BILL NUMBER: SB 1301	AMENDED
	BILL TEXT

	AMENDED IN ASSEMBLY  JUNE 30, 2014
	AMENDED IN ASSEMBLY  JUNE 11, 2014
	AMENDED IN ASSEMBLY  MAY 29, 2014
	AMENDED IN SENATE  APRIL 22, 2014

INTRODUCED BY   Senator DeSaulnier

                        FEBRUARY 21, 2014

   An act to amend Sections 107, 158, 171.08, 911, 1100, 1112.5,
1113, 1151, 1152, 1155, 1201, 2500, 2501, 2502, 2502.01, 2502.03,
2502.04, 2502.05, 2502.06, 2503.1, 2504, 2506, 2507, 2509, 2510,
2510.1, 2511, 2512, 2513, 2514, 2515, 2516, 2517, 2600, 2600.5, 2601,
2602, 2603, 2604, 2605, 2700, 2701, 2702, 2800, 2900, 3000, 3001,
3002, 3100, 3200, 3201, 3202, 3203, 3300, 3301, 3302, 3303, 3304,
3305, 3400, 3401, 3500, 3501, 3502, 3503, 5813.5, 7813.5, 9621, and
12504 of, to amend the heading of Division 1.5 (commencing with
Section 2500) of Title 1 of, and to add Section 3307 to, the
Corporations Code, relating to corporations.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1301, as amended, DeSaulnier. Corporate Flexibility Act of
2011: Social Purpose Corporations Act.
   The Corporate Flexibility Act of 2011 authorizes and regulates the
formation and operation of flexible purpose corporations.
   This bill would rename the act as the Social Purpose Corporations
Act and rename the type of corporation authorized and regulated under
that act as a social purpose corporation.
   Under the act, an existing business association organized as a
trust under the laws of this state or of a foreign jurisdiction may
incorporate under the act upon approval by its board of trustees or
similar governing body and approval by the affirmative vote of a
majority of the outstanding voting shares of beneficial interest, and
the filing of articles with a certificate.
   This bill would revise the approval by the affirmative vote of a
majority of the outstanding voting shares of beneficial interest
requirement to approval by the affirmative vote of 2/3 of those
shares.
   Under the act, the articles of incorporation are required to set
forth specified statements, including the name of the corporation.
   This bill would revise the statements that are required to be
contained in the articles of incorporation. This bill would authorize
a corporation formed pursuant to the act before January 1, 2015, to
elect to change its status from a flexible purpose corporation to a
social purpose corporation by amending its articles of incorporation,
as provided. The bill would require that any reference in the act to
social purpose corporation be deemed a reference to flexible purpose
corporation, for any flexible purpose corporation formed prior to
January 1, 2015, that has not amended its articles of incorporation
to change its status to a social purpose corporation.
   This bill would require, for corporations organized on and after
January 1, 2015, a statement that the corporation is organized as a
social purpose corporation under the Social Purpose Corporations Act.

   Under the act, the director, in discharging his or her duties, may
consider those factors, and give weight to those factors, as the
director deems relevant, including the short-term and long-term
prospects of the corporation, the best interests of the corporation
and its shareholders, and the purposes of the corporation as set
forth in its articles.
   This bill would revise one of the factors and would require the
director to consider those factors. This bill would authorize
shareholders to maintain a derivative lawsuit to enforce this
requirement.
   Under the act, certificates representing the shares of a
corporation formed under the act are required to contain specified
statements.
   This bill would revise the statements required to be on those
certificates. This bill would provide that the certificates
representing shares of a corporation formed pursuant to this act as a
"flexible purpose corporation" before January 1, 2015, continue to
be valid, and that any reference to a "flexible purpose corporation"
or any abbreviation of that term in those certificates is also a
reference to "social purpose corporation."
   Under the act, a corporation formed under the act may, by
amendment of its articles as specified in the act, convert to a
domestic corporation.
   This bill would instead provide that a corporation formed under
the act may change its status to that of a business corporation. This
bill would provide that if the status change is approved,
shareholders with dissenting shares may exercise dissenters' rights
set forth in the General Corporation Law.
   Under the act certain mergers require approval by an affirmative
vote of at least 2/3 of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
of the disappearing corporation.
   This bill would provide that if the merger is approved,
shareholders with dissenting shares may exercise dissenters' rights
set forth in the General Corporation Law.
   Under the act, a corporation formed under the act may be converted
into a domestic other business entity if specified conditions are
met. The act requires the approval of a plan of conversion.
   This bill would provide that if the plan is approved, shareholders
with dissenting shares may exercise dissenters' rights set forth in
the General Corporation Law.
   Under the act, the principal terms of a reorganization are
required to be approved by the outstanding shares of any class of a
corporation formed under that act that is a party to a merger or
sale-of-assets reorganization if holders of shares of that class
receive shares of the surviving or acquiring corporation formed under
that act or parent party having different rights, preferences,
privileges, or restrictions than those surrendered.
   This bill would instead require the principal terms of a
reorganization to be approved by the affirmative vote of at least 2/3
of each class, or a greater vote if required in the articles, of the
outstanding shares of any class of a corporation formed under that
act that is a party to a merger or sale-of-assets reorganization if
holders of shares of that class receive shares of the surviving or
acquiring corporation formed under that act or parent party having
different rights, preferences, privileges, or restrictions than those
surrendered.
   Under the act, the board of a corporation formed under the act is
required to cause an annual report to be sent to the shareholders,
provided with a management discussion and analysis (special purpose
MD&A) that contains specified information concerning the corporation'
s stated purposes. Existing law exempts the annual report and special
purpose MD&A requirement for corporations formed under the act with
fewer than 100 holders of record of its shares if specified
conditions exist.
   This bill would revise the information required to be contained in
the special purpose MD&A. This bill would repeal the exemption.
   Existing law sets forth procedures for how a corporation formed
pursuant to the Corporate Flexibility Act of 2011 can convert or
change their status into other types of entities and how other
entities can convert or change their status to a corporation formed
pursuant to the Corporate Flexibility Act of 2011.
   This bill would revise those procedures.
   This bill would make other changes to correct erroneous
cross-references.
   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 107 of the Corporations Code is amended to
read:
   107.  No corporation, social purpose corporation, association, or
individual shall issue or put in circulation, as money, anything but
the lawful money of the United States.
  SEC. 2.  Section 158 of the Corporations Code is amended to read:
   158.  (a) "Close corporation" means a corporation, including a
close social purpose corporation, whose articles contain, in addition
to the provisions required by Section 202, a provision that all of
the corporation's issued shares of all classes shall be held of
record by not more than a specified number of persons, not exceeding
35, and a statement "This corporation is a close corporation."
   (b) The special provisions referred to in subdivision (a) may be
included in the articles by amendment, but if such amendment is
adopted after the issuance of shares only by the affirmative vote of
all of the issued and outstanding shares of all classes.
   (c) The special provisions referred to in subdivision (a) may be
deleted from the articles by amendment, or the number of shareholders
specified may be changed by amendment, but if such amendment is
adopted after the issuance of shares only by the affirmative vote of
at least two-thirds of each class of the outstanding shares;
provided, however, that the articles may provide for a lesser vote,
but not less than a majority of the outstanding shares, or may deny a
vote to any class, or both.
   (d) In determining the number of shareholders for the purposes of
the provision in the articles authorized by this section, a husband
and wife and the personal representative of either shall be counted
as one regardless of how shares may be held by either or both of
them, a trust or personal representative of a decedent holding shares
shall be counted as one regardless of the number of trustees or
beneficiaries and a partnership or corporation or business
association holding shares shall be counted as one (except that any
such trust or entity the primary purpose of which was the acquisition
or voting of the shares shall be counted according to the number of
beneficial interests therein).
   (e) A corporation shall cease to be a close corporation upon the
filing of an amendment to its articles pursuant to subdivision (c) or
if it shall have more than the maximum number of holders of record
of its shares specified in its articles as a result of an inter vivos
transfer of shares which is not void under subdivision (d) of
Section 418, the transfer of shares on distribution by will or
pursuant to the laws of descent and distribution, the dissolution of
a partnership or corporation or business association or the
termination of a trust which holds shares, by court decree upon
dissolution of a marriage or otherwise by operation of law. Promptly
upon acquiring more than the specified number of holders of record of
its shares, a close corporation shall execute and file an amendment
to its articles deleting the special provisions referred to in
subdivision (a) and deleting any other provisions not permissible for
a corporation which is not a close corporation, which amendment
shall be promptly approved and filed by the board and need not be
approved by the outstanding shares.
   (f) Nothing contained in this section shall invalidate any
agreement among the shareholders to vote for the deletion from the
articles of the special provisions referred to in subdivision (a)
upon the lapse of a specified period of time or upon the occurrence
of a certain event or condition or otherwise.
   (g) The following sections contain specific references to close
corporations: Sections 186, 202, 204, 300, 418, 421, 1111, 1201,
1800, and 1904.
  SEC. 3.  Section 171.08 of the Corporations Code is amended to
read:
   171.08.  "Social purpose corporation" means any social purpose
corporation formed under Division 1.5 (commencing with Section 2500).

  SEC. 4.  Section 911 of the Corporations Code is amended to read:
   911.  (a) A corporation may, by amendment of its articles pursuant
to this section, change its status to that of a social purpose
corporation, nonprofit public benefit corporation, nonprofit mutual
benefit corporation, nonprofit religious corporation, or cooperative
corporation.
   (b) The amendment of the articles to change status to a nonprofit
corporation shall revise the statement of purpose, delete the
authorization for shares and any other provisions relating to
authorized or issued shares, make such other changes as may be
necessary or desired, and, if any shares have been issued, provide
either for the cancellation of those shares or for the 
change   conversion  of those shares to memberships
of the nonprofit corporation. The amendment of the articles to
change status to a cooperative corporation shall revise the statement
of purpose, make such other changes as may be necessary or desired,
and, if any shares have been issued, provide for the cancellation of
those shares or for the  change   conversion
 of those shares to memberships of the cooperative corporation,
if necessary.
   (c) If shares have been issued, an amendment to change status to a
nonprofit corporation shall be approved by all of the outstanding
shares of all classes regardless of limitations or restrictions on
the voting rights thereof and an amendment to change status to a
cooperative corporation shall be approved by the outstanding shares
(Section 152) of each class regardless of limitations or restrictions
on the voting rights thereof.
   (d) In the case of a change of status to a social purpose
corporation:
   (1) The corporation shall modify the name of the corporation,
revise the statement of purpose, include the statement required by
subparagraph (B) of paragraph (3) of subdivision (b) of Section 2602,
and make such other conforming changes as may be necessary or
desired.
   (2) The amendment shall be approved by the affirmative vote of at
least two-thirds of each class, or a greater vote if required in the
articles, of outstanding shares (Section 152) of that changing
corporation.
   (e) If an amendment pursuant to this section is included in a
merger agreement, the provisions of this section apply, except that
any provision for cancellation or  change  
conversion  of shares shall be in the merger agreement rather
than in the amendment of the articles.
   (f) Notwithstanding subdivision (c), if a corporation is a mutual
water company within the meaning of Section 2705 of the Public
Utilities Code and under the terms of the status change each
outstanding share is  changed   converted 
to a membership of a nonprofit mutual benefit corporation, an
amendment to change status to a nonprofit mutual benefit corporation
shall be approved by the outstanding shares (Section 152) of each
class regardless of limitations or restrictions on the voting rights
thereof.
  SEC. 5.  Section 1100 of the Corporations Code is amended to read:
   1100.  Any two or more corporations may be merged into one of
those corporations. A corporation may merge with one or more domestic
corporations (Section 167), social purpose corporations (Section
171.08), foreign corporations (Section 171), or other business
entities (Section 174.5) pursuant to this chapter. Mergers in which a
foreign corporation but no other business entity is a constituent
party are governed by Section 1108, mergers in which a social purpose
corporation but no other business entity is a constituent party are
governed by Section 1112.5, and mergers in which an other business
entity is a constituent party are governed by Section 1113.
  SEC. 6.  Section 1112.5 of the Corporations Code is amended to
read:
   1112.5.  If a disappearing corporation in a merger is a
corporation governed by this division and the surviving corporation
is a social purpose corporation, both of the following shall apply:
   (a) The merger shall be approved by the affirmative vote of at
least two-thirds of each class, or a greater vote if required in the
articles, of the outstanding shares (Section 152) of the disappearing
corporation, notwithstanding any provision of Chapter 12 (commencing
with Section 1200).
   (b) The shareholders of the disappearing corporation shall have
all of the rights under Chapter 13 (commencing with Section 1300) of
the shareholders of a corporation involved in a reorganization
requiring the approval of its outstanding shares (Section 152), and
the disappearing corporation shall have all of the obligations under
Chapter 13 (commencing with Section 1300) of a corporation involved
in the reorganization.
  SEC. 7.  Section 1113 of the Corporations Code is amended to read:
   1113.  (a) Any one or more corporations may merge with one or more
other business entities (Section 174.5). One or more domestic
corporations (Section 167) not organized under this division and one
or more foreign corporations (Section 171) may be parties to the
merger. Notwithstanding the provisions of this section, the merger of
any number of corporations with any number of other business
entities may be effected only if:
   (1) In a merger in which a domestic corporation not organized
under this division or a domestic other business entity is a party,
it is authorized by the laws under which it is organized to effect
the merger.
   (2) In a merger in which a foreign corporation is a party, it is
authorized by the laws under which it is organized to effect the
merger.
   (3) In a merger in which a foreign other business entity is a
party, it is authorized by the laws under which it is organized to
effect the merger.
   (b) Each corporation and each other party that desires to merge
shall approve, and shall be a party to, an agreement of merger. Other
persons, including a parent party (Section 1200), may be parties to
the agreement of merger. The board of each corporation that desires
to merge and, if required, the shareholders shall approve the
agreement of merger. The agreement of merger shall be approved on
behalf of each party by those persons required to approve the merger
by the laws under which it is organized. The agreement of merger
shall state:
   (1) The terms and conditions of the merger.
   (2) The name and place of incorporation or organization of each
party to the merger and the identity of the surviving party.
   (3) The amendments, if any, subject to Sections 900 and 907, to
the articles of the surviving corporation, if applicable, to be
effected by the merger. If any amendment changes the name of the
surviving corporation, if applicable, the new name may be, subject to
subdivision (b) of Section 201, the same as or similar to the name
of a disappearing party to the merger.
   (4) The manner of converting the shares of each constituent
corporation into shares, interests, or other securities of the
surviving party. If any shares of any constituent corporation are not
to be converted solely into shares, interests, or other securities
of the surviving party, the agreement of merger shall state (A) the
cash, rights, securities, or other property which the holders of
those shares are to receive in exchange for the shares, which cash,
rights, securities, or other property may be in addition to or in
lieu of shares, interests, or other securities of the surviving
party, or (B) that the shares are canceled without consideration.
   (5) Any other details or provisions required by the laws under
which any party to the merger is organized, including, if a public
benefit corporation or a religious corporation is a party to the
merger, Section 6019.1, or, if a mutual benefit corporation is a
party to the merger, Section 8019.1, or, if a consumer cooperative
corporation is a party to the merger, Section 12540.1, or if an
unincorporated association is a party to the merger, Section 18370,
or, if a domestic limited partnership is a party to the merger,
Section 15911.12, or, if a domestic partnership is a party to the
merger, Section 16911, or, if a domestic limited liability company is
a party to the merger, Section 17710.12.
   (6) Any other details or provisions as are desired, including,
without limitation, a provision for the payment of cash in lieu of
fractional shares or for any other arrangement with respect thereto
consistent with the provisions of Section 407.
   (c) Each share of the same class or series of any constituent
corporation (other than the cancellation of shares held by a party to
the merger or its parent, or a wholly owned subsidiary of either, in
another constituent corporation) shall, unless all shareholders of
the class or series consent and except as provided in Section 407, be
treated equally with respect to any distribution of cash, rights,
securities, or other property. Notwithstanding paragraph (4) of
subdivision (b), the unredeemable common shares of a constituent
corporation may be converted only into unredeemable common shares of
a surviving corporation or a parent party (Section 1200) or
unredeemable equity securities of a surviving party other than a
corporation if another party to the merger or its parent owns,
directly or indirectly, prior to the merger shares of that
corporation representing more than 50 percent of the voting power of
that corporation, unless all of the shareholders of the class consent
and except as provided in Section 407.
   (d) Notwithstanding its prior approval, an agreement of merger may
be amended prior to the filing of the agreement of merger or the
certificate of merger, as is applicable, if the amendment is approved
by the board of each constituent corporation and, if the amendment
changes any of the principal terms of the agreement, by the
outstanding shares (Section 152), if required by Chapter 12
(commencing with Section 1200), in the same manner as the original
agreement of merger. If the agreement of merger as so amended and
approved is also approved by each of the other parties to the
agreement of merger, the agreement of merger as so amended shall then
constitute the agreement of merger.
   (e) The board of a constituent corporation may, in its discretion,
abandon a merger, subject to the contractual rights, if any, of
third parties, including other parties to the agreement of merger,
without further approval by the outstanding shares (Section 152), at
any time before the merger is effective.
   (f) Each constituent corporation shall sign the agreement of
merger by its chairperson of the board, president or a vice
president, and also by its secretary or an assistant secretary acting
on behalf of their respective corporations.
   (g) (1) If the surviving party is a corporation or a foreign
corporation, or if a social purpose corporation (Section 171.08), a
public benefit corporation (Section 5060), a mutual benefit
corporation (Section 5059), a religious corporation (Section 5061),
or a corporation organized under the Consumer Cooperative Corporation
Law (Section 12200) is a party to the merger, after required
approvals of the merger by each constituent corporation through
approval of the board (Section 151) and any approval of the
outstanding shares (Section 152) required by Chapter 12 (commencing
with Section 1200) and by the other parties to the merger, the
surviving party shall file a copy of the agreement of merger with an
officers' certificate of each constituent domestic and foreign
corporation attached stating the total number of outstanding shares
or membership interests of each class entitled to vote on the merger
(and identifying any other person or persons whose approval is
required), that the agreement of merger in the form attached or its
principal terms, as required, were approved by that corporation by a
vote of a number of shares or membership interests of each class that
equaled or exceeded the vote required, specifying each class
entitled to vote and the percentage vote required of each class and,
if applicable, by that other person or persons whose approval is
required, or that the merger agreement was entitled to be and was
approved by the board alone (as provided in Section 1201, in the case
of corporations subject to that section). If equity securities of a
parent party (Section 1200) are to be issued in the merger, the
officers' certificate of that controlled party shall state either
that no vote of the shareholders of the parent party was required or
that the required vote was obtained. In lieu of an officers'
certificate, a certificate of merger, on a form prescribed by the
Secretary of State, shall be filed for each constituent other
business entity. The certificate of merger shall be executed and
acknowledged by each domestic constituent limited liability company
by all managers of the limited liability company (unless a lesser
number is specified in its articles of organization or operating
agreement) and by each domestic constituent limited partnership by
all general partners (unless a lesser number is provided in its
certificate of limited partnership or partnership agreement) and by
each domestic constituent general partnership by two partners (unless
a lesser number is provided in its partnership agreement) and by
each foreign constituent limited liability company by one or more
managers and by each foreign constituent general partnership or
foreign constituent limited partnership by one or more general
partners, and by each constituent reciprocal insurer by the
chairperson of the board, president, or vice president, and by the
secretary or assistant secretary, or, if a constituent reciprocal
insurer has not appointed those officers, by the chairperson of the
board, president, or vice president, and by the secretary or
assistant secretary of the constituent reciprocal insurer's
attorney-in-fact, and by each other party to the merger by those
persons required or authorized to execute the certificate of merger
by the laws under which that party is organized, specifying for that
party the provision of law or other basis for the authority of the
signing persons. The certificate of merger shall set forth, if a vote
of the shareholders, members, partners, or other holders of
interests of the constituent other business entity was required, a
statement setting forth the total number of outstanding interests of
each class entitled to vote on the merger and that the agreement of
merger in the form attached or its principal terms, as required, were
approved by a vote of the number of interests of each class that
equaled or exceeded the vote required, specifying each class entitled
to vote and the percentage vote required of each class, and any
other information required to be set forth under the laws under which
the constituent other business entity is organized, including, if a
domestic limited partnership is a party to the merger, subdivision
(a) of Section 15911.14, if a domestic partnership is a party to the
merger, subdivision (b) of Section 16915, and, if a domestic limited
liability company is a party to the merger, subdivision (a) of
Section 17710.04. The certificate of merger for each constituent
foreign other business entity, if any, shall also set forth the
statutory or other basis under which that foreign other business
entity is authorized by the laws under which it is organized to
effect the merger. The merger and any amendment of the articles of
the surviving corporation, if applicable, contained in the agreement
of merger shall be effective upon filing of the agreement of merger
with an officer's certificate of each constituent domestic and
foreign corporation and a certificate of merger for each constituent
other business entity, subject to subdivision (c) of Section 110 and
subject to the provisions of subdivision (j), and the several parties
thereto shall be one entity. If a domestic reciprocal insurer
organized after 1974 to provide medical malpractice insurance is a
party to the merger, the agreement of merger or certificate of merger
shall not be filed until there has been filed the certificate issued
by the Insurance Commissioner approving the merger pursuant to
Section 1555 of the Insurance Code. The Secretary of State may
certify a copy of the agreement of merger separate from the officers'
certificates and certificates of merger attached thereto.
   (2) If the surviving entity is an other business entity, and no
public benefit corporation (Section 5060), mutual benefit corporation
(Section 5059), religious corporation (Section 5061), or corporation
organized under the Consumer Cooperative Corporation Law (Section
12200) is a party to the merger, after required approvals of the
merger by each constituent corporation through approval of the board
(Section 151) and any approval of the outstanding shares (Section
152) required by Chapter 12 (commencing with Section 1200) and by the
other parties to the merger, the parties to the merger shall file a
certificate of merger in the office of, and on a form prescribed by,
the Secretary of State. The certificate of merger shall be executed
and acknowledged by each constituent domestic and foreign corporation
by its chairperson of the board, president or a vice president, and
also by its secretary or an assistant secretary and by each domestic
constituent limited liability company by all managers of the limited
liability company (unless a lesser number is specified in its
articles of organization or operating agreement) and by each domestic
constituent limited partnership by all general partners (unless a
lesser number is provided in its certificate of limited partnership
or partnership agreement) and by each domestic constituent general
partnership by two partners (unless a lesser number is provided in
its partnership agreement) and by each foreign constituent limited
liability company by one or more managers and by each foreign
constituent general partnership or foreign constituent limited
partnership by one or more general partners, and by each constituent
reciprocal insurer by the chairperson of the board, president, or
vice president, and by the secretary or assistant secretary, or, if a
constituent reciprocal insurer has not appointed those officers, by
the chairperson of the board, president, or vice president, and by
the secretary or assistant secretary of the constituent reciprocal
insurer's attorney-in-fact. The certificate of merger shall be signed
by each other party to the merger by those persons required or
authorized to execute the certificate of merger by the laws under
which that party is organized, specifying for that party the
provision of law or other basis for the authority of the signing
persons. The certificate of merger shall set forth all of the
following:
   (A) The name, place of incorporation or organization, and the
Secretary of State's file number, if any, of each party to the
merger, separately identifying the disappearing parties and the
surviving party.
   (B) If the approval of the outstanding shares of a constituent
corporation was required by Chapter 12 (commencing with Section
1200), a statement setting forth the total number of outstanding
shares of each class entitled to vote on the merger and that the
principal terms of the agreement of merger were approved by a vote of
the number of shares of each class entitled to vote and the
percentage vote required of each class.
   (C) The future effective date or time, not more than 90 days
subsequent to the date of filing of the merger, if the merger is not
to be effective upon the filing of the certificate of merger with the
office of the Secretary of State.
   (D) A statement, by each party to the merger which is a domestic
corporation not organized under this division, a foreign corporation,
or an other business entity, of the statutory or other basis under
which that party is authorized by the laws under which it is
organized to effect the merger.
   (E) Any other information required to be stated in the certificate
of merger by the laws under which each party to the merger is
organized, including, if a domestic limited liability company is a
party to the merger, subdivision (a) of Section 17710.14, if a
domestic partnership is a party to the merger, subdivision (b) of
Section 16915, and, if a domestic limited partnership is a party to
the merger, subdivision (a) of Section 15911.14.
   (F) Any other details or provisions that may be desired.
   Unless a future effective date or time is provided in a
certificate of merger, in which event the merger shall be effective
at that future effective date or time, a merger shall be effective
upon the filing of the certificate of merger in the office of the
Secretary of State and the several parties thereto shall be one
entity. The surviving other business entity shall keep a copy of the
agreement of merger at its principal place of business which, for
purposes of this subdivision, shall be the office referred to in
Section 17710.13 if a domestic limited liability company, at the
business address specified in paragraph (5) of subdivision (a) of
Section 17710.14 if a foreign limited liability company, at the
office referred to in subdivision (a) of Section 16403 if a domestic
general partnership, at the business address specified in subdivision
(f) of Section 16911 if a foreign partnership, at the office
referred to in subdivision (a) of Section 15901.14 if a domestic
limited partnership, or at the business address specified in
paragraph (3) of subdivision (a) of Section 15909.02 if a foreign
limited partnership. Upon the request of a holder of equity
securities of a party to the merger, a person with authority to do so
on behalf of the surviving other business entity shall promptly
deliver to that holder, a copy of the agreement of merger. A waiver
by that holder of the rights provided in the foregoing sentence shall
be unenforceable. If a domestic reciprocal insurer organized after
1974 to provide medical malpractice insurance is a party to the
merger the agreement of merger or certificate of merger shall not be
filed until there has been filed the certificate issued by the
Insurance Commissioner approving the merger in accordance with
Section 1555 of the Insurance Code.
   (h) (1) A copy of an agreement of merger certified on or after the
effective date by an official having custody thereof has the same
force in evidence as the original and, except as against the state,
is conclusive evidence of the performance of all conditions precedent
to the merger, the existence on the effective date of the surviving
party to the merger, and the performance of the conditions necessary
to the adoption of any amendment to the articles, if applicable,
contained in the agreement of merger.
   (2) For all purposes for a merger in which the surviving entity is
a domestic other business entity and the filing of a certificate of
merger is required by paragraph (2) of subdivision (g), a copy of the
certificate of merger duly
       certified by the Secretary of State is conclusive evidence of
the merger of the constituent corporations, either by themselves or
together with the other parties to the merger, into the surviving
other business entity.
   (i) (1) Upon a merger pursuant to this section, the separate
existences of the disappearing parties to the merger cease and the
surviving party to the merger shall succeed, without other transfer,
to all the rights and property of each of the disappearing parties to
the merger and shall be subject to all the debts and liabilities of
each in the same manner as if the surviving party to the merger had
itself incurred them.
   (2) All rights of creditors and all liens upon the property of
each of the constituent corporations and other parties to the merger
shall be preserved unimpaired, provided that those liens upon
property of a disappearing party shall be limited to the property
affected thereby immediately prior to the time the merger is
effective.
   (3) Any action or proceeding pending by or against any
disappearing corporation or disappearing party to the merger may be
prosecuted to judgment, which shall bind the surviving party, or the
surviving party may be proceeded against or substituted in its place.

   (4) If a limited partnership or a general partnership is a party
to the merger, nothing in this section is intended to affect the
liability a general partner of a disappearing limited partnership or
general partnership may have in connection with the debts and
liabilities of the disappearing limited partnership or general
partnership existing prior to the time the merger is effective.
   (j) (1) The merger of domestic corporations with foreign
corporations or foreign other business entities in a merger in which
one or more other business entities is a party shall comply with
subdivision (a) and this subdivision.
   (2) If the surviving party is a domestic corporation or domestic
other business entity, the merger proceedings with respect to that
party and any domestic disappearing corporation shall conform to the
provisions of this section. If the surviving party is a foreign
corporation or foreign other business entity, then, subject to the
requirements of subdivision (c), and of Section 407 and Chapter 12
(commencing with Section 1200) and Chapter 13 (commencing with
Section 1300), and, if applicable, corresponding provisions of the
Nonprofit Corporation Law or the Consumer Cooperative Corporation
Law, with respect to any domestic constituent corporations, Article
11 (commencing with Section 17711.01) of Title 2.6 with respect to
any domestic constituent limited liability companies, Article 6
(commencing with Section 16601) of Chapter 5 of Title 2 with respect
to any domestic constituent general partnerships, and Article 11.5
(commencing with Section 15911.20) of Chapter 5.5 of Title 2 with
respect to any domestic constituent limited partnerships, the merger
proceedings may be in accordance with the laws of the state or place
of incorporation or organization of the surviving party.
   (3) If the surviving party is a domestic corporation or domestic
other business entity, the certificate of merger or the agreement of
merger with attachments shall be filed as provided in subdivision (g)
and thereupon, subject to subdivision (c) of Section 110 or
paragraph (2) of subdivision (g), as is applicable, the merger shall
be effective as to each domestic constituent corporation and domestic
constituent other business entity.
   (4) If the surviving party is a foreign corporation or foreign
other business entity, the merger shall become effective in
accordance with the law of the jurisdiction in which the surviving
party is organized, but, except as provided in paragraph (5), the
merger shall be effective as to any domestic disappearing corporation
as of the time of effectiveness in the foreign jurisdiction upon the
filing in this state of a copy of the agreement of merger with an
officers' certificate of each constituent foreign and domestic
corporation and a certificate of merger of each constituent other
business entity attached, which officers' certificates and
certificates of merger shall conform to the requirements of paragraph
(1) of subdivision (g). If one or more domestic other business
entities is a disappearing party in a merger pursuant to this
subdivision in which a foreign other business entity is the surviving
entity, a certificate of merger required by the laws under which
that domestic other business entity is organized, including
subdivision (a) of Section 15911.14, subdivision (b) of Section
16915, or subdivision (a) of Section 17710.14, as is applicable,
shall also be filed at the same time as the filing of the agreement
of merger.
   (5) If the date of the filing in this state pursuant to this
subdivision is more than six months after the time of the
effectiveness in the foreign jurisdiction, or if the powers of a
domestic disappearing corporation are suspended at the time of
effectiveness in the foreign jurisdiction, the merger shall be
effective as to the domestic disappearing corporation as of the date
of filing in this state.
   (6) In a merger described in paragraph (3) or (4), each foreign
disappearing corporation that is qualified for the transaction of
intrastate business shall by virtue of the filing pursuant to this
subdivision, subject to subdivision (c) of Section 110, automatically
surrender its right to transact intrastate business in this state.
The filing of the agreement of merger or certificate of merger, as is
applicable, pursuant to this subdivision, by a disappearing foreign
other business entity registered for the transaction of intrastate
business in this state shall, by virtue of that filing, subject to
subdivision (c) of Section 110, automatically cancels the
registration for that foreign other business entity, without the
necessity of the filing of a certificate of cancellation.
  SEC. 8.  Section 1151 of the Corporations Code is amended to read:
   1151.  (a) A corporation may be converted into a domestic other
business entity, including, but not limited to, a limited liability
company or a partnership, pursuant to this chapter if, pursuant to
the proposed conversion, (1) each share of the same class or series
of the converting corporation shall, unless all the shareholders of
the class or series consent, be treated equally with respect to any
cash, rights, securities, or other property to be received by, or any
obligations or restrictions to be imposed on, the holder of that
share, and (2) nonredeemable common shares of the converting
corporation shall be converted only into nonredeemable equity
securities of the converted entity unless all of the shareholders of
the class consent; provided, however, that clause (1) shall not
restrict the ability of the shareholders of a converting corporation
to appoint one or more managers, if the converted entity is a limited
liability company, or one or more general partners, if the converted
entity is a limited partnership, in the plan of conversion or in the
converted entity's governing documents.
   (b) Notwithstanding this section, the conversion of a corporation
into a domestic other business entity, including, but not limited to,
a limited liability company or a partnership, may be effected only
if both of the following conditions are complied with:
   (1) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
   (2) The corporation complies with any and all other requirements
of any other law that applies to conversion to the converted entity.
  SEC. 9.  Section 1152 of the Corporations Code is amended to read:
   1152.  (a) A corporation that desires to convert to a domestic
other business entity shall approve a plan of conversion. The plan of
conversion shall state all of the following:
   (1) The terms and conditions of the conversion.
   (2) The jurisdiction of the organization of the converted entity
and of the converting corporation and the name of the converted
entity after conversion.
   (3) The manner of converting the shares of each of the
shareholders of the converting corporation into securities of, or
interests in, the converted entity.
   (4) The provisions of the governing documents for the converted
entity, including the partnership agreement or limited liability
company articles of organization and operating agreement, to which
the holders of interests in the converted entity are to be bound.
   (5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the converting corporation.
   (b) The plan of conversion shall be approved by the board of the
converting corporation (Section 151), and the principal terms of the
plan of the conversion shall be approved by the outstanding shares
(Section 152) of each class of the converting corporation. The
approval of the outstanding shares may be given before or after
approval by the board. Notwithstanding the foregoing, if a converting
corporation is a close corporation, the conversion shall be approved
by the affirmative vote of at least two-thirds of each class, or a
greater vote if required in the articles, of outstanding shares
(Section 152) of that converting corporation; provided, however, that
the articles may provide for a lesser vote, but not less than a
majority of the outstanding shares of each class.
   (c) If the corporation is converting into a general or limited
partnership or into a limited liability company, then in addition to
the approval of the shareholders set forth in subdivision (b), the
plan of conversion shall be approved by each shareholder who will
become a general partner or manager, as applicable, of the converted
entity pursuant to the plan of conversion unless the shareholders
have dissenters' rights pursuant to Section 1159 and Chapter 13
(commencing with Section 1300).
   (d) Upon the effectiveness of the conversion, all shareholders of
the converting corporation, except those that exercise dissenters'
rights as provided in Section 1159 and Chapter 13 (commencing with
Section 1300), shall be deemed parties to any agreement or agreements
constituting the governing documents for the converted entity
adopted as part of the plan of conversion, irrespective of whether or
not a shareholder has executed the plan of conversion or those
governing documents for the converted entity. Any adoption of
governing documents made pursuant thereto shall be effective at the
effective time or date of the conversion.
   (e) Notwithstanding its prior approval by the board and the
outstanding shares or either of them, a plan of conversion may be
amended before the conversion takes effect if the amendment is
approved by the board and, if it changes any of the principal terms
of the plan of conversion, by the shareholders of the converting
corporation in the same manner and to the same extent as was required
for approval of the original plan of conversion.
   (f) A plan of conversion may be abandoned by the board of a
converting corporation, or by the shareholders of a converting
corporation if the abandonment is approved by the outstanding shares,
in each case in the same manner as required for approval of the plan
of conversion, subject to the contractual rights of third parties,
at any time before the conversion is effective.
   (g) The converted entity shall keep the plan of conversion at (1)
the principal place of business of the converted entity if the
converted entity is a domestic partnership or (2) at the office at
which records are to be kept under Section 15901.11 if the converted
entity is a domestic limited partnership or at the office at which
records are to be kept under Section 17701.13 if the converted entity
is a domestic limited liability company. Upon the request of a
shareholder of a converting corporation, the authorized person on
behalf of the converted entity shall promptly deliver to the
shareholder, at the expense of the converted entity, a copy of the
plan of conversion. A waiver by a shareholder of the rights provided
in this subdivision shall be unenforceable.
  SEC. 10.  Section 1155 of the Corporations Code is amended to read:

   1155.  (a) To convert a corporation:
   (1) If the corporation is converting into a domestic limited
partnership, a statement of conversion shall be completed on the
certificate of limited partnership for the converted entity.
   (2) If the corporation is converting into a domestic partnership,
a statement of conversion shall be completed on the statement of
partnership authority for the converted entity, or if no statement of
partnership authority is filed then a certificate of conversion
shall be filed separately.
   (3) If the corporation is converting into a domestic limited
liability company, a statement of conversion shall be completed on
the articles of organization for the converted entity.
   (b) Any statement or certificate of conversion of a converting
corporation shall be executed and acknowledged by those officers of
the converting corporation as would be required to sign an officers'
certificate (Section 173), and shall set forth all of the following:
   (1) The name and the Secretary of State's file number of the
converting corporation.
   (2) A statement of the total number of outstanding shares of each
class entitled to vote on the conversion, that the principal terms of
the plan of conversion were approved by a vote of the number of
shares of each class which equaled or exceeded the vote required
under Section 1152, specifying each class entitled to vote and the
percentage vote required of each class.
   (3) The name, form, and jurisdiction of organization of the
converted entity.
   (c) For the purposes of this chapter, the certificate of
conversion shall be on a form prescribed by the Secretary of State.
   (d) The filing with the Secretary of State of a statement of
conversion on an organizational document or a certificate of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of dissolution by the converting
corporation and no converting corporation that has made the filing is
required to file a certificate of election under Section 1901 or a
certificate of dissolution under Section 1905 as a result of that
conversion.
   (e) Upon the effectiveness of a conversion pursuant to this
chapter, a converted entity that is a domestic partnership, domestic
limited partnership, or domestic limited liability company shall be
deemed to have assumed the liability of the converting corporation
(1) to prepare and file or cause to be prepared and filed all tax and
information returns otherwise required of the converting corporation
under the Corporation Tax Law (Part 11 (commencing with Section
23001) of Division 2 of the Revenue and Taxation Code) and (2) to pay
any tax liability determined to be due pursuant to that law.
  SEC. 11.  Section 1201 of the Corporations Code is amended to read:

   1201.  (a) The principal terms of a reorganization shall be
approved by the outstanding shares (Section 152) of each class of
each corporation the approval of whose board is required under
Section 1200, except as provided in subdivision (b) and except that
(unless otherwise provided in the articles) no approval of any class
of outstanding preferred shares of the surviving or acquiring
corporation or parent party shall be required if the rights,
preferences, privileges, and restrictions granted to or imposed upon
that class of shares remain unchanged (subject to the provisions of
subdivision (c)). For the purpose of this subdivision, two classes of
common shares differing only as to voting rights shall be considered
as a single class of shares.
   (b) No approval of the outstanding shares (Section 152) is
required by subdivision (a) in the case of any corporation if that
corporation, or its shareholders immediately before the
reorganization, or both, shall own (immediately after the
reorganization) equity securities, other than any warrant or right to
subscribe to or purchase those equity securities, of the surviving
or acquiring corporation or a parent party (subdivision (d) of
Section 1200) possessing more than five-sixths of the voting power of
the surviving or acquiring corporation or parent party. In making
the determination of ownership by the shareholders of a corporation,
immediately after the reorganization, of equity securities pursuant
to the preceding sentence, equity securities which they owned
immediately before the reorganization as shareholders of another
party to the transaction shall be disregarded. For the purpose of
this section only, the voting power of a corporation shall be
calculated by assuming the conversion of all equity securities
convertible (immediately or at some future time) into shares entitled
to vote but not assuming the exercise of any warrant or right to
subscribe to or purchase those shares.
   (c) Notwithstanding subdivision (b), the principal terms of a
reorganization shall be approved by the outstanding shares (Section
152) of the surviving corporation in a merger reorganization if any
amendment is made to its articles that would otherwise require that
approval.
   (d) Notwithstanding subdivision (b), the principal terms of a
reorganization shall be approved by the outstanding shares (Section
152) of any class of a corporation that is a party to a merger or
sale-of-assets reorganization if holders of shares of that class
receive shares of the surviving or acquiring corporation or parent
party having different rights, preferences, privileges, or
restrictions than those surrendered. Shares in a foreign corporation
received in exchange for shares in a domestic corporation have
different rights, preferences, privileges, and restrictions within
the meaning of the preceding sentence.
   (e) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the affirmative vote of at
least two-thirds of each class, or a greater vote if required in the
articles, of the outstanding shares (Section 152) of any close
corporation if the reorganization would result in their receiving
shares of a corporation that is not a close corporation. However, the
articles may provide for a lesser vote, but not less than a majority
of the outstanding shares of each class.
   (f) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by at least two-thirds of each
class, or a greater vote if required in the articles, of the
outstanding shares (Section 152) of a corporation that is a party to
a merger reorganization if holders of shares receive shares of a
surviving social purpose corporation in the merger.
   (g) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the outstanding shares
(Section 152) of any class of a corporation that is a party to a
merger reorganization if holders of shares of that class receive
interests of a surviving other business entity in the merger.
   (h) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by all shareholders of any
class or series if, as a result of the reorganization, the holders of
that class or series become personally liable for any obligations of
a party to the reorganization, unless all holders of that class or
series have the dissenters' rights provided in Chapter 13 (commencing
with Section 1300).
   (i) Any approval required by this section may be given before or
after the approval by the board. Notwithstanding approval required by
this section, the board may abandon the proposed reorganization
without further action by the shareholders, subject to the
contractual rights, if any, of third parties.
  SEC. 12.  The heading of Division 1.5 (commencing with Section
2500) of Title 1 of the Corporations Code is amended to read:

      DIVISION 1.5.   SOCIAL PURPOSE CORPORATIONS ACT


  SEC. 13.  Section 2500 of the Corporations Code is amended to read:

   2500.  This division shall be known and may be cited as the Social
Purpose Corporations Act.
  SEC. 14.  Section 2501 of the Corporations Code is amended to read:

   2501.  Except as otherwise expressly stated, the provisions of
Division 1 (commencing with Section 100) shall apply to corporations
organized under this division, and references in that division to the
terms "close corporation," "constituent corporation," "corporation,"
"disappearing corporation," "domestic corporation," "foreign
corporation," "surviving corporation," and similar terms shall be
read to apply, in the same manner, to include the similar "social
purpose corporation."
  SEC. 15.  Section 2502 of the Corporations Code is amended to read:

   2502.  This division applies only to social purpose corporations
organized expressly under this division whether organized or existing
under this division or amended, merged or converted into a social
purpose corporation in accordance with Chapter 9 (commencing with
Section 900) of Division 1, Chapter 11 (commencing with Section 1100)
of Division 1 or Chapter 11.5 (commencing with Section 1150) of
Division 1, including all flexible purpose corporations formed under
this division prior to January 1, 2015, and now existing except as
provided in paragraph (2) of subdivision (b) of Section 2601 and
paragraph (3) of subdivision (b) of Section 2602.
  SEC. 16.  Section 2502.01 of the Corporations Code is amended to
read:
   2502.01.  Every social purpose corporation organized under the
laws of this state or similar foreign social purpose corporation, all
of the capital stock of which is beneficially owned by the United
States, an agency or instrumentality of the United States or any
social purpose corporation or similar foreign social purpose
corporation the whole of the capital stock of which is owned by the
United States or by an agency or instrumentality of the United
States, is conclusively presumed to be an agency and instrumentality
of the United States and is entitled to all privileges and immunities
to which the holders of all of its stock are entitled as agencies of
the United States.
  SEC. 17.  Section 2502.03 of the Corporations Code is amended to
read:
   2502.03.  A social purpose corporation may be sued in the same
manner as a corporation as provided in the Code of Civil Procedure.
  SEC. 18.  Section 2502.04 of the Corporations Code is amended to
read:
   2502.04.  A social purpose corporation formed under this division
shall, in respect of its property, as a condition of its existence as
a social purpose corporation, be subject, in the same manner as a
corporation, to the provisions of the Code of Civil Procedure
authorizing the attachment of corporate property.
  SEC. 19.  Section 2502.05 of the Corporations Code is amended to
read:
   2502.05.  The fees of the Secretary of State for filing
instruments by or on behalf of social purpose corporations shall be
the same fees prescribed for corporations in Article 3 (commencing
with Section 12180) of Chapter 3 of Part 2 of Division 3 of Title 2
of the Government Code.
  SEC. 20.  Section 2502.06 of the Corporations Code is amended to
read:
   2502.06.  (a) Provisions of the articles described in paragraph
(3) of subdivision (e) of Section 2602 and subdivisions (a) and (b)
of Section 2603 may be made dependent upon facts ascertainable
outside of the articles, if the manner in which those facts shall
operate upon those provisions is clearly and expressly set forth in
the articles. Similarly, any of the terms of an agreement of merger
pursuant to Section 1101 may be made dependent upon facts
ascertainable outside of that agreement, if the manner in which those
facts shall operate upon the terms of the agreement is clearly and
expressly set forth in the agreement of merger.
   (b) Notwithstanding subdivision (a), when any provisions or terms
of articles or an agreement of merger are made dependent upon facts
ascertainable outside of the filed instrument through a reference to
an agreement or similar document, the social purpose corporation
filing that instrument shall maintain at its principal executive
office a copy of that referenced agreement or document and all
amendments, and shall provide to its shareholders, in the case of
articles, or to shareholders of any constituent corporation or other
business entity, in the case of an agreement of merger, a copy of
them upon written request and without charge.
   (c) For the purposes of this section, "referenced agreement" means
an agreement or contract to which the social purpose corporation is
a party. An amendment or revision of a referenced agreement shall
require shareholder approval, in addition to any other required
approvals, upon any of the following circumstances:
   (1) If the amendment or revision of the referenced agreement would
result in a material change in the rights, preferences, privileges,
or restrictions of a class or series of shares, the amendment or
revision shall be approved by the outstanding shares, as defined in
Section 152, of that class or series.
   (2) If the amendment or revision of the referenced agreement would
result in a material change in the rights or liabilities of any
class or series of shares with respect to the subject matter of
paragraph (1), (2), (3), (5), or (9) of subdivision (a) of Section
2603, the amendment or revision shall be approved by the outstanding
shares, as defined in Section 152, of that class or series.
   (3) If the amendment or revision of the referenced agreement would
result in a material change in the restrictions on transfer or
hypothecation of any class or series of shares, the amendment or
revision shall be approved by the outstanding shares, as defined in
Section 152, of that class or series.
   (4) If the amendment or revision of the referenced agreement would
result in a change of any of the principal terms of an agreement of
merger, the amendment or revision shall be approved in the same
manner as required by Section 3504 for a change in the principal
terms of an agreement of merger.
  SEC. 21.  Section 2503.1 of the Corporations Code is amended to
read:
   2503.1.  "Close social purpose corporation" means a social purpose
corporation that is also a close corporation.
  SEC. 22.  Section 2504 of the Corporations Code is amended to read:

   2504.  "Constituent social purpose corporation" means a social
purpose corporation that is merged with or into one or more
corporations or one or more other business entities and includes a
surviving social purpose corporation.
  SEC. 23.  Section 2506 of the Corporations Code is amended to read:

                                                2506.  "Disappearing
social purpose corporation" means a constituent social purpose
corporation that is not the surviving entity.
  SEC. 24.  Section 2507 of the Corporations Code is amended to read:

   2507.  "Domestic social purpose corporation" means a corporation
organized under this division.
  SEC. 25.  Section 2509 of the Corporations Code is amended to read:

   2509.  "Social purpose corporation," unless otherwise expressly
provided, refers only to a corporation organized under this division.

  SEC. 26.  Section 2510 of the Corporations Code is amended to read:

   2510.  "Social purpose corporation subject to the Banking Law"
means any of the following:
   (a) A social purpose corporation that, with the approval of the
Commissioner of Financial Institutions, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner of
Financial Institutions to engage in, the commercial banking business
under the Banking Law (Division 1 (commencing with Section 99) of the
Financial Code).
   (b) Any social purpose corporation that, with the approval of the
Commissioner of Financial Institutions, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner of
Financial Institutions to engage in, the industrial banking business
under the Banking Law (Division 1 (commencing with Section 99) of the
Financial Code).
   (c) Any social purpose corporation, other than a social purpose
corporation described in subdivision (d), that, with the approval of
the Commissioner of Financial Institutions, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner of
Financial Institutions to engage in, the trust business under the
Banking Law (Division 1 (commencing with Section 99) of the Financial
Code).
   (d) Any social purpose corporation that is authorized by the
Commissioner of Financial Institutions and the Commissioner of
Insurance to maintain a title insurance department to engage in title
insurance business and a trust department to engage in trust
business.
   (e) Any social purpose corporation that, with the approval of the
Commissioner of Financial Institutions, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner of
Financial Institutions to engage in, business under Article 1
(commencing with Section 3500) of Chapter 19 of Division 1 of the
Financial Code.
  SEC. 27.  Section 2510.1 of the Corporations Code is amended to
read:
   2510.1.  "Social purpose corporation subject to the Insurance Code
as an insurer" means a social purpose corporation that has met the
requirements of Sections 201.5, 201.6, and 201.7.
  SEC. 28.  Section 2511 of the Corporations Code is amended to read:

   2511.  "Reorganization" means a merger reorganization, an exchange
reorganization, or a sale of assets reorganization.
   (a) "Merger reorganization" means a merger pursuant to Chapter 11
(commencing with Section 1100) of Division 1 and Chapter 8
(commencing with Section 3200), of this division, other than a
short-form merger.
   (b) "Exchange reorganization" means the acquisition by one
domestic social purpose corporation, foreign social purpose
corporation, or other business entity in exchange, in whole or in
part, for its equity securities, or the equity securities of a
domestic social purpose corporation, a foreign social purpose
corporation, or an other business entity that is in control of the
acquiring entity, of equity securities of another domestic social
purpose corporation, foreign social purpose corporation, or other
business entity if, immediately after the acquisition, the acquiring
entity has control of the other entity.
   (c) "Sale-of-assets reorganization" means the acquisition by one
domestic social purpose corporation, foreign social purpose
corporation, or other business entity in exchange in whole or in part
for its equity securities, or the equity securities of a domestic
social purpose corporation, a foreign social purpose corporation, or
an other business entity that is in control of the acquiring entity,
or for its debt securities, or debt securities of a domestic social
purpose corporation, foreign social purpose corporation, or other
business entity that is in control of the acquiring entity, that are
not adequately secured and that have a maturity date in excess of
five years after the consummation of the reorganization, or both, of
all or substantially all of the assets of another domestic social
purpose corporation, foreign social purpose corporation, or other
business entity.
  SEC. 29.  Section 2512 of the Corporations Code is amended to read:

   2512.  "Share exchange tender offer" means any acquisition by one
social purpose corporation in exchange in whole or in part for its
equity securities, or the equity securities of a corporation or a
social purpose corporation that is in control of the acquiring social
purpose corporation, of shares of another corporation or social
purpose corporation, other than an exchange reorganization
(subdivision (b) of Section 2511).
  SEC. 30.  Section 2513 of the Corporations Code is amended to read:

   2513.  "Special purpose" means the special purpose set forth in a
social purpose corporation's articles pursuant to subdivision (b) of
Section 2602.
  SEC. 31.  Section 2514 of the Corporations Code is amended to read:

   2514.  "Special purpose current report" means the report required
of a social purpose corporation pursuant to Section 3501.
  SEC. 32.  Section 2515 of the Corporations Code is amended to read:

   2515.  "Special purpose MD&A" means the management discussion and
analysis required of a social purpose corporation pursuant to
subdivision (b) of Section 3500.
  SEC. 33.  Section 2516 of the Corporations Code is amended to read:

   2516.  "Special purpose objectives" means those objectives set
forth by management and the directors of a social purpose corporation
for purposes of measuring the impact of the social purpose
corporation's efforts relating to its special purpose in accordance
with Section 3500.
  SEC. 34.  Section 2517 of the Corporations Code is amended to read:

   2517.  "Surviving social purpose corporation" means a social
purpose corporation into which one or more other corporations or one
or more other business entities is merged.
  SEC. 35.  Section 2600 of the Corporations Code is amended to read:

   2600.  (a) One or more natural persons, partnerships,
associations, social purpose corporations, or corporations, domestic
or foreign, may form a social purpose corporation under this division
by executing and filing articles of incorporation.
   (b) If initial directors are named in the articles, each director
named in the articles shall sign and acknowledge the articles. If
initial directors are not named in the articles, the articles shall
be signed by one or more incorporators who shall be persons described
in subdivision (a).
   (c) The corporate existence begins upon the filing of the articles
and continues perpetually, unless otherwise expressly provided by
law or in the articles.
  SEC. 36.  Section 2600.5 of the Corporations Code is amended to
read:
   2600.5.  (a) An existing business association organized as a trust
under the laws of this state or of a foreign jurisdiction may
incorporate under this division upon approval by its board of
trustees or similar governing body and approval by the affirmative
vote of two-thirds of the outstanding voting shares of beneficial
interest, or a greater proportion of the outstanding shares of
beneficial interest or the vote of those other classes of shares of
beneficial interest as may be specifically required by its
declaration of trust or bylaws, and the filing of articles with a
certificate attached pursuant to this chapter.
   (b) In addition to the matters required to be set forth in the
articles pursuant to Section 2602, the articles filed pursuant to
this section shall state that an existing unincorporated association,
stating its name, is being incorporated by the filing of the
articles.
   (c) The articles filed pursuant to this section shall be signed by
the president, or any vice president, and the secretary, or any
assistant secretary, of the existing association and shall be
accompanied by a certificate signed and verified by those officers
signing the articles and stating that the incorporation of the
association has been approved by the trustees and by the required
vote of holders of shares of beneficial interest in accordance with
subdivision (a).
   (d) Upon the filing of articles pursuant to this section, the
social purpose corporation shall succeed automatically to all of the
rights and property of the association being incorporated and shall
be subject to all of its debts and liabilities in the same manner as
if the social purpose corporation had itself incurred them. The
incumbent trustees of the association shall constitute the initial
directors of the social purpose corporation and shall continue in
office until the next annual meeting of the shareholders or their
earlier death, resignation, or removal. All rights of creditors and
all liens upon the property of the association shall be preserved
unimpaired. Any action or proceeding pending by or against the
association may be prosecuted to judgment, which shall bind the
social purpose corporation, or the social purpose corporation may be
proceeded against or substituted in its place.
   (e) The filing for record in the office of the county recorder of
any county in this state in which any of the real property of the
association is located of a copy of the articles filed pursuant to
this section, certified by the Secretary of State, shall evidence
record ownership in the social purpose corporation of all interests
of the association in and to the real property located in that
county.
  SEC. 37.  Section 2601 of the Corporations Code is amended to read:

   2601.  (a) The Secretary of State shall not file articles setting
forth a name in which "bank," "trust," "trustee," or related words
appear, unless the certificate of approval of the Commissioner of
Financial Institutions is attached to the articles. This subdivision
does not apply to the articles of any social purpose corporation
subject to the Banking Law on which is endorsed the approval of the
Commissioner of Financial Institutions.
   (b) (1) The Secretary of State shall not file articles that set
forth a name that is likely to mislead the public or that is the same
as, or resembles so closely as to tend to deceive, the name of a
domestic corporation, the name of a domestic social purpose
corporation, or the name of a foreign corporation that is authorized
to transact intrastate business or has registered its name pursuant
to Section 2101, a name that a foreign corporation has assumed under
subdivision (b) of Section 2106, a name that will become the record
name of a corporation or social purpose corporation or a foreign
corporation upon the effective date of a filed corporate instrument
where there is a delayed effective date pursuant to subdivision (c)
of Section 110 or subdivision (c) of Section 5008, or a name that is
under reservation for another corporation or social purpose
corporation pursuant to this title, except that a social purpose
corporation may adopt a name that is substantially the same as an
existing corporation or social purpose corporation, foreign or
domestic, which is authorized to transact intrastate business or has
registered its name pursuant to Section 2101, upon proof of consent
by the domestic or foreign corporation or social purpose corporation
and a finding by the Secretary of State that under the circumstances
the public is not likely to be misled. The use by a social purpose
corporation of a name in violation of this section may be enjoined
notwithstanding the filing of its articles by the Secretary of State.

   (2) A corporation formed pursuant to this division before January
1, 2015, may elect to change its status from a flexible purpose
corporation to a social purpose corporation by amending its articles
of incorporation to change its name to replace "flexible purpose
corporation" with "social purpose corporation" and to replace the
term "flexible purpose corporation" with "social purpose corporation"
as applicable in any statements contained in the articles. For any
flexible purpose corporation formed prior to January 1, 2015, that
has not amended its articles of incorporation to change its status to
a social purpose corporation, any reference in this division to
social purpose corporation shall be deemed a reference to "flexible
purpose corporation."
   (c) Any applicant may, upon payment of the fee prescribed in the
Government Code, obtain from the Secretary of State a certificate of
reservation of any name not prohibited by subdivision (b), and upon
the issuance of the certificate the name stated in the certificate
shall be reserved for a period of 60 days. The Secretary of State
shall not, however, issue certificates reserving the same name for
two or more consecutive 60-day periods to the same applicant or for
the use or benefit of the same person, partnership, firm,
corporation, or social purpose corporation. No consecutive
reservations shall be made by or for the use or benefit of the same
person, partnership, firm, corporation, or social purpose corporation
of names so similar as to fall within the prohibitions of
subdivision (b).
  SEC. 38.  Section 2602 of the Corporations Code is amended to read:

   2602.  The articles of incorporation shall set forth:
   (a) The name of the social purpose corporation that shall contain
the words "social purpose corporation" or an abbreviation of those
words.
   (b) (1) Either of the following statements, as applicable:
   (A) "The purpose of this social purpose corporation is to engage
in any lawful act or activity for which a social purpose corporation
may be organized under Division 1.5 of the California Corporations
Code, other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the
California Corporations Code, for the benefit of the overall
interests of the social purpose corporation and its shareholders and
in furtherance of the following enumerated purposes ____."
   (B) "The purpose of this social purpose corporation is to engage
in the profession of ____ (with the insertion of a profession
permitted to be incorporated by the California Corporations Code) and
any other lawful activities, other than the banking or trust company
business, not prohibited to a social purpose corporation engaging in
that profession by applicable laws and regulations, for the benefit
of the overall interests of the social purpose corporation and its
shareholders and in furtherance of the following enumerated purposes
____."
   (2) A statement that a purpose of the social purpose 
corporation   corporation, in addition to the purpose
stated pursuant to paragraph (1),  is to engage in one or more
of the following  enumerated  purposes,  in addition
to the purpose stated pursuant to paragraph (1):   as
also specified in the statement set forth pursuant to paragraph (1):

   (A) One or more charitable or public purpose activities that a
nonprofit public benefit corporation is authorized to carry out.
   (B) The purpose of promoting positive effects of, or minimizing
adverse effects of, the social purpose corporation's activities upon
any of the  following:   following, provided
that the corporation consider the purpose in addition to or together
with the financial interests of the shareholders and compliance with
legal obligations, and take action consistent with that purpose:

   (i) The social purpose corporation's employees, suppliers,
customers, and creditors.
   (ii) The community and society.
   (iii) The environment.
   (3) (A) For any corporation organized under this division before
January 1, 2015, that has not elected to change its status to a
social purpose corporation, a statement that the corporation is
organized as a flexible purpose corporation under the Corporate
Flexibility Act of 2011. Such a corporation is not required to revise
the statements required in paragraphs (1) and (2) to conform to the
changes made by the act adding this subparagraph.
   (B) For any corporation organized under this division on and after
January 1, 2015, or that has elected to change its status to a
social purpose corporation pursuant to paragraph (2) of subdivision
(b) of Section 2601, a statement that the corporation is organized as
a social purpose corporation under the Social Purpose Corporations
Act.
   (4) If the social purpose corporation is a social purpose
corporation subject to the Banking Law (Division 1.1 (commencing with
Section 1000) of the Financial Code), the articles shall set forth a
statement of purpose that is prescribed by the applicable provision
of the Banking Law (Division 1.1 (commencing with Section 1000) of
the Financial Code).
   (5) If the social purpose corporation is a social purpose
corporation subject to the Insurance Code as an insurer, the articles
shall additionally state that the business of the social purpose
corporation is to be an insurer.
   (6) If the social purpose corporation is intended to be a
professional corporation within the meaning of the Moscone-Knox
Professional Corporation Act (Part 4 (commencing with Section 13400)
of Division 3), the articles shall additionally contain the statement
required by Section 13404. The articles shall not set forth any
further or additional statement with respect to the purposes or
powers of the social purpose corporation, except by way of limitation
or except as expressly required by any law of this state, other than
this division, or any federal or other statute or regulation,
including the Internal Revenue Code and regulations thereunder as a
condition of acquiring or maintaining a particular status for tax
purposes.
   (7) If the social purpose corporation is a close social purpose
corporation, a statement as required by subdivision (a) of Section
158.
   (c) The name and street address in this state of the social
purpose corporation's initial agent for service of process in
accordance with subdivision (b) of Section 1502.
   (d) The initial street address of the corporation.
   (e) The initial mailing address of the corporation, if different
from the initial street address.
   (f) If the social purpose corporation is authorized to issue only
one class of shares, the total number of shares that the social
purpose corporation is authorized to issue.
   (g) If the social purpose corporation is authorized to issue more
than one class of shares, or if any class of shares is to have two or
more series, the articles shall state:
   (1) The total number of shares of each class that the social
purpose corporation is authorized to issue and the total number of
shares of each series that the social purpose corporation is
authorized to issue or that the board is authorized to fix the number
of shares of any such series.
   (2) The designation of each class and the designation of each
series or that the board may determine the designation of any such
series.
   (3) The rights, preferences, privileges, and restrictions granted
to or imposed upon the respective classes or series of shares or the
holders thereof, or that the board, within any limits and
restrictions stated, may determine or alter the rights, preferences,
privileges, and restrictions granted to or imposed upon any wholly
unissued class of shares or any wholly unissued series of any class
of shares. As to any series the number of shares of which is
authorized to be fixed by the board, the articles may also authorize
the board, within the limits and restrictions stated in the article
or in any resolution or resolutions of the board originally fixing
the number of shares constituting any series, to increase or
decrease, but not below the number of shares of such series then
outstanding, the number of shares of any series subsequent to the
issue of shares of that series. If the number of shares of any series
shall be so decreased, the shares constituting that decrease shall
resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of that series.
  SEC. 39.  Section 2603 of the Corporations Code is amended to read:

   2603.  The articles of incorporation may set forth:
   (a) Any or all of the following provisions, which shall not be
effective unless expressly provided in the articles:
   (1) Granting, with or without limitations, the power to levy
assessments upon the shares or any class of shares.
   (2) Granting to shareholders preemptive rights to subscribe to any
or all issues of shares or securities.
   (3) Special qualifications of persons who may be shareholders.
   (4) A provision limiting the duration of the social purpose
corporation's existence to a specified date.
   (5) A provision requiring, for any or all corporate actions,
except as provided in Section 303, subdivision (b) of Section 402.5,
subdivision (c) of Section 708, and Section 1900, the vote of a
larger proportion or of all of the shares of any class or series, or
the vote or quorum for taking action of a larger proportion or of all
of the directors, than is otherwise required by Division 1
(commencing with Section 100) or this division.
   (6) So long as consistent with the purpose of the social purpose
corporation as set forth in the articles in accordance with
subdivision (b) of Section 2602, a provision limiting or restricting
the business in which the social purpose corporation may engage or
the powers which the social purpose corporation may exercise, or
both.
   (7) A provision conferring upon the holders of any evidences of
indebtedness, issued or to be issued by the social purpose
corporation, the right to vote in the election of the directors and
on any other matters on which shareholders may vote.
   (8) A provision conferring upon shareholders the right to
determine the consideration for which shares shall be issued.
   (9) A provision requiring the approval of the shareholders
(Section 153) or the approval of the outstanding shares (Section 152)
for any corporate action, even though not otherwise required by
Division 1 (commencing with Section 100) or this division.
   (10) Provisions eliminating or limiting the personal liability of
a director for monetary damages in an action brought by or in the
right of the social purpose corporation for breach of a director's
duties to the social purpose corporation and its shareholders, as set
forth in Section 2700, subject to the following:
   (A) The provision may not eliminate or limit the liability of
directors (i) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (ii) for acts
or omissions that a director believes to be contrary to the best
interests of the social purpose corporation or its shareholders and
its corporate purposes as expressed in its articles, or that involve
the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal
benefit, (iv) for acts or omissions that show a reckless disregard
for the director's duty to the social purpose corporation or its
shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the social purpose
corporation, its shareholders, or its corporate purposes as expressed
in its articles, (v) for acts or omissions that constitute an
unexcused pattern of inattention that amounts to an abdication of the
director's duty to the social purpose corporation, its shareholders,
or its corporate purposes as expressed in its articles pursuant to
Section 2602, or (vi) under Section 310 or 2701.
   (B) The provision shall not eliminate or limit the liability of a
director for any act or omission occurring prior to the date on which
the provision becomes effective.
   (C) The provision shall not eliminate or limit the liability of an
officer for any act or omission as an officer, notwithstanding that
the officer is also a director or that his or her actions, if
negligent or improper, have been ratified by the directors.
   (11) A provision authorizing, whether by bylaw, agreement, or
otherwise, the indemnification of agents of the social purpose
corporation for breach of duty to the social purpose corporation and
its shareholders, provided, however, that the provision may not
provide for indemnification of any agent for any acts or omissions or
transactions from which a director may not be relieved of liability
as described in subparagraphs (A), (B), and (C) of paragraph (10).
   Notwithstanding this subdivision, bylaws may require, for all or
any actions by the board, the affirmative vote of a majority of the
authorized number of directors. Nothing contained in this subdivision
shall affect the enforceability, as between the parties thereto, of
any lawful agreement not otherwise contrary to public policy.
   (b) Reasonable restrictions upon the right to transfer or
hypothecate shares of any class or classes or series, except that no
restriction shall be binding with respect to shares issued prior to
the adoption of the restriction unless the holders of those shares
voted in favor of the restriction.
   (c) The names and addresses of the persons appointed to act as
initial directors.
   (d) Any other provision, not in conflict with law, for the
management of the business and for the conduct of the affairs of the
social purpose corporation, including any provision that is required
or permitted by this division to be stated in the bylaws.
  SEC. 40.  Section 2604 of the Corporations Code is amended to read:

   2604.  Subject to any limitation contained in the articles, to
compliance with any other applicable laws, and to consistency with
the special purpose of the social purpose corporation, any social
purpose corporation other than a social purpose corporation subject
to the Banking Law or a professional social purpose corporation may
engage in any business activity. A social purpose corporation subject
to the Banking Law or a professional social purpose corporation may
engage in any business activity not prohibited by the respective
statutes and regulations to which it is subject.
  SEC. 41.  Section 2605 of the Corporations Code is amended to read:

   2605.  Subject to any limitations contained in the articles, to
compliance with other provisions of this division and any other
applicable laws, and to consistency with the special purpose of the
                                             social purpose
corporation, a social purpose corporation shall have all 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. 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 a 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 social purpose corporation or any of its
subsidiaries or affiliates, and to indemnify and purchase and
maintain insurance on behalf of any fiduciary of these 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 that participation involves sharing or delegation of control
with or to others.
  SEC. 42.  Section 2700 of the Corporations Code is amended to read:

   2700.  (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner the director
believes to be in the best interests of the social purpose
corporation and its shareholders, and with that care, including
reasonable inquiry, as an ordinarily prudent person in a like
position would use under similar circumstances.
   (b) In performing the duties of a director, a director shall be
entitled to rely upon information, opinions, reports, or statements,
including financial statements and other financial data, in each case
prepared or presented by any of the following:
   (1) An officer or employee of the social purpose corporation whom
the director believes to be reliable and competent in the matters
presented.
   (2) Counsel, independent accountants, or other persons as to
matters which the director believes to be within that person's
professional or expert competence.
   (3) A committee of the board upon which the director does not
serve, as to matters within its designated authority, which committee
the director believes to merit confidence, so long as the director
acts in good faith, after reasonable inquiry when the need therefor
is indicated by the circumstances and without knowledge that would
cause that reliance to be unwarranted.
   (c) In discharging his or her duties, a director shall consider
those factors, and give weight to those factors, as the director
deems relevant, including the overall prospects of the social purpose
corporation, the best interests of the social purpose corporation
and its shareholders, and the purposes of the social purpose
corporation as set forth in its articles.
   (d) A person who performs the duties of a director in accordance
with subdivisions (a), (b), and (c) shall have no liability based
upon any alleged failure to discharge the person's obligations as a
director. The liability of a director for monetary damages may be
eliminated or limited by a social purpose corporation's articles to
the extent provided in paragraph (10) of subdivision (a) of Section
2603.
   (e) Notwithstanding any of the purposes set forth in its articles,
a social purpose corporation shall not be deemed to hold any of its
assets for the benefit of any party other than its shareholders.
However, nothing in this division shall be construed as negating
existing charitable trust principles or the Attorney General's
authority to enforce any charitable trust created.
   (f) Nothing in this section, express or implied, is intended to
create or grant or shall create or grant any right in or for any
person or any cause of action by or for any person, and a director
shall not be responsible to any party other than the social purpose
corporation and its shareholders.
  SEC. 43.  Section 2701 of the Corporations Code is amended to read:

   2701.  (a) Subject to Section 2700, directors of a social purpose
corporation who approve any of the following corporate actions shall
be jointly and severally liable to the social purpose corporation for
the benefit of all of the creditors or shareholders entitled to
institute an action under subdivision (c):
   (1) The making of any distribution to its shareholders to the
extent that it is contrary to the provisions of Sections 500 to 503,
inclusive.
   (2) The distribution of assets to shareholders after institution
of dissolution proceedings of the social purpose corporation, without
paying or adequately providing for all known liabilities of the
social purpose corporation, excluding any claims not filed by
creditors within the time limit set by the court in a notice given to
creditors under Chapter 18 (commencing with Section 1800) of
Division 1, Chapter 20 (commencing with Section 1900) of Division 1,
and Chapter 20 (commencing with Section 2000).
   (3) The making of any loan or guaranty contrary to Section 2715.
   (b) A director who is present at a meeting of the board, or any
committee of the board, at which an action specified in subdivision
(a) is taken and who abstains from voting, shall be deemed to have
approved the action.
   (c) Suit may be brought in the name of the social purpose
corporation to enforce the liability as follows:
   (1) Under paragraph (1) of subdivision (a) against any or all
directors liable, by the persons entitled to sue under subdivision
(b) of Section 506.
   (2) Under paragraph (2) or (3) of subdivision (a) against any or
all directors liable, by any one or more creditors of the social
purpose corporation whose debts or claims arose prior to the time of
any of the corporate actions specified in paragraph (2) or (3) of
subdivision (a) and who have not consented to the corporate action,
regardless of whether they have reduced their claims to judgment.
   (3) Under paragraph (3) of subdivision (a) against any or all
directors liable, by any one or more holders of shares outstanding at
the time of any corporate action specified in paragraph (3) of
subdivision (a) who have not consented to the corporate action,
without regard to the provisions of Section 2900.
   (d) The damages recoverable from a director under this section
shall be the amount of the illegal distribution, or if the illegal
distribution consists of property, the fair market value of that
property at the time of the illegal distribution, plus interest
thereon from the date of the distribution at the legal rate on
judgments until paid, together with all reasonably incurred costs of
appraisal or other valuation, if any, of that property or loss
suffered by the social purpose corporation as a result of the illegal
loan or guaranty, respectively, but not exceeding the liabilities of
the social purpose corporation owed to nonconsenting creditors at
the time of the violation and the injury suffered by nonconsenting
shareholders.
   (e) Any director sued under this section may implead all other
directors liable and may compel contribution, either in that action
or in an independent action against directors not joined in that
action.
   (f) Directors liable under this section shall also be entitled to
be subrogated to the rights of the social purpose corporation:
   (1) With respect to paragraph (1) of subdivision (a), against
shareholders who received the distribution.
   (2) With respect to paragraph (2) of subdivision (a), against
shareholders who received the distribution of assets.
   (3) With respect to paragraph (3) of subdivision (a), against the
person who received the loan or guaranty.
   Any director sued under this section may file a cross-complaint
against the person or persons who are liable to the director as a
result of the subrogation provided for in this subdivision or may
proceed against them in an independent action.
  SEC. 44.  Section 2702 of the Corporations Code is amended to read:

   2702.  (a) For the purposes of this section:
   (1) "Agent" means any person who is or was a director, officer,
employee, or other agent of the social purpose corporation, or is or
was serving at the request of the social purpose corporation as a
director, officer, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise,
or was a director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of the
social purpose corporation or of another enterprise at the request of
the predecessor corporation.
   (2) "Proceeding" means any threatened, pending, or completed
action or proceeding, whether civil, criminal, administrative, or
investigative.
   (3) "Expenses" includes without limitation attorneys' fees and any
expenses of establishing a right to indemnification under
subdivision (b).
   (b) Subject to the standards and restrictions, if any, set forth
in its articles or bylaws, and subject to the limitations required by
paragraph (11) of subdivision (a) of Section 2603, a social purpose
corporation may indemnify and hold harmless any agent or any other
person from and against any and all claims and demands whatsoever.
   (c) Expenses incurred in defending any proceeding may be advanced
by the social purpose corporation prior to the final disposition of
the proceeding. The provisions of subdivision (a) of Section 315 do
not apply to advances made pursuant to this subdivision.
   (d) A social purpose corporation may purchase and maintain
insurance on behalf of any of its agents against any liability
asserted against or incurred by the agent in that capacity or arising
out of the agent's status as an agent regardless of whether the
social purpose corporation would have the power to indemnify the
agent against that liability under this section. The fact that a
social purpose corporation owns all or a portion of the shares of the
company issuing a policy of insurance shall not render this
subdivision inapplicable if either of the following conditions are
satisfied:
   (1) The insurance provided by this subdivision is limited as
indemnification is required to be limited by paragraph (11) of
subdivision (a) of Section 2603.
   (2) (A) The company issuing the insurance policy is organized,
licensed, and operated in a manner that complies with the insurance
laws and regulations applicable to its jurisdiction of organization.
   (B) The company issuing the policy provides procedures for
processing claims that do not permit that company to be subject to
the direct control of the social purpose corporation that purchased
that policy.
   (C) The policy issued provides for some manner of risk sharing
between the issuer and purchaser of the policy, on one hand, and some
unaffiliated person or persons, on the other, such as by providing
for more than one unaffiliated owner of the company issuing the
policy or by providing that a portion of the coverage furnished will
be obtained from some unaffiliated insurer or reinsurer.
   (e) This section does not apply to any proceeding against any
trustee, investment manager, or other fiduciary of an employee
benefit plan in that person's capacity as such, even though the
person may also be an agent as defined in subdivision (a) of the
employer social purpose corporation. A social purpose corporation
shall have power to indemnify a trustee, investment manager, or other
fiduciary to the extent permitted by subdivision (f) of Section
2605.
  SEC. 45.  Section 2800 of the Corporations Code is amended to read:

   2800.  (a) All certificates representing shares of a social
purpose corporation shall contain, in addition to any other
statements required by this section, the following conspicuous
language on the face of the certificate.


   "This entity is a social purpose corporation organized under
Division 1.5 of the California Corporations Code. The articles of
this corporation state one or more purposes required by law. Refer to
the articles on file with the Secretary of State, and the bylaws and
any agreements on file with the secretary of the corporation, for
further information."


   (b) There shall also appear on the certificate, the initial
transaction statement, and written statements, unless stated or
summarized under subdivision (a) or (b) of Section 417, the
statements required by all of the following, to the extent
applicable:
   (1) The fact that the shares are subject to restrictions upon
transfer.
   (2) If the shares are assessable or are not fully paid, a
statement that they are assessable or the statements required by
subdivision (d) of Section 409 if they are not fully paid.
   (3) The fact that the shares are subject to a voting agreement
under subdivision (a) of Section 706 or an irrevocable proxy under
subdivision (e) of Section 705 or restrictions upon voting rights
contractually imposed by the social purpose corporation.
   (4) The fact that the shares are redeemable.
   (5) The fact that the shares are convertible and the period for
conversion.
   Statements or references to statements on the face of the
certificate, the initial transaction statement, and written
statements required by paragraph (1) or (2) shall be conspicuous.
   (c) Unless stated on the certificate, the initial transaction
statement, and written statements as required by subdivision (a), no
restriction upon transfer, no right of redemption and no voting
agreement under subdivision (a) of Section 706, no irrevocable proxy
under subdivision (e) of Section 705, and no voting restriction
imposed by the social purpose corporation shall be enforceable
against a transferee of the shares without actual knowledge of the
restriction, right, agreement, or proxy. With regard only to
liability to assessment or for the unpaid portion of the subscription
price, unless stated on the certificate as required by subdivision
(a), that liability shall not be enforceable against a transferee of
the shares. For the purpose of this subdivision, "transferee"
includes a purchaser from the social purpose corporation.
   (d) All certificates representing shares of a close social purpose
corporation shall contain, in addition to any other statements
required by this section, the following conspicuous legend on the
face thereof:


   "This social purpose corporation is a close social purpose
corporation. The number of holders of record of its shares of all
classes cannot exceed ____ (a number not in excess of 35). Any
attempted voluntary inter vivos transfer which would violate this
requirement is void. Refer to the articles, bylaws, and any
agreements on file with the secretary of the social purpose
corporation for further restrictions."


   (e) Any attempted voluntary inter vivos transfer of the shares of
a close social purpose corporation that would result in the number of
holders of record of its shares exceeding the maximum number
specified in its articles is void if the certificate contains the
legend required by subdivision (c).
   (f) Notwithstanding any other subdivision, the certificates
representing shares of a corporation formed pursuant to this division
as a "flexible purpose corporation" before January 1, 2015, shall
continue to be valid even if the certificates reference a "flexible
purpose corporation." A corporation formed pursuant to this division
before January 1, 2015, may, but is not required to, reissue
certificates to replace "flexible purpose corporation" with "social
purpose corporation" as applicable. Any reference to a "flexible
purpose corporation" or any abbreviation of that term in certificates
representing shares of a corporation formed pursuant to this
division before January 1, 2015, shall also be a reference to "social
purpose corporation."
  SEC. 46.  Section 2900 of the Corporations Code is amended to read:

   2900.  (a) As used in this section:
   (1) "Social purpose corporation" includes an unincorporated
association.
   (2) "Board" includes the managing body of an unincorporated
association.
   (3) "Shareholder" includes a member of an unincorporated
association.
   (4) "Shares" includes memberships in an unincorporated
association.
   (b) Shareholders of a social purpose corporation may maintain a
derivative lawsuit to enforce the requirements set forth in
subdivision (c) of Section 2700.
   (c) No action may be instituted or maintained in right of any
domestic or foreign social purpose corporation under this section by
any party other than a shareholder of the social purpose corporation.

   (d) No action may be instituted or maintained in right of any
domestic or foreign social purpose corporation by any holder of
shares or of voting trust certificates of the social purpose
corporation unless both of the following conditions exist:
   (1) The plaintiff alleges in the complaint that plaintiff was a
shareholder, of record or beneficially, or the holder of voting trust
certificates at the time of the transaction or any part thereof of
which plaintiff complains or that plaintiff's shares or voting trust
certificates thereafter devolved upon plaintiff by operation of law
from a holder who was a holder at the time of the transaction or any
part thereof complained of. Any shareholder who does not meet these
requirements may nevertheless be allowed, in the discretion of the
court, to maintain the action on a preliminary showing to and
determination by the court, by motion and after a hearing, at which
the court shall consider the evidence by affidavit or testimony, as
it deems material, of all of the following:
   (A) There is a strong prima facie case in favor of the claim
asserted on behalf of the social purpose corporation.
   (B) No other similar action has been or is likely to be
instituted.
   (C) The plaintiff acquired the shares before there was disclosure
to the public or to the plaintiff of the wrongdoing of which
plaintiff complains.
   (D) Unless the action can be maintained the defendant may retain a
gain derived from defendant's willful breach of a fiduciary duty.
   (E) The requested relief will not result in unjust enrichment of
the social purpose corporation or any shareholder of the social
purpose corporation.
   (2) The plaintiff alleges in the complaint with particularity
plaintiff's efforts to secure from the board the action as plaintiff
desires, or the reasons for not making that effort, and alleges
further that plaintiff has either informed the social purpose
corporation or the board in writing of the ultimate facts of each
cause of action against each defendant or delivered to the social
purpose corporation or the board a true copy of the complaint which
plaintiff proposes to file.
   (e) In any action referred to in subdivision (c), at any time
within 30 days after service of summons upon the social purpose
corporation or upon any defendant who is an officer or director of
the social purpose corporation, or held that office at the time of
the acts complained of, the social purpose corporation or the
defendant may move the court for an order, upon notice and hearing,
requiring the plaintiff to furnish a bond as hereinafter provided.
The motion shall be based upon one or both of the following grounds:
   (1) There is no reasonable possibility that the prosecution of the
cause of action alleged in the complaint against the moving party
will benefit the social purpose corporation or its shareholders.
   (2) The moving party, if other than the social purpose
corporation, did not participate in the transaction complained of in
any capacity.
   The court on application of the social purpose corporation or any
defendant may, for good cause shown, extend the 30-day period for an
additional period or periods not exceeding 60 days.
   (f) At the hearing upon any motion pursuant to subdivision (d),
the court shall consider the evidence, written or oral, by witnesses
or affidavit, as may be material to the ground or grounds upon which
the motion is based, or to a determination of the probable reasonable
expenses, including attorney's fees, of the social purpose
corporation and the moving party that will be incurred in the defense
of the action. If the court determines, after hearing the evidence
adduced by the parties, that the moving party has established a
probability in support of any of the grounds upon which the motion is
based, the court shall fix the amount of the bond, not to exceed
fifty thousand dollars ($50,000), to be furnished by the plaintiff
for reasonable expenses, including attorney's fees, which may be
incurred by the moving party and the social purpose corporation in
connection with the action, including expenses for which the social
purpose corporation may become liable pursuant to Section 2702. A
ruling by the court on the motion shall not be a determination of any
issue in the action or of the merits thereof. If the court, upon the
motion, makes a determination that a bond shall be furnished by the
plaintiff as to any one or more defendants, the action shall be
dismissed as to the defendant or defendants, unless the bond required
by the court has been furnished within such reasonable time as may
be fixed by the court.
   (g) If the plaintiff, either before or after a motion is made
pursuant to subdivision (d), or any order or determination pursuant
to the motion, furnishes a bond in the aggregate amount of fifty
thousand dollars ($50,000) to secure the reasonable expenses of the
parties entitled to make the motion, the plaintiff shall be deemed to
have complied with the requirements of this section and with any
order for a bond theretofore made, and any motion then pending shall
be dismissed and no further or additional bond shall be required.
   (h) If a motion is filed pursuant to subdivision (d), no pleadings
need be filed by the social purpose corporation or any other
defendant and the prosecution of the action shall be stayed until 10
days after the motion has been disposed of.
  SEC. 47.  Section 3000 of the Corporations Code is amended to read:

   3000.  (a) A proposed amendment to the articles of a social
purpose corporation shall be approved by the outstanding shares of a
class, regardless of whether that class is entitled to vote thereon
by the provisions of the articles, if the amendment would:
   (1) Increase or decrease the aggregate number of authorized shares
of that class, other than an increase as provided in either
subdivision (b) of Section 405 or subdivision (b) of Section 902.
   (2) Effect an exchange, reclassification, or cancellation of all
or part of the shares of that class, including a reverse stock split
but excluding a stock split.
   (3) Effect an exchange, or create a right of exchange, of all or
part of the shares of another class into the shares of that class.
   (4) Change the rights, preferences, privileges, or restrictions of
the shares of that class.
   (5) Create a new class of shares having rights, preferences, or
privileges prior to the shares of that class, or increase the rights,
preferences, or privileges or the number of authorized shares of any
class having rights, preferences, or privileges prior to the shares
of that class.
   (6) In the case of preferred shares, divide the shares of any
class into series having different rights, preferences, privileges,
or restrictions or authorize the board to do so.
   (7) Cancel or otherwise affect dividends on the shares of that
class that have accrued but have not been paid.
   (b) A proposed amendment shall be approved by an affirmative vote
of at least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
if the amendment would materially alter any special purpose of the
social purpose corporation stated in the articles pursuant to
paragraph (2) of subdivision (b) of Section 2602, regardless of
whether that purpose, as amended, would comply with the provisions of
that paragraph.
   (c) Different series of the same class shall not constitute
different classes for the purpose of voting by classes except when a
series is adversely affected by an amendment in a different manner
than other shares of the same class.
   (d) In addition to approval by a class as provided in subdivisions
(a) and (b), a proposed amendment shall also be approved by the
outstanding voting shares (Section 152).
  SEC. 48.  Section 3001 of the Corporations Code is amended to read:

   3001.  (a) A social purpose corporation may, by amendment of its
articles pursuant to this section, change its status to that of a
nonprofit public benefit corporation, nonprofit mutual benefit
corporation, nonprofit religious corporation, or cooperative
corporation.
   (b) The amendment of the articles to change its status to a
nonprofit corporation shall revise the statement of purpose, delete
the authorization for shares and any other provisions relating to
authorized or issued shares, make other changes as may be necessary
or desired, and, if any shares have been issued, provide either for
the cancellation of those shares or for the  change 
 conversion  of those shares to memberships of the
nonprofit corporation. The amendment of the articles to change status
to a cooperative corporation shall revise the statement of purpose,
make other changes as may be necessary or desired, and, if any shares
have been issued, provide for the cancellation of those shares or
for the change of those shares to memberships of the cooperative
corporation, if necessary.
   (c) If shares have been issued, an amendment to change status to a
nonprofit corporation shall be approved by all of the outstanding
shares of all classes regardless of limitations or restrictions on
their voting rights and an amendment to change status to a
cooperative corporation shall be approved by the outstanding shares
of                                                    each class
regardless of limitations or restrictions on their voting rights.
   (d) If an amendment pursuant to this section is included in a
merger agreement, the provisions of this section shall apply, except
that any provision for cancellation or  change  
conversion  of shares shall be in the merger agreement rather
than in the amendment of the articles.
   (e) Notwithstanding subdivision (c), if a social purpose
corporation is a mutual water company within the meaning of Section
2705 of the Public Utilities Code and under the terms of the status
change each outstanding share is converted to a membership of a
nonprofit mutual benefit corporation, an amendment to change 
status  to a nonprofit mutual benefit corporation shall be
approved by the outstanding shares of each class regardless of
limitations or restrictions on their voting rights.
  SEC. 49.  Section 3002 of the Corporations Code is amended to read:

   3002.  (a) A social purpose corporation may, by amendment of its
articles pursuant to this section, change its status to that of a
business corporation.
   (b) The amendment of the articles to change status to a business
corporation shall revise the statement of purpose to delete any
provisions in the articles that are permitted by Section 2602, but
that are not permitted to be in the articles of a domestic
corporation.
   (c) If shares have been issued, an amendment to change status to a
business corporation shall be approved by an affirmative vote of at
least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles.
If the status change is approved, shareholders with dissenting
shares, as defined in subdivision (b) of Section 1300, may exercise
dissenters' rights pursuant to Section 3305 and Chapter 13
(commencing with Section 1300) of Division 1.
   (d) If an amendment pursuant to this section is included in a
merger agreement, the provisions of this section shall apply, except
that any provision for cancellation or  change  
conversion  of shares shall be in the merger agreement rather
than in the amendment of the articles.
  SEC. 50.  Section 3100 of the Corporations Code is amended to read:

   3100.  (a) A social purpose corporation may sell, lease, convey,
exchange, transfer, or otherwise dispose of all or substantially all
of its assets when the principal terms of the transaction are
approved by the board and are approved by an affirmative vote of at
least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
either before or after approval by the board and before the
transaction. A transaction constituting a reorganization shall be
subject to Chapter 12 (commencing with Section 1200) of Division 1
and Chapter 10 (commencing with Section 3400) of this division and
shall not be subject to this section, other than subdivision (d). A
transaction constituting a conversion shall be subject to Chapter
11.5 (commencing with Section 1150) of Division 1 and Chapter 9
(commencing with Section 3300) of this division and shall not be
subject to this section.
   (b) Notwithstanding approval of two-thirds of the outstanding
shares, the board may abandon the proposed transaction without
further action by the shareholders, subject to the contractual
rights, if any, of third parties.
   (c) The sale, lease, conveyance, exchange, transfer, or other
disposition may be made upon those terms and conditions and for that
consideration as the board may deem in the best interests of the
social purpose corporation. The consideration may be money,
securities, or other property.
   (d) If the acquiring party in a transaction pursuant to
subdivision (a) or subdivision (g) of Section 2001 is in control of
or under common control with the disposing social purpose
corporation, the principal terms of the sale shall be approved by at
least 90 percent of the voting power of the disposing social purpose
corporation unless the disposition is to a domestic or foreign other
business entity or social purpose corporation, the articles of
incorporation of which specify materially the same purposes, in
consideration of the nonredeemable common shares or nonredeemable
equity securities of the acquiring party or its parent.
   (e) Subdivision (d) shall not apply to a transaction if the
Commissioner of Corporations, the Commissioner of Financial
Institutions, the Insurance Commissioner, or the Public Utilities
Commission has approved the terms and conditions of the transaction
and the fairness of those terms and conditions pursuant to Section
25142, Section 696.5 of the Financial Code, Section 838.5 of the
Insurance Code, or Section 822 of the Public Utilities Code.
  SEC. 51.  Section 3200 of the Corporations Code is amended to read:

   3200.  If any disappearing social purpose corporation in a merger
is a close social purpose corporation and the surviving social
purpose corporation is not a close social purpose corporation, the
merger shall be approved by an affirmative vote of at least
two-thirds of the outstanding shares of each class, or a greater vote
if required in the articles, regardless of whether that class is
entitled to vote thereon by the provisions of the articles, of the
disappearing social purpose corporation. The articles may provide for
a lesser vote, but not less than a majority of the outstanding
shares of each class.
  SEC. 52.  Section 3201 of the Corporations Code is amended to read:

   3201.  If any disappearing corporation in a merger is a social
purpose corporation and the surviving entity is not a social purpose
corporation, or is a social purpose corporation the articles of
incorporation of which set forth materially different purposes, the
merger shall be approved by an affirmative vote of at least
two-thirds of the outstanding shares of each class, or a greater vote
if required in the articles, regardless of whether that class is
entitled to vote thereon by the provisions of the articles, of the
disappearing social purpose corporation. If the merger is approved,
shareholders with dissenting shares, as defined in subdivision (b) of
Section 1300, may exercise dissenters' rights pursuant to Section
3305 and Chapter 13 (commencing with Section 1300) of Division 1.
  SEC. 53.  Section 3202 of the Corporations Code is amended to read:

   3202.  If a disappearing social purpose corporation in a merger is
a social purpose corporation governed by this division and the
surviving corporation is a nonprofit public benefit corporation, a
nonprofit mutual benefit corporation, or a nonprofit religious
corporation, the merger shall be approved by all of the outstanding
shares of all classes of the disappearing social purpose corporation,
regardless of limitations or restrictions on their voting rights,
notwithstanding any provision of Chapter 10 (commencing with Section
3400).
  SEC. 54.  Section 3203 of the Corporations Code is amended to read:

   3203.  (a) Any one or more social purpose corporations may merge
with one or more other business entities. One or more domestic social
purpose corporations not organized under this division and one or
more foreign corporations may be parties to the merger.
Notwithstanding this section, the merger of any number of social
purpose corporations with any number of other business entities may
be effected only if:
   (1) In a merger in which a domestic social purpose corporation not
organized under this division or a domestic other business entity is
a party, it is authorized by the laws under which it is organized to
effect the merger.
   (2) In a merger in which a foreign corporation is a party, it is
authorized by the laws under which it is organized to effect the
merger.
   (3) In a merger in which a foreign other business entity is a
party, it is authorized by the laws under which it is organized to
effect the merger.
   (b) Each social purpose corporation and each other party that
desires to merge shall approve, and shall be a party to, an agreement
of merger. Other persons, including a parent party, may be parties
to the agreement of merger. The board of each social purpose
corporation that desires to merge, and, if required, the
shareholders, shall approve the agreement of merger. The agreement of
merger shall be approved on behalf of each party by those persons
required to approve the merger by the laws under which it is
organized. The agreement of merger shall state:
   (1) The terms and conditions of the merger.
   (2) The name and place of incorporation or organization of each
party to the merger and the identity of the surviving party.
   (3) The amendments, if any, subject to Sections 900, 902, 907, and
3002 to the articles of the surviving social purpose corporation, if
applicable, to be effected by the merger. If any amendment changes
the name of the surviving social purpose corporation, if applicable,
the new name may be, subject to subdivision (b) of Section 2601, the
same as or similar to the name of a disappearing party to the merger.

   (4) The manner of converting the shares of each constituent social
purpose corporation into shares, interests, or other securities of
the surviving party. If any shares of any constituent social purpose
corporation are not to be converted solely into shares, interests, or
other securities of the surviving party, the agreement of merger
shall state (A) the cash, rights, securities, or other property that
the holders of those shares are to receive in exchange for the
shares, which cash, rights, securities, or other property may be in
addition to or in lieu of shares, interests, or other securities of
the surviving party, or (B) that the shares are canceled without
consideration.
   (5) Any other details or provisions required by the laws under
which any party to the merger is organized, including, if a domestic
corporation is a party to the merger, Section 3203, if a public
benefit corporation or a religious corporation is a party to the
merger, Section 6019.1, if a mutual benefit corporation is a party to
the merger, Section 8019.1, if a consumer cooperative corporation is
a party to the merger, Section 12540.1, if a domestic limited
partnership is a party to the merger, Section 15911.12, if a domestic
partnership is a party to the merger, Section 16911, and if a
domestic limited liability company is a party to the merger, Section
17551.
   (6) Any other details or provisions as are desired, including,
without limitation, a provision for the payment of cash in lieu of
fractional shares or for any other arrangement with respect thereto
consistent with the provisions of Section 407.
   (c) Each share of the same class or series of any constituent
social purpose corporation, other than the cancellation of shares
held by a party to the merger or its parent, or a wholly owned
subsidiary of either, in another constituent social purpose
corporation, shall, unless all shareholders of the class or series
consent and except as provided in Section 407, be treated equally
with respect to any distribution of cash, rights, securities, or
other property. Notwithstanding paragraph (4) of subdivision (b), the
nonredeemable common shares of a constituent social purpose
corporation may be converted only into nonredeemable common shares of
a surviving social purpose corporation or a parent party or
nonredeemable equity securities of a surviving party other than a
social purpose corporation if another party to the merger or its
parent owns, directly or indirectly, prior to the merger shares of
that corporation representing more than 50 percent of the voting
power of that social purpose corporation, unless all of the
shareholders of the class consent and except as provided in Section
407.
   (d) Notwithstanding its prior approval, an agreement of merger may
be amended prior to the filing of the agreement of merger or the
certificate of merger, as is applicable, if the amendment is approved
by the board of each constituent social purpose corporation and, if
the amendment changes any of the principal terms of the agreement, by
the outstanding shares, if required by Chapter 10 (commencing with
Section 3400), in the same manner as the original agreement of
merger. If the agreement of merger as so amended and approved is also
approved by each of the other parties to the agreement of merger,
the agreement of merger as so amended shall then constitute the
agreement of merger.
   (e) The board of a constituent social purpose corporation may, in
its discretion, abandon a merger, subject to the contractual rights,
if any, of third parties, including other parties to the agreement of
merger, without further approval by the outstanding shares, at any
time before the merger is effective.
   (f) Each constituent social purpose corporation shall sign the
agreement of merger by its chairperson of the board, president, or a
vice president and also by its secretary or an assistant secretary
acting on behalf of their respective corporations.
   (g) (1) If the surviving party is a domestic social purpose
corporation, or if a domestic corporation or a foreign corporation, a
public benefit corporation, a mutual benefit corporation, a
religious corporation, or a corporation organized under the Consumer
Cooperative Corporation Law (Part 2 (commencing with Section 12200)
of Division 3) is a party to the merger, after required approvals of
the merger by each constituent social purpose corporation through
approval of the board and any approval of the outstanding shares
required by Chapter 10 (commencing with Section 3400) and by the
other parties to the merger, the surviving party shall file a copy of
the agreement of merger with an officers' certificate of each
constituent domestic social purpose corporation and foreign social
purpose corporation attached stating the total number of outstanding
shares of each class entitled to vote on the merger, and identifying
any other person or persons whose approval is required, that the
agreement of merger in the form attached or its principal terms, as
required, were approved by that social purpose corporation by a vote
of a number of shares of each class that equaled or exceeded the vote
required, specifying each class entitled to vote and the percentage
vote required of each class and, if applicable, by that other person
or persons whose approval is required, or that the merger agreement
was entitled to be and was approved by the board alone, as provided
in Section 3401, in the case of a social purpose corporation subject
to that section. If equity securities of a parent party are to be
issued in the merger, the officers' certificate of that controlled
party shall state either that no vote of the shareholders of the
parent party was required or that the required vote was obtained. In
lieu of an officers' certificate, a certificate of merger, on a form
prescribed by the Secretary of State, shall be filed for each
constituent other business entity. The certificate of merger shall be
executed and acknowledged by each domestic constituent limited
liability company by all managers of the limited liability company,
unless a lesser number is specified in its articles or organization
or operating agreement, and by each domestic constituent limited
partnership by all general partners, unless a lesser number is
provided in its certificate of limited partnership or partnership
agreement, and by each domestic constituent general partnership by
two partners, unless a lesser number is provided in its partnership
agreement, and by each foreign constituent limited liability company
by one or more managers and by each foreign constituent general
partnership or foreign constituent limited partnership by one or more
general partners, and by each constituent reciprocal insurer by the
chairperson of the board, president, or vice president, and by the
secretary or assistant secretary, or, if a constituent reciprocal
insurer has not appointed those officers, by the chairperson of the
board, president, or vice president, and by the secretary or
assistant secretary of the constituent reciprocal insurer's
attorney-in-fact, and by each other party to the merger by those
persons required or authorized to execute the certificate of merger
by the laws under which that party is organized, specifying for that
party the provision of law or other basis for the authority of the
signing persons. The certificate of merger shall set forth, if a vote
of the shareholders, members, partners, or other holders of
interests of the constituent other business entity was required, a
statement setting forth the total number of outstanding interests of
each class entitled to vote on the merger and that the agreement of
merger in the form attached or its principal terms, as required, were
approved by a vote of the number of interests of each class that
equaled or exceeded the vote required, specifying each class entitled
to vote and the percentage vote required of each class, and any
other information required to be set forth under the laws under which
the constituent other business entity is organized, including, if a
domestic limited partnership is a party to the merger, subdivision
(a) of Section 15911.14, if a domestic partnership is a party to the
merger, subdivision (b) of Section 16915, and, if a domestic limited
liability company is a party to the merger, subdivision (a) of
Section 17552. The certificate of merger for each constituent foreign
other business entity, if any, shall also set forth the statutory or
other basis under which that foreign other business entity is
authorized by the laws under which it is organized to effect the
merger. The merger and any amendment of the articles of the surviving
social purpose corporation, if applicable, contained in the
agreement of merger shall be effective upon filing of the agreement
of merger with an officer's certificate of each constituent domestic
corporation and foreign corporation and a certificate of merger for
each constituent other business entity, subject to subdivision (c) of
Section 110 and subject to the provisions of subdivision (j), and
the several parties thereto shall be one entity. If a domestic
reciprocal insurer organized after 1974 to provide medical
malpractice insurance is a party to the merger, the agreement of
merger or certificate of merger shall not be filed until there has
been filed the certificate issued by the Insurance Commissioner
approving the merger pursuant to Section 1555 of the Insurance Code.
The Secretary of State may certify a copy of the agreement of merger
separate from the officers' certificates and certificates of merger
attached thereto.
   (2) If the surviving entity is an other business entity, and no
public benefit corporation, mutual benefit corporation, religious
corporation, or corporation organized under the Consumer Cooperative
Corporation Law (Part 2 (commencing with Section 12200) of Division
3) is a party to the merger, after required approvals of the merger
by each constituent social purpose corporation through approval of
the board and any approval of the outstanding shares required by
Chapter 10 (commencing with Section 3400) and by the other parties to
the merger, the parties to the merger shall file a certificate of
merger in the office of, and on a form prescribed by, the Secretary
of State. The certificate of merger shall be executed and
acknowledged by each constituent domestic and foreign social purpose
corporation by its chairperson of the board, president, or a vice
president and also by its secretary or an assistant secretary and by
each domestic constituent limited liability company by all managers
of the limited liability company, unless a lesser number is specified
in its articles of organization or operating agreement, and by each
domestic constituent limited partnership by all general partners,
unless a lesser number is provided in its certificate of limited
partnership or partnership agreement, and by each domestic
constituent general partnership by two partners, unless a lesser
number is provided in its partnership agreement, and by each foreign
constituent limited liability company by one or more managers and by
each foreign constituent general partnership or foreign constituent
limited partnership by one or more general partners, and by each
constituent reciprocal insurer by the chairperson of the board,
president, or vice president, and by the secretary or assistant
secretary, or, if a constituent reciprocal insurer has not appointed
those officers, by the chairperson of the board, president, or vice
president, and by the secretary or assistant secretary of the
constituent reciprocal insurer's attorney-in-fact. The certificate of
merger shall be signed by each other party to the merger by those
persons required or authorized to execute the certificate of merger
by the laws under which that party is organized, specifying for that
party the provision of law or other basis for the authority of the
signing persons. The certificate of merger shall set forth all of the
following:
   (A) The name, place of incorporation or organization, and the
Secretary of State's file number, if any, of each party to the
merger, separately identifying the disappearing parties and the
surviving party.
   (B) If the approval of the outstanding shares of a constituent
social purpose corporation was required by Chapter 10 (commencing
with Section 3400), a statement setting forth the total number of
outstanding shares of each class entitled to vote on the merger and
that the principal terms of the agreement of merger were approved by
a vote of the number of shares of each class entitled to vote and the
percentage vote required of each class.
   (C) The future effective date or time, not more than 90 days
subsequent to the date of filing of the merger, if the merger is not
to be effective upon the filing of the certificate of merger with the
Secretary of State.
   (D) A statement, by each party to the merger that is a domestic
corporation not organized under this division, a foreign corporation
or foreign other business entity, or an other business entity, of the
statutory or other basis under which that party is authorized by the
laws under which it is organized to effect the merger.
   (E) Any other information required to be stated in the certificate
of merger by the laws under which each respective party to the
merger is organized, including, if a domestic limited liability
company is a party to the merger, subdivision (a) of Section 17552,
if a domestic partnership is a party to the merger, subdivision (b)
of Section 16915, and, if a domestic limited partnership is a party
to the merger, subdivision (a) of Section 15911.14.
   (F) Any other details or provisions that may be desired.
   Unless a future effective date or time is provided in a
certificate of merger, in which event the merger shall be effective
at that future effective date or time, a merger shall be effective
upon the filing of the certificate of merger with the Secretary of
State and the several parties thereto shall be one entity. The
surviving other business entity shall keep a copy of the agreement of
merger at its principal place of business which, for purposes of
this subdivision, shall be the office referred to in Section 17057 if
a domestic limited liability company, at the business address
specified in paragraph (5) of subdivision (a) of Section 17552 if a
foreign limited liability company, at the office referred to in
subdivision (a) of Section 16403 if a domestic general partnership,
at the business address specified in subdivision (f) of Section 16911
if a foreign partnership, at the office referred to in subdivision
(a) of Section 15901.14 if a domestic limited partnership, or at the
business address specified in paragraph (5) of subdivision (a) of
Section 15911.14 if a foreign limited partnership. Upon the request
of a holder of equity securities of a party to the merger, a person
with authority to do so on behalf of the surviving other business
entity shall promptly deliver to that holder, a copy of the agreement
of merger. A waiver by that holder of the rights provided in the
foregoing sentence shall be unenforceable. If a domestic reciprocal
insurer organized after 1974 to provide medical malpractice insurance
is a party to the merger the agreement of merger or certificate of
merger shall not be filed until there has been filed the certificate
issued by the Insurance Commissioner approving the merger in
accordance with Section 1555 of the Insurance Code.
   (h) (1) A copy of an agreement of merger certified on or after the
effective date by an official having custody thereof has the same
force in evidence as the original and, except as against the state,
is conclusive evidence of the performance of all conditions precedent
to the merger, the existence on the effective date of the surviving
party to the merger, and the performance of the conditions necessary
to the adoption of any amendment to the articles, if applicable,
contained in the agreement of merger.
   (2) For all purposes for a merger in which the surviving entity is
a domestic other business entity and the filing of a certificate of
merger is required by paragraph (2) of subdivision (g), a copy of the
certificate of merger duly certified by the Secretary of State is
conclusive evidence of the merger of the constituent corporations,
either by themselves or together with the other parties to the
merger, into the surviving other business entity.
   (i) (1) Upon a merger pursuant to this section, the separate
existences of the disappearing parties to the merger cease and the
surviving party to the merger shall succeed, without other transfer,
to all the rights and property of each of the disappearing parties to
the merger and shall be subject to all the debts and liabilities of
each in the same manner as if the surviving party to the merger had
itself incurred them.
   (2) All rights of creditors and all liens upon the property of
each of the constituent social purpose corporations and other parties
to the merger shall be preserved unimpaired, provided that those
liens upon property of a disappearing party shall be limited to the
property affected thereby immediately prior to the time the merger is
effective.
   (3) Any action or proceeding pending by or against any
disappearing social purpose corporation or disappearing party to the
merger may be prosecuted to judgment, which shall bind the surviving
party, or the surviving party may be proceeded against or substituted
in its place.
                                                           (4)
Nothing in this section shall be construed to affect the liability a
general partner of a disappearing limited partnership or general
partnership may have in connection with the debts and liabilities of
the disappearing limited partnership or general partnership existing
prior to the time the merger is effective.
   (j) (1) The merger of domestic social purpose corporations with
foreign corporations or foreign other business entities in a merger
in which one or more other business entities is a party shall comply
with subdivision (a) and this subdivision.
   (2) If the surviving party is a domestic social purpose
corporation or domestic other business entity, the merger proceedings
with respect to that party and any domestic disappearing social
purpose corporation shall conform to the provisions of this section.
If the surviving party is a foreign corporation or foreign other
business entity, then, subject to the requirements of subdivision
(c), Section 407, Chapter 10 (commencing with Section 3400), and
Chapter 13 (commencing with Section 1300) of Division 1, and, if
applicable, corresponding provisions of the Nonprofit Corporation Law
(Division 2 (commencing with Section 5002)) or the Consumer
Cooperative Corporation Law (Part 2 (commencing with Section 12200)
of Division 3), with respect to any domestic constituent
corporations, Chapter 13 (commencing with Section 17600) of Title 2.5
with respect to any domestic constituent limited liability
companies, Article 6 (commencing with Section 16601) of Chapter 5 of
Title 2 with respect to any domestic constituent general
partnerships, and Article 11.5 (commencing with Section 15911.20) of
Chapter 5.5 of Title 2 with respect to any domestic constituent
limited partnerships, the merger proceedings may be in accordance
with the laws of the state or place of incorporation or organization
of the surviving party.
   (3) If the surviving party is a domestic social purpose
corporation or domestic other business entity, the certificate of
merger or the agreement of merger with attachments shall be filed as
provided in subdivision (g) and thereupon, subject to subdivision (c)
of Section 110 or paragraph (2) of subdivision (g), as applicable,
the merger shall be effective as to each domestic constituent social
purpose corporation and domestic constituent other business entity.
   (4) If the surviving party is a foreign corporation or foreign
other business entity, the merger shall become effective in
accordance with the law of the jurisdiction in which the surviving
party is organized, but, except as provided in paragraph (5), the
merger shall be effective as to any domestic disappearing social
purpose corporation as of the time of effectiveness in the foreign
jurisdiction upon the filing in this state of a copy of the agreement
of merger with an officers' certificate of each constituent foreign
and domestic social purpose corporation and a certificate of merger
of each constituent other business entity attached, which officers'
certificates and certificates of merger shall conform to the
requirements of paragraph (1) of subdivision (g). If one or more
domestic other business entities is a disappearing party in a merger
pursuant to this subdivision in which a foreign other business entity
is the surviving entity, a certificate of merger required by the
laws under which that domestic other business entity is organized,
including subdivision (a) of Section 15911.14, subdivision (b) of
Section 16915, or subdivision (a) of Section 17552, as is applicable,
shall also be filed at the same time as the filing of the agreement
of merger.
   (5) If the date of the filing in this state pursuant to this
subdivision is more than six months after the time of the
effectiveness in the foreign jurisdiction, or if the powers of a
domestic disappearing social purpose corporation are suspended at the
time of effectiveness in the foreign jurisdiction, the merger shall
be effective as to the domestic disappearing social purpose
corporation as of the date of filing in this state.
   (6) In a merger described in paragraph (3) or (4), each foreign
disappearing social purpose corporation that is qualified for the
transaction of intrastate business shall by virtue of the filing
pursuant to this subdivision, subject to subdivision (c) of Section
110, automatically surrender its right to transact intrastate
business in this state. The filing of the agreement of merger or
certificate of merger, as is applicable, pursuant to this
subdivision, by a disappearing foreign other business entity
registered for the transaction of intrastate business in this state
shall, by virtue of that filing, subject to subdivision (c) of
Section 110, automatically cancel the registration for that foreign
other business entity, without the necessity of the filing of a
certificate of cancellation.
  SEC. 55.  Section 3300 of the Corporations Code is amended to read:

   3300.  For purposes of this chapter, the following definitions
shall apply:
   (a) "Converted social purpose corporation" means a social purpose
corporation that results from a conversion of an other business
entity or a foreign other business entity or a foreign corporation
pursuant to Section 3307.
   (b) "Converted entity" means a domestic other business entity that
results from a conversion of a social purpose corporation under this
chapter.
   (c) "Converting social purpose corporation" means a social purpose
corporation that converts into a domestic other business entity
pursuant to this chapter.
   (d) "Converting entity" means an other business entity or a
foreign other business entity or foreign corporation that converts
into a social purpose corporation pursuant to Section 3307.
   (e) "Domestic other business entity" has the meaning provided in
Section 167.7.
   (f) "Foreign other business entity" has the meaning provided in
Section 171.07.
   (g) "Other business entity" has the meaning provided in Section
174.5.
  SEC. 56.  Section 3301 of the Corporations Code is amended to read:

   3301.  (a) A social purpose corporation may be converted into a
domestic other business entity pursuant to this chapter if, pursuant
to the proposed conversion, each of the following conditions is met:
   (1) Each share of the same class or series of the converting
social purpose corporation shall, unless all the shareholders of the
class or series consent, be treated equally with respect to any cash,
rights, securities, or other property to be received by, or any
obligations or restrictions to be imposed on, the holder of that
share.
   (2) The conversion is approved by an affirmative vote of at least
two-thirds of the outstanding shares of each class, or a greater vote
if required in the articles, regardless of whether that class is
entitled to vote thereon by the provisions of the articles.
   (3) Nonredeemable common shares of the converting social purpose
corporation shall be converted only into nonredeemable equity
securities of the converted entity unless all of the shareholders of
the class consent.
   (4) Paragraph (1) shall not restrict the ability of the
shareholders of a converting social purpose corporation to appoint
one or more managers, if the converted entity is a limited liability
company, or one or more general partners, if the converted entity is
a limited partnership, in the plan of conversion or in the converted
entity's governing documents.
   (b) Notwithstanding subdivision (a), the conversion of a social
purpose corporation into a domestic other business entity may be
effected only if both of the following conditions are met:
   (1) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
   (2) The social purpose corporation complies with any and all other
requirements of any other law that applies to conversion to the
converted entity.
  SEC. 57.  Section 3302 of the Corporations Code is amended to read:

   3302.  (a) A social purpose corporation that desires to convert to
a domestic other business entity shall approve a plan of conversion.
The plan of conversion shall state all of the following:
   (1) The terms and conditions of the conversion.
   (2) The jurisdiction of the organization of the converted entity
and of the converting social purpose corporation and the name of the
converted entity after conversion.
   (3) The manner of converting the shares of each of the
shareholders of the converting social purpose corporation into
securities of, or interests in, the converted entity.
   (4) The provisions of the governing documents for the converted
entity, including the articles and bylaws, partnership agreement or
limited liability company articles of organization and operating
agreement, to which the holders of interests in the converted entity
are to be bound.
   (5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the converting social purpose corporation.
   (b) The plan of conversion shall be approved by the board of the
converting social purpose corporation, and the principal terms of the
plan of the conversion shall be approved by at least two-thirds of
the outstanding shares of each class, or a greater vote if required
in the articles, regardless of whether that class is entitled to vote
thereon by the provisions of the articles of the converting social
purpose corporation. The approval of at least two-thirds of the
outstanding shares may be given before or after approval by the
board. If the plan is approved, shareholders with dissenting shares,
as defined in subdivision (b) of Section 1300, may exercise
dissenters' rights pursuant to Section 3305 and Chapter 13
(commencing with Section 1300) of Division 1.
   (c) If the social purpose corporation is converting into a general
or limited partnership or into a limited liability company, then in
addition to the approval of the shareholders set forth in subdivision
(b), the plan of conversion shall be approved by each shareholder
who will become a general partner or manager, as applicable, of the
converted entity pursuant to the plan of conversion unless the
shareholders have dissenters' rights pursuant to Section 3305 and
Chapter 13 (commencing with Section 1300) of Division 1.
   (d) Upon the effectiveness of the conversion, all shareholders of
the converting social purpose corporation, except those that exercise
dissenters' rights as provided in Section 3305 and Chapter 13
(commencing with Section 1300) of Division 1, shall be deemed parties
to any agreement or agreements constituting the governing documents
for the converted entity adopted as part of the plan of conversion,
regardless of whether a shareholder has executed the plan of
conversion or those governing documents for the converted entity. Any
adoption of governing documents made pursuant thereto shall be
effective at the effective time or date of the conversion.
   (e) Notwithstanding its prior approval by the board and the
outstanding shares, or either of them, a plan of conversion may be
amended before the conversion takes effect if the amendment is
approved by the board and, if it changes any of the principal terms
of the plan of conversion, by the shareholders of the converting
social purpose corporation in the same manner and to the same extent
as was required for approval of the original plan of conversion.
   (f) A plan of conversion may be abandoned by the board of a
converting social purpose corporation, or by the shareholders of a
converting social purpose corporation if the abandonment is approved
by the outstanding shares, in each case in the same manner as
required for approval of the plan of conversion, subject to the
contractual rights of third parties, at any time before the
conversion is effective.
   (g) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the converted
entity is a domestic partnership, or at the office at which records
are to be kept under Section 15901.14 if the converted entity is a
domestic limited partnership, or at the office at which records are
to be kept under Section 17701.13 if the converted entity is a
domestic limited liability company. Upon the request of a shareholder
of a converting social purpose corporation, the authorized person on
behalf of the converted entity shall promptly deliver to the
shareholder, at the expense of the converted entity, a copy of the
plan of conversion. A waiver by a shareholder of the rights provided
in this subdivision shall be unenforceable.
  SEC. 58.  Section 3303 of the Corporations Code is amended to read:

   3303.  (a) After the approval, as provided in Section 3302, of a
plan of conversion by the board and the outstanding shares of a
social purpose corporation converting into a domestic other business
entity, the converting social purpose corporation shall cause the
filing of all documents required by law to effect the conversion and
create the converted entity, which documents shall include a
certificate of conversion or a statement of conversion as required by
Section 3304, and the conversion shall thereupon be effective.
   (b) A copy of the statement of partnership authority, certificate
of limited partnership, or articles of organization complying with
 Section 1155,   Section 3304,  duly
certified by the Secretary of State on or after the effective date,
shall be conclusive evidence of the conversion of the social purpose
corporation.
  SEC. 59.  Section 3304 of the Corporations Code is amended to read:

   3304.  (a) To convert a social purpose corporation:
   (1) If the social purpose corporation is converting into a
domestic limited partnership, a statement of conversion shall be
completed on the certificate of limited partnership for the converted
entity.
   (2) If the social purpose corporation is converting into a
domestic partnership, a statement of conversion shall be completed on
the statement of partnership authority for the converted entity, or
if no statement of partnership authority is filed, then a certificate
of conversion shall be filed separately.
   (3) If the social purpose corporation is converting into a
domestic limited liability company, a statement of conversion shall
be completed on the articles of organization for the converted
entity.
   (b) Any statement or certificate of conversion of a converting
social purpose corporation shall be executed and acknowledged by
those officers of the converting social purpose corporation as would
be required to sign an officers' certificate, and shall set forth all
of the following:
   (1) The name and the Secretary of State's file number of the
converting social purpose corporation.
   (2) A statement of the total number of outstanding shares of each
class entitled to vote on the conversion, that the principal terms of
the plan of conversion were approved by a vote of the number of
shares of each class which equaled or exceeded the vote required
under Section 3602, specifying each class entitled to vote and the
percentage vote required of each class.
   (3) The name, form, and jurisdiction of organization of the
converted entity.
   (c) The certificate of conversion shall be on a form prescribed by
the Secretary of State.
   (d) The filing with the Secretary of State of a statement of
conversion on an organizational document or a certificate of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of dissolution by the converting social
purpose corporation and no converting social purpose corporation that
has made the filing is required to file a certificate of election
under Section 1901 or a certificate of dissolution under Section 1905
as a result of that conversion.
   (e) Upon the effectiveness of a conversion pursuant to this
chapter, a converted entity that is a domestic partnership, domestic
limited partnership, or domestic limited liability company shall be
deemed to have assumed the liability of the converting social purpose
corporation to prepare and file or cause to be prepared and filed
all tax and information returns otherwise required of the converting
social purpose corporation under the Corporation Tax Law (Part 11
(commencing with Section 23001) of Division 2 of the Revenue and
Taxation Code) and to pay any tax liability determined to be due
pursuant to that law.
  SEC. 60.  Section 3305 of the Corporations Code is amended to read:

   3305.  The shareholders with dissenting rights, as defined in
subdivision (b) of Section 1300, of a converting social purpose
corporation shall have all of the rights under Chapter 13 (commencing
with Section 1300) of Division 1 of the shareholders of a
corporation involved in a reorganization requiring the approval of
its outstanding shares, and the converting social purpose corporation
shall have all of the obligations under Chapter 13 (commencing with
Section 1300) of Division 1 of a corporation involved in the
reorganization. Solely for purposes of applying the provisions of
Chapter 13 (commencing with Section 1300) of Division 1, and not for
purposes of this chapter, a conversion pursuant to Section 3301 or
3307 shall be deemed to constitute a reorganization.
  SEC. 61.  Section 3307 is added to the Corporations Code, to read:
   3307.  (a) An other business entity or a foreign other business
entity or a foreign corporation may be converted into a social
purpose corporation pursuant to this chapter only if the converting
entity is authorized by the laws under which it is organized to
effect the conversion.
   (b) An other business entity or a foreign other business entity or
a foreign corporation that desires to convert into a social purpose
corporation shall approve a plan of conversion or other instrument as
is required to be approved to effect the conversion pursuant to the
laws under which that entity is organized.
   (c) The conversion of an other business entity or a foreign other
business entity or a foreign corporation shall be approved by the
number or percentage of the partners, members, shareholders, or other
holders of interest of the converting entity that is required by the
laws under which that entity is organized, or a greater or lesser
percentage as may be set forth in the converting entity's partnership
agreement, articles of organization, operating agreement, articles
of incorporation, or other governing document in accordance with
applicable laws.
   (d) The conversion by an other business entity or a foreign other
business entity or a foreign corporation shall be effective under
this chapter upon the filing with the Secretary of State of the
articles of incorporation of the converted corporation, containing a
statement of conversion that complies with subdivision (e).
   (e) A statement of conversion of an entity converting into a
social purpose corporation pursuant to this chapter shall set forth
all of the following:
   (1) The name, form, and jurisdiction of organization of the
converting entity.
   (2) The Secretary of State's file number, if any, of the
converting entity.
   (3) If the converting entity is a foreign other business entity or
a foreign corporation, the statement of conversion shall contain the
following:
   (A) A statement that the converting entity is authorized to effect
the conversion by the laws under which it is organized.
   (B) A statement that the converting entity has approved a plan of
conversion or other instrument as is required to be approved to
effect the conversion pursuant to the laws under which the converting
entity is organized.
   (C) A statement that the conversion has been approved by the
number or percentage of the partners, members, shareholders, or other
holders of interest of the converting entity that is required by the
laws under which that entity is organized, or a greater or lesser
percentage as may be set forth in the converting entity's partnership
agreement, articles of organization, operating agreement, articles
of incorporation, or other governing document in accordance with
applicable laws.
   (f) The filing with the Secretary of State of articles of
incorporation containing a statement pursuant to subdivision (e)
shall have the effect of the filing of a certificate of cancellation
by a converting foreign limited liability company or foreign limited
partnership, and no converting foreign limited liability company or
foreign limited partnership that has made the filing is required to
file a certificate of cancellation under Section 17708.06 or 15909.07
as a result of that conversion. If a converting entity is a foreign
corporation qualified to transact business in this state, the foreign
corporation shall, by virtue of the filing, automatically surrender
its right to transact intrastate business.
  SEC. 62.  Section 3400 of the Corporations Code is amended to read:

   3400.  A reorganization or a share exchange tender offer shall be
approved by the board of all of the following:
   (a) Each constituent social purpose corporation in a merger
reorganization.
   (b) The acquiring social purpose corporation in an exchange
reorganization.
   (c) The acquiring social purpose corporation and the social
purpose corporation whose property and assets are acquired in a
sale-of-assets reorganization.
   (d) The acquiring social purpose corporation in a share exchange
tender offer.
   (e) The social purpose corporation in control of any constituent
or acquiring domestic or foreign social purpose corporation or other
business entity under subdivision (a), (b), or (c) and whose equity
securities are issued, transferred, or exchanged in the
reorganization, hereafter a "parent party."
  SEC. 63.  Section 3401 of the Corporations Code is amended to read:

   3401.  (a) The principal terms of a reorganization shall be
approved by the outstanding shares of each class of each social
purpose corporation the approval of whose board is required under
Section 3400, except as provided in subdivision (b) and except that,
unless otherwise provided in the articles, no approval of any class
of outstanding preferred shares of the surviving or acquiring social
purpose corporation or parent party shall be required if the rights,
preferences, privileges, and restrictions granted to or imposed upon
that class of shares remain unchanged, subject to the provisions of
subdivision (c). For the purpose of this subdivision, two classes of
common shares differing only as to voting rights shall be considered
as a single class of shares.
   (b) No approval of the outstanding shares is required by
subdivision (a) if the social purpose corporation, or its
shareholders immediately before the reorganization, or both, shall
own, immediately after the reorganization, equity securities, other
than any warrant or right to subscribe to or purchase those equity
securities, of the surviving or acquiring social purpose corporation
or a parent party possessing more than five-sixths of the voting
power of the surviving or acquiring social purpose corporation or
parent party. In making the determination of ownership by the
shareholders of a social purpose corporation, immediately after the
reorganization, of equity securities pursuant to the preceding
sentence, equity securities that they owned immediately before the
reorganization as shareholders of another party to the transaction
shall be disregarded. For the purpose of this section, the voting
power of a social purpose corporation shall be calculated by assuming
the conversion of all equity securities convertible, immediately or
at some future time, into shares entitled to vote but not assuming
the exercise of any warrant or right to subscribe to or purchase
those shares.
   (c) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the outstanding shares of
the surviving social purpose corporation in a merger reorganization,
as otherwise required by Chapter 10 (commencing with Section 3400),
if any amendment is made to its articles that would otherwise require
that approval.
   (d) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the affirmative vote of at
least two-thirds of each class, or a greater vote if required in the
articles, of the outstanding shares of any class of a social purpose
corporation that is a party to a merger or sale-of-assets
reorganization if holders of shares of that class receive shares of
the surviving or acquiring social purpose corporation or parent party
having different rights, preferences, privileges, or restrictions
than those surrendered. Shares in a foreign corporation received in
exchange for shares in a domestic social purpose corporation shall be
deemed to have different rights, preferences, privileges, and
restrictions within the meaning of the preceding sentence.
   (e) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the affirmative vote of at
least two-thirds of each class, or a greater vote if required in the
articles, of the outstanding shares of any social purpose corporation
that is a close social purpose corporation if the reorganization
would result in the holders receiving shares or other interests of a
corporation or other business entity that is not a close social
purpose corporation. The articles may provide for a lesser vote, but
not less than a majority of the outstanding shares of each class.
   (f) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by a vote of at least
two-thirds of the outstanding shares of each class, or a greater vote
if required in the articles, of a social purpose corporation that is
a party to a merger reorganization, regardless of whether that class
is entitled to vote thereon by the provisions of the articles, if
holders of shares of that class receive interests of a surviving
other business entity in the merger that is not a social purpose
corporation, or receive interests of a surviving social purpose
corporation the articles of incorporation of which specify a
materially different purpose as part of the reorganization.
   (g) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by all shareholders of any
class or series if, as a result of the reorganization, the holders of
that class or series become personally liable for any obligations of
a party to the reorganization, unless all holders of that class or
series have the dissenters' rights provided in Chapter 13 (commencing
with Section 1300) of Division 1.
            (h) Any approval required by this section may be given
before or after the approval by the board. Notwithstanding approval
required by this section, the board may abandon the proposed
reorganization without further action by the shareholders, subject to
the contractual rights, if any, of third parties.
  SEC. 64.  Section 3500 of the Corporations Code is amended to read:

   3500.  (a) The board of a social purpose corporation shall cause
an annual report to be sent to the shareholders not later than 120
days after the close of the fiscal year. The annual report shall
contain (1) a balance sheet as of the end of that fiscal year and an
income statement and a statement of cashflows for that fiscal year,
accompanied by any report thereon of independent accountants or, if
there is no report, the certificate of an authorized officer of the
social purpose corporation that the statements were prepared without
audit from the books and records of the corporation, and (2) the
information required by subdivision (b).
   (b) The board shall cause to be provided with the annual report, a
management discussion and analysis (special purpose MD&A) concerning
the social purpose corporation's stated purpose or purposes as set
forth in its articles pursuant to paragraph (2) of subdivision (b) of
Section 2602, and, to the extent consistent with reasonable
confidentiality requirements, shall cause the special purpose MD&A to
be made publicly available by posting it on the social purpose
corporation's Internet Web site or providing it through similar
electronic means. The special purpose MD&A shall include the
information specified in this subdivision and any other information
that the social purpose corporation's officers and directors believe
to be reasonably necessary or appropriate to an understanding of the
social purpose corporation's efforts in connection with its special
purpose or purposes. The special purpose MD&A shall also include the
following information:
   (1) Identification and discussion of the overall objectives of the
social purpose corporation relating to its special purpose or
purposes, and an identification and explanation of any changes made
in those special purpose objectives during the fiscal year.
   (2) Identification and discussion of the material actions taken by
the social purpose corporation during the fiscal year to achieve its
special purpose objectives, the impact of those actions, including
the causal relationships between the actions and the reported
outcomes, and the extent to which those actions achieved the special
purpose objectives for the fiscal year.
   (3) Identification and discussion of material actions, including
the intended impact of those actions, that the social purpose
corporation expects to take in the short term and long term with
respect to achievement of its special purpose objectives.
   (4) A description of the process for selecting, and an
identification and description of, the financial, operating, and
other measures used by the social purpose corporation during the
fiscal year for evaluating its performance in achieving its special
purpose objectives, including an explanation of why the social
purpose corporation selected those measures and identification and
discussion of the nature and rationale for any material changes in
those measures made during the fiscal year.
   (5) Identification and discussion of any material operating and
capital expenditures incurred by the social purpose corporation
during the fiscal year in furtherance of achieving the special
purpose objectives, a good faith estimate of any additional material
operating or capital expenditures the social purpose corporation
expects to incur over the next three fiscal years in order to achieve
its special purpose objectives, and other material expenditures of
resources incurred by the social purpose corporation during the
fiscal year, including employee time, in furtherance of achieving the
special purpose objectives, including a discussion of the extent to
which that capital or use of other resources serves purposes other
than and in addition to furthering the achievement of the special
purpose objectives.
   (c) Except as may otherwise be excused pursuant to subdivision (h)
of Section 1501.5, the reports specified in subdivisions (a) and (b)
shall be sent to the shareholders at least 15 days, or, if sent by
bulk mail, 35 days, prior to the annual meeting of shareholders to be
held during the next fiscal year. This requirement shall not limit
the requirement for holding an annual meeting as required by Section
600.
   (d) If no annual report for the last fiscal year has been sent to
shareholders, the social purpose corporation shall, upon the written
request of any shareholder made more than 120 days after the end of
that fiscal year, deliver or mail to the person making the request
within 30 days following the request, the statements required by
subdivisions (a) and (b) for that fiscal year.
   (e) A shareholder or shareholders holding at least 5 percent of
the outstanding shares of any class of a social purpose corporation
may make a written request to the social purpose corporation for an
income statement of the social purpose corporation for the
three-month, six-month, or nine-month period of the current fiscal
year ended more than 30 days prior to the date of the request and a
balance sheet of the social purpose corporation as at the end of that
period and, in addition, if no annual report for the most recent
fiscal year has been sent to the shareholders, the statements
referred to in subdivisions (a) and (b) relating to that fiscal year.
The statements shall be delivered or mailed to the person making the
request within 30 days following the request. A copy of the
statements shall be kept on file in the principal office of the
social purpose corporation for 12 months and shall be exhibited at
all reasonable times to any shareholder demanding an examination of
the statements or a copy shall be mailed to the shareholder. The
quarterly income statements and balance sheets referred to in this
subdivision shall be accompanied by the report thereon, if any, of
any independent accountants engaged by the social purpose corporation
or the certificate of an authorized officer of the social purpose
corporation that the financial statements were prepared without audit
from the books and records of the social purpose corporation.
  SEC. 65.  Section 3501 of the Corporations Code is amended to read:

   3501.  (a) The board shall cause a special purpose current report
to be sent to the shareholders not later than 45 days following the
occurrence of any one or more of the events specified in subdivision
(b) or (c), and, to the extent consistent with reasonable
confidentiality requirements, shall cause the special purpose current
report to be made publicly available by posting it on the social
purpose corporation's Internet Web site or providing it through
similar electronic means.
   (b) Unless previously reported in the most recent annual report,
the special purpose current report shall identify and discuss, in
reasonable detail, any expenditure or group of related or planned
expenditures, excluding compensation of officers and directors, made
in furtherance of the special purpose objectives, whether an
operating expenditure, a capital expenditure, or some other
expenditure of corporate resources, including, but not limited to,
employee time, whether the expenditure was direct or indirect, and
whether the expenditure was categorized as overhead or otherwise
where the expenditure has or is likely to have a material adverse
impact on the social purpose corporation's results of operations or
financial condition for a quarterly or annual fiscal period.
   (c) Unless previously reported in the most recent annual report,
the special purpose current report shall identify and discuss, in
reasonable detail, any decision by the board or action by management
to do either of the following:
   (1) Withhold expenditures or a group of related or planned
expenditures, whether temporarily or permanently, that were to have
been made in furtherance of the special purpose as contemplated in
the most recent annual report, whether those planned expenditures
were an operating expenditure, a capital expenditure, or some other
expenditure of corporate resources, including, but not limited to,
employee time, whether the planned expenditure was direct or
indirect, and whether the planned expenditure to be made would have
been categorized as overhead or otherwise, in any case, where the
planned expenditure was likely to have had a material positive impact
on the social purpose corporation's impact in furtherance of its
special purpose objectives, as contemplated in the most recent annual
report.
   (2) Determine that the special purpose has been satisfied or
should no longer be pursued, whether temporarily or permanently.
  SEC. 66.  Section 3502 of the Corporations Code is amended to read:

   3502.  (a) Nothing contained in subdivision (b) of Section 3500 or
Section 3501 shall require a detailing or itemization of every
relevant expenditure incurred, or planned or action taken or planned,
by the corporation. Management and the board shall use their
discretion in providing that information, including the reasonable
detail that a reasonable investor would consider important in
understanding the corporation's objectives, actions, impacts,
measures, rationale, and results of operations as they relate to the
nature and achievement of the special purpose objectives.
   (b) Where best practices emerge for providing the information
required by subdivision (b) of Section 3500 or Section 3501, use of
those best practices shall create a presumption that the social
purpose corporation caused all the information required by those
provisions to be provided. This presumption can only be rebutted by
showing that the reporting contained either a misstatement of a
material fact or omission of a material fact.
   (c) Notwithstanding subdivision (b) of Section 3500 and Section
3501, under no circumstances shall the social purpose corporation be
required to provide information that would result in a violation of
state or federal securities laws or other applicable laws.
   (d) The social purpose corporation and its officers and directors
are expressly excluded from liability for any and all forward looking
statements supplied in the report required by subdivision (b) of
Section 3500 and Section 3501, so long as those statements are
supplied in good faith. Statements are deemed to be forward looking
as that term is defined in the federal securities laws.
   (e) The special purpose MD&A and any special purpose current
report shall be written in plain English and shall be provided in an
efficient and understandable manner, avoiding repetition and
disclosure of immaterial information.
   (f) Unless otherwise provided by the articles or bylaws, and if
approved by the board of directors, the reports specified in Sections
3500 and 3501 and any accompanying material sent pursuant to this
section may be sent by electronic transmission by the corporation.
   (g) The financial statements of any social purpose corporation
with fewer than 100 holders of record of its shares, determined as
provided in Section 605, required to be furnished by Sections 3500
and 3501 are not required to be prepared in conformity with generally
accepted accounting principles if they reasonably set forth the
assets and liabilities and the income and expense of the social
purpose corporation and disclose the accounting basis used in their
preparation.
   (h) The requirements described in Section 3500 shall be satisfied
if a corporation with an outstanding class of securities registered
under Section 12 of the Securities Exchange Act of 1934 both complies
with Section 240.14a-16 of Title 17 of the Code of Federal
Regulations, as amended from time to time, with respect to the
obligation of a corporation to furnish an annual report to
shareholders pursuant to Section 240.14a-3(b) of Title 17 of the Code
of Federal Regulations, and includes the information required by
subdivision (b) of Section 3500 in the annual report.
   (i) The requirements described in Section 3501 shall be satisfied
if a corporation with an outstanding class of securities registered
under Section 12 of the Securities Exchange Act of 1934 both complies
with Section 240.13a-13 of Title 17 of the Code of Federal
Regulations, as amended from time to time, with respect to the
obligation of a corporation to furnish a quarterly report to
shareholders, and includes the information required by subdivision
(b) of Section 3501 in the quarterly report.
   (j) In addition to the penalties provided for in this division,
the superior court of the proper county shall enforce the duty of
making and mailing or delivering the information and financial
statements required by Sections 3500 and 3501 and, for good cause
shown, may extend the time therefor.
   (k) In any action or proceeding with respect to Section 3500 or
3501, if the court finds the failure of the social purpose
corporation to comply with the requirements of those sections to have
been without justification, the court may award an amount sufficient
to reimburse the shareholder for the reasonable expenses incurred by
the shareholder, including attorney's fees, in connection with the
action or proceeding.
   (l) Section 3500 and Section 3501 apply to any domestic social
purpose corporation and also to a foreign social purpose corporation
having its principal executive office in this state or customarily
holding meetings of its board in this state.
   (m) All reports and notices required by Section 3500 and Section
3501 shall be maintained by the social purpose corporation, in an
electronic form for a period of not less than 10 years.
  SEC. 67.  Section 3503 of the Corporations Code is amended to read:

   3503.  Any officers, directors, employees, or agents of a social
purpose corporation who do any of the following shall be liable
jointly and severally for all the damages resulting therefrom to the
social purpose corporation or any person injured by those actions who
relied on those actions or to both:
   (a) Make, issue, deliver, or publish any prospectus, report,
including the reports required pursuant to Sections 3500 and 3501,
circular, certificate, financial statement, balance sheet, public
notice, or document respecting the social purpose corporation or its
shares, assets, liabilities, capital, dividends, business, earnings,
or accounts which is false in any material respect, knowing it to be
false, or participate in the making, issuance, delivery, or
publication thereof with knowledge that the same is false in a
material respect.
   (b) Make or cause to be made in the books, minutes, records, or
accounts of a social purpose corporation any entry that is false in
any material particular knowing it to be false.
   (c) Remove, erase, alter, or cancel any entry in any books or
records of the social purpose corporation, with intent to deceive.
   (d) With respect to the reports required pursuant to subdivision
(b) of Section 3500 and Section 3501, omit to state any material fact
necessary in order to make the statements contained therein, in
light of the circumstances under which those statements were made,
not misleading in a material respect, knowing the omission to be
misleading.
  SEC. 68.  Section 5813.5 of the Corporations Code is amended to
read:
   5813.5.  (a) A public benefit corporation may amend its articles
to change its status to that of a mutual benefit corporation, a
social purpose corporation, a religious corporation, a business
corporation, or a cooperative corporation by complying with this
section and the other sections of this chapter.
   The Secretary of State shall notify the Franchise Tax Board, in
the manner and at the times agreed upon by the Secretary of State and
the Franchise Tax Board, of any amendments to a public benefit
corporation's articles.
   (b) If the public benefit corporation has any assets, an amendment
to change its status to a mutual benefit corporation,  business
corporation,  social purpose corporation, or cooperative
corporation shall be approved in advance in writing by the Attorney
General. If the public benefit corporation has no assets, the
Attorney General shall be given a copy of the amendment at least 20
days before the amendment is filed.
   (c) Amended articles authorized by this section shall include the
provisions which would have been required (other than the initial
street address and initial mailing address of the corporation and the
name of the initial agent for service of process if a statement has
been filed pursuant to Section 6210), and may in addition only
include those provisions which would have been permitted, in original
articles filed by the type of corporation (mutual benefit,
religious, business, social purpose, or cooperative) into which the
public benefit corporation is changing its status.
   (d) In the case of a change of status to a business corporation,
social purpose corporation, or cooperative corporation, if the
Franchise Tax Board has issued a determination exempting the
corporation from tax as provided in Section 23701 of the Revenue and
Taxation Code, the corporation shall be subject to Section 23221 of
the Revenue and Taxation Code upon filing the certificate of
amendment.
  SEC. 69.  Section 7813.5 of the Corporations Code is amended to
read:
   7813.5.  (a) A mutual benefit corporation may amend its articles
to change its status to that of a public benefit corporation, a
religious corporation, a business corporation, a social purpose
corporation, or a cooperative corporation by complying with this
section and the other sections of this chapter.
   (b) Except as authorized by Section 7811 or unless the corporation
has no members, an amendment to change its status to a public
benefit corporation or religious corporation shall: (i) be approved
by the members (Section 5034), and the fairness of the amendment to
the members shall be approved by the Commissioner of Corporations
pursuant to Section 25142; (ii) be approved by the members (Section
5034) in an election conducted by written ballot pursuant to Section
7513 in which no negative votes are cast; or (iii) be approved by 100
percent of the voting power.
   (c) Amended articles authorized by this section shall include the
provisions which would have been required (other than the initial
street address and initial mailing address of the corporation and the
name of the initial agent for service of process if a statement has
been filed pursuant to Section 8210), and may in addition only
include those provisions which would have been permitted, in original
articles filed by the type of corporation (public benefit,
religious, business, social purpose, or cooperative) into which the
mutual benefit corporation is changing its status.
   (d) At the time of filing a certificate of amendment to change
status to a public benefit corporation, the Secretary of State shall
forward a copy of the filed certificate to the Attorney General.
   (e) In the case of a change of status to a business corporation,
social purpose corporation, or a cooperative corporation, if the
Franchise Tax Board has issued a determination exempting the
corporation from tax as provided in Section 23701 of the Revenue and
Taxation Code, the corporation shall be subject to Section 23221 of
the Revenue and Taxation Code upon filing the certificate of
amendment.
  SEC. 70.  Section 9621 of the Corporations Code is amended to read:

   9621.  (a) A religious corporation may amend its articles to
change its status to that of (1), a public benefit corporation, by
complying with this section and the other sections of Chapter 8
(commencing with Section 5810) of Part 2 (made applicable pursuant to
Section 9620) or (2), a mutual benefit corporation, business
corporation, a social purpose corporation, or cooperative corporation
by complying with Chapter 8 (commencing with Section 5810) of Part
2.
   (b) Amended articles authorized by this section shall include the
provisions which would have been required (other than the initial
street address and initial mailing address of the corporation and the
name of the initial agent for service of process if a statement has
been filed pursuant to Section 6210, made applicable pursuant to
Section 9660) and may in addition only include those provisions which
would have been permitted, in original articles filed by the type of
corporation (public benefit, mutual benefit, business, social
purpose, or cooperative) into which the religious corporation is
changing its status.
  SEC. 71.  Section 12504 of the Corporations Code is amended to
read:
   12504.  (a) A corporation may amend its articles to change its
status to that of a nonprofit public benefit corporation, a nonprofit
mutual benefit corporation, a nonprofit religious corporation, a
business corporation, or a social purpose corporation by complying
with this section and the other sections of this chapter.
   (b) Except as authorized by Section 12501 or unless the
corporation has no members, an amendment to change its status to a
nonprofit public benefit corporation or a nonprofit religious
corporation shall: (1) be approved by the members (Section 12224),
and the fairness of the amendment to the members shall be approved by
the Commissioner of Corporations pursuant to Section 25142; or (2)
be approved by the members (Section 12224) in an election conducted
by written ballot pursuant to Section 12463 in which no negative
votes are cast; or (3) be approved by 100 percent of the voting
power.
   (c) Amended articles authorized by this section shall include the
provisions which would have been required (other than the initial
street address and initial mailing address of the corporation and the
name of the initial agent for service of process if a statement has
been filed pursuant to Section 12570), and may in addition only
include those provisions which would have been permitted, in original
articles filed by the type of corporation (nonprofit public benefit,
nonprofit mutual benefit, nonprofit religious, business, or social
purpose) into which the corporation is changing its status.
   (d) At the time of filing a certificate of amendment to change
status to a nonprofit public benefit corporation, the Secretary of
State shall forward a copy of the filed certificate to the Attorney
General.