§1629e Settlement Trust option

Summary

A Native Corporation may transfer assets, including stock, into a Settlement Trust under state law. If the corporation wants to give all or nearly all of its assets to the trust, shareholders must approve that transfer in a resolution. Any transfer that breaks that rule or that gives away subsurface rights (the underground estate) is treated as if it never happened and courts will not enforce it. Transfers must obey laws about fraudulent transfers and creditors. Dissenters’ rights apply under state law only if the trust beneficiaries’ rights cannot be sold and a shareholder vote is required by section 1629b(a)(4). A Settlement Trust must help beneficiaries’ health, education, welfare, and Native culture. The trust cannot run a business, sell land it got from the corporation (except it can return land to the settlor or give up to 1.5 acres for a homesite to a beneficiary who is a legal resident of the Native village under Alaska law), or favor mostly employees or officers of the settlor. The Native Corporation chooses and can remove trustees for cause. The corporation can add later holders of Settlement Common Stock as beneficiaries without reducing original beneficiaries. Land moved into a trust stays subject to the chapter’s rules as if the corporation still owned it. Timber in the trust can only be removed to stop disease or infestation, to fight or prevent fires, or to protect public safety. Valid contracts, judgments, liens, or obligations that applied before the transfer still apply and can be enforced against the trust or the transferor as if the transfer had not changed them. A transfer cannot leave the corporation unable to meet those claims or insolvent, and the trust cannot make distributions that would prevent it from meeting such claims; those improper transfers are treated as if they never happened. Beneficiary interests are open to creditor claims only to the same extent that Settlement Common Stock is under section 1606(h).