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LEGISLATIVE UPDATE – JANUARY 2017

HB 1653 known as Act 171 of 2016 (the “Amendment”) amends the Pennsylvania Procurement Code (the “Code”) to require the Department of General Services of the Commonwealth (the “Department”) to establish a process to verify a Pennsylvania business, either minority-owned, women-owned or veteran-owned (each a “Diverse and Disadvantaged Business”) as “Pennsylvania home state-certified for the purpose of other state or national disadvantaged business programs.” Such a process will enable Pennsylvania to put Diverse and Disadvantaged Businesses that are not small businesses on “a level playing field nationally and globally” with other similarly certified businesses from other states according to Rep. Donna Oberlander (R-Clarion, Armstrong, Forrest Counties), sponsor of the Amendment. Further, the Amendment requires the Department to “verify a business that has been certified as a Diverse and Disadvantaged Business by a third-party organization.

The ownership of each of the three classes of Diverse and Disadvantaged Businesses must be at least 51% owned and controlled by the constituents of each class. Such a business that is a corporation must have 51% or more stock owned by the constituents of such class. For Minority-owned businesses, the constituents are “African Americans, Hispanic Americans, Native Americans, Asian Americans, Alaskans or Pacific Islanders.” For Veteran-owned businesses the constituents are set forth at 51 Pa. C. S. A. section 9601: “An individual who served on active duty in the United States Armed Forces, including” a reservist or member of the National Guard (1)  “who was discharged or released from the service under honorable conditions”… (2) “who completed an initial term of enlistment or qualifying period of service” or (3) “who was disabled in the line of duty during training.” The constituents of a Woman-owned business are women.

Previously, Pennsylvania, unlike other states, did not have a mechanism to recognize larger Diverse and Disadvantaged Businesses that do not conform to the Small Business Act criteria.  The Amendment also provides the right of a Diverse and Disadvantaged Business to ask the Department to provide notice of the verified status of the business. To encourage procurement from Diverse and Disadvantaged Businesses verified under the Amendment, the Department must “compile, maintain and make available source lists of” such businesses. Governor Wolf signed the Amendment on November 21, 2016, and it takes effect 120 days later, on March 21, 2017.

 

 

HB 1398 known as Act 170 of 2016 (the “Amendment”) amends Titles 15 (the Associations Code) and 54 (Names) of the Pennsylvania Consolidated Statutes to adopt uniform terms applicable to unincorporated entities: general partnerships, limited liability partnerships, limited partnerships and limited liability companies (each an “Unincorporated Entity”). The Amendment modernizes Pennsylvania’s laws on these Unincorporated Entities by repealing those as to partnerships, limited partnerships and limited liability companies and replacing them with model uniform laws on the same subjects. For example, the Amendment repeals Chapter 83 of Title 15 and replaces it with new Chapter 84 entitled, “The Pennsylvania Uniform Partnership Act of 2016.” Section 26 of the Amendment repeals the present law on limited partnerships, Chapter 85 of Title 15,  and Section 27 adds a new Chapter 86 entitled, “The Pennsylvania Uniform Limited Partnership Act of 2016.” Similarly, Section 30 of the Amendment repeals chapter 89 of Title 15 and Section 29 adds to Title 15 a new Chapter 88 entitled, “The Pennsylvania Uniform Limited Liability Company Act of 2016.”

According to Rep. Adam Harris (R-Franklin, Juniata, Mifflin Counties), the chief sponsor of the Amendment, it “focuses on making the current laws more user-friendly for businesses in Pennsylvania. Having the most modern and up-to-date business laws will help active businesses grow, and it will encourage new businesses to choose Pennsylvania as their home.” By following uniform model laws, people will feel more comfortable with the rights, duties, remedies and privileges in the new Pennsylvania laws on Unincorporated Entities. Rep. Harris acknowledges support for the Amendment from the Pennsylvania Bar Association, the Pennsylvania Chamber of Business and Industry and the National Federation of Independent Businesses.

The Amendment allows partners or members to draft more flexibly the entity’s operating terms subject to certain mandatory terms and other limiting terms regarding fairness and loyalty. The rights and liabilities of the entity and the partners or members of the entity as to each other and to third parties have been drafted  with respect to specific time periods:  after formation but before dissociation of a partner or member; after dissociation of a member or partner but before dissolution; and after dissolution. In addition to certificates of formation, termination and dissolution, there may now be filed with the Department of State Bureau of Corporations and Charitable Organizations (the “Department”) statements of authority and statements of denial, giving the public better notice of the authority of members and partners with respect to the Unincorporated Entity, for example, to transfer title to real property on behalf of the entity.  The Department will revise all 20 forms for limited partnerships and limited liability companies. Further, the Department will publish 11 new forms for Unincorporated Entities. The Amendment provides liability for signatories regarding misleading statements or material omissions from these forms filed with the Department.

The Governor approved the Amendment on November 21, 2016 and it will become effective 60 days later or on April 1, 2017, depending on the Unincorporated Entity involved: first, on February 21, 2017, for all general partnerships, limited partnerships and limited liability companies formed on and after February 21, 2017; and second, April 1, 2017, for all general partnerships, limited partnerships and limited liability companies formed before February 21, 2017, unless they elect to be subject to the Amendment on February 21, 2017.  Note that the sixtieth day following November 21, 2016 should be February 19, 2017, but the effective date is recited as February 21, 2017 on the Pennsylvania website at www.legis.state.pa.us/doc/legis/LI, where the terms of the Associations Code, as amended by the Amendment, may be found.

 

© 2017 Robert J. Hobaugh, Jr.