SB2368

SECTION 1. Chapter 421J, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§421J- Termination of association. (a) Notwithstanding any law or provision of the association documents to the contrary, an association may be terminated by a plan of dissolution that:

(1) Meets the requirements of this section;

(2) Is approved by sixty-seven per cent of the votes association members are entitled to cast under the association documents;

(3) Is approved by a court of competent jurisdiction; and

(4) Is consented to in writing by the holders of all liens affecting association property.

(b) Any plan of dissolution shall include:

(1) A timeline for the proposed termination of the association;

(2) A plan for distributing or otherwise dealing with any assets of the association;

(3) A plan to determine and pay all creditors of the association; and,

(4) A plan for the management of the former assets of the association after the termination of the association, including funding for the maintenance of the assets.

(c) A special meeting of the association to consider a plan of dissolution may be called by the board or by a petition to the board signed by not less than twenty-five per cent of the members; provided that if the board fails to send out notices for the special meeting within fourteen days of the receipt of the petition, the petitioners may set the time, date, and place for the special meeting and may send out notices and proxies for the special meeting at the association's expense in accordance with the association documents and this chapter; provided further that a special meeting to consider a plan of dissolution shall be set no later than sixty days from the receipt of the petition. Notice of the special meeting to consider the plan of dissolution shall be given in accordance with section 421J-3.5 and shall include a copy of the plan of dissolution. No board member shall use association funds to oppose a plan of dissolution.

(d) If the members duly approve the plan of dissolution, the board shall submit the plan of dissolution to a court of competent jurisdiction. The court shall examine the plan of dissolution for compliance with this section and any other applicable law and shall notify the board in writing of any deficiencies in the plan of dissolution. If the court determines that the plan of dissolution meets the requirements of this section and any other applicable law, the court shall authorize the termination of the association and the dissolution may proceed in accordance with this section.

(e) A court-approved plan of dissolution shall be recorded. The termination of the association is effective on the date of recording or at a later date, as specified in the plan.

(f) Upon the recording of the plan of dissolution, title to all real and personal property owned by the association shall vest in the termination trustee. The board, or a person appointed by the plan of dissolution, shall serve as the termination trustee and shall have a fiduciary duty to carry out the dissolution plan. The termination trustee shall have the powers granted to the board by the association documents and subsection (g). If the board fails to act as the termination trustee, a court of competent jurisdiction shall appoint a termination trustee upon a petition to the court by any member of the association.

(g) The approval of a plan of dissolution shall not terminate the board, which shall continue in existence following the approval of the plan of dissolution with all powers and duties of the board under the association documents as necessary to wind up the affairs of the association. Notwithstanding anything in the association documents to the contrary, after approval of the plan of dissolution, to the extent the board deems necessary to wind up the affairs of the association, the board may:

(1) Conduct the affairs of the association;

(2) Employ agents, attorneys, and other professionals;

(3) Carry out contracts and collect, pay, and settle debts and claims for and against the association;

(4) Defend any lawsuits brought against the association;

(5) Sue in the name of the association for all amounts due or owed to the association or to recover any association property;

(6) Maintain and repair association property and demolish any unsafe or uninhabitable improvements to association property;

(7) Sell, exchange, convey, or otherwise dispose of assets of the association for an amount the board deems in the best interests of the association, and execute bills of sale and deeds of conveyance in the name of the association;

(8) Collect and receive rents, profits, accounts receivable, income, maintenance fees, special assessments, or insurance proceeds for the association; and

(9) Contract and do anything in the name of the association that is proper and convenient to terminate the affairs of the association.

(h) If the association is incorporated under chapter 414D, after the approval of the plan of dissolution, the board shall file articles of dissolution with the department of commerce and consumer affairs pursuant to section 414D-243.

(i) Any assets of the association remaining after completion of the plan of dissolution shall be distributed equally among the members or as otherwise provided in the plan of dissolution. No member shall be personally liable for the unpaid obligations of the terminated association other than any assessments chargeable to the member's unit before the approval of the plan of dissolution."

SECTION 2. New statutory material is underscored.

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2368
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII