Indiana Business Entity Harmonization: Part IV

iStock-621263016-300x97[March 3, 2018. The General Assembly amended some of the provisions created the Business Entity Harmonization Bill, as discussed in a Postscript to this series.]

This is the last in four-part series. The first three parts are here: here, here, and here.

This Part IV describes some flaws of Senate Enrolled Act 443 that we ran across while writing the first three parts.  We hope the General Assembly will address them, either in the 2018 session or another.

Relationship to ESIGN

I.C. § 23‑0.6‑6‑2 contains a curious provision:

[Article 0.6 of the Uniform Business Organization Transactions Act] modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. 7001, et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. 7003(b).

The federal statute described above, usually called ESIGN, has the general effect of rendering electronic records and electronic signatures valid for most purposes that paper records and manual signatures are valid, with certain exceptions, including those described in 15 U.S.C. §§ 7001(c) (relating to disclosures under consumer laws) and 7003(b) (relating to court orders, documents related to hazardous materials, and a few other specific documents), referenced above.

ESIGN permits a state law to supersede its provisions (again with certain exceptions) in two situations:  (1) the state law constitutes an enactment of the Uniform Electronic Transactions Act (known as UETA) or (2) the state law provides alternative procedures or requirements to substitute for the procedures set forth in ESIGN. I.C. § 23‑0.6‑6‑2 appears to be written to invoke the second method of superseding the provisions of ESIGN.

The curious part is that Indiana has already superseded ESIGN very broadly through the first method — by enacting its version of UETA at I.C. ch. 26‑2‑8. The provision is even more curious in that it applies only to Article 0.6, not to Article 0.5, which also has record and signature requirements.

The question arises, if there are differences between Article 0.6 and Indiana’s enactment of UETA, which controls? If one follows the usual rule that a specific statute controls over a conflicting general statute, UETA does not apply to Article 0.6, but it does control records and signatures under Article 0.5 — hardly a logical result. A better approach would be to provide that UETA controls records and signatures required or permitted under either Article 0.5 or Article 0.6.

“Company” or “Co.” in Assumed Business Names for LLCs, LPs, and LLPs

I.C. § 23‑0.5‑3‑4(f) retains the following language from previous versions of the statute:

A filing entity may not include an entity indicator, such as “Inc.”, “Corp.”, “LLC”, “LP”, or “LLP” or a similar description in an assumed business name filing, that is inconsistent with the entity type for which the assumed business name is being filed.

The obvious goal is to prevent an assumed business name from presenting a misleading impression that an entity has one form when it actually has another. An issue that predates the Business Entity Harmonization Bill is that “company” and “Co.,” both entity indicators for corporations, are historically common in the names of businesses that are not corporations. It seems unlikely that people would be misled into assuming the business is a corporation based solely on the word “company” or “Co.” in its name, as evidenced by the fact that the statute does not prohibit general partnerships or sole proprietorships from using an assumed business name with “Company” or “Co.” (or any other entity indicator, for that matter). I.C. § 23‑0.5‑3‑4(a)-(d)  In fact, the Secretary of State appears to recognize as much because the Secretary of State’s website lists many LLCs, LPs, and LLPs with assumed business names that include one of those words.

“LP” is Not an Approved Entity Indicator for Limited Partnerships

I.C. § 23‑0.5‑3‑2(b) retains the requirement that the name of a limited partnership must contain the words “limited partnership” or the abbreviation “L.P.” Even though LLC names and LLP names may include the abbreviation either with or without the periods, “LP” (without the periods) is not a permissible entity indicator for limited partnerships. Again, the Secretary of State accepts limited partnership names that include “LP” without the periods, even though the statute does not expressly approve them.

Nonprofit Corporation Names Omitted

In an apparent oversight, SEA 443 repeals the previous sections of the Nonprofit Corporation Act addressing naming requirements with no replacement provision in the section that addresses the names of other types of entities, I.C. § 23‑0.5‑3‑2.

[March 3, 2018. This omission was corrected by the General Assembly’s amendments discussed in the Postscript to this series.]

Incorrect Citations to the Nonprofit Corporation Act

New Article 0.6 of Title 23 contains two citations obviously incorrect citations to I.C. ch. 23‑17‑9, one in I.C. § 23‑0.6‑1.5‑19 (the Article 0.6 definition of organic law) and one in I.C. § 23‑0.6‑2‑1(d) (excluding nonprofit corporations from the merger provisions of Article 0.6). At least the second citation, and probably both of them, should instead refer to I.C. ch. 23‑17‑19, dealing with mergers of nonprofit corporations.

[March 3, 2018. the incorrect citations were corrected by the General Assembly’s amendments discussed in the Postscript to this series.]