BILL NUMBER: AB 1233 INTRODUCED
BILL TEXT
INTRODUCED BY Assembly Member Silva
FEBRUARY 27, 2009
An act to amend Sections 5047, 5047.5, 5062, 5063.5, 5132, 5150,
5151, 5211, 5212, 5213, 5220, 5222, 5231, 6610, 7132, 7150, 7151,
7211, 7212, 7213, 7220, 7222, 7231, 8610, 9132, 9151, 9211, 9212,
9213, 9220, 9222, 9241, 9680, 9916, 12233, 12241, 12242.5, 12330,
12331, 12351, 12352, 12353, 12360, 12362, 12371, 12630, 12694, 18360,
and 24001.5 of, to add Sections 5039.5 and 12228.5 to, and to add
Article 6 (commencing with Section 9260) to Chapter 2 of Part 4 of
Division 2 of Title 1, the Corporations Code, relating to
corporations.
LEGISLATIVE COUNSEL'S DIGEST
AB 1233, as introduced, Silva. Nonprofit and consumer cooperative
corporations: nonprofit medical associations.
(1) Existing law, the Nonprofit Corporation Law, regulates the
organization and operation of nonprofit public benefit corporations,
nonprofit mutual benefit corporations, and nonprofit religious
corporations. Existing law, the Consumer Cooperative Corporation Law,
regulates the organization and operation of consumer cooperatives.
Under those laws, the term "director" is defined as a natural
person, designated in the articles or bylaws or elected by the
incorporators, as well as natural persons designated, elected or
appointed by any other name or title to act as members of the
governing body of the corporation.
This bill would specify that a person who does not have authority
to act as a member of that governing body is not a director, but if
the articles or bylaws provide that a natural person is a director or
a member of the governing body because he or she occupies a certain
position, then that person is a director for all purposes.
Existing law authorizes the article of incorporation and bylaws of
nonprofit corporations and consumer cooperatives to contain certain
provisions, including, but not limited to, a provision requiring that
an amendment or repeal of those articles or bylaws be approved in
writing by a specified person or persons other than the board.
Existing law also authorizes the articles or bylaws to provide for
the designation or selection of directors by a specified person or
persons rather than by election by a member or members and similarly
to authorize a specified person or persons to remove a designated or
selected director.
This bill would specify that these approval requirements and
designation and selection, and removal entitlements are inapplicable
in those circumstances when the specified person or persons have died
or ceased to exist, the office or status that created the right or
entitlement ceased to exist, or when the corporation has attempted
and failed to obtain approval from the specified person or persons.
Under existing law, a majority of the number of directors,
authorized in the articles or bylaws, constitutes a quorum for the
transaction of business of a nonprofit corporation or a consumer
cooperative.
This bill would, subject to certain limitations, authorize the
articles or bylaws to require the presence of one or more specified
directors in order to constitute a quorum of the board to transact
business.
Existing law authorizes a board of a nonprofit corporation or a
consumer cooperative to form one or more committees consisting of 2
or more directors to serve at the pleasure of the board and provides
that these committees have the authority of the board.
This bill would prohibit a committee exercising the authority of
the board from including, as members, persons who are not directors;
however, the bill would authorize the board to create other
committees with nondirectors that do not exercise the authority of
the board.
Existing law requires a nonprofit corporation or consumer
cooperative to have a chairman or a president or both, a secretary, a
chief financial officer, and other officers as provided in the
bylaws or determined by the board.
This bill would require such a corporation to have a chair, as
defined, or a president or both, a secretary, a treasurer or a chief
financial officer or both, and other officers as provided in the
bylaws or determined by the board. The bill would also specify that
if there is no chief financial officer, the treasurer is the chief
financial officer.
Existing law authorizes a nonprofit corporation or consumer
cooperative to elect to voluntarily wind up and dissolve by approval
of a majority of the members, as defined, or by approval of the board
and approval of the members, as defined.
This bill would authorize such a corporation meeting certain
requirements, including the lack of a quorum, to elect to voluntarily
wind up and dissolve, as specified.
Under existing law, certain public benefit corporations deemed to
be private foundations, as defined, are subject to Federal Internal
Revenue Code requirements.
This bill would make those requirements applicable to nonprofit
religious corporations deemed to be a private foundation.
(2) Existing law prohibits a cause of action for monetary damages
from arising against any director or officer of a nonprofit
corporation or a nonprofit medical association, who serves without
compensation, on account of any specified negligent act or omission
if the nonprofit corporation or nonprofit medical association has a
general liability insurance policy in a specified amount that is in
force both at the time of the injury and at the time the claim is
made.
This bill would instead prohibit those causes of action if these
corporations or associations maintain a liability insurance policy
that is applicable to the claim.
(3) Existing law regulates unincorporated associations. Existing
law authorizes an unincorporated association to merge into a
specified corporation, limited partnership, general partnership, or
limited liability company.
This bill would authorize an unincorporated association to merge
with one of these entities.
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 5039.5 is added to the Corporations Code, to
read:
5039.5. The term "chair" includes "chairperson," "chairman," and
"chairwoman." All references in this division to "chairman" shall be
deemed to refer to "chair."
SEC. 2. Section 5047 of the Corporations Code is amended to read:
5047. Except where otherwise expressly provided, "directors"
means natural persons, designated in the articles or bylaws or
elected by the incorporators, and their successors and natural
persons designated, elected or appointed by any other name or title
to act as members of the governing body of the corporation. A
person who does not have authority to act as a member of the
governing body of the corporation, including through voting rights as
a member of the governing body, is not a director as that term is
used in this division regardless of title. However, if the articles
or bylaws designate that a natural person is a director or a member
of the governing body of the corporation by reason of occupying a
specified position within or outside the cor
poration, that person shall be a director for all purposes and shall
have the same rights and obligations, including voting rights, as the
other directors.
SEC. 3. Section 5047.5 of the Corporations Code is amended to
read:
5047.5. (a) The Legislature finds and declares that the services
of directors and officers of nonprofit corporations who serve without
compensation are critical to the efficient conduct and management of
the public service and charitable affairs of the people of
California. The willingness of volunteers to offer their services has
been deterred by a perception that their personal assets are at risk
for these activities. The unavailability and unaffordability of
appropriate liability insurance makes it difficult for these
corporations to protect the personal assets of their volunteer
decisionmakers with adequate insurance. It is the public policy of
this state to provide incentive and protection to the individuals who
perform these important functions.
(b) Except as provided in this section, no cause of action for
monetary damages shall arise against any person serving without
compensation as a director or officer of a nonprofit corporation
subject to Part 2 (commencing with Section 5110), Part 3 (commencing
with Section 7110), or Part 4 (commencing with Section 9110) of this
division on account of any negligent act or omission occurring (1)
within the scope of that person's duties as a director acting as a
board member, or within the scope of that person's duties as an
officer acting in an official capacity; (2) in good faith; (3) in a
manner that the person believes to be in the best interest of the
corporation; and (4) is in the exercise of his or her policymaking
judgment.
(c) This section shall not limit the liability of a director or
officer for any of the following:
(1) Self-dealing transactions, as described in Sections 5233 and
9243.
(2) Conflicts of interest, as described in Section 7233.
(3) Actions described in Sections 5237, 7236, and 9245.
(4) In the case of a charitable trust, an action or proceeding
against a trustee brought by a beneficiary of that trust.
(5) Any action or proceeding brought by the Attorney General.
(6) Intentional, wanton, or reckless acts, gross negligence, or an
action based on fraud, oppression, or malice.
(7) Any action brought under Chapter 2 (commencing with Section
16700) of Part 2 of Division 7 of the Business and Professions Code.
(d) This section only applies to nonprofit corporations organized
to provide religious, charitable, literary, educational, scientific,
social, or other forms of public service that are exempt from federal
income taxation under Section 501(c)(3) or 501(c)(6) of the Internal
Revenue Code.
(e) This section applies only if the nonprofit corporation
maintains a general liability insurance policy
with an amount of coverage of at least the following amounts:
(1) If the corporation's annual budget is less than fifty thousand
dollars ($50,000), the minimum required amount is five hundred
thousand dollars ($500,000).
(2) If the corporation's annual budget equals or exceeds fifty
thousand dollars ($50,000), the minimum required amount is one
million dollars ($1,000,000).
This section applies only if the claim against the director or
officer may can also be made directly
against the corporation and a general liability
insurance policy is in force both at the time of injury and
at the time the claim against the corporation is made, so that a
policy is applicable to the claim. If a general
liability that policy is found to cover the
damages caused by the director or officer, no cause of action as
provided in this section shall be maintained against the director or
officer.
(f) For the purposes of this section, the payment of actual
expenses incurred in attending meetings or otherwise in the execution
of the duties of a director or officer shall not constitute
compensation.
(g) Nothing in this section shall be construed to limit the
liability of a nonprofit corporation for any negligent act or
omission of a director, officer, employee, agent, or servant
occurring within the scope of his or her duties.
(h) This section does not apply to any corporation that unlawfully
restricts membership, services, or benefits conferred on the basis
of political affiliation, age, or any characteristic listed or
defined in subdivision (b) or (e) of Section 51 of the Civil Code.
(i) This section does not apply to any volunteer director or
officer who receives compensation from the corporation in any other
capacity, including, but not limited to, as an employee.
SEC. 4. Section 5062 of the Corporations Code is amended to read:
5062. "Officer's certificate" means a certificate signed and
verified by the chairman chair of the
board, the president or any vice president and by the secretary, the
chief financial officer, the treasurer or any assistant secretary or
assistant treasurer.
SEC. 5. Section 5063.5 of the Corporations Code is amended to
read:
5063.5. "Other business entity" means a domestic or foreign
limited liability company, limited partnership, general partnership,
business trust, real estate investment trust, unincorporated
association (other than a nonprofit association) ,
or a domestic reciprocal insurer organized after 1974 to provide
medical malpractice insurance as set forth in Article 16 (commencing
with Section 1550) of Chapter 3 of Part 2 of Division 1 of the
Insurance Code. As used herein, "general partnership" means a
"partnership" as defined in subdivision (7)
(9) of Section 16101; "business trust" means a business
organization formed as a trust; "real estate investment trust" means
a "real estate investment trust" as defined in subsection (a) of
Section 856 of the Internal Revenue Code of 1986, as amended; and
"unincorporated association" has the meaning set forth in Section
18035.
SEC. 6. Section 5132 of the Corporations Code is amended to read:
5132. (a) The articles of incorporation may set forth any or all
of the following provisions, which shall not be effective unless
expressly provided in the articles:
(1) A provision limiting the duration of the corporation's
existence to a specified date.
(2) In the case of a subordinate corporation instituted or created
under the authority of a head organization, a provision setting
forth either or both of the following:
(i) That the subordinate corporation shall dissolve whenever its
charter is surrendered to, taken away by, or revoked by the head
organization granting it.
(ii) That in the event of its dissolution pursuant to an article
provision allowed by subdivision (a), paragraph (2), clause (i), of
this section, or, in the event of its dissolution for any reason, any
assets of the corporation after compliance with the applicable
provisions of Chapters 15 (commencing with Section 6510), 16
(commencing with Section 6610) and 17 (commencing with Section 6710)
shall be distributed to the head organization.
(b) Nothing contained in subdivision (a) shall affect the
enforceability, as between the parties thereto, of any lawful
agreement not otherwise contrary to public policy.
(c) The articles of incorporation may set forth any or all of the
following provisions:
(1) The names and addresses of the persons appointed to act as
initial directors.
(2) The classes of members, if any, and if there are two or more
classes, the rights, privileges, preferences, restrictions and
conditions attaching to each class.
(3) A provision which that would
allow any member to have more or less than one vote in any election
or other matter presented to the members for a vote.
(4) A provision that requires an amendment to the articles, as
provided in subdivision (c) (a) of
Section 5812, or to the bylaws, and any amendment or repeal of that
amendment, to be approved in writing by a specified person or persons
other than the board or the members. However, this approval
requirement, unless the articles specify otherwise, shall not apply
if any of the following circumstances exist:
(A) The specified person or persons have died or ceased to exist.
(B) If the right of the specified person or persons to approve is
in the capacity of an officer, trustee, or other status and the
office, trust, or status has ceased to exist.
(C) If the corporation has a specific proposal for amendment or
repeal, and the corporation has provided written notice of that
proposal, including a copy of the proposal, to the specified person
or persons at the most recent address for each of them, based on the
corporation's records, and the corporation has not received written
approval or nonapproval within the period specified in the notice,
which shall not be less than 10 nor more than 30 days commencing at
least 20 days after the notice has been provided.
(5) Any other provision, not in conflict with law, for the
management of the activities and for the conduct of the affairs of
the corporation, including any provision which
that is required or permitted by this part to be stated in the
bylaws.
SEC. 7. Section 5150 of the Corporations Code is amended to read:
5150. (a) Except as provided in subdivision (c), and Sections
5151, 5220, 5224, 5512, 5613, and 5616, bylaws may be adopted,
amended or repealed by the board unless the action would materially
and adversely affect the rights of members as to voting or transfer.
(b) Bylaws may be adopted, amended or repealed by approval of
members (Section 5034); provided, however, that such adoption,
amendment or repeal also requires approval by the members of a class
if such that action would materially
and adversely affect the rights of that class as to voting or
transfer in a manner different than such that
action affects another class.
(c) The articles or bylaws may restrict or eliminate the power of
the board to adopt, amend or repeal any or all bylaws, subject to
subdivision (e) of Section 5151.
(d) Bylaws may also provide that repeal or amendment of those
bylaws, or the repeal or amendment of specified portions of those
bylaws, may occur only with the approval in writing of a specified
person or persons other than the board or members. However, this
approval requirement, unless the bylaws specify otherwise, shall not
apply if any of the following circumstances exist:
(1) The specified person or persons have died or ceased to exist.
(2) If the right of the specified person or persons to approve is
in the capacity of an officer, trustee, or other status and the
office, trust, or status has ceased to exist.
(3) If the corporation has a specific proposal for amendment or
repeal, and the corporation has provided written notice of that
proposal, including a copy of the proposal, to the specified person
or persons at the most recent address for each of them, based on the
corporation's records, and the corporation has not received written
approval or nonapproval within the period specified in the notice,
which shall not be less than 10 nor more than 30 days commencing at
least 20 days after the notice has been provided.
SEC. 8. Section 5151 of the Corporations Code is amended to read:
5151. (a) The bylaws shall set forth (unless such
that provision is contained in the articles, in
which case it may only be changed by an amendment of the articles)
the number of directors of the corporation ;
, or the method of determining the number of directors of the
corporation, or that the number of directors shall be not less
than a stated minimum nor more than a stated maximum with the exact
number of directors to be fixed, within the limits specified, by
approval of the board or the members (Section 5034), in the manner
provided in the bylaws, subject to subdivision (e) of
Section 5151 . The number or minimum number of directors
may be one or more.
(b) Once members have been admitted, a bylaw specifying or
changing a fixed number of directors or the maximum or minimum number
or changing from a fixed to a variable board or vice versa may only
be adopted by approval of the members (Section 5034).
(c) The bylaws may contain any provision, not in conflict with law
or the articles, for the management of the activities and for the
conduct of the affairs of the corporation, including but not limited
to:
(1) Any provision referred to in subdivision (c) of Section 5132.
(2) The time, place and manner of calling, conducting and giving
notice of members', directors' and committee meetings, or of
conducting mail ballots.
(3) The qualifications, duties and compensation of directors; the
time of their election; and the requirements of a quorum for
directors' and committee meetings.
(4) The appointment and authority of committees.
(5) The appointment, duties, compensation and tenure of officers.
(6) The mode of determination of members of record.
(7) The making of reports and financial statements to members.
(8) Setting, imposing and collecting dues, assessments and
admission fees.
(d) The bylaws may provide for the manner of admission,
withdrawal, suspension, and expulsion of members, consistent with the
requirements of Section 5341.
(e) The bylaws may require, for any or all corporate actions
(except as provided in paragraphs (1) and (2) of subdivision (a) of
Section 5222, subdivision (c) of Section 5616, and Section 6610), the
vote of a larger proportion of, or all of, the members or the
members of any class, unit, or grouping of members, or the vote of a
larger proportion of, or all of, the directors, than is otherwise
required by this part. Such a provision in the bylaws requiring such
greater vote shall not be altered, amended or repealed except by such
greater vote, unless otherwise provided in the bylaws.
(f) The bylaws may contain a provision limiting the number of
members, in total or of any class, which the corporation is
authorized to admit.
SEC. 9. Section 5211 of the Corporations Code is amended to read:
5211. (a) Unless otherwise provided in the articles or in the
bylaws, all of the following apply:
(1) Meetings of the board may be called by the chair of the board
or the president or any vice president or the secretary or any two
directors.
(2) Regular meetings of the board may be held without notice if
the time and place of the meetings are fixed by the bylaws or the
board. Special meetings of the board shall be held upon four days'
notice by first-class mail or 48 hours' notice delivered personally
or by telephone, including a voice messaging system or by electronic
transmission by the corporation (Section 20). The articles or bylaws
may not dispense with notice of a special meeting. A notice, or
waiver of notice, need not specify the purpose of any regular or
special meeting of the board.
(3) Notice of a meeting need not be given to a director who
provides a waiver of notice or consent to holding the meeting or an
approval of the minutes thereof in writing, whether before or after
the meeting, or who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to that director.
These waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meetings.
(4) A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place. If the
meeting is adjourned for more than 24 hours, notice of an
adjournment to another time or place shall be given prior to the time
of the adjourned meeting to the directors who were not present at
the time of the adjournment.
(5) Meetings of the board may be held at a place within or without
the state that has been designated in the notice of the meeting or,
if not stated in the notice or there is no notice, designated in the
bylaws or by resolution of the board.
(6) Members of the board may participate in a meeting through use
of conference telephone, electronic video screen communication or
electronic transmission by and to the corporation (Sections 20 and
21). Participation in a meeting through use of conference telephone
or electronic video screen communication pursuant to this subdivision
constitutes presence in person at that meeting as long as all
members participating in the meeting are able to hear one another.
Participation in a meeting through use of electronic transmission by
and to the corporation, other than conference telephone and
electronic video screen communication, pursuant to this subdivision
constitutes presence in person at that meeting if both of the
following apply:
(A) Each member participating in the meeting can communicate with
all of the other members concurrently.
(B) Each member is provided the means of participating in all
matters before the board, including, without limitation, the capacity
to propose, or to interpose an objection to, a specific action to be
taken by the corporation.
(7) A majority of the number of directors authorized in or
pursuant to the articles or bylaws constitutes a quorum of the
board for the transaction of business. The articles or bylaws
may require the presence of one or more specified directors in order
to constitute a quorum of the board to transact business,
as long as the death of a director or the death or nonexistence of
the person or persons otherwise authorized to appoint or designate
that director does not prevent the corporation from transacting
business in the normal course of events. The articles or bylaws
may not provide that a quorum shall be less than one-fifth the
number of directors authorized in or pursuant to the
articles or bylaws, or less than two, whichever is larger, unless the
number of directors authorized in or pursuant to the
articles or bylaws is one, in which case one director constitutes a
quorum.
(8) Subject to the provisions of Sections 5212, 5233, 5234, 5235,
and subdivision (e) of Section 5238, an act or decision done or made
by a majority of the directors present at a meeting duly held at
which a quorum is present is the act of the board. The articles or
bylaws may not provide that a lesser vote than a majority of the
directors present at a meeting is the act of the board. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that
meeting, or a greater number required by this division, the articles
or the bylaws.
(b) An action required or permitted to be taken by the board may
be taken without a meeting, if all members of the board shall
individually or collectively consent in writing to that action. The
written consent or consents shall be filed with the minutes of the
proceedings of the board. The action by written consent shall have
the same force and effect as a unanimous vote of the directors. For
purposes of this subdivision only, "all members of the board" does
not include an "interested director" as defined in Section 5233.
(c) Each director present and voting at a meeting shall have one
vote on each matter presented to the board of directors for action at
that meeting. No director may vote at any meeting by proxy.
(c)
(d) The provisions of this section apply also to
incorporators, to committees of the board, and to action by those
incorporators or committees mutatis mutandis.
SEC. 10. Section 5212 of the Corporations Code is amended to read:
5212. (a) The board may, by resolution adopted by a majority of
the number of directors then in office, provided that a quorum is
present, create one or more committees, each consisting of two or
more directors, to serve at the pleasure of the board. Appointments
to such committees shall be by a majority vote of
the directors then in office, unless the articles or bylaws require a
majority vote of the number of directors authorized in or
pursuant to the articles or bylaws. The bylaws may authorize
one or more committees, each consisting of two or more directors, and
may provide that a specified officer or officers who are also
directors of the corporation shall be a member or members of
such a committee or committees. The board may
appoint one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee.
Any such committee, to the extent provided in the
resolution of the board or in the bylaws, shall have all the
authority of the board, except with respect to:
(1) The approval of any action for which this part also requires
approval of the members (Section 5034) or approval of a majority of
all members (Section 5033) , regardless of whether
the corporation has members .
(2) The filling of vacancies on the board or in any committee
which has the authority of the board.
(3) The fixing of compensation of the directors for serving on the
board or on any committee.
(4) The amendment or repeal of bylaws or the adoption of new
bylaws.
(5) The amendment or repeal of any resolution of the board which
by its express terms is not so amendable or repealable.
(6) The appointment of committees of the board or the members
thereof.
(7) The expenditure of corporate funds to support a nominee for
director after there are more people nominated for director than can
be elected.
(8) The approval of any self-dealing transaction except as
provided in paragraph (3) of subdivision (d) of Section 5233.
(b) Subdivision (a) shall not apply to any committee
which does not exercise the authority of the board. A
committee exercising the authority of the board shall not include as
members persons who are not directors. However, the board may create
other committees that do not exercise the authority of the board and
these other committees may include persons who are not directors.
(c) Unless the bylaws otherwise provide, the board may delegate to
any committee powers as authorized by Section 5210, but may not
delegate the powers set forth in paragraphs (1) through
to (8) , inclusive, of subdivision
(a) of this section .
SEC. 11. Section 5213 of the Corporations Code is amended to read:
5213. (a) A corporation shall have a chairman
chair of the its board ,
who may be given the title chair of the board, chairperson of the
board, chairman of the board, or chairwoman of the board, or a
president or both, a secretary, a treasurer or a chief
financial officer or both, and such
any other officers with such any
titles and duties as shall be stated in the bylaws or
determined by the board and as may be necessary to enable it to sign
instruments. The president, or if there is no president the
chairman chair of the board, is the general
manager and chief executive officer of the corporation, unless
otherwise provided in the articles or bylaws. Unless otherwise
specified in the articles or the bylaws, if there is no chief
financial officer, the treasurer is the chief financial officer of
the corporation. Any number of offices may be held by the same
person unless the articles or bylaws provide otherwise, except that
neither the secretary nor
, the treasurer, or the chief financial officer may not
serve concurrently as the president or chairman
chair of the board.
(b) Except as otherwise provided by the articles or bylaws,
officers shall be chosen by the board and serve at the pleasure of
the board, subject to the rights, if any, of an officer under any
contract of employment. Any officer may resign at any time upon
written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is a
party.
(c) If the articles or bylaws provide for the election of any
officers by the members, the term of office of the elected officer
shall be one year unless the articles or bylaws provide for a
different term which shall not exceed three years.
SEC. 12. Section 5220 of the Corporations Code is amended to read:
5220. (a) Except as provided in subdivision (d), directors shall
be elected for the terms, not longer than four years, as are fixed in
the articles or bylaws. However, the terms of directors of a
corporation without members may be up to six years. In the absence of
any provision in the articles or bylaws, the term shall be one year.
The articles or bylaws may provide for staggering the terms of
directors by dividing the total number of directors into groups of
one or more directors. The terms of office of the several groups and
the number of directors in each group need not be uniform. No
amendment of the articles or bylaws may extend the term of a director
beyond that for which the director was elected, nor may any bylaw
provision increasing the terms of directors be adopted without
approval of the members
(Section 5034).
(b) Unless the articles or bylaws otherwise provide, each
director, including a director elected to fill a vacancy, shall hold
office until the expiration of the term for which elected and until a
successor has been elected and qualified , unless the director
has been removed from office .
(c) The articles or bylaws may provide for the election of one or
more directors by the members of any class voting as a class.
(d) Subdivisions (a) through (c) notwithstanding, all or any
portion of the directors authorized in the articles or bylaws of a
corporation may hold office by virtue of designation or selection as
provided by the articles or bylaws rather than by election by a
member or members or the board . Those directors shall
continue in office for the term prescribed by the governing article
or bylaw provision, or, if there is no term prescribed, until the
governing article or bylaw provision is duly amended or repealed,
except as provided in subdivision (e) of Section 5222. A bylaw
provision authorized by this subdivision may be adopted, amended, or
repealed only by approval of the members (Section 5034), subject, if
so provided in the bylaws, to the consent of the person or persons
entitled to designate or select the director or directors.
Unless otherwise provided in the articles or bylaws, the entitlement
to designate or select the director or directors shall not apply if
any of the following circumstances exist:
(1) The specified person or persons have died or ceased to exist.
(2) If the entitlement of the person or persons to designate is in
the capacity of an officer, trustee, or other status and the office,
trust, or status has ceased to exist. After this cessation, the
members or, if there are no members, the board shall succeed to this
entitlement to designate or select the director or directors.
(e) If a corporation has not issued memberships and (1) all the
directors resign, die, or become incompetent, or (2) a corporation's
initial directors have not been named in the articles and all
incorporators resign, die, or become incompetent before the election
of the initial directors, the superior court of any county may
appoint directors of the corporation upon application by any party in
interest.
SEC. 13. Section 5222 of the Corporations Code is amended to read:
5222. (a) Subject to subdivisions (b) and (f), any or all
directors may be removed without cause if:
(1) In a corporation with fewer than 50 members, the removal is
approved by a majority of all members (Section 5033).
(2) In a corporation with 50 or more members, the removal is
approved by the members (Section 5034).
(3) In a corporation with no members, the removal is approved by a
majority of the directors then in office.
(b) Except for a corporation having no members pursuant to Section
5310:
(1) In a corporation in which the articles or bylaws authorize
members to cumulate their votes pursuant to subdivision (a) of
Section 5616, no director may be removed (unless the entire board is
removed) if the votes cast against removal, or not consenting in
writing to the removal, would be sufficient to elect the director if
voted cumulatively at an election at which the same total number of
votes were cast (or, if the action is taken by written ballot, all
memberships entitled to vote were voted) and the entire number of
directors authorized at the time of the director's most recent
election were then being elected.
(2) If by the provisions of the articles or bylaws the members of
any class, voting as a class, are entitled to elect one or more
directors, any director so elected may be removed only by the
applicable vote of the members of that class.
(3) If by the provisions of the articles or bylaws the members
within a chapter or other organizational unit, or region or other
geographic grouping, voting as such, are entitled to elect one or
more directors, any director so elected may be removed only by the
applicable vote of the members within the organizational unit or
geographic grouping.
(c) Any reduction of the authorized number of directors or any
amendment reducing the number of classes of directors does not remove
any director prior to the expiration of the director's term of
office unless the reduction or any amendment also provides for
the removal of one or more specified directors .
(d) Except as provided in this section and Sections 5221 and 5223,
a director may not be removed prior to the expiration of the
director's term of office.
(e) If a director removed under this section or Section 5221 or
5223 was chosen by designation pursuant to subdivision (d) of Section
5220, then:
(1) If a different person may be designated pursuant to a
governing article or bylaw provision, the new designation shall be
made.
(2) If the governing article or bylaw provision contains no
provision under which a different person may be designated, the
governing article or bylaw provision shall be deemed repealed.
(f) If by the provisions of the articles or bylaws a person or
persons are entitled to designate one or more directors, then:
(1) Unless otherwise provided in the articles or bylaws at the
time of designation, any director so designated may be removed
without cause by the designating person or persons.
(2) Any director so designated may only be removed under
subdivision (a) with the written consent of the designating person or
persons.
(3) Unless otherwise provided in the articles or bylaws, the right
to remove shall not apply if any of the following circumstances
exist:
(A) The person or persons entitled to that right have died or
ceased to exist.
(B) If that right to remove is in the capacity of an officer,
trustee, or other status, and the office, trust, or status has ceased
to exist. After this cessation, the members or, if there are no
members, the board shall succeed to this right to remove.
SEC. 14. Section 5231 of the Corporations Code is amended to read:
5231. (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 such
that director believes to be in the best
interests of the corporation and with such 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:
(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
which the director believes to be within such
that person's professional or expert competence; or
(3) A committee of the board upon which the
director does not serve that is composed exclusively of any or
any combination of directors, persons described in paragraph (1), or
persons described in paragraph (2) , as to matters within
its the committee's designated
authority, which committee the director believes 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
such that reliance to be unwarranted.
(c) Except as provided in Section 5233, 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, including, without limiting
the generality of the foregoing, any actions or omissions which
exceed or defeat a public or charitable purpose to which a
corporation, or assets held by it, are dedicated.
SEC. 15. Section 6610 of the Corporations Code is amended to read:
6610. (a) Any corporation may elect voluntarily to wind up and
dissolve (1) by approval of a majority of all members (Section 5033)
or (2) by approval of the board and approval of the members (Section
5034).
(b) Any corporation which comes within one of the following
descriptions may elect by approval of the board to wind up and
dissolve:
(1) A corporation which has been adjudicated a bankrupt.
(2) A corporation which has disposed of all of its assets and has
not conducted any activity for a period of five years immediately
preceding the adoption of the resolution electing to dissolve the
corporation.
(3) A corporation which has no members.
(4) A corporation which is required to dissolve under provisions
of its articles adopted pursuant to subdivision (a), paragraph (2),
clause (i), of Section 5132.
(c) If a corporation comes within one of the descriptions in
subdivision (b) and the number of directors then in office is less
than a quorum, the corporation may elect to voluntarily wind up and
dissolve by any of the following:
(1) The unanimous consent of the directors then in office.
(2) The affirmative vote of a majority of the directors then in
office at a meeting held pursuant to waiver of notice by those
directors complying with subdivision (a) of Section 5211.
(3) The vote of a sole remaining director.
(d) If a corporation elects to voluntarily wind up and dissolve
pursuant to subdivision (c), references to the board in this chapter
and Chapter 17 (commencing with Section 6710) shall be deemed to be
to a board consisting solely of those directors or that sole director
and action by the board shall require at least the same consent or
vote as would be required under subdivision (c) for an election to
wind up and dissolve.
SEC. 16. Section 7132 of the Corporations Code is amended to read:
7132. (a) The articles of incorporation may set forth any or all
of the following provisions, which shall not be effective unless
expressly provided in the articles:
(1) A provision limiting the duration of the corporation's
existence to a specified date.
(2) A provision conferring upon the holders of any evidences of
indebtedness, issued or to be issued by a corporation the right to
vote in the election of directors and on any other matters on which
members may vote under this part even if the corporation does not
have members.
(3) A provision conferring upon members the right to determine the
consideration for which memberships shall be issued.
(4) In the case of a subordinate corporation instituted or created
under the authority of a head organization, a provision setting
forth either or both of the following:
(i) That the subordinate corporation shall dissolve whenever its
charter is surrendered to, taken away by, or revoked by the head
organization granting it.
(ii) That in the event of its dissolution pursuant to an article
provision allowed by subdivision (a), paragraph (4), clause (i), of
this section, or, in the event of its dissolution for any reason, any
assets of the corporation after compliance with the applicable
provisions of Chapters 15 (commencing with Section 8510), 16
(commencing with Section 8610), and 17 (commencing with Section 8710)
shall be distributed to the head organization.
(b) Nothing contained in subdivision (a) shall affect the
enforceability, as between the parties thereto, of any lawful
agreement not otherwise contrary to public policy.
(c) The articles of incorporation may set forth any or all of the
following provisions:
(1) The names and addresses of the persons appointed to act as
initial directors.
(2) Provisions concerning the transfer of memberships, in
accordance with Section 7320.
(3) The classes of members, if any, and if there are two or more
classes, the rights, privileges, preferences, restrictions and
conditions attaching to each class.
(4) A provision which would allow any member to have more or less
than one vote in any election or other matter presented to the
members for a vote.
(5) A provision that requires an amendment to the articles ,
as provided in subdivision (a) of Section 7812, or to the
bylaws, and any amendment or repeal of that amendment, to be approved
in writing by a specified person or persons other than the board or
the members. However, this approval requi rement,
unless the articles specify otherwise, shall not apply if any of the
following circumstances exist:
(A) The specified person or persons have died or ceased to exist.
(B) If the right of the specified person or persons to approve is
in the capacity of an officer, trustee, or other status and the
office, trust, or status has ceased to exist.
(C) If the corporation has a specific proposal for amendment or
repeal, and the corporation has provided written notice of that
proposal, including a copy of the proposal, to the specified person
or persons at the most recent address for each of them, based on the
corporation's records, and the corporation has not received written
approval or nonapproval within the period specified in the notice,
which shall not be less than 10 nor more than 30 days commencing at
least 20 days after the notice has been provided.
(6) Any other provision, not in conflict with law, for the
management of the activities and for the conduct of the affairs of
the corporation, including any provision which is required or
permitted by this part to be stated in the bylaws.
SEC. 17. Section 7150 of the Corporations Code is amended to read:
7150. (a) Except as provided in subdivision (c) and Sections
7151, 7220, 7224, 7512, 7613, and 7615, bylaws may be adopted,
amended or repealed by the board unless the action would:
(1) Materially and adversely affect the rights of members as to
voting, dissolution, redemption, or transfer;
(2) Increase or decrease the number of members authorized in total
or for any class;
(3) Effect an exchange, reclassification or cancellation of all or
part of the memberships; or
(4) Authorize a new class of membership.
(b) Bylaws may be adopted, amended or repealed by approval of the
members (Section 5034); provided, however, that such adoption,
amendment or repeal also requires approval by the members of a class
if such action would:
(1) Materially and adversely affect the rights, privileges,
preferences, restrictions or conditions of that class as to voting,
dissolution, redemption, or transfer in a manner different than such
action affects another class;
(2) Materially and adversely affect such class as to voting,
dissolution, redemption, or transfer by changing the rights,
privileges, preferences, restrictions or conditions of another class;
(3) Increase or decrease the number of memberships authorized for
such class;
(4) Increase the number of memberships authorized for another
class;
(5) Effect an exchange, reclassification or cancellation of all or
part of the memberships of such class; or
(6) Authorize a new class of memberships.
(c) The articles or bylaws may restrict or eliminate the power of
the board to adopt, amend or repeal any or all bylaws, subject to
subdivision (e) of Section 7151.
(d) Bylaws may also provide that the repeal or amendment of those
bylaws, or the repeal or amendment of specified portions of those
bylaws, may occur only with the approval in writing of a specified
person or persons other than the board or members. However, this
approval requirement, unless the bylaws specify otherwise, shall not
apply if any of the following circumstances exist:
(1) The specified person or persons have died or ceased to exist.
(2) If the right of the specified person or persons to approve is
in the capacity of an officer, trustee, or other status and the
office, trust, or status has ceased to exist.
(3) If the corporation has a specific proposal for amendment or
repeal, and the corporation has provided written notice of that
proposal, including a copy of the proposal, to the specified person
or persons at the most recent address for each of them, based on the
corporation's records, and the corporation has not received written
approval or nonapproval within the period specified in the notice,
which shall not be less than 10 nor more than 30 days commencing at
least 20 days after the notice has been provided.
SEC. 18. Section 7151 of the Corporations Code is amended to read:
7151. (a) The bylaws shall set forth (unless such provision is
contained in the articles, in which case it may only be changed by an
amendment of the articles) the number of directors of the
corporation ; , or the method of determining
the number of directors of the corporation, or that the number
of directors shall be not less than a stated minimum nor more than a
stated maximum with the exact number of directors to be fixed, within
the limits specified, by approval of the board or the members
(Section 5034), in the manner provided in the bylaws, subject to
subdivision (e) of Section 7151 . The number or
minimum number of directors may be one or more.
(b) Once members have been admitted, a bylaw specifying or
changing a fixed number of directors or the maximum or minimum number
or changing from a fixed to a variable board or vice versa may only
be adopted by approval of the members (Section 5034).
(c) The bylaws may contain any provision, not in conflict with law
or the articles, for the management of the activities and for the
conduct of the affairs of the corporation, including but not limited
to:
(1) Any provision referred to in subdivision (c) of Section 7132.
(2) The time, place and manner of calling, conducting and giving
notice of members', directors' and committee meetings, or of
conducting mail ballots.
(3) The qualifications, duties and compensation of directors; the
time of their election; and the requirements of a quorum for
directors' and committee meetings.
(4) The appointment of committees, composed of directors or
nondirectors or both, by the board or any officer and the authority
of any such committees.
(5) The appointment, duties, compensation and tenure of officers.
(6) The mode of determination of members of record.
(7) The making of reports and financial statements to members.
(8) Setting, imposing and collecting dues, assessments, and
admission and transfer fees.
(d) The bylaws may provide for the manner of admission,
withdrawal, suspension, and expulsion of members, consistent with the
requirements of Section 7341.
(e) The bylaws may require, for any or all corporate actions
(except as provided in paragraphs (1) and (2) of subdivision (a) of
Section 7222, subdivision (c) of Section 7615, and Section 8610) the
vote of a larger proportion of, or all of, the members or the members
of any class, unit, or grouping of members or the vote of a larger
proportion of, or all of, the directors, than is otherwise required
by this part. Such a provision in the bylaws requiring such greater
vote shall not be altered, amended or repealed except by such greater
vote, unless otherwise provided in the bylaws.
(f) The bylaws may contain a provision limiting the number of
members, in total or of any class, which the corporation is
authorized to admit.
SEC. 19. Section 7211 of the Corporations Code is amended to read:
7211. (a) Unless otherwise provided in the articles or in the
bylaws, all of the following apply:
(1) Meetings of the board may be called by the chair of the board
or the president or any vice president or the secretary or any two
directors.
(2) Regular meetings of the board may be held without notice if
the time and place of the meetings are fixed by the bylaws or the
board. Special meetings of the board shall be held upon four days'
notice by first-class mail or 48 hours' notice delivered personally
or by telephone, including a voice messaging system or by electronic
transmission by the corporation (Section 20). The articles or bylaws
may not dispense with notice of a special meeting. A notice, or
waiver of notice, need not specify the purpose of any regular or
special meeting of the board.
(3) Notice of a meeting need not be given to a director who
provided a waiver of notice or consent to holding the meeting or an
approval of the minutes thereof in writing, whether before or after
the meeting, or who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to that director.
These waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meetings.
(4) A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place. If the
meeting is adjourned for more than 24 hours, notice of an
adjournment to another time or place shall be given prior to the time
of the adjourned meeting to the directors who were not present at
the time of the adjournment.
(5) Meetings of the board may be held at a place within or without
the state that has been designated in the notice of the meeting or,
if not stated in the notice or if there is no notice, designated in
the bylaws or by resolution of the board.
(6) Members of the board may participate in a meeting through use
of conference telephone, electronic video screen communication, or
electronic transmission by and to the corporation (Sections 20 and
21). Participation in a meeting through use of conference telephone
or electronic video screen communication pursuant to this subdivision
constitutes presence in person at that meeting as long as all
members participating in the meeting are able to hear one another.
Participation in a meeting through use of electronic transmission by
and to the corporation, other than conference telephone and
electronic video screen communication, pursuant to this subdivision
constitutes presence in person at that meeting if both of the
following apply:
(A) Each member participating in the meeting can communicate with
all of the other members concurrently.
(B) Each member is provided the means of participating in all
matters before the board, including, without limitation, the capacity
to propose, or to interpose an objection to, a specific action to be
taken by the corporation.
(7) A majority of the number of directors authorized in or
pursuant to the articles or bylaws constitutes a quorum of the
board for the transaction of business. The articles or bylaws
may require the presence of one or more specified directors in order
to constitute a quorum of the board to transact business, as long as
the death of a director or the death or nonexistence of the person or
persons otherwise authorized to appoint or designate that director
does not prevent the corporation from transacting business in the
normal course of events. The articles or bylaws may not provide
that a quorum shall be less than one-fifth the number of directors
authorized in or pursuant to the articles or bylaws, or
less than two, whichever is larger, unless the number of directors
authorized in or pursuant to the articles or bylaws is
one, in which case one director constitutes a quorum.
(8) Subject to the provisions of Sections 7212, 7233, 7234, and
subdivision (e) of Section 7237 and Section 5233, insofar as it is
made applicable pursuant to Section 7238, an act or decision done or
made by a majority of the directors present at a meeting duly held at
which a quorum is present is the act of the board. The articles or
bylaws may not provide that a lesser vote than a majority of the
directors present at a meeting is the act of the board. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that
meeting, or a greater number required by this division, the articles
or the bylaws.
(b) An action required or permitted to be taken by the board may
be taken without a meeting, if all members of the board shall
individually or collectively consent in writing to that action. The
written consent or consents shall be filed with the minutes of the
proceedings of the board. The action by written consent shall have
the same force and effect as a unanimous vote of the directors. For
purposes of this subdivision only, "all members of the board" does
not include an "interested director" as defined in Section 5233,
insofar as it is made applicable pursuant to Section 7238.
(c) Each director present and voting at a meeting shall have one
vote on each matter presented to the board of directors for action at
that meeting. No director may vote at any meeting by proxy.
(c)
(d) This section applies also to incorporators, to
committees of the board, and to action by those incorporators or
committees mutatis mutandis.
SEC. 20. Section 7212 of the Corporations Code is amended to read:
7212. (a) The board may, by resolution adopted by a majority of
the number of directors then in office, provided that a quorum is
present, create one or more committees, each consisting of two or
more directors, to serve at the pleasure of the board. Appointments
to such committees shall be by a majority vote of
the directors then in office, unless the articles or bylaws require a
majority vote of the number of directors authorized in or
pursuant to the articles or bylaws. The bylaws may authorize
one or more committees, each consisting of two or more directors, and
may provide that a specified officer or officers who are also
directors of the corporation shall be a member or members of
such a committee or committees. The board may
appoint one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee.
Any such
committee, to the extent provided in the resolution of the board or
in the bylaws, shall have all the authority of the board, except with
respect to:
(1) The approval of any action for which this part also requires
approval of the members (Section 5034) or approval of a majority of
all members (Section 5033) , regardless of whether
the corporation has members .
(2) The filling of vacancies on the board or in any committee
which has the authority of the board.
(3) The fixing of compensation of the directors for serving on the
board or on any committee.
(4) The amendment or repeal of bylaws or the adoption of new
bylaws.
(5) The amendment or repeal of any resolution of the board which
by its express terms is not so amendable or repealable.
(6) The appointment of committees of the board or the members
thereof.
(7) The expenditure of corporate funds to support a nominee for
director after there are more people nominated for director than can
be elected.
(8) With respect to any assets held in charitable trust, the
approval of any self-dealing transaction except as provided in
paragraph (3) of subdivision (d) of Section 5233.
(b) Subdivision (a) shall not apply to any committee
which does not exercise the authority of the board. A
committee exercising the authority of the board shall not include as
members persons who are not directors. However, the board may create
other committees that do not exercise the authority of the board and
these other committees may include persons who are not directors.
(c) Unless the bylaws otherwise provide, the board may delegate to
any committee, appointed pursuant to paragraph (4) of subdivision
(c) of Section 7151 or otherwise, powers as authorized by Section
7210, but may not delegate the powers set forth in paragraphs (1)
through to (8) , inclusive,
of subdivision (a) of this section .
SEC. 21. Section 7213 of the Corporations Code is amended to read:
7213. (a) A corporation shall have a chairman
chair of the its board
, who may be given the title chair of the board, chairperson of the
board, chairman of the board, or chairwoman of the board, or a
president or both, a secretary, a treasurer or a
chief financial officer and such any
other officers with such any
titles and duties as shall be stated in the bylaws or determined by
the board and as may be necessary to enable it to sign instruments.
The president, or if there is no president the chairman
chair of the board, is the general manager and
chief executive officer of the corporation, unless otherwise provided
in the articles or bylaws. Unless otherwise specified in the
articles or the bylaws, if there is no chief financial officer, the
treasurer is the chief financial officer of the corporation.
Any number of offices may be held by the same person unless the
articles or bylaws provide otherwise.
(b) Except as otherwise provided by the articles or bylaws,
officers shall be chosen by the board and serve at the pleasure of
the board, subject to the rights, if any, of an officer under any
contract of employment. Any officer may resign at any time upon
written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is a
party.
SEC. 22. Section 7220 of the Corporations Code is amended to read:
7220. (a) Except as provided in subdivision (d), directors shall
be elected for such terms, not longer than four years, as are fixed
in the articles or bylaws. However, the terms of directors of a
corporation without members may be up to six years. In the absence of
any provision in the articles or bylaws, the term shall be one year.
The articles or bylaws may provide for staggering the terms of
directors by dividing the total number of directors into groups of
one or more directors. The terms of office of the several groups and
the number of directors in each group need not be uniform. No
amendment of the articles or bylaws may extend the term of a director
beyond that for which the director was elected, nor may any bylaw
provision increasing the terms of directors be adopted without
approval of the members (Section 5034).
(b) Unless the articles or bylaws otherwise provide, each
director, including a director elected to fill a vacancy, shall hold
office until the expiration of the term for which elected and until a
successor has been elected and qualified , unless the director
has been removed from office .
(c) The articles or bylaws may provide for the election of one or
more directors by the members of any class voting as a class.
(d) Subdivisions (a) through (c) notwithstanding, all or any
portion of the directors authorized in the articles or bylaws of a
corporation may hold office by virtue of designation or selection as
provided by the articles or bylaws rather than by election by a
member or members or the board . Such directors shall
continue in office for the term prescribed by the governing article
or bylaw provision, or, if there is no term prescribed, until the
governing article or bylaw provision is duly amended or repealed,
except as provided in subdivision (e) of Section 7222. A bylaw
provision authorized by this subdivision may be adopted, amended, or
repealed only by approval of the members (Section 5034). Unless
otherwise provided in the articles or bylaws, the entitlement to
designate or select the director or directors shall not apply if any
of the following circumstances exist:
(1) The specified person or persons have died or ceased to exist.
(2) If the entitlement of the person or persons to designate is in
the capacity of an officer, trustee, or other status and the office,
trust, or status has ceased to exist. After this cessation, the
members or, if there are no members, the board shall succeed to this
entitlement to designate or select the director or directors.
(e) If a corporation has not issued memberships and (1) all the
directors resign, die, or become incompetent, or (2) a corporation's
initial directors have not been named in the articles and all
incorporators resign, die, or become incompetent before the election
of the initial directors, the superior court of any county may
appoint directors of the corporation upon application by any party in
interest.
SEC. 23. Section 7222 of the Corporations Code is amended to read:
7222. (a) Subject to subdivisions (b) and (f) of this
section , any or all directors may be removed without cause
if:
(1) In a corporation with fewer than 50 members, the removal is
approved by a majority of all members (Section 5033).
(2) In a corporation with 50 or more members, the removal is
approved by the members (Section 5034).
(3) In a corporation with no members, the removal is approved by a
majority of the directors then in office.
(b) Except for a corporation having no members, pursuant to
Section 7310:
(1) In a corporation in which the articles or bylaws authorize
members to cumulate their votes pursuant to subdivision (a) of
Section 7615, no director may be removed (unless the entire board is
removed) when the votes cast against removal, or not consenting in
writing to the removal, would be sufficient to elect the director if
voted cumulatively at an election at which the same total number of
votes were cast (or, if the action is taken by written ballot, all
memberships entitled to vote were voted) and the entire number of
directors authorized at the time of the director's most recent
election were then being elected.
(2) When by the provisions of the articles or bylaws the members
of any class, voting as a class, are entitled to elect one or more
directors, any director so elected may be removed only by the
applicable vote of the members of that class.
(3) When by the provisions of the articles or bylaws the members
within a chapter or other organizational unit, or region or other
geographic grouping, voting as such, are entitled to elect one or
more directors, any director so elected may be removed only by the
applicable vote of the members within the organizational unit or
geographic grouping.
(c) Any reduction of the authorized number of directors or any
amendment reducing the number of classes of directors does not remove
any director prior to the expiration of the director's term of
office unless the reduction or amendment also provides for the
removal of one or more specified directors .
(d) Except as provided in this section and Sections 7221 and 7223,
a director may not be removed prior to the expiration of the
director's term of office.
(e) Where a director removed under this section or Section 7221 or
7223 was chosen by designation pursuant to subdivision (d) of
Section 7220, then:
(1) Where a different person may be designated pursuant to the
governing article or bylaw provision, the new designation shall be
made.
(2) Where the governing article or bylaw provision contains no
provision under which a different person may be designated, the
governing article or bylaw provision shall be deemed repealed.
(f) When by the provisions of the articles or bylaws a person or
persons are entitled to designate one or more directors, then:
(1) Unless otherwise provided in the articles or bylaws at the
time of designation, any director so designated may be removed
without cause by the designating person or persons.
(2) Any director so designated may only be removed under
subdivision (a) with the written consent of the designating person or
persons.
(3) Unless otherwise provided in the
articles or bylaws, the right to remove shall not apply if any of the
following circumstances exist:
(A) The person or persons entitled to that right have died or
ceased to exist.
(B) If that right to remove is in the capacity of an officer,
trustee, or other status, and the office, trust, or status has ceased
to exist. After this cessation, the members or, if there are no
members, the board shall succeed to this right to remove.
SEC. 24. Section 7231 of the Corporations Code is amended to read:
7231. (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 such director
believes to be in the best interests of the corporation and with such
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:
(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 which the director believes to be within such person's
professional or expert competence; or
(3) A committee of the board upon which the
director does not serve that is composed exclusively of any or
any combination of directors, persons described in paragraph (1), or
persons described in paragraph (2) , as to matters within
its the committee's designated
authority, which committee the director believes 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
such 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,
including, without limiting the generality of the foregoing, any
actions or omissions which exceed or defeat a public or charitable
purpose to which assets held by a corporation are dedicated.
SEC. 25. Section 8610 of the Corporations Code is amended to read:
8610. (a) Any corporation may elect voluntarily to wind up and
dissolve (1) by approval of a majority of all members (Section 5033),
or (2) by approval of the board and approval of the members (Section
5034).
(b) Any corporation which comes within one of the following
descriptions may elect by approval of the board to wind up and
dissolve:
(1) A corporation which has been adjudicated as bankrupt.
(2) A corporation which has disposed of all of its assets and has
not conducted any activity for a period of five years immediately
preceding the adoption of the resolution electing to dissolve the
corporation.
(3) A corporation which has no members.
(4) A corporation which is required to dissolve under provisions
of its articles adopted pursuant to subdivision (a), paragraph (4),
clause (i) of Section 7132.
(c) If a corporation comes within one of the descriptions in
subdivision (b) and if the number of directors then in office is less
than a quorum, it may elect to voluntarily wind up and dissolve by
any of the following:
(1) The unanimous consent of the directors then in office.
(2) The affirmative vote of a majority of the directors then in
office at a meeting held pursuant to waiver of notice by those
directors complying with paragraph (3) of subdivision (a) of Section
7211.
(3) The vote of a sole remaining director.
(d) If a corporation elects to voluntarily wind up and dissolve
pursuant to subdivision (c), references to the board in this chapter
and Chapter 17 (commencing with Section 8710) shall be deemed to be
to a board consisting solely of those directors or that sole director
and action by the board shall require at least the same consent or
vote as would be required under subdivision (c) for an election to
wind up and dissolve.
SEC. 26. Section 9132 of the Corporations Code is amended to read:
9132. (a) The articles of incorporation may set forth any or all
of the following provisions, which shall not be effective unless
expressly provided in the articles:
(1) A provision limiting the duration of the corporation's
existence to a specified date.
(2) In the case of a subordinate corporation instituted or created
under the authority of a head organization, a provision setting
forth either or both of the following:
(i) That the subordinate corporation shall dissolve whenever its
charter is surrendered to, taken away by, or revoked by the head
organization granting it.
(ii) That in the event of its dissolution pursuant to an article
provision allowed by subdivision (a), paragraph (2), clause (i), of
this section, or, in the event of its dissolution for any reason, any
assets of the corporation after compliance with the applicable
provisions of Chapters 16 (commencing with Section 6610) and 17
(commencing with Section 6710) (made applicable pursuant to Section
9680) shall be distributed to the head organization.
(b) Nothing contained in subdivision (a) shall affect the
enforceability, as between the parties thereto, of any lawful
agreement not otherwise contrary to public policy.
(c) The articles of incorporation may set forth any or all of the
following provisions:
(1) The names and addresses of the persons appointed to act as
initial directors.
(2) The classes of members, if any, and if there are two or more
classes, the rights, privileges, preferences, restrictions and
conditions attaching to each class.
(3) A provision which would allow any member to have more or less
than one vote in any election or other matter presented to the
members for a vote.
(4) A provision that requires an amendment to the articles or to
the bylaws, and any amendment or repeal of that amendment, to be
approved in writing by a specified person or persons other than the
board or the members. However, this approval requirement, unless
the articles or the bylaws specify otherwise, shall not apply if any
of the following circumstances exist:
(A) The specified person or persons have died or ceased to exist.
(B) If the right of the specified person or persons to approve is
in the capacity of an officer, trustee, or other status and the
office, trust, or status has ceased to exist.
(C) If the corporation has a specific proposal for amendment or
repeal, and the corporation has provided written notice of that
proposal, including a copy of the proposal, to the specified person
or persons at the most recent address for each of them, based on the
corporation's records, and the corporation has not received written
approval or nonapproval within the period specified in the notice,
which shall not be less than 10 nor more than 30 days commencing at
least 20 days after the notice has been provided.
(5) Any other provision, not in conflict with law, for the
management of the activities and for the conduct of the affairs of
the corporation, including any provision which is required or
permitted by this part to be stated in the bylaws.
SEC. 27. Section 9151 of the Corporations Code is amended to read:
9151. (a) The bylaws shall set forth (unless such provision is
contained in the articles, in which case it may only be changed by an
amendment of the articles) the number of directors of the
corporation ; , or the method of determining
the number of directors of the corporation , or that the number
of directors shall be not less than a stated minimum nor more than a
stated maximum with the exact number of directors to be fixed,
within the limits specified, by approval of the board or the members
(Section 5034), in the manner provided in the bylaws, subject to
subdivision (e) of Section 9151. The number or minimum number of
directors may be one or more.
(b) Except as otherwise provided in the articles or bylaws, once
members have been admitted, a bylaw specifying or changing a fixed
number of directors or the maximum or minimum number or changing from
a fixed to a variable board or vice versa may only be adopted by
approval of the members (Section 5034).
(c) The bylaws may contain any provision, not in conflict with law
or the articles, for the management of the activities and for the
conduct of the affairs of the corporation, including but not limited
to:
(1) Any provision referred to in subdivision (c) of Section 9132.
(2) The time, place and manner of calling, conducting and giving
notice of members', directors' and committee meetings, or of
conducting mail ballots.
(3) The qualifications, duties and compensation of directors; the
time of their election; and the requirements of a quorum for
directors' and committee meetings.
(4) The appointment of committees, composed of directors or
nondirectors or both, by the board or any officer and the authority
of any such committees.
(5) The appointment, duties, compensation and tenure of officers.
(6) The mode of determination of members of record.
(7) The making of reports and financial statements to members.
(8) Setting, imposing and collecting dues, assessments, and
admissions and transfer fees.
(d) The bylaws may provide for the manner of admission,
withdrawal, suspension, and expulsion of members.
(e) The bylaws may require, for any or all corporate actions
(except as provided in Section 9222 and subdivision (b) of Section
9680), the vote of a larger proportion of, or all of, the members or
the members of any class, unit, or grouping of members, or the vote
of a larger proportion of, or all of, the directors than is otherwise
required by this part. Such a provision in the bylaws requiring such
greater vote shall not be altered, amended or repealed except by
such greater vote, unless otherwise provided in the bylaws.
(f) The bylaws may contain a provision limiting the number of
members, in total or of any class, which the corporation is
authorized to admit.
SEC. 28. Section 9211 of the Corporations Code is amended to read:
9211. (a) Unless otherwise provided in the articles or in the
bylaws, all of the following apply:
(1) Meetings of the board may be called by the chair of the board
or the president or any vice president or the secretary or any two
directors.
(2) Regular meetings of the board may be held without notice if
the time and place of the meetings are fixed by the bylaws or the
board. Special meetings of the board shall be held upon four days'
notice by first-class mail or 48 hours' notice delivered personally
or by telephone, including a voice messaging system or by electronic
transmission by a corporation (Section 20). The articles or bylaws
may not dispense with notice of a special meeting. A notice, or
waiver of notice, need not specify the purpose of any regular or
special meeting of the board.
(3) Notice of a meeting need not be given to a director who
provided a waiver of notice or consent to holding the meeting or an
approval of the minutes thereof in writing, whether before or after
the meeting, or who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to that director.
These waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meetings.
(4) A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place.
(5) Meetings of the board may be held at a place within or without
the state that has been designated in the notice of the meeting or,
if not stated in the notice or there is no notice, designated in the
bylaws or by resolution of the board.
(6) Members of the board may participate in a meeting through use
of conference telephone, electronic video screen communication, or
electronic transmission by and to the corporation. Participation in a
meeting through use of conference telephone or electronic video
screen communication pursuant to this subdivision constitutes
presence in person at that meeting as long as all members
participating in the meeting are able to hear one another.
Participation in a meeting through use of electronic transmission by
and to the corporation, other than conference telephone and
electronic video screen communication pursuant to this subdivision
constitutes presence in person at that meeting, if both of the
following apply:
(A) Each member participating in the meeting can communicate with
all of the other members concurrently.
(B) Each member is provided the means of participating in all
matters before the board, including, without limitation, the capacity
to propose, or to interpose an objection to, a specific action to be
taken by the corporation.
(7) A majority of the number of directors authorized in or
pursuant to the articles or bylaws constitutes a quorum of the
board for the transaction of business.
The articles or bylaws may require the presence of one or more
specified directors to constitute a quorum of the board to transact
business, as long as the death of a director or the death or
nonexistence of the person or persons otherwise authorized to appoint
or designate that director does not prevent the corporation from
transacting business in the normal course of events.
(8) An act or decision done or made by a majority of the directors
present at a meeting duly held at which a quorum is present is the
act of the board. The articles or bylaws may not provide that a
lesser vote than a majority of the directors present at a meeting is
the act of the board. A meeting at which a quorum is initially
present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least
a majority of the required quorum for that meeting, or a greater
number as is required by this division, the articles or bylaws.
(b) An action required or permitted to be taken by the board may
be taken without a meeting, if all members of the board shall
individually or collectively consent in writing to that action. The
written consent or consents shall be filed with the minutes of the
proceedings of the board. The action by written consent shall have
the same force and effect as a unanimous vote of the directors.
(c) Each director present and voting at a meeting shall have one
vote on each matter presented to the board of directors for action at
that meeting. No director may vote at any meeting by proxy.
(c)
(d) This section applies also to incorporators, to
committees of the board, and to action by those incorporators or
committees mutatis mutandis.
SEC. 29. Section 9212 of the Corporations Code is amended to read:
9212. (a) Subject to any provision in the articles or bylaws: (i)
the board may, by resolution adopted by a majority of the number of
directors then in office, provided that a quorum is present, create
one or more committees, each consisting of two or more directors, to
serve at the pleasure of the board; and (ii) appointments to
such those committees shall be by a majority
vote of the directors then in office. The bylaws may authorize one or
more committees, each consisting of two or more directors, and may
provide that a specified officer or officers who are also directors
of the corporation shall be a member or members of such
that committee or committees. The board may
appoint one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee.
Any such committee, to the extent provided in the
resolution of the board or in the bylaws, shall have all the
authority of the board, except with respect to:
(1) The approval of any action for which this part also requires
approval of the members (Section 5034) or approval of a majority of
all members (Section 5033) regardless of whether the
corporation has members .
(2) The filling of vacancies on the board or in any
committee which has the authority of the board.
(3) The fixing of compensation of the directors for serving on the
board or on any committee.
(4) The amendment or repeal of bylaws or the adoption of new
bylaws.
(5) The amendment or repeal of any resolution of the board which
by its express terms is not so amendable or repealable.
(6) The appointment of committees of the board or the members
thereof.
(b) Subdivision (a) shall not apply to any committee
which does not exercise the authority of the board. A
committee exercising the authority of the board shall not
include as members persons who are not directors. However, the board
may create other committees that do not exercise the authority of the
board and these other committees may include persons who are not
directors.
(c) Unless the bylaws otherwise provide, the board may delegate to
any committee powers as authorized by Section 9210, but may not
delegate the powers set forth in paragraphs (1) through
to (6) , inclusive, of subdivision
(a) of this section .
SEC. 30. Section 9213 of the Corporations Code is amended to read:
9213. (a) A corporation shall have a chairman
chair of the board , who may be given the title chair
of the board, chairman of the board, or chairwoman of the board,
or a president or both, a secretary, a treasurer or a
chief financial officer and such other officers with such
titles and duties as shall be stated in the bylaws or determined by
the board and as may be necessary to enable it to sign instruments.
The president, or if there is no president, the chairman
chair of the board, is the general manager and
chief executive officer of the corporation, unless otherwise provided
in the articles or bylaws. If there is no chief financial
officer, the treasurer is the chief financial officer of the
corporation unless otherwise provided in the articles or bylaws.
Any number of offices may be held by the same person unless the
articles or bylaws provide otherwise, except that neither
the secretary nor , the
treasurer, or the chief financial officer may serve
concurrently as the president or chairman
chair of the board.
(b) Except as otherwise provided by the articles or bylaws,
officers shall be chosen by the board and serve at the pleasure of
the board, subject to the rights, if any, of an officer under any
contract of employment. Any officer may resign at any time upon
written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is a
party.
SEC. 31. Section 9220 of the Corporations Code is amended to read:
9220. (a) The articles or bylaws may provide for the tenure,
election, selection, designation, removal, and resignation of
directors.
(b) In the absence of any provision in the articles or bylaws, the
term of directors shall be one year.
(c) Unless the articles or bylaws otherwise provide, each
director, including a director elected to fill a vacancy, shall hold
office until the expiration of the term for which elected and until a
successor has been elected and qualified , unless the director
has been removed from office .
(d) If a corporation has not issued memberships and (1) all the
directors resign, die, or become incompetent, or (2) a corporation's
initial directors have not been named in the articles and all
incorporators resign, die, or become incompetent before the election
of the initial directors, the superior court of any county may
appoint directors of the corporation upon application by any party in
interest.
SEC. 32. Section 9222 of the Corporations Code is amended to read:
9222. (a) Except as provided in the articles or bylaws and
subject to subdivision (b) of this section, any or all directors may
be removed without cause if the removal is approved by the members
(Section 5034).
(b) Except for a corporation having no members pursuant to Section
9310:
(1) When by the provisions of the articles or bylaws the members
of any class, voting as a class, are entitled to elect one or more
directors, any director so elected may be removed only by the
applicable vote of the members of that class.
(2) When by the provisions of the articles or bylaws the members
within a chapter or other organizational unit, or region or other
geographic grouping, voting as such, are entitled to elect one or
more directors, any director so elected may be removed only by the
applicable vote of the members within the organizational unit or
geographic grouping.
(c) Any reduction of the authorized number of directors or any
amendment reducing the number of classes of directors does not remove
any director prior to the expiration of the director's term of
office , unless the reduction or the amendment also provides for
the removal of one or more specified directors .
SEC. 33. Section 9241 of the Corporations Code is amended to read:
9241. (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 such director
believes to be in the best interests of the corporation and with such
care, including reasonable inquiry, as is appropriate under the
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:
(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 which the director believes to be within such
that person's professional or expert competence;
(3) A committee of the board upon which the
director does not serve that is composed exclusively of any or
any combination of directors, persons described in paragraph (1), or
persons described in paragraph (2) , as to matters within
its the committee's designated
authority, which committee the director believes to merit confidence;
or
(4) Religious authorities and ministers, priests, rabbis, or other
persons whose position or duties in the religious organization the
director believes justify reliance and confidence and whom the
director believes to be reliable and competent in the matters
presented, 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 such that reliance to
be unwarranted.
(c) The provisions of this section, and not Section 9243, shall
govern any action or omission of a director in regard to the
compensation of directors, as directors or officers, or any loan of
money or property to or guaranty of the obligation of any director or
officer. No obligation, otherwise valid, shall be voidable merely
because directors who benefited by a board resolution to pay such
compensation or to make such loan or guaranty participated in making
such board resolution.
(d) Except as provided in Section 9243, 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
his or her obligations as a director, including, without limiting the
generality of the foregoing, any actions or omissions which exceed
or defeat any purpose to which the corporation, or assets held by it,
may be dedicated.
SEC. 34. Article 6 (commencing with Section 9260) is added to
Chapter 2 of Part 4 of Division 2 of Title 1 of the Corporations
Code, to read:
Article 6. Compliance with Internal Revenue Code
9260. Any other provision of law notwithstanding, every
corporation, during any period or periods that corporation is deemed
to be a "private foundation" as defined in Section 509 of the
Internal Revenue Code of 1954 as amended by Section 101 of the Tax
Reform Act of 1969, shall be subject to the requirements of Section
5260.
SEC. 35. Section 9680 of the Corporations Code is amended to read:
9680. (a) Chapters 16 (commencing with Section 6610) and 17
(commencing with Section 6710) of Part 2 apply to religious
corporations except for Sections 6610, 6614, 6710, 6711 and 6716.
(b) (1) Any corporation may elect voluntarily to wind up and
dissolve (A) by approval of a majority of all the members (Section
5033) or (B) by approval of the board and approval of the members
(Section 5034).
(2) Any corporation which comes within one of the following
descriptions may elect by approval of the board to wind up and
dissolve:
(A) A corporation which has been adjudicated a bankrupt.
(B) A corporation which has disposed of all its assets and has not
conducted any activity for a period of five years immediately
preceding the adoption of the resolution electing to dissolve the
corporation.
(C) A corporation which has no members.
(D) A corporation which is required to dissolve under provisions
of its articles adopted pursuant to subparagraph (i) of paragraph (2)
of subdivision (a) of Section 9132.
(3) If a corporation comes within one of the descriptions in
paragraph (2) and if the number of directors then in office is less
than a quorum, it may elect to voluntarily wind up and dissolve by
any of the following:
(A) The unanimous consent of the directors then in office.
(B) The affirmative vote of a majority of the directors then in
office at a meeting held pursuant to waiver of notice by those
directors complying with paragraph (3) of subdivision (a) of Section
9211.
(C) The vote of a sole remaining director.
(4) If a corporation elects to voluntarily wind up and dissolve
pursuant to paragraph (3), references to the board in this chapter
shall be deemed to be to a board consisting solely of those directors
or that sole director and action by the board shall require at least
the same consent or vote as would be required under paragraph (3)
for an election to wind up and dissolve.
(c) If a corporation is in the process of voluntary winding up,
the superior court of the proper county, upon the petition of (1) the
corporation, or (2) the authorized number (Section 5036), or (3) the
Attorney General, or (4) three or more creditors, and upon such
notice to the corporation and members and creditors as the court may
order, may take jurisdiction over the voluntary winding up proceeding
if that appears necessary for the protection of the assets of the
corporation. The court, if it assumes jurisdiction, may make such
orders as to any and all matters concerning the winding up of the
affairs of the corporation and the protection of its creditors and
its assets as justice and equity may require. Chapter 15 (commencing
with Section 6510) (except Sections 6510 and 6511) shall apply to
those court proceedings.
(d) The powers and duties of the directors (or other persons
appointed by the court pursuant to Section 6515) and officers after
commencement of a dissolution proceeding include, but are not limited
to, the following acts in the name and on behalf of the corporation:
(1) To elect officers and to employ agents and attorneys to
liquidate or wind up its affairs.
(2) To continue the conduct of the affairs of the corporation
insofar as necessary for the disposal or winding up thereof.
(3) To carry out contracts and collect, pay, compromise, and
settle debts and claims for or against the corporation.
(4) To defend suits brought against the corporation.
(5) To sue, in the name of the corporation, for all sums due or
owing to the corporation or to recover any of its property.
(6) To collect any amounts remaining unpaid on memberships or to
recover unlawful distributions.
(7) Subject to the provisions of Section 9142, to sell at public
or private sale, exchange, convey, or otherwise dispose of all or any
part of the assets of the corporation in an amount deemed reasonable
by the board without compliance with Section 9631, and to execute
bills of sale and deeds of conveyance in the name of the corporation.
(8) In general, to make contracts and to do any and all things in
the name of the corporation which may be proper or convenient for the
purposes of winding up, settling and liquidating the affairs of the
corporation.
(e) After complying with Section 6713:
(1) Except as provided in Section 6715, all of a corporation's
assets shall be disposed of on dissolution in conformity with its
articles or bylaws subject to complying with the provisions of any
trust under which such assets are held.
(2) Except as provided in subdivision (3), the disposition
required in subdivision (1) shall be made by decree of the superior
court of the proper county. The decree shall be made upon petition
therefor, upon 30 days' notice to the Attorney General, by any person
concerned in the dissolution.
(3) The disposition required in subdivision (1) may be made
without the decree of the superior court, subject to the rights of
persons concerned in the dissolution, if the Attorney General makes a
written waiver of objections to the disposition.
(f) A vacancy on the board may be filled during a winding up
proceeding in the manner provided in Section 9224.
(g) Chapter 15 (commencing with Section 6510) does not apply to
religious corporations except to the extent its provisions apply
under subdivision (d) of Section 6617, subdivision (c) of Section
6719, or subdivision (c) or (d) of this section.
SEC. 36. Section 9916 of the Corporations Code is amended to read:
9916. Subdivision (a) of Section 5213 of the new public benefit
corporation law applies to subject corporations governed by the
public benefit corporation law, subdivision (a) of Section 7213 of
the new mutual benefit corporation law apply to subject corporations
governed by the mutual benefit corporation law, and subdivision (a)
of Section 9213 of the new religious corporation law applies to
subject corporations governed by the religious corporation law; but
the "treasurer" of such those
corporations shall be deemed to be the "chief financial
officer." officer," unless otherwise
provided in the articles or bylaws.
SEC. 37. Section 12228.5 is added to the Corporations Code, to
read:
12228.5. The term "chair" includes "chairperson," "chairman," and
"chairwoman." For the purposes of this part, all references to
"chairman" shall be deemed to refer to "chair."
SEC. 38. Section 12233 of the Corporations Code is amended to
read:
12233. "Directors" means natural persons, designated in the
articles or bylaws or elected by the incorporators, and their
successors and natural persons designated, elected, or appointed by
any other name or title to act as members of the governing body of
the corporation. "Directors" also means alternate directors described
in Section 12331. A person who does not have authority to act
as a member of the governing body of the corporation, including
through voting rights as a member of the governing body, is not a
director as that term is used in this part regardless of title.
However, if the articles or bylaws designate that a natural person is
a director or a member of the governing body of the corporation by
reason of occupying a specified position within or outside the
corporation, that person shall be a director for all purposes
and shall have the same rights and obligations, including voting
rights, as the other directors.
SEC. 39. Section 12241 of the Corporations Code is amended to
read:
12241. "Officers' certificate" means a certificate signed and
verified by the chairman chair of the
board, the president, or any vice president, and by the secretary,
the chief financial officer, the treasurer, or any assistant
secretary or assistant treasurer.
SEC. 40. Section 12242.5 of the Corporations Code is amended to
read:
12242.5. "Other business entity" means a domestic or foreign
limited liability company, limited partnership, general partnership,
business trust, real estate investment trust, unincorporated
association (other than a nonprofit association) ,
or a domestic reciprocal insurer organized after 1974 to provide
medical malpractice insurance as set forth in Article 16 (commencing
with Section 1550) of Chapter 3 of Part 2 of Division 1 of the
Insurance Code. As used herein, "general partnership" means a
"partnership" as defined in subdivision (7)
(9) of Section 16101; "business trust" means a business
organization formed as a trust; "real estate investment trust" means
a "real estate investment trust" as defined in subsection (a) of
Section 856 of the Internal Revenue Code of 1986, as amended; and
"unincorporated association" has the meaning set forth in Section
18035.
SEC. 41. Section 12330 of the Corporations Code is amended to
read:
12330. (a) Except as provided in subdivision (c) and Sections
12331, 12360, 12364, 12462, and 12484, bylaws may be adopted, amended
, or repealed by the board unless the action would:
(1) Materially and adversely affect the rights or obligations of
members as to voting, dissolution, redemption, transfer,
distributions, patronage distributions, patronage, property rights,
or rights to repayment of contributed capital;
(2) Increase or decrease the number or members authorized in total
or for any class;
(3) Effect an exchange, reclassification or cancellation of all or
part of the memberships; or
(4) Authorize a new class of membership.
(b) Bylaws may be adopted, amended or repealed by approval of the
members (Section 12224); provided, however, that such
adoption, amendment , or repeal also requires
approval by the members of a class if such
that action would:
(1) Materially and adversely affect the rights or obligations of
that class as to voting, dissolution, redemption, transfer,
distributions, patronage distributions, patronage, property rights,
or rights to repayment of contributed capital, in a manner different
than such action affects another class;
(2) Materially and adversely affect such class as to voting,
dissolution, redemption, transfer, distributions, patronage
distributions, patronage, property rights, or rights to repayment of
contributed capital, by changing the rights, privileges, preferences,
restrictions or conditions of another class;
(3) Increase or decrease the number of memberships authorized for
such class;
(4) Increase the number of memberships authorized for another
class;
(5) Effect an exchange, reclassification or cancellation of all or
part of the memberships of such class; or
(6) Authorize a new class of memberships.
(c) The articles or bylaws may restrict or eliminate the power of
the board to adopt, amend or repeal any or all bylaws, subject to
subdivision (e) of Section 12331.
(d) Bylaws may also provide that repeal or amendment of those
bylaws, or the repeal or amendment of specified portions of those
bylaws, may occur only with the approval in writing of a specified
person or persons other than the board or members. However, this
approval requirement, unless the articles or the bylaws specify
otherwise, shall not apply if any of the following circumstances
exist:
(1) The specified person or persons have died or ceased to exist.
(2) If the right of the specified person or persons to approve is
in the capacity of an officer, trustee, or other status and the
office, trust, or status has ceased to exist.
(3) If the corporation has a specific proposal for amendment or
repeal, and the corporation has provided written notice of that
proposal, including a copy of the proposal, to the specified person
or persons at the most recent address for each of them, based on the
corporation's records, and the corporation has not received written
approval or nonapproval within the period specified in the notice,
which shall not be less than 10 nor more than 30 days commencing at
least 20 days after the notice has been provided.
SEC. 42. Section 12331 of the Corporations Code is amended to
read:
12331. (a) The bylaws shall set forth (unless such provision is
contained in the articles, in which case it may only be changed by an
amendment of the articles) the number of directors of the
corporation ; , or the method of determining
the number of directors of the corporation, or that the number
of directors shall be not less than a stated minimum or more than a
stated maximum with the exact number of directors to be fixed, within
the limits specified, by approval of the board or the members
(Sections 12222 and 12224), in the manner provided in the bylaws,
subject to subdivision (e). The number or minimum number of directors
shall not be less than three. Alternate directors may be permitted,
in which event, the bylaws shall specify the manner and times of
their election and the conditions to their service in place of a
director.
(b) Once members have been admitted, a bylaw specifying or
changing a fixed number of directors or the maximum or minimum number
or changing from a fixed to a variable board or vice versa may only
be adopted by approval of the members.
(c) The bylaws may contain any provision, not in conflict with law
or the articles, for the management of the activities and for the
conduct of the affairs of the corporation, including but not limited
to:
(1) Any provision referred to in subdivision (c) of Section 12313.
(2) The time, place and manner of calling, conducting and giving
notice of members', directors' , and committee meetings,
or of conducting mail ballots.
(3) The qualifications, duties and compensation of directors; the
time of their election; and the requirements of a quorum for
directors' and committee meetings.
(4) The appointment of committees, composed of directors or
nondirectors or both, by the board or any officer and the authority
of any such committees.
(5) The appointment, duties, compensation and tenure of officers.
(6) The mode of determination of members of record.
(7) The making of reports and financial statements to members.
(8) Setting, imposing and collecting dues, assessments, and
membership and transfer fees.
(9) The time and manner of patronage distributions consistent with
this part.
(d) The bylaws may provide for eligibility, the manner of
admission, withdrawal, suspension, and expulsion of members, and the
suspension or termination of memberships consistent with the
requirements of Section 12431.
(e) The bylaws may require, for any or all corporate actions, the
vote of a larger proportion of, or all of, the members or the members
of any class, unit, or grouping of members or the vote of a larger
proportion of, or all of, the directors, than is otherwise required
by this part. Such a provision in the bylaws requiring such greater
vote shall not be altered, amended or repealed except by such greater
vote, unless otherwise provided in the bylaws.
(f) The bylaws may contain a provision limiting the number of
members, in total or of any class, which the corporation is
authorized to admit.
(g) The bylaws may provide for the establishment by the
corporation of a program for the education of its members, officers,
employees and the general public in the principles and techniques of
cooperation.
SEC. 43. Section 12351 of the Corporations Code is amended to
read:
12351. (a) Unless otherwise provided in the articles or in the
bylaws:
(1) Meetings of the board may be called by the chairman
chair of the board or the president or any vice
president or the secretary or any two directors.
(2) Regular meetings of the board may be held without notice if
the time and place of the meetings are fixed by the bylaws or the
board. Special meetings of the board shall be held upon four days'
notice by first-class mail or 48 hours' notice delivered personally
or by telephone, including a voice messaging system or by electronic
transmission by the corporation (Section 20). The articles or bylaws
may not dispense with notice of a special meeting. A notice, or
waiver of notice, need not specify the purpose of any regular or
special meeting of the board.
(3) Notice of a meeting need not be given to any director who
provides a waiver of notice or consent to holding the meeting or an
approval of the minutes thereof in writing, whether before or after
the meeting, or who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to that director.
All waivers, consents , and approvals shall be filed with
the corporate records or made a part of the minutes of the meetings.
(4) A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place. If the
meeting is adjourned for more than 24 hours, notice of any
adjournment to another time or place shall be given prior to the time
of the adjourned meeting to the directors who were not present at
the time of the adjournment.
(5) Meetings of the board may be held at any place within or
without the state which has been designated in the notice of the
meeting or, if not stated in the notice or if there is no notice,
designated in the bylaws or by resolution of the board.
(6) Members of the board may participate in a meeting through use
of conference telephone, electronic video screen communication, or
electronic transmission by and to the corporation (Sections 20 and
21). Participation in a meeting through use of conference telephone
or electronic video screen communication pursuant to this subdivision
constitutes presence in person at that meeting as long as all
members participating in the meeting are able to hear one another.
Participation in a meeting through use of electronic transmission by
and to the corporation, other than conference telephone and
electronic video screen communication pursuant to this subdivision
constitutes presence in person at that meeting if both of the
following apply:
(A) Each member participating in the meeting can communicate with
all of the other members concurrently.
(B) Each member is provided the means of participating in all
matters before the board, including, without limitation, the capacity
to propose, or to interpose an objection to, a specific action to be
taken by the corporation.
(7) A majority of the number of directors authorized in or
pursuant to the articles or bylaws constitutes a quorum of the
board for the transaction of business. The articles or bylaws
may require the presence of one or more specified directors to
constitute a quorum of the board to transact business, as long as the
death of a director or the death or nonexistence of the person or
persons otherwise authorized to a ppoint or designate a
director does not prevent the corporation from transacting business
in the normal course of events. The articles or bylaws may not
provide that a quorum shall be less than one-fifth the number of
directors authorized in or pursuant to the articles or
bylaws, or less than two, whichever is larger.
(8) Subject to the provisions of Sections 12352, 12373, 12374
, and subdivision (e) of Section 12377, every act or decision
done or made by a majority of the directors present at a meeting duly
held at which a quorum is present is the act of the board. The
articles or bylaws may not provide that a lesser vote than a majority
of the directors present at a meeting is the act of the board. A
meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any
action taken is approved by at least a majority of the required
quorum for the meeting, or a greater number as is required by this
division, the articles or bylaws.
(b) Any action required or permitted to be taken by the board may
be taken without a meeting, if all members of the board shall
individually or collectively consent in writing to such
that action. Such written consent or consents
shall be filed with the minutes of the proceedings of the board.
The action by written consent shall have the same force and effect
as a unanimous vote of the directors.
(c) Each director present and voting at a meeting shall have one
vote on each matter presented to the board of directors for action at
that meeting. No director may vote at any meeting by proxy.
SEC. 44. Section 12352 of the Corporations Code is amended to
read:
12352. (a) The board may, by resolution adopted by a majority of
the number of directors then in office, provided that a quorum is
present, create one or more committees, each consisting of two or
more directors, to serve at the pleasure of the board. Appointments
to such those committees shall be by a
majority vote of the directors then in office, unless the articles or
bylaws require a majority vote of the number of directors authorized
in the articles or bylaws. The bylaws may authorize one or more
committees, each consisting of two or more directors, and may provide
that a specified officer or officers who are also directors of the
corporation shall be a member or members of such
the committee or committees. The board may appoint one or
more directors as alternate members of any committee, who may replace
any absent member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the
board or in the bylaws, shall have all the authority of the board,
except with respect to:
(1) The approval of any action for which this part also requires
approval of the members (Section 12224) or approval of a majority of
all members (Section 12223) regardless of whether the
corporation has members .
(2) The filling of vacancies on the board or in any committee
which has the authority of the board.
(3) The fixing of compensation of the directors for serving on the
board or on any committee.
(4) The amendment or repeal of bylaws or the adoption of new
bylaws.
(5) The amendment or repeal of any resolution of the board which
by its express terms is not so amendable or repealable.
(6) The appointment of committees of the board or the members
thereof.
(7) The expenditure of corporate funds to support a nominee for
director after there are more people nominated for director than can
be elected.
(b) Subdivision (a) shall not apply to any committee
which does not exercise the authority of the board. A
committee exercising the authority of the board shall not include as
members persons who are not directors. The board may create other
committees that do not exercise the authority of the board and these
other committees may include persons who are not directors.
(c) Unless the bylaws otherwise provide, the board may delegate to
any committee, appointed pursuant to paragraph (4) of subdivision
(c) of Section 12331 or otherwise, powers as authorized by Section
12350, but may not delegate the powers set forth in paragraphs (1)
through (7) of subdivision (a) of this section.
SEC. 45. Section 12353 of the Corporations Code is amended to
read:
12353. (a) A corporation shall have a chairman
chair of the board , who may be given the title
chair of the board, chairperson of the board, chairman of the board,
or chairwoman of the board, or a president or both, a
secretary, a treasurer or a chief financial officer ,
or both, and such any other
officers with such any titles and
duties as shall be stated in the bylaws or determined by the board
and as may be necessary to enable it to sign instruments. The
president, or if there is no president the chairman
chair of the board, is the chief executive
officer of the corporation, unless otherwise provided in the articles
or bylaws. If there is no chief financial officer, the
treasurer is the chief financial officer of the corporation, unless
otherwise provided for in the articles or bylaws. Any number of
offices may be held by the same person unless the articles or bylaws
provide otherwise. Either the chairman chair
of the board or the president shall be elected from among
those board members elected by the membership of the corporation.
(b) Except as otherwise provided by the articles or bylaws,
officers shall be chosen by the board and serve at the pleasure of
the board, subject to the rights, if any, of an officer under any
contract of employment. Any officer may resign at any time upon
written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is a
party.
SEC. 46. Section 12360 of the Corporations Code is amended to
read:
12360. (a) Except as provided in subdivision (d), directors shall
be elected for such terms, not longer than four years, as are fixed
in the articles or bylaws. In the absence of any provision in the
articles or bylaws, the terms shall be one year. No amendment of the
articles or bylaws may extend the term of a director beyond that for
which the director was elected, nor may any bylaw provision
increasing the terms of directors be adopted without approval of the
members.
(b) Unless the articles or bylaws otherwise provide, each
director, including a director elected to fill a vacancy, shall hold
office until the expiration of the term for which elected and until a
successor has been elected and qualified , unless
the director has been removed from office .
(c) The articles or bylaws may prescribe requirements for
eligibility for election as a director.
(d) Subdivisions (a) through (c) notwithstanding, all or any
portion of the directors authorized in the articles or bylaws of a
corporation may hold office by virtue of designation or selection as
provided by the articles or bylaws rather than by election by a
member or members. Such directors shall continue in office for the
term prescribed by the governing article or bylaw provision, or, if
there is no term prescribed, until the governing article or bylaw
provision is duly amended or repealed, except as provided in
subdivision (f) of Section 12362. A bylaw provision authorized by
this subdivision may be adopted, amended, or repealed only by
approval of the members (Section 12224). Unless otherwise
provided in the articles or bylaws, the entitlement to designate or
select the director or directors shall not apply if any of the
following circumstances exist:
(1) The specified person or persons have died or ceased to exist.
(2) If the entitlement of the person or persons to designate is in
the capacity of an officer, trustee, or other status and the office,
trust, or status has ceased to exist. After this cessation, the
members or, if there are no members, the board shall succeed to this
entitlement to designate or select the director or directors.
(e) If a corporation has not issued memberships and (1) all the
directors resign, die, or become incompetent, or (2) a corporation's
initial directors have not been named in the articles and all
incorporators resign, die, or become incompetent before the election
of the initial directors, the superior court of any county may
appoint directors of the corporation upon application by any party in
interest.
SEC. 47. Section 12362 of the Corporations Code is amended to
read:
12362. (a) Subject to subdivisions (b), (c) and (g), any or all
directors may be removed without cause if one of the following
applies:
(1) In a corporation with fewer than 50 members, the removal is
approved by a majority of all members (Section 12223).
(2) In a corporation with 50 or more members, the removal is
approved by the members (Section 12224).
(b) In a corporation in which the articles or bylaws authorize
members to cumulate their votes pursuant to subdivision (a) of
Section 12485, no director may be removed (unless the entire board is
removed) when the votes cast against removal, or not consenting in
writing to the removal, would be sufficient to elect the director if
voted cumulatively at an election at which the same total number of
votes were cast (or, if the action is taken by written ballot, all
memberships entitled to vote were voted) and the entire number of
directors authorized at the time of the director's most recent
election were then being elected; and
(c) When by the provisions of the articles or bylaws the members
of any class, voting as a class, are entitled to elect one or more
directors, any director so elected may be removed only by the
applicable vote of the members of that class.
(d) Any reduction of the authorized number of directors or any
amendment reducing the number of class of directors does not remove
any director prior to the expiration of the director's term of office
, unless the reduction or amendment also provides
for removal of one or more specified directors .
(e) Except as provided in this section and Sections 12361 and
12363, a director may not be removed prior to the expiration of the
director's term of office.
(f) Where a director removed under this section or Section 12361
or 12363 was chosen by designation pursuant to subdivision (d) of
Section 12360, then:
(1) Where a different person may be designated pursuant to the
governing article or bylaw provision, the new designation shall be
made; or
(2) Where the governing article or bylaw provision contains no
provision under which a different person may be designated, the
governing article or bylaw provision shall be deemed repealed.
(g) When by the provisions of the articles or bylaws a person or
persons are entitled to designate one or more directors, the
provisions shall also provide for removal of those directors and any
director so designated may only be removed as so provided.
(h) If the articles or bylaws entitle a person or persons to
designate one or more directors, then:
(1) Unless as otherwise provided in the articles or bylaws at the
time of designation, any director so designated may be removed
without cause by the designating person or persons.
(2) Any director so designated may only be removed under
subdivision (a) with the written consent of the designating person or
persons.
(3) Unless as otherwise provided in the articles or bylaws, the
right to remove shall not apply if any of the following circumstances
exist:
(A) The person or persons entitled to that right have died or
ceased to exist.
(B) If that right to remove is in the capacity of an officer,
trustee, or other status, and the office, trust, or status has ceased
to exist. After this cessation, the members or, if there are no
members, the board shall succeed to this right to remove.
SEC. 48. Section 12371 of the Corporations Code is amended to
read:
12371. (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 such director
believes to be in the best interests of the corporation and with such
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:
(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 which the director believes to be within such person's
professional or expert competence; or
(3) A committee of the board upon which the
director does not serve that is composed exclusively of any or
any combination of directors, persons described in paragraph (1), or
persons described in paragraph (2) , as to matters within
its the committee's designated
authority, which committee the director believes 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 such 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 persons's obligations as a director.
SEC. 49. Section 12630 of the Corporations Code is amended to
read:
12630. (a) Any corporation may elect voluntarily to wind up and
dissolve (1) by approval of a majority of all members (Section 12223)
or (2) by approval of the board and approval of the members (Section
12224).
(b) Any corporation which comes within one of the following
descriptions may elect by approval of the board to wind up and
dissolve:
(1) A corporation which has been adjudicated as bankrupt.
(2) A corporation which has disposed of all of its assets and has
not conducted any activity for a period of five years immediately
preceding the adoption of the resolution electing to dissolve the
corporation.
(3) A corporation which has no members.
(c) If a corporation comes within one of the descriptions in
subdivision (b) and if the number of directors then in office is less
than a quorum, it may elect to voluntarily wind up and dissolve by
any of the following:
(1) The unanimous consent of the directors then in office.
(2) The affirmative vote of a majority of the directors then in
office at a meeting held pursuant to waiver of notice by those
directors complying with subdivision (a) of Section 12351.
(3) The vote of a sole remaining director.
(d) If a corporation elects to voluntarily wind up and dissolve
pursuant to subdivision (c), references to the board in this chapter
and Chapter 17 (commencing with Section 12650) shall be deemed to be
to a board consisting solely of those directors or that sole director
and action by the board shall require at least the same consent or
vote as would be required under subdivision (c) for an election to
wind up and dissolve.
SEC. 50. Section 12694 of the Corporations Code is amended to
read:
12694. Subdivision (a) of Section 12353 of the new law shall
apply to subject corporations, but the treasurer of these
corporations shall be deemed to be the chief financial officer
unless otherwise provided in the articles or bylaws .
SEC. 51. Section 18360 of the Corporations Code is amended to
read:
18360. An unincorporated association may merge into
with a domestic or foreign corporation, domestic
or foreign limited partnership, domestic or foreign general
partnership, or domestic or foreign limited liability company.
Notwithstanding this section, a merger may be effected only if each
constituent entity is authorized to effect the merger by the laws
under which it was organized.
SEC. 52. Section 24001.5 of the Corporations Code is amended to
read:
24001.5. (a) The Legislature finds and declares that the services
of directors or officers of nonprofit medical associations, as
defined in Section 21200, who serve without compensation are critical
to the efficient conduct and management of the public service and
charitable affairs of the people of California. The willingness of
volunteers to offer their services has been deterred by a perception
that their personal assets are at risk for these activities. The
unavailability and unaffordability of appropriate liability insurance
makes it difficult for these associations to protect the personal
assets of their volunteer decisionmakers with adequate insurance. It
is the public policy of this state to provide incentive and
protection to the individuals who perform these important functions.
(b) Except as provided in this section, no cause of action for
monetary damages shall arise against any person serving without
compensation as a director or officer of a nonprofit medical
association, as defined in Section 21200, on account of any negligent
act or omission occurring (1) within the scope of that person's
duties as a director acting as a board member, or within the scope of
that person's duties as an officer acting in an official capacity;
(2) in good faith; (3) in a manner that the person believes to be in
the best interest of the association; and (4) is in the exercise of
his or her policymaking judgment.
(c) This section shall not limit the liability of a director or
officer for any of the following:
(1) Self-dealing transactions, as described in Sections 5233 and
9243.
(2) Conflicts of interest, as described in Section 7233.
(3) Actions described in Sections 5237, 7236, and 9245.
(4) In the case of a charitable trust, an action or proceeding
against a trustee brought by a beneficiary of that trust.
(5) Any action or proceeding brought by the Attorney General.
(6) Intentional, wanton, or reckless acts, gross negligence, or an
action based on fraud, oppression, or malice.
(7) Any action brought under Chapter 2 (commencing with Section
16700) of Part 2 of Division 7 of the Business and Professions Code.
(d) This section only applies to nonprofit organizations organized
to provide charitable, educational, scientific, social, or other
forms of public service that are exempt from federal income taxation
under Section 501(c)(3) or 501(c)(6) of the Internal Revenue Code.
(e) This section applies only if the nonprofit association
maintains a general liability insurance policy
with an amount of coverage of at least the following amounts:
(1) If the association's annual budget is less than fifty thousand
dollars ($50,000), the minimum required amount is five hundred
thousand dollars ($500,000).
(2) If the association's annual budget equals or exceeds fifty
thousand dollars ($50,000), the minimum required amount is one
million dollars ($1,000,000).
This section applies only if the general
liability insurance policy is in force both at the time of
injury and at the time that the claim is made, so that the policy
is applicable to the claim.
(f) For the purposes of this section, the payment of actual
expenses incurred in attending meetings or otherwise in the execution
of the duties of a director or officer shall not constitute
compensation.
(g) Nothing in this section shall be construed to limit the
liability of a nonprofit association for any negligent act or
omission of a director, officer, employee, agent, or servant
occurring within the scope of his or her duties.
(h) This section does not apply to any association that unlawfully
restricts membership, services, or benefits conferred on the basis
of political affiliation, age, or any characteristic listed or
defined in subdivision (b) or (e) of Section 51 of the Civil Code.
(i) This section does not apply to any volunteer director or
officer who receives compensation from the association in any other
capacity, including, but not limited to, as an employee.