BILL NUMBER: AB 2752 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 14, 2004
INTRODUCED BY Assembly Member Chu
FEBRUARY 20, 2004
An act to add Sections 301.2 and 301.3
Section 301.2 to the Corporations Code, relating to
corporations.
LEGISLATIVE COUNSEL'S DIGEST
AB 2752, as amended, Chu. Corporations: elections.
Existing law, the General Corporation Law, generally
provides for the regulation of corporations by the
Department of Corporations election of a corporation's
directors at its annual shareholders' meeting .
This bill would require a corporation that is a publicly traded
company, as defined, to have in place corporate election procedures
meeting specified requirements, which it would be required
to file with the Secretary of State for shareholders
to nominate candidates for election as directors . The
bill would require a company's proxy cards to include specified
information, and would require a company to make information
regarding its nomination and elections process available upon request
of a shareholder and on its Web site. The bill would require the
Secretary of State, not later than December 31, 2005, to provide
access to the corporate election procedures by means of an online
database.
This bill would require a corporation doing business in California
that provides for shareholders to submit and vote on proposals on an
annual ballot to implement proposals that pass by a majority vote,
unless the ballot clearly states that the proposals are advisory,
within the later of 180 days from the vote or a date specified in the
proposal. The bill would authorize the Secretary of State, the
Attorney General, or any individual or entity eligible to vote in the
election to seek a court-order to compel the corporation to
implement the proposal or be in contempt of court and subject to a
fine of up to $100,000 per day until the proposal is implemented.
The bill would require 50% of the fine to be paid to the General Fund
and 50% to the California Victims of Fraud Restitution Fund.
The bill would require these corporations to file a
copy of these procedures with the Secretary of State, to post them on
the corporation's Internet Web site, and to make them available to a
shareholder upon his or her request.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known, and may be cited as, the
Corporate Elections Fairness Act of 2004.
SEC. 2. Section 301.2 is added to the Corporations Code, to read:
301.2. (a) If a corporation is publicly traded company, it shall
have in place a process for its shareholders to nominate a candidate
or candidates for election as directors. This process shall be known
as its corporate election procedures.
(b) For purposes of this section, "publicly traded company" or
"company" means an issuer, as defined in paragraph (8) of subsection
(a) of Section 78c of Title 15 of the United States Code, that meets
either of the following requirements:
(1) Its securities are registered under Section 78l of Title 15 of
the United States Code.
(2) It is required to file reports under subsection (d) of Section
78o of Title 15 of the United States Code.
(c) A domestic corporation or foreign corporation, other than a
foreign association, qualified to transact intrastate business shall
file a copy of its corporate election procedures with the Secretary
of State within 120 days after the end of its 2004-05 fiscal year or
within 120 days of the effective date of this section, whichever is
later, and again whenever the corporate election procedures are
changed or amended.
(d) The election procedures of a company shall include, but shall
not be limited to, provisions addressing all of the following
subjects:
(1) Shareholder eligibility. The procedures may include a minimum
eligibility for a shareholder or group of shareholders to make a
nomination, which shall not be lower than the number of shareholders
who beneficially own, either individually or in the aggregate, more
than 2 percent of the company's voting securities with each security
having been held for at least two years as of the date of the
nomination.
(2) Soliciting support. The procedures shall include a
requirement that the company make information available to
shareholders no less than once per year regarding all individuals or
groups interested in soliciting support to nominate candidates for
the board, in order to enable individuals to join their groups.
(3) Deadlines and candidate information. The company may set a
reasonable deadline and limit on the amount of information provided
for each group to solicit support, but in no event shall the amount
of information permitted be less than one complete 8 1/2 x 11 inch
page. In addition, prior to an election, proxy statements shall be
required to include a statement provided by the candidate of the same
length as is allowed to any other director candidate, but in no
event shall it be less than 250 words in length.
(4) Candidate limits. The company may set a limit on the number
of candidates who can be elected by shareholders, but the limit may
not be less than 40 percent of the total number of directors on the
board.
(5) Nomination process. The procedures shall include a
requirement that, in order to have a nominee included in a company's
proxy statement and proxy card, the nominating shareholder or
nominating group must provide notice to the company, no later than 80
days before the date that the company mails its proxy material for
the annual meeting, of its intent to require that the company include
the nominee. The procedures shall require this notice to include
all of the following:
(A) A statement from the nominee for inclusion in the company's
proxy statement that the nominee consents to being named in the proxy
statement and to serve on the board if elected.
(B) A statement that the nominee has complied with the proxy
statement disclosure requirements applicable to directors.
(C) The following information with regard to the nominating
shareholder or members of a nominating group:
(i) Name and business address.
(ii) Present principal occupation or employment and the name,
principal business, and address of any corporation or other
organization in which the employment is carried on.
(iii) The amount of each class of securities of the company that
the individual owns beneficially, directly, or indirectly.
(iv) Whether or not during the past 10 years the individual has
been convicted in a criminal proceeding, excluding traffic violations
or similar misdemeanors, and, if so, the details with respect to
each conviction.
(6) Allowable restrictions. The procedures may include
restrictions to ensure director independence and high ethical
standards by restricting nominees who are not independent and those
who have been convicted in a criminal proceeding in the past 10
years.
(e) If the corporate election procedures do not contain all of the
requirements in subdivision (d), or are not submitted to the
Secretary of State within 120 days after the end of the corporation's
2004-05 fiscal year or within 120 days of the effective date of this
section, whichever is later, and again whenever the procedures are
changed or amended, it shall constitute a failure to file a statement
pursuant to Section 2117 or 1502.
(f) (1) A company's proxy card shall identify any shareholder
nominees, and shall present the nominees in an impartial manner. A
company is permitted to recommend on the proxy card that the
shareholder vote against, or withhold votes from, shareholder
nominees and in favor of the management nominees. A company may not
provide security holders with the option of voting for, or
withholding authority to vote for, the company nominees as a group.
A company shall require that each candidate be voted on separately,
and shall list on the proxy card the name of each candidate.
(g) If a company includes statements in its proxy statement
supporting company nominees or opposing the nominating shareholder's
nominee or nominees, or both, other than a mere recommendation to
vote in favor of, or withhold votes from, specified candidates, the
nominating shareholder or nominating group shall be given the
opportunity to include in the company's proxy statement a statement
of support for the shareholder nominee or nominees, of a length not
to exceed 500 words per nominee. A company shall not be liable for
false or misleading statements included in the notice or in
disclosures provided to the company by the nominating shareholder or
nominating group.
(h) A shall make information regarding the process and deadlines
to nominate and elect an individual to the board available upon
request of any shareholder, and shall include that information on its
Web site in each location that the company's annual report is found.
(i) The information required in subdivision (h) shall be available
and open to the public for inspection. The Secretary of State
shall, not later than December 31, 2005, provide access to the
corporate election procedures by means of an online database.
SEC. 3. Section 301.3 is added to the Corporations Code, to read:
301.3. (a) A corporation doing business in California that
provides for shareholders to submit and vote on proposals on an
annual ballot shall implement any proposal that passes by a majority
vote. A corporation is not required to implement a proposal if the
ballot clearly states that the proposal is advisory. However, if a
corporation establishes a means to place an advisory shareholder
proposal on the ballot, it shall also establish a means to place
shareholder proposals on the ballot that are required be implemented.
(b) If a corporation does not implement a shareholder proposal
that received a majority vote and that was not clearly marked as
advisory, either within 180 days from the date of the shareholder
vote or by a date specified in the proposal, whichever is later, the
corporation shall be in violation of this section. The Secretary of
State, the Attorney General, or any individual or entity that owned
shares and was eligible to vote in the election in which the proposal
was voted on, may seek a court-order to compel the corporation to
implement the proposal.
(c) If the corporation does not comply with a court-order issued
pursuant to subdivision (b), the corporation shall be in contempt of
court and may be fined up to one hundred thousand dollars ($100,000)
per day for every day that the proposal is not implemented. The fine
shall be paid 50 percent into the General Fund and 50 percent into
the California Victims of Fraud Restitution Fund provided in Section
1502.5.
(d) A corporation described in subdivision (c) shall make
available a copy of its corporate election procedures to a
shareholder, upon the shareholder's request, and shall post its
corporate election procedures on the corporation's Internet Web site.