BILL ANALYSIS �
SB 918
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Date of Hearing: June 27, 2011
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
SB 918 (Anderson) - As Amended: April 13, 2011
SENATE VOTE : 40-0
SUBJECT : Mutual water companies: boards of directors.
SUMMARY : Establishes under California's General Corporations
Law that mutual water companies can elect directors to staggered
4-year terms if authorized. Specifically, this bill :
1)Requires the mutual water company to authorize the staggered
4-year terms in their articles of incorporation or bylaws.
2)Provides that upon the initial election of directors to
staggered terms that the elected directors shall determine by
lot who among them shall serve the initial two-year terms and
who among them shall serve four-year terms.
3)Requires prior to any election in which the terms of elected
directors are determined by lot that the mutual water company
notify its shareholders.
EXISTING LAW
1)Establishes that at each annual meeting of shareholders,
directors shall be elected to hold office until the next
annual meeting. (Corporations Code, Section 301)
2)Defines a "mutual water company" as any private corporation or
association organized for the purposes of delivering water to
its stockholders and members at cost, including use of works
for conserving, treating and reclaiming water. (Public and
Utilities Code, Section 2725)
3)Establishes California's General Corporation Law whereby a
mutual water company may be formed. (Corporations Code,
Section 100)
4)Creates the Nonprofit Mutual Benefit Corporation Law, whereby
a mutual water company may be formed. (Corporations Code,
Section 7110)
SB 918
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FISCAL EFFECT : None.
COMMENTS :
Need for the bill: According to the Author, SB 918 will provide
administrative flexibility for private mutual water companies in
the area of elections. Currently, California law requires
mutual water companies to hold elections for their board of
directors annually. This bill will allow mutual water companies
to conduct elections every two years and elect their board
members to staggered 4-year terms. Compulsory annual elections
have created confusion and inconsistency for some mutual water
companies. Electing all five members of their board of
directors at each annual shareholder meeting has created high
turnover and instability for their board, staff and
shareholders.
SB 918 is not a requirement but an additional tool for mutual
water companies under the General Corporation Law to voluntarily
determine in their articles of incorporation or bylaws that they
wish to elect their boards of directors to staggered 4-year
terms every two-year instead of holding elections each year at
their annual meeting. According to the Sponsor, the Farm Mutual
Water Company, SB 918 is consistent with election practices for
public water agencies throughout the state of California.
Over 500 mutual water companies exist in California. Mutual
water companies exist for a number of reasons including to
develop, distribute, store and deliver water for irrigation,
fire protection and domestic uses.
REGISTERED SUPPORT / OPPOSITION :
Support
The Farm Mutual Water Company - sponsor
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081
SB 918
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