BILL NUMBER: AB 434	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Hagman

                        FEBRUARY 15, 2013

   An act to amend Section 402.5 of the Corporations Code, relating
to corporations.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 434, as introduced, Hagman. Preferred shares: rights and
preferences distributions.
   Existing law authorizes a corporation to issue one or more classes
or series of shares, as specified, including designating a class or
series of shares as "preferred," which are defined as shares other
than common shares.
   Under existing law, a corporation may make a distribution to the
corporation's shareholders only if certain conditions are met.
Existing law prohibits a corporation from making a distribution to
its shareholders unless the board of directors determines that either
(1) the amount of retained earnings of the corporation immediately
prior to the distribution equals or exceeds the sum of the amount of
the proposed distribution plus the preferential dividends arrears
amount, or (2) immediately after the distribution, the value of the
corporation's assets would equal or exceed the sum of its total
liabilities plus the preferential rights amount. Existing law defines
"preferential dividends arrears" and "preferential rights amount"
for these purposes.
   Existing law authorizes the rights, preferences, privileges, and
restrictions imposed on a class or series of preferred shares to
exclude specified provisions that would otherwise be required by law.

   This bill would also authorize the rights, preferences,
privileges, and restrictions imposed on preferred shares to exclude
specified rights to a preferential dividends arrears amount,
preferential rights amount, or both in a distribution to the
corporation's junior shareholders.
   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 402.5 of the Corporations Code is amended to
read:
   402.5.  The rights, preferences, privileges, and restrictions
granted to or imposed upon a class or series of preferred shares
(Section 176) the designation of which includes either the word
"preferred" or the word "preference" may:
   (a) Notwithstanding paragraph (9) of subdivision (a) of Section
204, include a provision requiring a vote of a specified percentage
or proportion of the outstanding shares of the class or series that
is less than a majority of the class or series to approve any
corporate action, except where the vote of a majority or greater
proportion of the class or series is required by this division,
regardless of restrictions or limitations on the voting rights
thereof.
   (b) Notwithstanding paragraph (5) of subdivision (a) of Section
204, provide that in addition to the requirement of subdivision (a)
of Section 1900 the corporation may voluntarily wind up and dissolve
only upon the vote of a specified percentage (which shall not exceed
662/3 percent) of such class or series.
   (c)  Provide   Notwithstanding subdivision
(a) of Section   500   , provide  that
 Section 502 or 503 not apply in whole or in part with
respect to distributions on shares junior to the class or series
  a distribution may be made without regard to the
preferential dividends arrears amount, or any preferential rights
amount, or both, as described in paragraphs (1) and (2) of
subdivision (a) of Section 500  .