Senate Bill No. 351

Introduced by Committee on Banking and Financial Institutions (Senators Block (Chair), Galgiani, Hall, Hueso, Lara, Morrell, and Vidak)

February 24, 2015

An act to amend Sections 5039.5, 5213, 7213, 9213, 12228.5, 12320, 12331, and 12353 of the Corporations Code, relating to corporations.

LEGISLATIVE COUNSEL’S DIGEST

SB 351, as introduced, Committee on Banking and Financial Institutions. Corporations: management.

(1) The Nonprofit Corporation Law authorizes the formation of public benefit corporations, mutual benefit corporations, and religious corporations. The Consumer Cooperative Corporation Law authorizes the formation of consumer cooperatives. Each of these laws require a corporation formed under its provisions to have specific corporate officers, which include, among others, a chair of the board, which is also referred to with gender variations.

This bill would specifically expand the permissible titles relating to a chair of a board.

(2) The Consumer Cooperative Corporation Law authorizes the formation of consumer cooperatives corporations, and specifies the corporate power of a corporation and its officers formed under its provisions.

This bill would expand the authority of a consumer cooperative corporation to conduct its ordinary business operations in anticipation of, or under the conditions of, an emergency, as defined, to include, among others, the authority to modify the requirements of giving notice to directors of a meeting of the board of directors in any practicable manner. The bill would also authorize a consumer cooperative corporation to enact bylaws effective only during an emergency relating to the management and conduct of its ordinary business affairs, to include, among others, bylaws providing procedures for designating additional or substitute directors.

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 5039.5 of the Corporations Code is
amended to read:

5039.5.  

begin delete The term “chair” includes “chairperson,” “chairman,”
and “chairwoman.” end delete All references in this division to begin delete “chairman”
shall be deemed to refer to “chair.” end delete begin insert “chairman of the board,” other
than in Sections 5213, 7213, and 9213, shall be deemed to refer
to all permissible titles for a chair of the board, as permitted by
Sections 5213, 7213, and 9213. end insert

SEC. 2.  

Section 5213 of the Corporations Code is amended to
read:

5213.  

(a) A corporation shall have begin insert (1) end insert a chair of the board,
who may be given the title begin insert chair, chairperson, chairman,
chairwomen, end insert chair of the board, chairperson of the board, chairman
of the board, or chairwoman of the board, or a president or both,
begin insert (2) end insert a secretary, begin insert (3) end insert a treasurer or a chief financial officer or both,
and begin insert (4) end insert any other officers with any titles and duties as shall be
stated in the bylaws or determined by the board and as may be
necessary to enable it to sign instruments. The president, or if there
is no president the chair of the board, is the general manager and
chief executive officer of the corporation, unless otherwise
provided in the articles or bylaws. Unless otherwise specified in
the articles or the bylaws, if there is no chief financial officer, the
treasurer is the chief financial officer of the corporation. Any
number of offices may be held by the same person unless the
articles or bylaws provide otherwise, except that no person serving
as the secretary, the treasurer, or the chief financial officer may
serve concurrently as the president or chair of the board. Any
compensation of the president or chief executive officer and the
chief financial officer or treasurer shall be determined in
accordance with subdivision (g) of Section 12586 of the
Government Code, if applicable.

(b) Except as otherwise provided by the articles or bylaws,
officers shall be chosen by the board and serve at the pleasure of
the board, subject to the rights, if any, of an officer under any
contract of employment. Any officer may resign at any time upon
written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is
a party.

(c) If the articles or bylaws provide for the election of any
officers by the members, the term of office of the elected officer
shall be one year unless the articles or bylaws provide for a
different term which shall not exceed three years.

SEC. 3.  

Section 7213 of the Corporations Code is amended to
read:

7213.  

(a) A corporation shall have begin insert (1) end insert a chair of the board,
who may be given the title begin insert chair, chairperson, chairman,
chairwomen, end insert chair of the board, chairperson of the board, chairman
of the board, or chairwoman of the board, or a president or both,
begin insert (2) end insert a secretary, begin insert (3) end insert a treasurer or a chief financial officer or both,
and begin insert (4) end insert any other officers with any titles and duties as shall be
stated in the bylaws or determined by the board and as may be
necessary to enable it to sign instruments. The president, or if there
is no president the chair of the board, is the general manager and
chief executive officer of the corporation, unless otherwise
provided in the articles or bylaws. Unless otherwise specified in
the articles or the bylaws, if there is no chief financial officer, the
treasurer is the chief financial officer of the corporation. Any
number of offices may be held by the same person unless the
articles or bylaws provide otherwise. Where a corporation holds
assets in charitable trust, any compensation of the president or
chief executive officer and the chief financial officer or treasurer
shall be determined in accordance with subdivision (g) of Section
12586 of the Government Code, if applicable.

(b) Except as otherwise provided by the articles or bylaws,
officers shall be chosen by the board and serve at the pleasure of
the board, subject to the rights, if any, of an officer under any
contract of employment. Any officer may resign at any time upon
written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is
a party.

SEC. 4.  

Section 9213 of the Corporations Code is amended to
read:

9213.  

(a) A corporation shall have begin insert (1) end insert a chair of the board,
who may be given the title begin insert chair, chairperson, chairman,
chairwomen, end insert chair of the board, chairperson of the board, chairman
of the board, or chairwoman of the board, or a president or both,
begin insert (2) end insert a secretary, begin insert (3) end insert a treasurer or a chief financial officer or both
and begin insert (4) end insert any other officers with any titles and duties as are stated
in the bylaws or determined by the board and as may be necessary
to enable it to sign instruments. The president, or if there is no
president, the chair of the board, is the general manager and chief
executive officer of the corporation, unless otherwise provided in
the articles or bylaws. Unless otherwise specified in the articles
or the bylaws, if there is no chief financial officer, the treasurer is
the chief financial officer of the corporation. Any number of offices
may be held by the same person unless the articles or bylaws
provide otherwise, except that no person serving as the secretary,
the treasurer, or the chief financial officer may serve concurrently
as the president or chair of the board. Any compensation of the
president or chief executive officer and the chief financial officer
or treasurer shall be determined in accordance with subdivision
(g) of Section 12586 of the Government Code, if applicable.

(b) Except as otherwise provided by the articles or bylaws,
officers shall be chosen by the board and serve at the pleasure of
the board, subject to the rights, if any, of an officer under any
contract of employment. Any officer may resign at any time upon
written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is
a party.

SEC. 5.  

Section 12228.5 of the Corporations Code is amended
to read:

12228.5.  

begin delete The term “chair” includes “chairperson,” “chairman,”
and “chairwoman.” end delete For the purposes of this part, all references to
begin delete “chairman” shall be deemed to refer to “chair.” end delete begin insert “chairman of the
board,” other than in Section 12353, shall be deemed to refer to
all permissible titles for a chair of the board, as permitted by
Section 12353. end insert

SEC. 6.  

Section 12320 of the Corporations Code is amended
to read:

12320.  

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

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

(b) Adopt, amend, and repeal bylaws.

(c) Qualify to conduct its activities in any other state, territory,
dependency or foreign country.

(d) Issue, purchase, redeem, receive, take or otherwise acquire,
own, sell, lend, exchange, transfer or otherwise dispose of, pledge,
use and otherwise deal in and with its own memberships, bonds,
debentures, notes and debt securities.

(e) Pay pensions, and establish and carry out pension, deferred
compensation, saving, thrift and other retirement, incentive and
benefit plans, trusts and provisions for any or all of its directors,
officers, employees, and persons providing services to it or any of
its subsidiary or related or associated corporations, and to
indemnify and purchase and maintain insurance on behalf of any
fiduciary of such plans, trusts, or provisions.

(f) Issue certificates evidencing membership in accordance with
the provisions of Section 12401 and issue identity cards to identify
those persons eligible to use the corporation’s facilities.

(g) Levy dues, assessments, and membership and transfer fees.

(h) Make donations for the public welfare or for community
funds, hospital, charitable, educational, scientific, civic, religious
or similar purposes.

(i) Assume obligations, enter into contracts, including contracts
of guarantee or suretyship, incur liabilities, borrow or lend money
or 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 and income.

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

(k) Act as trustee under any trust incidental to the principal
objects of the corporation, and receive, hold, administer, exchange,
and expend funds and property subject to such trust.

(l) Carry on a business at a profit and apply any profit that results
from the business activity to any activity in which it may lawfully
engage.

begin insert

(m) (1) In anticipation of or during an emergency, take either
or both of the following actions necessary to conduct the
corporation’s ordinary business operations and affairs, unless
bylaws, authorized pursuant to subdivision (h) of Section 12331,
provide otherwise:

end insert begin insert

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

end insert begin insert

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

end insert begin insert

(2) During an emergency, take either or both of the following
actions necessary to conduct the corporation’s ordinary business
operations and affairs, unless bylaws, authorized pursuant to
subdivision (h) of Section 12331, provide otherwise:

end insert begin insert

(A) Give notice to a director or directors in any practicable
manner under the circumstances, including, but not limited to, by
publication and radio, when notice of a meeting of the board
cannot be given to that director or directors in the manner
prescribed by the bylaws or Section 12351.

end insert begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert begin insert

(D) A state of emergency proclaimed by the governor or by the
President of the United States.

end insert

SEC. 7.  

Section 12331 of the Corporations Code is amended
to read:

12331.  

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

(b) Once members have been admitted, a bylaw specifying or
changing a fixed number of directors or the maximum or minimum
number or changing from a fixed to a variable board or vice versa
may only be adopted by approval of the members.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert begin insert

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

end insert begin insert

(5) For purposed of this subdivision, “emergency” has the same
meaning as the term does in Section 12320.

end insert

SEC. 8.  

Section 12353 of the Corporations Code is amended
to read:

12353.  

(a) A corporation shall have begin insert (1) end insert a chair of the board,
who may be given the title begin insert chair, chairperson, chairman,
chairwomen, end insert chair of the board, chairperson of the board, chairman
of the board, or chairwoman of the board, or a president or both,
begin insert (2) end insert a secretary, begin insert (3) end insert a treasurer or a chief financial officer or both,
and begin insert (4) end insert any other officers with any titles and duties as shall be
stated in the bylaws or determined by the board and as may be
necessary to enable it to sign instruments. The president, or if there
is no president the chair of the board, is the chief executive officer
of the corporation, unless otherwise provided in the articles or
bylaws. Unless otherwise specified in the articles or the bylaws,
if there is no chief financial officer, the treasurer is the chief
financial officer of the corporation. Any number of offices may
be held by the same person unless the articles or bylaws provide
otherwise. Either the chair of the board or the president shall be
elected from among those board members elected by the
membership of the corporation.

(b) Except as otherwise provided by the articles or bylaws,
officers shall be chosen by the board and serve at the pleasure of
the board, subject to the rights, if any, of an officer under any
contract of employment. Any officer may resign at any time upon
written notice to the corporation without prejudice to the rights, if
any, of the corporation under any contract to which the officer is
a party.