By Kevin Handly
Effective July 1, 2004, the Massachusetts Business Corporation Act, MGL chapter 156D (“156D”), replaced the former business corporation law, chapter 156B (“156B”), as the basic business corporation law of Massachusetts. This was a bold move, many years in the making, and brought the Commonwealth into the mainstream community of states that base their corporation laws on the American Bar Association’s Model Business Corporation Act. When a Massachusetts business corporation wants to merge, amend its articles, change its name, issue or retire capital stock, organize a holding company, liquidate or reorganize, its lawyers look to the provisions of 156D. Surprisingly, to this day nearly 10 years later, the Massachusetts banking laws have not caught up, but still refer in thirty-two different places -- to 156B.
At the time of 156D’s enactment, it was thought this anomaly would be short-lived. The proponents of the new Business Corporation Act had enough on their hands convincing the legislature to update the general business corporation laws. Surely, the banking laws were the province of lawyers who specialized in that field and regularly conducted corporate transactions for banks. They could be depended upon to quickly suggest the necessary modifications to bring the banking laws’ cross references to 156B into line with 156D. As the draftsmen’s commentary to chapter 156D noted, “it is expected that over time . . . the existing references to the BCL in other statutes will be changed to incorporate various sections of [156D].”
Well, that was over nine years ago, and the references to the 156B in the banking laws are still there today. As a result, lawyers planning corporate transactions involving Massachusetts banks still need to refer to 156B (a law that has no function other than giving meaning to these outdated cross-references in the banking laws), 156D (which governs corporate transactions of the holding companies of most Massachusetts banks), and the applicable banking law itself (either chapter 168 governing savings banks, chapter 170 governing cooperative banks or chapter 172 governing trust companies).
Apart from the burden and expense of consulting three separate sets of laws –156B, 156D and the applicable banking law to structure a Massachusetts bank’s corporate transactions, the failure to update the Commonwealth’s banking laws also produces anomalous results when it comes to transactional filings at the Secretary of State’s office. The Corporations Division long ago replaced all of its preprinted forms referencing 156B with updated forms referencing the appropriate sections of 156D. But when a Massachusetts bank seeks to merge or amend its charter, increase its capital stock, or perform some other corporate transaction, the new forms simply don’t work. For that reason, the Corporations Division still keeps a supply of old forms referencing 156B to use for banking transactions.
Noticing this state of affairs and that no one else seemed to be doing anything about it, banking and corporate transactional lawyers from Pierce Atwood LLP, a Maine firm then newly arrived on the Boston banking scene, saw an opportunity to be helpful. The firm came up with a legislative proposal to replace the outdated 156B references in the banking laws with updated references to the appropriate sections of 156D. They were careful to avoid substantive changes to the banking laws, and to fashion the bill (insofar as possible) as a strictly neutral update of technical corporate law provisions. They provided copies and separate briefings on the bill to Terry Flynn, General Counsel at the Corporations Division, and Joseph Leonard, General Counsel at the Division of Banks. They briefed Kathleen Joyce, the legislative expert of the Boston Bar Association, and offered a similar briefing to Kathleen’s counterpart at the Massachusetts Bar Association. With the assistance of the Massachusetts Bankers Association and Representative David Nangle of 17th Middlesex, the bill was introduced and tagged number 1000 in January 2009 (“H.B. 1000”). A short time later, H.B. 1000 was endorsed by the Council of the Boston Bar Association.
The legislative draftsmen met with then-House chair of the Joint Committee on Financial Services, Peter Koutoujian, and his chief of staff, Karl Abate, to brief them on the bill, answer any questions and urge swift passage. On February 4, 2009, in the presence of Joe Leonard, the Pierce Atwood team appeared and testified in support of the bill at an open hearing of the Joint Committee. Dave Floreen, Beacon Hill lobbyist for the Massachusetts Bankers Association, stood and spoke in favor of the bill. And that’s as far as it went. The bill stalled, ran out of gas, was referred for further study, was not debated or discussed and went no further on Beacon Hill.
H.B. 1000 died a quiet death. It wasn’t even re-filed when the new legislative session commenced in 2011. Later, filed by Rep. Jeffrey Sanchez H.B. 1000 was referred to the Committee on Rules but never emerged – another good idea dying a quiet and slow death in the Byzantine halls of Beacon Hill.
Or so it seemed until now. Today, H.B. 1000 has been picked up once again by the Financial Services Section of the Boston Bar Association and is on Kathy Joyce’s desk ready to be re-filed when the 188th Session of the General Court opens in January 2013. On October 11, 2012 Kevin Handly and Kathy Joyce hosted a brown bag lunch to brief Boston Bar Association members on the bill and garner membership support. With the recent formation by the Massachusetts Bankers Association of a special task force to examine and improve the Massachusetts banking laws, the subject of banking law reform seems to be moving to center stage. Perhaps this time, the General Court will take up the call and enact the much needed legislation to provide Massachusetts banks the legal framework they need to thrive and grow and better serve their communities.
 The cross references to chapter 156B appear in sections 34, 34A, 34B, 34D and 34F of chapter 168 (savings banks), sections 26A, 26B and 26D of chapter 170 (cooperative banks), and sections 12, 24, 26B, 36A, 36C and 36F of chapter 172 (trust companies). They deal with such things as dissenters’ rights of appraisal, special meetings of stockholders, the timing, manner of effecting, and legal effects of a bank merger, amendment of articles of organization, and the like.