SF 118 (LSB 1033XS (5) 87)

SENATE FILE 118

BY  QUIRMBACH and DVORSKY

A BILL FOR

An Act providing law enforcement authorities with access to ownership and control information of domestic business entities.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  82.1  Definitions.
   As used in this chapter, unless the context otherwise requires:
   1.  “Appropriate request” means a civil, criminal, or administrative subpoena or summons from a state, local, or federal law enforcement authority.
   2.  “Domestic business entity” means a business entity organized under the laws of this state that has no more than fifty interest holders on the effective date of its corporate or organizational existence, including but not limited to a limited liability company as defined in section 489.102; a corporation organized pursuant to chapter 490; a nonprofit corporation organized under chapter 504; a partnership, limited partnership, limited liability partnership, or limited liability limited partnership as provided in chapter 486A or 488; or a cooperative association or other cooperative organized under this chapter or chapter 497, 498, 499, or 501, but it does not include any of the following:
   a.  An entity licensed or authorized to do business as a bank, savings and loan association, credit union, or other depository institution, trust company, insurance company, public utility, or securities or commodities broker or dealer.
   b.  An entity registered as an investment company under the federal Investment Company Act of 1940.
   c.  An entity registered as an investment advisor under the federal Investment Advisor Act of 1940.
   d.  An entity in which one or more entities of the types described in paragraphs “a” through “c” holds, directly or indirectly, a majority of the outstanding interests entitled to vote on any issue. 
   e.  An entity that holds, directly or indirectly, a majority of the outstanding interests entitled to vote on any issue in an entity of a type described in paragraphs “a” through “c”.
   f.  An entity registered as an exempt organization by the internal revenue service.
   3.  “Governing individual” means an individual who is designated to be responsible for governing a domestic business entity, including but not limited to a manager of a limited liability company; a director of a corporation; a director of a nonprofit corporation; a general partner of a partnership, limited partnership, limited liability partnership, or limited liability limited partnership; or a director of a cooperative association or other cooperative.
   4.  “Interest holder” means a person who holds an interest in a domestic business entity, including but not limited to a member of a limited liability company; a shareholder of a corporation; a member of a nonprofit corporation; a member of a general or limited partner of a partnership, limited partnership, limited liability partnership, or limited liability limited partnership; or a member of a cooperative association or other cooperative. 
   5.  “Person” means the same as defined in section 4.1.
   6.  “Transferable interest” means an interest holder’s right to receive distributions. 
   7.  “Transferee” means a person to which all or part of a transferable interest has been transferred, whether or not the transferee is an interest holder. 
    Sec. 2.  NEW SECTION.  82.2  Access to ownership and control information by law enforcement authorities.
   1.  A domestic business entity, upon receiving an appropriate request from a state, local, or federal law enforcement authority, shall provide in a timely manner the following information to the requesting law enforcement authority:
   a.  The name and last known address of each current interest holder and transferee of which the domestic business entity has actual knowledge. 
   b.  The jurisdiction whose laws govern the internal affairs of any current interest holder or transferee that is an entity.
   c.  The name and residential or business address of each current governing individual.
   d.  A copy of each current governing individual’s passport, driver’s license, or government-issued nondriver identification card.
   e.  Records regarding the process by which the governing individuals of the domestic business entity are elected or otherwise designated. 
   f.  Records indicating the voting power of each current interest holder or records describing the manner in which each interest holder’s voting power in the domestic business entity is determined.
   g.  The name of all individuals responsible for producing the information provided to a law enforcement authority pursuant to this subsection.
   h.  A certification as required under subsection 2.
   2.  A domestic business entity providing information to a law enforcement authority pursuant to subsection 1 shall include a certification, signed under penalty of perjury, that the information provided accurately reflects the current records of the domestic business entity. 
    Sec. 3.  NEW SECTION.  82.3  Judicial dissolution.
   1.  The district court may dissolve a domestic business entity in a proceeding brought by the attorney general, if it is established that the domestic business entity materially failed to comply with an information request pursuant to section 82.2. 
   2.  Venue for a proceeding by the attorney general to dissolve a domestic business entity pursuant to this section lies in Polk county. 
   3.  It is not necessary to make interest holders or transferees parties to a proceeding to dissolve a domestic business entity unless relief is sought against them individually.
   4.  The court may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the domestic business entity’s assets wherever located, and carry on the business of the domestic business entity until a full hearing can be held. 
   5.  a.  The court may appoint one or more receivers to wind up and liquidate the business and affairs of the domestic business entity. The court shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, before appointing a receiver. The court appointing a receiver has jurisdiction over the domestic business entity and all its property wherever located. 
   b.  The court may appoint an individual or an entity authorized to transact business in this state as a receiver. The court may require the receiver to post bond, with or without sureties, in an amount the court directs.
   c.  The court shall describe the powers and duties of the receiver in its appointing order, which may be amended from time to time. Among other powers, the receiver may do either or both of the following:
   (1)  Dispose of all or any part of the assets of the domestic business entity wherever located, at a public or private sale, if authorized by the court.
   (2)  Sue and defend in the receiver’s own name as receiver of the domestic business entity in all courts of this state. 
   d.  The court from time to time during the receivership may order compensation paid and expenses paid or reimbursed to the receiver from the assets of the domestic business entity or proceeds from the sale of the assets.
   6.  a.  If after a hearing the court determines that grounds for dissolution as described in subsection 1 exist, the court may enter a decree dissolving the domestic business entity and specifying the effective date of the dissolution, and the clerk of court shall deliver a certified copy of the decree to the secretary of state, who shall file it.
   b.  After entering the decree of dissolution, the court shall direct the winding up and liquidation of the domestic business entity’s business and affairs in accordance with the laws of this state. 
    Sec. 4.  NEW SECTION.  82.4  Limitation of liabilities.
   1.  a.  An individual who produces the information required under section 82.2, subsection 1, shall not be held personally liable to the domestic business entity or its interest holders or transferees for producing, upon an appropriate request, the information required under section 82.2, subsection 1.
   b.  An individual who produces the information required under section 82.2, subsection 1, shall not be held personally liable for any inaccuracy in or omission from the information required under section 82.2, subsection 1, unless the production of such information is reckless or involves intentional misconduct or criminal conduct.
   2.  The interest holders, transferees, and governing individuals of a domestic business entity shall not be held personally liable for the debts, obligations, or other liabilities of the domestic business entity solely arising from its compliance or noncompliance with section 82.2.
    Sec. 5.  Section 602.8102, Code 2017, is amended by adding the following new subsection:
   NEW SUBSECTION.  21.  Certify a copy of a decree of dissolution of a domestic business entity to the secretary of state as provided in section 82.3, subsection 6, paragraph “a”.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill provides law enforcement authorities with access to the ownership and control information of domestic business entities.
   The bill includes several definitions. The bill defines “appropriate request” to mean a civil, criminal, or administrative subpoena or summons from any state, local, or federal law enforcement authority. “Domestic business entity” is defined as a business entity organized under Iowa law that has no more than 50 interest holders on the effective date of its corporate or organizational existence, including but not limited to limited liability companies, corporations, nonprofit corporations, partnerships, limited partnerships, limited liability partnerships, limited liability limited partnerships, cooperative associations, and cooperatives. However, the definition of “domestic business entity” does not include any of the following: entities licensed to do business as banks or other depository institutions, trust companies, insurance companies, or securities or commodities brokers; entities registered as investment companies under federal law; entities registered as investment advisors under federal law; entities controlled by or under the control of any entity not included in the definition of “domestic business entity”; or entities registered as exempt organizations by the internal revenue service. “Governing individual” is defined as an individual who is designated to be responsible for governing a domestic business entity, including but not limited to directors and general partners. “Interest holder” is defined as a person who holds an interest in a domestic business entity, including but not limited to shareholders, general or limited partners, or members. “Person” is the same as defined in Code section 4.1. “Transferable interest” is defined as an interest holder’s right to receive distributions. “Transferee” is defined as a person to which all or part of a transferable interest has been transferred.
   The bill requires a domestic business entity to provide ownership and control information, in a timely manner, to a requesting law enforcement authority upon receiving an appropriate request from the authority. Such information must include all of the following: the names and addresses of current interest holders and known transferees; the governing jurisdiction of any current interest holder or transferee that is an entity; the names and addresses of current governing individuals; copies of government-issued identification documents of current governing individuals; records regarding the process by which governing individuals are elected; records regarding voting power; the names of the individuals responsible for producing the information; and a certification that the information provided is accurate, signed under penalty of perjury. 
   The bill authorizes the district court to dissolve a domestic business entity in a proceeding brought by the attorney general if the entity materially fails to comply with an information request required under the bill. Venue for such a proceeding is in Polk county. A court in a proceeding brought to dissolve a domestic business entity may issue injunctions, appoint receivers or custodians, and take any other action needed. However, a court must hold a hearing prior to appointing a receiver. Such a receiver may be an individual or an entity authorized to do business in the state and may be required to post bond. The court must describe the receiver’s powers and duties in its appointing order. The court may order the domestic business entity to compensate or reimburse the receiver for expenses from time to time. If after a hearing the court determines that grounds for dissolution exist, it may enter a decree dissolving the domestic business entity on a specific date, a certified copy of which is received and filed by the secretary of state. Such a domestic business entity must wind up and liquidate its business and affairs in accordance with Iowa law. 
   The bill prohibits individuals responsible for producing information required under the bill from being held personally liable for producing the information after receiving an appropriate request or for any inaccuracies or omissions from the information produced, except if the individual acts with recklessness or the individual’s act involves intentional misconduct or criminal conduct. Interest holders, transferees, and governing individuals cannot be held personally liable for a domestic business entity’s compliance or noncompliance with the bill. 
   The bill adds certifying a copy of a decree of dissolution of a domestic business entity to the secretary of state to the list of general duties for the office of the clerk of the district court in Code section 602.8102.