California Legislature—2013–14 Regular Session

Assembly Bill No. 491

Introduced by Assembly Member Torres

February 19, 2013

An act to amend Sections 207 and 212 of the Corporations Code, relating to corporations.

LEGISLATIVE COUNSEL’S DIGEST

AB 491, as introduced, Torres. Corporations: bylaws.

The General Corporation Law authorizes and regulates the formation and operation of a corporation, including, but not limited to, the adoption and contents of corporate bylaws.

This bill would authorize a corporation to take actions during an emergency, as defined, to conduct the corporation’s ordinary business operations and affairs, as specified, and provide that any action taken in good faith during an emergency under this authorization would bind the corporation and not be a basis to impose liability on a corporate director, officer, employee, or agent. This bill would also authorize a corporation to adopt bylaws to further direct the operations of the corporation during an emergency, as specified.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 207 of the Corporations Code is amended
to read:

207.  

Subject to any limitations contained in the articles and to
compliance with other provisions of this division and any other
applicable laws, a corporation shall have all of the powers of a
natural person in carrying out its business activities, including,
without limitation, the power to:

(a) Adopt, use and at will alter a corporate seal, but failure to
affix a seal does not affect the validity of any instrument.

(b) Adopt, amend and repeal bylaws.

(c) Qualify to do business in any other state, territory,
dependency or foreign country.

(d) Subject to the provisions of Section 510, issue, purchase,
redeem, receive, take or otherwise acquire, own, hold, sell, lend,
exchange, transfer or otherwise dispose of, pledge, use and
otherwise deal in and with its own shares, bonds, debentures and
other securities.

(e) Make donations, regardless of specific corporate benefit, for
the public welfare or for community fund, hospital, charitable,
educational, scientific, civic or similar purposes.

(f) Pay pensions, and establish and carry out pension,
profit-sharing, share bonus, share purchase, share option, savings,
thrift and other retirement, incentive and benefit plans, trusts and
provisions for any or all of the directors, officers and employees
of the corporation or any of its subsidiary or affiliated corporations,
and to indemnify and purchase and maintain insurance on behalf
of any fiduciary of such plans, trusts or provisions.

(g) Subject to the provisions of Section 315, assume obligations,
enter into contracts, including contracts of guaranty or suretyship,
incur liabilities, borrow and lend money and otherwise use its
credit, and secure any of its obligations, contracts or liabilities by
mortgage, pledge or other encumbrance of all or any part of its
property, franchises and income.

(h) Participate with others in any partnership, joint venture or
other association, transaction or arrangement of any kind, whether
or not such participation involves sharing or delegation of control
with or to others.

begin insert

(i) (1) In advance of, or during an emergency, take any or all
of the following actions necessary to conduct the corporation’s
ordinary business operations and affairs during an emergency,
unless emergency bylaws provide otherwise pursuant to subdivision
(c) of Section 212:

end insert begin insert

(A) Modify lines of succession to accommodate the incapacity
of any director, officer, employee, or agent resulting from the
emergency.

end insert begin insert

(B) Relocate the principal office, designate alternative principal
offices or regional offices, or authorize the officers to do so.

end insert begin insert

(C) Give notice to a director or directors in any practicable
manner under the circumstances, including, but not limited to, by
publication and radio, when notice of a meeting of the board
cannot be given to that director or directors in the manner
prescribed by the bylaws or Section 307.

end insert begin insert

(D) Deem that one or more officers of the corporation present
at a board meeting is a director, in order of rank and within the
same rank in order of seniority, as necessary to achieve a quorum
for that meeting.

end insert begin insert

(2) During an emergency, the board may not take any action
that requires the vote of the shareholders or is not in the
corporation’s ordinary course of business, unless the required
vote of the shareholders was obtained prior to the emergency.

end insert begin insert

(3) Any actions taken in good faith during an emergency under
this subdivision binds the corporation and may not be used to
impose liability on a corporate director, officer, employee, or
agent.

end insert begin insert

(4) For purposes of this subdivision, “emergency” means any
of the following events or circumstances as a result of which a
quorum of the corporation’s board of directors cannot be readily
convened for action:

end insert begin insert

(A) A natural catastrophe, including, but not limited to, a
hurricane, tornado, storm, high water, wind-driven water, tidal
wave, tsunami, earthquake, volcanic eruption, landslide, mudslide,
snowstorm, or drought, or, regardless of cause, any fire, flood, or
explosion.

end insert begin insert

(B) An attack on this state or nation by an enemy of the United
States of America, or upon receipt by this state of a warning from
the federal government indicating that an enemy attack is probable
or imminent.

end insert begin insert

(C) An act of terrorism or other man-made disaster that results
in extraordinary levels of casualties or damage or disruption
severely affecting the infrastructure, environment, economy,
government functions, or population, including, but not limited to,
mass evacuations.

end insert begin insert

(D) A state of emergency proclaimed by the Governor.

end insert

SEC. 2.  

Section 212 of the Corporations Code is amended to
read:

212.  

(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 that the number of directors shall be not less than
a stated minimum nor more than a stated maximum (which in no
case shall be greater than two times the stated minimum minus
one), with the exact number of directors to be fixed, within the
limits specified, by approval of the board or the shareholders
(Section 153) in the manner provided in the bylaws, subject to
paragraph (5) of subdivision (a) of Section 204. The number or
minimum number of directors shall not be less than three; provided,
however, that (1) before shares are issued, the number may be one,
(2) before shares are issued, the number may be two, (3) so long
as the corporation has only one shareholder, the number may be
one, (4) so long as the corporation has only one shareholder, the
number may be two, and (5) so long as the corporation has only
two shareholders, the number may be two. After the issuance of
shares, 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 outstanding shares (Section 152); provided, however, that
a bylaw or amendment of the articles reducing the fixed number
or the minimum number of directors to a number less than five
cannot be adopted if the votes cast against its adoption at a meeting
or the shares not consenting in the case of action by written consent
are equal to more than 162⁄3 percent of the outstanding shares
entitled to vote.

(b) The bylaws may contain any provision, not in conflict with
law or the articles for the management of the business and for the
conduct of the affairs of the corporation, including but not limited
to:

(1) Any provision referred to in subdivision (b), (c) or (d) of
Section 204.

(2) The time, place and manner of calling, conducting and giving
notice of shareholders’, directors’ and committee meetings.

(3) The manner of execution, revocation and use of proxies.

(4) The qualifications, duties and compensation of directors;
the time of their annual election; and the requirements of a quorum
for directors’ and committee meetings.

(5) The appointment and authority of committees of the board.

(6) The appointment, duties, compensation and tenure of
officers.

(7) The mode of determination of holders of record of its shares.

(8) The making of annual reports and financial statements to
the shareholders.

begin insert

(c) (1) The bylaws may contain any provision, not in conflict
with the articles, to manage and conduct the ordinary business
affairs of the corporation effective only in an emergency as defined
in Section 207, including, but not limited to, procedures for calling
a board meeting, quorum requirements for a board meeting, and
designation of additional or substitute directors.

end insert begin insert

(2) During an emergency, the board may not take any action
that requires the vote of the shareholders or otherwise is not in
the corporation’s ordinary course of business, unless the required
vote of the shareholders was obtained prior to the emergency.

end insert begin insert

(3) All provisions of the regular bylaws consistent with the
emergency bylaws shall remain effective during the emergency,
and the emergency bylaws shall not be effective after the emergency
ends.

end insert begin insert

(4) Corporate action taken in good faith in accordance with the
emergency bylaws binds the corporation, and may not be used to
impose liability on a corporate director, officer, employee, or
agent.

end insert