BILL NUMBER: AB 3101	CHAPTERED
	BILL TEXT

	CHAPTER   1105
	FILED WITH SECRETARY OF STATE   SEPTEMBER 30, 1996
	APPROVED BY GOVERNOR   SEPTEMBER 29, 1996
	PASSED THE ASSEMBLY   AUGUST 28, 1996
	PASSED THE SENATE   AUGUST 20, 1996
	AMENDED IN SENATE   JULY 10, 1996
	AMENDED IN SENATE   JUNE 25, 1996
	AMENDED IN ASSEMBLY   MAY 8, 1996
	AMENDED IN ASSEMBLY   APRIL 18, 1996
	AMENDED IN ASSEMBLY   APRIL 10, 1996

INTRODUCED BY  Assembly Member Isenberg
   (Principal coauthor:  Assembly Member Knowles)
   (Principal coauthors:  Senators Killea and Kopp)
   (Coauthors: Assembly Members Davis, Ducheny, Goldsmith, and
Morrow)

                        FEBRUARY 23, 1996

   An act to amend Section 5913 of, to add a heading of Article 1
(commencing with Section 5910) to, and to add Article 2 (commencing
with Section 5914) to, Chapter 9 of Part 2 of Division 2 of Title 1
of, the Corporations Code, relating to public benefit corporations.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 3101, Isenberg.  Public benefit corporations:  health
facilities:  sale of assets.
   Existing law provides that a public benefit corporation may sell,
lease, convey, exchange, transfer, or otherwise dispose of all or
substantially all of its assets when the principal terms are approved
by the board of directors and the members of the corporation and by
any other person whose approval is required by the articles, except
as specified.  Existing law requires a public benefit corporation to
give written notice to the Attorney General 20 days before it sells,
leases, conveys, exchanges, transfers, or otherwise disposes of all
or substantially all of its assets, except as specified.
   This bill would subject a nonprofit corporation that is subject to
the public benefit corporation law and is a health facility or
provides similar health care to additional requirements prior to the
corporation entering into any agreement or transaction to sell,
transfer, lease, exchange, option, convey, or otherwise dispose of a
material amount of its assets to a for-profit corporation or entity
or to a mutual benefit corporation or entity, unless the agreement or
transaction is in the usual and regular course of the activities of
the corporation or unless the Attorney General has given the
corporation a written waiver of these requirements as to the proposed
agreement or transaction.
   The bill would require the corporation to notify the Attorney
General.  The bill would require the Attorney General to conduct a
public meeting and to notify the corporation in writing of his or her
decision to consent, conditionally consent, or not consent to the
agreement or transaction.  The bill would authorize the Attorney
General to adopt regulations, to contract with, consult, and receive
advice from any state agency, and to contract with experts or
consultants.
   The bill would require the public benefit corporation to reimburse
the Attorney General for costs in complying with its provisions,
upon request of the Attorney General.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) Charitable, nonprofit health facilities, including nonprofit
hospitals, hold all of their assets in trust, and those assets are
irrevocably dedicated, as a condition of their tax-exempt status, to
the specific charitable purposes set forth in the articles of
incorporation of nonprofit entities.
   (b) The public is the beneficiary of the trust on which
charitable, nonprofit health facilities hold their assets.
   (c) Charitable, nonprofit health facilities have a substantial and
beneficial effect on the provision of health care to the people of
California, providing as part of their charitable mission
uncompensated care to uninsured low-income families and
under-compensated care to the poor, elderly, and disabled.
   (d) Transfers of the assets of nonprofit, charitable health
facilities to the for-profit sector, such as by sale, joint venture,
or other sharing of assets, directly affect the charitable use of
those assets and may affect the availability of community health care
services.
   (e) The state Attorney General is entrusted by law to bring
actions on behalf of the public in the event of a breach of the
charitable trust of a nonprofit entity and to represent the public in
the sale or other transfer of the assets of a nonprofit entity.
   (f) It is in the best interests of the public to ensure that the
public interest is fully protected whenever the assets of a
charitable nonprofit health facility are transferred out of the
charitable trust and to a for-profit or mutual benefit entity.
   (g) The consent of the state Attorney General shall be required
for any transaction involving a nonprofit, charitable health facility
when a material amount of the charitable assets are transferred to a
for-profit or mutual benefit entity.
  SEC. 2.  A heading of Article 1 (commencing with Section 5910) is
added to Chapter 9 of Part 2 of Division 2 of Title 1 of the
Corporations Code, to read:

      Article 1.  General Provisions

  SEC. 3.  Section 5913 of the Corporations Code is amended to read:

   5913.  Except for an agreement or transaction subject to Section
5914, a corporation must give written notice to the Attorney General
20 days before it sells, leases, conveys, exchanges, transfers or
otherwise disposes of all or substantially all of its assets unless
the transaction is in the usual and regular course of its activities
or unless the Attorney General has given the corporation a written
waiver of this section as to the proposed transaction.
  SEC. 4.  Article 2 (commencing with Section 5914) is added to
Chapter 9 of Part 2 of Division 2 of the Corporations Code, to read:


      Article 2.  Health Facilities

   5914.  (a) Any nonprofit corporation that is subject to the public
benefit corporation law and is a health facility, as defined in
Section 1250 of the Health and Safety Code, or is a facility that
provides similar health care, shall be required to provide written
notice to, and to obtain the written consent of, the Attorney General
prior to entering into any agreement or transaction to do either of
the following:
   (1) Sell, transfer, lease, exchange, option, convey, or otherwise
dispose of, its assets to a for-profit corporation or entity or to a
mutual benefit corporation or entity when a material amount of the
assets of the public benefit corporation are involved in the
agreement or transaction.
   (2) Transfer control, responsibility, or governance of a material
amount of the assets or operations of the nonprofit public benefit
corporation to any for-profit corporation or entity or to any mutual
benefit corporation or entity.
   (b) The notice to the Attorney General provided for in this
section shall include and contain the information the Attorney
General determines is required.
   (c) This article shall not apply to a public benefit corporation
if the agreement or transaction is in the usual and regular course of
its activities or if the Attorney General has given the corporation
a written waiver of this article as to the proposed agreement or
transaction.
   5915.  Within 60 days of the receipt of the written notice
required by Section 5914, the Attorney General shall notify the
public benefit corporation in writing of the decision to consent to,
give conditional consent to, or not consent to the agreement or
transaction.  The Attorney General may extend this period for one
additional 45-day period, provided the extension is necessary to
obtain information pursuant to subdivision (a) of Section 5919.
   5916.  Prior to issuing any written decision referred to in
Section 5915, the Attorney General shall conduct one or more public
meetings, one of which shall be in the county in which the facility
is located, to hear comments from interested parties.  At least 14
days before conducting the public meeting, the Attorney General shall
provide written notice of the time and place of the meeting through
publication in one or more newspapers of general circulation in the
affected community and to the board of supervisors of the county in
which the facility is located.
   5917.  The Attorney General shall have discretion to consent to,
give conditional consent to, or not consent to any such agreement or
transaction described in subdivision (a) of Section 5914.  In making
the determination, the Attorney General shall consider any factors
that the Attorney General deems relevant, including, but not limited
to, whether any of the following apply:
   (a) The terms and conditions of the agreement or transaction are
fair and reasonable to the nonprofit public benefit corporation.
   (b) The agreement or transaction will result in inurement to any
private person or entity.
   (c) Any agreement or transaction that is subject to this article
is at fair market value.  In this regard, "fair market value" means
the most likely price that the assets being sold would bring in a
competitive and open market under all conditions requisite to a fair
sale, the buyer and seller, each acting prudently, knowledgeably and
in their own best interest, and a reasonable time being allowed for
exposure in the open market.
   (d) The market value has been manipulated by the actions of the
parties in a manner that causes the value of the assets to decrease.

   (e) The proposed use of the proceeds from the agreement or
transaction is consistent with the charitable trust on which the
assets are held by the health facility or by the affiliated nonprofit
health system.
   (f) The agreement or transaction involves or constitutes any
breach of trust.
   (g) The Attorney General has been provided, pursuant to Section
5250, with sufficient information and data by the nonprofit public
benefit corporation to evaluate adequately the agreement or
transaction or the effects thereof on the public.
   (h) The agreement or transaction may create a significant effect
on the availability or accessibility of health care services to the
affected community.
   (i) The proposed agreement or transaction is in the public
interest.
   5918.  The Attorney General may adopt regulations implementing
this article.
   5919.  (a) Within the time periods designated in Section 5915 and
relating to those factors specified in Section 5917, the Attorney
General may do the following:
   (1) Contract with, consult, and receive advice from any state
agency on those terms and conditions that the Attorney General deems
appropriate.
   (2) In his or her sole discretion, contract with experts or
consultants to assist in reviewing the proposed agreement or
transaction.
   (b) Contract costs shall not exceed an amount that is reasonable
and necessary to conduct the review and evaluation.  Any contract
entered into under this section shall be on a noncompetitive bid
basis and shall be exempt from Chapter 2 (commencing with Section
10290) of Part 2 of Division 2 of the Public Contract Code.  The
nonprofit public benefit corporation, upon request, shall pay the
Attorney General promptly for all contract costs.
   (c) The Attorney General shall be entitled to reimbursement from
the nonprofit public benefit corporation for all actual, reasonable,
direct costs incurred in reviewing, evaluating, and making the
determination referred to in this article, including administrative
costs.  The nonprofit public benefit corporation shall promptly pay
the Attorney General, upon request, for all such costs.