BILL ANALYSIS
AB 1233
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CONCURRENCE IN SENATE AMENDMENTS
AB 1233 (Silva)
As Amended August 17, 2009
Majority vote
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|ASSEMBLY: |77-0 |(May 18, 2009) |SENATE: |39-0 |(August 24, |
| | | | | |2009) |
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Original Committee Reference: B. & F.
SUMMARY : Clarifies various sections of the Corporations Code
so that nonprofit and consumer cooperative corporations may have
more certainty in their operations. Specifically, this bill :
1)Specifies that a person who does not have authority to act as
a member of the governing board 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 occupied a
certain position, then that person is a director for all
purposes.
2)Specifies the approval requirement for nonprofit corporations
and consumer cooperatives shall not apply if any of the
following circumstances exist:
a) The specified designator of that director or directors
has died or ceased to exist;
b) If the right of the specified designator of that
director or directors to approve is in the capacity of an
officer, trustee, or other status and the office, trust, or
status has ceased to exist; and,
c) If the corporation has 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 person 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.
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3)Authorizes 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.
4)Prohibits a committee exercising the authority of the board
from including, as members, persons who are not directors.
5)Authorizes the board to create other committees with
nondirectors that do not exercise the authority of the board.
6)Requires a nonprofit corporation or consumer cooperative to
have a chair 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.
7)Authorizes a nonprofit corporation or consumer cooperative
meeting certain requirements, including the lack of a quorum,
to elect to voluntarily wind up and dissolve.
8)Subjects the Federal Internal Revenue Code requirements to
nonprofit religious corporations deemed to be a private
foundation.
9)Prohibits a cause of action if the corporations or
associations maintain a liability insurance policy that is
applicable to the claim.
10)Authorizes an unincorporated association to merge into a
specified corporation, limited partnership, general
partnership, or limited liability company.
The Senate amendments make technical changes to the bill.
EXISTING LAW :
1)Defines "directors" as a natural persons, designated in the
articles or bylaw or elected by the incorporators, and their
successor, and natural persons designated, elected or
appointed by any other name or title to act as members of the
governing body of the corporation. (Corporations Code,
Section 5047, all further references are to the Corporations
Code)
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2)Defines "officers' certificate" as a certificate signed and
verified by the chairman 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. (Section 5062)
3)Defines "other business entity" as 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)
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. (5063.5)
4)Provides restrictions on the authority of board committees,
including, the approval of any action for which this part also
requires approval of the members or approval of a majority of
all members. (5212 (a), 7212 (a), 9212 (a), and 12352 (a))
5)Requires a corporation to have a chairman of the board or a
president or both, also requires a chief financial officer and
a secretary. (5213 (a))
6)Allows the board to delegate the management of the activities
of the corporation to anyone, although it retains ultimate
responsibility. (5210, 7210, 9210, 12350)
7)Requires approval of the board for voluntary dissolution of a
nonprofit public benefit corporation if there are no members
and in certain other situations. (6610)
FISCAL EFFECT : None
AS PASSED BY THE ASSEMBLY , this bill is substantially similar to
the bill passed by the Senate.
COMMENTS : This bill, sponsored by the Business Law Section of
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the California State Bar, will clarify nonprofit and consumer
cooperative corporations director voting rights, authorized
number of directors, quorum, board committees, and officer
titles and board reliance. AB 1233 will also provide for a
streamlined merger and liquidation process, default provisions
in the case of third party approvals, procedures for board
reductions and the requisite private foundation restrictions.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081
FN: 0002412