BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 918|
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THIRD READING
Bill No: SB 918
Author: Anderson (R)
Amended: 4/13/11
Vote: 21
SENATE BANKING & FINANCIAL INST. COMMITTEE : 7-0, 4/6/11
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla,
Walters
SUBJECT : Mutual water companies: boards of directors
SOURCE : Farm Mutual Water Company
DIGEST : This bill authorizes mutual water companies to
elect directors to serve staggered four-year terms, if
authorized in their articles of incorporation or bylaws.
Upon the initial election of directors to staggered terms,
the elected directors shall determine by lot who among them
shall serve initial two-year terms and who among them shall
serve four-year terms. Prior to any election in which the
terms of elected directors shall be determined by lot, the
mutual water company shall notify its shareholders that the
terms of the directors elected shall be determined among
those directors by lot.
ANALYSIS :
Existing law:
1. Authorizes the formation of mutual water companies under
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the General Corporation Law, as specified, and under the
Nonprofit Mutual Benefit Corporation Law, as specified.
2. Like other corporations organized under the General
Corporation Law, mutual water companies organized under
the General Corporation Law must elect their directors
annually, at their annual shareholder meeting, unless
the company's articles of incorporation specify a
shorter term. The General Corporation Law also provides
that each director shall hold office until the
expiration of the term for which he or she is elected,
and until a successor has been elected and qualified.
3. Like other nonprofits authorized under the Nonprofit
Mutual Benefit Corporation Law, mutual water companies
organized under the Nonprofit Mutual Benefit Corporation
Law are required to elect their directors to terms not
exceeding four years, as specified in the corporation's
articles of incorporation or bylaws. The articles or
bylaws may provide for staggering the terms by dividing
the total number of directors into groups of one or more
directors.
4. Existing law regarding municipal water districts also
authorizes four-year terms for directors. Water Code
Section 71000 et seq. authorizes the formation of
municipal water districts, and provides that each
director of a municipal water district shall hold office
for a term of four years. The Water Code establishes a
procedure to be followed by municipal water districts
upon their formation, in which the elected directors
classify themselves by lot; two of them serve until the
next general district election, and three serve until
the second succeeding general district.
Comments
This bill, sponsored by the Farm Mutual Water Company, is
intended to provide administrative flexibility for private
mutual water companies that are organized under the General
Corporation Law. Under existing law, any corporation
formed under the General Corporation Law must hold annual
elections for their boards of directors.
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The Farm Mutual Water Company states that compulsory annual
elections have created confusion and inconsistency among
some mutual water companies. Electing all five members of
their boards of directors at each annual shareholder
meeting has created high turnover and instability among
boards, staff, and shareholders.
This bill gives California mutual water companies organized
under the General Corporation Law the flexibility to elect
the members of their boards of directors to staggered
four-year terms every two years, in lieu of the annual
elections currently required of these companies. The
sponsor states that the proposal for staggered four-year
terms is consistent with election practices for public
water agencies throughout California.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/12/11)
Farm Mutual Water Company (source)
DLW:do 4/12/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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