BILL ANALYSIS �
AB 2755
Page 1
Date of Hearing: May 8, 2014
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Roger Dickinson, Chair
AB 2755 (Committee on Revenue & Taxation) - As Introduced:
March 24, 2014
SUBJECT : Nonprofit corporations: directors.
SUMMARY : Makes changes to the definition of directors under
California's Nonprofit Corporation Law. Specifically, this
bill :
1)Provides that if a person does not have the authority to vote
as a member of the board of directors of a nonprofit
corporation, they may not be considered a member of the board.
2)Provides that an individual designated as a member of the
board through the corporation's articles or by-laws will not
be limited with regard to that person's right to vote as a
member of the board.
EXISTING LAW defines "directors" as natural persons, designated
in the articles or bylaws or elected by the incorporators, and
their successors and natural persons designated, elected or
appointed by any other name or title to act as members of the
governing body of the corporation. A person who does not have
authority to act as a member of the governing body of the
corporation, including through voting rights as a member of the
governing body, is not a director as that term is used in this
division regardless of title. However, if the articles or bylaws
designate that a natural person is a director or a member of the
governing body of the corporation by reason of occupying a
specified position within or outside the corporation, that
person shall be a director for all purposes and shall have the
same rights and obligations, including voting rights, as the
other directors. [Corporations Code, Section 5047]
FISCAL EFFECT : None.
COMMENTS :
Prior to 2010, "directors" was defined as natural persons,
designated in the articles or bylaw or elected by the
AB 2755
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incorporators, and their successor, and natural persons
designated, elected or appointed by any other name or title to
act as members of the governing body of the corporation.
In 2009, the Business Law Section of the California State Bar
sponsored, AB 1233 (Silva, Chapter 631, Statutes of 2009) which
further expanded upon the definition of nonprofit directors by
adding:
"A person who does not have authority to act as a member of the
governing body of the corporation, including through voting
rights as a member of the governing body, is not a director as
that term is used in this division regardless of title. However,
if the articles or bylaws designate that a natural person is a
director or a member of the governing body of the corporation by
reason of occupying a specified position within or outside the
corporation, that person shall be a director for all purposes
and shall have the same rights and obligations, including voting
rights, as the other directors."
This went into effect on January 1, 2010. According to the
sponsor of AB 2755, these changes did not cure the confusion
surrounding the definition of a director.
AB 2755, sponsored by the Business Law Section, Nonprofit
Organizations Committee of the State Bar of California, believes
further clarification to the definition of directors is needed.
According to the sponsors, Corporations Code, Section 5047 "does
not specify with sufficient clarity that, as was the intent of
the statute: a person is only a director as defined in the
statute if that person has the right to vote as a member of the
governing body; and, a person who is a director by virtue of
occupying a specific position within or outside the corporation
(an ex officio director) can only be a director if that person
has the right to vote as a member of the governing body." AB
2755 addresses these issues raised by the State Bar Committee
by: clarifying that an ex officio director, whose voting rights
were not limited, is a director with all attendant rights and
obligations; and, clarifies that someone without voting rights
on the board is not a director.
Pending Legislation
AB 1529 (John A. Perez) Establishes an administrative
dissolution process and an administrative surrender process for
nonprofit corporations, as well as, makes other various changes
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to California's Nonprofit Corporation Law. Pending in Assembly
Appropriations Committee.
Recommended Amendments
While the author of this measure is the Assembly Revenue and
Taxation Committee, it should be noted that the subject matter
(Corporations Code, Section 5047) of this bill falls within the
jurisdiction of the Assembly Banking and Finance Committee;
therefore, the Assembly Banking and Finance Committee
respectfully recommends amendments that would remove the
Assembly Revenue and Taxation Committee and insert
Assemblymember Bocanegra as the author to more appropriately
reflect the contents of the measure.
In addition, a technical amendment:
On page 2, line 9, after within, add "the corporation"
REGISTERED SUPPORT / OPPOSITION :
Support
Business Law Section, Nonprofit Organizations Committee of the
State Bar of California (Sponsor)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081