TITLE 18
Fiduciaries
CHAPTER 18-4.1
The Public Radio Conversions Act
SECTION 18-4.1-6
§ 18-4.1-6 Review process and criteria of
the department of attorney general.
(a) In considering conversions in accordance with this section, the department
of attorney general shall adhere to the following process:
(1) Within sixty (60) days after receipt of an initial
filing, the department of attorney general shall advise the filer, in writing,
whether the filing is complete, and, if not, shall specify all additional
information the filer is requested to provide;
(2) The filer shall have thirty (30) working days to submit
the requested information. If the additional information is submitted within
the thirty (30) day period, the department of attorney general will have thirty
(30) working days within which to determine acceptability of the additional
information. If the additional information is not submitted by the filer within
the thirty (30) day period or if the department of the attorney general
determines the additional information submitted by the filer is insufficient,
the conversion will be deemed not to provide a community benefit and the
department of attorney general shall specify a conversion fee to be paid. If
the department of attorney general determines the additional information to be
as requested, the filer will be notified, in writing, of the date of acceptance
of the filing;
(3) Within sixty (60) working days after acceptance of the
initial filing, the department of attorney general shall render its
determination on confidentiality pursuant to § 18-4.1-14 and the
department of attorney general shall publish notice of the filing in a
newspaper of general circulation in the state and shall notify by United States
mail any person who has requested notice of the filing. The notice shall:
(i) State that an initial filing has been received and
accepted for review;
(ii) State the names of the transacting parties;
(iii) State the date by which a person may submit written
comments to the department of attorney general; and
(iv) Provide notice of the date, time and place of
informational meeting open to the public which shall be conducted within ninety
(90) days of the date of the notice.
(4) The department of attorney general shall determine
whether the conversion constitutes a community benefit, and if not, the amount
of any applicable payments due, within one hundred and eighty (180) days of the
date of acceptance of the filing.
(b) In considering a conversion pursuant to subsection (a)
the department of the attorney general shall consider the following criteria:
(1) Whether the proposed conversion will harm the public's
interest in property given, devised, or bequeathed to the existing public radio
station for charitable, educational or religious purposes located or
administered in this state;
(2) Whether a trustee or trustees of the acquiree will be
deemed to have exercised reasonable care, diligence, and prudence in performing
as a fiduciary in connection with the proposed conversion;
(3) Whether the board established appropriate criteria in
deciding to pursue a conversion in relation to carrying out its mission and
purposes;
(4) Whether the board formulated and issued appropriate
requests for proposals in pursuing a conversion;
(5) Whether the board considered the proposed conversion as
the only alternative or as the best alternative in carrying out its mission and
purposes;
(6) Whether any conflict of interest exists concerning the
proposed conversion relative to members of the board, officers, directors,
senior management, experts or consultants engaged in connection with the
proposed conversion including, but not limited to, attorneys, accountants,
investment bankers, actuaries, broadcasting experts, or industry analysts;
(7) Whether individuals described in subdivision (b)(6) were
provided with contracts or consulting agreements or arrangements which included
pecuniary rewards based in whole, or in part on the contingency of the
completion of the conversion;
(8) Whether the board exercised due care in engaging
consultants with the appropriate level of independence, education, and
experience in similar conversions;
(9) Whether the board exercised due care in accepting
assumptions and conclusions provided by consultants engaged to assist in the
proposed conversion;
(10) Whether the board exercised due care in assigning a
value to the existing public radio station and its charitable assets in
proceeding to negotiate the proposed conversion;
(11) Whether the board exposed an inappropriate amount of
assets by accepting in exchange for the proposed conversion future or
contingent value based upon success of the new radio station;
(12) Whether officers, directors, board members or senior
management will receive future contracts in existing, new, or affiliated public
radio stations or organizations;
(13) Whether any members of the board will retain any
authority in the new radio station;
(14) Whether the board accepted fair consideration and value
for any management contracts made part of the proposed conversion;
(15) Whether individual officers, directors, board members or
senior management engaged legal counsel to consider their individual rights or
duties in acting in their capacity as a fiduciary in connection with the
proposed conversion;
(16) Whether the proposed conversion results in an
abandonment of the original purposes of the existing public radio station or
whether a resulting entity will depart from the traditional purposes and
mission of the existing public radio station such that a cy pres or comparable
proceeding would be necessary in the absence of this statute;
(17) Whether the proposed conversion contemplates the
appropriate and reasonable fair market value;
(18) Whether the proposed conversion was based upon
appropriate valuation methods including, but not limited to, market approach,
third-party report or fairness opinion;
(19) Whether the conversion is proper under the Rhode Island
nonprofit corporation act chapter 6 of title 7;
(20) Whether the conversion is proper under applicable state
tax code provisions;
(21) Whether the proposed conversion jeopardizes the tax
status of the existing public radio station;
(22) Whether the individuals who represented the existing
public radio station in negotiations avoided conflicts of interest;
(23) Whether officers, board members, directors, or senior
management deliberately acted or failed to act in a manner that impacted
negatively on the decision to approve the conversion or its terms and
conditions;
(24) Whether the formula used in determining the value of the
existing public radio station was appropriate and reasonable which may include,
but not be limited to, factors such as: the multiplier factor applied to the
"EBITDA" earnings before interest, taxes, depreciation, and
amortization; the time period of the evaluation; price/earnings multiplies; the
projected efficiency differences between the existing public radio station and
the new radio station; and the historic value of any tax exemptions granted to
the existing public radio station;
(25) Whether the proposed conversion appropriately provides
for the disposition of proceeds of the conversion that may include, but not
limited to:
(i) Whether an existing entity or a new entity will receive
the proceeds and whether such recipient serves the public interest of Rhode
Islanders;
(ii) Whether appropriate tax status implications of the
entity receiving the proceeds have been considered;
(iii) Whether the mission statement and program agenda will
be or should be closely related with the purposes of the mission of the
existing public radio station;
(iv) Whether any conflicts of interest arise in the proposed
handling of the conversion's proceeds;
(v) Whether the bylaws and articles of incorporation have
been prepared for the new entity;
(vi) Whether the board of any new or continuing entity will
be independent from the new radio station;
(vii) Whether the method for selecting board members, staff,
and consultants is appropriate;
(viii) Whether the board will be comprised of an appropriate
number of individuals with experience in pertinent areas such as foundations,
public radio, business, labor, community programs, financial management, legal,
accounting, grant making and public members representing diverse ethnic
populations of the affected communities;
(ix) Whether the size of the board and proposed length of
board terms are sufficient;
(26) Whether the transacting parties are in compliance with
the Charitable Trust Act, chapter 9 of title 18;
(27) Whether a right of first refusal to repurchase the
assets has been retained;
(28) Whether the character, commitment, competence and
standing in the community, or any other communities served by the transacting
parties are satisfactory;
(29) Whether a control premium is an appropriate component of
the proposed conversion;
(30) Whether the value of assets factored in the conversion
is based on past performance or future potential performance; and
(31) Whether based on all the facts and circumstances, the
attorney general concludes that the acquiree's charitable and educational
missions are no longer viable absent the conversion.
History of Section.
(P.L. 2005, ch. 211, § 1; P.L. 2005, ch. 369, § 1.)
