Business Vantage Point Blog

Pennsylvania Gov. Josh Shapiro signed House Bill 1716 into law on July 15, officially designating it Act 59 of 2024. Act 59 ushers in crucial clarifications to Title 15 of the Pennsylvania Consolidated Statutes regarding Corporations and Unincorporated Associations.

Derivative Actions
The changes to Section 1781 of Title 15 refine shareholder derivative action rights. In the event a shareholder makes a demand on the corporation or the board of directors requesting that the corporation bring an action, the board must notify the shareholders within 60 days after the demand was made of the board’s determination on how it plans to proceed, or not proceed, with the shareholder’s demand. Corresponding changes were also made to Sections 5781 (for nonprofit corporations), 8692 (for limited partnerships) and 8882 (for limited liability companies).

Contents of Partnership Agreements
Section 8415(c)(2) of Title 15 preserves the right of an interest holder to object to a fundamental transaction in which the interest holder will become subject to personal liability in respect of an entity in which the interest holder will continue to own an interest after the transaction. The existing language of Subsection (c)(2) treats a domestication in the same way as it treats other fundamental transactions for this purpose. Corresponding changes are also being made to Sections 8615 (for limited partnerships) and 8815 (for limited liability companies).

Registration of Name of Domestic Nonfiling Association
Domestic nonfiling associations (other than limited liability partnerships, which are required to file a statement of qualification to elect limited liability partnership status and, therefore, are already covered) may now register their names with the Pennsylvania Department of State in accordance with Section 202 of Title 15 (relating to requirements for names generally). The domestic nonfiling association must renew its name annually by filing an application for renewal between October 1 and December 31 of each year.

Nature of Transactions
Act 59 clarifies that a fundamental transaction (i.e., merger, conversion, interest exchange, domestication, etc.) should not be reclassified as a different form of transaction merely because such transaction could have been achieved through a different transaction type under Chapter 3 or any other law.

Foreign Association Registration
The changes to Sections 412 and 1103 of Title 15 reflect that the concept formerly referred to as “qualification to do business” is now referred to as “registration to do business.” Other provisions of law continue to use the older terminology of qualification, but new Section 412(b)(6) states that any references to “qualification to do business” includes “registration to do business.”

Application of Article
Act 59 deleted the words “savings association” from Section 4101 of Title 15, recognizing that the Savings Associations Code was repealed in 2013.

Overall Impact
Although most of these changes are more technical in nature, Act 59 revises Title 15 to conform with previous changes in entity constituent statutes, reducing inconsistencies and ambiguity in Pennsylvania business organizations law.