Michigan closed out 2024 with a small but consequential housekeeping package aimed at clarifying how the Michigan Business Corporation Act (“MBCA”) intersects with older “special act” charters and with the state’s limited liability company statute. Senate Bill 984 now Public Act 176 of 2024 amends MBCA §123 (MCL 450.1123) to refine when the MBCA applies, to reaffirm long-standing exceptions, and to make room for a targeted modernization in the telecommunications space: conversions of nineteenth-century telephone corporations into domestic LLCs. For general business planners, these changes look modest. For municipal and rural telephone systems, special-purpose utility enterprises, and certain legacy entities organized under nineteenth- and early twentieth-century laws, the tweaks are a welcome alignment of overlapping statutes that reduces friction around conversions and day-to-day governance.
Although the MBCA is the default corporate code for Michigan-organized business corporations, §123 has always been the statute’s “scope” section an interpretive map that says which entities are picked up by the MBCA and which continue to live under their own charters, unless there is an inconsistency. SB 984 keeps that architecture, but it refreshes the text and, importantly for telecoms and their owners, adds an explicit cross-reference that the MBCA does not block a telephone corporation’s conversion into a domestic LLC under the Michigan Limited Liability Company Act. The result is continuity for special-act entities that wish to remain as they are and predictability for those planning a migration to an LLC platform.
The first pillar of §123 remains the rule of compatibility. Unless another organizing act “otherwise provides” or is “inconsistent” with the MBCA, the MBCA fills in gaps for a familiar list of special-act creatures that predate modern codes. That list is a tour through the state’s business history: deposit and security companies, summer resort associations, brine pipeline and telegraph companies, telephone companies, safety and collateral deposit companies, canal, river, and harbor improvement companies, cemetery, burial, and cremation associations, railroad, bridge, and tunnel companies, and agricultural and horticultural fair societies. The statute underscores that these entities are not incorporated under the MBCA, but they can borrow its provisions where their own acts are silent and no conflict exists. This is not an expansion of MBCA jurisdiction; it is an assurance that when older public acts do not speak to a practical governance question say, board procedures or recordkeeping MBCA rules can supply a workable answer unless the special act says otherwise.
The second pillar is the set of persistent exclusions. Insurance and surety companies, savings and loan associations, fraternal benefit societies, and banking corporations continue to sit outside the MBCA entirely. These sectors have comprehensive frameworks of their own, and SB 984 does not disturb that settlement. For counsel who manage mixed corporate families that include regulated financial entities alongside ordinary operating companies, the message is simple: the MBCA is still not your statute for banks, S&Ls, insurers, or fraternals, and the §123 changes do not pull those entities into MBCA orbit.
The most visible innovation is tucked into §123(3). The new sentence makes explicit that nothing in the MBCA prevents a telephone corporation organized under the 1883 telephone act from converting into a domestic LLC under the Michigan LLC Act. This resolves the kind of interpretive hesitation that arises when a nineteenth-century corporate charter meets a modern conversion provision, by stating right in the MBCA that conversion is fair game if the entity satisfies the LLC Act’s requirements. While many practitioners were already comfortable that existing conversion machinery could be read to reach these entities, the Legislature has now said so in unmistakable terms.
Understanding why the Legislature bothered to add that sentence requires a quick look at the companion bills. SB 982 (now Public Act 174 of 2024) amends the 1883 telephone and messenger service companies act to authorize conversions of telephone corporations into domestic LLCs, expressly routing those conversions through §709 of the Michigan LLC Act. SB 983 (now Public Act 175 of 2024) amends the LLC Act’s definitional provisions so that a “telephone corporation formed under 1883 PA 129” is treated as a “business organization” eligible to convert under the LLC Act. SB 984 then completes the triangle by clarifying the MBCA’s scope and by assuring that nothing in the MBCA stands in the way of a telephone corporation’s conversion when the LLC Act’s requirements are met. In other words, the package answers the “may we convert,” “by what mechanism,” and “does any other code block us” questions in one coordinated sweep.
The practical audience for this change is broader than the label “telephone corporation” suggests. In many parts of Michigan, especially rural areas, legacy telephone companies operate as community fixtures or as arms of local government with a mix of copper, fiber, and wireless assets. Some remain organized under special acts dating to the late nineteenth century, with charter language that predates both the MBCA and the modern LLC Act by decades. Those charters can be serviceable for basic corporate governance but awkward for contemporary capital and joint-venture structures, tax planning, and risk compartmentalization. The 2024 package acknowledges this reality. It allows such entities to modernize their “wrapper” to an LLC while keeping their operational history, regulatory relationships, and local ownership intact, provided they follow the conversion mechanics spelled out in the LLC Act.
For boards and municipal owners, the conversion tool is primarily about flexibility, not deregulation. A telephone company that becomes an LLC remains subject to sector-specific law, including any applicable public service or franchising requirements; SB 982’s cross-reference to §709 of the LLC Act pulls in the conversion procedure, not a regulatory escape hatch. Likewise, the tax treatment of any converted telephone company is addressed elsewhere in the package: the Senate Fiscal Agency’s analysis explains that a separate bill ensures an LLC formed by conversion is treated as a corporation for Michigan income tax purposes, preserving parity and avoiding tax arbitrage. The headline point is that the Legislature wants to enable governance modernization without creating an unintended tax or regulatory advantage.
Special-act entities outside telecom can also read SB 984 as a reaffirmation that the MBCA functions as a helpful backstop rather than a usurper. Cemetery associations, summer resort associations, and the assortment of infrastructure companies listed in §123 often confront day-to-day questions board vacancies, indemnification, meeting notices that their home statutes do not address comprehensively. The MBCA’s compatibility clause lets those entities reach for MBCA solutions unless a conflict exists. After SB 984, that interpretive posture is unchanged, but the Legislature has taken the opportunity to reprint and tidy the list, which reduces the risk of overlooking older categories when advising clients. A fair reading of the update is that the Legislature intends to preserve historic corporate forms where they are still doing useful work while giving them the benefit of modern corporate housekeeping rules when needed.
For counsel contemplating conversions, the operational path runs through the LLC Act, not through the MBCA. SB 983’s amendment to §705a of the LLC Act enlarges the universe of “business organizations” that can use the conversion provisions to include the special-act telephone corporations. That definitional fix matters because §709 of the LLC Act describes who may become a domestic LLC by conversion and what approvals, filings, and plan contents are required. With §705a updated, a telephone corporation can prepare a conversion plan, obtain the required approvals, and file the necessary certificates with the Corporations Division, all under the familiar LLC Act framework. SB 984’s role is to clear the “conflict check” on the MBCA side of the ledger, so that an argument cannot be made that the MBCA’s scope or silence bars the move.
It is also worth emphasizing what SB 984 does not do. It does not convert any entity automatically, nor does it displace the chartering statute for special-act corporations that wish to remain as they are. It does not expand the MBCA to cover insurance and banking companies. And it does not change the long-standing principle that, where an entity’s organizing act affirmatively provides different rules, those rules govern. The statute says what it has always said: the MBCA applies unless another act otherwise provides or is inconsistent. That default is a tool for filling gaps, not an invitation to rewrite special charters by implication.
From a governance-design perspective, conversions to LLCs are often about aligning the legal form with the economics of the business. Many telephone systems operate today with layered infrastructure partnerships, wholesale transport arrangements, and federal or state grant participation for broadband projects. An LLC platform can be easier to slot into those structures, because the LLC Act supports contribution agreements, preferred capital features, and member-level consents that may be harder to achieve cleanly under an older corporate charter. SB 984, by removing any residual doubt about the MBCA’s role, makes it simpler to recommend an LLC conversion where the economics and stakeholder mix point that way. The change is especially helpful for entities with cooperative or municipal DNA, where board members and local officials want certainty that a conversion is lawful before they open discussions with lenders or private-sector partners.
Practitioners should still approach the mechanics with care. The conversion plan has to comply with §709, including a description of the terms and conditions of the conversion, the manner and basis of converting shares if any, and the organizational documents of the resulting LLC. Because many telephone corporations hold regulated assets and franchise rights, counsel should map approvals that may be required outside the conversion statutes, such as consents under local franchises, pole-attachment agreements, or fiber-IRU arrangements. Where debt is outstanding, the conversion typically triggers “organizational changes” provisions; lenders often require amendments to security documents or new UCC filings to reflect the new entity type. None of these steps are created by SB 984, but the bill makes it easier to explain to counterparties that the conversion is authorized and routine.
For special-act entities beyond telecom, the message is that the MBCA remains available as a governance toolkit, but it is not a magic wand for structural overhauls. A cemetery association looking to adopt modern indemnification language can look to the MBCA’s indemnification provisions where its own act is silent and there is no inconsistency. A summer resort association needing to clarify vacancies can consult MBCA provisions on board action to fill vacancies under the same logic. But if the goal is to change the entity’s fundamental form for example, to move from a special-act corporation to an LLC counsel must find an affirmative path in the organizing act or in an applicable conversion statute. SB 984 highlights that principle by showing how the Legislature provided that path for telephone corporations through SB 982 and SB 983.
Because conversions can have tax consequences, boards should coordinate with tax advisors early. The Legislature anticipated at least one corner case by ensuring, through a separate measure described in the Senate Fiscal Agency analysis, that an LLC formed by converting a telephone corporation would be treated as a corporation for Michigan income tax purposes. That choice preserves the tax baseline for these historically corporate enterprises and avoids any perception that the conversion toolkit is a vehicle for tax arbitrage. If a transaction model expects different tax treatment, additional structuring will be required. The safer planning posture is to assume tax neutrality at the state level and build your capital and governance logic around operational benefits.
For clients that interact with these entities vendors, municipalities, grant-making bodies, and cooperative members the clarity delivered by SB 984 should reduce closing risk. Third parties no longer have to parse whether the MBCA’s silence on some corner of special-act governance implies a prohibition; instead, the statute itself confirms that MBCA provisions may fill gaps and that MBCA is not a barrier to a telephone corporation’s conversion where the LLC Act’s requirements are met. In negotiations, that clarity can shorten side-letter wrangling over “authority” and enable parties to focus on commercial terms.
There is also a broader policy story here. Michigan’s corporate law is layered because the state grew up alongside the industries it chartered. The Legislature rightly resists sweeping the old layers aside: many of those special-act entities have identities knitted into local governance and community life. But layered law can lead to hesitation in routine transactions. By tightening the text of §123 and knitting it together with targeted updates to the LLC Act and to the telephone corporation act, the Legislature reduces interpretive friction without forcing every legacy entity into the same mold. This is business-law pragmatism of the kind that deals with the legal plumbing so owners and boards can turn their attention to operations and investment.
Looking ahead, the same pattern could be applied when other special-act sectors want modernization options. If a similar need emerges for, say, certain infrastructure or utility companies on the §123 list, the Legislature now has a tested template: confirm eligibility to convert by adjusting the LLC Act’s definitions; ensure the sector’s organizing statute points to the LLC Act’s conversion mechanics; and tweak the MBCA’s scope, if necessary, to make clear that MBCA provisions will not obstruct the change. Nothing in SB 984 compels that next step for other sectors, but the path is visible. For clients and counsel, the practical takeaway is to keep §123 on the checklist whenever advising a special-act entity, both to harvest the MBCA’s governance defaults where appropriate and to spot whether a tailored legislative fix would unlock needed structural flexibility.
In sum, SB 984 is not a headline-grabbing overhaul, but for the niche world of special-act corporations and, especially, for telephone companies contemplating twenty-first-century capital and partnership arrangements, it is a useful bit of legislative maintenance. It preserves the MBCA’s role as a compatibility code for legacy entities, keeps core exclusions intact, and adds a clear lane for telecom conversions to LLCs. When paired with SB 982 and SB 983, it answers the practical question that boards and advisors ask most often: can we do this, and how? The Legislature’s answer is yes and here is the map.
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Sources
Public Act 176 of 2024 (SB 984), amending MBCA §123 (MCL 450.1123). Michigan Legislature. https://www.legislature.mi.gov/Bills/Bill?ObjectName=2024-SB-0984
Public Act 174 of 2024 (SB 982), amending 1883 PA 129 to authorize conversion of telephone corporations into domestic LLCs. Michigan Legislature. https://www.legislature.mi.gov/Bills/Bill?ObjectName=2024-SB-0982
Public Act 175 of 2024 (SB 983), amending §705a of the Michigan LLC Act to include telephone corporations as “business organizations” eligible for conversion. Michigan Legislature. https://www.legislature.mi.gov/documents/2023-2024/publicact/htm/2024-PA-0175.htm
MCL 450.1123 — Applicability of the Michigan Business Corporation Act, scope and exclusions. https://www.legislature.mi.gov/Laws/MCL?objectName=mcl-450-1123
Senate Fiscal Agency Analysis: “Telecomm Company LLC Conversion, S.B. 982–984 (and 1050),” Michigan Senate Fiscal Agency. https://www.legislature.mi.gov/Bills/Bill?ObjectName=2024-SB-0982