Date: 02/05/2009
Final
BILL SUMMARY for HB09-1117
HOUSE COMMITTEE ON BUSINESS AFFAIRS AND LABOR
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07:05 AM -- House Bill 09-1117
Representative Frangas, prime sponsor, presented House Bill 09-1117 concerning the authority to recapture unearned compensation given to persons in a publicly traded business entity's governance. HB09-1117 prohibits giving unearned compensation to a principal of a publicly traded business entity if the business is undercapitalized or is reasonably expected to become undercapitalized as liabilities and debts mature. A principal is defined to mean one of the top five highest-paid employees or contractors of a business entity whose total annual compensation exceeds $1 million.
An action may be brought in district court by a shareholder, creditor, receiver, assignee, trustee, or the Attorney General to recover the prohibited payment. The bill authorizes damages and reasonable attorney fees for violations of the principal's fiduciary duty. Retaliation against any person for reporting an alleged violation to the Attorney General is prohibited. A person who retaliates could be liable for treble damages plus reasonable attorney fees to the person subject to the retaliation. Representative Frangas distributed and discussed the following amendments:
- Amendment L.001;
- Amendment L.002; and
- Amendment L.004.
The amendments would limit the bill to civil action only. Representative Frangas responded to a question of whether a person can already sue for this type of behavior. There was a discussion about whether the bill interferes with private business.
07:23 AM -- Larry Marquess, representing the Colorado Association of Commerce and Industry, testified against the bill. He said the bill is inconsistent and there are a lack of definitions. Mr. Marques stated that the last thing undercapitalized companies need is a lawsuit. He stated that this issue should be left up to the federal government who is already working on fixing it. Mr. Marques said the bill does not define stockholder and stockholders could use the bill against the company. He said the bill is vague and that it allows lawsuits if the company is undercapitalized and allows them even if it may become undercapitalized which means a lawsuit can be brought at any time. Mr. Marques said the top five employees under the bill would include experts brought in to turn around a company and not just the people that caused the problems at the company.
07:37 AM -- Tom Clark, representing the Denver Metro Chamber of Commerce, testified against the bill. He talked about their efforts to attract businesses to the state and said the bill has too much risk for businesses and will cause companies to leave the state.