BILL ANALYSIS �
AB 491
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 491 (Torres)
As Amended June 24, 2013
Majority vote
-----------------------------------------------------------------
|ASSEMBLY: |70-0 |(May 16, 2013) |SENATE: |33-0 |(July 8, 2013) |
-----------------------------------------------------------------
Original Committee Reference: B. & F.
SUMMARY : Allows a corporation to take actions necessary to
conduct the corporation's ordinary business during an emergency.
Specifically, this bill :
1)Provides that actions taken in anticipation of, or during an
emergency can include:
a) Modifying lines of succession to accommodate the
incapacity of any director, officer, employee, or agent
resulting from the emergency;
b) Relocating the principal office.
2)Specifies during an emergency that a corporation take either
or both of following actions:
a) Giving notice to a director or directors in any
practical manner under the circumstances, including, but
not limited to, by publication and radio;
b) Deeming that one or more officers of the corporation
present at a board meeting is a director, as necessary to
achieve a quorum.
3)Prohibits the board during an emergency from taking any action
that requires the vote of the members or an action that is
outside the corporation's ordinary course of business, unless
the required voted was obtained prior to the emergency.
4)Provides any action taken in good faith during an emergency
binds the corporation and may not be used to impose liability
on a corporate director, office, employee, or agent.
5)Defines "emergency" as any of the following:
AB 491
Page 2
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.
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.
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.
d) A state of emergency proclaimed by the Governor.
6)Authorizes a corporation to adopt bylaws to further direct the
operations of the corporation during an emergency.
The Senate amendments make technical and clarifying changes.
EXISTING LAW :
1)Establishes the Corporations Code to provide the fundamental
terms and provisions for the governance of corporations.
Sections 200-213 relate to corporations organization and
bylaws.
2)Defines three conditions or degrees of emergency:
a) "State of war emergency" means the condition which
exists immediately, with or without a proclamation thereof
by the Governor, whenever this state or nation is attacked
by an enemy of the United States, or upon receipt by the
state of a warning from the federal government indicating
that such an enemy attack is probable or imminent.
b) "State of emergency" means the duly proclaimed existence
of conditions of disaster or of extreme peril to the safety
of persons and property within the state caused by such
conditions as air pollution, fire, flood, storm, epidemic,
AB 491
Page 3
riot, drought, sudden and severe energy shortage, plant or
animal infestation or disease, the Governor's warning of an
earthquake or volcanic prediction, or an earthquake, or
other conditions, other than conditions resulting from a
labor controversy or conditions causing a "state of war
emergency," which, by reason of their magnitude, are or are
likely to be beyond the control of the services, personnel,
equipment, and facilities of any single county, city and
county, or city and require the combined forces of a mutual
aid region or regions to combat, or with respect to
regulated energy utilities, a sudden and severe energy
shortage requires extraordinary measures beyond the
authority vested in the California Public Utilities
Commission.
c) "Local emergency" means the duly proclaimed existence of
conditions of disaster or of extreme peril to the safety of
persons and property within the territorial limits of a
county, city and county, or city, caused by such conditions
as air pollution, fire, flood, storm, epidemic, riot,
drought, sudden and severe energy shortage, plant or animal
infestation or disease, the Governor's warning of an
earthquake or volcanic prediction, or an earthquake, or
other conditions, other than conditions resulting from a
labor controversy, which are or are likely to be beyond the
control of the services, personnel, equipment, and
facilities of that political subdivision and require the
combined forces of other political subdivisions to combat,
or with respect to regulated energy utilities, a sudden and
severe energy shortage requires extraordinary measures
beyond the authority vested in the California Public
Utilities Commission. (Government Code Section 8558)
FISCAL EFFECT : None
COMMENTS : According to the sponsor, State Bar of California,
Business Law Section, Corporations Committee, "Although there is
no ready example of a corporation facing managerial setbacks
because of an emergency, the possibility of catastrophic events
effectively disabling boards cannot be ignored. Recent acts of
terrorism, earthquakes, tsunamis and nuclear disasters are
timely reminders of the vulnerability of the ordinary course of
business in the face of large-scale emergencies."
This bill would enact two provisions in California's
AB 491
Page 4
Corporations Code, one implementing emergency powers and one
implementing emergency bylaws. Currently, California
corporations do not have any emergency provisions in place. In
case of an emergency, this bill would allow corporations to take
certain actions it might not otherwise be able to take, as well
as, adopt provisions not conflicting with the articles necessary
to manage business.
This bill is based off the Model Business Corporation Act (MBCA)
which contains both a provision on emergency bylaws and
emergency powers. The MBCA is a model set of laws prepared by
the Committee on Corporate Laws of the Section of Business Law
of the American Bar Association (ABA). This bill closely
mirrors both provisions of the MBCA section 2.07, emergency
bylaws, and section 3.03, emergency powers. This bill does
differ from the MBCA in terms of the emergency definition but
the definition in the bill combines elements from California
Emergencies Services Act, Government Code Section 8558 and
federal National Emergencies Act, 50 United States Code 1601.
Thirty-eight of 52 U.S. jurisdictions have adopted emergency
powers provisions for for-profit corporations. Twenty-eight
jurisdictions have adopted both an emergency powers provision
and emergency bylaws provision.
An example of California law that expanded authority during a
disaster can be seen through domestic insurers. Under Insurance
Code Section 688, "the Legislature declares that it is desirable
for the general welfare and in particular for the welfare of
insurance beneficiaries, policyholders, injured claimants and
others that the business of domestic insurers be continued
notwithstanding the event of a national emergency."
Analysis Prepared by : Mark Farouk / B. & F. / (916) 319-3081
FN: 0001231