BILL ANALYSIS �
AB 2755
Page 1
ASSEMBLY THIRD READING
AB 2755 (Bocanegra)
As Amended May 12, 2014
Majority vote
BANKING & FINANCE 7-1
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|Ayes:|Dickinson, Achadjian, |
| |Bonta, Chau, Gatto, |
| |Weber, Williams |
| | |
|-----+--------------------------|
|Nays:|Allen |
| | |
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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 bylaws 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
AB 2755
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other directors. (Corporations Code Section 5047)
FISCAL EFFECT : None
COMMENTS :
Prior to 2010, "directors" was defined as natural persons,
designated in the articles or bylaws or elected by the
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 this bill, these changes did not cure the confusion
surrounding the definition of a director.
This bill, 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." This
bill addresses these issues raised by the State Bar Committee
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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.
There is no opposition on file.
Pending Legislation: AB 1529 (John A. P�rez) of the current
legislative session, establishes an administrative dissolution
process and an administrative surrender process for nonprofit
corporations, as well as, makes other various changes to
California's Nonprofit Corporation Law. It is currently pending
in the Assembly Appropriations Committee.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081
FN: 0003404