Bill
HB 8450
Rhode Island will overhaul corporate governance, create a rapid arbitration framework, expand LLC/trust options, and impose a new annual Franchise Tax regime for entities.
Date Introduced: April 15, 2026
Jurisdiction: Rhode Island, General Assembly
Purpose and overall aim
- The Rhode Island Business Climate Reform Act seeks to reform several aspects of corporate, LLC, and partnership governance to accelerate dispute resolution, modernize corporate processes, and broaden the state’s business-friendly framework.
- Key overarching themes: adoption of a business judgment rule for directors/managers, creation of a new framework for rapid arbitration, expansion of LLC and trust-related authorities, introduction of a state-level franchise tax/fee structure, and significant changes to real property homestead exemptions and court structure in equity matters.
Main provisions by subject area
1) Corporate governance and derivative actions (Rhode Island Business Corporation Act)
- 7-1.2-711 (Derivative actions)
- Clarifies standing, demand requirements, and dismissal standards for derivative suits.
- Creates a framework for court dismissal of derivative actions if independent directors or a designated committee determines the action is not in the corporation’s best interests.
- Sets burden-sharing depending on whether a majority of the board is independent.
- Allows appointment of an independent panel to determine if maintenance of derivative actions is in the corporation’s best interests.
- Addresses costs and expenses depending on conduct and outcomes.
- Establishes a minimum ownership threshold for initiating derivative actions for certain entities (effective July 1, 2026) and limits certain attorneys’ fee awards tied to disclosures.
- 7-1.2-1408 (Registered office/agent for foreign corporations)
- Secretary of State may serve as registered agent for foreign corporations or LLCs starting July 1, 2026.
- Mortgage payoff/discharge arrangements for foreign mortgage holders located in RI.
- 7-1.2-815 (Business judgment rule)
- Introduces a presumptive business judgment rule: directors/managers are presumed to have acted in good faith, with appropriate information, and in the entity’s best interests if specified criteria are met.
- Burden of proof on challengers; specifics on what constitutes an “association” and related party considerations.
- 7-1.2-1806 to 7-1.2-1808 (Independence determinations; waiver of class voting; shielded communications)
- Allows preliminary court determinations of director independence for related-party reviews.
- Enables waiver of class-by-class voting in certain circumstances.
- Protects communications from inspection in certain contexts, while preserving court authority to compel disclosure when warranted.
- 7-1.2-1807–1808 (Additional related provisions)
- Related procedural and confidentiality adjustments concerning governance and communications.
2) Limited liability company (LLC) reforms
- 7-16-11 (Resident agent)
- Secretary of State may serve as resident agent for foreign LLCs from July 1, 2026.
- Eases application requirements by removing the need for a home jurisdiction good-standing certificate.
- 7-16-78 (Anonymous LLCs)
- Creates “Anonymous LLCs” (ALLCs): members/managers names are not public on filings, but the ALLC must include a registered agent.
- Internal ownership information remains in the operating agreement.
- 7-16-79 (Rhode Island protected series LLC)
- Allows designating protected series with separate rights and obligations; flexibility remains for freedom of contract.
- 7-16-80 (Limitation of liability)
- Permits limiting/eliminating certain liabilities in LLC operating agreements, with a prohibition on bad-faith breaches of the implied covenant of good faith and fair dealing.
3) Complex court system and equity (Courts and procedures)
- 8-2-41 (Complex Commercial Litigation Calendar)
- Establishes a separate calendar for complex commercial litigation in the RI Superior Court (effective July 1, 2027).
- Eligible cases involve at least $1,000,000 in controversy or certain contractual designations; excludes some types (e.g., personal injury, mortgage foreclosures, certain employment-related matters).
- Expedited handling: memoranda due within 60 days; limited or no continuances except for good cause.
- 8-2-42 to 8-2-43 (Court of Chancery and equity jurisdiction)
- Establishes a distinct Court of Chancery within the Superior Court to hear matters in equity (no monetary damages).
- Powers and jurisdiction defined; the court can transfer matters after equitable resolution.
- Allows waivers of jury trials for internal claims (derivative, fiduciary issues) under governing documents.
- 9-36 series (Rhode Island Rapid Arbitration Act)
- Creates a new rapid arbitration framework for business disputes (Chapter 9-36).
- Validates arbitration agreements between RI-based entities, with specific requirements (e.g., signatories, governing law, scope, inclusion of this chapter).
- Sets court jurisdiction for confirmation, challenges, appointment of arbitrators, fees, and enforcement, including timelines (final awards to be issued within 120 days unless extended by written agreement; appeals to RI Supreme Court under limited circumstances).
- Arbitration procedures cover hearings, evidence, subpoenas (where allowed by agreement), and interim rulings.
- 18-1-6 and 18-1-7 (Trusts: expanded authority)
- Broad changes expanding trust doctrine: dynasty/trust duration up to 1,000-year terms, unity of control via trust protectors/advisors, silent or quiet trusts, directed trusts, and flexible representation for minor/beneficiary claims.
- Nominee trusts recognized; trust documents may be sealed or private; Uniform Directed Trust Act provisions adopted.
4) Taxation and franchise fees (Franchise tax regime)
- 44-11-2 (Corporate income tax)
- Repeal or phase-out of certain corporate income tax aspects by replacing with a Franchise Fee (details vary by section; minimum thresholds and adjustments).
- 44-12.1-1 through 12 (Franchise Tax)
- Introduces a Franchise Tax payable annually by all corporations, LLCs, partnerships, trusts, and associations in Rhode Island.
- Franchise fee schedule for corporations:
- 5,000 or fewer authorized shares: $450
- 5,001 to 10,000: $750
- 10,001+ shares: $1,000
- Franchise fee is deductible from the state business corporation tax (if applicable).
- Filing and payment requirements, penalties, liens, and procedures for nonpayment, including potential charter forfeiture after two years of nonpayment.
- Exceptions: some specific hospitals, insurers, and certain entities may be exempt.
- Effective dates:
- Franchise/fee regime takes effect upon passage, with phased provisions; sections 6 (some provisions), 10, and 11 scheduled for different effective dates (July 1, 2027, and January 1, 2027 for certain elements).
5) Other notable elements
- 9-26-4.1 (Homestead exemption expansion)
- Ii ncreases the homestead exemption to unlimited value starting July 1, 2026, for primary residences, subject to stated exceptions (tax liens, pre-existing debts, certain secured debts, and government reimbursements). Automatic exemption; no filing required.
- Severability and interpretation
- The act affirms freedom of contract principle and the enforceability of arbitration agreements.
Effective dates (summary)
- Most sections become effective upon passage.
- July 1, 2026: several provisions apply (e.g., foreign agent/service changes, residence agent for LLCs, trust-related expansions, unilateral homestead changes).
- January 1, 2027: certain sections (including some tax/franchise-related elements) take effect.
- July 1, 2027: complex commercial litigation calendar becomes effective; other procedural adjustments apply.
Potential impact and who is affected
- Corporations, LLCs, partnerships, and trusts operating in Rhode Island would face a new franchise tax regime, new filing requirements, and potential charter forfeiture risks for nonpayment.
- Publicly traded and large private entities could utilize the business judgment rule and the derivative action framework with heightened governance considerations.
- Anonymous LLCs and protected-series structures would expand privacy for members/managers and allow distinct series management.
- Civil and business disputes would have an optional rapid arbitration path, potentially reducing traditional court time for commercial disputes.
- The judiciary would see structural changes, including the creation of a Court of Chancery and a specialized complex commercial litigation calendar to handle large or complex cases more efficiently.
Notes
- The bill is designed to modernize Rhode Island’s corporate and business framework, attract investment, and streamline dispute resolution, while introducing new fees and supervisory approaches that could affect capital formation and ongoing compliance for Rhode Island-based entities.
Compiled from official sources — confirm details with the bill’s official record.
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