Secretary of State
General Assembly Passes Second Major Business Enhancement Legislation in as Many Years; Grayson’s Legislative Priority Heads to Governor’s Desk

Press Release Date:  Tuesday, March 27, 2007  
Contact Information:  Les Fugate, Deputy Assistant Secretary of State
Office of the Secretary of State
Office: (502) 564-3490
Cell: (502) 229-3803

(Frankfort, KY)  The Kentucky State House today passed HB 334, sponsored by Rep. Scott Brinkman (R-Louisville), one of the largest pieces of modernization legislation for Kentucky Business Entity laws in the Commonwealth’s history.  The over 200 page bill focuses primarily on providing conformity among business entity statutes. This change will not only make Kentucky law easier to clarify to constituents; it reduces the burdensome bureaucratic hoops that many citizens face when trying to form a business entity.


“This legislation will be a big boost to small business owners who may choose to file their business entities on their own.  So many times in our office, we spend time trying to explain why an arcane statute will allow for one procedure for a certain type of business entity but not for others,” remarked Grayson.  “This legislation reduces the burden on small businesses so that we may have a more vibrant economy.  I am grateful for the time that Rep. Brinkman, Chairman Robert Stivers (R-Manchester), and Chairman Kathy Stein (D-Lexington) have dedicated to this bill and to members of the legislature for their overwhelming support of the legislation.”


The legislation is a response to an effort to step back, assess the position of Kentucky Business Entity Law, and lay the framework for future innovation and development.  The legislation makes sure that the laws in place are effective by eliminating and reconciling meaningless inconsistencies between statutes.  One of the primary focuses of the bill is to address the variations of the corporate and other business organization acts regarding business entity names.


Rep. Brinkman remarked, “I am pleased to have worked with Secretary of State Grayson, Dean Vestal of the University of Kentucky College of Law and numerous business lawyers throughout Kentucky in further modernizing our business entity laws through the passage of House Bill 334.  It is important for our Kentucky businesses as well as our Kentucky attorneys that our laws regulating business entities be clear, concise and consistent.”


Testifying on behalf of the bill earlier in the 2007 session were Tom Rutledge, an authority on business law from the firm of Stoll, Keenon and Ogden and Allan Vestal, Dean of the University of Kentucky School of Law.

“With the passage of House Bill 334, we bring the process of modernization and harmonization of Kentucky Entity Law significantly towards a conclusion, leaving Kentucky solidly in the progressive mainstream as an excellent choice for a friendly location in which to organize a business,” commented Dean Vestal.

Tom Rutledge noted that with its passage, House Bill 334 will make it “considerably easier for Kentucky’s lawyers and business people to interact with the Office of the Secretary of State and to successfully file a business entity.”

Another important change includes the adoption of not-for-profit LLC’s.  When LLC law was originally written, it did not contemplate LLC’s in a non-profit status.  However, a court decision in 1999 held that an LLC need not have a for-profit purpose.  The bill requires that non-profit LLC’s be subject to similar limitations as non-profit corporations. 


The bill adds provisions to the Business Trust Act to make certain its provisions are uniform with rules applied to other forms of business organizations.  It allows corporations to convert to an LLC as well as provide for the existence of an LLC after the death or other termination of its last member.  Finally, the bill brings the Business Corporation Act closer to the Model Business Corporation Act.


The legislation was a top priority for Secretary of State Trey Grayson in the 2007 legislative session and now heads to Governor Fletcher for his consideration.


            During the 2006 session the Generally Assembly passed legislation that substantially modernized and enhanced Kentucky partnership law for the first time in over fifty years.  House Bill 234, also sponsored by Rep. Brinkman, aligned Kentucky law with the most recent version of the Uniform Partnership Act, as approved by the National Conference of Commissioners on Uniform State Laws.  The two bills represent the largest changes to Kentucky Business Entity Legislation in decades.


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