BILL ANALYSIS Ó
SB 351
Page 1
Date of Hearing: June 22, 2015
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Matthew Dababneh, Chair
SB
351 (Committee on Banking and Financial Institutions) - As
Amended June 9, 2015
SENATE VOTE: 38-0
SUBJECT: Corporations.
SUMMARY: Makes various changes to the Corporations Code to
correct references to the "chairman of the board" and expands
emergency bylaws to consumer cooperative corporations.
Specifically, this bill:
1)Updates permissible titles allowed when referring to the chair
of a board.
2)Adds a provision authorizing a consumer cooperative
cooperation to enact bylaws effective only during an emergency
relating to the management and conduct its ordinary business
affairs, to include, among others, bylaws providing procedures
for designating additional or substitute directors.
a) Defines "emergency" as any of the following events or
circumstances as a result of which, and only so long as, a
SB 351
Page 2
quorum of the corporation's board of directors cannot be
readily convened for action:
i) 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;
ii) 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;
iii) 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; and,
iv) A state of emergency proclaimed by a Governor or by
the President of the United States.
3)Makes other technical changes.
EXISTING LAW:
SB 351
Page 3
1)Provides that a corporation shall have a chairman of the
board or a president or both, a secretary, a chief financial
officer and such other officers with such 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 and share
certificates. The president, or if there is no president the
chairman of the board, is the general manager and chief
executive officer of the corporation, unless otherwise
provided in the articles or bylaws. Any number of offices may
be held by the same person unless the articles or bylaws
provide otherwise. (Corporations Code, Section 312)
2)Authorizes for-profit, public benefit, mutual benefit, and
religious corporations to take specified actions in good faith
to further their corporations' ordinary business operations,
in anticipation of or during an emergency. (Corporations
Code, Sections 207, 5140, 7140, and 9140)
FISCAL EFFECT: None.
COMMENTS:
This measure: amends the Corporations Code to provide that a
corporation shall have a "chairperson of the board," who may be
given the title of chair, chairperson, chairman, chairwoman,
chair of the board, chairperson of the board, chairman of the
board, or chairwoman of the board. Makes conforming changes
throughout the Corporations Code to standardize the manner in
which a chairperson of the board is referenced; and, adds
provisions to the Consumer Cooperative Corporation Law
(Corporations Code Section 12200 et seq.) to allow a consumer
cooperative corporation to take specified actions to conduct the
corporation's ordinary business operations and affairs, as
specified, in anticipation of or during an emergency. Further
authorizes the bylaws of a consumer cooperative corporation to
contain any provision, not in conflict with the corporation's
SB 351
Page 4
articles of incorporation, to manage and conduct the ordinary
business affairs of the corporation, as specified.
Need for the bill:
AB 351 addresses two issues:
1)Adds emergency powers and bylaw provisions to the California
Consumer Cooperative Corporation Law (Cosponsored by the
Nonprofit Organizations Committee and Corporations Committee
of the Business Law Section of the California State Bar): In
2013, the Nonprofit Organizations Committee and the
Corporations Committee of the Business Law Section of the
California State Bar jointly sponsored AB 491 (Torres),
Chapter 255, Statutes of 2013. AB 491 amended the sections of
the Corporations Code applicable to for-profit, public
benefit, mutual benefit, and religious corporations to help
ensure that these corporations did not incur liability for
specified actions taken in good faith to further the
corporations' ordinary business operations, in anticipation
of, or during an emergency. Examples of actions that were
authorized under AB 491 include: modification of lines of
succession to accommodate the incapacity of any director,
officer, employee, or agent resulting from an emergency;
relocating the principal office, designating alternative
principal offices or regional offices, or authorizing the
officers to do so; giving notice to a director or directors in
SB 351
Page 5
any practicable manner under the circumstances, when notice of
a meeting of the board cannot be given to that director or
directors in the manner ordinarily required; and deeming that
one or more officers of the corporation that are present at a
board meeting is a director, as necessary to achieve a quorum
for that meeting.
Due to a drafting oversight, AB 491 did not amend the Consumer
Cooperative Corporation Law. SB 351 corrects that drafting
oversight by adding the language contained in AB 491 to the
Consumer Cooperative Corporation Law.
2)Updates and corrects sections of the Corporations Code which
refer to Chair, Chairperson, Chairman, Chairwoman, and Chair
of the Board (Co-sponsored by the Nonprofit Organizations
Committee and Corporations Committee of the Business Law
Section of the California State Bar): At various places within
the Corporations Code, corporations are authorized to have a
chair of the board, who may be given the title "chair of the
board," "chairperson of the board," "chairman of the board,"
or "chairwoman of the board." However, existing law does not
expressly authorize use of the titles "chair," "chairperson,"
"chairman," or "chairwoman." Because these titles are not
expressly authorized in statute, corporate filings submitted
to the California Secretary of State's office are returned to
the filer if the term "chair" (rather than "chair of the
board") or "chairman" (rather than chairman of the board) is
used as a signatory for the filing. Updating and clarifying
the Corporations Code to allow chairs to be referenced in
multiple ways will eliminate these sorts of returned filings.
SB 351
Page 6
Related Legislation:
AB 816 (Bonta) renames the Consumer Cooperative Corporation Law
to the Cooperative Corporation Law. Pending in Senate Banking
and Financial Institutions Committee.
Prior Legislation:
AB 491 (Torres, Chapter 255, Statutes of 2013) amended the
sections of the Corporations Code applicable to for-profit,
public benefit, mutual benefit, and religious corporations to
help ensure that these corporations did not incur liability for
specified actions taken in good faith to further the
corporations' ordinary business operations, in anticipation of
or during an emergency.
REGISTERED SUPPORT / OPPOSITION:
Support
SB 351
Page 7
State Bar of California (Sponsor)
Opposition
None on file.
Analysis Prepared by:Kathleen O'Malley / B. & F. / (916)
319-3081