Amended in Senate July 9, 2013

Amended in Senate June 12, 2013

Amended in Assembly May 9, 2013

Amended in Assembly March 18, 2013

California Legislature—2013–14 Regular Session

Assembly Bill No. 1255

Introduced by Assembly Member Pan

(Coauthors: Assembly Members Bloom and Chesbro)

February 22, 2013

An act to amend Sections 12313, 12330, 12331, 12420, 12422, 12446, 12502, and 12503 of, and to add Sections 12245.2 and 12246.2 to, the Corporations Code, relating to corporations.

LEGISLATIVE COUNSEL’S DIGEST

AB 1255, as amended, Pan. Corporations: consumer cooperatives.

Existing law, the Consumer Cooperative Corporation Law, governs the organization and operation of consumer cooperative corporations. The law specifies the provisions that may be set forth in the articles of incorporation of a consumer cooperative.

This bill would include among these provisions authorization for the board of directors to fix the rights, privileges, preferences, restrictions, and conditions attaching to any wholly unissued class of memberships authorized in the bylaws or articles and, if the bylaws or articles authorize a class of memberships to be divisible into begin delete a end delete series, to any wholly unissued series of a membership class authorized to be divisible into begin delete a end delete series, and to fix the number of memberships in the series and the designation of the series, as specified. The bill would require any amendment to the bylaws or articles of a consumer cooperative to be approved by the members of a series if the series would be adversely affected by the action, as specified. The bill would also make other conforming changes.

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 12245.2 is added to the Corporations
Code, to read:

12245.2.  

“Preferred memberships” means memberships that
have a preference over any other memberships with respect to
distribution of assets on liquidation or with respect to payment of
distributions.

SEC. 2.  

Section 12246.2 is added to the Corporations Code,
to read:

12246.2.  

“Series” of memberships means memberships within
a class of memberships that have the same rights, privileges,
preferences, restrictions, and conditions, but that differ in one or
more rights, privileges, preferences, restrictions, or conditions
from other memberships within the class. Certificated securities
and uncertificated securities do not constitute a different series if
the only difference is certificated and uncertificated status.

SEC. 3.  

Section 12313 of the Corporations Code is amended
to read:

12313.  

(a) The articles of incorporation may set forth any or
all of the following provisions, which shall not be effective unless
expressly provided in the articles:

(1) A provision limiting the duration of the corporation’s
existence to a specified date.

(2) A provision providing for the distribution of the remaining
assets of the corporation, after payment or adequate provision for
all of its debts and liabilities, to a charitable trust.

(b) Nothing contained in subdivision (a) shall affect the
enforceability, as between the parties thereto, of any lawful
agreement not otherwise contrary to public policy.

(c) The articles of incorporation may set forth any or all of the
following provisions:

(1) The names and addresses of the persons appointed to act as
initial directors.

(2) Provisions concerning the transfer of memberships, in
accordance with Section 12410.

(3) The classes of members, if any, and if there are two or more
classes, the rights, privileges, preferences, restrictions, and
conditions attaching to each class.

(4) Any other provision, not in conflict with law, for the
management of the activities and for the conduct of the affairs of
the corporation, including any provision which is required or
permitted by this part to be stated in the bylaws.

(5) A provision conferring upon members the right to determine
the consideration for which memberships shall be issued.

(6) A provision authorizing the board of directors, within any
limits or restrictions stated, to fix the rights, privileges, preferences,
restrictions, and conditions attaching to any wholly unissued class
of memberships authorized in the bylaws or the articles.

(7) If the bylaws or articles authorize a class of memberships
to be divisible into begin delete a end delete series, a provision authorizing the board of
directors, within any limits or restrictions stated, to fix the rights,
privileges, preferences, restrictions, and conditions attaching to
any wholly unissued series of a membership class authorized to
be divisible into begin delete a end delete series, and to fix the number of memberships
in the series and the designation of the series. As to any series, the
number of which is authorized to be fixed by the board, the articles
may also authorize the board to increase or decrease begin insert , but not below
the number of memberships then outstanding, end insert the number of
memberships of any begin insert such end insert series begin delete of this type end delete subsequent to the
issuance of that begin delete series, but not below the number of memberships
then outstanding end delete begin insert series end insert . Unless the articles or bylaws provide
otherwise, in case the number of memberships of any series is
decreased, the memberships constituting this decrease shall resume
the status which they had prior to the adoption of the board
resolution originally fixing the number of memberships of begin delete this end delete begin insert the end insert
series.

SEC. 4.  

Section 12330 of the Corporations Code is amended
to read:

12330.  

(a) Except as provided in subdivision (c) and Sections
12331, 12360, 12364, 12462, and 12484, bylaws may be adopted,
amended, or repealed by the board unless the action would do any
of the following:

(1) Materially and adversely affect the rights or obligations of
members as to voting, dissolution, redemption, transfer,
distributions, patronage distributions, patronage, property rights,
or rights to repayment of contributed capital.

(2) Increase or decrease the number or members authorized in
total or for any class.

(3) Effect an exchange, reclassification or cancellation of all or
part of the memberships.

(4) Authorize a new class of membership.

(b) Bylaws may be adopted, amended or repealed by approval
of the members (Section 12224); provided, however, that adoption,
amendment, or repeal also requires approval by the members of a
class or series if that action would do any of the following:

(1) Materially and adversely affect the rights or obligations of
that class or series as to voting, dissolution, redemption, transfer,
distributions, patronage distributions, patronage, property rights,
or rights to repayment of contributed capital, in a manner different
than such action affects another class or another series within the
same class.

(2) Materially and adversely affect such class or series as to
voting, dissolution, redemption, transfer, distributions, patronage
distributions, patronage, property rights, or rights to repayment of
contributed capital, by changing the rights, privileges, preferences,
restrictions or conditions of another class or another series within
the same class.

(3) Increase or decrease the number of memberships authorized
for the class.

(4) Increase the number of memberships authorized for another
class.

(5) Effect an exchange, reclassification or cancellation of all or
part of the memberships of the class or series.

(6) Authorize a new class of memberships.

(c) The articles or bylaws may restrict or eliminate the power
of the board to adopt, amend or repeal any or all bylaws, subject
to subdivision (e) of Section 12331.

(d) Bylaws may also provide that repeal or amendment of those
bylaws, or the repeal or amendment of specified portions of those
bylaws, may occur only with the approval in writing of a specified
person or persons other than the board or members. However, this
approval requirement, unless the articles or the bylaws specify
otherwise, shall not apply if any of the following circumstances
exist:

(1) The specified person or persons have died or ceased to exist.

(2) If the right of the specified person or persons to approve is
in the capacity of an officer, trustee, or other status and the office,
trust, or status has ceased to exist.

(3) If the corporation has a 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 persons 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.

SEC. 5.  

Section 12331 of the Corporations Code is amended
to read:

12331.  

(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 the method of determining the number of directors
of the corporation, or that the number of directors shall be not less
than a stated minimum or more than a stated maximum with the
exact number of directors to be fixed, within the limits specified,
by approval of the board or the members (Sections 12222 and
12224), in the manner provided in the bylaws, subject to
subdivision (e). The number or minimum number of directors shall
not be less than three. Alternate directors may be permitted, in
which event, the bylaws shall specify the manner and times of
their election and the conditions to their service in place of a
director.

(b) Once members have been admitted, 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 members.

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

(1) Any provision referred to in subdivision (c) of Section
12313.

(2) The time, place and manner of calling, conducting and giving
notice of members’, directors’, and committee meetings, or of
conducting mail ballots.

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

(4) The appointment of committees, composed of directors or
nondirectors or both, by the board or any officer and the authority
of these committees.

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

(6) The mode of determination of members of record.

(7) The making of reports and financial statements to members.

(8) Setting, imposing and collecting dues, assessments, and
membership and transfer fees.

(9) The time and manner of patronage distributions consistent
with this part.

(d) The bylaws may provide for eligibility, the manner of
admission, withdrawal, suspension, and expulsion of members,
and the suspension or termination of memberships consistent with
the requirements of Section 12431.

(e) The bylaws may require, for any or all corporate actions,
the vote of a larger proportion of, or all of, the members or the
members of any class, unit, or grouping of members or the vote
of a larger proportion of, or all of, the directors, than is otherwise
required by this part. A provision in the bylaws requiring a greater
vote shall not be altered, amended or repealed except by the greater
vote, unless otherwise provided in the bylaws.

(f) The bylaws may contain a provision limiting the number of
members, in total or of any class or series, which the corporation
is authorized to admit.

(g) The bylaws may provide for the establishment by the
corporation of a program for the education of its members, officers,
employees and the general public in the principles and techniques
of cooperation.

SEC. 6.  

Section 12420 of the Corporations Code is amended
to read:

12420.  

A corporation may issue memberships having different
rights, privileges, preferences, restrictions, or conditions, as
provided in its articles or bylaws. If the articles or bylaws authorize
at least one class of voting memberships, a corporation may also
authorize and issue additional classes of memberships, preferred
or otherwise, that are divisible into a series or are nonvoting or
both.

SEC. 7.  

Section 12422 of the Corporations Code is amended
to read:

12422.  

(a) Unless the corporation’s articles or bylaws so
provide, memberships are not redeemable. A corporation may
provide in its articles or bylaws for one or more classes or series
of memberships which are redeemable, in whole or in part, for
such consideration within such time or upon the happening of one
or more specified events and upon the terms and conditions stated
in the articles or bylaws. However, no membership shall actually
be redeemed if prohibited by Chapter 4 (commencing with Section
12450).

(b) Nothing in this section shall prevent a corporation from
creating a sinking fund or similar provision for, or entering into
an agreement for, the redemption or purchase of its memberships
to the extent permitted by Chapter 4 (commencing with Section
12450).

SEC. 8.  

Section 12446 of the Corporations Code is amended
to read:

12446.  

(a) Subject to subdivision (b), Chapter 7 (commencing
with Section 1500) of Title 10 of Part 3 of the Code of Civil
Procedure shall not apply to any proprietary interest in a consumer
cooperative corporation. Any proprietary interest that would
otherwise escheat to the state pursuant to Chapter 7 (commencing
with Section 1500) of Title 10 of Part 3 of the Code of Civil
Procedure shall instead become the property of the corporation.

(b) Notwithstanding subdivision (a), no proprietary interest shall
become the property of the corporation under this section unless
the following requirements are satisfied:

(1) The articles or bylaws shall specifically provide for the
transfer of ownership of the otherwise escheated proprietary
interests to the corporation.

(2) At least 60 days prior notice of the proposed transfer of the
proprietary interest to the corporation is given to the affected
member by first-class or second-class mail to the last address of
the member shown on the corporation’s records, and by publication
in a newspaper of general circulation in the county in which the
corporation has its principal office. Notice given in the foregoing
manner shall be deemed actual notice.

(3) No proprietary interest shall become the property of the
corporation under this section if written notice objecting thereto
is received by the corporation from the affected member prior to
the date of the proposed transfer.

(c) For purposes of this section, a “proprietary interest” shall
mean and include any membership, membership certificate,
membership share, or share certificate of any class or series
representing a proprietary interest in, and issued by, the corporation
together with all accrued and unpaid dividends and patronage
distributions relating thereto.

SEC. 9.  

Section 12502 of the Corporations Code is amended
to read:

12502.  

(a) Except as provided in this section or Section 12503,
amendments may be adopted if approved by the board and
approved by the members before or after the approval by the board.

(b) Notwithstanding subdivision (a), the following amendments
may be adopted by approval of the board alone:

(1) An amendment extending the corporate existence or making
the corporate existence perpetual, if the corporation was organized
prior to August 14, 1929.

(2) An amendment deleting the initial street address and initial
mailing address of the corporation, the names and addresses of the
first directors, or the name and address of the initial agent.

(3) Any amendment, at a time the corporation has no members.

(4) Any amendment authorized in the articles pursuant to
subdivision (c) of Section 12313 fixing the rights, privileges,
preferences, restrictions, and conditions attaching to any wholly
unissued class of memberships.

(5) Any amendment authorized in the articles pursuant to
subdivision (c) of Section 12313 fixing the designation, number
of memberships and the rights, privileges, preferences, restrictions,
and conditions attaching to any wholly unissued series of
memberships, or an increase or decrease in the number of
memberships of any series.

(c) Whenever the articles require for corporate action the
approval of a particular class of members or of a larger proportion
of, or all of, the votes of any class, or of a larger proportion of, or
all of, the directors, than is otherwise required by this part, the
provision in the articles requiring a greater vote shall not be altered,
amended or repealed except by the class or the greater vote, unless
otherwise provided in the articles.

SEC. 10.  

Section 12503 of the Corporations Code is amended
to read:

12503.  

(a) An amendment shall also be approved by the
members (Section 12224) of a class, whether or not the class is
entitled to vote thereon by the provisions of the articles, if the
amendment would do any of the following:

(1) Materially and adversely affect the rights, privileges,
preferences, restrictions or conditions of that class as to voting,
dissolution, redemption or transfer, or the obligations of that class,
in a manner different than such action affects another class.

(2) Materially and adversely affect such class as to voting,
dissolution, redemption or transfer by changing the rights,
privileges, preferences, restrictions or conditions of another class.

(3) Increase the number of memberships authorized for the class.

(4) Increase the number of memberships authorized for another
class.

(5) Effect an exchange, reclassification or cancellation of all or
part of the memberships of the class.

(6) Authorize a new class of memberships.

(b) An amendment shall also be approved by the members of a
series whether or not the series is entitled to vote thereon by the
articles or bylaws if the series is adversely affected by the
amendment in a different manner than other shares of the same
class.