HOUSE BILL 363
57th legislature - STATE OF NEW MEXICO - first session, 2025
INTRODUCED BY
Meredith A. Dixon and Joshua N. Hernandez
AN ACT
RELATING TO NONPROFIT ASSOCIATIONS; CREATING THE DECENTRALIZED UNINCORPORATED NONPROFIT ASSOCIATION ACT.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:
SECTION 1. [NEW MATERIAL] SHORT TITLE.--This act may be cited as the "Decentralized Unincorporated Nonprofit Association Act".
SECTION 2. [NEW MATERIAL] DEFINITIONS.--As used in the Decentralized Unincorporated Nonprofit Association Act:
A. "administrator" means a person authorized by the members of a decentralized unincorporated nonprofit association to perform administrative and operational tasks at the direction of the membership;
B. "agreement" means the agreement among the members of an association, including any amendments thereto, that govern the purpose and operation of the association and the rights and obligations of the association's members and administrators;
C. "automated transaction" means a transaction conducted or performed, in whole or in part, by electronic means or electronic records, in which the acts or records of one or both parties are not reviewed by an individual in the ordinary course in forming a contract, performing under an existing contract or fulfilling an obligation required by the transaction;
D. "blockchain" means a system in which a record of transactions, including those made in a cryptocurrency, is maintained across computers that are linked in a peer-to-peer network;
E. "decentralized unincorporated nonprofit association" or "association" means an unincorporated association that meets all of the following criteria:
(1) consists of at least two or more members joined by mutual consent under a written agreement for a common purpose permitted by the Decentralized Unincorporated Nonprofit Association Act;
(2) has elected to be formed under that act; and
(3) is not formed under any other law governing the association's organization or operation;
F. "digital asset" means a representation of economic, proprietary or access rights that is stored in a computer-readable format and is either a digital consumer asset, digital security or virtual currency;
G. "digital consumer asset" means a digital asset that is used or bought primarily for consumptive, personal or household purposes and includes an open blockchain token constituting intangible personal property, but does not include digital securities or virtual currencies;
H. "digital security" means a digital asset that constitutes a security, but shall exclude digital consumer assets and virtual currency;
I. "distributed ledger technology" means a distributed ledger protocol and supporting infrastructure, including blockchain, that uses a distributed, shared and replicated ledger, whether public or private, permissioned or permissionless, and that may include the use of digital assets as a medium of exchange;
J. "member" means a person who, under the terms of the agreement of an association, may participate in the selection of the association's administrators or the development of the policies and activities of the association;
K. "membership interest" means a member's voting right in an association determined by the association's agreement, including as ascertained from decentralized ledger technology on which the association relies to determine a member's voting rights;
L. "peer-to-peer network" means a decentralized network that allows participating computers to share resources, data and information among the computers without requiring a central server;
M. "person" means an individual, a corporation, a business trust, an estate, a trust, a partnership, an association, an agency, a joint venture or any other legal commercial entity;
N. "smart contract" means an automated transaction, or any substantially similar analogue or code, script or programming language relying on distributed ledger technology, including blockchain, which may include facilitating and instructing transfer of an asset, administrating membership interest votes with respect to a decentralized unincorporated nonprofit association or issuing executable instructions for these actions based on the occurrence or non-occurrence of specified conditions; and
O. "virtual currency" means a digital asset that is:
(1) used as a medium of exchange, unit of account or store of value; and
(2) not recognized as legal tender by the United States government.
SECTION 3. [NEW MATERIAL] PURPOSE OF ASSOCIATION.--A decentralized unincorporated nonprofit association may be formed for any lawful purpose, including charitable, benevolent, eleemosynary, educational, civic, patriotic, political, religious, social, fraternal, literary, cultural, scientific, professional, commercial, industrial or trade purposes; provided that the association is not formed for the individual profit of the members of the association.
SECTION 4. [NEW MATERIAL] FORMATION--FILING STATEMENT AND ASSOCIATION FORMATION AGREEMENT WITH SECRETARY OF STATE.--Persons desiring to form a decentralized unincorporated nonprofit association shall file a statement with the office of the secretary of state containing the name of the association, the names and residences of the persons forming such association and a copy of the written agreement of the persons forming the association that contains the rules or regulations governing the transaction of its objects and purposes and prescribes the terms by which the members may establish, maintain or cease the membership in the association.
SECTION 5. [NEW MATERIAL] GOVERNING LAW--TERRITORIAL APPLICATION.--
A. The Decentralized Unincorporated Nonprofit Association Act governs any decentralized unincorporated nonprofit association that is formed in New Mexico.
B. A decentralized unincorporated nonprofit association's agreement shall identify the:
(1) jurisdiction in which the decentralized unincorporated nonprofit association is formed; and
(2) initial administrator who will fulfill administrative and operational tasks for the association for the first year, until the administrator is replaced by the members of the association.
SECTION 6. [NEW MATERIAL] DIVIDENDS PROHIBITED--COMPENSATION AND OTHER PERMITTED PAYMENTS.--A dividend shall not be paid, and no part of the income, profits or assets of a decentralized unincorporated nonprofit association shall be distributed to its members or administrators. A decentralized unincorporated nonprofit association may provide compensation in a reasonable amount to its members or administrators for services rendered and may confer benefits on its members in conformity with its purposes and upon dissolution or final liquidation and may make distributions as permitted by its agreement and the Decentralized Unincorporated Nonprofit Association Act.
SECTION 7. [NEW MATERIAL] PROPERTY HOLDINGS--EFFECT OF MEMBER'S DEATH OR TERMINATION OF MEMBERSHIP--MEMBER'S INTEREST NOT SUBJECT TO EXECUTION.--
A. A decentralized unincorporated nonprofit association may hold and acquire real or personal property by deed, lease or otherwise, in the name of the association, and may acquire title to property by purchase or otherwise for its objects and purposes. The property shall be deemed to be held by the association for the use and benefit of the association members.
B. Upon the decease of a member or the termination of a membership, the interest of that member in the property of the association shall cease and terminate, without right of succession to heirs, executors or administrators of that deceased member, or to the creditors or trustee in bankruptcy or assignee of that member whose membership is terminated.
C. The interest of a member in the property of an association shall not be subject to execution as and for the member's debts or as the member's individual or special property.
SECTION 8. [NEW MATERIAL] MORTGAGE OR SALE OF PROPERTY-- METHOD OF CONVEYANCE.--
A. The real and personal property or leasehold interest of a decentralized unincorporated nonprofit association may be mortgaged or sold at such time and upon such terms as the members of the association may determine by vote as prescribed in the association's formation agreement.
B. A deed signed by the administrator or a member designated by resolution or other action of the members as permitted by the agreement shall be deemed sufficient to convey the fee simple title, or any title, to any property held or possessed by the association free and clear of any interest, claim or title of any of the individual members of the association, their heirs, executors and administrators, as tenants in common or otherwise.
SECTION 9. [NEW MATERIAL] SUITS AGAINST OR BY DECENTRALIZED UNINCORPORATED NONPROFIT ASSOCIATIONS--RECOVERY OF JUDGMENTS.--
A. A decentralized unincorporated nonprofit association may sue or be sued in its name for the purpose of enforcing for or against it any substantive right. Suit may be brought against a decentralized unincorporated nonprofit association by a member of the association, and the decentralized unincorporated nonprofit association may sue a member of the association and its administrators.
B. A money judgment obtained against a decentralized unincorporated nonprofit association shall only bind the joint or common property of the association.
C. Members shall not be jointly and severally liable for debts of the association.
D. In an action against a decentralized unincorporated nonprofit association, process may be served by delivering a copy of the summons and complaint or other pleading to the administrator of the association.
SECTION 10. [NEW MATERIAL] SUITS AGAINST OR BY DECENTRALIZED UNINCORPORATED NONPROFIT ASSOCIATIONS--ACTIONS AGAINST MEMBERS.--
A. A decentralized unincorporated nonprofit association may sue or be sued in its name without the individual members of the association being made parties to the suit.
B. An association may sue a member as a defendant in any matter arising out of the member's membership in the association or the termination of the member's membership, and may recover judgment, if necessary, for any dues or obligations due and owing by the member to the association, whether the member has ceased to be a member or not.
SECTION 11. [NEW MATERIAL] VENUE.--For purposes of venue, a decentralized unincorporated nonprofit association is a resident of a county where:
A. the association has an office; or
B. the place of business of the administrator of the association is located.
SECTION 12. [NEW MATERIAL] TERM OF EXISTENCE--DISSOLUTION--DISTRIBUTION OF PROCEEDS OR PROPERTY.--
A. Except as otherwise provided in the association's formation agreement, a decentralized unincorporated nonprofit association shall have perpetual existence.
B. A decentralized unincorporated nonprofit association may be dissolved:
(1) at a time or method for dissolution provided in the association's formation agreement; or
(2) if the association's formation agreement does not provide a time or method for dissolution, by a two-thirds' vote of the entire membership at any regular or special meeting legally called or by any other process permitted by the agreement for taking a vote of the members.
SECTION 13. [NEW MATERIAL] ADMISSION, SUSPENSION, DISMISSAL OR EXPULSION OF MEMBERS.--
A. A person shall:
(1) be eligible for membership in a decentralized unincorporated nonprofit association if it has met the qualifications for eligibility stated in the association's formation agreement;
(2) be deemed a member upon payment in full or assumption of ownership of a membership interest or other property or instrument that confers membership with the association; and
(3) shall continue as a member absent suspension, dismissal or expulsion pursuant to Subsection B of this section, resignation or the association's dissolution and wind-up.
B. A member may be expelled by the vote of a majority of the members voting at a regular or special meeting, or as otherwise permitted by the association's formation agreement.
C. Unless otherwise provided for in the association's formation agreement, expulsion of a member does not relieve the member of any obligation incurred or commitment made by the member before the expulsion.
SECTION 14. [NEW MATERIAL] RESIGNATION.--
A. A member may resign as a member of a decentralized unincorporated nonprofit association in accordance with the association's formation agreement. If the agreement does not provide for the resignation of a member, a member shall be deemed to have resigned upon the disposal, whether voluntary or involuntary, of all of the member's interests, property or instruments that confer a voting right on the person.
B. Unless otherwise provided for in the association's formation agreement, expulsion of a member does not relieve the member of any obligation incurred or commitment made by the member before the expulsion.
SECTION 15. [NEW MATERIAL] MEMBER INTEREST TRANSFERABLE.--Except as otherwise provided in the decentralized unincorporated nonprofit association's formation agreement, a member interest, property or other right of membership in the association is freely transferable to another person through conveyance of the membership interest, property or right that confers upon a person a voting right in the association; provided that the person to whom the interest is transferred meets the qualifications for eligibility stated in the association's formation agreement.
SECTION 16. [NEW MATERIAL] APPROVAL BY MEMBERS.--
A. Except as otherwise provided in the association's formation agreement, a decentralized unincorporated nonprofit association shall require the approval of the majority of membership interests participating in a vote to:
(1) suspend, dismiss or expel a member;
(2) select or dismiss an administrator;
(3) amend or repeal the agreement;
(4) sell, lease, exchange or otherwise dispose of the association's property;
(5) dissolve the association;
(6) undertake an act outside the ordinary course of the association's activities; or
(7) determine the policy and purpose of the association.
B. An association shall have the approval of the majority of its members in accordance with the association's formation agreement to perform any acts or exercise a right that the agreement requires to be approved by members.
C. Unless otherwise provided for in the association's formation agreement, membership interest in an association shall be calculated in proportion to a member's voting rights within the association.
SECTION 17. [NEW MATERIAL] USE OF DISTRIBUTED LEDGER TECHNOLOGY.--
A. A decentralized unincorporated nonprofit association may provide for its governance, in whole or in part, through distributed ledger technology, including smart contracts.
B. An association's formation agreement may:
(1) specify whether a distributed ledger technology used or enabled by the association will be fully immutable or subject to change by the association and whether a distributed ledger will be fully or partially public or private, including the extent of a member's access to information; and
(2) adopt voting procedures, which may include smart contracts deployed to distributed ledger technology that provide for:
(a) proposals for upgrades from members or administrators in the association, modifications or additions to software systems or protocols; and
(b) other proposed changes to the association's formation agreement.
SECTION 18. [NEW MATERIAL] CONSENSUS FORMATION ALGORITHMS AND GOVERNANCE PROCESS.--In accordance with a decentralized unincorporated nonprofit association's governing principles, an association may:
A. adopt reasonable algorithmic means for establishing consensus for the validation of records and for establishing requirements, processes and procedures for conducting operations or making organizational decisions with respect to the distributed ledger technology used by the association; and
B. in accordance with a procedure specified pursuant to Section 17 of the Decentralized Unincorporated Nonprofit Association Act, modify the consensus mechanism and the requirements, processes and procedures or substitute a new consensus mechanism and associated requirements, processes or procedures that comply with that act.
SECTION 19. [NEW MATERIAL] SELECTION OF ADMINISTRATORS--RIGHTS AND DUTIES OF ADMINISTRATORS.--
A. Unless otherwise provided for in an association's formation agreement, the members of an association may select the association's administrators pursuant to Section 16 of the Decentralized Unincorporated Nonprofit Association Act.
B. If no administrators are selected, no member shall be considered an administrator for the association; provided that the association's formation agreement shall provide for an individual who may execute documents and perform other administrative tasks on behalf of the decentralized nonprofit unincorporated association if no administrators are selected.
C. An association shall not be required to have an administrator, and the rights and duties of an administrator shall be established as part of the authorization of authority to act as an administrator.
D. The governing principles of an association may limit or eliminate the liability of an administrator to the association or its members for money damages for any action taken, or failure to take any action, as an administrator, except liability for:
(1) the amount of financial benefit improperly received by the administrator;
(2) an intentional infliction of harm on the association or its members;
(3) an intentional violation of criminal law;
(4) a breach of the duty of loyalty, should one exist, unless, following full disclosure of all material facts to the association members, the specific act or transaction that would otherwise be a breach of the duty of loyalty is authorized or ratified by approval of the disinterested members pursuant to Section 16 of the Decentralized Unincorporated Nonprofit Association Act; or
(5) making or receiving improper distributions.
SECTION 20. [NEW MATERIAL] RIGHT TO INSPECT RECORDS.--
A. Except as provided by Subsection B of this section, on reasonable notice, a member or an administrator of a decentralized unincorporated nonprofit association shall be entitled to an electronic record of any record maintained by the association regarding the association's activities, financial condition or other circumstances, to the extent the information is material to a member's or administrator's rights and duties under the association's formation agreement or the Decentralized Unincorporated Nonprofit Association Act.
B. An association shall not be obligated to provide records requested from a member or administrator if access to the information is contained in a record available to the member or administrator on decentralized ledger technology.
C. An association may impose reasonable restrictions on access to and use of information that may be provided pursuant to this section, including by designating the information confidential and imposing nondisclosure or other safeguarding obligations on the recipient of the information. In a dispute concerning the reasonableness of a restriction, the association shall have the burden of proving reasonableness.
D. A former member or administrator may have access to information to which the former member or administrator was entitled as a member or an administrator if the:
(1) information relates to the period of time during which the former member or administrator was a member or an administrator;
(2) former member or former administrator seeks the information in good faith; and
(3) former member or former administrator satisfies the requirements of Subsections A through C of this section with respect to the information.
SECTION 21. [NEW MATERIAL] EXPENSES--INDEMNIFICATION.--
A. Unless otherwise provided for in a decentralized unincorporated nonprofit association's formation agreement, an association may reimburse a member or an administrator for authorized expenses reasonably incurred on behalf of the association.
B. An association shall have the power to indemnify a member or an administrator or a former member or administrator of the association against reasonable expenses, costs and attorney fees actually and reasonably incurred by the member or administrator in connection with the defense of any action, suit or proceeding, civil or criminal, in which the member or administrator is made a party by reason of being or having been a member or an administrator. The indemnification may include any amounts paid to satisfy a judgment or to compromise or settle a claim. The member or administrator shall not be indemnified if the member or administrator is found to be liable on the basis that the member or administrator has breached or failed to perform the duties of the member's or administrator's position and the breach or failure to perform constitutes willful misconduct or recklessness. Advance indemnification may be allowed for reasonable expenses to be incurred in connection with the defense of the action, suit or proceeding; provided that the member or administrator shall reimburse the association if it is subsequently determined that the member or administrator was not entitled to indemnification. An association may make any other indemnification as authorized by the association's formation agreement or by a resolution adopted after notice to the members entitled to vote.
SECTION 22. [NEW MATERIAL] DISSOLUTION.--
A. A dissolved decentralized unincorporated nonprofit association shall wind up its operations and the association shall continue after dissolution only for the purpose of winding up.
B. The assets of an association in the process of dissolution shall be applied and distributed as follows:
(1) all liabilities and obligations of the association shall be paid and discharged, or adequate provision shall be made therefor;
(2) assets held by the association on condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution, shall be returned, transferred or conveyed in accordance with those requirements;
(3) assets received and held by the association subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of the dissolution, shall be transferred or conveyed to one or more nonprofit organizations engaged in activities substantially similar to those of the dissolving association, pursuant to a plan of distribution adopted by the members;
(4) other assets, if any, shall be distributed in accordance with the provisions of the association's formation agreement, but in no event shall a member, a former member, an administrator or a former administrator receive directly or indirectly a distribution or portion of a distribution of any assets; and
(5) any remaining assets may be distributed to such persons or organizations, whether for-profit or nonprofit, as may be specified in a plan of distribution adopted by the members.
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