Bill Text: TX SB1623 | 2019-2020 | 86th Legislature | Enrolled


Bill Title: Relating to nonprofit legal services corporations.

Spectrum: Slight Partisan Bill (Republican 2-1)

Status: (Passed) 2019-06-10 - Effective on 9/1/19 [SB1623 Detail]

Download: Texas-2019-SB1623-Enrolled.html
 
 
  S.B. No. 1623
 
 
 
 
AN ACT
  relating to nonprofit legal services corporations.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Section 501.204(a), Insurance Code, is amended
  to read as follows:
         (a)  This section applies to each insurer authorized to
  engage in business in this state under:
               (1)  Chapter 841;
               (2)  Chapter 842;
               (3)  Section 1367.053, Subchapter A, Chapter 1452,
  Subchapter B, Chapter 1507, Chapter 222, 251, or 258, as applicable
  to a health maintenance organization, Chapter 843, Chapter 1271, or
  Chapter 1272;
               (4)  Chapter 882;
               (5)  Chapter 884;
               (6)  Chapter 885;
               (7)  Chapter 887;
               (8)  Chapter 888;
               (9)  [Chapter 961;
               [(10)] Chapter 962;
               (10) [(11)]  Chapter 982;
               (11) [(12)]  Subchapter B, Chapter 1103;
               (12) [(13)]  Subchapter A, Chapter 1104;
               (13) [(14)]  Chapter 1201, or a provision listed in
  Section 1201.005;
               (14) [(15)]  Chapter 1551;
               (15) [(16)]  Chapter 1578; or
               (16) [(17)]  Chapter 1601.
         SECTION 2.  Section 961.002(a), Insurance Code, is amended
  to read as follows:
         (a)  The Texas Nonprofit Corporation Law as described by
  Section 1.008, Business Organizations Code, applies [Texas
  Miscellaneous Corporation Laws Act (Article 1302-1.01 et seq.,
  Vernon's Texas Civil Statutes) and the Texas Non-Profit Corporation
  Act (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes)
  apply] to a nonprofit legal services corporation to the extent
  provided by [not in conflict with] this chapter.
         SECTION 3.  Section 961.003, Insurance Code, is amended to
  read as follows:
         Sec. 961.003.  CORPORATION NOT SUBJECT TO DEPARTMENT
  REGULATION.  A [Each] nonprofit legal services corporation is not 
  subject to [this chapter and to direct] regulation by the
  department.
         SECTION 4.  Section 961.004, Insurance Code, is amended to
  read as follows:
         Sec. 961.004.  CORPORATION NOT ENGAGED IN BUSINESS OF
  INSURANCE. A nonprofit legal services corporation [that complies
  with this chapter] is not engaged in the business of insurance and[,
  except as provided by Section 961.002(b),] is not subject to laws
  relating to insurers.
         SECTION 5.  The heading to Section 961.051, Insurance Code,
  is amended to read as follows:
         Sec. 961.051.  FILING OF CERTIFICATE OF FORMATION
  [APPLICATION FOR CORPORATE CHARTER]; NONPROFIT STATUS REQUIRED.
         SECTION 6.  Section 961.051, Insurance Code, is amended by
  amending Subsection (a) and adding Subsection (a-1) to read as
  follows:
         (a)  Seven or more persons may file with [apply to] the
  secretary of state a certificate of formation in accordance with
  Title 1, Business Organizations Code, to form a nonprofit legal
  services corporation.
         (a-1)  Notwithstanding Subsection (a), a nonprofit legal
  services corporation that on or before September 1, 2019, was
  organized [for a corporate charter] under the former Texas
  Non-Profit Corporation Act (Article 1396-1.01 et seq., Vernon's
  Texas Civil Statutes) or was formed under the Texas Nonprofit
  Corporation Law, as described by Section 1.008, Business
  Organizations Code, is [for] a nonprofit legal services corporation
  for purposes of this chapter.
         SECTION 7.  The heading to Subchapter D, Chapter 961,
  Insurance Code, is amended to read as follows:
  SUBCHAPTER D.  OFFICERS [BOARD OF DIRECTORS; PERSONNEL]
         SECTION 8.  Section 961.152, Insurance Code, is amended to
  read as follows:
         Sec. 961.152.  FINANCIAL OFFICER[; BOND].  [(a)]  A
  nonprofit legal services corporation, by resolution entered in its
  minutes, shall designate one or more officers to be responsible for
  handling the corporation's funds.  [The president, secretary, or
  general manager of the corporation must certify a copy of the
  resolution, and the corporation shall file the copy with the
  department.
         [(b)     Except as provided by Subsection (c), the corporation
  shall make and file a separate or blanket surety bond covering each
  officer designated under Subsection (a).   The bond must:
               [(1)     be issued by a corporate surety company
  authorized to issue surety bonds in this state;
               [(2)     be satisfactory to the department and payable to
  the department for the use and benefit of the corporation;
               [(3)     obligate the principal and surety to pay any
  monetary loss to the corporation through an act of fraud,
  dishonesty, forgery, theft, embezzlement, or wilful misapplication
  by a covered officer, whether acting alone or with other persons,
  while employed as or exercising the powers of an officer designated
  under Subsection (a); and
               [(4)     be in an amount of at least $25,000 for each
  officer covered.
         [(c)     Instead of the bond required by Subsection (b), an
  officer designated under Subsection (a) may deposit with the
  department cash or securities approved by the department in the
  amount and subject to the conditions applicable to the bond.
         [(d)     Successive recoveries may be made on a bond under this
  section until the amount of the bond is exhausted.]
         SECTION 9.  The heading to Subchapter E, Chapter 961,
  Insurance Code, is amended to read as follows:
  SUBCHAPTER E.  OPERATION [REGULATION] OF NONPROFIT LEGAL SERVICES
  CORPORATIONS
         SECTION 10.  Section 961.206, Insurance Code, is amended to
  read as follows:
         Sec. 961.206.  ADVANCE TO CORPORATION. Any person may
  advance to a nonprofit legal services corporation, on a contingent
  liability basis, money necessary for the purposes of the
  corporation's business or to comply with this chapter[, except that
  the advance may be repaid only on prior approval of the department].  
  The advance may be made in an amount and at a rate of interest agreed
  to by the person and the corporation.
         SECTION 11.  Section 961.207, Insurance Code, is amended to
  read as follows:
         Sec. 961.207.  PARTICIPATION AGREEMENTS.  A [(a) Subject to
  Subsection (b), a] nonprofit legal services corporation may:
               (1)  contract with another nonprofit legal services
  corporation or an insurer authorized to engage in business in this
  state for joint participation through:
                     (A)  a mutualization contract agreement; or
                     (B)  a guaranty treaty; and
               (2)  cede or accept a legal services obligation from
  such a corporation or insurer on all or part of a legal services
  obligation.
         [(b)     Each document used for a purpose described by
  Subsection (a) must be filed with the department and approved by the
  department to be in accordance with the corporation's plan of
  operation before the document takes effect.
         [(c)     To carry out the purposes of this section, the
  commissioner may adopt rules governing an agreement with an insurer
  under Subsection (a).]
         SECTION 12.  Section 961.254(a), Insurance Code, is amended
  to read as follows:
         (a)  A nonprofit legal services corporation may issue a
  contract for legal services[, as provided by rules adopted by the
  commissioner,] providing for indemnity for costs of services of an
  attorney who is not a contracting attorney [if the department is
  satisfied that the corporation's plan of operation, experience, and
  financial standing, including a proper amount of unencumbered
  surplus, are adequate to ensure performance of the contract].
         SECTION 13.  Section 961.301, Insurance Code, is amended to
  read as follows:
         Sec. 961.301.  CONTRACTS WITH ATTORNEYS.  [(a)]  A nonprofit
  legal services corporation may contract with qualified attorneys
  [as provided by this chapter] to ensure to each participant legal
  services performed by the attorneys under the contract for legal
  services between the corporation and the participant.  A
  contracting attorney must be licensed to practice law in the
  jurisdiction in which legal services are to be provided.
         [(b)     Before issuing a contract for legal services and while
  the corporation continues to issue those contracts, the corporation
  must maintain the number of contracting attorneys that the
  department determines is necessary to service the participant
  contracts contemplated by the corporation's plan of operation.]
         SECTION 14.  Section 961.307, Insurance Code, is amended to
  read as follows:
         Sec. 961.307.  COMPLAINT REGARDING ATTORNEY. If a nonprofit
  legal services corporation [the department] receives a complaint
  concerning the performance of an attorney connected with the [a
  nonprofit legal services] corporation, the corporation
  [department] shall refer the complaint to:
               (1)  the supreme court of this state or a person that
  the supreme court designates to receive attorney grievances from
  the public, if the attorney is licensed by this state; or
               (2)  the appropriate licensing agency of another
  jurisdiction where the attorney is licensed, if the attorney is not
  licensed by this state.
         SECTION 15.  Section 961.402, Insurance Code, is amended to
  read as follows:
         Sec. 961.402.  VOLUNTARY DISSOLUTION. (a)  The board of
  directors of a nonprofit legal services corporation may vote to
  dissolve the corporation at any time[, but the corporation may not
  be dissolved without the department's approval].
         (b)  In a dissolution under this section, the officers of the
  corporation shall settle all outstanding obligations to
  participants and otherwise dispose of the corporation's affairs.  
  After the officers have completed the corporation's liquidation
  [and a final settlement has been filed with and approved by the
  department], the corporation shall be dissolved as provided by:
               (1)  the provisions relating to winding up and
  termination under Subchapter G, Chapter 22, Business Organizations
  Code; or
               (2)  if the corporation was organized [to voluntary
  dissolution] under the former Texas Non-Profit Corporation Act
  (Article 1396-1.01 et seq., Vernon's Texas Civil Statutes), the
  provisions relating to voluntary dissolution under that former law.
         SECTION 16.  Section 4001.002(a), Insurance Code, is amended
  to read as follows:
         (a)  Except as otherwise provided by this code, this title
  applies to each person licensed under:
               (1)  Subchapter H, Chapter 885;
               (2)  Subchapter F, Chapter 911;
               (3)  Section 912.251;
               (4)  [Section 961.005;
               [(5)] Subchapter E, Chapter 981;
               (5) [(6)]  Subchapter D, Chapter 1152;
               (6) [(7)]  Subchapter C or D of this chapter;
               (7) [(8)]  Subtitle B, C, or D of this title; or
               (8) [(9)]  Subsection (c), Article 5.13-1.
         SECTION 17.  The following provisions of the Insurance Code
  are repealed:
               (1)  Chapter 260;
               (2)  Sections 961.002(b) and 961.005;
               (3)  Section 961.052;
               (4)  Subchapter C, Chapter 961;
               (5)  Sections 961.151 and 961.153;
               (6)  Sections 961.201, 961.202, 961.203, 961.204,
  961.205, 961.208, 961.209, 961.210, 961.211(b), and 961.212;
               (7)  Section 961.252;
               (8)  Sections 961.304 and 961.305(b); and
               (9)  Sections 961.401, 961.403, and 961.404.
         SECTION 18.  This Act takes effect September 1, 2019.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 1623 passed the Senate on
  May 10, 2019, by the following vote:  Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 1623 passed the House on
  May 22, 2019, by the following vote:  Yeas 142, Nays 2, two
  present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor
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