Washington Code 24.03A.875 – Effect of entity conversion
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(1) Except as provided in RCW 24.03A.770, when a conversion under RCW 24.03A.755 through 24.03A.880 becomes effective:
Terms Used In Washington Code 24.03A.875
- Appraisal: A determination of property value.
- Bequest: Property gifted by will.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Devise: To gift property by will.
- Gift: A voluntary transfer or conveyance of property without consideration, or for less than full and adequate consideration based on fair market value.
- Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Personal property: All property that is not real property.
(a) The title to all real and personal property, both tangible and intangible, of the converting entity remains in the surviving entity without reversion or impairment;
(b) The liabilities of the converting entity remain the liabilities of the surviving entity;
(c) An action or proceeding pending against the converting entity continues against the surviving entity as if the conversion had not occurred;
(d) In the case of a surviving entity that is a filing entity, its articles or public organic record and its private organic rules become effective;
(e) In the case of a surviving entity that is a nonfiling entity, its private organic rules become effective;
(f) The memberships or interests of the converting entity are reclassified into memberships, interests, other securities, obligations, rights to acquire memberships, interests, or securities, or into cash or other property in accordance with the plan of conversion; and the members or interest holders of the converting entity are entitled only to the rights provided to them under the terms of the conversion and to any appraisal rights they may have under the organic law of the converting entity;
(g) A devise, bequest, gift, grant, or promise contained in a will or other instrument, in trust or otherwise, made to or for the converting entity before or after the conversion, inures to the surviving entity, subject to the express terms of the will or other instrument; and
(h) The surviving entity is deemed to be:
(i) Incorporated or organized under and subject to the organic law of the converting entity for all purposes; and
(ii) The same nonprofit corporation or unincorporated entity without interruption as the converting entity.
(2) A member who becomes subject to interest holder liability for some or all of the debts, obligations, or liabilities of the surviving entity has interest holder liability only for those debts, obligations, or liabilities of the surviving entity that arise after the effective time of the articles of entity conversion.
(3) The interest holder liability of an interest holder in an unincorporated entity that converts to a domestic nonprofit corporation is as follows:
(a) The conversion does not discharge any interest holder liability under the organic law of the unincorporated entity to the extent the interest holder liability arose before the effective time of the articles of entity conversion.
(b) The interest holder does not have interest holder liability under the organic law of the unincorporated entity for any debt, obligation, or liability of the corporation that arises after the effective time of the articles of entity conversion.
(c) The provisions of the organic law of the unincorporated entity continue to apply to the collection or discharge of any interest holder liability preserved by (a) of this subsection, as if the conversion had not occurred.
(d) The interest holder has whatever rights of contribution from other interest holders are provided by the organic law of the unincorporated entity with respect to any interest holder liability preserved by (a) of this subsection, as if the conversion had not occurred.
NOTES:
Effective date—2021 c 176: See note following RCW 24.03A.005.