BILL NUMBER: AB 2944	AMENDED
	BILL TEXT

	AMENDED IN SENATE  AUGUST 22, 2008
	AMENDED IN SENATE  JUNE 18, 2008
	AMENDED IN ASSEMBLY  MAY 6, 2008
	AMENDED IN ASSEMBLY  APRIL 22, 2008

INTRODUCED BY   Assembly Member Leno

                        FEBRUARY 22, 2008

   An act to amend, repeal, and add Section 309 of the Corporations
Code, relating to corporations.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 2944, as amended, Leno. Corporations: director's duties.
   Under existing law, a director of a corporation is required to
perform the duties of a director in good faith and in a manner that
the director believes to be in the best interests of the corporation
and its shareholders, and with the care of an ordinarily prudent
person.
   This bill would, until January 1, 2015, specify that, in
considering the best interests of the corporation, the board of
directors, committees of the board, and individual directors of a
domestic corporation may consider specified factors, including, among
others, the effect the corporation's actions would have on the
prospects for potential growth and on the economy of the state and
nation. The bill would enact related provisions relative to the
consideration of these factors  , as specified,  and the
duties of the board of directors, committees of the board, and
individual directors of a domestic corporation.  The bill would
also, until January 1, 2015, provide that an act of the board of
directors, a committee of the board, or an individual director of a
domestic corporation shall be presumed to be in the best interests of
the corporation, except as specified. 
   Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 309 of the Corporations Code is amended to
read:
   309.  (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner that the director
believes to be in the best interests of the corporation and its
shareholders and with the care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
   (b) In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports, or statements,
including financial statements and other financial data, in each case
prepared or presented by any of the following:
   (1) One or more officers or employees of the corporation whom the
director believes to be reliable and competent in the matters
presented.
   (2) Counsel, independent accountants, or other persons as to
matters that the director believes to be within the person's
professional or expert competence.
   (3) A committee of the board upon which the director does not
serve, as to matters within its designated authority, where the
director believes the committee to merit confidence, so long as, in
any such case, the director acts in good faith, after reasonable
inquiry when the need therefor is indicated by the circumstances and
without knowledge that would cause the reliance to be unwarranted.
   (c) A person who performs the duties of a director in accordance
with subdivisions (a) and (b) shall have no liability based upon any
alleged failure to discharge the person's obligations as a director.
In addition, the liability of a director for monetary damages may be
eliminated or limited in a corporation's articles of incorporation to
the extent provided in paragraph (10) of subdivision (a) of Section
204.
   (d) In performing the duties of their respective positions, the
board of directors, committees of the board, and individual directors
of a domestic corporation may, in considering the best interests of
the corporation  and its shareholders  , consider, without
limitation, the following factors  and any other appropriate
factors consistent with the business judgment rule  , to the
extent they deem them appropriate:
   (1) The long-term and the short-term interests of the corporation
and its shareholders.
   (2) The effects that the corporation's actions may have in the
short term or in the long term upon any of the following:
   (A) The prospects for potential growth, development, productivity,
and profitability of the corporation.
   (B) The economy of the state and the nation.
   (C) The corporation's employees, suppliers, customers, and
creditors.
   (D) Community and societal considerations.
   (E) The environment.
   (e) (1) Nothing in this section shall create any duties owed by
any director to any person or entity to consider or afford any
particular weight to any interest or factor described in subdivision
(d) or to abrogate any duty of the directors, either statutory or
recognized by common law or court decisions  , including, but not
limited to, those duties set forth in subdivision (a)  .
   (2) The duty of the board of directors, committees of the board,
and individual directors under subdivisions (a) and (b) is solely to
the domestic corporation and may be enforced directly by the
corporation or may be enforced by a shareholder or member by an
action in the right of the corporation, and may not be enforced
directly by a shareholder, member, or by any other person or group.
   (3) Notwithstanding paragraph (2), subdivision (d) shall not
impose upon the board of directors, committees of the board, and
individual directors any legal or equitable duties, obligations or
liabilities, or create any right or cause of action against, or basis
for standing to sue, the board of directors, committees of the
board, and individual directors.
   (f) (1) Absent breach of fiduciary duty, lack of good faith, or
self-dealing, any act  as   of  the board
of directors, a committee of the board, or an individual director
 of a domestic corporation  shall be presumed to be in the
best interests of the corporation.  In assessing whether the
standard set forth in this section has been satisfied, there shall
not be any greater obligation to justify, or higher burden of proof
with respect to, any act as the board of directors, any committee of
the board, or any individual director relating to or affecting an
acquisition or potential or proposed acquisition of control of the
corporation than is applied to any other act as a board of directors,
any committee of the board, or any individual director. 
   (2)  Notwithstanding paragraph (1), any  Any
 act of the board of directors, a committee of the board, or an
individual director  of a domestic corporation  relating to
or affecting an acquisition or potential or proposed acquisition of
control to which a majority of the disinterested directors have
assented shall be presumed to satisfy the standard set forth in this
section, unless  it is proven by clear and convincing
evidence that  the disinterested directors did not assent to
the act in good faith after reasonable investigation.  Provided
the articles of incorporation have been amended pursuant to Section
152, this paragraph shall become operative on the date the amendment
was approved by the outstanding shares. 
   (g) This section shall remain in effect only until January 1,
2015, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2015, deletes or extends
that date.
  SEC. 2.  Section 309 is added to the Corporations Code, to read:
   309.  (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner that the director
believes to be in the best interests of the corporation and its
shareholders and with the care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances.
   (b) In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case
prepared or presented by any of the following:
    (1) One or more officers or employees of the corporation whom the
director believes to be reliable and competent in the matters
presented.
    (2) Counsel, independent accountants  ,  or other
persons as to matters that the director believes to be within the
person's professional or expert competence.
    (3) A committee of the board upon which the director does not
serve, as to matters within its designated authority, where the
director believes the committee to merit confidence, so long as, in
any such case, the director acts in good faith, after reasonable
inquiry when the need therefor is indicated by the circumstances and
without knowledge that would cause the reliance to be unwarranted.
   (c) A person who performs the duties of a director in accordance
with subdivisions (a) and (b) shall have no liability based upon any
alleged failure to discharge the person's obligations as a director.
In addition, the liability of a director for monetary damages may be
eliminated or limited in a corporation's articles to the extent
provided in paragraph (10) of subdivision (a) of Section 204.
   (d) This section shall become operative on January 1, 2015.