(2)__Delivering a duly executed copy of the notice to the principal place of business in the State of the person to be served; or

(3)__Mailing by registered or certified mail a duly executed copy of the notice addressed to the person to be served to the person's principal place of business.

C.__Each notice must:

(1)__State the time and place for the taking of testimony or the examination and the name and address of each person to be examined, if known and, if the name is not known, a general description sufficient to identify the person;

(2)__State the alleged violation that is under investigation, state the general subject matter of the investigation and state the title and section governing the alleged violation;

(3)__Describe the class or classes of documentary material to be produced with reasonable specificity, so as to fairly indicate the material demanded;

(4)__Prescribe a return date by which the documentary material must be produced; and

(5)__Identify the members of the Attorney General's staff to whom the documentary material must be made available for inspection and copying.

D.__A notice may not contain a requirement that would be unreasonable if contained in a subpoena duces tecum issued by a court of the State; or require the disclosure of any documentary material that would be privileged or that for any other reason would not be required by a subpoena duces tecum issued by a court of the State.

E.__Any documentary material or other information produced by a person pursuant to this section may not, unless otherwise ordered by a court of the State for good cause shown, be disclosed to a person other than the authorized agent or representative of the Attorney General unless with the consent of the person producing the documentary material.

F.__The Superior Court for Kennebec County or a Superior Court in any other county in which a person who is served notice pursuant to this section resides or has that person's usual place of business may, at any time prior to the date specified in the notice, or within 21 days after the notice has been served, whichever period is shorter, upon motion for good cause shown, extend the reporting date, modify or set aside the notice provided for in paragraph A or grant a protective order in accordance with the standards set forth in Rule 26(c) of the Maine Rules of Civil Procedure.

5.__Final order.__A person upon whom a notice is served pursuant to subsection 4 shall comply with the terms of the notice unless otherwise provided by the order of a court of the State.__A person who fails to appear or with intent to avoid civil investigation under this chapter, removes from any place, conceals, withholds or destroys, mutilates, alters or by any other means falsifies any documentary material in the possession of that person subject to the notice, or knowingly conceals any relevant information, may be assessed a civil penalty of not more than $5,000.

The Attorney General may file in the Superior Court of the county in which the person resides or that person's principal place of business, or in the Superior Court of Kennebec County if the person is a nonresident or has no principal place of business in the State, and serve upon the person, in the same manner as provided in subsection 4, a petition for an order of the court for the enforcement of this subsection.__Disobedience of a final order entered under this subsection by court is punished as a contempt.

6.__Gift.__A gift made for a public charitable purpose is deemed to have been made with a general intention to devote the property to public charitable purposes, unless otherwise provided in writing in the gift instrument.

Sec. 2. 5 MRSA §194-B is enacted to read:

§194-B.__Nonprofit conversions

1.__Definitions.__As used in sections 194-C to 194-F, unless the context otherwise indicates, the following terms have the following meanings.

A.__"Nonprofit conversion transaction" means:

(1)__The sale, transfer, lease, exchange, optioning, conveyance or other disposition of all or substantially

all of the assets or operations of a nonprofit entity to an entity or person other than a nonprofit entity; and

(2)__The transfer of control or governance of all or substantially all of the assets or operations of a nonprofit entity to an entity or person other than a nonprofit entity.

B.__"Nonprofit entity" means__a public charity, including a public benefit corporation, charitable trust or mutual corporation holding assets in charitable trust.

C.__"Nonprofit health care conversion transaction" means:

(1)__The sale, transfer, lease, exchange, optioning, conveyance or other disposition of all or substantially all of the assets or operations of a licensed nonprofit hospital, nonprofit health maintenance organization or nonprofit health care insurer, including a mutual corporation holding assets in charitable trust, to an entity or person other than a nonprofit entity; and

(2)__The transfer of control or governance of all or substantially all of the assets or operations of a licensed hospital, nonprofit health maintenance organization or nonprofit health care insurer, including a mutual corporation holding assets in charitable trust, to an entity or person other than a nonprofit entity.

D.__"Nonprofit health care entity" means a nonprofit hospital, including a corporation or a hospital created under a trust or will, nonprofit health maintenance organization or nonprofit health care insurer, including an entity affiliated with any of these through ownership, governance or membership, such as a holding company or subsidiary.__"Nonprofit health care entity" includes, but is not limited to, nonprofit entities that are licensed as hospitals, health maintenance organizations or health care insurers, including mutual corporations holding assets in charitable trust, under the laws of the State.

E.__"Nonprofit health care insurer" means a nonprofit provider of health care insurance, including a hospital service association, health service corporation and__ physician service organization.

F.__"Person" means an individual, partnership, trust, estate, corporation, association, joint venture, joint stock company, insurance company or other organization.

§194-C.__Approval or waiver required

1.__Requirement.__Prior to completing a nonprofit conversion transaction, a nonprofit entity shall obtain:

A.__Court approval pursuant to section 194-E; or

B.__A waiver in lieu of approval from the Attorney General pursuant to section 194-D.

2.__Filing with Secretary of State.__A nonprofit entity shall file a copy of the approval or waiver obtained to comply with this section with the Secretary of State.

3.__Failure to obtain approval or waiver.__A nonprofit conversion transaction entered into without approval or waiver as required in this section is void and subject to the penalties and remedies provided for in section 194-F.

§194-D.__Notice; review by Attorney General

1.__Notice to Attorney General.__A nonprofit entity shall provide written notice of its intent to enter into a nonprofit conversion transaction at least 90 days prior to entering into that transaction.__Notice to the Attorney General is not complete until the Attorney General acknowledges receipt of a complete notice.__The Attorney General may demand that the nonprofit entity provide information reasonably necessary to complete the Attorney General's review of the transaction.__Failure to provide the information requested in a timely manner is sufficient grounds for the Attorney General's refusal to grant a waiver.__ The nonprofit entity shall provide written certification to the Attorney General, as part of the notice, that a copy of sections 194-B to 194-F has been given to each member of the board of trustees or other governing body of the nonprofit entity.

2.__Public notice.__At the same time as it provides the initial notice under this section to the Attorney General, the nonprofit entity shall publish notice of its intent to enter into a nonprofit conversion transaction in a newspaper of general circulation in the county in which a majority of the assets of the nonprofit entity are located.

3.__Waiver.__At any time during the review under this section the Attorney General determines that the nonprofit conversion transaction does not merit further review by the Attorney General or by the court, the Attorney General may issue a waiver in lieu of approval.

4.__Public meetings; notice of time and place.__During the

review of the nonprofit conversion transaction, the Attorney General may conduct one or more public meetings, one of which must be held in the county where the nonprofit entity's assets to be transferred are located.__At the public meeting, the Attorney General shall hear comments from interested persons regarding the proposed nonprofit conversion transaction.__At least 21 days before the meeting, the nonprofit entity shall publish notice of the time and place of the meeting in one or more newspapers of general circulation in the affected community and shall provide written notice to the county commissioners and, if applicable, to the city council of the city where the nonprofit entity's assets to be transferred are located.__The notices must include the name of the nonprofit entity, the name of the acquirer or other parties to the proposed nonprofit conversion transaction, the nature of the proposed nonprofit conversion transaction and the anticipated consideration that will be paid by the acquirer.

5.__Required public hearing.__The Attorney General shall conduct a public hearing pursuant to subsection 4 if a petition signed by at least 150 registered voters of the State and requesting a hearing is submitted within 45 days after public notice is given.__Prior to its presentation to the Attorney General, the petition must be verified and certified in the same manner as provided in Title 21-A, section 354, subsection 7, paragraphs A and C.

6.__Contracts with agencies and consultants; reimbursement for costs.__To assist in the review of the proposed nonprofit conversion transaction, the Attorney General may:

A.__Contract with, consult and receive advice from an agency of the State or the United States on terms and conditions the Attorney General considers appropriate; and

B.__At the Attorney General's sole discretion, contract with experts or consultants the Attorney General considers appropriate to assist the Attorney General in reviewing the proposed nonprofit conversion transaction.

Contract costs incurred by the Attorney General pursuant to this subsection may not exceed an amount that is reasonable and necessary to conduct the review of the proposed nonprofit conversion transaction.__The Attorney General is exempt from the provisions of applicable state laws regarding public bidding procedures for purposes of entering into contracts pursuant to this subsection.__The nonprofit entity giving notice under subsection 1 shall pay the Attorney General promptly upon request for all costs of contracts entered into by the Attorney General pursuant to this subsection.

The Attorney General is entitled to reimbursement from the nonprofit entity giving notice under subsection 1 for all reasonable and actual costs incurred by the Attorney General in reviewing a proposed nonprofit conversion transaction, including attorney's fees at the billing rate used by the Attorney General to bill state agencies for legal services.__The nonprofit entity giving notice under subsection 1 shall pay the Attorney General promptly upon request for all costs.

7.__Public records.__All documents submitted to the Attorney General by a person, including nonprofit health care entities giving notice under subsection 1, in connection with the Attorney General's review of the proposed nonprofit conversion transaction are public records subject to Title 1, chapter 13, subchapter I except records made confidential by statute or privileged under the Maine Rules of Evidence.

8.__Rules.__The Attorney General may adopt such rules as the Attorney General considers appropriate to implement sections 194- B to 194-F.__Rules adopted pursuant to this subsection are routine technical rules as defined in chapter 375, subchapter II- A.

9.__Attorney General authority not limited.__Sections 194-B to 194-F do not limit the common law authority of the Attorney General to protect charitable trusts and charitable assets in this State.__The penalties and remedies provided in section 194-F are in addition to, and are not a replacement for, any other civil or criminal action the Attorney General may take under common law or statute, including an action to rescind the nonprofit conversion transaction to obtain injunctive relief or a combination of this action and other remedies available under common law or statute.

§194-E.__Court approval

1.__Filing of court action; factors to consider.__A nonprofit entity shall file an action in Superior Court in the county in which the nonprofit entity's assets to be transferred are located or in Kennebec County.__The Attorney General must be made a party to the action.__The court shall determine whether the proposed transaction is consistent with the charitable or other public purpose of the nonprofit entity, whether the nonprofit entity will receive full and fair market value for the assets transferred and whether the transaction violates any statutory or common law duty on the part of the directors or other parties involved in the transaction.__In making the determination, the court shall consider:

A.__Whether the nonprofit entity will receive full and fair market value for its charitable or social welfare assets;

B.__Whether the fair market value of the nonprofit entity's assets to be transferred has been manipulated by the actions of the parties in a manner that causes the fair market value of the assets to decrease;

C.__Whether the proceeds of the proposed nonprofit conversion transaction will be used in accordance with the rules of the trust under which the assets are held by the nonprofit entity and whether the proceeds will be controlled as funds independent of the acquiring entity or entities related to the acquiring entity;

D.__Whether the proposed nonprofit conversion transaction will result in a breach of fiduciary duty, including conflicts of interest related to payments or benefits to officers, directors, board members, executives and experts employed or retained by the parties;

E.__Whether the governing body of the nonprofit entity exercised due diligence in deciding to dispose of the nonprofit entity's assets, selecting the acquiring entity and negotiating the terms and conditions of the disposition;

F.__Whether the nonprofit conversion transaction will result in private inurement to any person;

G.__Whether the terms of a management or services contract negotiated in conjunction with the proposed nonprofit conversion transaction are reasonable;

H.__If a foundation is to be established to hold the proceeds of the sale, whether the foundation will be broadly based in the community and be representative of the affected community, taking into consideration the structure and governance of such foundation;

I.__Whether the Attorney General has been provided with sufficient information and data by the nonprofit entity to evaluate adequately the proposed nonprofit conversion transaction or the effects of the proposed nonprofit conversion transaction on the public, as long as the Attorney General has notified the nonprofit entity or the acquiring entity of an inadequacy of the information or data and has provided a reasonable opportunity to remedy the inadequacy; and

J.__Any other criteria the court considers necessary to determine whether the standards for approval have been met.

2.__Nonprofit health care conversions; additional factors.__In determining whether to approve a nonprofit health care conversion, in addition to the factors described in subsection 1, the court shall consider the following factors in determining whether the proposed transaction is consistent with the charitable or other public purpose of the nonprofit health care entity:

A.__The effect of the transaction on the availability and accessibility of health care service to the affected community;

B.__Whether sufficient safeguards are included to ensure the affected community has continued access to affordable care;

C.__Whether the proposed nonprofit health care conversion transaction creates or has the likelihood of creating an adverse effect on the access to or availability or cost of health care services to the community;

D.__Whether the acquiring entities have made a commitment, at least comparable to the nonprofit health care entity, to provide health care to the disadvantaged, the uninsured and the under insured and to provide benefits to the affected community to promote improved health care.__Activities and funding provided by the nonprofit health care entity or its successor nonprofit health care entity or foundation to provide such health care or to provide support or medical education and teaching programs or medical research programs must be considered in evaluating compliance with this commitment;

E.__Whether the nonprofit health care conversion transaction will result in the revocation of hospital privileges;

F.__Whether sufficient safeguards are included to maintain appropriate capacity for health science research and health care provider education;

G.__Whether the proposed nonprofit health care conversion transaction demonstrates that the public interest will be served by considering the essential medical services needed to provide safe and adequate treatment, appropriate access and balanced health care delivery to the residents; and

H.__Whether health care providers will be offered the

opportunity to invest or own an interest in the acquiring entity or related party and whether procedures or safeguards are in place to avoid conflict of interest in patient referrals.

§194-F.__Penalties

A nonprofit conversion transaction entered into in violation of section 194-C is void, and each member of the governing boards and the chief financial officers of the parties to that nonprofit conversion transaction may be subject to a civil penalty of up to $100,000, the amount to be determined by the Superior Court of Kennebec County or in the county in which the nonprofit entity's assets to be transferred are located.__The Attorney General may institute proceedings to impose such a penalty.__In addition, in the case of a nonprofit health care conversion transaction, a permit to operate a hospital may not be issued or renewed if the nonprofit health care conversion transaction was entered into in violation of the review and approval requirements of sections 194-C to 194-E.

Sec. 3. 13 MRSA §3062 is repealed.

Sec. 4. 13 MRSA §4101, sub-§3, as enacted by PL 1993, c. 371, §2, is amended to read:

3. Governing board. "Governing board" means the body responsible for the management of an institution or an institutional fund or a trustee or trustees of a charitable trust.

Sec. 5. 13 MRSA §4101, sub-§6, as enacted by PL 1993, c. 371, §2, is repealed and the following enacted in its place:

6.__Institutional fund.__"Institutional fund" means a fund held for or by an institution for its exclusive use, benefit or purposes and includes a fund held by a trustee for one or more institutions or other charitable purposes in which no beneficiary that is not an institution or charitable beneficiary has an interest, other than possible rights that could arise upon violation of failure of the purposes of the fund.__"Institutional fund" does not include a fund held or created by a town or other municipality.

Sec. 6. 13 MRSA §4106, as amended by PL 1997, c. 302, §1, is further amended by adding at the end a new paragraph to read:

In the administration of the powers to appropriate appreciation, to make and retain investments and to delegate investment management of institutional funds, trustees of charitable trusts are governed by the standards set forth in Title 18-A, section 7-302.

Sec. 7. 13-B MRSA §102, sub-§8-A is enacted to read:

8-A.__Mutual benefit corporation.__"Mutual benefit corporation" means a mutual benefit corporation as described in section 1406 or a corporation formed as a mutual benefit corporation pursuant to chapter 4.

Sec. 8. 13-B MRSA §102, sub-§10-A is enacted to read:

10-A.__Public benefit corporation.__"Public benefit corporation" means a public benefit corporation described in section 1406 or a domestic corporation formed as a public benefit corporation pursuant to chapter 4.

Sec. 9. 13-B MRSA §403, sub-§1, ¶B, as enacted by PL 1977, c. 525, §13, is amended to read:

B. The purpose or purposes for which the corporation is organized and a statement that it is organized for all purposes permitted under the Act; or one of the following statements:

(1)__This corporation is a public benefit corporation; or

(2)__This corporation is a mutual benefit corporation.

Sec. 10. 13-B MRSA §704, as amended by PL 1979, c. 127, §101, is further amended to read:

§704. Removal of directors by members

1. Removal for cause. At a special meeting of members called expressly for that purpose, the entire board of directors or any individual director may be removed, with or without cause, by a vote of the members as provided in this section.

2. Vote of 2/3 of membership required for removal. Subject to the limitation in subsection 4, if the corporation does not have a board of directors so classified that different classes of members elect different directors, such removal may be accomplished by the affirmative vote of 2/3 of the members entitled to vote for directors. The articles of incorporation may provide that such removal be accomplished by a lesser vote, but in no case by a vote of less than a majority of members voting on the proposed removal.

3. Articles of incorporation may provide removal by lesser vote. Subject to the limitation in subsection 4, if the

directors are so classified that different classes of members elect different directors, a director may be removed only by the affirmative vote of 2/3 of the members of that class which elected him the director. The articles of incorporation may provide that such removal may be accomplished by a lesser vote of the members of that class, but in no case by a vote of less than a majority of the members of that class voting on the proposed removal.

4. All directors removed at meeting. If any or all directors are removed at such meeting of the members, new directors may be elected at the same meeting without express notice being given of such election.

5. Action in court for removal from office. Notwithstanding the foregoing provisions, if 2/3 of the directors then in office resolve that individual directors should be removed from office for cause, the corporation may bring an action in any court having equity jurisdiction to remove such directors from office. If the court finds, by a preponderance of the evidence, that any such director has been guilty of fraudulent or dishonest acts, to the detriment of the corporation or any substantial group of its members, or has been guilty of gross abuse of authority or discretion in discharge of his duties to the corporation, the court shall order him removed from office and may bar him from reelection for a period of time prescribed by the court, and may make such other orders as are just and equitable.

Sec. 11. 13-B MRSA §704-A is enacted to read:

§704-A.__Removal of directors by judicial proceeding

1.__Removal.__The Superior Court may remove any director of the corporation from office in a proceeding commenced either by the corporation, its members holding at least 10% of the voting power or the Attorney General in the case of a public benefit corporation if the court finds that:

A.__The director engaged in fraudulent or dishonest conduct or gross abuse of authority or discretion with respect to the corporation, that section 713-A has been violated or a final judgment has been entered finding that the director has violated a duty set forth in section 712 or sections 717 to 20; and

B.__Removal is in the best interest of the corporation.

2.__Petition.__The petition for removal must be filed:

A.__In the county where the corporation's principal office is located;

B.__In the county where the corporation's registered office is located if the corporation has no principal office in this State; or

C.__In the Superior Court of Kennebec County if the corporation has no principal office or registered office in this State.

The court that removes a director may bar the director from serving on the board of director's for a period prescribed by the court.__If members or the Attorney General commence a proceeding under subsection 1, the corporation is made a party defendant.__ If a public benefit corporation or its members commence a proceeding under subsection 1, the public benefit corporation must give the Attorney General written notice of the proceeding.

Sec. 12. 13-B MRSA §713-A is enacted to read:

§713-A.__Public benefit corporation; board

1.__Board.__No more than 49% of the individuals on the board of a public benefit corporation may be financially interested persons.

2.__Financially interested person.__For the purposes of this section, "Financially interested person" means:

A.__An individual who has received or is entitled to receive compensation, directly or indirectly, from a public benefit corporation for services rendered to the corporation within the previous 12 months, whether as a full-time or part-time employee, independent contractor, consultant or otherwise, excluding any reasonable payments made to directors for serving as directors; or

B.__A spouse, brother, sister, parent or child of the individual described in paragraph A.

3.__Validity; enforceability.__The failure to comply with this section does not affect the validity or enforceability of any transaction entered into by a corporation.

Sec. 13. 13-B MRSA §714, sub-§3, as amended by PL 1981, c. 470, Pt. A, §31, is further amended to read:

3. Indemnity made by corporation. Any indemnification Indemnification under subsection 1, unless ordered by a court or required by the bylaws, shall may be made by the corporation only as authorized in the specific case upon a determination that

indemnification of the director, officer, employee or agent is proper in the circumstances because he the director, officer, employee or agent has met the applicable standard of conduct set forth in subsection 1. Such The determination shall must be made by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such the action, suit or proceeding, or if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested directors so directs, by independent legal counsel in a written opinion. Such a The determination, once made by the board of directors may not be revoked by the board of directors, and upon the making of such the determination by the board of directors, the director, officer, employee or agent may enforce the indemnification against the corporation by a separate action notwithstanding any attempted or actual subsequent action by the board of directors. A director of a public benefit corporation may not be indemnified until 20 days after the effective date of written notice to the Attorney General of the proposed indemnification.

Sec. 14. 13-B MRSA §715, as enacted by PL 1977, c. 525, §13, is repealed and the following enacted in its place:

§715.__Books and records

1.__Book; records of accounts.__Each corporation shall keep correct and complete books and records of accounts and shall keep minutes of the proceedings of its members, board of directors and committees having any of the authority of the board of directors and shall keep at its registered office or principal office in this State a record of the names and addresses of its members entitled to vote.__All books and records of a corporation may be inspected by any officer, director or member or the officer's, director's or member's agent or attorney, for any proper purpose at any reasonable time, as long as the officer, director or member or the officer's, director's or member's agent or attorney gives the corporation written notice at least 5 business days before the date on which the officer, director or member or the officer's, director's or member's agent or attorney wishes to inspect and copy any books or records.__The corporation may require the officer, director or member or the officer's director's or member's agent or attorney to pay the reasonable cost of the copies made.

2.__Refusal to allow inspection.__If a corporation does not make available for inspection or copying the books and records required by subsection 1, the Superior Court in the county where the corporation's principal office is located, or if the corporation has no principal office in the State, then at the location of its registered office, may summarily order inspection and copying of the records demanded at the corporation's expense

upon application of the officer, director or member or the officer's, director's or member's agent or attorney.

A.__If the court orders inspection and copying of the records demanded, the court shall also order the corporation to pay the costs of the officer, director or member or the officer's, director's or member's agent or attorney, including reasonable attorney's fees, incurred to obtain the order unless the corporation provides that it refused inspection in good faith because it had a reasonable basis for doubt about the right of the member to inspect the records demanded.

B.__If the court orders inspection and copying of the records demanded, it may impose reasonable restrictions on the use or distribution of the records by the demanding officer, director or member or the officer's, director's or member's agent or attorney.

Sec. 15. 13-B MRSA §716, as enacted by PL 1981, c. 7, is repealed.

Sec. 16. 13-B MRSA §§717 to 720 are enacted to read:

§717.__General standards for directors

1.__Discharge duties.__A director shall discharge the director's duties:

A.__In good faith;

B.__With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

C.__In a manner the director reasonably believes to be in the best interests of the corporation.

2.__Rely on information.__In discharging the director's duties, a director is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by:

A.__One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters presented;

B.__Legal counsel, public accountants or other persons as to matters the director reasonably believes are within the person's professional or expert competence; or

C.__A committee of the board of directors of which the director is not a member, as to the matters within its jurisdiction, if the director reasonably believes the committee merits confidence.

A director is not acting in good faith if the director relies on information, opinions, reports or statements that the director knows or has reason to believe are unwarranted.

3.__Performance; compliance.__A director is not liable for the performance of the duties of the director's office if the director acted in compliance with this section.

4.__Trustee.__A director is not considered a trustee with respect to the corporation or with respect to any property held or administered by the corporation, including, without limitation, property that may be subject to restrictions imposed by the donor or transferor of the property.

§718.__Director conflict of interest

1.__Conflict of interest transaction.__A conflict of interest transaction is a transaction with a public benefit corporation or a mutual benefit corporation in which a director of the corporation has a direct or indirect interest.__A conflict of interest transaction is not voidable on the basis of imposing liability on the director if the transaction was fair at the time it was entered into.

2.__Public benefit corporation; approval.__A transaction in which a director of a public benefit corporation has a conflict of interest may be approved:

A.__In advance by the vote of the board of directors or a committee of the board if:

(1)__The material facts of the transaction and the director's interest are disclosed or known to the board of directors or a committee of the board; and

(2)__The directors on the board or committee of the board, approving the transaction in good faith, reasonably believe that the transaction is fair to the corporation; or

B.__Before or after the transaction is consummated, by obtaining approval of the:

(1)__Attorney General; or

(2)__Superior Court in an action in which the Attorney General is joined as party.

3.__Mutual benefit corporation; approval.__A transaction in which a director of a mutual benefit corporation has a conflict of interest may be approved if:

A.__The material facts of the transaction and the director's interest were disclosed or known to the board of directors or a committee of the board and the board or committee of the board authorized, approved or ratified the transaction; or

B.__The material facts of the transaction and the director's interest were disclosed or known to the members and they approved the transaction.

4.__Indirect interest.__For the purposes of this section, a director of a public benefit corporation or a mutual benefit corporation has an indirect interest in a transaction if:

A.__Another entity in which the director has a material interest or in which the director is a general partner is a party to the transaction; or

B.__Another entity of which the director is a director, officer or trustee is a party to the transaction.

5.__Affirmative vote.__For purposes of subsections 2 and 3, a conflict of interest transaction is approved if it receives the affirmative vote of a majority of the directors on the board or on a committee of a board, who have no direct or indirect interest in the transaction, but a transaction may not be approved under this subsection by a single director.__If a majority of the directors on the board who have no direct or indirect interest in the transaction vote to approve the transaction, a quorum is present for the purpose of taking action under this section.

6.__Conflict of interest transaction; authorized.__For purposes of subsection 3, paragraph B, a conflict of interest transaction is approved by the members if it receives a majority of the votes entitled to be counted under this subsection.__Votes cast by or voted under the control of a director who has a direct or indirect interest in the transaction and votes cast by or voted under the control of an entity described in subsection 4, paragraph A, may not be counted in a vote of members to determine whether to approve a conflict of interest transaction under subsection 3, paragraph B.__The vote of these members, however,

is counted in determining whether the transaction is approved under other sections of this chapter.__A majority of the voting power, whether or not present, that is entitled to be counted in a vote on the transaction under this subsection constitutes a quorum for the purpose of taking action under this section.

7.__Additional requirements.__The articles of incorporation, bylaws or a resolution of the board may impose additional requirements on conflict of interest transactions.

§719.__Duties and authority of officers

Each officer has the authority and shall perform the duties set forth in the bylaws.__In addition, each officer, to the extent consistent with the bylaws, has the authority and shall perform the duties prescribed in a resolution of the board.__The board may authorize an officer, pursuant to a resolution of the board and to the extent consistent with the bylaws, to prescribe the duties and authority of other officers.

§720.__Standards of conduct for officers

1.__Discretionary authority.__An officer with discretionary authority shall discharge that officer's duties under that authority:

A.__In good faith;

B.__With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and

C.__In a manner the officer reasonably believes to be in the best interests of the corporation and its members.

2.__Rely on information.__In discharging the officer's duties, an officer is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by:

A.__One or more officers or employees of the corporation who the officer reasonably believes to be reliable and competent in the matters presented; or

B.__Legal counsel, public accountants or other persons as to matters the officer reasonably believes are within the person's professional or expert competence.

An officer is not acting in good faith if the officer relies on information, opinions, reports or statements that the officer knows or has reason to believe are unwarranted.

3.__Compliance.__An officer is not liable to the corporation, any member or other person for any action taken or not taken as an officer, if the officer acted in compliance with this section.

Sec. 17. 13-B MRSA §802, sub-§5 is enacted to read:

5.__Amendment of articles of public benefit corporation.__If an amendment of the articles of incorporation of a public benefit corporation results in a material change in the nature of the activities conducted by the corporation, the Attorney General must be given notice of the proposed amendment at least 20 days prior to the filing of the amended articles with the Secretary of State.

Sec. 18. 13-B MRSA §§907 and 908 are enacted to read:

§907.__Limitations on mergers by public benefit corporations

1.__Prior approval.__Without the prior approval of the Superior Court of Kennebec County in a proceeding for which the Attorney General has been given written notice in accordance with Title 5, section 194, subsection 6, a public benefit corporation may merge only with:

A.__Another public benefit corporation; or

B.__A foreign nonprofit corporation that would qualify under this Title as a public benefit corporation.

2.__Notice.__Before consummation of any merger of a public benefit corporation, notice, including a copy of the proposed plan of merger, must be delivered to the Attorney General.

§908.__Bequests, devises and gifts

Any bequest, devise, gift, grant or promise contained in a will or other instrument of donation, subscription or conveyance that is made to a constituent corporation and that takes effect or remains payable after the merger inures to the surviving corporation unless the will or other instrument otherwise specifically provides.

Sec. 19. 13-B MRSA §1001, as enacted by PL 1977, c. 525, §13, is amended to read:

§1001. Sale of assets other than in the regular course of

activities

1. Terms and conditions. Sale, lease, exchange, mortgage, pledge or other disposition of all, or substantially all, the property and assets of a corporation may be made upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, real or personal, including shares of any corporation for profit, domestic or foreign, as may be authorized in the following manner.

A. If there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending such sale, lease, exchange, mortgage, pledge or other disposition and directing that it be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice stating that the purpose, or one of the purposes, of such meeting is to consider the sale, lease, exchange, mortgage, pledge or other disposition of all, or substantially all, the property and assets of the corporation shall must be given to each member entitled to vote at such meeting, within the time and in the manner provided by this Act for the giving of notice of meetings of members. At such meeting, the members may authorize such sale, lease, exchange, mortgage, pledge or other disposition and may fix, or may authorize the board of directors to fix, any or all of the terms and conditions thereof and the consideration to be received by the corporation thereto. Such authorization shall require requires at least a majority of the votes which members present at such meeting or represented by proxy are entitled to cast. After such authorization by a vote of members, the board of directors, nevertheless, in its discretion, may abandon such sale, lease, exchange, mortgage, pledge or other disposition of assets, subject to the rights of 3rd parties under any contracts relating thereto, without further action or approval by members.

B. If there are no members, or no members entitled to vote thereon, a sale, lease, exchange, mortgage, pledge or other disposition of all, or substantially all, the property and assets of a corporation shall be are authorized upon receiving the vote of a majority of the directors in office.

C. If all members entitled to vote by the articles of incorporation authorize by written consent a sale, lease, exchange, mortgage, pledge or other disposition of all, or substantially all, the property and assets of a corporation, no resolution of the board of directors, approving, proposing, submitting, recommending or otherwise respecting such sale is necessary.

2. Provision prescribing for approval of sale. The articles of incorporation of any corporation may contain a provision prescribing for approval of any sale of assets a vote greater than, but in no event less than, that prescribed by subsection 1.

3.__Sale of assets of a public benefit corporation.__A public benefit corporation may not sell, lease, exchange or otherwise dispose of all or substantially all of its property if the transaction is not in the usual and regular course of its activities unless it has complied with Title 5, section 194-C.

Sec. 20. 13-B MRSA §1104, sub-§1, ¶D, as enacted by PL 1977, c. 525, §13, is amended to read:

D. That all remaining property and assets of the corporation have been distributed among its members in accordance with their respective rights and interests, or have been otherwise distributed pursuant to the articles or bylaws of the corporation, provided that as long as the assets of a public benefit corporation whose purposes and activities have been primarily charitable, religious, eleemosynary, benevolent or educational shall be are transferred or conveyed only to one or more domestic or foreign corporations, societies or organizations to a public benefit corporation engaged in activities substantially similar to those of the dissolving or liquidating corporation; and

Sec. 21. 13-B MRSA §1105, as enacted by PL 1977, c. 525, §13, is repealed.

Sec. 22. 13-B MRSA §1105-A is enacted to read:

§1105-A.__Grounds for judicial dissolution

1.__Dissolution.__The Superior Court may dissolve a corporation:

A.__If, in a proceeding by the Attorney General, it is established that:

(1)__The corporation obtained its articles of incorporation through fraud;

(2)__The corporation has exceeded or abused the authority conferred upon it by law;

(3)__The corporation is a public benefit corporation and the corporate assets are being misapplied or wasted; or

(4)__The corporation is a public benefit corporation and is no longer able to carry out its purposes;

B.__If, in a proceeding by 50 members or members holding 5% of the voting power, whichever is less, or by a director or any person specified in the articles of incorporation, it is established that:

(1)__The directors are deadlocked in the management of the corporate affairs, and the members, if any, are unable to breach the deadlock;

(2)__The directors or those in control of the corporation have acted or are acting in a manner that is illegal, oppressive or fraudulent;

(3)__The members are deadlocked in voting power and have failed, for a period that includes at least 2 consecutive annual meeting dates, to elect successors to directors whose terms have or would otherwise have expired;

(4)__The corporate assets are being misapplied or wasted; or

(5)__The corporation is a public benefit corporation and is no longer able to carry out its purposes;

C.__If, in a proceeding by a creditor, it is established that:

(1)__The creditor's claim has been reduced to judgment, the execution on the judgment returned unsatisfied and the corporation is insolvent; or

(2)__The corporation has admitted in writing that the creditor's claim is due and owing and the corporation is insolvent; or

D.__If, in a proceeding it is established that the corporation's__voluntary dissolution is continued under court supervision.

2.__Consideration of court.__Prior to dissolving a corporation, the court shall consider whether:

A.__There are reasonable alternatives to dissolution;

B.__Dissolution is in the public interest, if the corporation is a public benefit corporation; or

C.__Dissolution is the best way of protecting the interests of members, if the corporation is a mutual benefit corporation.

Sec. 23. 13-B MRSA §1109, as enacted by PL 1977, c. 525, §13, is amended to read:

§1109. Decree of dissolution

1. Decree. In proceedings to liquidate the assets and activities of a corporation, when the costs and expenses of such the proceedings and all debts, obligations and liabilities of the corporation shall have been paid and discharged and all of its remaining property and assets distributed in accordance with the provisions of this Act, or in case when its property and assets are not sufficient to satisfy and discharge such the costs, expenses, debts and obligations, and all the property and assets have been applied so far as they will go to their payment, the court shall enter a decree dissolving the corporation, whereupon after which the existence of the corporation shall cease ceases.

2. Certified copy of decree to Secretary of State. In case When the court shall enter enters a decree dissolving a corporation, it shall be is the duty of the clerk of such the court to cause a certified copy of the decree to be filed with the Secretary of State. No A fee shall may not be charged by the Secretary of State for the filing thereof of the decree.

Sec. 24. 13-B MRSA §1110, sub-§2, as enacted by PL 1977, c. 525, §13, is amended to read:

2. Deposit with Treasurer of State. Such A deposit with the Treasurer of State shall must, to the extent thereof of the deposit, absolutely discharge the persons having control and supervision over the distribution of the corporation's assets from liability to such the unknown, unlocated, legally disabled or nonaccepting persons. If the dissolution is under the supervision of the Superior Court pursuant to section 1105 1105- A, no such the deposit shall may not be made with the Treasurer of State, except pursuant to order of the court, on such terms as the court may order.

Sec. 25. 13-B MRSA §1202, sub-§1, ¶E, as amended by PL 1997, c. 376, §26, is further amended to read:

E. The address of the registered or principal office of the corporation in the jurisdiction of its incorporation or the principal office wherever located; and

Sec. 26. 13-B MRSA §1202, sub-§1, ¶F, as enacted by PL 1977, c. 525, §13, is amended to read:

F. The address of its proposed registered office in this State and the name of its proposed registered agent in this State at such address.; and

Sec. 27. 13-B MRSA §1202, sub-§1, ¶G is enacted to read:

G.__Whether the corporation, if it had been incorporated in this State, would be a public benefit or mutual benefit corporation.

Sec. 28. 13-B MRSA §1302, sub-§4 is enacted to read:

4.__Notice to Attorney General in case of public benefit corporation.__In the case of a public benefit corporation, the Secretary of State shall notify the Attorney General of the revocation or suspension of the corporation's authority to carry on activities under subsection 1.

Sec. 29. 13-B MRSA §1406 is enacted to read:

§1406.__Public benefit and mutual benefit corporations

1.__Designation.__On the effective date of this section, a domestic corporation that is or becomes subject to this Act is designated as a public benefit corporation or mutual benefit corporation as follows.

A.__A corporation designated by law as a public benefit corporation or mutual benefit corporation is the type of corporation designated by statute.

B.__A corporation that is recognized as exempt under the Internal Revenue Code, Section 501(c)(3) or any successor provision is a public benefit corporation.

C.__A corporation that does not meet the requirements of paragraph A or B but that is organized for a public or charitable purpose and upon dissolution must distribute its assets to a public benefit corporation, the United States, a state, or a person that is recognized as exempt under the Internal Revenue Code, Section 501(c)(3) or any successor provision is a public benefit corporation.

D.__A corporation that does not meet the requirements of paragraph B or C is a mutual benefit corporation.

2.__Elect designation.__In any filing with the Secretary of State, an existing corporation may elect designation as a public benefit corporation or mutual benefit corporation.__An existing corporation shall elect a designation as a public or mutual benefit corporation by amending its articles of incorporation or application for authority within 12 months of the effective date of this section.__The Secretary of State may act administratively to implement this section.__If a corporation has not elected a designation as a public benefit or mutual benefit corporation within 12 months of the effective date of this section, the Secretary of State may revoke or suspend the corporation's articles of incorporation or authority to do business in the State.

SUMMARY

This bill amends the statutes to give the Attorney General authority to investigate public charities, including trusts and nonprofit corporations. The bill also amends the Maine Nonprofit Corporation Act to provide the Attorney General with some oversight over nonprofit corporations that are charities.

The bill allows those who manage charitable trusts to adopt investment policies similar to those of foundation managers consistent with the appropriate standards of prudence.

This bill also adds guidelines to assist the Attorney General in dealing with nonprofit conversion transactions.