Chapter 134 Oregon Laws 2005

AN ACT

HB 3324

Relating to business organizations; creating new provisions; and amending ORS 711.175, 711.180 and 711.185.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Section 2 of this 2005 Act is added to and made a part of ORS chapter 707.

SECTION 2. (1) As an alternative to being organized as a corporation under this chapter, an Oregon bank may be organized as a limited liability company.

(2) With respect to any Oregon bank that is organized as a limited liability company, as used in the Bank Act:

(a) “Articles of incorporation” means the Oregon bank’s articles of organization, as defined in ORS 63.001.

(b) “Bylaws” means the Oregon bank’s operating agreement, as defined in ORS 63.001.

(c) “Certificate of incorporation” means a certificate of organization issued to the Oregon bank.

(d) “Corporation,” means a limited liability company, as defined in ORS 63.001.

(e) “Director,” “directors” or “board of directors” means the Oregon bank’s manager or managers, as defined in ORS 63.001.

(f) “Dividends” means distributions, as defined in ORS 63.001, declared or paid by the Oregon bank.

(g) “Incorporator” means the Oregon bank’s organizer, as defined in ORS 63.001.

(h) “Share” or “stock” means a membership interest in the Oregon bank, as defined in ORS 63.001.

(i) “Stockholder,” “stockholders,” “shareholder” or “shareholders” means the Oregon bank’s member or members, as defined in ORS 63.001.

(3) An Oregon bank organized as a limited liability company shall be organized under the authority of the Director of the Department of Consumer and Business Services under this chapter. Except as set forth in subsection (4) of this section, with respect to all other aspects of its operation and existence, an Oregon bank that is organized as a limited liability company is subject to the provisions of ORS chapter 63, to the extent that ORS chapter 63 does not conflict with the Bank Act. In the event of any conflict between the Bank Act and ORS chapter 63, the Bank Act controls.

(4)(a) Notwithstanding any provision of ORS chapter 63, the articles of organization of an Oregon bank that is organized as a limited liability company shall:

(A) State that the existence of the Oregon bank is perpetual; and

(B) Provide that the Oregon bank is to be managed by a board of not fewer than five managers.

(b) Notwithstanding any provision of ORS chapter 63, an Oregon bank that is organized as a limited liability company shall be managed exclusively by its board of managers in substantially the same manner as an Oregon bank that is organized as a corporation is managed by its board of directors. The board of managers of an Oregon bank that is organized as a limited liability company has substantially the same rights, powers, privileges, duties and responsibilities as the board of directors of an Oregon bank that is organized as a corporation and is subject to the provisions of this chapter pertaining to directors.

(c) Notwithstanding any provision of ORS chapter 63, membership interests in an Oregon bank that is organized as a limited liability company are freely transferable, and consent of the Oregon bank or its members or managers is not required for a person to acquire or transfer a membership interest in the Oregon bank. Immediately upon the completion of the transfer of the membership interest to a person, the person becomes a member and has all the rights of a member.

(d) ORS 63.621 (2) to (4) do not apply to an Oregon bank organized as a limited liability company.

(5) The articles of organization of an Oregon bank that is organized as a limited liability company shall require that liquidation of the Oregon bank conform with the requirements of the Bank Act.

(6) An Oregon bank that is organized as a limited liability company shall have the officers described in ORS 707.700. The officers shall be elected by the board of managers of the Oregon bank and are subject to the provisions of this chapter.

(7) Each Oregon bank that is organized as a limited liability company shall have a written operating agreement containing any provisions for the affairs of the Oregon bank as may be agreed upon by its members and that are consistent with the Bank Act.

(8) Any number of persons, not fewer than five, may act as organizers of an Oregon bank that is organized as a limited liability company.

SECTION 3. Section 4 of this 2005 Act is added to and made a part of ORS chapter 709.

SECTION 4. (1) As an alternative to being organized as a corporation pursuant to the provisions of ORS chapter 707 and this chapter, an Oregon trust company may be organized as a limited liability company.

(2) With respect to any Oregon trust company that is organized as a limited liability company, as used in the Bank Act:

(a) “Articles of incorporation” means the Oregon trust company’s articles of organization, as defined in ORS 63.001.

(b) “Bylaws” means the Oregon trust company’s operating agreement, as defined in ORS 63.001.

(c) “Certificate of incorporation” means a certificate of organization issued to the Oregon trust company.

(d) “Corporation,” means a limited liability company, as defined in ORS 63.001.

(e) “Director,” “directors” or “board of directors” means the Oregon trust company’s manager or managers, as defined in ORS 63.001.

(f) “Dividends” means distributions, as defined in ORS 63.001, declared or paid by the Oregon trust company.

(g) “Incorporator” means the Oregon trust company’s organizer, as defined in ORS 63.001.

(h) “Share” or “stock” means a membership interest in the Oregon trust company, as defined in ORS 63.001.

(i) “Stockholder,” “stockholders,” “shareholder” or “shareholders” means the Oregon trust company’s member or members, as defined in ORS 63.001.

(3) An Oregon trust company organized as a limited liability company shall be organized under the authority of the Director of the Department of Consumer and Business Services under this chapter and ORS chapter 707. Except as set forth in subsection (4) of this section, with respect to all other aspects of its operation and existence, an Oregon trust company that is organized as a limited liability company is subject to the provisions of ORS chapter 63, to the extent that ORS chapter 63 does not conflict with the Bank Act. In the event of any conflict between the Bank Act and ORS chapter 63, the Bank Act controls.

(4)(a) Notwithstanding any provision of ORS chapter 63, the articles of organization of an Oregon trust company that is organized as a limited liability company shall:

(A) State that the existence of the Oregon trust company is perpetual; and

(B) Provide that the Oregon trust company is to be managed by a board of not fewer than five managers.

(b) Notwithstanding any provision of ORS chapter 63, an Oregon trust company that is organized as a limited liability company shall be managed exclusively by its board of managers in substantially the same manner as an Oregon trust company that is organized as a corporation is managed by its board of directors. The board of managers of an Oregon trust company that is organized as a limited liability company has substantially the same rights, powers, privileges, duties and responsibilities as the board of directors of an Oregon trust company that is organized as a corporation and is subject to the provisions of ORS chapter 707 and this chapter pertaining to directors.

(c) Notwithstanding any provision of ORS chapter 63, membership interests in an Oregon trust company that is organized as a limited liability company are freely transferable, and consent of the Oregon trust company or its members or managers is not required for a person to acquire or transfer a membership interest in the Oregon trust company. Immediately upon the completion of the transfer of the membership interest to a person, the person becomes a member, and has all the rights of a member.

(d) ORS 63.621 (2) to (4) do not apply to an Oregon trust company organized as a limited liability company.

(5) The articles of organization of an Oregon trust company that is organized as a limited liability company shall require that liquidation of the Oregon trust company conform with the requirements of the Bank Act.

(6) An Oregon trust company that is organized as a limited liability company shall have the officers described in ORS 707.700. The officers shall be elected by the board of managers of the Oregon trust company and shall be subject to the provisions of this chapter and ORS chapter 707.

(7) Each Oregon trust company that is organized as a limited liability company shall have a written operating agreement containing any provisions for the affairs of the Oregon trust company as may be agreed upon by its members and that are consistent with the Bank Act.

(8) Any number of persons, not fewer than five, may act as organizers of an Oregon trust company that is organized as a limited liability company.

SECTION 5. Sections 6 to 8 of this 2005 Act are added to and made a part of ORS chapter 711.

SECTION 6. (1) An Oregon bank or Oregon trust company organized as a corporation under ORS chapter 707 or 709 may be converted to a limited liability company. An Oregon bank or Oregon trust company organized as a limited liability company may be converted to a corporation. The conversion shall be accomplished by the approval of a plan of conversion under section 7 of this 2005 Act and the filing of articles of conversion under section 8 of this 2005 Act.

(2) The plan of conversion shall set forth:

(a) The name of the Oregon bank or Oregon trust company prior to the conversion;

(b) The name of the Oregon bank or Oregon trust company after the conversion;

(c) A summary of the material terms and conditions of the conversion;

(d) The manner and basis of converting the ownership interests of each owner into the ownership interests or obligations of the converted Oregon bank or Oregon trust company, or into cash or other property, in whole or in part; and

(e) Any additional information required by the Director of the Department of Consumer and Business Services.

(3) The plan of conversion may set forth other provisions relating to the conversion.

SECTION 7. (1) A plan of conversion for an Oregon bank or Oregon trust company shall be approved as follows:

(a) In the case of the conversion of an Oregon bank or Oregon trust company that was organized as a corporation under ORS chapter 707 or 709 to a limited liability company, the conversion shall be approved by:

(A) A simple majority of the full board of directors of the converting Oregon bank or Oregon trust company, unless the articles of incorporation or bylaws of the converting Oregon bank or Oregon trust company require a greater percentage; and

(B) A vote of a simple majority of the outstanding stock of each class of voting shares at a meeting called to consider the conversion, unless the articles of incorporation or bylaws of the converting Oregon bank or Oregon trust company require a greater percentage.

(b) In the case of the conversion of an Oregon bank or Oregon trust company that was organized as a limited liability company under section 2 or 4 of this 2005 Act to a corporation, the conversion shall be approved by:

(A) A simple majority of the full board of managers of the converting Oregon bank or Oregon trust company, unless the articles of organization or operating agreement of the converting Oregon bank or Oregon trust company require a greater percentage; and

(B) A vote of the holders of a simple majority of outstanding membership interests in the converting Oregon bank or Oregon trust company, at a meeting called to consider the conversion, unless the articles of organization or operating agreement of the converting Oregon bank or Oregon trust company require a greater percentage.

(2) Following approval of the plan of conversion by the board and the owners under subsection (1) of this section, the converting Oregon bank or Oregon trust company shall submit the plan of conversion to the Director of the Department of Consumer and Business Services for approval. The converting Oregon bank or Oregon trust company shall also submit a nonrefundable application fee of $3,000 and certified copies of the resolutions adopted by the board and by the owners of the Oregon bank or Oregon trust company showing approval of the plan of conversion. The director shall approve the plan of conversion if the director finds that the plan of conversion has been approved by the board and the owners of the converting institution in accordance with subsection (1) of this section and that:

(a) In the case of the conversion of an Oregon bank or Oregon trust company from a corporation to a limited liability company, the converting institution meets the requirements of section 2 or 4 of this 2005 Act for the organization of an Oregon bank or Oregon trust company as a limited liability company; or

(b) In the case of the conversion of an Oregon bank or Oregon trust company from a limited liability company to a corporation, the converting institution meets the requirements of the Bank Act for the organization of an Oregon bank or Oregon trust company as a corporation.

SECTION 8. (1) After a plan of conversion is approved under section 7 of this 2005 Act, the converting Oregon bank or Oregon trust company shall file articles of conversion with the Director of the Department of Consumer and Business Services. The articles shall:

(a) State the name and type of the business entity prior to conversion;

(b) State the name and type of the business entity after conversion; and

(c) Include the plan of conversion.

(2) The conversion takes effect on the date the articles of conversion are filed with the director, unless the articles of conversion state another effective date.

SECTION 9. ORS 711.175 is amended to read:

711.175. (1) A stockholder of an Oregon stock bank or Oregon trust company may dissent from the following:

(a) A plan of merger pursuant to which the Oregon stock bank or Oregon trust company is not the resulting insured institution;

(b) A plan of merger pursuant to which the Oregon stock bank or Oregon trust company is the resulting insured stock institution and the number of its voting shares outstanding immediately after the merger, plus the number of shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will exceed by more than 20 percent the total number of voting shares of the resulting insured stock institution outstanding immediately before the merger;

(c) A plan of share exchange pursuant to which the Oregon stock bank or Oregon trust company in which the stockholder owns shares is acquired; [and]

(d) An acquisition transaction requiring [such] the stockholder’s approval pursuant to ORS 711.170 (5); and

(e) A plan of conversion pursuant to which the Oregon stock bank or Oregon trust company is to be converted to a limited liability company.

(2) To perfect a stockholder’s right to dissent to a transaction described in subsection (1) of this section, the stockholder must send or deliver a notice of dissent to the Oregon stock bank or Oregon trust company prior to or at the meeting of the stockholders at which the transaction is submitted to a vote, or the stockholder must vote against [such] the transaction.

(3) A stockholder [shall] may not dissent as to less than all the shares registered in the name of the stockholder, except a stockholder holding, as a fiduciary or nominee, shares registered in the stockholder’s name for the benefit of more than one beneficiary, may dissent as to less than all of the shares registered in the fiduciary or nominee’s name if any dissent as to the shares held for a beneficiary is made as to all the shares held by the fiduciary for that beneficiary or nominee. The fiduciary’s rights shall be determined as if the shares to which the fiduciary has dissented and the other shares are registered in the names of different stockholders.

SECTION 10. ORS 711.180 is amended to read:

711.180. (1) Any stockholder of an Oregon stock bank or Oregon trust company who dissented to a transaction listed under ORS 711.175 (1) and who desires to receive the value in cash of those shares, shall make written demand upon the Oregon stock bank, Oregon trust company or its successor and accompany the demand with the surrender of the share certificates, properly indorsed within 30 days after the stockholders’ meeting at which a vote to approve [such] the transaction involving an Oregon stock bank or Oregon trust company was taken. Any stockholder failing to make written demand within the 30-day period shall be bound by the terms of the proposed plan of merger, plan of share exchange, plan of conversion or acquisition transaction agreement.

(2) Within 30 days after a transaction listed under ORS 711.175 (1) is effected, the Oregon stock bank, Oregon trust company or its successor shall give written notice thereof to each dissenting stockholder who has made demand under this section at the address of the stockholder on the stock record books of the Oregon stock bank or Oregon trust company, and shall make a written offer to each such stockholder to pay for the shares at a specified price in cash determined by the Oregon stock bank, Oregon trust company or its successor to be the fair value of the shares as of the effective date of the transaction. The notice and offer shall be accompanied by a statement of condition of the Oregon stock bank or Oregon trust company, the shares of which the dissenting stockholder held, as of the latest available date and not more than four months prior to the consummation of the transaction, and a statement of income of the Oregon stock bank or Oregon trust company for the period ending on the date of the statement of condition.

(3) Any stockholder who accepts the offer of the Oregon stock bank, Oregon trust company or its successor within 30 days following the date on which notice of the offer was mailed or delivered to dissenting stockholders shall be paid the price per share offered, in cash, within 30 days following the date on which the stockholder communicates acceptance in writing to the Oregon stock bank, Oregon trust company or its successor. Upon payment, the dissenting stockholder shall cease to have any interest in the shares previously held by the stockholder.

(4) If, within 30 days after notice of the offer, one or more dissenting stockholders do not accept the offer of the Oregon stock bank, Oregon trust company or its successor or if no offer is made, then the value of the shares of the dissenting stockholders who have not accepted the offer shall be ascertained, as of the effective date of the transaction, by an independent, qualified appraiser chosen by the Director of the Department of Consumer and Business Services. The valuation determined by the appraiser shall govern and the appraiser’s valuation of [such] the shares shall not be appealable except for one or more of the reasons set forth in ORS 36.705 (1)(a) to (d) for vacation of an arbitrator’s award, and for one of the grounds for modification or correction of an arbitrator’s award under ORS 36.710. Any [such] appeal must be made within 30 days after the date of the appraiser’s valuation and is subject to ORS 183.415 to 183.500. The Oregon stock bank, Oregon trust company or its successor shall pay the dissenting shareholders the appraised value of the shares within 30 days after the date the appraiser sends the Oregon stock bank, Oregon trust company or its successor written notice of the appraiser’s valuation.

(5) The director shall assess the reasonable costs and expenses of the appraisal proceeding equally to the Oregon stock bank, Oregon trust company or its successor and to the dissenting shareholders, as a group, if the amount offered by the Oregon stock bank, Oregon trust company or its successor is between 85 percent and 115 percent of the appraised value of the shares. The director shall assess the reasonable costs and expenses of the appraisal proceeding and the reasonable costs and expenses, including attorney fees and costs, of the Oregon stock bank, Oregon trust company or its successor to the dissenting stockholders, as a group, if the amount offered by the Oregon stock bank, Oregon trust company or its successor is 115 percent or more of the appraised value of the shares. The director shall assess the reasonable costs and expenses of the appraisal proceeding and the reasonable costs and expenses, including attorney fees and costs, of the dissenting shareholders, as a group, to the Oregon stock bank, Oregon trust company or its successor if the amount offered by the Oregon stock bank, Oregon trust company or its successor is 85 percent or less of the appraised value of the shares. The director’s decision regarding assessment of fees and costs may be appealed as provided in ORS 183.415 to 183.500.

(6) Amounts required to be paid by the Oregon stock bank, Oregon trust company or its successors, or the dissenting shareholders under this section shall be paid within 30 days after the director’s assessment of any fees or costs becomes final or, if the director’s decision is appealed, within 30 days after a final determination of [such] the fees and costs is made.

(7) The director may require, as a condition of approving a transaction listed in ORS 711.175 (1), the replacement of all or a portion of the stockholders’ equity of an Oregon stock bank or Oregon trust company expended in payment to dissenting stockholders under this section.

(8) A stockholder may not receive the fair value of the stockholder’s shares under this section:

(a) If the plan of merger provides that all stockholders of the [resulting insured stock institution] Oregon stock bank receive common stock of a holding company pursuant to a merger with an interim [Oregon stock bank] banking institution chartered under ORS 707.025, [and] the stockholder’s Oregon stock bank or Oregon trust company and the interim [Oregon stock bank] banking institution are the only parties to the merger and the stockholders’ relative interests in the holding company are in substantially the same proportions as the stockholders’ relative interests in the Oregon stock bank or Oregon trust company, except for nominal changes in the stockholders’ interests resulting from elimination of fractional shares; [or]

(b) If the shares held by the dissenting stockholder immediately before the effective date of a transaction listed in ORS 711.175 (1) are listed on any national securities exchange or are [included on the list of over-the-counter margin stocks issued by the Board of Governors of the Federal Reserve System] listed for trading on the National Association of Securities Dealers Automated Quotation stock market on either the national market or smallcap market; or

(c) If the plan of stock exchange provides that all stockholders of the Oregon stock bank or Oregon trust company receive stock of a holding company pursuant to the plan of stock exchange with the result that the stockholders’ relative interests in the holding company are in substantially the same proportions as the stockholders’ relative interests in the Oregon stock bank or Oregon trust company, except for nominal changes in stockholders’ interests resulting from elimination of fractional interests.

SECTION 11. ORS 711.185 is amended to read:

711.185. (1) A dissenting stockholder making a demand under ORS 711.180 may withdraw the demand if:

(a) The Oregon stock bank, Oregon trust company or its successor consents to the withdrawal; or

(b) The dissenting stockholder pays [such] the stockholder’s pro rata share of the appraisal costs and the Oregon stock bank’s or Oregon trust company’s reasonable costs and expenses, including attorney fees and costs.

(2) When a dissenting stockholder withdraws the demand under subsection (1) of this section, the stockholder’s status as a stockholder shall be restored, without prejudice to any corporate proceedings taking place in the interim.

SECTION 12. Section 13 of this 2005 Act is added to and made a part of ORS chapter 711.

SECTION 13. (1) A member of an Oregon bank or Oregon trust company that is organized as a limited liability company may dissent to a plan of conversion under which the Oregon bank or Oregon trust company is to be converted from a limited liability company to a corporation.

(2) To perfect a member’s right to dissent to a plan of conversion described in subsection (1) of this section, the member must send or deliver a notice of dissent to the Oregon bank or Oregon trust company prior to or at the meeting of the members at which the conversion is submitted to a vote, or the member must vote against the conversion.

(3) A member may not dissent as to less than all the membership interests held in the name of the member, except a member holding, as a fiduciary or nominee, membership interests held in the member’s name for the benefit of more than one beneficiary, may dissent as to less than all of the membership interests held in the fiduciary or nominee’s name if any dissent as to the membership interests held for a beneficiary is made as to all the membership interests held by the fiduciary for that beneficiary or nominee. The fiduciary’s rights shall be determined as if the membership interests to which the fiduciary has dissented and the other membership interests are held in the names of different members.

(4) Any member who dissented to a plan of conversion under this section and who desires to receive the value in cash of the member’s membership interests, shall make written demand upon the Oregon bank or Oregon trust company and accompany the demand with the surrender of the member’s certificates of membership interest, properly indorsed within 30 days after the meeting of the members at which the vote to approve the plan of conversion was taken. Any member failing to make written demand within the 30-day period shall be bound by the terms of the proposed plan of conversion.

(5) Within 30 days after the plan of conversion becomes effective, the Oregon bank or Oregon trust company shall give written notice thereof to each dissenting member who has made demand under this section at the address of the member on the membership books of the Oregon bank or Oregon trust company, and shall make a written offer to each such member to pay for the member’s membership interests at a specified price in cash, determined by the Oregon bank or Oregon trust company to be the fair value of the membership interests as of the effective date of the conversion. The notice and offer shall be accompanied by a statement of condition of the Oregon bank or Oregon trust company as of the latest available date and not more than four months prior to the effective date of the plan of conversion, and a statement of income of the Oregon bank or Oregon trust company for the period ending on the date of the statement of condition.

(6) Any member who accepts the offer of the Oregon bank or Oregon trust company within 30 days following the date on which notice of the offer was mailed or delivered to dissenting members shall be paid the price per share offered in cash, within 30 days following the date on which the member communicates acceptance in writing to the Oregon bank or Oregon trust company. Upon payment, the dissenting member shall cease to have any interest in the membership interests previously held by the member.

(7) If within 30 days after notice of the offer, one or more dissenting members do not accept the offer of the Oregon bank or Oregon trust company or if no offer is made, then the value of the membership interests of the dissenting members who have not accepted the offer shall be ascertained, as of the effective date of the conversion, by an independent, qualified appraiser chosen by the Director of the Department of Consumer and Business Services. The valuation determined by the appraiser shall govern and the appraiser’s valuation of the membership interests is not appealable except for one or more of the reasons set forth in ORS 36.705 (1)(a) to (d) for vacation of an arbitrator’s award, and for one of the grounds for modification or correction of an arbitrator’s award under ORS 36.710. Any appeal must be made within 30 days after the date of the appraiser’s valuation and is subject to ORS 183.415 to 183.500. The Oregon bank or Oregon trust company shall pay the dissenting members the appraised value of the membership interests within 30 days after the date the appraiser sends the Oregon bank or Oregon trust company written notice of the appraiser’s valuation.

(8) The director shall assess the reasonable costs and expenses of the appraisal proceeding equally to the Oregon bank or Oregon trust company and to the dissenting members, as a group, if the amount offered by the Oregon bank or Oregon trust company is between 85 percent and 115 percent of the appraised value of the membership interests. The director shall assess the reasonable costs and expenses of the appraisal proceeding and the reasonable costs and expenses, including attorney fees and costs, of the Oregon bank or Oregon trust company to the dissenting members, as a group, if the amount offered by the Oregon bank or Oregon trust company is 115 percent or more of the appraised value of the membership interests. The director shall assess the reasonable costs and expenses of the appraisal proceeding and the reasonable costs and expenses, including attorney fees and costs, of the dissenting members, as a group, to the Oregon bank or Oregon trust company if the amount offered by the Oregon bank or Oregon trust company is 85 percent or less of the appraised value of the membership interests. The director’s decision regarding assessment of fees and costs may be appealed as provided in ORS 183.415 to 183.500.

(9) Amounts required to be paid by the Oregon bank or Oregon trust company, or by the dissenting members under this section shall be paid within 30 days after the director’s assessment of any fees or costs becomes final, or, if the director’s decision is appealed, within 30 days after a final determination of the fees and costs is made.

(10) The director may require, as a condition of approving a plan of conversion, the replacement of all or a portion of the members’ equity of an Oregon bank or Oregon trust company.

(11) A dissenting member making a demand under subsection (4) of this section may withdraw the demand if:

(a) The Oregon bank or Oregon trust company consents to the withdrawal; or

(b) The dissenting member pays the member’s pro rata share of the appraisal costs and the Oregon bank’s or Oregon trust company’s reasonable costs and expenses, including attorney fees and costs.

(12) When a dissenting member withdraws the demand under subsection (11) of this section, the member’s status as a member shall be restored, without prejudice to any proceedings taking place in the interim.

Approved by the Governor June 6, 2005

Filed in the office of Secretary of State June 7, 2005

Effective date January 1, 2006

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