BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                   SB 918|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
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                                 THIRD READING


          Bill No:  SB 918
          Author:   Anderson (R)
          Amended:  4/13/11
          Vote:     21

           
           SENATE BANKING & FINANCIAL INST. COMMITTEE  :  7-0, 4/6/11
          AYES:  Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla, 
            Walters


           SUBJECT  :    Mutual water companies:  boards of directors

           SOURCE  :     Farm Mutual Water Company


           DIGEST  :    This bill authorizes mutual water companies to 
          elect directors to serve staggered four-year terms, if 
          authorized in their articles of incorporation or bylaws.  
          Upon the initial election of directors to staggered terms, 
          the elected directors shall determine by lot who among them 
          shall serve initial two-year terms and who among them shall 
          serve four-year terms.  Prior to any election in which the 
          terms of elected directors shall be determined by lot, the 
          mutual water company shall notify its shareholders that the 
          terms of the directors elected shall be determined among 
          those directors by lot.

           ANALYSIS  :    

          Existing law:

          1. Authorizes the formation of mutual water companies under 
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             the General Corporation Law, as specified, and under the 
             Nonprofit  Mutual Benefit Corporation Law, as specified.

          2. Like other corporations organized under the General 
             Corporation Law, mutual water companies organized under 
             the General Corporation Law must elect their directors 
             annually, at their annual shareholder meeting, unless 
             the company's articles of incorporation specify a 
             shorter term.  The General Corporation Law also provides 
             that each director shall hold office until the 
             expiration of the term for which he or she is elected, 
             and until a successor has been elected and qualified.

          3. Like other nonprofits authorized under the Nonprofit 
             Mutual Benefit Corporation Law, mutual water companies 
             organized under the Nonprofit Mutual Benefit Corporation 
             Law are required to elect their directors to terms not 
             exceeding four years, as specified in the corporation's 
             articles of incorporation or bylaws.  The articles or 
             bylaws may provide for staggering the terms by dividing 
             the total number of directors into groups of one or more 
             directors.  

          4. Existing law regarding municipal water districts also 
             authorizes four-year terms for directors.  Water Code 
             Section 71000 et seq. authorizes the formation of 
             municipal water districts, and provides that each 
             director of a municipal water district shall hold office 
             for a term of four years.  The Water Code establishes a 
             procedure to be followed by municipal water districts 
             upon their formation, in which the elected directors 
             classify themselves by lot; two of them serve until the 
             next general district election, and three serve until 
             the second succeeding general district.   

           Comments
           
          This bill, sponsored by the Farm Mutual Water Company, is 
          intended to provide administrative flexibility for private 
          mutual water companies that are organized under the General 
          Corporation Law.  Under existing law, any corporation 
          formed under the General Corporation Law must hold annual 
          elections for their boards of directors.  


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          The Farm Mutual Water Company states that compulsory annual 
          elections have created confusion and inconsistency among 
          some mutual water companies.  Electing all five members of 
          their boards of directors at each annual shareholder 
          meeting has created high turnover and instability among 
          boards, staff, and shareholders.

          This bill gives California mutual water companies organized 
          under the General Corporation Law the flexibility to elect 
          the members of their boards of directors to staggered 
          four-year terms every two years, in lieu of the annual 
          elections currently required of these companies.  The 
          sponsor states that the proposal for staggered four-year 
          terms is consistent with election practices for public 
          water agencies throughout California.  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No   
          Local:  No

           SUPPORT  :   (Verified  4/12/11)

          Farm Mutual Water Company (source)



          DLW:do  4/12/11   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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