Analysis

Topic: Corporations
Sponsor: Senator Bullard
Date Introduced: February 14, 2001
Date Ordered Enrolled: June 26, 2001
Date of Analysis: July 2, 2001

Position: The Department of Consumer and Industry Services supports the bill.

Background: In 1989 the Attorney General ruled (OAG 6592) that Section 13 of the Professional Service Corporation Act does not include amendments to the Business Corporation Act that occurred subsequent to its last amendment. Section 13 states that the requirements of the Business Corporation Act apply to professional service corporations, except to the extent there is a conflict. Where there is a conflict, the requirements of the Professional Service Corporation Act apply.

Some analysts believe the opinion is inconsistent with Section 8 of the Revised Statutes of 1846. This section was added to the statute in 1982 and seems to provide that when reference is made in any statute to any other statute the latest amendments to that other statute are included.

Bill Content: The bill amends Section 13 of the Professional Service Corporation Act by inserting an enacting section. The enacting section states that it is the Legislature's intent to eliminate confusion with respect to the application of the Business Corporation Act to professional service corporations. The enacting section also declares that the reference to the Business Corporation Act in Section 13 includes the latest amendments to that act.

Arguments For: It is beneficial to the public and for administration of the act if the most recent amendments to the Business Corporation Act apply to professional service corporations. The Business Corporation Act has been frequently amended in recent years. Subsequent to the amendments in 1987 discussed in the Attorney General's opinion, there have been amendments in 1989 and 1997. Additional amendments are proposed in Senate Bill 206, which has been returned to the Senate for enrolling and presentation to the Governor. The bill will eliminate significant confusion with respect to the application of these amendments to professional service corporations.

Arguments Against: It is not clear that a statement of legislative intent in an enacting section will overcome the problem identified in OAG 6592. Nor will the amendment accomplish the objective of the bill's proponents to incorporate the latest amendments to the Business Corporations Act without the need to amend the Professional Services Corporations Act. A 1984 Court of Appeals ruling in the case of Michigan Manufacturing Association v. James Brakora, et. al. stated that the adoption by reference of future legislation and rules is unconstitutional. The confusion in this area is therefore likely to continue.

Supporters/Opponents: No information is available on supporters or opponents.

Fiscal Impact: The bill would have no fiscal impact on the Department of Consumer and Industry Services.

Administrative Rules Impact: No new or revised administrative rules would be required as a result of this bill.