, a person who acquires shares in the ordinary course of business for the benefit of others in good faith and not for the purpose of circumventing the chapter has voting power only of shares in respect of which that person would be able to exercise or direct the exercise of votes without further instruction from others. Acquisition of any shares of an issuing public corporation does not constitute a control share acquisition if the acquisition is consummated in any of the following circumstances:

      (a) Before January 1, 1998.
      (b) Pursuant to a contract existing before January 1, 1998.
      (c) By gift, testamentary disposition, marital settlement, descent and distribution, or otherwise without consideration.
      (d) Pursuant to the satisfaction of a pledge or other security interest created in good faith and not for the purpose of circumventing this chapter.
      (e) Pursuant to a merger or share exchange effected in compliance with Sections 701 to 735 if the issuing public corporation is a party to the agreement of merger or share exchange.
      (f) By a governmental official acting in an official or fiduciary capacity.

    The acquisition of shares of an issuing public corporation in good faith and not for the purpose of circumventing the chapter by any person whose voting rights previously had been authorized by shareholders in compliance with this chapter, or whose previous acquisition of shares of an issuing public corporation would have constituted a control share acquisition but for subsection (4)(see (a) through (f) above), does not constitute a control share acquisition, unless the acquisition entitles a person, directly or indirectly, alone or as part of a group, to exercise or direct the exercise of voting power of the corporation in the election of directors in excess of the range of the voting power which the acquiring person was entitled to exercise or direct prior to such acquisition.

    The formation of a group does not constitute a control share acquisition of shares of an issuing public corporation held by members of the group. Shares without voting rights because the formation of a group after April 1, 1998 was deemed to be a control share acquisition must have the same voting rights as were accorded the shares before the formation of the group.

    H. Credit Union Act

    Effective June 1, 2004, Public Act No. 215 repealed Public Act No. 285 of 1925, which regulates credit unions, and creates the "Credit Union Act."

    The Act requires a credit union to identify its field of membership.

    A credit union that establishes or revises its field of membership must submit it to the Commissioner for approval or disapproval. If the Commissioner determines that the proposed field of membership meets the common bond requirements, he or she can disapprove of an application only on the basis of safety and soundness of the credit union.

    III. Proposed Legislation

    A. The Check Cashing Licensing Act

    Senate Bill 61 of 2003, introduced by Senators Clark-Coleman and Switalski, would create the Check Cashing Licensing Act. The Act would require persons who wish to engage in the business of cashing checks for a fee to first obtain a license under the Act.

    Applicants for licensure must submit a $300 nonrefundable licensing fee for the first business location, and $150 for each additional business location. Annual renewal fees in the same amount must also be paid. Applicants must also submit financial statements to the Office of Financial and Insurance Services showing that the applicants have working capital in excess of $5,000 for each of the applicant's business locations, and cash in excess of $25,000. Applicants must also provide a $5,000 surety bond for each business location and file an appointment of the Commissioner of the Office of Financial and Insurance Services as the agent for service of process in this State.

    After applicants submit the requisite materials, the Department must investigate the financial responsibility, financial business experience and character and general fitness of the applicant. If the Department finds these factors and qualities meet the requirements of the Act and reasonably warrant the belief that the applicant's business will be conducted honestly, fairly, equitably, carefully, efficiently, and in a manner commanding the confidence and trust of the community, the Commissioner must issue a license.

    The Act expressly precludes licensees from collecting a fee that exceeds the following:

    • 5% for payroll, pension, or government checks;
    • 7% for a check from an insurance company, including but not limited to a private health or disability insurance plan payment;
    • 10% for a personal check, money order or other check.

    The Commissioner may not deny, suspend or revoke a license without proper notice. If necessary, the licensee may demand a hearing and the Commissioner must hear and determine the matter in accordance with the Administrative Procedures Act.

    Violations of the Act constitute a misdemeanor, punishable by a fine of not more than $500, or imprisonment of not more than 90 days, or both. Each transaction in violation of the Act constitutes a separate offense.

    The bill was referred to the Committee on Banking and Financial Institutions on January 23, 2003.

    IV. Corporation Division Statistics

    A. Total Active and Out Business Entities—February, 2004

    B. New Business Entities

    Yearly Totals from fiscal year 1995-2002. Fiscal year is October 1–September 30. Prior to 10/1/99 the numbers below included foreign entities in the totals. Starting fiscal year 1999, these numbers are shown separately.

    C. New Corporation and Limited Liability Company Monthly Totals

March 4, 2004

    I. PUBLIC ACTS

    A. Public Acts 23-25 of 2003: Public Act 23 amends Section27a of the Revenue Act (MCLA 205.27(a)) to provide that controlling, supervising, or responsible officers, members, managers, or partners of a corporation, limited liability company, limited liability partnership, partnership, or limited partnership liable for taxes may be held personally liable for failure to file required returns, notwithstanding dissolution of the business entity. Public Acts 24 and 25 delete language in the General Sales Tax Act (MCL 205.27(a)) and Use Tax Act (MCL 205.96) which is substantially similar to the provision added to the Revenue Act. These Acts became effective June 24, 2003.

    B. Public Act 42 of 2003: Provides for the regulation of the transmission of electronic mail advertisements. This Act became effective September 1, 2003.

    C. Public Act 44 of 2003: This Act provides for the enforcement of a security interest or lien on a mobile home by real property foreclosure where the owner of a mobile home has an ownership interest in the real property. Ownership interest is generally defined as having title to the property or being a lessee of a ground lease of twenty years or more. This Act became effective July 14, 2003.

    D. Public Act 45 of 2003: Amends the Income Tax Act to define "flow-through entity," "member" of a flow-through entity and "nonresident member" of a flow-through entity.

    E. Public Act 46 of 2003: Effective October 1, 2003, requires all business entities authorized to transact business in the state submitting a certificate of dissolution or requesting a certificate of withdrawal, to request a certificate from the Michigan Treasury Department stating that taxes are not due.

    F. Public Act 52 of 2003: Expands the definition of "business income" under Section4 of the Income Tax Act of 1967. Effective July 14, 2003.

    G. Public Act 53 of 2003: Amends the Administrative Procedures Act to require the Office of Regulatory Reform to publish the Michigan Administrative Code, the annual supplement to the Michigan Administrative Code, and the Michigan Register, in Electronic Format. Effective July 14, 2003.

    H. Public Act 81 of 2003: Amends Section1101 of the Michigan Limited Liability Act to reflect changes pertaining to filing fees. Effective July23, 2003.

    I. Public Act 106 of 2003: Amends the Michigan Business Corporation Act to reflect changes pertaining to filing fees. Effective July24, 2003.

    J. Public Act 107 of 2003: Amends the Michigan Nonprofit Corporation Act to reflect changes pertaining to filing fees. Effective July24, 2003.

    K. Public Act 131 of 2003. Revises the reference in the Tax Tribunal Act from "homestead exemption" to "principal residence exemption." Effective January1, 2004. See also Public Act 140 of 2003 which revises the General Property Tax Act to replace the term "homestead" with the term "principal residence." Various other statutes have been/may be amended to revise the definition of "homestead exemption" to "principal residence exemption."

    II. NEW BILLS AND STATUS OF PENDING BILLS

    Respectfully submitted,
    Eric I. Lark
    Kerr, Russell and Weber, PLC

December 6, 2003

    I. PUBLIC ACTS

    A. Public Acts 23-25 of 2003: Public Act 23 amends Section27a of the Revenue Act (MCLA 205.27(a)) to provide that controlling, supervising, or responsible officers, members, managers, or partners of a corporation, limited liability company, limited liability partnership, partnership, or limited partnership liable for taxes may be held personally liable for failure to file required returns, notwithstanding dissolution of the business entity. Public Acts 24 and 25 delete language in the General Sales Tax Act (MCL 205.27(a)) and Use Tax Act (MCL 205.96) which is substantially similar to the provision added to the Revenue Act. These Acts became effective June 24, 2003.

    B. Public Act 42 of 2003: Provides for the regulation of the transmission of electronic mail advertisements. This Act became effective September 1, 2003.

    C. Public Act 44 of 2003: This Act provides for the enforcement of a security interest or lien on a mobile home by real property foreclosure where the owner of a mobile home has an ownership interest in the real property. Ownership interest is generally defined as having title to the property or being a lessee of a ground lease of twenty years or more. This Act became effective July 14, 2003.

    D. Public Act 45 of 2003: Amends the Income Tax Act to define "flow-through entity", "member" of a flow-through entity and "nonresident member" of a flow-through entity.

    E. Public Act 46 of 2003: Effective October 1, 2003, requires all business entities authorized to transact business in the state submitting a certificate of dissolution or requesting a certificate of withdrawal, to request a certificate from the Michigan Treasury Department stating that taxes are not due.

    F. Public Act 52 of 2003: Expands the definition of "business income" under Section4 of the Income Tax Act of 1967. Effective July 14, 2003

    G. Public Act 53 of 2003: Amends the Administrative Procedures Act to require the Office of Regulatory Reform to publish the Michigan Administrative Code, the annual supplement to the Michigan Administrative Code, and the Michigan Register, in Electronic Format. Effective July 14, 2003.

    H. Public Act 81 of 2003: Amends Section1101 of the Michigan Limited Liability Act to reflect changes pertaining to filing fees. Effective July23, 2003.

    I. Public Act 106 of 2003: Amends the Michigan Business Corporation Act to reflect changes pertaining to filing fees. Effective July24, 2003.

    J. Public Act 107 of 2003: Amends the Michigan Nonprofit Corporation Act to reflect changes pertaining to filing fees. Effective July24, 2003.

    K. Public Act 131 of 2003. Revises the reference in the Tax Tribunal Act from "homestead exemption" to "principal residence exemption." Effective January1, 2004. See also Public Act 140 of 2003 which revises the General Property Tax Act to replace the term "homestead" with the term "principal residence." Various other statutes have been/may be amended to revise the definition of "homestead exemption" to "principal residence exemption."

    L. Public Act 150 of 2003: Effective August 8, 2003, this Act contains revisions to the filing fees under the Uniform Securities Act.

    M. Public Act 174 of 2003: Amends the Michigan Employment Security Act to allow the payment of additional temporary extended unemployment compensation based upon the State's average rate of total unemployment. Effective August 14, 2003.

    N. Public Act 181 of 2003: Amends Section791 of the Michigan Business Corporation Act to expressly state that formation of a group does not constitute a control share acquisition of shares of an issuing public corporation held by members of the group. Also adds Section 798a which states that shares without voting rights because of the formation of a group shall have the same voting rights as were accorded the shares before formation of the group. Effective October 7, 2003.

    O. Public Act 215 of 2003: Repeals Public Act 285 of 1925 and creates the "Credit Union Act" to provide for the regulation of credit unions.

    P. Public Act 220 of 2003: Amends Public Act 322 of 1978, which authorizes financial institutions to make electronic funds transfer terminals available to consumers. Effective December 2, 2003.

    II. NEW BILLS AND STATUS OF PENDING BILLS

    A. Senate Bill 21 of 2003—would create a new Act for the regulation of deferred deposit loan transactions. Referred to the Committee on Banking and Financial Institutions on January21, 2003.

    B. Senate Bill 61 of 2003—would create the Check Cashing Licensing Act, which requires check-cashing businesses to first obtain a license. Referred to Committee on Banking and Financial Institutions on January 23, 2003.

    C. Senate Bill113-114 of 2003. This Bill proposes certain amendments to the Non-Profit Corporation Act and the Limited Liability Company Act, respectively, to eliminate the annual fee if the non-profit corporation or limited liability company is recording no changes in officers and directors and is not changing its resident agent or registered office address. Referred to the Committee on Economic Development, Small Business and Reg. Reform on January29, 2003.

    D. Senate Bill 167 of 2003. Similar to Senate Bills 113 and 114 of 2003, except applies to profit corporations under the MBCA. Referred to the Committee on Economic Development, Small Business and Reg. Reform on February 11, 2003.

    E. Senate Bill 172 of 2003—would create a new Act to require the seller of real property to make disclosures regarding toxic mold. The Bill was referred to the Committee on Economic Development, Small Business and Reg. Reform on February11, 2003.

    F. Senate Bill 208 of 2003. For tax years beginning after December31, 2002, would allow a deduction for the cost of the purchase of a hybrid fuel vehicle for income tax purposes. This Bill was referred to the Committee on Finance on February25, 2003.

    G. Senate Bill 218 of 2003—would amend the Michigan Business Corporation Act (Sections506, 511, 611 and 698) to do the following:

    1. Prohibit a corporation, if its board were divided into classes with staggered terms, from amending its Articles to reduce the term of a director, amend or repeal the provision dividing the board into classes, or change the number of directors, without the prior approval of a majority of the directors then serving, unless the Articles provided otherwise.

    2. Specify that, for a corporation whose board is divided into classes, shareholders could remove directors only for cause, unless the Articles allowed removal without cause.

    3. For corporations with publicly traded stock, require that a proposed amendment to the corporation's Articles be adopted by the board of directors.

    4. Allow the directors of a corporation (as well as the shareholders) to grant control shares acquired in a controlled share acquisition the same voting rights as the shares had before the control share acquisition. The Bill was referred to the Committee on Commerce & Labor on March13, 2003.

    H. Senate Bill 220 of 2003—would amend the Michigan Consumer Protection Act to prohibit issuing or delivering to a consumer a receipt that displayed any part of a credit or debit card's expiration date or more than the last four digits of the consumer's account number, if a credit card or debit card were used for payment in a consumer transaction. Referred to Committee on Economic Development, Small Business and Regulatory Reform on February 26, 2003. Reported favorably on December 2, 2003.

    I. Senate Bill 415 of 2003—would require out-of-state affiliates to be subject to taxation. The Bill was referred to the Committee on Finance on April29, 2003. See also House Bill 4571 of 2003

    J. Senate Bill 474 of 2003—would create the Deferred Presentment Services Act, which would preclude conducting such a business without first obtaining a license from the Commissioner of the Office of Financial and Insurance Services (OFIS). Passed the Senate on November 12, 2003.

    K. Senate Bill 490—495 of 2003—would amend various laws to replace references to Public Act 285 of 1925 with references to the "Credit Union Act." The bills also would refer to a "domestic credit union" rather than a "credit union" or "state-chartered credit union", and would update references to the Banking Code and the Savings and Loan Act. Referred to Committee on Commerce on October16, 2003.

    L. Senate Bill 657 of 2003—would amend the Michigan Consumer Protection Act, making it unlawful to require a consumer to disclose his or her Social Security number as a condition of sale, unless the transaction involved an extension of credit or disclosure was required or authorized by law. The bill would take effect on March 31, 2004. Referred to Committee on Judiciary on August 13, 2003. Reported favorably with amendment on December 2, 2003.

    M. Senate Bill 675 of 2003: Called the Employee Communications Monitoring Act, this bill would prohibit certain employers from monitoring employee communications unless a monitoring policy is established and disclosed to the employees. Referred to Committee on Commerce and Labor on September 16, 2003.

    N. Senate Bill 745—746 of 2003—would amend the Michigan Limited Liability Act and Business Corporation Act to permit converting entities to transfer certificates of assumed names. The Bill would also specify the requirements for a plan of conversion for converting entities. Referred to Committee on Commerce and Labor on September 30, 2003.

    O. Senate Bill 747 of 2003—would amend the Professional Service Corporation Act to expressly require that limited liability companies converting to a corporation may not convert into a professional corporation unless members who will become shareholders are licensed persons who may be shareholders under the Act. Referred to Committee on Commerce and Labor on September 30, 2003.

    P. Senate Bill 775—776 of 2003—would amend the Single Business Tax Act and Income Tax Act to permit taxpayers to claim a $1,000 credit for each alternative energy vehicle purchased or leased as a fleet car. Referred to Committee on Finance on October 14, 2003.

    Q. Senate Bill 862—873 of 2003—would amend various statutes to provide qualified start-up businesses with specific tax and development advantages. Referred to Committee on Finance, Economic Development, Small Business and Regulatory Reform on December 2, 2003.

    R. House Bill 4220 of 2003—would exempt non-profit charitable institutions from special assessments, revising MCLA211.7(o). Referred to the Committee on Tax Policy on February13, 2003.

    S. House Bill 4346 of 2003—would amend the Michigan Liquor Control Code of 1998 to allow for the importation of alcoholic liquor containing less than 21% alcohol by volume, for personal use and only up to 24 bottles per month, from a state determined to allow reciprocal sales. Allows reciprocal shipping for wine producers. This Bill was referred to the Committee on Regulatory Reform on March13, 2003. See also Heald v. Engler (Electronic citation: 2003 FED App. 0308P 6th CIR August 28, 2003).

    T. House Bill 4571 of 2003—would require out-of-state affiliates to be subject to taxation. The Bill was referred to the Committee on Tax Policy on April10, 2003. See also Senate Bill 415 of 2003.

    U. House Bill 4882 of 2003—would eliminate the Use Tax on manufactured home sales, except for new manufactured homes purchased out of state and brought into the state for initial use. On June24, 2003, the Bill was referred to the Committee on Commerce. It was reported with recommendation for referral to the Committee on Local Government and Urban Policy on September30, 2003.

    V. House Bill 5010 of 2003—would provide for revisions to the General Property Tax Act, including providing for a one time summer property tax collection. Referred to the Committee on Tax Policy on August13, 2003.

    W. House Bill 5075 of 2003—would amend Section4110 of the Uniform Commercial Code (MCL 440.4110) so that an agreement for electronic presentment shall provide a procedure that prohibits presentment by transmission of an image of an item or presentment notice if the drawer of the item requests that electronic presentment not be used for the drawer's items and requires written notice to each drawer of his or her right to make that request. Referred to Committee on Commerce on September 25, 2003.

    X. House Bill 5148 of 2003—would amend Section9501 of the Uniform Commercial Code (MCL 440.9501), requiring that the secretary of state provide written notice of the filing of financing statements. It also makes the filing of a fraudulent financing statement a misdemeanor punishable by imprisonment, fines, or both. Referred to Committee on Government Operations on October 9, 2003.

    Y. House Bill 5249 of 2003—would amend the Single Business Tax Act (MCL 208.37e) to permit a taxpayer purchasing tangible personal property from a qualified tool and die business to claim a credit against the SBT equal to the amount actually paid for tangible personal property. The bill applies to tax years beginning January 1, 2004. Referred to Committee on Commerce on November 4, 2003.

    Z. House Bill 5295 of 2003: Called the Public Auction Licensing Act, this bill would bar the sale at public auction within the state without first obtaining a license under the Act. Referred to Committee on Regulatory Reform on November 13, 2003.

    AA. House Bill 5296 of 2003: Called the Liquidation Sale Licensing Act, this bill would bar the sale or advertisement of sale as an insurance, bankruptcy, mortgage, insolvency, assignee's, executor's, administrator's, receiver's, trustee's, removal, or going out of business sale, or a sale of damaged goods, without first obtaining a license. Referred to Committee on Regulatory Reform on November 13, 2003.

    Respectfully submitted,

    Eric I. Lark
    Kerr, Russell and Weber, PLC

September 11, 2003

    I. PUBLIC ACTS

    A. Public Act 686 of 2002, effective December 30, 2002, amends the Michigan Limited Liability Company Act. The amendments were drafted by the Limited Liability Company Act Revision Subcommittee of the Business Law Section. A summary of the amendments to the Limited Liability Company Act should be posted on the Business Law Section website.

    B. Public Act 5 of 2003, amends Section 2 of Public Act 198 of 1974 concerning tax abatements for industrial facilities, to provide for tax abatements for plants that manufacture bio-diesel fuel.

    C. Public Act 21 of 2003, amends the Income Tax Act to include in the taxable income of non-residents casino winnings at casinos subject to the Michigan Gaming Control and Revenue Act (such as those casinos in Detroit). Effective June 24, 2003. See also Public Acts 45—51 of 2003.

    D. Public Act 22 of 2003, amends the Income Tax Act to extend withholding requirements to distributions made by flow-through entities to non-resident members, winnings reportable under Federal tax law by casinos licensed under the pertinent Michigan Act, and winnings reportable under Federal tax law by track licensees operating under the Horse Racing Law of 1995. Effective October 1, 2003.

    E. Public Acts 23-25 of 2003. Public Act 23 extends the provisions of the Revenue Act (MCLA 205.27(a)) regarding personal liability for failure to pay taxes concerning limited liability companies, limited liability partnerships, partnerships, and limited partnerships to their individual members, managers and partners. Public Acts 24 and 25 delete language in the General Sales Tax Act (MCLA 205.65) and Use Tax Act (MCLA 205.96) which is substantially similar to the provisions of the Revenue Act being amended by Public Act 23. These Public Acts are effective June 24, 2003.

    F. Public Act 42 of 2003. Provides for the regulation of the transmission of electronic mail advertisements. This Act became effective September 1, 2003.

    G. Public Act 44 of 2003. This Act provides for the enforcement of a security interest or lien on a mobile home by real property foreclosure where the owner of a mobile home has an ownership interest in the real property. Ownership interest is generally defined as having title to the property or being a lessee of a ground lease of twenty years or more. This Act became effective July 14, 2003.

    H. Public Act 45 of 2003. Amends the Income Tax Act to define "flow-through entity", "member" of a flow-through entity and "non resident member" of a flow-through entity.

    I. Public Act 46 of 2003. Effective October 1, 2003, requires all business entities authorized to transact business in the state submitting a certificate of dissolution or requesting a certificate of withdrawal, to request a certificate from the Michigan Treasury Department stating that taxes are not due.

    J. Public Act 52 of 2003. Expands the definition of "business income" under Section 4 of the Income Tax Act of 1967. Effective July 14, 2003.

    K. Public Act 53 of 2003. Amends the Administrative Procedures Act to require the Office of Regulatory Reform to publish the Michigan Administrative Code, the annual supplement to the Michigan Administrative Code, and the Michigan Register in Electronic Format. Effective July 14, 2003.

    L. Public Act 81 of 2003. Revises the filing fees for limited liability companies. Effective July 23, 2003.

    M. Public Act 92 of 2003. Amends the Revenue Act (MCLA 205.3) to require the Michigan Department of Treasury to publish and make available to the public, in printed and electronic format, Bulletins and Letter Rulings issued by the Department. Effective July 24, 2003.

    N. Public Act 106 of 2003. Effective July 24, 2003, the Act revises certain filing fees for business corporations.

    O. Public Act 107 of 2003. Effective July 24, 2003, the Act revises certain filing fees for non-profit corporations.

    P. Public Act 131 of 2003. Revises the reference in the Tax Tribunal Act from "homestead exemption" to "principal residence exemption." Effective January 1, 2004. See also Public Act 140 of 2003 which revises the General Property Tax Act to replace the term "homestead" with the term "principal residence." Various other statutes have been/may be amended to revise the definition of "homestead exemption" to "principal residence exemption."

    Q. Public Act 150 of 2003. Effective August 8, 2003, this Act contains revisions to the filing fees under the Uniform Securities Act.

    R. Public Act 174 of 2003. Amends the Michigan Employment Security Act to allow the payment of additional temporary extended unemployment compensation based upon the State's average rate of total unemployment. The Act became effective August 14, 2003.

    II. NEW BILLS AND STATUS OF PENDING BILLS

    A. Senate Bill 21 of 2003—would create a new Act for the regulation of deferred deposit loan transactions. Referred to the Committee on Banking and Financial Institutions on January 21, 2003.

    B. Senate Bill 113-114 of 2003. This Bill proposes certain amendments to the Non-Profit Corporation Act and the Limited Liability Company Act, respectively, to eliminate the annual fee if the non-profit corporation or limited liability company is recording no changes in officers and directors and is not changing its resident agent or registered office address. Referred to the Committee on Economic Development, Small Business and Reg. Reform on January 29, 2003.

    C. Senate Bill 167 of 2003. Similar to Senate Bills 113 and 114 of 2003, except applies to profit corporations under the MBCA. Referred to the Committee on Economic Development, Small Business and Reg. Reform on February 11, 2003.

    D. Senate Bill 172 of 2003. Would create a new Act to require the seller of real property to make disclosures regarding toxic mold. The Bill was referred to the Committee on Economic Development, Small Business and Reg. Reform on February 11, 2003.

    E. Senate Bill 208 of 2003. For tax years beginning after December 31, 2002, would allow a deduction for the cost of the purchase of a hybrid fuel vehicle for income tax purposes. This Bill was referred to the Committee on Finance on February 25, 2003.

    F. Senate Bill 218 of 2003—would amend the Michigan Business Corporation Act (Sections 506, 511, 611 and 698) to do the following:

    1. Prohibit a corporation, if its board were divided into classes with staggered terms, from amending its Articles to reduce the term of a director, amend or repeal the provision dividing the board into classes, or change the number of directors, without the prior approval of a majority of the directors then serving, unless the Articles provided otherwise.

    2. Specify that, for a corporation whose board is divided into classes, shareholders could remove directors only for cause, unless the Articles allowed removal without cause.

    3. For corporations with publicly traded stock, require that a proposed amendment to the corporation's Articles be adopted by the board of directors.

    4. Allow the directors of a corporation (as well as the shareholders) to grant control shares acquired in a controlled share acquisition the same voting rights as the shares had before the control share acquisition.The Bill was referred to the Committee on Commerce & Labor on March 13, 2003.

    E. Senate Bill 415 of 2003—would require out-of-state affiliates to be subject to taxation. The Bill was referred to the Committee on Finance on April 29, 2003. See also House Bill 4571 of 2003

    F. Senate Bill 496 of 2003.—would create a new Credit Union Act, repealing MCLA 490.1—490.31. This Bill was reported favorably by the Senate on June 25, 2003. See also House Bill 4694 of 2003.

    G. House Bill 4346 of 2003—would amend the Michigan Liquor Control Code of 1998 to allow for the importation of alcoholic liquor containing less than 21% alcohol by volume, for personal use and only up to 24 bottles per month, from a state determined to allow reciprocal sales. Allows reciprocal shipping for wine producers. This Bill was referred to the Committee on Regulatory Reform on March 13, 2003. See also Heald v. Engler (Electronic citation: 2003 FED App. 0308P 6th CIR August 28, 2003).

    H. House Bill 4220 of 2003.—would exempt non-profit charitable institutions from special assessments, revising MCLA 211.7(o). Referred to the Committee on Tax Policy on February 13, 2003.

    I. House Bill 4571 of 2003—would require out-of-state affiliates to be subject to taxation. The Bill was referred to the Committee on Finance on April 29, 2003. See also Senate Bill 415 of 2003.

    J. House Bill 4694 of 2003.—would create a new Credit Union Act, repealing MCLA 490.1—490.31. This Bill was reported favorably by the Senate on June 25, 2003. See also Senate Bill 496 of 2003.

    K. House Bill 4764 of 2003. This Bill arises from the Simon/Taubman litigation and would amend Section 791 of, and add Section 798(a) to, the Michigan Business Corporation Act. The Bill would revise the control share acquisition provisions of the Business Corporation Act to provide that the formation of a group does not constitute a control share acquisition of shares of an issuing public corporation held by members of the group. Accordingly, such shares could be voted in the same manner as before the formation of the group. The Bill would also have retroactive effect. The Bill was passed by the House on or about June 5, 2003 and on June 10, 2003 was referred by the Senate to the Committee on Commerce and Labor.

    L. House Bill 4882 of 2003—would eliminate the Use Tax on manufactured home sales, except for new manufactured homes purchased out of state and brought into the state for initial use. On June 24, 2003, the Bill was referred to the Committee on Commerce.

    M. House Bill 5010 of 2003—would provide for revisions to the General Property Tax Act, including providing for a one time summer property tax collection. Referred to the Committee on Tax Policy on August 13, 2003.

    Eric I. Lark

May 17, 2003

    I. PUBLIC ACTS

    A. Public Act 579 of 2002, effective November12, 2002, amends the Sales Tax Act, Use Tax Act and Income Tax Act, respectively, to eliminate the tax clearance requirement.

    B. Public Act 663 of 2002, amends the Cyber Court provisions to add a definition of "business enterprise" and also amends certain provisions related to removal to Circuit Court.

    C. Public Act 686 of 2002, effective December 30, 2002, amends the Michigan Limited Liability Company Act. The amendments were drafted by the Limited Liability Company Act Provision Subcommittee of the Business Law Section. A summary of the amendments to the Limited Liability Company Act should be posted on the Business Law Section website.

    D. Public Act 5 of 2003, amends Section2 of Public Act198 of 1974 concerning tax abatements for industrial facilities, to provide for tax abatements for plants that manufacture bio-diesel fuel.

    II. NEW BILLS AND STATUS OF PENDING BILLS

    A. Senate Bill 21 of 2003—would create a new Act for the regulation of deferred deposit loan transactions. Referred to the Committee on Banking and Financial Institutions on January21, 2003.

    B. Senate Bill113-114 of 2003. This Bill proposes certain amendments to the Non-Profit Corporation Act and the Limited Liability Company Act, respectively, to eliminate the annual fee if the non-profit corporation or limited liability company is recording no changes in officers and directors and is not changing its resident agent or registered office address. Referred to the Committee on Economic Development, Small Business and Reg. Reform, on January29, 2003.

    C. Senate Bill 167 of 2003. Similar to Senate Bills 113 and 114 of 2003, except applies to profit corporations under the MBCA. Referred to the Committee on Economic Development, Small Business and Reg. Reform, on February 11, 2003.

    D. Senate Bill 208 of 2003. For tax years beginning after December31, 2002, would allow a deduction for the cost of the purchase of a hybrid fuel vehicle for income tax purposes. This Bill was referred to the Committee on Finance on February25, 2003.

    E. Senate Bill 218 of 2003—would amend the Michigan Business Corporation Act (Sections506, 511, 611 and 698) to do the following:

    1. Prohibit a corporation, if its board were divided into classes with staggered terms, from amending its Articles to reduce the term of a director, amend or repeal the provision dividing the board into classes, or change the number of directors, without the prior approval of a majority of the directors then serving, unless the Articles provided otherwise.

    2. Specify that, for a corporation whose board is divided into classes, shareholders could remove directors only for cause, unless the Articles allowed removal without cause.

    3. For corporations with publicly traded stock, require that a proposed amendment to the corporation's Articles be adopted by the board of directors.

    4. Allow the directors of a corporation (as well as the shareholders) to grant control shares acquired in a controlled share acquisition the same voting rights as the shares had before the control share acquisition.

    The Bill was referred to the Committee on Commerce & Labor on March13, 2003.

    F. Senate Bill 359 of 2003—provides that beginning October1, 2003, certain filing fees pursuant to the Michigan Limited Liability Company Act would be established by a fee schedule contained in an appropriation act for that fiscal year. This Bill was referred to the Committee on Appropriations on April2, 2003.

    G. Senate Bill 391 of 2003—similar to Senate Bill 359, but applies to fees under the Uniform Securities Act. This Bill was referred to the Committee on Appropriations on April21, 2003.

    H. Senate Bill 401 of 2003—would require all business entities authorized to transact business in the state that submit a certificate of dissolution or request a certificate of withdrawal from the state, to request a certificate from the treasury department stating that income taxes are not due. This Bill was referred to the Committee on Finance on April 24, 2003.

    I. Senate Bill 409 of 2003—Section12 of the Income Tax Act of 1967, as amended, would be further amended to provide a definition for "flow-through entity" to include an S corporation, partnership, limited partnership, limited liability partnership, or limited liability company. Certain other related definitions would be adopted. This Bill was referred to the Committee on Finance on April 24, 2003.

    J. Senate Bill 424 of 2003—would expand the definition of business income under Section4 of the Income Tax Act of 1967

    K. House Bill 4220 of 2003—would exempt non-profit charitable institutions from special assessments, revising MCLA211.7(o). Referred to the Committee on Tax Policy on February13, 2003.

    L. House Bill 4346 of 2003—would amend the Michigan Liquor Control Code of 1998 to allow for the importation of alcoholic liquor containing less than 21% alcohol by volume, for personal use and only up to 24 bottles per month, from a state determined to allow reciprocal sales. Allows reciprocal shipping for wine producers. This Bill was referred to the Committee on Regulatory Reform on March13, 2003.

    M. House Bill 4557 of 2003, revises the definition of business income under the Income Tax Act of 1967. This Bill was passed by the House on May1, 2003. See also, Senate Bill424 of 2003.

    N. House Bill 4564 of 2003, requires all business entities authorized to transact business in the state submitting a certificate of dissolution or requesting a certificate of withdrawal, to request a certificate stating that taxes are not due. This Bill was referred to the Committee on Tax Policy on April10, 2003. See also, Senate Bill 401 of 2003.

    O. House Bill 4565 of 2003—would amend the Income Tax Act of 1967 to provide for the definition of a flow-through entity and certain related definitions. This Bill was referred to the Committee on Tax Policy on April10, 2003. See also, Senate Bill409 of 2003.

    P. HB 4567 of 2003: Revises provisions concerning tax liability contained in MCL 205.27a for sellers and purchasers of businesses. This Bill also establishes personal liability for members, managers and partners in certain situations where the taxes of their entities remain unpaid. The Bill was passed by the House on May 8, 2003.

    Eric I. Lark

March 6, 2003

    I. PUBLIC ACTS

    A. Public Act 15 of 2002, revises the Uniform Commercial Code, MCL 440.2201, to increase to $1,000 the price of goods for which a writing is required for an enforceable contract.

    B. Public Act 579 of 2002, effective November 12, 2002, amends the Sales Tax Act, Use Tax Act and Income Tax Act, respectively, to eliminate the tax clearance requirement.

    C. Public Act 663 of 2002, amends the Cyber Court provisions to add a definition of "business enterprise" and also amends certain provisions related to removal to Circuit Court.

    D. Public Act 686 of 2002, effective December 30, 2002, amends the Michigan Limited Liability Company Act. The amendments were drafted by the Limited Liability Company Act Revision Subcommittee of the Business Law Section. A summary of the amendments to the Limited Liability Company Act will be posted on the Business Law Section website.

    II. NEW BILLS AND STATUS OF PENDING BILLS

    A. Senate Bill 21 of 2003—would create a new Act for the regulation of deferred deposit loan transactions. Referred to the Committee on Banking and Financial Institutions on January 21, 2003.

    B. Senate Bill 61 of 2003—would create a new Act to require the licensure of check cashing businesses. Referred to the Committee on Banking and Financial Institutions on January 23, 2003.

    C. Senate Bill 113-114 of 2003. This Bill proposes certain amendments to the Non-Profit Corporation Act and the Limited Liability Company Act, respectively, to eliminate the annual fee if the non-profit corporation or limited liability company is recording no changes in officers and directors and is not changing its resident agent or registered office address. Referred to the Committee on Economic Development, Small Business and Reg. Reform, on January 29, 2003.

    D. Senate Bill 167 of 2003. Similar to Senate Bills 113 and 114 of 2003, except applies to profit corporations under the MBCA. Referred to the Committee on Economic Development, Small Business and Reg. Reform, on February 11, 2003.

    E. House Bill 4220 of 2003—would exempt non-profit charitable institutions from special assessments. Would revise MCLA 211.7(o). Referred to the Committee on Tax Policy on February 13, 2003.

    Eric I. Lark

December 7, 2002

    I. PUBLIC ACTS

    A. Public Act 15 of 2002 revises the Uniform Commercial Code, MCL440.2201, to increase the price of goods for which a writing is required for an enforceable contract to $1,000.

    B. Public Act 511 of 2002, effective July23, 2002, amends the Use Tax Act to add limited liability companies to the definition of "person" and also provides some exemptions for certain international sporting events.

    C. Public Act 579 of 2002, effective November12, 2002, amends the Sales Tax Act, Use Tax Act and Income Tax Act, respectively, to eliminate the tax clearance requirement.

    II. NEW BILLS AND STATUS OF PENDING BILLS

    A. Senate Bill 1415 of 2002—Establishes that certain corporate misconduct is a crime. Would amend MCL750.1—750.568 by adding Section411t. The Bill was referred to the Committee on Judiciary on September17, 2002.

    B. Senate Bill 1418 of 2002—amends the Limited Liability Company Act. Drafted by Subcommittee of the Business Law Section and was introduced on September18, 2002. It passed the Senate on November13, 2002, and was referred to the Committee on Insurance and Financial Services the same day.

    C. Senate Bills 1493, 1494, 1495 and 1496 of 2002—amend pertinent acts to allow for conversion of corporations and limited partnerships into limited liability companies, conversion of limited liability companies into corporations and conversion of limited liability companies into professional service corporations. Senate Bill 1496 concerns and clarifies the availability of names of limited partnerships which are similar in name to limited liability companies. The Bills were referred to the Committee on Financial Services on November12, 2002.

    D. Senate Bills 820-822 of 2001, concerning annual reports for non profit corporations, limited liability companies and profit corporations, would require annual reports only when changes in the business entity are being reported. These Senate Bills are currently mired in the Committee on Financial Services, where they have been since late 2001.

    E. House Bill 5638 of 2002. This Bill, referred to the Committee on Tax Policy on February14, 2002, would amend MCL211.27(a) to exclude from certain property tax consequences the transfer of property from an individual to a family controlled corporation or other entity.

    F. House Bill 5954, introduced on April23, 2002, would amend Sections511 and 611 of the MBCA. The amendment to Section511 would provide for the removal of directors on a classified board only for cause unless the Articles of Incorporation allowed for removal without cause. The amendment to Section611 would provide that amendments to the Articles of Incorporation of a publicly traded company must be approved by both the directors and shareholders.

    G. House Bill 6338 of 2002, which would adopt the Uniform Securities Act, was up for hearing on November13, 2002.

    H. House Bill 6361 of 2002 amends MCL206.260, providing for an income tax credit for contributions to charitable organizations.

    I. House Bill 6387 of 2002 would amend MCL211.1—211.157 by adding Section9j to allow certain small businesses to exempt personal property with a taxable value of less than $10,000.

    J. House Bill 6447 of 2002 would amend the Cyber Court provisions to add a definition of "business enterprise" and also would amend certain provisions relating to removal to Circuit Court. This Bill was referred to a second reading on November13, 2002.

    Eric I. Lark

September 26, 2002

    There has been little activity on legislation since May. The bills to eliminate the requirement that a tax clearance accompany a Certificate of Dissolution have passed both houses. The Limited Liability Company Act amendments were introduced in a few days ago.

    I. PUBLIC ACTS

    SB 517 is Public Act 402 of 2002, effective June 3, 2002 allows referral of patients, under certain circumstances, to facilities in which the physician has a financial interest.

    SB 422 is PA 433 of 2002, effective June 10, 2002, and repealed sections 5320 and 3615 of the Revised Judicature Act.

    SB 738 is PA 438 of 2002, effective June 11, 2002, amends section 2021 of the Revised Judicature Act. These changes eliminate provisions regarding dissolution and wind up and revise provisions regarding foreign corporations transacting business in Michigan to eliminate conflicts with the Business Corporation Act.

    SB 1370 is PA 511 of 2002, effective July 23, 2002. It amends the Use Tax Act to add limited liability company to the definition of "person" and provides some exemptions for certain international sporting events.

    II. NEW BILLS

    SB 1418 amending the Limited Liability Company Act was introduced on introduced on September 18, 2002, and referred to the Committee on Financial Services. It was on the Committee's agenda for Tuesday, September 24. This bill was drafted by subcommittee of the Business Law Section.

    III. STATUS OF PENDING BILLS

    SB 593, 594 and SB 595 amending the Sales Tax Act, Use Tax Act and the Income Tax Act, respectively, to eliminate the tax clearance requirement were enrolled on September 19, 2002.

    HB 5954 introduced on April 23, 2002, would amend sections 511 and 611 of the Business Corporation Act. The amendment to section 511 would provide for removal of directors on classified board only for cause unless articles of incorporation allow removal without cause. The amendment to section 611 would provide that amendments to the articles of incorporation of a publicly traded company must have approval of both directors and shareholders.

    HB 4647 to provide for registration and title protection for respiratory therapists passed the House in July 2001 and a Senate substitute passed the Senate on December 31, 2001, No activity since December.

    HB 5377 to require registration of certain contact lens providers passed the House on February 13, 2002, and was referred to the Senate on February 14, 2002. Tie barred to HB 5378 and 5379.

    HB 5552 to expand authority of optometrists to allow for initial diagnosis of glaucoma and to begin a course of treatment without consulting a physician. Passed the House on May 9, 2002. HB 5548-5552 tie barred.

    HB 5981 introduced on April 30, 2002, would provide for licensing and regulation of clinical laboratory technicians.

    HB 1036, placed on third reading in the House on February 13, 2002, amends PA 269 of 1929, regarding nonprofit organization emblems and insignias to restrict who may to display the organization's logo on their motor vehicle and permits contributors to display the emblem or insignia.

    SB 820-822 to only require an annual reports when changes are being reported have had no activity since last fall.

    G. Ann Baker

May 18, 2002

    There is currently activity of several pieces of legislation. There are upcoming recesses for the primary and for the November elections. Jim Cambridge reported that proposed amendments to the Limited Liability Company Act have been sent to Senator Bullard.

    I. PUBLIC ACTS

    HB 5108 is PA 100 of 2002, immediate effect. It creates the Public Pension Protection Act. Included in the package are HB 5108-5114. Retirement benefit is not subject to execution, garnishment, attachment, the operation of bankruptcy or insolvency laws, or other process of law and could not be assigned.

    HB 5434, PA 80 of 2002 signed by Governor on April 9, 2002. Comprehensive revisions to the Grain Dealers Act, changes in authority for MDA, and changes to definitions. Add administrative remedies.

    II. NEW BILLS

    SB 1288 introduced on May 7, 2002, would amend the General Corporation Act to be consistent with Executive Order 1999-12.

    HB 5912 introduced on April 16, 2002 was referred to second reading in the House on April 23. It would amend the General Corporation Act to be consistent with Executive Order 1999-12. Part of package consisting of HB 5901-5923.

    HB 5954 introduced on April 23, 2002, would amend sections 511 and 611 of the Business Corporation Act. The amendment to section 511 would provide for removal of directors on classified board only for cause unless articles of incorporation allow removal without cause. The amendment to section 611 would provide that amendments to the articles of incorporation of a publicly traded company must have approval of both directors and shareholders.

    III. STATUS OF PENDING BILLS

    SB 422 and SB 738, on second reading in the House on May 7, 2002, amend the Revised Judicature Act to eliminate provisions regarding dissolution and wind up and foreign corporations transacting business in Michigan that conflict with the Business Corporation Act.

    SB 593, 594 and SB 595 amending the Sales Tax Act, Use Tax Act and the Income Tax Act, respectively, to eliminate the tax clearance requirement passed the Senate on May 1, 2002 and have been referred to the House.

    SB 517 passed the Senate and an amended version passed the House on May 9, 2002, and was returned to the Senate. The bill would allow referral of patients, under certain circumstances, to facilities in which the physician has a financial interest.

    HB 4647 to provide for registration and title protection for respiratory therapists passed the House in July 2001 and a Senate substitute passed the Senate on December 31, 2001, No activity since December.

    HB 5377 to require registration of certain contact lens providers passed the House on February 13, 2002, and was referred to the Senate on February 14, 2002. Tie barred to HB 5378 and 5379.

    HB 5552 to expand authority of optometrists to allow for initial diagnosis of glaucoma and to begin a course of treatment without consulting a physician. Passed the House on May 9, 2002. HB 5548-5552 tie barred.

    HB 5981 introduced on April 30, 2002, would provide for licensing and regulation of clinical laboratory technicians.

    HB 1036, placed on third reading in the House on February 13, 2002, amends PA 269 of 1929, regarding nonprofit organization emblems and insignias to restrict who may to display the organization's logo on their motor vehicle and permits contributors to display the emblem or insignia.

    SB 820-822 to only require an annual reports when changes are being reported have had no activity since last fall.

    We are looking for someone to serve as Director of Legislative Review for 2002/2003.

    G. Ann Baker

March 7, 2002

    On January 16, 2002, the legislature launched their new web site, michiganlegislature.org. It should make tracking particular bills easier. It gives users an option of advancing to Michigan Legislature information or law information and makes navigation easier for the many users that use both sites interchangeably.

    The Department of Consumer and Industry Services added to its web site on January 22, 2002, a Name Availability program to check for availability for a corporation, limited partnership, or limited liability company.

    Bills to permit corporations and limited liability companies operating nursing homes to use in their name "health care", "health care center", "rehabilitation center", or terms conveying similar meaning were signed January 11, 2002, and have immediate effect.

    SB 525, Public Act 273 of 2001, amends the Public Health Code.

    SB 746, Public Act 276 of 2001, amends the Business Corporation Act.

    SB 747, Public Act 277 of 2001, amends the Limited Liability Company Act.

    SB 422, passed the House on November 8, amends the Revised Judicature Act to eliminate provisions regarding dissolution and wind up which conflict with the Business Corporation Act.

    HB 4647 passed the Senate on December 13. It amends the Public Health Code to require respiratory therapists to be registered and to restrict various titles used by respiratory therapists.

    SB 594 and SB 595 amending the Use Tax Act and the Income Tax Act, respectively, to eliminate the tax clearance requirement have had no activity since July, 2001.

    HB 1036, on third reading in the House, amends PA 269 of 1929, regarding nonprofit organization emblems and insignias to restrict who may to display the organization's logo on their motor vehicle and permits contributors to display the emblem or insignia.

    HB 1042, passed House on February 14, repeals criminal provision related to railroad securities.

    SB 5022-5025, passed both houses and presented to Governor on February 18, 2001, eliminate witness requirements for certain documents concerning conveyance of land that must be recorded with Register of Deeds.

    G. Ann Baker

December 8, 2001

    The following pending legislation may be of interest to section members.

    Changes to Article 9 of UCC:

    HB 4774, Public Act 145, effective January 2, 2002

    Amends Article 9 of UCC regarding security interest in property such as motor vehicles.

    Changes to RJA regarding corporations:

    SB 422, passed Senate, November 8, 2001

    Repeals sections3520 and 3615 of the Revised Judicature Act regarding dissolved corporations.

    SB 738 , passed Senate, November 8, 2001

    Amends section 2021 of the Revised Judicature Act to exclude application of the provision to a foreign corporation that has failed to obtain a certificate of authority to transact business in the state.

    Nursing home names:

    SB 525, passed Senate, October 31, 2001

    Amends Public Health Code to permit nursing homes to use "health center" or "health care center", or "rehabilitation center" in their name.

    SB 746, passed Senate, October 31, 2001

    Amends section 213 of the Business Corporation Act to add subsection (2) permitting corporation that is licensed as a nursing home to use "health center", "health care center" a term conveying a meaning substantially similar to those terms, or the term "rehabilitation center" in their name.

    SB 747, passed Senate, October 31, 2001

    Amends limited liability company act to add section 204A to permit a limited liability company that is licensed as a nursing home to use "health center", "health care center" or a term conveying a meaning substantially similar to those terms, or the term "rehabilitation center" in their name.

    Change annual fees for corporations and limited liability companies:

    SB 820, introduced November 7, 2001

    Amends the nonprofit corporation act to eliminate the annual fee for an annual report if no changes are reported.

    SB 821, introduced November 7, 2001

    Amends the limited liability company act to eliminate the annual fee for an annual report or annual statement if no changes are reported.

    SB 822, introduced November 7, 2001

    Amends the business corporation act to eliminate the annual fee for an annual report if no changes are reported.

    G. Ann Baker

March 1, 2001

    The following bills of interest from the last session passed:

    Public Act 334 of 2000 (SB 1239)

    amends the Occupational Code to require a simple majority of equity owners of a CPA firm be licensed CPAs. Immediate effect.

    Public Act 333 of 2000 (SB 1238) and Public Act 335 of 2000 (SB 1240)

    amends the Limited Liability Company Act and the Professional Service Corporation Act, respectively to eliminate language which would conflict with the changes made to the Occupational Code by Public Act 334 of 2000. Immediate effect.

    Public Act 336 of 2000 (SB 1241)

    amends the definition of services in a learned profession in the Michigan Limited Liability Company Act, deleting "certified or other public accountant." Immediate effect.

    Public Act 358 of 2000( SB 5412)

    amends reference to Uniform Commercial Code in section 471 of the Business Corporation Act.

    Public Act 359 of 2000 (SB 5413)

    amends reference to the Uniform Commercial Code in section 471 of the Nonprofit Corporation Act.

    Public Act 463 of 2000 (SB 863)

    amends the Estates and Protected Individuals Act. Section 5106(7) provides an exception to the banking code for a "for-profit or nonprofit, nonbanking corporation organized under the laws of this state to serve in a fiduciary capacity" if appointed by the court. Eff. date June 1, 2001

    Public Act 494 of 2000 (HB 5763)

    amends the Michigan Uniform Securities Act to make changes that will conform to National Securities Markets Improvements Act of 1996 (NSMIA) which effectively preempted portions of the state's securities law. Immediate effect.

    Cy Moscow has been working with Senator Bullard's office to get bills introduced to amend Section 5 of the Use Tax Act, MCL 205.95, and Section 451 of the Income Tax Act, MCL 206.451, to eliminate the requirement for a corporation to obtain a tax clearance before filing a certificate of dissolution or certificate of withdrawal. In addition, Cy is working on getting a bill introduced which would repeal provision in the Revised Judicature Act that are inconsistent with the Business Corporation Act.

    Karen Williams, at the State Bar of Michigan, has advised Dan Minkus that the Public Policy Committee of the Board of Commissioners will consider SB 1425 at its March 9, 2001, meeting and has asked for a recommended position on the bill. SB 1425 is amendments to the Business Corporation Act drafted by the Business Law Section subcommittee and introduced last session by Senator Bullard. Senate Bill 206 is substantially identical. The proposed amendments will permit greater use of electronic transactions for the internal operation of a corporation. In addition changes to section 342a specifically addresses shareholder rights plans and changes to section 489 specifically provide for a shareholder cause of action. The latter is in reaction to Baks v Moroun, 227 Mich. App. 472 (1998).

    The Council has not taken a position on the bill. I spoke with Cy Moscow on February 15, 2001, and he urges the Council to support for the bill. Justin Klimko can provide the Council with more information regarding the amendments.

    G. Ann Baker

December 2, 2000

    The current legislative session is winding down. The following is an update on legislation which may be on interest to the Business Law Section.

    New Public Acts

    Public Act 247, effective June 29, 2000 (HB 5767) amends Plant Rehabilitation and Industrial Development Districts Act to include "engaging in a high-technology activity."

    Public Act 248, effective June 29, 2000 (HB 5766) amends the Local Development Financing Act to allow a municipality with a local development finance authority to apply to the Michigan Economic Development Corporation for designation of all or part of the authority as a certified technology park.

    Public Act 239, effective June 28, 2000 (SB 1197) amends Public Act 118 of 1981, which regulates motor vehicle manufacturers, distributors, wholesalers, and dealers to replace provisions under which a manufacturer, distributor, or wholesaler may not establish a dealership that would unfairly compete with a new motor vehicle dealer or distributor.

    Public Act 195, effective June 22, 2000 SB 796) Amends the Income Tax Act to place additional qualification requirements on community foundations.

    Public Act 309, effective October 17, 2000 (SB 801) Provides for property tax exemption for property owned by nonprofit and occupied as residence or leased to governmental entity.

    Public Act 305, effective October 16, 2000 (HB 5537) creates the Uniform Electronic Transactions Act.

    Passed both houses

    HB 5066 (Passed Senate, November 14, 2000) Structured Settlement Protection Act

    SB 1238 (Passed House, November 29, 2000) amends the LLC Act to delete specific language regarding 2/3 ownership of PLLC by licensed CPAs

    SB 1240 (Passed House, November 29, 2000) amends the Professional Service Corporation Act to delete specific language regarding 2/3 ownership of PC by licensed CPAs.

    SB 1241 (Passed House, November 29, 2000) amends the LLC Act to delete CPAs from definition of services in a learned profession.

    Passed one house:

    SB 863 (Passed Senate, November 14, 2000) Amends the EPIC. Deletes language in section 5106 which authorized nonprofit corporations to act as court appointed fiduciaries. Creates "professional fiduciary."

    SB 1014 (Passed Senate May 30, 2000) would amend the LLC act to require signed consent of resident agent

    HB 5413 (Passed House, September 27, 2000) Amends section 471 of Nonprofit Corporation Act to add article 8 of UCC.

    HB 5412 (Passed House, September 27, 2000) Amends section 471 of Business Corporation Act to add article 8 of UCC.

    Reported by committee:

    SB 1424 (reported w/o amendment, November 29, 2000) amends SBT Act to require community foundation to meet additional criteria.

    SB 1382 (reported by the Committee of the Whole, November 27, 2000) amends Income Tax Act for certain distributions made from a retirement or pension plan to a charitable organization.

    SB 1293 (reported by the Committee of the Whole, November 28, 2000) amends home rule city act to provide state would have an interest in any court proceeding in which plaintiff challenged a local ordinance regulating or prohibiting public nudity.

    Introduced:

    HB 6140 (Introduced November 14, 2000) amends the General Corporation Act regarding educational institutions operated by churches.

    SB 1425 (introduced November 9, 2000) amends the Business Corporation Act.

    Section committee's draft.

    G. Ann Baker

September 20, 2000

    No report.

Business Law Report 1999

    RECENT DEVELOPMENTS IN BUSINESS LAW
    by Timothy R. Damschroder
    Bodman, Longley & Dahling LLP

    A. MICHIGAN UNIFORM COMMERCIAL CODE (UCC)

    1. AMENDMENT OF UCC ARTICLE 5-LETTERS OF CREDIT

    Article 5 of the Michigan Uniform Commercial Code (440.5101 et seq.) was substantially rewritten by 1998 PA 488 (HB5327). The following summarizes the primary changes made.

    a. Industry Standards. In order to accommodate future changes in the banking industry for documentation, presentation and payment of letters of credit, Section 5-108(5) provides that "an issuer shall observe standard practice of financial institutions that regularly issue letters of credit. Determination of the issuer's observance of the standard practice is a matter of interpretation for the court. The court shall offer the parties a reasonable opportunity to present evidence of the standard of practice" (MCLA 440.5108(5)). Also, Section 5-116(3) provides that the liability of an issuer, nominated person, or adviser is governed by any rules of custom or practice (MCLA 440.5116(3)). These provisions allow for use of the oft referenced Uniform Customs and Practice for Documentary Credits (Publication No. 500 of the International Bank of Commerce) when interpreting Article 5 and any dispute between parties to a letter of credit.

    b. Documentation. Section 5-102 has been amended to broaden the definition of a document covered by Article 5 to include:

    "a draft or other demand, document or title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion that is not oral which is both of the following:

    (i) presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard of practice referred to in Section 5108(5) (see above).

    (ii) capable of being examined for compliance with the terms and conditions of the letter of credit."

    (MCLA 440.5102(F), italics added).

    Accordingly, Article 5 now allows for letter of credit transactions to take place through electronic communications.

    c. Presentation and Honor. Article 5-108 provides that the issuer must within a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day of its receipt of the presented documents, either honor the draft or notify the presenter of the discrepancies on which dishonor is based. An issuer is precluded from asserting as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated in the notice if timely notice is given (MCLA 440.5108). Additionally, an issuer must honor a presentation that, as determined by the standard of practice referred to above, "appears on its face strictly to comply with the terms and conditions of the letter of credit" (MCLA 440.5108(1)).

    d. Post-Honor Reimbursement. Article 5 now provides that an applicant must reimburse an issuer that has honored a presentation as required or permitted by the statute. Accordingly, an applicant must reimburse an issuer that has honored a presentation which, on its face, strictly complied with the document's terms and conditions (MCLA 440.5108(9)).

    e. Fraudulent Documentation. Article 5-109 provides that:

    "If a presentation is made that appears on its face strictly to comply with the terms and conditions of the letter of credit, but a required document is forged or materially fraudulent, or honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant:

    (A) The issuer shall honor the presentation, if honor is demanded by 1 or more of the following:

    (i) A nominated person who has given value in good faith and without notice of forgery or material fraud.

    (ii) A confirmer who has honored its confirmation in good faith.

    (iii) A holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person.

    (iv) An assignee of the issuer's or nominated person's deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person.

    (B) The issuer, acting in good faith, may honor or dishonor the presentation in any other cause." (MCLA 440.5109(1)).

    Article 5-109(2) sets forth the circumstances under which a court may grant a preliminary or permanent injunction against an issuer from honoring a forged or materially fraudulent letter of credit (MCLA 440.5109(2)).

    f. Warranty by Beneficiary. Article 5-110 grants the following warranties if presentation is honored:

    "(A) To the issuer, any other person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in Section 5109(1).

    (B) To the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit" (MCLA 440.5110(1)).

    The above warranties are in addition to those provided under UCC Articles 3, 4, 7, and 8.

    g. Subrogation. The prior version of Article 5 gave rise to a conflict in the courts as to subrogation rights in cases where a beneficiary was a secured creditor. This issue has been clarified under Article 5-117 such that an issuer that honors a beneficiary's presentation is subrogated to the rights of the beneficiary, and an applicant that reimburses an issuer is subrogated to the rights of the issuer against the beneficiary, presenter, or nominated person (MCLA 440.5117(1) and (2)).

    h. Statute of Limitations. Article 5-115 requires an action to enforce a right or obligation arising under Article 5 to be commenced within one year after the expiration date of the relevant letter of credit, or one year after the cause of action accrues, whichever occurs later. Under the Act, a cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach (MCLA 440.5115).

    i. Choice of Law and Forum. Article 5-116 contains intricate choice of law and choice of forum provisions. Generally, governing law will be the jurisdiction chosen by the documents, or in many case if none chosen, then by the law of the jurisdiction in which the defendant is located.

    j. Damages. An issuer that wrongfully dishonors the draft or demand presented under a letter of credit is liable to the applicant for damages resulting from the breach, including incidental, but not consequential damages, less than the amount saved as a result of the breach. The issuer is also liable for interest on the amount owed from the date of wrongful dishonor. Reasonable attorneys' fees and other expenses of litigation are awarded to the prevailing party in an action in which a remedy is sought under Article 5 (MCLA 440.5111).

    2. UCC ARTICLE 8-INVESTMENT SECURITIES. UCC Article 8 was amended by Public Act 278 of 1998. The primary purpose of the amendments was to update UCC Article 8 to provide a modern legal structure for the most prevalent system of holding securities in the United States. The revised Article 8 includes rules for the securities holding intermediary system through which securities are held, specifies the mechanisms by which ownership and other interests in securities are recorded and changed, and sets forth the rights and duties of the parties who participate in the securities holding system. The prior version of Article 8 introduced the concept of an "uncertificated security." This allowed issuance of a security without a certificate with transfers registered on the books of the issuer. The use of uncertificated securities was meant to insure that the transfer of large volumes of paper certificates would not slow down the market.

    However, by the time most states adopted the revised Article 8 allowing for uncertificated securities, most corporations had begun utilizing third party depository institutions (e.g., Depository Trust Corporation) to hold the certificates representing issued shares. Each brokerage firm has an account with the depository institution, designating the number of shares held in each corporation. A separate securities account is established for each customer of the brokerage firm indicating the number of shares held by the brokerage firm at the depository institution on behalf of the customer. Share certificates are seldom issued to the customer. This two-tiered system which has developed has allowed for high volume, fast and accurate electronic transfer of securities. The revised Article 8 establishes the rights, duties and obligations of all parties in connection with the indirect holding system described above.

    a. Security Entitlement. The most innovative change to UCC Article 8 is the addition of a "security entitlement" under the newly added Part 5 of UCC Article 8. A security entitlement is a property right that a person obtains in the contents of a security account with a "securities intermediary." A securities intermediary is defined as a clearing corporation, or a person, including a bank or a broker, that in the ordinary course of its business maintains securities accounts for others and is acting in that capacity (MCLA 440.8102(1)(n)). Generally, a security entitlement guarantees an entitlement holder a priority in the financial assets held in that account over the securities intermediary or the securities intermediary's creditors (MCLA 440.8503). UCC 8-501 establishes the rules for when security entitlement accrues as being when a securities intermediary does one or more of the following: (i) indicates by book entry that a financial asset has been credited to the person's securities account; (ii) receives a financial asset from the person or acquires a financial asset for the person and, in either case, accepts it for credit to the person's securities account; (iii) becomes obligated under other law, regulation, or rule to credit a financial asset to the person's securities account (MCLA 440.8501(2)).

    The new Part 5 of UCC Article 8 also establishes the holder's specific rights in their securities accounts as against the broker's rights.

    b. Definition of a Security. The definition of a "security" was expanded to include the following:

    "An obligation of an issuer or a share, participation, or other interest in an issuer or in property or an enterprise of an issuer and is all of the following:

    (i) Represented by a security certificate in bearer or registered form, or the transfer of which may be registered upon books maintained for that purpose by or on behalf of the issuer.

    (ii) One of a class or series or by its terms is divisible into a class or series of shares, participations, interests, or obligations.

    (iii) Either of the following:

    (A) Is, or is of a type, dealt in or traded on securities exchanges or securities markets.

    (B) Is a medium for investment and by its terms expressly provides that it is a security governed by UCC Article 8." (MCLA 440.8102(1)(o)).

    c. Uncertificated Securities. The concept of uncertificated securities was not abandoned by the new Article 8. Instead the revised Article 8 simplifies the use of uncertificated securities by removing the requirement for the issuer to provide an "Initial Transaction Statement" at any time a transaction is registered on the issuer's books. The Initial Transaction Statement was then sent to both the transferor and the transferee.

    d. Attaching and Perfecting Security Interests in Securities and a Security Entitlement. The revised UCC Article 8 and the accompanying amendments to UCC Article 9 simplify the granting of security interests in securities and a security entitlement. All provisions relating to attachment and perfection of security interests are now in UCC Article 9. Introduced to Article 9 is the concept of an "investment property." An investment property includes securities, securities accounts, security entitlements, commodity contracts and commodity accounts (MCLA 440.9115(f)). By adding commodity contracts and accounts to the definition of investment property, the revised UCC Article 9 is broader than the revised UCC Article 8.

    3. Repeal of UCC Article 6-Bulk Sales. By Public Act 489 of 1998 (effective January 4, 1999) Michigan joined at least 35 other states in repealing UCC Article 6, commonly known as the "Bulk Sales Law" (MCLA 440.6101, et seq.).

    4. Euro Currency. Public Act 394 of 1998 and Public Act 395 of 1998 added two new sections to UCC Article 1 which enable an orderly transition to Euro conversion and insure continuity of contracts despite the change in currency.

    a. UCC Section 1-210. The new UCC Section 1-210 defines the "Euro" as the currency of participating member states of the European Union that adopt a single currency in accordance with the treaty on European Unions signed February 7, 1992 (MCLA 440.1210(1)(b)). The section defines "ECU" or "European Currency Unit" as the currency basket that is from time to time used as the unit of account of the European Union as defined in European Council Regulation No. 3320/94 (MCLA 440.1210(1)(a)).

    b. UCC Section 1-211. Under the new UCC Section 1-211, the right to tender payment is not affected because a currency is replaced by the Euro, and the introduction of the Euro or tender of Euros under UCC 1-210 does not discharge or excuse performance under a contract, security or instrument or give a party the right unilaterally to alter or terminate a contract, security or instrument (MCLA 440.1211(1) and (2)).

    B. Uniform Trade Secrets Act. On December 29, 1998, Governor Engler signed the Uniform Trade Secrets Act, 1998 PA 448 (HB5312). According to the Michigan Senate Committee report on the Act, the Act displaces conflicting State law providing civil remedies for misappropriation of trade secrets and repeals an act providing a criminal penalty for the theft or embezzlement of a trade secret (1968 PA 329, MCLA 752.771-752.773 was repealed). The Act allows courts to enjoin actual or threatened misappropriation of a trade secret. The injunction is to be terminated when the trade secret has ceased to exist. However, the Act allows for an injunction to be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from misappropriation.

    C. Michigan Business Corporation Act. No amendments during the past year.

    D. Michigan Non-Profit Corporation Act. Public Act 445 of 1998 added a new section to the Michigan Non-Profit Corporation Act providing that a non-profit corporation organized for purposes described in Section 501(c)(3) of the Internal Revenue Code of 1986 may include a provision in its Articles of Incorporation allowing one or more directors on its board to be 16 or 17 years of age as long as that number does not exceed one-half of the total number of directors required for a quorum for the transaction of business (MCLA 440.2501a).

    E. Michigan Limited Liability Company Act. No amendments during the past year.

    F. Model Business Corporation Act. On June 13, 1998, the Committee on Corporate Laws of the Business Law Section (American Bar Association) amended the Model Business Corporation Act ("Model Act") revising the standard of conduct and liability of directors. The amendments alter Sections 8.30 and 8.33 and include a new Section 8.31. The amendments are printed in "The Business Lawyer," Vol. 53, No. 1, November, 1997, with final changes in "The Business Lawyer," Vol. 53, No. 3, May, 1998.

    G. Fraudulent Transfer Act. On December 29, 1998, Governor Engler signed into law Public Act 434 of 1998, which became effective on December 30, 1998, enacting the Uniform Fraudulent Transfer Act (the "UFTA") and simultaneously repealing the Uniform Fraudulent Conveyance Act, which had been the governing law on fraudulent conveyances in Michigan since 1919. The UFTA specifies circumstances under which a creditor can have a transfer made by a debtor set aside as either intentionally or constructively fraudulent with respect to creditors.

    1. Fraudulent Transfer. In general, under the UFTA a transfer made or obligation incurred by a debtor is fraudulent as to a creditor (whether the creditor's claim arose before or after the transfer was made or the obligation was incurred) if the debtor made the transfer or incurred the obligation:

    "(a) with actual intent to hinder, delay or defraud any creditor; or

    (b) without receiving a reasonably equivalent value in exchange, where the debtor:

    (i) was engaged or was about to engage in a business or transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction, or

    (ii) intended to incur, or believed or reasonably should have believed that he or she would incur, debts beyond his or her ability to pay as they became due." (MCLA 566.34).

    A transfer or obligation is fraudulent as to a creditor whose claim arose before the transfer was made or the obligation was incurred if the debtor made the transfer or incurred the obligation without receiving a reasonably equivalent value in exchange and the debtor was insolvent at the time or became insolvent as a result of the transfer or obligation (MCLA 566.35).

    2. Reasonable Equivalent Value. The concept of "reasonably equivalent value" in the UFTA replaces the "fair consideration" standard of the prior Act The term "fair consideration" was expressly defined to require good faith on the part of the non-debtor party to the transaction. This good faith requirement is notably absent from the UFTA's definition of value. However, the UFTA does allow the transferee or obligee to show good faith as a defense after a creditor establishes that a fraudulent transfer has been made (MCLA 566.38).

    3. Insiders. The UFTA also adds a new provision with respect to transfers made to "insiders." Specifically, a transfer made by a debtor is fraudulent as to a creditor whose claim arose before the transfer was made if the transfer is to an insider of the debtor, for an antecedent debt, the debtor was insolvent at the time, and the insider had reasonable cause to believe that the debtor was insolvent (MCLA 566.35(2). "Insider" is defined in much the same way as in the Bankruptcy Code, 11 USC 101(31), and includes a relative, a director or officer of a debtor, a partner, or a person in control of the debtor (and, in some instances, relatives of the foregoing) (MCLA 566.31(g)). Note that under this provision regarding insiders, a transfer may be set aside even if there is no intent to defraud and the debtor received reasonably equivalent value in exchange. There are, however, certain defenses that may be asserted by the insider. For example, a transfer may not be set aside to the extent that the insider gave new value (not secured by a valid lien) to the debtor after the transfer occurred, or the transfer was made in the ordinary course of business or financial affairs of the debtor and insider, or was made in a good faith effort to rehabilitate the debtor and the transfer secured present value given as well as an antecedent debt (MCLA 566.38(b)).

    4. Statute of Limitations. The UFTA establishes an express statute of limitations period of six years after the claim accrues, and one year for actions brought with regard to an insider under Section 5(2) of the UFTA (MCLA 566.39). The six year limitations period in Michigan may be extended up to two years after discovery by a defrauded creditor if the person who is liable on the claim fraudulently conceals the existence of the claim.

    H. Securities Laws.

    1. Securities Litigation Uniform Standards Act. On October 13, 1998, the Securities Litigation Uniform Standards Act of 1998 (Pub. L. No. 105-353 (1998)) was passed by the U.S. House and Senate. The Act was signed by the President on November 3, 1998. The primary purpose of the Act is to prevent plaintiffs' lawyers from bypassing the provisions of the Private Securities Litigation Reform Act of 1995 (Pub. L. No. 104-67 (1995)) by bringing cases in a state court rather than federal court. The purpose of the Private Securities Litigation Reform Act was to curtail what Congress felt was excessive filing of securities fraud class action suits in cases where there is a significant change in an issuer's stock price, where deep pockets are to be tapped, abuse of the discovery process, and manipulation by plaintiffs' lawyers of their consumer clients.

    2. Plain English Rules. The Securities and Exchange Commission ("SEC") has adopted Rule 421(d) (17 C.F.R. §230.421(d) (1988)) which requires issuers to write cover pages, the summary section, and the risk factors section of their prospectuses in plain English. The SEC outlines six basic plain English writing principles: (i) short sentences, (ii) definite, concrete, everyday language, (iii) active voice, (iv) tables or bullet lists for complex material, when possible, (v) no legal or highly technical terms, and (vi) no multiple negatives.

    3. Year 2000 Disclosures. Effective August 4, 1998, the SEC issued an interpretive release to provide additional guidance on the disclosure obligations regarding Year 2000 liability issues (Securities Act Release No. 7558, 63 Fed. Reg. 41,398 (1998). In general, an issuer should make a Year 2000 disclosure if its Year 2000 assessment has not been completed or if it is determined that a Year 2000 problem may have a material adverse affect on its business, results of operations, or financial condition without taking into account the company's efforts to avoid the consequences. The Year 2000 disclosure should describe the company's state of readiness, cost to address the problem, risks associated with the problem, and its contingency plans. The interpretive release contains further details which should be reviewed prior to making a Year 2000 disclosure.

    I. Real and Personal Property.

    1. Land Contract Mortgages. On June 3, 1998, Public Act 106 of 1998 (MCLA 565.356-361) was passed allowing for the creation, recording and enforcement of a mortgage granted against a land contract. According to the House Legislative Analysis, the Act was in response to legal uncertainties previously faced when attempting to obtain a mortgage on a land contract such as how to document the transaction, how to record the mortgage lien, and how to enforce a default.

    2. Marina and Boatyard Storage Lien Act. Public Act 236 of 1998 (MCLA 570.301, et seq.) provides for liens on water craft for repair, service, or storage in marinas, boatyards, and repair facilities. The marina and boatyard storage lien is a possessory lien granted in favor of the owner of a facility for storage, rent, labor, materials, supplies and other charges, and for expenses reasonably incurred in the sale of the property pursuant to the Act. Once the property subject to the lien has been removed from the owner's facility, the owner's right to a marina and boatyard storage lien expires (MCLA 570.303). The Act sets forth a formula for calculating the amount of the lien for purposes of extinguishing the lien (MCLA 573.303). The Act establishes fairly standard lien enforcement provisions once the amount due is over 180 days past due (MCLA 570.305).

    J. Taxation.

    1. IRS Restructuring and Reform Act of 1998. On July 22, 1998 Pub. L. No. 105-206 was passed providing for reorganization of structure and management of the IRS, electronic filing provisions, taxpayer protection and rights, a change in the capital gains holding period, certain changes to corporate reductions, changes concerning revenue offsets, and certain technical corrections. The following summarizes the provisions of the Act which are of interest to business lawyers.

    K. Delaware Law.

    1. Delaware General Corporation Law ("DGCL"). The DGCL was amended by 1998 Delaware Laws Chapter 339 (Senate Bill 331) to make several technical corrections, eliminate gender specific references, and to make a few substantive amendments. The substantive amendments include, in part, the following:

    2. Delaware Limited Liability Company Act ("DLLCA"). 1998 Delaware Laws Chapter 341 provided for several amendments to the DLLCA.

    3. Delaware Revised Uniform Limited Partnership Act. 1998 Delaware Laws Chapter 340 (Senate Bill No. 312) provided for several amendments to the Delaware Revised Uniform Limited Partnership Act.

    III. CASE LAW DEVELOPMENTS

    A. General Corporate.

    1. A Plaintiff who is a Minority Shareholder and Director of a Corporation may not Bring a Derivative Suit Against a Corporation as to Actions Which the Plaintiff Approved While he was a Director. The plaintiff in Wallad v Access Bidco, Inc., et al., ____ Mich App ____, ____ NW2d ____, Docket No. 207585, 1999 WL 452118 (1999) was a minority shareholder and director of Access Bidco during all but one of the transactions which the plaintiff challenged in a derivative suit against the corporation. The plaintiff voted in favor of decisions that allowed the disputed transactions to occur (including the amount of salaries paid and a bonus pool in question). The plaintiff claimed that he objected to the practices at issue when he spoke privately with other directors and that he acquiesced to the actions in question under threat of losing his job.

    2. Creditor Notice of Dissolution Must Be Given After Certificate of Dissolution Has Been Filed. Freeman v Hi Temp Prods, Inc, 229 Mich App 92, 580 NW2d 918 (1998) involved 38 consolidated cases seeking to recover damages for asbestos-related injuries. The court cases were filed after October 25, 1994. Defendant had submitted a certificate of dissolution with the Bureau of Corporations and Securities on October 14, 1993, but it was not filed with the agency until October 25, 1993. During the 11 day interim period, defendant sent notices to its creditors including all the plaintiffs named in this suit. Defendant further gave notice by publishing its dissolution in the local newspaper.

    3. Absent Cause to Pierce the Corporate Veil, a Parent Corporation Is Not Liable under CERCLA for Actions of a Subsidiary. United States v Bestfoods, et al, 118 S Ct 1876 (1998). The United States brought an action under § 107(a)(2) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) against, among others, respondent, CPC International, Inc., which was the parent corporation of the defunct Ott Chemical Company, for the costs in cleaning up industrial waste generated by Ott's chemical plant. Section 107(a)(2) of CERCLA allows suits to be brought against "any person who at the time of the disposal of any hazardous substance owned or operated any facility." The issue for the trial court was whether the parent corporation, CPC, had owned or operated Ott's plant within the meaning of § 107(a)(2). While the district court held the parent corporation liable under the theory that the parent had exerted power or influence over its subsidiary, the Sixth Circuit reversed, holding that:

    4. A Parent Corporation Cannot Be Held Liable for Tortiously Interfering with the Business or Contractual Relations of its Wholly-owned Subsidiary. Speroni, S.P.A. v Perceptron, Inc, Case No. 98-72259 (ED Mich 1998). Plaintiff Speroni filed a complaint against Perceptron on two counts. The first count alleged that Perceptron had tortiously interfered with Speroni's business relationship or expectancy thereof between Speroni and its customers. Count II alleged tortious interference with the contractual relationship which existed between Speroni and Perceptron, B.V., which is a wholly-owned subsidiary of Perceptron and is not a party to this suit. Speroni is an Italian corporation, and Perceptron is a Michigan corporation with its principal place of business in Plymouth, Michigan. The court granted summary judgment on the first count finding that no reasonable jury could find that Perceptron had submitted the alleged bid which was the basis of the claim. Count II was based on whether, under Michigan law, a parent corporation can ever be held liable for tortiously interfering with the business or contractual relations of its wholly-owned subsidiary. The law in Michigan requires that the intervening party be a third party to the contract. Therefore, the court had to decide whether a parent corporation qualifies as a third party capable of interfering. In Copperweld Corp v Independence Tube Corp, 467 US 752 (1984), the Supreme Court decided that a parent and its wholly-owned subsidiary could not conspire together under the Sherman Act because a parent and its wholly-owned subsidiary have a complete unity of interest, meaning that their objectives are common. "Their general corporate actions are guided or determined not by two separate corporate consciousnesses but one. They are not unlike a multiple team of horses drawing a vehicle under the control of a single driver * * * In reality, a parent and a wholly-owned subsidiary always have a unity of purpose or common design." Id. at 771. Using that rationale, the Speroni court held that Perceptron had a unity of interest with B.V. which precludes it from being considered a third party to the contract between Speroni and B.V. Therefore, Perceptron cannot be a third party intervenor liable for contractual tortious interference.

    5. Choice of Law Principles. McLewee v Wharton, 19 F Supp 2d 766 (WD Mich 1998). This case involved a defendant Michigan corporation that was in the business of selling bibles and religious books. Plaintiff alleges that defendants, Gary and Hazel Wharton, are individuals who reside in Michigan and who do business through a de facto partnership called Omni Communications. In June 1980, plaintiff signed a Trade Sales Representation Agreement with defendants. In June 1997, plaintiff was terminated by defendants when he refused to sign a new agreement because, under the agreement, plaintiff believed defendants were avoiding paying employment taxes. Count II of plaintiff's complaint alleges that the Trade Sales Representation Agreement was illegal under Michigan state law because it contained an illegal anticompetition covenant which prevented sales representation of publishers represented by Omni within a year of termination with the exception of World Bible Publishers. Plaintiff also accused defendants of anticompetitive conduct under an illegal agreement with World Bible Publishers in which World Bible Publishers agreed to not hire plaintiff within one year of the termination of his relationship with Omni. Defendants filed a motion for choice of law ruling as to the anticompetition covenant. Defendants asserted that the law of Tennessee governs the agreement, whereas plaintiff asserted that the law of the State of Michigan governed. This determination was important because, under Tennessee law, the covenant would be legal. Under Michigan law in 1980, the covenant would be void as against public policy.

    B. Delaware Cases.

    1. Preferred Stockholders Right to a Class Vote on a Merger. In Elliott Associates, LP v Avatex Corp, 715 A2d 843 (Del 1998) the Delaware Supreme Court reversed the Court of Chancery and held that preferred stockholders have the right to a class vote on a merger where (a) the certificate of incorporation expressly provides such a right in the event of any "amendment, alteration or repeal, whether by merger, consolidation or otherwise" of any of the provisions of the certificate of incorporation, (b) the certificate of incorporation that provides protections for the preferred stock is nullified and thereby repealed by the merger, and (c) the result of the transaction would materially and adversely affect the rights, preferences, privileges or voting power of those preferred stockholders.

    2. Deadhand Poison Pill Upheld. Carmody v Toll Brothers, Inc, 723 A2d 1180 (Del Ch 1998). The Delaware Court of Chancery declined to dismiss allegations that a shareholder rights plan adopted by the Toll Brothers, Inc. board of directors containing a so-called "deadhand" provision was both statutorily invalid and adopted in violation of the board's fiduciary duties under Delaware law.

    3. Business Judgment Rule Governs Propriety of Rejection of Merger. Kahn v MSB Bancorp, Inc, 1998 Del Ch LEXIS 112, involved a class action suit brought by individual shareholders claiming that the board of directors of MSB Bancorp, Inc. (MSB) had breached its fiduciary duties by failing to adequately consider offers to purchase the company. The Court of Chancery held that a board's decision to reject an unsolicited merger proposal is to be reviewed under the business judgment rule, and rejected an argument that a board should be required to persuade the court that it has acted in good faith and with due care when it rejects a merger offer.

     

 

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