2007 Legislative Update:  New Colorado Business Laws to Come into Play for Business

For the second legislative session in a row, the Colorado legislature made significant changes to Colorado law regarding mergers and conversions.  HB 1135, which was supported by the Business Law Section of the Colorado Bar Association and sponsored by Representative Robert E. Witwer, contains a number of substantial changes for Colorado business entities.  The effective date of HB 1135 is May 29, 2007.  Colorado businesses engaging in mergers or conversions after this date need to be aware of the new requirements. 

Approval Requirements for Mergers and Conversions
The bill contains a number of amendments to the merger and to the conversion process.  Specifically, the bill provides changes in the following areas:

·         Required provisions for Plans of Conversion and Plans of Merger

·         Approval requirements for Plans of Conversion and Plans of Merger

·         Legal effects of conversions and mergers

·         Dissenters rights—addressing the applicability of a surviving entity’s constituent operating documents to persons who do not exercise dissenters rights

The changes are comprehensive in nature and apply to all forms of business entities, including corporations, limited liability companies, partnerships, nonprofit corporations and cooperatives.

With the increased popularity in conversions over the past few years, as well as Colorado’s robust M&A market for middle market companies, it is likely that these changes will come into play for many Colorado companies in the near future.

Other Changes
In addition to the changes regarding approval requirements, the same HB 1135 addressed other issues for Colorado business entities.  Specifically, the law:    

·         Provides members of limited liability companies with the right to have a formal accounting of the limited liability company’s affairs whenever circumstances render it “just and reasonable”

·         Changes the time period from six years to three years for which a partner who has received a return of a capital contribution in violation of the partnership agreement is liable to a limited partnership

·         Clarifies the definition of what constitutes a company’s “principal address” for service of process and other purposes 

This legal update is for informational purposes only, as a service to clients and other friends, and is neither to be construed as legal advice nor intended as basis for decisions in specific situations.  For more information about this subject matter or other recent developments, please contact the attorneys in our Colorado Corporate Law practice group or any other attorney in our firm with whom you normally consult by calling (303) 825-4200.