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The Role of the Incorporator in Corporate Formation

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Role Of The Incorporator

The Incorporator is the individual(s) who take responsibility for filing the Articles of Incorporation with the Secretary of States and officially commencing the corporate existence. The Incorporator should assign any rights to the Corporation to the Directors or the owners of the Corporation as a corporate formality after the Corporation is formed of record.

It is not necessary for all shareholders or directors to act as incorporators. The incorporator can be any person.

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Minnesota Corporate Bylaws and Corporate Kit

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Compliance Forms announces the release of its Minnesota Corporate Kit and Bylaws legal form Package.

Minnesota Specific Bylaws and Corporate Kit? You may find Minnesota corporate bylaws and other documents for sale on the Internet. Ours is the only comprehensive package we have found that gives you all of the documents you will need to create your own Corporate Kit including share certificates, bylaws, officer and director elections, organizational minutes, Subchapter S resolutions. We are also the only provider to offer you our 80 plus document Small Business Document Package, over 120 corporate resolutions and meeting materials, business and legal forms.

ALL DELIVERED IN ONE EASY DOWNLOAD FOR YOUR IMMEDIATE USE

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In order to maintain corporate formalities, each Minnesota corporation must adopt Bylaws. Bylaws govern the general governance and operation of the Minnesota corporation. Bylaws include items such as the number, qualification, duties, election and terms of directors and officers. Corporate Bylaws generally include other items such as election procedures, matters relating to corporate stock, and a host of other provisions.  Corporations are also required to maintain certain records such as organizational documents, share transfer records, meeting minutes and documentation of major corporate resolutions.  Corporations should maintain these items in a central location. Most corporations maintain these items in an organized corporate record book, also known as a corporate kit.

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APPOINTMENT OF COMPLIANCE OFFICER RESOLUTION

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Appointment of a Compliance Office is a critical element in compliance program effectiveness. Failing to appoint a compliance officer is almost an automatic indication that a compliance program is not effective. Below is an example of a compliance officer appointment resolution.

The Board of Directors of _____________ (the “Provider”) as constituted on _____________, 2016, hereby take the following actions and resolutions at a meeting of the Board of Directors that was duly noticed, called, and at which a quorum was present to conduct business and which was held on the _____________ 2016.

The Board of Directors of the Corporation hereby take the following actions and resolutions regarding the establishment of a compliance program (hereinafter “Compliance Program”) and appointment of a compliance officer for the Corporation:

WHEREAS, it is the policy of the Provider to appoint senior-level personnel to oversee and implement the Compliance Program for the Provider.  The Compliance Program is a critical program for the continued well-being and viability of our organization that contributes significantly to maintaining the trusted relations we strive for with those we serve.

WHEREAS, successful integration of the compliance principles and standards into the daily activities of every position within the organization requires sustained efforts and vocal senior management support. Appointment of appropriate high-level staff underscores the importance assigned to this effort by senior management staff.

WHEREAS, the Provider wishes to ensure that the Provider Board of Directors adopts a corporate responsibility policy that underscores the need for governance oversight of the implementation and effectiveness of the Compliance Program and senior-level management responsibility for implementation and management of compliance efforts.

NOW THEREFORE, BE IT RESOLVED, that the Provider shall appoint a high-level member of the administrative staff to administer the Compliance Program and provide the support, staff, and resources required to implement and maintain an effective Compliance Program. The Compliance Officer may report administratively to the President of the Provider and shall have direct access to the Board of Directors for matters related to the implementation and effectiveness of the Compliance Program.

RESOLVED, that the Provider hereby appoints __________________ as Compliance Officer to serve until removed or replaced by the Board of Directors.

RESOLVED, that the Board of Directors has received from ______________ a summary of the recommendations of legal counsel regarding certain gaps that exist in the Provider’s Compliance Program and the Board of Directors wishes to direct the Compliance Officer to work in conjunction with legal counsel to develop a specific work plan to correct policy gaps that currently exist in the Compliance Program (“Work Plan”) and the Compliance Officer shall present the Work Plan to the Board of Directors for further consideration.

RESOLVED, the Compliance Officer shall work with legal counsel to further refine the structure of the Compliance Program to leverage existing Provider resources to the greatest extent possible and develop the policies necessary to implement the Compliance Structure for  consideration and approval by the Board of Directors.

RESOLVED, that the Compliance Officer shall include a report on the progress being made with respect to the Work Plan at each meeting of the Board of Directors until such time as the Board of Directors is satisfied that the basic elements of an effective Compliance Program are in place.

Internal Reporting System for Compliance Concerns

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Setting Up Your Internal Reporting Mechanism

One of the primary elements in a Compliance Program is the creation of a system that permits employees and others to provide information regarding potential compliance issues without fear of retaliation.  In larger organizations, multiple pathways permitting employees to make anonymous complaints should be maintained.  Oftentimes providers use 24 hour compliance “hotlines.”  Online reporting systems or “drop boxes” are also commonly used.  Whatever system is used, it is crucial that employee understand that they are encouraged to provide information and that there is a clear prohibition against others in the organization retaliating against them for providing information.  It should also be made clear to employees that wherever possible the identity of the person providing the information will be kept confidential.

Establish Compliance Reporting Process

The establishment of the compliance reporting process and communication to employees that retaliation will not be tolerated is a central element to an effective compliance program.  Such a system will help the practice obtain valuable information, hopefully early on, before the issue becomes a big problem.  Additionally, the openness of the program will send a strong signal to the outside world, such as government regulators, that the organization takes compliance seriously.

If information is obtained through the hotline system it must be taken seriously.  Certainly not every piece of information will be reflective of a serious compliance problem, and an employee could potentially have other motives for making a compliant.  Regardless, it is crucial that the information be acted upon and that the action be documented.  If the compliance officer concludes that there were alternative motivations for the complaint, that fact should be substantiated and documented.  If an objective investigation indicates that there could be a compliance issue, the matter needs to be pursued through an appropriate outcome.  Depending on the circumstances and the result of a thorough investigation, the outcome could range anywhere from additional training through a self disclosure to the government.

 

Successor Liability and Compliance Due Diligence

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Due Diligence of Compliance Issues in Acquisitions

Successor liability issues are a central factor to consider when assessing the scope of compliance due diligence.  The acquiring organization must assess the degree to which it will assume liability for the past obligations of the target company.  If there is no risk that past obligations for compliance issues will be assumed, compliance efforts can at least conceptually be focused on integrative activities rather than assessive activities.  In effect, if there is no risk of successor liabilities, the acquiring organization can focus on the future, at least when it comes to compliance issues.  Of course there is never a perfect world and likewise, there is never a perfectly “clean” deal when it comes to successor liability.  This is particularly true in the health care industry, which has some counteractive rules regarding successor liability.

Normally, if an asset acquisition takes place, the acquiring entity will only assume the liabilities that it expressly assumes or which attach to the assets that it is acquiring.  Normally, the closing process will result in satisfaction of liabilities that might attach to the acquired assets.  Past Medicare liabilities can be an exception to this general rule.  Under Medicare rules, even if the transaction is structured as an asset purchase, all of the past provider’s Medicare liabilities will be passed forward to the acquiring provider.  This is because the Medicare change of ownership rules (sometimes referred to as CHOW rules) provide for the automatic assignment of the past provider’s Medicare provider agreement.  By virtue of the automatic assignment of the provider agreement, the acquiring party is deemed to assume virtually all past Medicare obligations of the target company.

Federal courts have consistently upheld these rules and have held the acquiring organization liable for past obligations.  Federal cases have specifically held acquiring parties for overpayments that were previously paid to the seller and civil penalties arising out of the actions of the seller that occurred before the acquisition.

The outside parameters of successor liability are yet to be tested in the context of recently expanded health care fraud and abuse laws.  Medicare regulations specifically state that the acquiring party does not assume past obligations based on personal fraud.  However, questions still remain whether corporate fraud can be assumed under successor liability theories.  Issues regarding the extent to which liability based on “knowledge-based” statutes, such as the False Claims Act, can be passed on to the acquirer.  Our initial reaction may be that it is not possible to assume responsibility for a knowledge-based violation.  But what about violations that are invoked based on the “reckless disregard” for the truth?  Is it possible that failure to perform reasonable due diligence could be construed as “reckless disregard?”

Medicare rules permit the acquiring organization to specifically reject the provider agreement of the previous entity.  However, there are very specific, time sensitive requirements for effectively rejecting past obligations.  Additionally, rejection will require the acquiring party to obtain independent certification and enter into a new provider agreement.  This process will inevitably result in interruption of revenues to the acquiring party.  This will in turn affect purchase price and other business factors.

Skilled Nursing Facility Compliance Work Plan

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Skilled Nursing Facility and Nursing Home Annual Work Plan

The OIG’s 2017 Annual Work Plan identified a few new areas of focus relating to nursing homes and skilled nursing facilities. Nursing home compliance officers should consider these newly identified issues when developing their annual compliance work plan.

Investigation of Serious Nursing Home Conditions

The Work Plan references a 2006 OIG report which found that state agencies failed to investigate in a timely manner some of the most serious complaints regarding nursing home conditions. The report referenced nursing home complaints involving immediate jeopardy and/or actual harm to residents. Complaints that rise to this level of severity are to be investigated by applicable state agencies within a 2 and 10 day timeframe. The Work Plan states that OIG will determine the extent to which State agencies investigate serious nuring home complaints within the required timeframes. Nursing homes can expect this to put more pressure on states that are responsible for these investigations to meet these timeframes on a more regular basis.

Unreported Incidents of Potential Abuse and Neglect

This newly identified topic relates to skilled nursing facilities. The OIG states that is plans to “assess” the incidence of abuse and neglect that occurs in skilled nursing facilities. It then plans to make a determination whether these incidents were properly reported and investigated as required under applicable Federal and state law. It appears that the OIG will be taking a sampled representation of cases to investigate. This conclusion can be garnered from reference in the Work Plan to “sampled” incident reports. The OIG plans to interview state officials to assure that incident reports that are examined under its sampling system were reported as required under law. The OIG plans to go even further and determine whether each reportable incident was investigated and subsequently prosecuted by the state.

This area could create some immediate risk exposure to facilities who are sampled as part of the OIG’s investigation. Facilities who are found to have failed to appropriately report potential abuse and neglect incidents could be subject to sanctions.

Review of SNF Use of Minimum Data Set Tool

the OIG states that it will review documentation of selected Skilled Nursing Facilities to determine whether Minimum Data Set Tool have been properly used to determine the severity of the patient’s condition. SNF reimbursment is tied to the severity of the patient’s condition through application of this tool. Periodic assessments must be performed on each patient by applicable skilled nursing facility. Improper use of the tool results in higher reimbursment than may be justified by the patient’s condition.

This issue was called out by previous OIG studies that indicated higher levels of reimbursement were being paid due to improper use of the Minimum Data Set Tool. Again, this is an area of specific concern for facilities who are lucky enough to be selected for audit by the OIG. If the facility is found to have improperly assessed patient severity, overpayment and potential penalties may be imposed. A finding on a small sample could also lead to expansion past the initially reviewed cases.

 

Compliance Committee Charter Example

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COMPLIANCE COMMITTEE  CHARTER – Introduction Example

The Compliance Committee (“Committee”) is an oversight group for clinical compliance issues related to ________________ (the “System”).  The Committee is advisory to both the Compliance Officer of the System and the System Compliance Officer.    The Committee also assists with the Clinical Compliance Program.  The term “compliance” used in this charter refers to adhering to federal, state, and local laws and regulations; System policies; coding and billing rules for third party payors that impact or relate to System services.  The Committee membership represents the hospital services of the Health Care System defined below.

Introduction Only – Remainder of Body of Charter Omitted

 

Yates Memorandum Main Steps and Key Priorities

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General Priorities in the Yates Memorandum

  • The Yates Memo prioritizes the manner in which Government civil and criminal law enforcement investigations are conducted.
  • It begins by proclaiming that “One of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing . . .
  • [accountability] it deters future illegal activity, incentives to changes in corporate behavior . . . and it promotes the public’s confidence in our justice system.”

The Yates Memo identifies six “key steps” to enable DOJ attorneys “to most effectively pursue the individuals responsible for corporate wrongs.”

  • Corporations will be eligible for cooperation credit only if they provide DOJ with “all relevant facts” relating to all individuals responsible for misconduct, regardless of the level of seniority.
  • Criminal and civil DOJ investigations should focus on investigating individuals “from the inception of the investigation.”
  • Criminal and civil DOJ attorneys should be in “routine communication” with each other, including by criminal attorneys notifying civil counterparts “as early as permissible” when conduct giving rise to potential individual civil liability is discovered (and vice versa).
  • Absent extraordinary circumstances, DOJ should not agree to a corporate resolution that provides immunity to potentially culpable individuals.
  • DOJ should have a “clear plan” to resolve open investigations of individuals when the case against the corporation is resolved.
  • Civil attorneys should focus on individuals as well, taking into account issues such as accountability and deterrence in addition to the ability to pay.

Yate Memorandum Compliance Program Impact – Progression of DOJ Pronouncements

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Yates Memorandum and Progression of DOJ Pronouncement Memos

The Yates Memo is the latest in a line of similar pronouncements that began in 1999

  • “Bringing Criminal Charges Against Corporations
  • Thompson Memo(2003)
  • McNulty Memo(2006)
  • Filip Memo(2008)
  • U.S. Attorney’s Manual (“USAM”) as the Principles of Federal Prosecution of Business Organizations(USAM § 9-28.000).
  • The “Principles” have been revised to incorporate the Yates Memo’s dictates on individual accountability for corporate wrongdoing.