§1629e Settlement Trust Option

Summary

A Native Corporation may transfer assets, including stock, into a Settlement Trust under state law unless the state law conflicts with federal rules. If the corporation tries to transfer all or most of its assets into the trust, the shareholders must approve that transfer by a resolution. Any transfer of underground mineral or subsurface rights is not allowed and is invalid from the start and will not be enforced by any court. Transfers are subject to laws about fraud and creditors. Shareholders who oppose a transfer get dissenters’ rights 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 promote the health, education, welfare, and culture of its beneficiaries. The trust cannot run a business, and it generally cannot sell or give away land it receives, except to return land to the corporation or to give up to 1.5 acres for a homesite to a beneficiary who is a legal resident of the Native village under Alaska law. The corporation that created the trust alone picks and can remove trustees for cause. The corporation may add new classes of beneficiaries, such as holders of Settlement Common Stock issued after the trust was set up, without paying the original beneficiaries. Land or other interests moved into the trust remain subject to the chapter’s rules as if the corporation still held them. Timber covered by section 1606(i) may only be sold or moved to deal with diseased timber, stop the spread of disease or insects, fight or prevent fire, or protect public safety. Transfers do not cancel valid contracts, judgments, liens, or other obligations that existed before the transfer; those claims can be enforced against the trust just as they could against the corporation, and some claims can also be enforced against the transferring corporation. A transfer must not leave the corporation unable to meet those claims or insolvent, and the trust may not make distributions that would prevent it from meeting such claims; any transfer or distribution that violates this is invalid from the start. Shareholder approval is only needed when state law requires it. A beneficiary’s interest and distributions are subject to creditors only to the same extent Settlement Common Stock and its distributions are subject under section 1606(h).