3879

(a) The special employee-owned corporation may establish subsidiaries organized under the provisions of this chapter or any other provisions of this subtitle. Special employee-owned corporations that are subsidiaries of nonprofit corporations may also be organized. Profitable corporations may have subsidiaries that are special employee-owned corporations only if they are part of a reorganization plan to convert such profitable corporation into a special employee-owned corporation in a specific term through a merger, consolidation or any other form, or with the purpose of separating a part or segment of its operations, or is liquidated as such. The reorganization plan shall be submitted together with the certificate of incorporation of the new entity. Pursuant to § 3871(a) of this title, the conversion thus allowed shall be limited to corporations or partnerships at risk of closing. The term during which the profitable corporation may maintain a special employee-owned corporation as a subsidiary shall not exceed five (5) years.\nThe special employee-owned corporation subsidiary of a for profit corporation which is part of a reorganization and conversion plan, as provided herein,

a subsidiary shall not exceed five (5) years.\nThe special employee-owned corporation subsidiary of a for profit corporation which is part of a reorganization and conversion plan, as provided herein, shall enjoy all the benefits of this chapter from the time of its organization and registration as a special corporation in the Department of State, and the holding of the first meeting of members duly certified by notarial certificate; provided, that the regular members of a special employee-owned corporation or subsidiary corporation have control of such entity equal to not less than fifty-five percent (55%) immediately after its conversion. Meanwhile, the parent corporation of said subsidiary corporation shall be deemed to be and shall continue to operate as a for profit corporation.\nThe requirements for filing a reorganization plan and the maximum term for the conversion are also applicable to a for profit corporation that amends its certificate of incorporation to become a special employee-owned corporation.\nIn those cases in which it is determined that the above mentioned provisions for the reorganization and conversion plan have not been complied with as indicated, within the

ployee-owned corporation.\nIn those cases in which it is determined that the above mentioned provisions for the reorganization and conversion plan have not been complied with as indicated, within the maximum period provided in this section, it shall constitute prima facie evidence that the sole purpose for the transaction was to take advantage of the tax benefits provided under the Internal Revenue Code of 1994. An administrative fine of one thousand dollars ($1,000) per day shall be imposed by the Secretary of State pursuant to the procedure established through regulations; all tax benefits received by the parent corporation, the subsidiary and its regular and special members shall be paid and reimbursed to the Secretary of the Treasury, and the certificate of incorporation shall be canceled retroactively. The imposition of said fines and penalties shall apply equally to special employee-owned corporations that are not the result of a corporate conversion or reorganization, and which have not been organized in good faith to carry out a new business activity.\nThe special employee-owned corporation subsidiary of a for profit corporation which is a part of a reorganization and

hich have not been organized in good faith to carry out a new business activity.\nThe special employee-owned corporation subsidiary of a for profit corporation which is a part of a reorganization and conversion plan, as provided herein, shall enjoy all the benefits of this chapter from the time of its organization and registration as a special corporation in the Department of State, and the holding of their first meeting of members duly certified by a notarial certificate.\n(b) When the parent corporation establishes a subsidiary organized under the provisions of this chapter, it may appoint up to the joint maximum limit for all special and corporate members, of one-third (⅓) of the directors and officers of the subsidiary corporation, if it is so established in the certificate of incorporation.\n(c) The parent corporation that establishes a subsidiary organized under the provisions of this chapter may cast the number of votes in the assembly of members of the subsidiary, authorized in the certificate of incorporation of the subsidiary, up to the joint maximum limit for all special and corporate members, of forty-five percent (45%) of the total number of votes that all the members

the certificate of incorporation of the subsidiary, up to the joint maximum limit for all special and corporate members, of forty-five percent (45%) of the total number of votes that all the members of the subsidiary may cast.\n(d) The certificate of incorporation of the subsidiary may only be amended by the affirmative vote of three-fourths (¾) of the members meeting in the assembly of members.\n(e) The special employee-owned corporation may join other corporations organized under the provisions of this chapter, nonprofit organizations, and cooperative credit unions to form associations, federations, or confederations, if not specifically forbidden by law and they are incorporated under the provisions of this chapter, and in that case, the corporation shall only have corporate members. In these cases the corporate members shall be entitled to cast one (1) single vote per member and it will not be permitted to vote by proxy nor delegate the power to vote on any other person except the representative designated by the corporate member; provided, that said corporate members may appoint all the directors and officers and shall be the only ones authorized to vote on corporate

cept the representative designated by the corporate member; provided, that said corporate members may appoint all the directors and officers and shall be the only ones authorized to vote on corporate matters.\n(f) The special employee-owned corporation may acquire a profitable corporation from natural or juridical persons as regular shareholders of said corporations, provided, that the special corporation holds fifty-five percent (55%) of the outstanding voting stock of said entity immediately after the sale or exchange. Said control must be increased to eighty percent (80%) within a period three (3) years or less, as established in § 8679 of Title 13. The subsidiary corporation thus owned shall become a special employee-owned corporation in a term that shall not exceed five (5) years. Consequently, the regular stockholder of said corporation must dispose of the remaining shares within the above stated term. Meanwhile, and until the date of conversion, the relationship of both the special corporation and the investor or natural person with respect to said subsidiary, shall be that of a regular or voting stockholder of a for profit corporation.

ion, the relationship of both the special corporation and the investor or natural person with respect to said subsidiary, shall be that of a regular or voting stockholder of a for profit corporation. The present provision shall apply when the stock of said corporation is exchanged or sold to employees of said corporation for the purpose of converting the same into a special employee-owned corporation subject to the terms of the above-mentioned § 8679 of Title 13 and in compliance with a reorganization plan established to such effects. Notwithstanding the foregoing, said alternative is only available in the event that the corporation whose stock is sold to the employees is at a risk of closing.\nHistory —Dec. 16, 2009, No. 164, § 16.09.