35-14-935. Effect of conversion. (1) When a conversion becomes effective:

(a) all property owned by and every contract right possessed by the converting entity remain the property and contract rights of the converted entity without transfer, reversion, or impairment;

(b) all debts, obligations, and other liabilities of the converting entity remain the debts, obligations, and other liabilities of the converted entity;

(c) the name of the converted entity may be but need not be substituted for the name of the converting entity in any pending action or proceeding;

(d) if the converted entity is a filing entity, a domestic business corporation, or a domestic or foreign nonprofit corporation, its public organic record and its private organic rules become effective;

(e) if the converted entity is a nonfiling entity, its private organic rules become effective;

(f) if the converted entity is a limited liability partnership, the filing required to become a limited liability partnership and its private organic rules become effective;

(g) the shares or eligible interests of the converting entity are reclassified into shares, eligible interests or other securities, obligations, rights to acquire shares, eligible interests or other securities, cash, or other property in accordance with the terms of the conversion, and the shareholders or interest holders of the converting entity are entitled only to the rights provided to them by those terms and to any appraisal rights they may have under the organic law of the converting entity; and

(h) the converted entity is:

(i) incorporated or organized under and subject to the organic law of the converted entity;

(ii) the same entity without interruption as the converting entity; and

(iii) considered to have been incorporated or otherwise organized on the date that the converting entity was originally incorporated or organized.

(2) When a conversion of a domestic corporation to a foreign eligible entity becomes effective, the converted entity is considered to have:

(a) appointed the secretary of state as its agent for service of process in a proceeding to enforce the rights of shareholders who exercise appraisal rights in connection with the conversion; and

(b) agreed that it will promptly pay any amount to which those shareholders are entitled under part 13 of this chapter.

(3) Except as otherwise provided in the articles of incorporation of a domestic corporation or the organic law or organic rules of a foreign corporation or a domestic or foreign eligible entity, a shareholder or eligible interest holder who becomes subject to interest holder liability with respect to a domestic corporation or eligible entity as a result of the conversion has the interest holder liability only with respect to interest holder liabilities that arise after the conversion becomes effective.

(4) Except as otherwise provided in the organic law or the organic rules of the eligible entity, the interest holder liability of an interest holder in a converting eligible entity that converts to a domestic corporation who had interest holder liability with respect to that converting eligible entity before the conversion becomes effective is as follows:

(a) The conversion does not discharge that prior interest holder liability with respect to any interest holder liabilities that arose before the conversion became effective.

(b) The provisions of the organic law of the eligible entity continue to apply to the collection or discharge of any interest holder liabilities preserved by subsection (4)(a) as if the conversion had not occurred.

(c) The eligible interest holder has the rights of contribution from other persons that are provided by the organic law of the eligible entity with respect to any interest holder liabilities preserved by subsection (4)(a) as if the conversion had not occurred.

(d) The eligible interest holder does not, by reason of the prior interest holder liability, have interest holder liability with respect to any interest holder liabilities that arise after the conversion becomes effective.

(5) A conversion does not require the converting entity to wind up its affairs and does not constitute or cause the dissolution or termination of the entity.

(6) Property held for charitable purposes under the laws of this state by a corporation or a domestic or foreign eligible entity immediately before a conversion may not, as a result of the transaction, be diverted from the objects for which it was donated, granted, devised, or otherwise transferred except and to the extent permitted by or pursuant to the laws of this state addressing cy pres or dealing with nondiversion of charitable assets.

(7) A bequest, devise, gift, grant, or promise contained in a will or other instrument of donation, subscription, or conveyance that is made to the converting entity and that takes effect or remains payable after the conversion inures to the converted entity.

(8) A trust obligation that would govern property if transferred to the converting entity applies to property that is transferred to the converted entity after the conversion takes effect.

History: En. Sec. 148, Ch. 271, L. 2019.