7.__Professional service.__"Professional service" means the professional services provided by the following persons to the extent they are required to be licensed under Title 32:

A.__Accountants, advanced practice registered nurses, attorneys, chiropractors, dentists, optometrists, osteopathic physicians, physicians and surgeons, physician assistants, podiatrists and veterinarians; and

B.__Acupuncturists, alcohol and drug counselors, architects, landscape architects, audiologists, counseling professionals, dental hygienists, dieticians, denturists, engineers, land surveyors, naturopathic doctors, occupational therapists, pharmacists, physical therapists, psychologists, respiratory care practitioners, social workers and speech pathologists.

8.__Qualified person.__"Qualified person" means an individual, general partnership, professional limited liability company, professional limited liability partnership, other professional corporation that is eligible under this chapter to be issued shares by a professional corporation or any other entity that is authorized by statute to provide the same professional service provided by the professional corporation.

SUBCHAPTER II

CREATION

§731.__Election of professional corporation status

1.__Mandatory coverage.__ A corporation performing any professional service described in section 723, subsection 7, paragraph A shall incorporate as a professional corporation.

2.__Optional coverage.__A corporation performing any professional service described in section 723, subsection 7, paragraph B may incorporate as a professional corporation.

3.__Filing requirement.__One or more persons may incorporate a professional corporation by delivering to the Secretary of State for filing articles of incorporation that state that the corporation is a professional corporation and the corporation's purpose is to render the specified professional service.

4.__Election to be covered.__A corporation incorporated under a general law of this State may elect professional corporation status by amending its articles of incorporation to comply with subsection 3 and section 736.

§732.__Purposes

1.__Single profession.__Except to the extent authorized by subsections 2 and 3, a corporation may elect professional corporation status under section 731 solely for the purpose of rendering professional services, including services ancillary to them, and solely within a single profession.

2.__Multiple professions.__A corporation may elect professional corporation status under section 731 for the purpose of rendering professional services within 2 or more professions and for the purpose of engaging in any lawful business authorized by Title 13-A, section 40, to the extent the combination of professional purposes or of professional and business purposes is not prohibited by the licensing law of this State applicable to each profession in the combination.

3.__Accountants.__Nonlicensed individuals may organize with individuals who are licensed under Title 32, chapter 113 and may become shareholders of a firm licensed to practice public accountancy under Title 32, section 12252, as long as all of the requirements for licensure under Title 32, section 12252, subsection 3 are met by the firm.

§733.__General powers

A professional corporation has the powers enumerated in Title 13-A, section 202.

§734.__Rendering professional services

1.__License required.__A domestic professional corporation or foreign professional corporation may render professional services in this State only through individuals licensed or otherwise authorized in this State to render the services.

2.__Scope.__Nothing in subsection 1 may be construed to:

A.__Require an individual employed by a professional corporation to be licensed to perform services for the corporation if a license is not otherwise required;

B.__Prohibit a licensed individual from rendering professional services in that individual's individual

capacity even though that individual is a shareholder, director, officer, employee or agent of a domestic professional corporation or foreign professional corporation; or

C.__Prohibit an individual licensed in another state from rendering professional services for a domestic professional corporation or foreign professional corporation in this State if not prohibited by the licensing authority having jurisdiction over such professional service.

§735.__Prohibited activities

1.__Limited activities.__A professional corporation may not render any professional service or engage in any business or service other than the professional service and business authorized by its articles of incorporation and services or businesses reasonably related thereto.

2.__Investments.__Nothing in subsection 1 prohibits a professional corporation from investing its funds in real estate, mortgages, securities or any other type of investment.

§736.__Corporate name

1.__Words required.__The name of a domestic professional corporation or of a foreign professional corporation authorized to transact business in this State, in addition to satisfying the requirements of Title 13-A, sections 301 and 1205:

A.__Must contain the words "chartered," "professional corporation," "professional association" or "service corporation" or the abbreviation "P.C.," "P.A." or "S.C.";

B.__May not contain language stating or implying that it is incorporated for a purpose other than that authorized by section 732 and its articles of incorporation; and

C.__Must conform with any rule adopted by the licensing authority having jurisdiction over a professional service described in the corporation's articles of incorporation.

2.__Assumed name.__A domestic professional corporation or foreign professional corporation may render professional services and exercise its authorized powers under a name that is identical to its corporate name except that the words "chartered," "professional corporation," "professional association" or "service corporation" or the abbreviation "P.C.," "P.A." or "S.C." is omitted, as long as the corporation has first registered the name to be so used in the manner required by Title 13-A, section 307.

SUBCHAPTER III

SHARES

§741.__Issuance of shares

1.__Qualified shareholders.__A professional corporation may issue shares, fractional shares and rights or options to purchase shares only to:

A.__Individuals who are authorized by law in this State or another state to render a professional service described in the corporation's articles of incorporation;

B.__General partnerships in which all the partners are qualified persons with respect to the professional corporation and in which at least one partner is authorized by law in this State to render a professional service described in the corporation's articles of incorporation;

C.__Professional corporations, professional limited liability companies or professional limited liability partnerships, domestic or foreign, authorized by law in this State to render a professional service described in the corporation's articles of incorporation; or

D.__Any other entity that is authorized by law to provide the same professional service provided by the professional corporation.

2.__Licensing authority jurisdiction.__If a licensing authority with jurisdiction over a profession considers it necessary to prevent violation of the ethical standards of the profession, the authority may adopt rules under its general rulemaking authority or other regulatory authority to restrict or condition, or revoke in part, the authority of professional corporations subject to its jurisdiction to issue shares.__A rule described in this subsection does not, of itself, make a shareholder of a professional corporation at the time the rule becomes effective a disqualified person.

3.__Unlawful shares void.__Shares issued in violation of this section or a rule described in subsection 2 are void.

§742.__Share transfer restriction

1.__Limit to transfers.__A shareholder of a professional corporation may transfer or pledge shares, fractional shares and

rights or options to purchase shares of the corporation only to qualified persons.

2.__Other transfers void.__A transfer of shares made in violation of subsection 1, except one made by operation of law or court judgment, is void.

§743.__Compulsory acquisition of shares after death or

disqualification of shareholder

1.__Triggering events.__A professional corporation must acquire or cause to be acquired by a qualified person the shares of its shareholder if:

A.__The shareholder dies;

B.__The shareholder becomes a disqualified person, except as provided in subsection 4; or

C.__The shares are transferred by operation of law or court judgment to a disqualified person, except as provided in subsection 4.

2.__Agreements binding.__If a professional corporation's articles of incorporation or bylaws or a private agreement provides the terms, price and other conditions for the acquisition of the shares of a shareholder upon the occurrence of an event described in subsection 1, then that article, bylaw or private agreement is binding on the parties and is specifically enforceable.

3.__Corporate acquisition of shares.__In the absence of an article provision, bylaw provision or private agreement described in subsection 2, a professional corporation shall acquire the shares in accordance with section 744; except that, if the disqualified person rejects the corporation's purchase offer, either the person or the corporation may commence a proceeding under section 745 to determine the fair value of the shares.

4.__Limited disqualification.__In the absence of an article provision, bylaw provision or private agreement described in subsection 2, this section does not require the acquisition of shares in the event of a shareholder's becoming a disqualified person if the disqualification lasts no more than 5 months from the date the disqualification or the transfer of shares pursuant to subsection 1 occurs.

5.__Other benefits unaffected.__Nothing in this section or section 744 prevents or relieves a professional corporation from paying pension benefits or other deferred compensation for

services rendered to a former shareholder if otherwise permitted by law.

§744.__Acquisition procedure

1.__Written notice.__In the absence of an article provision, bylaw provision or private agreement described in section 743, subsection 2, if shares must be acquired under section 743, a professional corporation shall deliver a written notice to the executor or administrator of the estate of its deceased shareholder, or to the disqualified person or transferee, offering to purchase the shares at a price the corporation believes represents their fair value as of the date of death, disqualification or transfer.__The offer notice must be accompanied by the corporation's balance sheet for a fiscal year ending not more than 16 months before the effective date of the offer notice, an income statement for that year, a statement of changes in shareholders' equity for that year and the latest available interim financial statements, if any.

2.__Option period.__A disqualified person has 30 days from the effective date of the notice provided pursuant to subsection 1 to accept the professional corporation's offer or demand that the corporation commence a proceeding under section 745 to determine the fair value of that disqualified person's shares.__If the disqualified person accepts the offer, the corporation shall make payment for the shares within 60 days from the effective date of the offer notice, unless a later date is agreed on, upon the disqualified person's surrender of the shares to the corporation.

3.__Termination of interest.__After a professional corporation makes payment for shares in accordance with this section, a disqualified person has no further interest in those shares.

§745.__Court action to appraise shares

1.__Demand for proceeding.__If a disqualified person does not accept a professional corporation's offer under section 744, subsection 2 within the 30-day period, the disqualified person at any time during the 60-day period following the effective date of the notice may deliver a written notice to the corporation demanding that it commence a proceeding to determine the fair value of the shares.__The corporation may commence a proceeding at any time during the 60 days following the effective date of its offer notice.__If the corporation does not commence such a proceeding, the disqualified person may commence a proceeding against the corporation to determine the fair value of those shares.

2.__Court procedure.__A professional corporation or disqualified person shall commence a proceeding under this section in the Superior Court of the county where the corporation's principal office or, if there is no principle office in this State, its registered office is located.__The corporation shall make the disqualified person a party to the proceeding as in an action against the disqualified person's shares.__The jurisdiction of the court in which the proceeding is commenced is plenary and exclusive.

3.__Appraisers.__The court may appoint one or more persons as appraisers to receive evidence and recommend decision on the question of fair value.__The appraisers have the power described in the order appointing them or in any amendment to it.

4.__Valuation date.__A disqualified person is entitled to judgment for the fair value of the person's shares determined by the court as of the date of death, disqualification or transfer together with interest from that date at a rate found by the court to be fair and equitable.

5.__Payment installments.__The court may order a judgment ordered under this section paid in installments determined by the court.

§746.__Court costs and fees of experts

1.__Assessment of costs.__The court in an appraisal proceeding commenced under section 745 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court, and shall assess the costs against the professional corporation; except that the court may assess costs against the disqualified person in an amount the court finds equitable if the court finds the person acted arbitrarily, vexatiously or not in good faith in refusing to accept the corporation's offer.

2.__Assessment against corporation.__In addition to costs assessed under subsection 1, the court may assess the fees and expenses of counsel and experts for a disqualified person against the professional corporation and in favor of the person if the court finds that the fair value of the person's shares substantially exceeded the amount offered by the corporation or that the corporation did not make an offer.

§747.__Cancellation of disqualified shares

If the shares of a disqualified person are not acquired pursuant to section 743 within 10 months after the death of the

shareholder or within 5 months after the disqualification or transfer, the professional corporation shall immediately cancel the shares on its books and the disqualified person has no further interest as a shareholder in the corporation other than the right to payment for the shares under section 743.

SUBCHAPTER IV

GOVERNANCE

§751.__Directors and officers

Not less than a majority of the directors of a professional corporation and all of its officers, except the clerk, secretary and treasurer, if any, must be qualified persons with respect to the corporation.

§752.__Voting of shares

1.__Right to vote.__Except as otherwise provided in this section, only a qualified person may vote the shares of a professional corporation.

2.__Proxies.__Only a qualified person may be appointed a proxy to vote shares of a professional corporation.

3.__Voting trusts.__A voting trust with respect to shares of a professional corporation is not valid unless all of its trustees and beneficiaries are qualified persons; except that, if a beneficiary who is a qualified person dies or becomes a disqualified person, a voting trust valid under this subsection continues to be valid for 10 months after the date of death or for 5 months after the disqualification occurred.

4.__Limited voting right.__Any shares transferred to a disqualified person by reason of the death of a qualified person or by operation of law may be voted by such disqualified person only for the purposes of amending the articles of incorporation to convert to a regular business corporation or dissolving the professional corporation.

§753.__Responsibility for professional services

1. Relationship between professional and recipient of services.__This chapter does not modify the liability of a person rendering professional service with respect to that service.

2.__Shareholder liability for debts and claims.__Except as provided in subsection 3, the liability of shareholders for the

debts of and claims against a corporation is the same as that of shareholders of a business corporation.

3.__Shareholder liability arising from rendering professional service.__A shareholder is jointly and severally liable for claims arising from the rendering of a professional service by a domestic professional corporation or foreign professional corporation if that shareholder:

A.__Personally and directly participated in rendering that portion of a professional service that was performed negligently or in breach of any other legal duty; or

B.__Directly supervised and controlled that portion of a professional service rendered by another person that was performed negligently or in breach of any other legal duty.

SUBCHAPTER V

REORGANIZATION AND TERMINATION

§761.__Merger

1.__Merger allowed.__A professional corporation may merge with another domestic professional corporation or foreign professional corporation or with a domestic or foreign business entity as defined in Title 13-A, chapter 9 if all the interest holders of the constituent entities are qualified to be interest holders of the surviving entity.

2.__Compliance.__After a merger in accordance with subsection 1, if the surviving corporation is to render in this State any of the professional services described in section 723, subsection 7, paragraph A, the surviving corporation must comply with this Act.

§762.__Termination of professional activities

If a professional corporation ceases to render professional services, it must amend its articles of incorporation to delete references to rendering professional services and to conform its corporate name to the requirements of Title 13-A, section 301.__ After the amendment becomes effective, the corporation may continue in existence as a business corporation under Title 13-A and the corporation is no longer subject to this Act.

§763.__Judicial dissolution

The Attorney General may commence a proceeding under Title 13- A, section 1111 to dissolve a professional corporation if:

1.__Service of notice of violation.__The Secretary of State serves written notice on the professional corporation under Title 13-A, section 1112 that it has violated or is violating a provision or provisions of this Act;

2.__Failure to correct.__The professional corporation does not correct each alleged violation or demonstrate to the reasonable satisfaction of the Secretary of State that the violation or violations did not occur, within 60 days after service of the notice is perfected under Title 13-A, section 1112; and

3.__Certify.__The Secretary of State certifies to the Attorney General a description of the violation or violations, that it notified the professional corporation of the violation or violations and that the corporation did not correct the violation or violations or demonstrate that the violation or violations did not occur, within 60 days after perfection of service of the notice.

SUBCHAPTER VI

FOREIGN PROFESSIONAL CORPORATIONS

§771.__Authority to transact business

1.__Prohibition.__Except as provided in subsection 3, a foreign professional corporation may not transact business in this State until it obtains authority from the Secretary of State.

2.__Preconditions.__A foreign professional corporation may not obtain authority to transact business in this State unless:

A.__Its corporate name satisfies the requirements of section 736;

B.__It is incorporated for one or more of the purposes described in section 732; and

C.__All of its shareholders, not less than a majority of its directors and all of its officers other than its clerk, secretary and treasurer, if any, are licensed in one or more states to render a professional service described in its articles of incorporation.

3.__Office required.__A foreign professional corporation is not required to obtain authority to transact business in this State unless it maintains or intends to maintain an office in this State for conduct of business or professional practice.

§772.__Application for authority to transact business

The application of a foreign professional corporation for authority to render professional services in this State must contain the information set forth in Title 13-A, section 1202 and in addition include a statement that all of its shareholders, not less than a majority of its directors and all of its officers other than its clerk, secretary and treasurer, if any, are licensed in one or more states to render a professional service described in its articles of incorporation.

Sec. 3. Application to existing corporations.

1. Existing professional corporations. This Act applies to every corporation incorporated under the Maine Revised Statutes, Title 13, former chapter 22. An existing professional corporation to which this Act applies need not amend its articles of incorporation to specify the professional service that it renders as of the effective date of this Act. A professional corporation that is in existence on the effective date of this Act shall amend its articles of incorporation if, after the effective date of this Act, that professional corporation engages in any additional professional service, which amendment must specify all professional services to be engaged in by the professional corporation.

2. Other corporations. This Act does not apply to a corporation that is or will be incorporated under a law of this State that is not repealed by this Act unless the corporation elects professional corporation status under the Maine Revised Statutes, Title 13, section 731.

3. Other rights unaffected. This Act does not affect any right or privilege to render professional services through the use of any other form of business entity.

Sec. 4. Saving provisions.

1. Effect of repeal. Except as provided in subsection 2, the repeal of the Maine Revised Statutes, Title 13, chapter 22 by this Act does not affect:

A. The operation of the statute or any action taken under it before its repeal;

B. Any ratification, right, remedy, privilege, obligation or liability acquired, accrued or incurred under the statute before its repeal;

C. Any violation of the statute, or any penalty, forfeiture or punishment incurred because of the violation, before its repeal;

D. Any proceeding, reorganization or dissolution commenced under the statute before its repeal, and the proceeding, reorganization or dissolution may be completed in accordance with the statute as if it had not been repealed; and

E. Any provision in an existing professional corporation's articles of incorporation or bylaws that is legal and enforceable as of the date of the adoption of this Act.

2. Reduction in penalty or punishment. If a penalty or punishment imposed for violation of a statute repealed by this Act is reduced by this Act, the penalty or punishment if not already imposed must be imposed in accordance with this Act.

Sec. 5. Revisor's review; cross-references. The Revisor of Statutes shall review the Maine Revised Statutes and include in the errors and inconsistencies bill submitted to the First Regular Session of the 121st Legislature pursuant to Title 1, section 94 any sections necessary to correct and update any cross-references in the statutes to provisions of law repealed in this Act.

Sec. 6. Effective date. This Act takes effect July 1, 2003.

SUMMARY

This bill repeals the Professional Service Corporation Act and replaces it with a new chapter of law governing professional service corporations.