Session Laws

Be it enacted by the Senate and House of Representatives in General Court assembled, and by the authority of the same, as follows:

SECTION 1. The General Laws are hereby amended by striking out chapter 156A and inserting in place thereof the following chapter:- `tuc CHAPTER 156A. `tuc PROFESSIONAL CORPORATIONS.

Section 1. This chapter shall be known and may be cited as the Professional Corporation Law.

Section 2. In this chapter, unless the context otherwise requires, the following words shall have the following meanings:

(a) "Professional corporation", a domestic corporation organized under this chapter for the purpose of rendering one or more professional services. As used in sections five, six, eight, ten and nineteen, the term "professional corporation" shall also include foreign professional corporations.

(b) "Professional service", (i) the service performed by registered physicians and surgeons, chiropractors, podiatrists, engineers, electrologists, physical therapists, psychologists, certified public accountants, public accountants, dentists, veterinarians, and optometrists, so long as the foregoing are registered or licensed under the provisions of chapter one hundred and twelve; and by attorneys-at-law admitted to practice in the courts of the commonwealth under chapter two hundred and twenty-one; (ii) any other type of service which may be rendered only pursuant to a license issued under law of the commonwealth, if the applicable regulating boards permit the licensed person to incorporate his profession under this chapter, or if such licensed person elects to incorporate his profession under this chapter and such incorporation is not prohibited by law or by regulations of the applicable regulating board.

(c) "Regulating board", a board or governing authority which is charged with licensing and regulating the profession of any person performing a professional service.

(d) "Foreign professional corporation", a corporation organized for the purpose of rendering professional service under a law other than the law of the commonwealth.

(e) "Qualified person", with respect to any professional corporation means a natural person, general partnership, or professional corporation which is eligible under this chapter to own shares issued by such professional corporation.

(f) "Disqualified person", with respect to any professional corporation means any natural person, corporation, partnership, or other entity which for any reason is or becomes ineligible under this chapter to own shares issued by such professional corporation.

Section 3. (a) Except as hereinafter provided, a professional corporation may be organized under this chapter only for the purpose of rendering professional services and services ancillary thereto within a single profession.

(b) A professional corporation may be organized for the purpose of rendering professional services within two or more professions except to the extent expressly prohibited by the licensing laws of the commonwealth applicable to such professions or the regulations of any of the applicable regulating boards.

(c) The provisions of this chapter shall not be construed as prohibiting the organization of a corporation to render professional services, or as limiting the rendering of professional services or the practice of any profession under any other provisions of law except to the extent expressly prohibited or limited by such provisions of law or the regulations of the applicable regulating boards.

Section 4. (a) All of the provisions of chapter one hundred and fifty-six B shall be applicable to professional corporations and such corporations shall enjoy the powers and privileges, and be subject to the duties, restrictions and liabilities of corporations organized under said chapter, except where inconsistent with the provisions of this chapter.

(b) A professional corporation may own real and personal property necessary or appropriate for rendering the professional service it was organized to render, and may invest its funds in real estate, mortgages, stocks, bonds, or any other type of investment.

Section 5. A professional corporation may render professional services in the commonwealth only through its officers, employees and agents who are duly licensed to render such professional services in the commonwealth; provided, however, that nothing in this chapter shall be construed (a) to require any person who is employed by a professional corporation to be licensed to perform services for which no license is otherwise required, (b) to prohibit the rendering of professional services by a licensed natural person acting in his individual capacity, notwithstanding that such person may be a shareholder, director, officer, employee or agent of a professional corporation, or (c) to prohibit unlicensed persons employed by a professional corporation from rendering professional services under the supervision of licensed officers, employees or agents of such professional corporation, to the extent permitted by law or the regulations of the applicable regulating board.

Section 6. (a) Except as otherwise provided by law or regulation, the personal liability of a shareholder of a professional corporation organized under this chapter shall be no greater in any respect than that of a shareholder of a corporation organized under chapter one hundred and fifty-six B.

(b) This chapter shall not alter any law applicable to the relationship between a person rendering professional services and a person receiving such services, including liability arising out of such professional services.

(c) Any privilege applicable to communications between a person rendering professional services and the person receiving such services shall extend to communications between a professional corporation or its employees rendering professional services and the person receiving such services.

Section 7. One or more individuals, each of whom is licensed to perform a professional service, may organize a professional corporation by complying with the provisions of section twelve of chapter one hundred and fifty-six B. The articles of organization of a professional corporation shall contain the following:

(a) corporate purposes indicating the professional services to be rendered;

(b) the names and residence addresses of all of the original shareholders, directors and officers;

(c) a certificate by the appropriate regulating board or boards that each of the incorporators, the president and any vice presidents, a majority of the directors and each shareholder is duly licensed to render a professional service permitted by the articles of organization of the corporation.

Section 8. The corporate name of every professional corporation shall end with the word "Professional Corporation", "Corporation" or "Incorporated" or the abbreviation "P.C.", "Corp." or "Inc." or any other word or words which in the judgment of the state secretary indicates that the professional corporation is incorporated; provided, however, that a regulating board may by rule adopt further requirements as to the names of professional corporations organized to render a professional service subject to the jurisdiction of such regulating board.

Section 9. A majority of directors of a professional corporation and all of its officers except the treasurer, clerk, secretary and any assistant treasurer, assistant clerk or assistant secretary shall be licensed in the commonwealth to render a professional service permitted by the articles of organization of the corporation.

Section 10. (a) A professional corporation may issue shares, fractional shares, and rights or options to purchase shares only to:

(1) natural persons who are licensed in the commonwealth or in any other state or territory of the United States or the District of Columbia to render a professional service permitted by the articles of organization of the corporation;

(2) general partnerships in which all the partners are natural persons described in subparagraph (1); and

(3) professional corporations authorized by law to render a professional service permitted by the articles of organization of the corporation.

(b) A regulating board may by rule further restrict the authority of professional corporations to issue or transfer shares, but no such rule shall have the effect of causing a shareholder of a professional corporation at the time such rule becomes effective to become a disqualified person.

(c) A shareholder of a professional corporation may transfer shares and rights or options to purchase shares of the corporation only to qualified persons, as defined herein; provided, however, that, subject to sections twelve and thirteen, nothing herein shall prohibit the pledge of shares of a professional corporation to a disqualified person or the transfer of such shares by operation of law or court decree to a disqualified person.

(d) Nothing herein shall prevent a professional corporation from adopting other restrictions on the transfer of its shares or requiring that transferees be approved by its shareholders or directors under provisions of its articles of organization, by-laws or an agreement binding upon all of its shareholders.

(e) Every certificate issued representing shares of a professional corporation shall state thereon in bold print that the shares represented thereby are subject to restrictions on transfer imposed by this chapter and any further restrictions on transfer imposed by the appropriate regulating board or boards from time to time pursuant to this chapter.

(f) All transfers of shares in violation of this section shall be void.

Section 11. No proxy for shares of a professional corporation shall be valid unless it shall be given to a qualified person, or unless it is limited to voting for one or more of the actions described in subsection (a) of section thirteen under the circumstances described therein. A voting trust with respect to shares of a professional corporation shall not be valid unless all the trustees and beneficiaries thereof are qualified persons, except that such voting trust may be validly continued for a period of not more than six months after the death of a trustee or beneficiary or for a period of not more than six months after a trustee or beneficiary has become a disqualified person.

Section 12. (a) It shall be provided in the articles of organization or by-laws of a professional corporation, or in an agreement binding upon all of its shareholders, that the corporation shall redeem all of the shares of a shareholder upon the occurrence of any one or more of the following events, unless the provisions of section thirteen apply or said shares are transferred to a qualified person within twelve months after occurrence of the event:

(1) If such shareholder dies;

(2) If such shareholder is determined to be disqualified to render professional service for a period of six months or more;

(3) If such shareholder is determined, in the manner set forth in the applicable instrument, to be incompetent or permanently disabled so as to be unable to render any professional services on behalf of the corporation;

(4) If such shareholder voluntarily withdraws from the active practice of professional services on behalf of the corporation;

(5) If any of the shares of such shareholder are transferred voluntarily or by operation of law to a disqualified person; or

(6) If any other event specified in the articles of organization or by-laws or said shareholder agreement shall occur.

(b) The redemption of shares shall take place within twelve months after the occurrence of any of the events described in subsection (a), unless a shorter time is specified in the articles of organization, by-laws or said shareholder agreement. The consideration for such redemption shall be an amount equal to the fair value of such shares on the date of said event, unless otherwise provided in the articles of organization, by-laws or said shareholder agreement. In lieu of such redemption, all the shares of such shareholder may be transferred to a qualified person within such twelve month period.

(c) If a redemption or transfer of any shares of a professional corporation is not completed within the prescribed time period, such shares may be cancelled by the corporation and the holder shall have no further interest or rights of a shareholder of the corporation other than the right to receive an amount equal to the fair value of his shares under subsection (b), unless otherwise provided in the articles of organization, by-laws or said shareholder agreement.

(d) Nothing herein shall affect the obligations of a professional corporation to a shareholder whose interest in the corporation is terminated hereunder with respect to compensation, benefits or other matters accrued prior to his termination or disqualification.

(e) During the pendency of a redemption or transfer hereunder of the shares of a shareholder who is deceased, disabled or incompetent, said shares may be voted by the personal representatives of such shareholder.

Section 13. (a) If any of the events described in subsection (a) of section twelve shall occur with respect to the sole shareholder of a professional corporation or if the corporation is disqualified from rendering, or will cease rendering, any further professional services pursuant to this chapter, in lieu of or in addition to the redemption or transfer of the shares of such shareholder under said section twelve, within twelve months thereafter

(1) the corporation shall be liquidated and dissolved;

(2) the corporation shall be merged into or consolidated with a corporation qualified to render the same professional service or services; or

(3) the corporation shall be merged into, consolidated with or changed by articles of amendment into a corporation organized pursuant to chapter one hundred and fifty-six B in accordance with section fourteen.

In the event that such action has not been taken within such twelve month period, the corporation shall cease rendering any professional service until all its shares are owned by one or more qualified persons and the corporation is otherwise in compliance with the terms of this chapter.

(b) During the pendency of action under subsection (a) of this section, so long as a professional corporation has ceased to render professional services under this chapter, persons may be elected or appointed as its officers or directors who are not qualified to render professional services on its behalf, and its shares may be voted by the personal representative of a deceased or incapacitated shareholder.

Section 14. A professional corporation which has ceased to render any professional services under this chapter or which is permitted to render professional services as a business corporation organized under chapter one hundred and fifty-six B may change its status by merging into or consolidating with such a business corporation or by filing articles of amendment to change its name, where necessary, and purposes to those of such a business corporation.

Section 15. If action required by sections twelve or thirteen is not taken within the prescribed time period, or if it shall be established that a professional corporation has failed to comply with any other provisions of this chapter, the state secretary may dissolve the corporation in accordance with section one hundred and one of chapter one hundred and fifty-six B. The state secretary may also dissolve a professional corporation upon receipt of a certificate from any regulating board with jurisdiction stating that such corporation has failed to comply with the requirements of such board so as to give due cause for its dissolution, which certificate shall recite pertinent facts to support the requested dissolution. A copy of such certificate shall be given to such corporation at least sixty days in advance of said dissolution.

Section 16. (a) Except as provided in section fourteen, a professional corporation may merge or consolidate with another corporation, domestic or foreign, only if every shareholder of each corporation is a qualified person with respect to the surviving or resulting corporation.

(b) Upon the merger or consolidation of a professional corporation, if the surviving or resulting corporation is to render professional services in the commonwealth, it shall comply with the provisions of this chapter.

Section 17. (a) A foreign professional corporation shall register under the provisions of this section if (1) it maintains an office in the commonwealth; or (2) any of its shareholders, officers, or directors conducts such activity on behalf of the corporation in the commonwealth as to require licensing under the provisions of chapter one hundred and twelve or chapter two hundred and twenty-one.

(b) Any foreign professional corporation, including corporations subject to subsection (a), may register under the provisions of this section in order to render one or more professional services in the commonwealth; provided, however, that (1) the name of the corporation meets the requirements of this chapter and of section five of chapter one hundred and eighty-one; (2) the corporation is organized only for one or more purposes for which a professional corporation organized under this chapter may be organized; and (3) all the shareholders, a majority of the directors and all of its officers except the treasurer, clerk, secretary and any assistant treasurer, assistant clerk and assistant secretary are qualified persons and all the shareholders, directors, officers and employees who will render a professional service in the commonwealth are duly licensed in the commonwealth to do so.

(c) A foreign professional corporation shall register to practice in the commonwealth by filing with the state secretary the certificate and evidence of legal existence in the jurisdiction of incorporation required by section four of chapter one hundred and eighty-one. Such certificate shall in addition contain the following information and exhibits: (1) a description of the professional services to be rendered in the commonwealth through the professional corporation; (2) the names and residence addresses of all the shareholders, directors, and officers of the professional corporation and designations of which of them will render professional services in the commonwealth; (3) a statement that a majority of the directors and all of the officers, except the treasurer, clerk, secretary, and any assistant treasurer, assistant clerk and assistant secretary are natural persons who are licensed in a state or territory of the United States or the District of Columbia to render a professional service authorized by the corporation's articles of organization, or the equivalent, and that all of the shareholders are such persons, general partnerships comprised solely of such persons, or professional corporations authorized to render such professional services; and (4) a certificate by the appropriate regulating board or boards that the persons required by clause (3) of subsection (b) to be licensed in the commonwealth are so licensed.

(d) Every foreign professional corporation shall, except as otherwise provided in this chapter, be subject to the provisions of sections six and eight to sixteen, inclusive, of chapter one hundred and eighty-one.

(e) The certificate of registration of a foreign professional corporation may be revoked by the state secretary if such corporation fails to comply with any provision of this chapter applicable to it or upon receipt by the state secretary of a certificate from any regulating board with jurisdiction stating that such corporation has failed to comply with the requirements of such authority so as to give due cause for revocation of its registration, which certificate shall recite pertinent facts to support the proposed revocation. No certificate of registration of a foreign professional corporation shall be revoked by the state secretary unless he shall have given the corporation not less than sixty days' notice thereof and the corporation shall have failed prior to the effective date of the revocation to correct such noncompliance.

Section 18. The annual report of a professional corporation or a foreign professional corporation shall, in addition to the information required by section one hundred and nine of chapter one hundred and fifty-six B or section four of chapter one hundred and eighty-one, as the case may be, list the names and residence addresses of all shareholders and shall contain a certification that all such shareholders or all of the partners of a shareholder which is a general partnership are duly licensed to render one or more professional services for which the corporation was organized or are professional corporations authorized to render such professional services. A duplicate original copy of each annual report shall be filed at the same time with the regulating board. No filing fee shall be charged by the regulating board for such filing.

Section 19. Each regulating board in the commonwealth is hereby authorized to promulgate rules for professional corporations consistent with this chapter which are deemed necessary in the public interest or required by the public health or welfare or by generally recognized standards of professional conduct. Nothing in this chapter shall restrict or limit in any manner the authority or duty of regulating board with respect to natural persons rendering a professional service within the jurisdiction of the licensing authority, or any law, rule or regulation pertaining to standards of professional conduct.

SECTION 2. Section 3 of chapter 156B of the General Laws, as appearing in the 1984 Official Edition, is hereby amended by striking out the introductory clause and by inserting in place thereof the following introductory clause:-

Except so far as such application may be inconsistent with (i) provisions still in force of any special acts of incorporation, enacted before March eleventh, eighteen hundred and thirty-one, and not subject to amendment, alteration or repeal by the general court, or (ii) provisions of chapter one hundred and fifty-six A applicable to professional corporations incorporated thereunder, this chapter shall apply to:.

SECTION 3. Section 4 of chapter 180 of the General Laws, as so appearing, is hereby amended by adding the following paragraph:-

If a corporation is formed under this chapter for the purpose of rendering one or more professional services as defined in chapter one hundred and fifty-six A, the relationship between the corporation or an employee thereof rendering professional service and the person receiving such service shall be the same as if such corporation or employee rendered such service to said person as an individual practitioner, including any liability arising out of the rendering of such service.

SECTION 4. Chapter 182 of the General Laws is hereby amended by inserting after section 5 the following section:-

Section 5A. If a trust is formed under this chapter for the purpose of rendering one or more professional services as defined in chapter one hundred and fifty-six A, the relationship between the trust or a trustee or employee thereof rendering professional service and the person receiving such service shall be the same as if such trust or trustee or employee rendered such service to said person as an individual practitioner, including any liability arising out of the rendering of such service.

SECTION 5. Any corporation organized under chapter one hundred and fifty-six A may file with the state secretary within ninety days after the effective date of this act an election to be governed by this act signed by all of the stockholders of the corporation.

SECTION 6. This act shall take effect on July first, nineteen hundred and eighty-six.