Conversions of Idaho Entities

The Idaho Model Entity Act ("MET Act") authorizes conversion of Idaho entities. A conversion is the change of one type of entity to another type of entity. I.C. § 30-22-401. For example, a corporation changes to a limited liability company. An Idaho entity may convert into a different Idaho entity or a foreign entity. Id. However, an Idaho entity may only convert to a foreign entity if the law of the State of the foreign entity allows it.  I.C. § 30-22-401(b).

Plan of Conversion

An Idaho entity may complete a conversion if it adopts a plan. I.C. § 30-22-402(a). The Plan of Conversion must be in writing and state:

  • The name and type of entity of the converting entity. I.C. § 30-22-402(a)(1).
  • The name, jurisdiction of formation, and type of entity of the converted entity. I.C. § 30-22-402(a)(2).
  • The manner of converting the interests in the converting entity into interests, securities, obligations, money, other property, rights to acquire interests or securities, or any combination of the foregoing. I.C. § 30-22-402(a)(3).
  • The proposed public organic record of the converted entity if it will be a filing entity. I.C. § 30-22-402(a)(4).
  • The full text of the "private organic rules" of the converted entity that are proposed to be in a record. I.C. § 30-22-402(a)(5). 
  • The other terms and conditions of the conversion. I.C. § 30-22-402(a)(6).
  • Any other provision required by the law of this state or the "organic rules" of the converting entity. I.C. § 30-22-402(a)(7).

Approval of the Plan of Conversion

The Plan of Conversion must be approved by the Idaho entity. I.C. § 30-22-403(a)(1). The plan must be approved according the "organic rules" of the entity. I.C. § 30-22-403(a)(1)(A). If the organic rules do not provide for approval of a conversion, then the conversion must be approved in the same manner as a merger under the "organic law" of the entity. I.C. § 30-22-403(a)(1)(B). If the "organic law" does not provide for approval of a merger, then all the interest holders must approve the conversion. I.C. § 30-22-403(a)(1)(C).

Moreover, each interest holder who will have any liability for debts, obligations, and other liabilities that arise after the conversion must vote for or consent to the conversion. I.C. § 30-22-403(a)(2).

Amendment of the Plan of Conversion

A Plan of Conversion may be amended after it is adopted but before it becomes effective. I.C. § 30-22-404(a). The Plan of Conversion is amended the same way the Plan of Conversion was originally adopted. But only if the plan does NOT state how it can be amended. I.C. § 30-22-404(a)(1). If the plan states how it will be amended, then that process must be followed. I.C. § 30-22-404(a)(2). 

However, regardless of what the plan states on how it can be amended, all interest holders are allowed to vote on an amendment that changes the "amount or kind of interests, securities, obligations, money, other property, or rights to acquire interests or securities, or any combination of the foregoing" that the interest holder will receive in the conversion. I.C. § 30-22-404(a)(2)(A). In addition, if the amendment proposes to change the "public organic record" or the "private organic rules", the interest holders must approve the amendment if they are otherwise entitled to vote on the change to the "public organic record" or the "private organic rules." I.C. § 30-22-404(a)(2)(B). For example, if the amendment proposes to change the articles of incorporation and corporate law requires a vote of the shareholders to change the articles, then the interest holders must approve the amendment. Finally, interest holders must approve any amendment that would "adversely affect the interest holder in any material aspect." I.C. § 30-22-404(a)(2)(C). 

Abandonment of the Plan of Conversion. 

A Plan of Conversion may be abandoned before it becomes effective. I.C. § 30-22-404(b). The abandonment must be approved as stated in the plan or, if the plan does not provide for abandonment, in the same manner as the plan was adopted. Id. If the Plan of Conversion was filed with the Secretary of State, the entity must file a Statement of Abandonment with the Secretary of State. I.C. § 30-22-404(c).

Statement of Conversion

A Statement of Conversion must be delivered to the Secretary of State. I.C. § 30-22-405(a). A Statement of Conversion must state:

  • The name, jurisdiction of formation, and type of entity of the converting entity. I.C. § 30-22-405(b)(1).
  • The name, jurisdiction of formation, and type of entity of the converted entity. I.C. § 30-22-405(b)(2).
  • If the Statement of Conversion is not to be effective upon filing, the later date and time on which it will become effective, which may not be more than ninety (90) days after the date of filing. I.C. § 30-22-405(b)(3). 
  • If the converting entity is a domestic entity, a statement that the Plan of Conversion was approved in accordance with this part or, if the converting entity is a foreign entity, a statement that the conversion was approved by the foreign entity in accordance with the law of its jurisdiction of formation. I.C. § 30-22-405(b)(4). 
  • If the converted entity is a domestic filing entity, its "public organic record," as an attachment. I.C. § 30-22-405(b)(5).
  • If the converted entity is a domestic limited liability partnership, its Statement of Qualification, as an attachment. I.C. § 30-22-405(b)(6). 
  • If the converted entity is a foreign entity, a statement designating a registered agent in compliance with section 30-21-411, Idaho Code. I.C. § 30-22-405(b)(7).

The Statement of Conversion may also contain any provision not otherwise in violation of law. I.C. § 30-22-405(c).

If an Idaho entity is the subject of the conversion, its "public organic record" must contain all the information required by Idaho law. I.C. § 30-22-405(d). However, it does not need to be signed or contain anything that is not required by a restatement. Id.

The entity has the option of delivering a Plan of Conversion rather than a statement of conversion as long as the plan has all the information required by Idaho Code § 30-22-405(b). I.C. § 30-22-405(e).

Effect of Conversion

When an entity is converted, it is immediately governed by the organic law that governs the entity and it is treated as if it is the same entity without interruption as the converting entity. I.C. § 30-22-406(a)(1)(A)-(B). The converting entity's assets automatically become the assets of the converted entity.  I.C. § 30-22-406(a)(2). No deeds or other documents transferring title need to be signed. 

All the debts of the converting entity automatically become the debts of the converted entity. I.C. § 30-22-406(a)(3). 

All rights of the converting entity automatically come the rights of the converted entity. I.C. § 30-22-406(a)(4).

The name of the converted entity may be substituted for the name of the converting entity in any lawsuit. I.C. § 30-22-406(a)(5). 

The interests in the converting entity are converted, and the interest holders of the converting entity are entitled only to the rights provided to them under the Plan of Conversion and to any appraisal rights they have under section 30-22-109, Idaho Code, and the converting entity's organic law. I.C. § 30-22-406(a)(9).

An interest holder that did not have liability before the conversion will not have any liability after the conversion unless the liability is provided for in the organic law or arose after the conversion. I.C. § 30-22-406(c).

If an interest holder of a converting entity has liability before the conversion, the liability is not discharged by the conversion. I.C. § 30-22-406(d)(1). The opposite is also true. Any liability of the converting entity that arise after the conversion will not be a liability of the interest holder. I.C. § 30-22-406(d)(2). The law that governed any liability before the conversion still applies after the conversion. I.C. § 30-22-406(d)(3). This prevents a conversion for the purpose of discharging an interest holder's liability. Finally, the law of contribution still applies even after the conversion. I.C. § 30-22-406(d)(4). 

If a foreign entity converts to an Idaho entity, it can be served with a lawsuit in Idaho for liabilities that arose in another state. I.C. § 30-22-406(e). This prevents a foreign corporation from converting to an Idaho entity to avoid a lawsuit.

Finally, a conversion will not allow for an entity to wind up its affairs or dissolve. I.C. § 30-22-406(g).

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