14 May Pressure mounts for Doyle to repeal shareholder liability law
Madison, Wis. – The president of the Wisconsin Economic Development Association (WEDA) has called on Gov. Jim Doyle to sign a bill that would remove from the books a law that many view as an impediment to capital investment, but thus far the governor has been non-committal.
The bill, AB 1163, has passed both houses of the Legislature, and it has received another boost from James Otterstein, president of WEDA. It would repeal a shareholder liability provision in state statutes that holds shareholders of a corporation personally liable for the wages of unpaid workers. Under the law, shareholders are personally liable for an amount equal to the total value of their shares for all wages owed to employees for as long as the proceeding six months.
AB 1163 soon will be sent to Doyle for his review, and he is expected to act on a number of bills by month’s end. In a May 10 letter to Doyle, Otterstein noted the governor has cited capital investment as one of the priorities in “Grow Wisconsin,” his economic development plan. By repealing the shareholder liability provision, he said the governor would remove a “a major statutory impediment” that has plagued Wisconsin’s capital investment climate.
“When an out-of-state entity seeks to invest in a Wisconsin corporation, legal counsel is required to provide an opinion as to whether or not the investor could be personally liable for any obligations, and if the shares purchased will be owned free and clear – not subject to any claims, liens, or limitations,” Otterstein wrote. “In Wisconsin, unlike virtually every other state, the answer is no.”
Otterstein said investment practitioners cite this provision as one of the greatest statutory impediments to facilitating investments in Wisconsin.
AB 1163 passed the State Assembly by a 60-38 margin, and it passed the Senate on a vote of 18-14. Its chief legislative sponsor, State Rep. Jean Hundertmark, R-Clintonville, believes passage would spur investment and stimulate job creation.
“Wisconsin, as far as we know, is the only state to have this kind of law on the books,” she said.
With rare exceptions, Wisconsin businesses have been frustrated in their attempts to attract venture capital from out-of-state sources, and Hundertmark said the state ranks low in a key metric – the amount invested per year, per employee.
Corporations are designed so that a shareholder’s risk does not extend beyond their investment. Under shareholder liability, Hundertmark said investors could end up losing not only their original investment, but also an additional amount equal to or greater than that initial investment. Removing a “double-jeopardy provision” in Wisconsin law would move the state economy forward, she stated.
“It’s important that we recognize the need to have shareholder liability removed from the books,” she said.
Hundertmark said the governor has not signaled what he intends to do. Doyle, a Democrat, may be concerned about the reaction of people in his own party, but Hundertmark said unpaid workers already are protected under another statute known as the Universal Banking Bill.