Senate panel advances Native corporation reporting exemption despite concerns

The Senate Labor and Commerce Committee advanced a bill Monday that would exempt most Alaska Native village corporations from state reporting requirements, despite concerns the change could reduce shareholder protections and transparency.

The committee adopted a committee substitute for House Bill 126 that would cut the number of corporations required to file annual reports with the state from 59 to 22. That exempts 37 corporations. The reporting exemption was added language not core to the bill's original purpose, according to staff for the bill's sponsor. The panel then rejected an amendment that would have preserved reporting requirements for corporations with annual revenue exceeding $100 million.

The amendment, offered by Sen. Forrest Dunbar, failed 3-1 after staff to bill sponsor Rep. Neil Foster said Foster preferred the broader exemption in the committee substitute.

"We consider the chairman's language in the CS a friendly amendment. It is not core to what the bill itself does, but we are not opposed to it," said Paul LaBolle, staff to Foster.

Dunbar's amendment would have exempted corporations with 500 or fewer shareholders, those subject to federal Securities and Exchange Commission reporting requirements, and those with annual gross revenue below $100 million.

"Based on the research that my office have done, these three things together would exempt the vast majority of Alaska Native corporations from reporting," Dunbar said. "It goes a long way to achieving the same thing as Section 2. But for some of the very largest corporations, they would still have to do the reporting."

Ann Sivilich, Chief of ANCSA and Securities with the Division of Banking and Securities, testified that fewer filings would limit the division's ability to assist shareholders and investigate concerns. The division currently houses annual meeting materials as public documents and assists shareholders who have concerns about materials they receive.

"If fewer corporations are filing with our office, we would be able to assist fewer shareholders because less corporations will be filing with us," Sivilich said.

Dunbar questioned why the broader exemption was necessary when his amendment achieved the stated goals. "The amendment achieves what the folks who inserted this language claim they want to achieve," he said. "I am sort of puzzled by this discussion. It is like there is a goal that is being pursued that does not seem to match what the stated goals of the amendment are."

Christopher Slade, an attorney representing the Alaska Native Village Corporation Association, explained that under federal law, Alaska Native corporations with shareholder bases that would otherwise subject them to SEC regulation must still provide annual reports to shareholders containing substantially the same information required by publicly traded companies. Under the Alaska Native Claims Settlement Act, these corporations must annually prepare and transmit to shareholders a report containing substantially all the information required in an annual report by a publicly traded company, even though they are exempt from SEC registration.