§ 6-19-403 — Certification and criteria

(1) The proposed transaction shall
comply with the provisions of this section, and the parties to the transaction shall
include in the filing required by section 6-19-402 documentation and certification
from the parties, either joint or several as appropriate, that the covered transaction
will comply with the following:

(a) The transaction shall be in the public interest. A transaction is not in the
public interest unless appropriate steps have been taken to safeguard the value of
nonprofit hospital assets being transferred and to ensure that any proceeds of the
transaction are dedicated to the charitable purposes.

(b) The transaction results in continuing access to health-care services for
the affected community.

(c) No director, officer of the board, chief executive officer, chief operating
officer, or chief financial officer of the nonprofit entity submitting the filing or a
nonprofit charitable organization receiving the proceeds of the covered transaction
shall benefit directly or indirectly from the transaction.

(d) The nonprofit entity proposing the transaction shall use due diligence in
selecting the for-profit entity that is a party to the transaction and in negotiating
the price and other terms and conditions of the transaction.

(e) Proceeds of the covered transaction shall be set aside in an amount equal
to the fair market value of the hospital assets being transferred. Fair market value
shall be determined at the time of the transaction and include consideration of
market value, going concern value, net asset value, and any other significant
relevant factors.

(f) The distribution of the proceeds of the covered transaction shall be made
only to one or more existing or new charitable organizations operating pursuant to
26 U.S.C. sec. 501 (c)(3) of the federal Internal Revenue Code of 1986, as
amended.

(g) Each nonprofit charitable organization receiving the proceeds of the
covered transaction, its directors, officers, and staff shall be and remain
independent of the parties to the transaction and their affiliates. Except as provided
in this paragraph (g), no person who is a director, officer of the board, chief
executive officer, chief operating officer, or chief financial officer of any party to
the transaction submitting the notice and filing, at the time the notice is submitted
or at the time of the transaction, shall be qualified to be an officer of the board,
chief executive officer, chief operating officer, or chief financial officer of the
nonprofit charitable organization receiving the proceeds of the covered transaction.
The nonprofit entity that is a party to the proposed transaction shall include in its
notice and filing the proposed membership of the initial board of directors of the
nonprofit charitable organization that is to receive the proceeds of the covered
transaction that shall represent the diverse interests of the affected communities
and include persons from the area affected by the transaction. Notwithstanding the
requirements of this paragraph (g), each nonprofit charitable organization receiving
the proceeds of the covered transaction may have persons affiliated with parties to
the transaction or their affiliates serve on its board of directors provided that such
persons do not constitute more than one-third of the members of the board.

(h) A nonprofit charitable organization receiving the proceeds of the covered
transaction shall put mechanisms in place to avoid conflicts of interest and to
prohibit grants or other actions benefiting its board of directors or management
beyond the reasonable value of their services or substantially benefiting the for-profit entity.

(i) The charitable mission and functions of the nonprofit charitable
organization receiving the proceeds of the covered transaction shall reflect the
historical charitable purposes of the nonprofit entity proposing the transaction.

Legislative History

Source: L. 98: Entire article added, p. 524, � 1, effective April 30.