Corporate Legal

Corporations Code - CORP
TITLE 1. CORPORATIONS [100 - 14631] (Title 1 enacted by Stats. 1947, Ch. 1038. )
DIVISION 1. GENERAL CORPORATION LAW [100 - 2319] (Division 1 repealed and added by Stats. 1975, Ch. 682. )

CHAPTER 1. General Provisions and Definitions [100 - 195] (Chapter 1 added by Stats. 1975, Ch. 682.)

100. (a) This division shall be known and may be cited as the General Corporation Law.
(b) This title of the Corporations Code, or any division, part, chapter, article or section thereof, may at any time be amended or repealed.

(Repealed and added by Stats. 1975, Ch. 682.)

101. Unless the provision or the context otherwise requires, the general provisions and definitions set forth in this chapter govern the construction of this division.

(Repealed and added by Stats. 1975, Ch. 682.)

102. (a) Subject to Chapter 23 (commencing with Section 2300) (transition provisions), this division applies to corporations organized under this division and to domestic corporations that are not subject to Division 1.5 (commencing with Section 2500), and to domestic corporations that are not subject to Division 2 (commencing with Section 5000) or Part 1 (commencing with Section 12000), 2 (commencing with Section 12200), 3 (commencing with Section 13200), or 5 (commencing with Section 14000) of Division 3 on December 31, 1976, and that are not organized or existing under any statute of this state other than this code; this division applies to any other corporation only to the extent expressly included in a particular provision of this division.

(b) The existence of corporations formed or existing on the date of enactment or reenactment of this division shall not be affected by the enactment or reenactment of this division nor by any change in the requirements for the formation of corporations nor by the amendment or repeal of the laws under which they were formed or created.

(c) Neither the repeals effected by the enactment or reenactment of this division nor the enactment of this title nor the amendment thereof shall impair or take away any existing liability or cause of action against any corporation, its shareholders, directors, or officers incurred prior to the time of the enactment, reenactment, or amendment.

(Amended by Stats. 2011, Ch. 740, Sec. 1. (SB 201) Effective January 1, 2012.)

103. Every corporation organized under the laws of this state, any other state of the United States or the District of Columbia or under an act of the Congress of the United States, all of the capital stock of which is beneficially owned by the United States, an agency or instrumentality of the United States or any corporation the whole of the capital stock of which is owned by the United States or by an agency or instrumentality of the United States, is conclusively presumed to be an agency and instrumentality of the United States and is entitled to all privileges and immunities to which the holders of all of its stock are entitled as agencies of the United States.

(Repealed and added by Stats. 1975, Ch. 682.)

104. Unless otherwise expressly provided, whenever reference is made in this division to any other state or federal statute, such reference is to that statute as it may be amended from time to time, whether before or after the enactment of this division.

(Repealed and added by Stats. 1975, Ch. 682.)

105. A corporation or association may be sued as provided in the Code of Civil Procedure.

(Repealed and added by Stats. 1975, Ch. 682.)

106. Any corporation heretofore or hereafter formed under this division shall, as a condition of its existence as a corporation, be subject to the provisions of the Code of Civil Procedure authorizing the attachment of corporate property.

(Repealed and added by Stats. 1975, Ch. 682.)

107. No corporation, social purpose corporation, association, or individual shall issue or put in circulation, as money, anything but the lawful money of the United States.

(Amended by Stats. 2014, Ch. 694, Sec. 1. (SB 1301) Effective January 1, 2015.)

108. The fees of the Secretary of State for filing instruments by or on behalf of corporations are prescribed in Article 3 (commencing with Section 12180) of Chapter 3 of Part 2 of Division 3 of Title 2 of the Government Code.

(Repealed and added by Stats. 1975, Ch. 682.)

109. (a) Any agreement, certificate or other instrument relating to a domestic or foreign corporation filed pursuant to this division may be corrected with respect to any misstatement of fact contained therein, any defect in the execution thereof or any other error or defect contained therein, by filing a certificate of correction entitled “Certificate of Correction of ____ (insert here the title of the agreement, certificate or other instrument to be corrected and name(s) of corporation or corporations)”; provided, however, that no such certificate of correction shall alter the wording of any resolution or written consent which was in fact adopted by the board or the shareholders or effect a corrected amendment of articles which amendment as so corrected would not in all respects have complied with the requirements of this division at the time of filing of the agreement, certificate, or other instrument being corrected.
(b) If the certificate of correction corrects original articles, the certificate of correction shall be either an officers’ certificate or a certificate signed and verified by the incorporators, or a majority of them. If the certificate of correction corrects an agreement of merger or an officers’ certificate accompanying an agreement of merger, the certificate of correction shall be an officers’ certificate of the surviving corporation only. In all other instances, the certificate of correction shall be either an officer’s certificate or a certificate signed and verified as provided in this division with respect to the agreement, certificate or other instrument being corrected.

(1) The name or names of the corporation or corporations.

(2) The date the agreement, certificate or other instrument being corrected was filed.

(3) The provision in the agreement, certificate or other instrument as corrected and, if the execution was defective, wherein it was defective.

(4) If applicable, that the certificate does not alter the wording of any resolution or written consent which was in fact adopted by the board or the shareholders.

(d) A provision of the articles, amended articles, restated articles, or certificate of determination being corrected by a certificate of correction shall be identified in the certificate of correction in accordance with subdivision (a) of Section 907.

(e) The filing of the certificate of correction shall not alter the effective time of the agreement, certificate or instrument being corrected, which shall remain as its original effective time, and such filing shall not affect any right or liability accrued or incurred before such filing, except that any right or liability accrued or incurred by reason of the error or defect being corrected shall be extinguished by such filing if the person having that right has not detrimentally relied on the original instrument.

(Amended by Stats. 1988, Ch. 919, Sec. 1.)

109.5. (a) Provisions of the articles described in paragraph (3) of subdivision (g) of Section 202 and subdivisions (a) and (b) of Section 204 may be made dependent upon facts ascertainable outside the articles, if the manner in which those facts shall operate upon those provisions is clearly and expressly set forth in the articles. Similarly, any of the terms of an agreement of merger pursuant to Section 1101 may be made dependent upon facts ascertainable outside that agreement, if the manner in which those facts shall operate upon the terms of the agreement is clearly and expressly set forth in the agreement of merger.

(b) Notwithstanding subdivision (a), when any provisions or terms of articles or an agreement of merger are made dependent upon facts ascertainable outside the filed instrument through a reference to an agreement or similar document, the corporation filing that instrument shall (1) maintain at its principal executive office a copy of any such agreement or document and all amendments and (2) provide to its shareholders, in the case of articles, or to shareholders of any constituent corporation, in the case of an agreement of merger, a copy of them upon written request and without charge.

(c) If the reference to an agreement or contract is a reference to an agreement or contract to which the corporation is a party (a “referenced agreement” in this section), any amendment or revision of the referenced agreement requires shareholder approval, in addition to approvals otherwise required, in the following instances and no other:

(1) If the amendment or revision of the referenced agreement would result in a material change in the rights, preferences, privileges, or restrictions of a class or series of shares, the amendment or revision of the referenced agreement is required to be approved by the outstanding shares (Section 152) of that class or series.

(2) If the amendment or revision of the referenced agreement would result in a material change in the rights or liabilities of any class or series of shares with respect to the subject matter of paragraph (1), (2), (3), (5), or (9) of subdivision (a) of Section 204, the amendment or revision of the referenced agreement is required to be approved by the outstanding shares (Section 152) of that class or series.

(3) If the amendment or revision of the referenced agreement would result in a material change in the restrictions on transfer or hypothecation of any class or series of shares, the amendment or revision of the referenced agreement is required to be approved by the outstanding shares (Section 152) of that class or series.

(4) If the amendment or revision of the referenced agreement would result in a change of any of the principal terms of an agreement of merger, the amendment or revision of the referenced agreement is required to be approved in the same manner as required by Section 1104 for a change in the principal terms of an agreement of merger.

(Amended by Stats. 2014, Ch. 834, Sec. 1. (SB 1041) Effective January 1, 2015.)

110. (a) Upon receipt of any instrument by the Secretary of State for filing pursuant to this division, if it conforms to law, it shall be filed by, and in the office of, the Secretary of State and the date of filing endorsed thereon. Except for instruments filed pursuant to Section 1502, the date of filing shall be the date the instrument is received by the Secretary of State unless the instrument provides that it is to be withheld from filing until a future date or unless in the judgment of the Secretary of State the filing is intended to be coordinated with the filing of some other corporate document which cannot be filed. The Secretary of State shall file a document as of any requested future date not more than 90 days after its receipt, including a Saturday, Sunday, or legal holiday, if the document is received in the Secretary of State’s office at least one business day prior to the requested date of filing. An instrument does not fail to conform to law because it is not accompanied by the full filing fee if the unpaid portion of the fee does not exceed the limits established by the policy of the Secretary of State for extending credit in these cases.

(b) If the Secretary of State determines that an instrument submitted for filing or otherwise submitted does not conform to law and returns it to the person submitting it, the instrument may be resubmitted accompanied by a written opinion of the member of the State Bar of California submitting the instrument, or representing the person submitting it, to the effect that the specific provision of the instrument objected to by the Secretary of State does conform to law and stating the points and authorities upon which the opinion is based. The Secretary of State shall rely, with respect to any disputed point of law (other than the application of Sections 201, 2101, and 2106), upon that written opinion in determining whether the instrument conforms to law. The date of filing in that case shall be the date the instrument is received on resubmission.

(c) Any instrument filed with respect to a corporation (other than original articles) may provide that it is to become effective not more than 90 days subsequent to its filing date. In case such a delayed effective date is specified, the instrument may be prevented from becoming effective by a certificate stating that by appropriate corporate action it has been revoked and is null and void, executed in the same manner as the original instrument and filed before the specified effective date. In the case of a merger agreement, the certificate revoking the earlier filing need only be executed on behalf of one of the constituent corporations. If no revocation certificate is filed, the instrument becomes effective on the date specified.

(Amended by Stats. 2012, Ch. 494, Sec. 3. (SB 1532) Effective January 1, 2013.)

110.5. The Secretary of State may cancel the filing of articles of a domestic corporation or the filing of a statement and designation by a foreign corporation if a check or other remittance accepted in payment of the filing fee or franchise tax is not paid upon presentation. Upon receiving written notification that the item presented for payment has not been honored for payment, the Secretary of State shall give written notice of the applicability of this section and the cancellation date which shall be not less than 20 days from the date of mailing the written notice as certified by the Secretary of State, to the agent for service of process or to the person submitting the instrument. Thereafter, if the amount has not been paid by cashier’s check or equivalent before the date of cancellation as stated in the written notice of cancellation, the cancellation shall thereupon be effective. The written notice shall be given 70 days or less after the original filing.

(Amended by Stats. 1988, Ch. 508, Sec. 1.)

111. All references in this division to the voting of shares include the voting of other securities given voting rights in the articles pursuant to subdivision (a)(7) of Section 204.

(Repealed and added by Stats. 1975, Ch. 682.)

112. If the articles provide for more or less than one vote for any share on any matter, the references in Sections 152, 153 and 602 to a majority or other proportion of shares means, as to such matter, a majority or other proportion of the votes entitled to be cast. Whenever in this division shares are disqualified from voting on any matter, they shall not be considered outstanding for the determination of a quorum at any meeting to act upon, or the required vote to approve action upon, that matter under any other provision of this division or the articles or bylaws.

(Repealed and added by Stats. 1975, Ch. 682.)

113. Any reference in this division to mailing means first-class mail, postage prepaid, unless registered or some other form of mail is specified or permitted. Registered mail includes certified mail.

(Amended by Stats. 1978, Ch. 370.)
114. All references in this division to financial statements, balance sheets, income statements, and statements of cashflows, and all references to assets, liabilities, earnings, retained earnings, and similar accounting items of a corporation mean those financial statements or comparable statements or items prepared or determined in conformity with generally accepted accounting principles then applicable, fairly presenting in conformity with generally accepted accounting principles the matters that they purport to present, subject to any specific accounting treatment required by a particular section of this division. Unless otherwise expressly stated, all references in this division to financial statements mean, in the case of a corporation that has subsidiaries, consolidated statements of the corporation and each of its subsidiaries as are required to be included in the consolidated statements under generally accepted accounting principles then applicable and all references to accounting items mean the items determined on a consolidated basis in accordance with the consolidated financial statements. Financial statements other than annual statements may be condensed or otherwise presented as permitted by authoritative accounting pronouncements.

(Amended by Stats. 2006, Ch. 214, Sec. 1. Effective January 1, 2007.)

115. As used in this division, independent accountant means a certified public accountant or public accountant who is independent of the corporation as determined in accordance with generally accepted auditing standards and who is engaged to audit financial statements of the corporation or perform other accounting services.

(Amended by Stats. 1976, Ch. 641.)

116. Nothing contained in this division modifies the provisions of subdivision (h) of Section 25102 or the conditions provided therein to the availability of an exemption under that subdivision.

(Repealed and added by Stats. 1975, Ch. 682.)

117. Any requirement in this division for a vote of each class of outstanding shares means such a vote regardless of limitations or restrictions upon the voting rights thereof, unless expressly limited to voting shares.

(Added by Stats. 1976, Ch. 641.)

118. Any reference in this division to the time a notice is given or sent means, unless otherwise expressly provided, any of the following:

(a) The time a written notice by mail is deposited in the United States mails, postage prepaid.

(b) The time any other written notice, including facsimile, telegram, or electronic mail message, is personally delivered to the recipient or is delivered to a common carrier for transmission, or actually transmitted by the person giving the notice by electronic means, to the recipient.

(c) The time any oral notice is communicated, in person or by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, or wireless, to the recipient, including the recipient’s designated voice mailbox or address on the system, or to a person at the office of the recipient who the person giving the notice has reason to believe will promptly communicate it to the recipient.

(Amended by Stats. 2006, Ch. 538, Sec. 78. Effective January 1, 2007.)

149. “Acknowledged” means that an instrument is either:

(a) Formally acknowledged as provided in Article 3 (commencing with Section 1180) of Chapter 4 of Title 4 of Part 4 of Division 2 of the Civil Code, or

(b) Accompanied by a declaration in writing signed by the persons executing the same that they are such persons and that the instrument is the act and deed of the person or persons executing the same.

Any certificate of acknowledgment taken without this state before a notary public or a judge or clerk of a court of record having an official seal need not be further authenticated.

(Amended by Stats. 1976, Ch. 641.)

150. A corporation is an “affiliate” of, or a corporation is “affiliated” with, another specified corporation if it directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with the other specified corporation.

(Added by Stats. 1975, Ch. 682.)

151. “Approved by (or approval of) the board” means approved or ratified by the vote of the board or by the vote of a committee authorized to exercise the powers of the board, except as to matters not within the competence of the committee under Section 311.

(Added by Stats. 1975, Ch. 682.)

152. “Approved by (or approval of) the outstanding shares” means approved by the affirmative vote of a majority of the outstanding shares entitled to vote. Such approval shall include the affirmative vote of a majority of the outstanding shares of each class or series entitled, by any provision of the articles or of this division, to vote as a class or series on the subject matter being voted upon and shall also include the affirmative vote of such greater proportion (including all) of the outstanding shares of any class or series if such greater proportion is required by the articles or this division.

(Amended by Stats. 1976, Ch. 641.)

153. “Approved by (or approval of) the shareholders” means approved or ratified by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute at least a majority of the required quorum) or by the written consent of shareholders (Section 603) or by the affirmative vote or written consent of such greater proportion (including all) of the shares of any class or series as may be provided in the articles or in this division for all or any specified shareholder action.

(Amended by Stats. 1977, Ch. 235.)

154. “Articles” includes the articles of incorporation, amendments thereto, amended articles, restated articles, certificate of incorporation and certificates of determination. All references in this division to a vote required by the “articles” include, in the case of a close corporation (Section 158), any vote required by a shareholders’ agreement.

(Amended by Stats. 1976, Ch. 641.)

155. “Board” means the board of directors of the corporation.

(Added by Stats. 1975, Ch. 682.)

156. “Certificate of determination” means a certificate executed and filed pursuant to Section 401.

(Added by Stats. 1975, Ch. 682.)

156.1. “Certificated security” means a share (Section 184), as defined in paragraph (4) of subdivision (a) of Section 8102 of, or an obligation of the issuer as described in paragraph (15) of subdivision (a) of, the Commercial Code.

(Amended by Stats. 1996, Ch. 497, Sec. 25. Effective January 1, 1997.)

156.5. “Certificate of Redomestication” is the document by which the appropriate official of another state approves the redomestication of a California insurer.

(Added by Stats. 1995, Ch. 702, Sec. 1. Effective January 1, 1996.)

156.6. All references in this division to “chairperson of the board” shall be deemed to refer to all permissible titles for the chairperson of the board, as permitted by Section 312.

(Added by Stats. 2015, Ch. 98, Sec. 1. (SB 351) Effective January 1, 2016.)

157. “Chapter” refers to a chapter of this Division 1 of Title 1 of the Corporations Code, unless otherwise expressly stated.

(Added by Stats. 1975, Ch. 682.)

158. (a) “Close corporation” means a corporation, including a close social purpose corporation, whose articles contain, in addition to the provisions required by Section 202, a provision that all of the corporation’s issued shares of all classes shall be held of record by not more than a specified number of persons, not exceeding 35, and a statement, “This corporation is a close corporation.”

(b) The special provisions referred to in subdivision (a) may be included in the articles by amendment, but if such amendment is adopted after the issuance of shares only by the affirmative vote of all of the issued and outstanding shares of all classes.

(c) The special provisions referred to in subdivision (a) may be deleted from the articles by amendment, or the number of shareholders specified may be changed by amendment, but if such amendment is adopted after the issuance of shares, only by the affirmative vote of at least two-thirds of each class of the outstanding shares; provided, however, that the articles may provide for a lesser vote, but not less than a majority of the outstanding shares, or may deny a vote to any class, or both.

(d) In determining the number of shareholders for the purposes of the provision in the articles authorized by this section, spouses and the personal representative of either shall be counted as one regardless of how shares may be held by either or both of them, a trust or personal representative of a decedent holding shares shall be counted as one regardless of the number of trustees or beneficiaries, and a partnership or corporation or business association holding shares shall be counted as one (except that any such trust or entity the primary purpose of which was the acquisition or voting of the shares shall be counted according to the number of beneficial interests therein).

(e) A corporation shall cease to be a close corporation upon the filing of an amendment to its articles pursuant to subdivision (c) or, if it shall have more than the maximum number of holders of record of its shares specified in its articles as a result of an inter vivos transfer of shares which is not void under subdivision (d) of Section 418, the transfer of shares on distribution by will or pursuant to the laws of descent and distribution, the dissolution of a partnership or corporation or business association, or the termination of a trust which holds shares, by court decree upon dissolution of a marriage or otherwise by operation of law. Promptly upon acquiring more than the specified number of holders of record of its shares, a close corporation shall execute and file an amendment to its articles deleting the special provisions referred to in subdivision (a) and deleting any other provisions not permissible for a corporation which is not a close corporation, which amendment shall be promptly approved and filed by the board and need not be approved by the outstanding shares.

(f) Nothing contained in this section shall invalidate any agreement among the shareholders to vote for the deletion from the articles of the special provisions referred to in subdivision (a) upon the lapse of a specified period of time or upon the occurrence of a certain event or condition or otherwise.

(g) The following sections contain specific references to close corporations: Sections 186, 202, 204, 300, 418, 421, 1111, 1201, 1800, and 1904.

(Amended by Stats. 2016, Ch. 50, Sec. 20. (SB 1005) Effective January 1, 2017.)

159. “Common shares” means shares which have no preference over any other shares with respect to distribution of assets on liquidation or with respect to payment of dividends.

(Added by Stats. 1975, Ch. 682.)

160. (a) Except as provided in subdivision (b), “control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a corporation.

(b) “Control” in Sections 181, 1001, and 1200 means the ownership directly or indirectly of shares or equity securities possessing more than 50 percent of the voting power of a domestic corporation, a foreign corporation, or an other business entity.

(Amended by Stats. 1999, Ch. 437, Sec. 1. Effective January 1, 2000.)

161. “Constituent corporation” means a corporation which is merged with or into one or more other corporations or one or more other business entities and includes a surviving corporation.

(Amended by Stats. 1994, Ch. 1200, Sec. 9. Effective September 30, 1994.)

161.5. “Constituent limited partnership” means a limited partnership which is merged with one or more corporations and includes the surviving limited partnership.

(Added by Stats. 1993, Ch. 543, Sec. 2. Effective January 1, 1994.)

161.7. “Constituent other business entity” means an other business entity that is merged with or into one or more corporations and includes the surviving other business entity.

(Added by Stats. 1994, Ch. 1200, Sec. 10. Effective September 30, 1994.)

161.9. “Conversion” means a conversion pursuant to Chapter 11.5 (commencing with Section 1150).

(Added by Stats. 2002, Ch. 480, Sec. 1. Effective January 1, 2003.)

162. “Corporation”, unless otherwise expressly provided, refers only to a corporation organized under this division or a corporation subject to this division under the provisions of subdivision (a) of Section 102.

(Amended by Stats. 1976, Ch. 641.)

163. “Corporation subject to the Banking Law” (Division 1.1 (commencing with Section 1000) of the Financial Code) means:

(a) Any corporation which, with the approval of the Commissioner of Business Oversight, is incorporated for the purpose of engaging in, or which is authorized by the Commissioner of Business Oversight to engage in, the commercial banking business under Division 1.1 (commencing with Section 1000) of the Financial Code.

(b) Any corporation which, with the approval of the Commissioner of Business Oversight, is incorporated for the purpose of engaging in, or which is authorized by the Commissioner of Business Oversight to engage in, the industrial banking business under Division 1.1 (commencing with Section 1000) of the Financial Code.

(c) Any corporation (other than a corporation described in subdivision (d)) which, with the approval of the Commissioner of Business Oversight, is incorporated for the purpose of engaging in, or which is authorized by the Commissioner of Business Oversight to engage in, the trust business under Division 1.1 (commencing with Section 1000) of the Financial Code.

(d) Any corporation which is authorized by the Commissioner of Business Oversight and the Commissioner of Insurance to maintain a title insurance department to engage in title insurance business and a trust department to engage in trust business; or

(e) Any corporation which, with the approval of the Commissioner of Business Oversight, is incorporated for the purpose of engaging in, or which is authorized by the Commissioner of Business Oversight to engage in, business under Article 1 (commencing with Section 1850), Chapter 21, Division 1.1 of the Financial Code.

(Amended by Stats. 2014, Ch. 401, Sec. 16. (AB 2763) Effective January 1, 2015.)

163.1. For purposes of subdivision (b) of Section 500 and subdivision (b) of Section 506, “cumulative dividends in arrears” means only cumulative dividends that have not been paid as required on a scheduled payment date set forth in, or determined pursuant to, the articles of incorporation, regardless of whether those dividends had been declared prior to that scheduled payment date.

(Amended by Stats. 2011, Ch. 203, Sec. 1. (AB 571) Effective January 1, 2012.)

164. “Directors” means natural persons designated in the articles as such or elected by the incorporators and natural persons designated, elected or appointed by any other name or title to act as directors, and their successors.

(Amended by Stats. 1976, Ch. 641.)

165. “Disappearing corporation” means a constituent corporation which is not the surviving corporation.

(Added by Stats. 1975, Ch. 682.)

165.5. “Disappearing limited partnership” means a constituent limited partnership which is not the surviving limited partnership.

(Added by Stats. 1993, Ch. 543, Sec. 3. Effective January 1, 1994.)

166. “Distribution to its shareholders” means the transfer of cash or property by a corporation to its shareholders without consideration, whether by way of dividend or otherwise, except a dividend in shares of the corporation, or the purchase or redemption of its shares for cash or property, including the transfer, purchase, or redemption by a subsidiary of the corporation. The time of any distribution by way of dividend shall be the date of declaration thereof and the time of any distribution by purchase or redemption of shares shall be the date cash or property is transferred by the corporation, whether or not pursuant to a contract of an earlier date; provided, that where a debt obligation that is a security (as defined in Section 8102 of the Commercial Code) is issued in exchange for shares the time of the distribution is the date when the corporation acquires the shares in the exchange. In the case of a sinking fund payment, cash or property is transferred within the meaning of this section at the time that it is delivered to a trustee for the holders of preferred shares to be used for the redemption of the shares or physically segregated by the corporation in trust for that purpose. “Distribution to its shareholders” shall not include (a) satisfaction of a final judgment of a court or tribunal of appropriate jurisdiction ordering the rescission of the issuance of shares, (b) the rescission by a corporation of the issuance of it shares, if the board determines (with any director who is, or would be, a party to the transaction not being entitled to vote) that (1) it is reasonably likely that the holder or holders of the shares in question could legally enforce a claim for the rescission, (2) that the rescission is in the best interests of the corporation, and (3) the corporation is likely to be able to meet its liabilities (except those for which payment is otherwise adequately provided) as they mature, or (c) the repurchase by a corporation of its shares issued by it pursuant to Section 408, if the board determines (with any director who is, or would be, a party to the transaction not being entitled to vote) that (1) the repurchase is in the best interests of the corporation and that (2) the corporation is likely to be able to meet its liabilities (except those for which payment is otherwise adequately provided) as they mature.

(Amended by Stats. 1996, Ch. 497, Sec. 26. Effective January 1, 1997.)

167. “Domestic corporation” means a corporation formed under the laws of this state.

(Added by Stats. 1975, Ch. 682.)

167.3. “Domestic limited liability company” means a limited liability company as defined in subdivision (t) of Section 17000.

(Added by Stats. 1994, Ch. 1200, Sec. 11. Effective September 30, 1994.)

167.5. “Domestic limited partnership” means any limited partnership formed under the laws of this state.

(Amended by Stats. 2006, Ch. 495, Sec. 4. Effective January 1, 2007.)

167.7. “Domestic other business entity” means an other business entity organized under the laws of this state.

(Added by Stats. 1994, Ch. 1200, Sec. 12. Effective September 30, 1994.)

167.8. “Disappearing other business entity” means a constituent other business entity that is not the surviving other business entity.

(Added by Stats. 1994, Ch. 1200, Sec. 13. Effective September 30, 1994.)

168. “Equity security” in Sections 181, 1001, 1113, 1200, and 1201 means any share or membership of a domestic or foreign corporation; any partnership interest, membership interest, or equivalent equity interest in an other business entity; and any security convertible with or without consideration into, or any warrant or right to subscribe to or purchase, any of the foregoing.

(Amended by Stats. 1999, Ch. 437, Sec. 2. Effective January 1, 2000.)

169. “Filed”, unless otherwise expressly provided, means filed in the office of the Secretary of State.

(Added by Stats. 1975, Ch. 682.)

170. “Foreign association” means a business association organized as a trust under the laws of a foreign jurisdiction.

(Added by Stats. 1975, Ch. 682.)

171. “Foreign corporation” means any corporation other than a domestic corporation and, when used in Section 191, Section 201, Section 2203, Section 2258 and Section 2259 and Chapter 21, includes a foreign association, unless otherwise stated. “Foreign corporation” as used in Chapter 21 does not include a corporation or association chartered under the laws of the United States.

(Amended by Stats. 1977, Ch. 235.)

171.03. “Foreign limited liability company” means a foreign limited liability company as defined in subdivision (j) of Section 17701.02.

(Amended by Stats. 2012, Ch. 419, Sec. 5. (SB 323) Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.)

171.05. “Foreign limited partnership” means any limited partnership, including a limited liability limited partnership, formed under the laws of any state other than this state or of the District of Columbia or under the laws of a foreign country.

(Amended by Stats. 2006, Ch. 495, Sec. 5. Effective January 1, 2007.)

171.07. “Foreign other business entity” means an other business entity organized under the laws of any state, other than this state, or of the District of Columbia or under the laws of a foreign country.

(Added by Stats. 1994, Ch. 1200, Sec. 15. Effective September 30, 1994.)

171.08. “Social purpose corporation” means any social purpose corporation formed under Division 1.5 (commencing with Section 2500).

(Amended by Stats. 2014, Ch. 694, Sec. 3. (SB 1301) Effective January 1, 2015.)

171.1. “Initial transaction statement” means a statement signed by or on behalf of the issuer sent to the new registered owner or registered pledgee, and “written statements,” when used in connection with uncertificated securities, means the written statements that are periodically, or at the request of the registered owner or registered pledgee, sent by the issuer to the registered owner or registered pledgee describing the issue of which the uncertificated security is a part.

(Amended by Stats. 1996, Ch. 497, Sec. 27. Effective January 1, 1997.)

171.3. “Limited liability company” means a limited liability company as defined in subdivision (k) of Section 17701.02.

(Amended by Stats. 2012, Ch. 419, Sec. 6. (SB 323) Effective January 1, 2013. Operative January 1, 2014, by Sec. 32 of Ch. 419.)

171.5. “Limited partnership” means a partnership formed by two or more persons and having one or more general partners and one or more limited partners, or their equivalents under any name.

(Added by Stats. 1993, Ch. 543, Sec. 6. Effective January 1, 1994.)

172. “Liquidation price” or “liquidation preference” means amounts payable on shares of any class upon voluntary or involuntary dissolution, winding up or distribution of the entire assets of the corporation, including any cumulative dividends accrued and unpaid, in priority to shares of another class or classes.

(Added by Stats. 1975, Ch. 682.)

173. “Officers’ certificate” means a certificate signed and verified by the chairperson of the board, the president or any vice president and by the secretary, the chief financial officer, the treasurer or any assistant secretary or assistant treasurer.

(Amended by Stats. 2015, Ch. 98, Sec. 2. (SB 351) Effective January 1, 2016.)

174. “On the certificate” means that a statement appears on the face of a share certificate or on the reverse thereof with a reference thereto on the face or, in the case of an uncertificated security, that the applicable provisions of subdivision (a) of Section 8202 and Section 8204 of the Commercial Code have been complied with.

(Amended by Stats. 1996, Ch. 497, Sec. 28. Effective January 1, 1997.)

174.5. “Other business entity” means a domestic or foreign limited liability company, limited partnership, general partnership, business trust, real estate investment trust, unincorporated association (other than a nonprofit association), or a domestic reciprocal insurer organized after 1974 to provide medical malpractice insurance as set forth in Article 16 (commencing with Section 1550) of Chapter 3 of Part 2 of Division 1 of the Insurance Code. As used herein, “general partnership” means a “partnership” as defined in subdivision (7) of Section 16101; “business trust” means a business organization formed as a trust; “real estate investment trust” means a “real estate investment trust” as defined in subsection (a) of Section 856 of the Internal Revenue Code of 1986, as amended; and “unincorporated association” has the meaning set forth in Section 18035.

(Amended by Stats. 2004, Ch. 178, Sec. 4. Effective January 1, 2005.)

175. Except as used in Sections 1001, 1101, and 1113, a “parent” of a specified corporation is an affiliate in control (Section 160(a)) of that corporation directly or indirectly through one or more intermediaries. In Sections 1001, 1101, and 1113, “parent” means a person in control (Section 160(b)) of a domestic corporation, a foreign corporation, or an other business entity.

(Amended by Stats. 1999, Ch. 437, Sec. 4. Effective January 1, 2000.)

176. “Preferred shares” means shares other than common shares.

(Added by Stats. 1975, Ch. 682.)

177. “Proper county” means the county where the principal executive office of the corporation is located or, if the principal executive office of the corporation is not located in this state, or the corporation has no such office, the County of Sacramento.

(Added by Stats. 1975, Ch. 682.)

178. “Proxy” means a written authorization signed or an electronic transmission authorized by a shareholder or the shareholder’s attorney in fact giving another person or persons power to vote with respect to the shares of such shareholder. “Signed” for the purpose of this section means the placing of the shareholder’s name or other authorization on the proxy (whether by manual signature, typewriting, telegraphic, or electronic transmission or otherwise) by the shareholder or the shareholder’s attorney in fact.

A proxy may be transmitted by an oral telephonic transmission if it is submitted with information from which it may be determined that the proxy was authorized by the shareholder, or his or her attorney in fact.

(Amended by Stats. 1991, Ch. 308, Sec. 1.)

179. “Proxyholder” means the person or persons to whom a proxy is given.

(Added by Stats. 1975, Ch. 682.)

180. “Redemption price” means the amount or amounts (in cash, property or securities, or any combination thereof) payable on shares of any class or series upon the redemption of the shares. Unless otherwise expressly provided, the redemption price is payable in cash.

(Added by Stats. 1975, Ch. 682.)

180.5. “Redomestication” means the transfer of an insurer’s place of incorporation from another state to this state or from this state to another state.

(Added by Stats. 1995, Ch. 702, Sec. 2. Effective January 1, 1996.)

181. “Reorganization” means either:

(a) A merger pursuant to Chapter 11 (commencing with Section 1100) other than a short-form merger (a “merger reorganization”).

(b) The acquisition by one domestic corporation, foreign corporation, or other business entity in exchange, in whole or in part, for its equity securities (or the equity securities of a domestic corporation, a foreign corporation, or an other business entity which is in control of the acquiring entity) of equity securities of another domestic corporation, foreign corporation, or other business entity if, immediately after the acquisition, the acquiring entity has control of the other entity (an “exchange reorganization”).

(c) The acquisition by one domestic corporation, foreign corporation, or other business entity in exchange in whole or in part for its equity securities (or the equity securities of a domestic corporation, a foreign corporation, or an other business entity which is in control of the acquiring entity) or for its debt securities (or debt securities of a domestic corporation, foreign corporation, or other business entity which is in control of the acquiring entity) which are not adequately secured and which have a maturity date in excess of five years after the consummation of the reorganization, or both, of all or substantially all of the assets of another domestic corporation, foreign corporation, or other business entity (a “sale-of-assets reorganization”).

(Amended by Stats. 1999, Ch. 437, Sec. 5. Effective January 1, 2000.)

182. “Reverse stock split” means the pro rata combination of all the outstanding shares of a class into a smaller number of shares of the same class by an amendment to the articles stating the effect on outstanding shares.

(Added by Stats. 1975, Ch. 682.)

183. “Series” of shares means those shares within a class which have the same rights, preferences, privileges and restrictions but which differ in one or more rights, preferences, privileges or restrictions from other shares within the same class. Certificated securities and uncertificated securities do not constitute different series if the only difference is certificated and uncertificated status.

(Amended by Stats. 1986, Ch. 766, Sec. 9.)

183.5. “Share exchange tender offer” means any acquisition by one corporation in exchange in whole or in part for its equity securities (or the equity securities of a corporation which is in control of the acquiring corporation) of shares of another corporation, other than an exchange reorganization (subdivision (b) of Section 181).

(Added by Stats. 1989, Ch. 1116, Sec. 4. Effective September 30, 1989.)

184. “Shares” means the units into which the proprietary interests in a corporation are divided in the articles.

(Added by Stats. 1975, Ch. 682.)

185. “Shareholder” means one who is a holder of record of shares.

(Added by Stats. 1975, Ch. 682.)

186. “Shareholders’ agreement” means a written agreement among all of the shareholders of a close corporation, or if a close corporation has only one shareholder between such shareholder and the corporation, as authorized by subdivision (b) of Section 300.

(Amended by Stats. 1976, Ch. 641.)

187. “Short-form merger” means a merger pursuant to Section 1110.

(Added by Stats. 1975, Ch. 682.)

188. “Stock split” means the pro rata division, otherwise than by a share dividend, of all the outstanding shares of a class into a greater number of shares of the same class by an amendment to the articles stating the effect on outstanding shares.

(Added by Stats. 1975, Ch. 682.)

189. (a) Except as provided in subdivision (b), “subsidiary” of a specified corporation means a corporation shares of which possessing more than 50 percent of the voting power are owned directly or indirectly through one or more subsidiaries by the specified corporation.

(b) For the purpose of Section 703, “subsidiary” of a specified corporation means a corporation shares of which possessing more than 25 percent of the voting power are owned directly or indirectly through one or more subsidiaries as defined in subdivision (a) by the specified corporation.

(Amended by Stats. 1976, Ch. 641.)

190. “Surviving corporation” means a corporation into which one or more other corporations or one or more other business entities are merged.

(Amended by Stats. 1994, Ch. 1200, Sec. 18. Effective September 30, 1994.)

190.5. “Surviving limited partnership” means a limited partnership into which one or more other limited partnerships or one or more corporations are merged.

(Added by Stats. 1993, Ch. 543, Sec. 8. Effective January 1, 1994.)

190.7. “Surviving other business entity” means an other business entity into which one or more other business entities or one or more corporations are merged.

(Added by Stats. 1994, Ch. 1200, Sec. 19. Effective September 30, 1994.)

191. (a) For the purposes of Chapter 21 (commencing with Section 2100), “transact intrastate business” means entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce.

(b) A foreign corporation shall not be considered to be transacting intrastate business merely because its subsidiary transacts intrastate business or merely because of its status as any one or more of the following:

(1) A shareholder of a domestic corporation.

(2) A shareholder of a foreign corporation transacting intrastate business.

(3) A limited partner of a domestic limited partnership.

(4) A limited partner of a foreign limited partnership transacting intrastate business.

(5) A member or manager of a domestic limited liability company.

(6) A member or manager of a foreign limited liability company transacting intrastate business.

(c) Without excluding other activities that may not constitute transacting intrastate business, a foreign corporation shall not be considered to be transacting intrastate business within the meaning of subdivision (a) solely by reason of carrying on in this state any one or more of the following activities:

(1) Maintaining or defending any action or suit or any administrative or arbitration proceeding, or effecting the settlement thereof or the settlement of claims or disputes.

(2) Holding meetings of its board or shareholders or carrying on other activities concerning its internal affairs.

(3) Maintaining bank accounts.

(4) Maintaining offices or agencies for the transfer, exchange, and registration of its securities or depositaries with relation to its securities.

(5) Effecting sales through independent contractors.

(6) Soliciting or procuring orders, whether by mail or through employees or agents or otherwise, where those orders require acceptance outside this state before becoming binding contracts.

(7) Creating evidences of debt or mortgages, liens or security interests on real or personal property.

(8) Conducting an isolated transaction completed within a period of 180 days and not in the course of a number of repeated transactions of like nature.

(d) Without excluding other activities that may not constitute transacting intrastate business, any foreign lending institution, including, but not limited to: any foreign banking corporation, any foreign corporation all of the capital stock of which is owned by one or more foreign banking corporations, any foreign savings and loan association, any foreign insurance company or any foreign corporation or association authorized by its charter to invest in loans secured by real and personal property, whether organized under the laws of the United States or of any other state, district or territory of the United States, shall not be considered to be doing, transacting, or engaging in business in this state solely by reason of engaging in any or all of the following activities either on its own behalf or as a trustee of a pension plan, employee profit sharing or retirement plan, testamentary or inter vivos trust, or in any other fiduciary capacity:

(1) The acquisition by purchase, by contract to purchase, by making of advance commitments to purchase or by assignment of loans, secured or unsecured, or any interest therein, if those activities are carried on from outside this state by the lending institution.

(2) The making by an officer or employee of physical inspections and appraisals of real or personal property securing or proposed to secure any loan, if the officer or employee making any physical inspection or appraisal is not a resident of and does not maintain a place of business for that purpose in this state.

(3) The ownership of any loans and the enforcement of any loans by trustee’s sale, judicial process, or deed in lieu of foreclosure or otherwise.

(4) The modification, renewal, extension, transfer, or sale of loans or the acceptance of additional or substitute security therefor or the full or partial release of the security therefor or the acceptance of substitute or additional obligors thereon, if the activities are carried on from outside this state by the lending institution.

(5) The engaging by contractual arrangement of a corporation, firm, or association, qualified to do business in this state, that is not a subsidiary or parent of the lending institution and that is not under common management with the lending institution, to make collections and to service loans in any manner whatsoever, including the payment of ground rents, taxes, assessments, insurance, and the like and the making, on behalf of the lending institution, of physical inspections and appraisals of real or personal property securing any loans or proposed to secure any loans, and the performance of any such engagement.

(6) The acquisition of title to the real or personal property covered by any mortgage, deed of trust, or other security instrument by trustee’s sale, judicial sale, foreclosure or deed in lieu of foreclosure, or for the purpose of transferring title to any federal agency or instrumentality as the insurer or guarantor of any loan, and the retention of title to any real or personal property so acquired pending the orderly sale or other disposition thereof.

(7) The engaging in activities necessary or appropriate to carry out any of the foregoing activities.

Nothing contained in this subdivision shall be construed to permit any foreign banking corporation to maintain an office in this state otherwise than as provided by the laws of this state or to limit the powers conferred upon any foreign banking corporation as set forth in the laws of this state or to permit any foreign lending institution to maintain an office in this state except as otherwise permitted under the laws of this state.

(Amended by Stats. 2019, Ch. 143, Sec. 21. (SB 251) Effective January 1, 2020.)

191.1. “Uncertificated security” means a share (Section 184), or an obligation of the issuer, described in paragraphs (15) and (18) of subdivision (a) of Section 8102 of the Commercial Code.

(Amended by Stats. 1996, Ch. 497, Sec. 29. Effective January 1, 1997.)

192. “Vacancy” when used with respect to the board means any authorized position of director which is not then filled by a duly elected director, whether caused by death, resignation, removal, change in the authorized number of directors (by the board or the shareholders) or otherwise.

(Amended by Stats. 1976, Ch. 641.)

193. “Verified” means that the statements contained in a certificate or other document are declared to be true of the own knowledge of the persons executing the same in either:

(a) An affidavit signed by them under oath before an officer authorized by the laws of this state or of the place where it is executed to administer oaths, or

(b) A declaration in writing executed by them “under penalty of perjury” and stating the date and place (whether within or without this state) of execution.

Any affidavit sworn to without this state before a notary public or a judge or clerk of a court of record having an official seal need not be further authenticated.

(Added by Stats. 1975, Ch. 682.)

194. “Vote” includes authorization by written consent, subject to the provisions of subdivision (b) of Section 307 and subdivision (d) of Section 603.

(Repealed and added by Stats. 1993, Ch. 128, Sec. 3. Effective January 1, 1994.)

194.5. “Voting power” means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event which has not yet occurred. In any case where different classes of shares are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors which the shares in question (whether of one or more classes) have the power to elect in an election at which all shares then entitled to vote for the election of any directors are voted.

(Added by Stats. 1976, Ch. 641.)

194.7. “Voting shift” means a change, pursuant to or by operation of a provision of the articles, in the relative rights of the holders of one or more classes or series of shares, voting as one or more separate classes or series, to elect one or more directors.

(Added by Stats. 1988, Ch. 495, Sec. 1.)

195. “Written” or “in writing” includes facsimile, telegraphic, and other electronic communication when authorized by this code, including an electronic transmission by a corporation that satisfies the requirements of Section 20.

CHAPTER 2. Organization and Bylaws [200 - 213] (Chapter 2 added by Stats. 1975, Ch. 682.)

200. (a) One or more natural persons, partnerships, associations or corporations, domestic or foreign, may form a corporation under this division by executing and filing articles of incorporation.

(b) If initial directors are named in the articles, each director named in the articles shall sign and acknowledge the articles; if initial directors are not named in the articles, the articles shall be signed by one or more persons described in subdivision (a) who thereupon are the incorporators of the corporation.

(c) The corporate existence begins upon the filing of the articles and continues perpetually, unless otherwise expressly provided by law or in the articles.

(Amended by Stats. 1983, Ch. 1223, Sec. 1.)

200.5. (a) An existing business association organized as a trust under the laws of this state or of a foreign jurisdiction may incorporate under this division upon approval by its board of trustees or similar governing body and approval by the affirmative vote of a majority of the outstanding voting shares of beneficial interest (or such greater proportion of the outstanding shares of beneficial interest or the vote of such other classes of shares of beneficial interest as may be specifically required by its declaration of trust or bylaws) and the filing of articles of incorporation with certificate attached pursuant to this chapter.

(b) In addition to the matters required to be set forth in the articles pursuant to Section 202, the articles in the case of an incorporation authorized by subdivision (a) shall set forth that an existing unincorporated association, stating its name, is being incorporated by the filing of the articles.

(c) The articles filed pursuant to this section shall be signed by the president, or any vice president, and the secretary, or any assistant secretary, of the existing association and shall be accompanied by a certificate signed and verified by such officers signing the articles and stating that the incorporation of the association has been approved by the trustees and by the required vote of holders of shares of beneficial interest in accordance with subdivision (a).

(d) Upon the filing of articles of incorporation pursuant to this section, the corporation shall succeed automatically to all of the rights and property of the association being incorporated and shall be subject to all of its debts and liabilities in the same manner as if the corporation had itself incurred them. The incumbent trustees of the association shall constitute the initial directors of the corporation and shall continue in office until the next annual meeting of the shareholders, unless they die, resign or are removed prior thereto. All rights of creditors and all liens upon the property of the association shall be preserved unimpaired. Any action or proceeding pending by or against the association may be prosecuted to judgment, which shall bind the corporation, or the corporation may be proceeded against or substituted in its place.

(e) The filing for record in the office of the county recorder of any county in this state in which any of the real property of the association is located of a copy of the articles of incorporation filed pursuant to this section, certified by the Secretary of State, shall evidence record ownership in the corporation of all interests of the association in and to the real property located in that county.

(Added by Stats. 1978, Ch. 370.)

201. (a) The Secretary of State shall not file articles setting forth a name in which “bank,” “ trust,” “trustee,” or related words appear, unless the certificate of approval of the Commissioner of Business Oversight is attached thereto. This subdivision does not apply to the articles of any corporation subject to the Banking Law on which is endorsed the approval of the Commissioner of Business Oversight.

(b) The Secretary of State shall not file articles which set forth a name which is likely to mislead the public or which is the same as, or resembles so closely as to tend to deceive, the name of a domestic corporation, the name of a foreign corporation which is authorized to transact intrastate business or has registered its name pursuant to Section 2101, a name which a foreign corporation has assumed under subdivision (b) of Section 2106, a name which will become the record name of a domestic or foreign corporation upon the effective date of a filed corporate instrument where there is a delayed effective date pursuant to subdivision (c) of Section 110 or subdivision (c) of Section 5008, or a name which is under reservation for another corporation pursuant to this title, except that a corporation may adopt a name that is substantially the same as an existing domestic corporation or foreign corporation which is authorized to transact intrastate business or has registered its name pursuant to Section 2101, upon proof of consent by such domestic or foreign corporation and a finding by the Secretary of State that under the circumstances the public is not likely to be misled.

(c) The use by a corporation of a name in violation of this section may be enjoined notwithstanding the filing of its articles by the Secretary of State.

(d) Any applicant may, upon payment of the fee prescribed therefor in Article 3 (commencing with Section 12180) of Chapter 3 of Part 2 of Division 3 of Title 2 of the Government Code, obtain from the Secretary of State a certificate of reservation of any name not prohibited by subdivision (b), and upon the issuance of the certificate the name stated therein shall be reserved for a period of 60 days. The Secretary of State shall not, however, issue certificates reserving the same name for two or more consecutive 60-day periods to the same applicant or for the use or benefit of the same person; nor shall consecutive reservations be made by or for the use or benefit of the same person; of names so similar as to fall within the prohibitions of subdivision (b).

(Amended by Stats. 2015, Ch. 189, Sec. 1. (AB 1471) Effective January 1, 2016.)

201.5. The Secretary of State shall not file articles in which the business is to be an insurer unless the certificate of the Insurance Commissioner approving the corporate name is attached thereto.

(Added by Stats. 1979, Ch. 737.)

201.6. (a) (1) When an insurer has been approved by the Insurance Commissioner pursuant to Section 709.5 of the Insurance Code to redomesticate to this state, the redomesticating insurer shall file with the Secretary of State articles of incorporation that include a provision setting forth all of the following information:

(A) The name and former jurisdiction of the redomesticating insurer.

(B) The redomesticating insurer’s Secretary of State file number.

(C) A statement that the redomesticating insurer was authorized to effect the redomestication by the laws under which it formerly was organized.

(D) A statement that the redomesticating insurer has approved a plan of redomestication or other instrument as may be required to effect the redomestication to this state pursuant to the laws under which the redomesticating insurer was organized.

(E) A statement that the Insurance Commissioner has approved the redomestication of the insurer to this state.

(2) The Secretary of State shall not file articles of incorporation containing the information required by paragraph (1) unless a copy of the amended certificate of authority, evidencing the approval of the redomestication by the Insurance Commissioner, is attached thereto.

(b) If a redomesticating insurer is qualified to transact business in this state, by virtue of its filing of articles of incorporation in this state, the redomesticating insurer shall automatically surrender its right to transact intrastate business.

(c) (1) An insurer that has filed articles of incorporation in this state and has been approved by the Insurance Commissioner pursuant to Section 709.5 of the Insurance Code to redomesticate to another jurisdiction, shall file with the Secretary of State a statement of redomestication, on a form prescribed by the Secretary of State, containing all of the following information:

(A) The name of the redomesticating insurer.

(B) The redomesticating insurer’s Secretary of State file number.

(D) The name and street address of the redomesticated insurer’s agent for service of process.

(E) A statement that the redomesticating insurer is authorized to effect the redomestication under California law and the jurisdiction to which the insurer is redomesticating.

(F) A statement that the redomesticating insurer has complied with the requirements to redomesticate as required by California law and the jurisdiction to which the insurer is redomesticating.

(G) A statement that the Insurance Commissioner has approved the redomestication of the insurer.

(2) The Secretary of State shall not file the statement of redomestication required by paragraph (1) unless a copy of the amended certificate of authority, evidencing the approval of the redomestication by the Insurance Commissioner, is attached thereto.

(Repealed and added by Stats. 2017, Ch. 417, Sec. 2. (AB 1696) Effective January 1, 2018.)

201.7. Upon receipt of a certified copy of the commissioner’s authorization issued pursuant to subdivision (a) of Section 11542 or subdivision (a) of Section 4097.11 of the Insurance Code and subject to subdivision (a) of Section 110 of the Corporations Code, the Secretary of State shall accept for filing the certificate of amendment of the articles of incorporation of the domestic mutual insurer certified by the secretary thereof.

Upon receipt of a certified copy of the commissioner’s authorization to file articles of incorporation of a mutual holding company and a stock holding company authorized pursuant to conversion proceedings pursuant to subdivision (a) of Section 11542 or subdivision (a) of Section 4097.11 of the Insurance Code and subject to subdivision (a) of Section 110 of the Corporations Code, the Secretary of State shall accept for filing the articles of incorporation of the mutual holding company and stock holding company.

(Amended by Stats. 1998, Ch. 421, Sec. 1. Effective January 1, 1999.)

202. The articles of incorporation shall set forth:

(a) The name of the corporation; provided, however, that in order for the corporation to be subject to the provisions of this division applicable to a close corporation (Section 158), the name of the corporation must contain the word “corporation,” “incorporated,” or “limited” or an abbreviation of one of such words.

(b) (1) The applicable one of the following statements:

(A) The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code; or

(B) The purpose of the corporation is to engage in the profession of ____ (with the insertion of a profession permitted to be incorporated by the California Corporations Code) and any other lawful activities (other than the banking or trust company business) not prohibited to a corporation engaging in such profession by applicable laws and regulations.

(2) In case the corporation is a corporation subject to the Banking Law (Division 1.1 (commencing with Section 1000) of the Financial Code), the articles shall set forth a statement of purpose which is prescribed in the applicable provision of the Banking Law.

(3) In case the corporation is a corporation subject to the Insurance Code as an insurer, the articles shall additionally state that the business of the corporation is to be an insurer.

(4) If the corporation is intended to be a “professional corporation” within the meaning of the Moscone-Knox Professional Corporation Act (Part 4 (commencing with Section 13400) of Division 3), the articles shall additionally contain the statement required by Section 13404.

The articles shall not set forth any further or additional statement with respect to the purposes or powers of the corporation, except by way of limitation or except as expressly required by any law of this state other than this division or any federal or other statute or regulation (including the Internal Revenue Code and regulations thereunder as a condition of acquiring or maintaining a particular status for tax purposes).

(c) The name and street address in this state of the corporation’s initial agent for service of process in accordance with subdivision (b) of Section 1502.

(d) The initial street address of the corporation.

(e) The initial mailing address of the corporation, if different from the initial street address.

(f) If the corporation is authorized to issue only one class of shares, the total number of shares which the corporation is authorized to issue.

(g) If the corporation is authorized to issue more than one class of shares, or if any class of shares is to have two or more series:

(1) The total number of shares of each class the corporation is authorized to issue, and the total number of shares of each series which the corporation is authorized to issue or that the board is authorized to fix the number of shares of any such series;

(2) The designation of each class, and the designation of each series or that the board may determine the designation of any such series; and

(3) The rights, preferences, privileges, and restrictions granted to or imposed upon the respective classes or series of shares or the holders thereof, or that the board, within any limits and restrictions stated, may determine or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued class of shares or any wholly unissued series of any class of shares. As to any series the number of shares of which is authorized to be fixed by the board, the articles may also authorize the board, within the limits and restrictions stated therein or stated in any resolution or resolutions of the board originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any such series subsequent to the issue of shares of that series. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

(Amended by Stats. 2014, Ch. 64, Sec. 3. (AB 2742) Effective January 1, 2015.)

203. Except as specified in the articles or in any shareholders’ agreement, no distinction shall exist between classes or series of shares or the holders thereof.

(Added by Stats. 1975, Ch. 682.)

203.5. (a) If the articles include the designation and number of shares of one or more series within a class, the stated number of shares for all series within the class shall not exceed, and may be less than, the stated number of shares for the class.

(b) If so authorized in the articles and if the articles state the number of shares of the class, the articles may be amended by approval of the board alone to increase or decrease (but not below the number of shares of the series then outstanding) the number of shares of a series.

(c) If the articles authorize a class of shares which is stated to be issuable in series, the articles shall include either the designation and number of shares for at least one series within that class or an authorization of common shares.

(Added by Stats. 1988, Ch. 919, Sec. 2.)

204. The articles of incorporation may set forth:

(a) Any or all of the following provisions, which shall not be effective unless expressly provided in the articles:

(1) Granting, with or without limitations, the power to levy assessments upon the shares or any class of shares.

(2) Granting to shareholders preemptive rights to subscribe to any or all issues of shares or securities.

(3) Special qualifications of persons who may be shareholders.

(4) A provision limiting the duration of the corporation’s existence to a specified date.

(5) A provision requiring, for any or all corporate actions (except as provided in Section 303, subdivision (b) of Section 402.5, subdivision (c) of Section 708 and Section 1900) the vote of a larger proportion or of all of the shares of any class or series, or the vote or quorum for taking action of a larger proportion or of all of the directors, than is otherwise required by this division.

(6) A provision limiting or restricting the business in which the corporation may engage or the powers which the corporation may exercise or both.

(7) A provision conferring upon the holders of any evidences of indebtedness, issued or to be issued by the corporation, the right to vote in the election of directors and on any other matters on which shareholders may vote.

(8) A provision conferring upon shareholders the right to determine the consideration for which shares shall be issued.

(9) A provision requiring the approval of the shareholders (Section 153) or the approval of the outstanding shares (Section 152) for any corporate action, even though not otherwise required by this division.

(10) Provisions eliminating or limiting the personal liability of a director for monetary damages in an action brought by or in the right of the corporation for breach of a director’s duties to the corporation and its shareholders, as set forth in Section 309, provided, however, that (A) such a provision may not eliminate or limit the liability of directors (i) for acts or omissions that involve intentional misconduct or a knowing and culpable violation of law, (ii) for acts or omissions that a director believes to be contrary to the best interests of the corporation or its shareholders or that involve the absence of good faith on the part of the director, (iii) for any transaction from which a director derived an improper personal benefit, (iv) for acts or omissions that show a reckless disregard for the director’s duty to the corporation or its shareholders in circumstances in which the director was aware, or should have been aware, in the ordinary course of performing a director’s duties, of a risk of serious injury to the corporation or its shareholders, (v) for acts or omissions that constitute an unexcused pattern of inattention that amounts to an abdication of the director’s duty to the corporation or its shareholders, (vi) under Section 310, or (vii) under Section 316, (B) no such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when the provision becomes effective, and (C) no such provision shall eliminate or limit the liability of an officer for any act or omission as an officer, notwithstanding that the officer is also a director or that his or her actions, if negligent or improper, have been ratified by the directors.

(11) A provision authorizing, whether by bylaw, agreement, or otherwise, the indemnification of agents (as defined in Section 317) in excess of that expressly permitted by Section 317 for those agents of the corporation for breach of duty to the corporation and its stockholders, provided, however, that the provision may not provide for indemnification of any agent for any acts or omissions or transactions from which a director may not be relieved of liability as set forth in the exception to paragraph (10) or as to circumstances in which indemnity is expressly prohibited by Section 317.

Notwithstanding this subdivision, in the case of a close corporation any of the provisions referred to above may be validly included in a shareholders’ agreement. Notwithstanding this subdivision, bylaws may require for all or any actions by the board the affirmative vote of a majority of the authorized number of directors. Nothing contained in this subdivision shall affect the enforceability, as between the parties thereto, of any lawful agreement not otherwise contrary to public policy.

(12) (A) In the case of a corporation that does not have outstanding securities listed on the New York Stock Exchange, the NYSE Amex, the NASDAQ Global Market, or the NASDAQ Capital Market, a provision authorizing records administered by or on behalf of the corporation in which the names of all of the corporation’s stockholders of record, the address and number of shares registered in the name of each of those stockholders, and all issuances and transfers of stock of the corporation to be recorded and kept on or by means of blockchain technology, provided that all of the following requirements are met:

(i) The encrypted information in the records can be decrypted and converted into a clearly readable format within a reasonable period of time.

(ii) The records can be used to prepare the list of shareholders.

(iii) The records can be used to record information required to be included on stock certificates.

(iv) The records can be used to record required transfers of stock.

(B) For purposes of this paragraph, “blockchain technology” means a mathematically secured, chronological, and decentralized consensus ledger or database.

(b) Reasonable restrictions upon the right to transfer or hypothecate shares of any class or classes or series, but no restriction shall be binding with respect to shares issued prior to the adoption of the restriction unless the holders of such shares voted in favor of the restriction.

(d) Any other provision, not in conflict with law, for the management of the business and for the conduct of the affairs of the corporation, including any provision which is required or permitted by this division to be stated in the bylaws.

(e) This section shall remain in effect only until January 1, 2022, and as of that date is repealed.

(Amended by Stats. 2018, Ch. 889, Sec. 1. (SB 838) Effective January 1, 2019. Repealed as of January 1, 2022, by its own provisions. See later operative version added by Stats. 2018, Ch. 889.)

204. The articles of incorporation may set forth:

(a) Any or all of the following provisions, which shall not be effective unless expressly provided in the articles:

(1) Granting, with or without limitations, the power to levy assessments upon the shares or any class of shares.

(2) Granting to shareholders preemptive rights to subscribe to any or all issues of shares or securities.

(3) Special qualifications of persons who may be shareholders.

(4) A provision limiting the duration of the corporation’s existence to a specified date.

(5) A provision requiring, for any or all corporate actions, except as provided in Section 303, subdivision (b) of Section 402.5, subdivision (c) of Section 708, and Section 1900, the vote of a larger proportion or of all of the shares of any class or series, or the vote or quorum for taking action of a larger proportion or of all of the directors, than is otherwise required by this division.

(6) A provision limiting or restricting the business in which the corporation may engage or the powers which the corporation may exercise or both.

(8) A provision conferring upon shareholders the right to determine the consideration for which shares shall be issued.

(e) This section shall become operative on January 1, 2022.

(Repealed and added by Stats. 2018, Ch. 889, Sec. 2. (SB 838) Effective January 1, 2019. Section operative January 1, 2022, by its own provisions.)

204.5. (a) If the articles of a corporation include a provision reading substantially as follows: “The liability of the directors of the corporation for monetary damages shall be eliminated to the fullest extent permissible under California law”; the corporation shall be considered to have adopted a provision as authorized by paragraph (10) of subdivision (a) of Section 204 and more specific wording shall not be required.

(b) This section shall not be construed as setting forth the exclusive method of adopting an article provision as authorized by paragraph (10) of subdivision (a) of Section 204.

(c) This section shall not change the otherwise applicable standards or duties to make full and fair disclosure to shareholders when approval of such a provision is sought.

(Added by Stats. 1987, Ch. 1203, Sec. 1.5. Effective September 27, 1987.)

205. Solely for the purpose of any statute or regulation imposing any tax or fee based upon the capitalization of a corporation, all authorized shares of a corporation organized under this division shall be deemed to have a nominal or par value of one dollar ($1) per share. If any federal or other statute or regulation applicable to a particular corporation requires that the shares of such corporation have a par value, such shares shall have the par value determined by the board in order to satisfy the requirements of such statute or regulation.

(Added by Stats. 1975, Ch. 682.)

206. Subject to any limitation contained in the articles and to compliance with any other applicable laws, any corporation other than a corporation subject to the Banking Law or a professional corporation may engage in any business activity; and a corporation subject to the Banking Law or a professional corporation may engage in any business activity not prohibited by the respective statutes and regulations to which it is subject.

(Amended by Stats. 1978, Ch. 370.)

207. Subject to any limitations contained in the articles and to compliance with other provisions of this division and any other applicable laws, a corporation shall have all of the powers of a natural person in carrying out its business activities, including, without limitation, the power to:

(a) Adopt, use, and at will alter a corporate seal, but failure to affix a seal does not affect the validity of any instrument.

(b) Adopt, amend, and repeal bylaws.

(d) Subject to the provisions of Section 510, issue, purchase, redeem, receive, take or otherwise acquire, own, hold, sell, lend, exchange, transfer or otherwise dispose of, pledge, use, and otherwise deal in and with its own shares, bonds, debentures, and other securities.

(e) Make donations, regardless of specific corporate benefit, for the public welfare or for community fund, hospital, charitable, educational, scientific, civic, or similar purposes.

(f) Pay pensions, and establish and carry out pension, profit-sharing, share bonus, share purchase, share option, savings, thrift and other retirement, incentive, and benefit plans, trusts, and provisions for any or all of the directors, officers, and employees of the corporation or any of its subsidiary or affiliated corporations, and to indemnify and purchase and maintain insurance on behalf of any fiduciary of such plans, trusts, or provisions.

(g) Subject to the provisions of Section 315, assume obligations, enter into contracts, including contracts of guaranty or suretyship, incur liabilities, borrow and lend money, and otherwise use its credit, and secure any of its obligations, contracts, or liabilities by mortgage, pledge, or other encumbrance of all or any part of its property, franchises, and income.

(h) Participate with others in any partnership, joint venture or other association, transaction, or arrangement of any kind, whether or not such participation involves sharing or delegation of control with or to others.

(i) (1) In anticipation of or during an emergency, take either or both of the following actions necessary to conduct the corporation’s ordinary business operations and affairs, unless emergency bylaws provide otherwise pursuant to subdivision (c) of Section 212:

(A) Modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent resulting from the emergency.

(B) Relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so.

(2) During an emergency, take either or both of the following actions necessary to conduct the corporation’s ordinary business operations and affairs, unless emergency bylaws provide otherwise pursuant to subdivision (c) of Section 212:

(A) Give notice to a director or directors in any practicable manner under the circumstances, including, but not limited to, by publication and radio, when notice of a meeting of the board cannot be given to that director or directors in the manner prescribed by the bylaws or Section 307.

(B) Deem that one or more officers of the corporation present at a board meeting is a director, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum for that meeting.

(3) In anticipation of or during an emergency, the board may not take any action that requires the vote of the shareholders or is not in the corporation’s ordinary course of business, unless the required vote of the shareholders was obtained prior to the emergency.

(4) Any actions taken in good faith in anticipation of or during an emergency under this subdivision bind the corporation and may not be used to impose liability on a corporate director, officer, employee, or agent.

(5) For purposes of this subdivision, “emergency” means any of the following events or circumstances as a result of which, and only so long as, a quorum of the corporation’s board of directors cannot be readily convened for action:

(A) A natural catastrophe, including, but not limited to, a hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought, or, regardless of cause, any fire, flood, or explosion.

(B) An attack on this state or nation by an enemy of the United States of America, or upon receipt by this state of a warning from the federal government indicating that an enemy attack is probable or imminent.

(C) An act of terrorism or other manmade disaster that results in extraordinary levels of casualties or damage or disruption severely affecting the infrastructure, environment, economy, government functions, or population, including, but not limited to, mass evacuations.

(D) A state of emergency proclaimed by a governor or by the President.

(Amended by Stats. 2013, Ch. 255, Sec. 1. (AB 491) Effective January 1, 2014.)

208. (a) No limitation upon the business, purposes or powers of the corporation or upon the powers of the shareholders, officers or directors, or the manner of exercise of such powers, contained in or implied by the articles or by Chapters 18, 19 and 20 or by any shareholders’ agreement shall be asserted as between the corporation or any shareholder and any third person, except in a proceeding (1) by a shareholder or the state to enjoin the doing or continuation of unauthorized business by the corporation or its officers, or both, in cases where third parties have not acquired rights thereby, or (2) to dissolve the corporation or (3) by the corporation or by a shareholder suing in a representative suit against the officers or directors of the corporation for violation of their authority.

(b) Any contract or conveyance made in the name of a corporation which is authorized or ratified by the board, or is done within the scope of the authority, actual or apparent, conferred by the board or within the agency power of the officer executing it, except as the board’s authority is limited by law other than this division, binds the corporation, and the corporation acquires rights thereunder, whether the contract is executed or wholly or in part executory.

(c) This section applies to contracts and conveyances made by foreign corporations in this state and to all conveyances by foreign corporations of real property situated in this state.

(Added by Stats. 1975, Ch. 682.)

209. For all purposes other than an action in the nature of quo warranto, a copy of the articles of a corporation duly certified by the Secretary of State is conclusive evidence of the formation of the corporation and prima facie evidence of its corporate existence.

(Added by Stats. 1975, Ch. 682.)

210. If initial directors have not been named in the articles, the incorporator or incorporators, until the directors are elected, may do whatever is necessary and proper to perfect the organization of the corporation, including the adoption and amendment of bylaws of the corporation and the election of directors and officers.

(Added by Stats. 1975, Ch. 682.)

211. Bylaws may be adopted, amended or repealed either by approval of the outstanding shares (Section 152) or by the approval of the board, except as provided in Section 212. Subject to subdivision (a)(5) of Section 204, the articles or bylaws may restrict or eliminate the power of the board to adopt, amend or repeal any or all bylaws.

(Added by Stats. 1975, Ch. 682.)

212. (a) The bylaws shall set forth (unless such provision is contained in the articles, in which case it may only be changed by an amendment of the articles) the number of directors of the corporation; or that the number of directors shall be not less than a stated minimum nor more than a stated maximum (which in no case shall be greater than two times the stated minimum minus one), with the exact number of directors to be fixed, within the limits specified, by approval of the board or the shareholders (Section 153) in the manner provided in the bylaws, subject to paragraph (5) of subdivision (a) of Section 204. The number or minimum number of directors shall not be less than three; provided, however, that (1) before shares are issued, the number may be one, (2) before shares are issued, the number may be two, (3) so long as the corporation has only one shareholder, the number may be one, (4) so long as the corporation has only one shareholder, the number may be two, and (5) so long as the corporation has only two shareholders, the number may be two. After the issuance of shares, a bylaw specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa may only be adopted by approval of the outstanding shares (Section 152); provided, however, that a bylaw or amendment of the articles reducing the fixed number or the minimum number of directors to a number less than five cannot be adopted if the votes cast against its adoption at a meeting or the shares not consenting in the case of action by written consent are equal to more than 162/3 percent of the outstanding shares entitled to vote.

(b) The bylaws may contain any provision, not in conflict with law or the articles for the management of the business and for the conduct of the affairs of the corporation, including, but not limited to:

(1) Any provision referred to in subdivision (b), (c) or (d) of Section 204.

(2) The time, place, and manner of calling, conducting, and giving notice of shareholders’, directors’, and committee meetings.

(3) The manner of execution, revocation, and use of proxies.

(4) The qualifications, duties, and compensation of directors; the time of their annual election; and the requirements of a quorum for directors’ and committee meetings.

(5) The appointment and authority of committees of the board.

(6) The appointment, duties, compensation, and tenure of officers.

(7) The mode of determination of holders of record of its shares.

(8) The making of annual reports and financial statements to the shareholders.

(c) (1) The bylaws may contain any provision, not in conflict with the articles, to manage and conduct the ordinary business affairs of the corporation effective only in an emergency as defined in Section 207, including, but not limited to, procedures for calling a board meeting, quorum requirements for a board meeting, and designation of additional or substitute directors.

(2) During an emergency, the board may not take any action that requires the vote of the shareholders or otherwise is not in the corporation’s ordinary course of business, unless the required vote of the shareholders was obtained prior to the emergency.

(3) All provisions of the regular bylaws consistent with the emergency bylaws shall remain effective during the emergency, and the emergency bylaws shall not be effective after the emergency ends.

(4) Corporate action taken in good faith in accordance with the emergency bylaws binds the corporation, and may not be used to impose liability on a corporate director, officer, employee, or agent.

(Amended by Stats. 2013, Ch. 255, Sec. 2. (AB 491) Effective January 1, 2014.)

213. Every corporation shall keep at its principal executive office in this state, or if its principal executive office is not in this state at its principal business office in this state, the original or a copy of its bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. If the principal executive office of the corporation is outside this state and the corporation has no principal business office in this state, it shall upon the written request of any shareholder furnish to such shareholder a copy of the bylaws as amended to date.

(Added by Stats. 1975, Ch. 682.)

CHAPTER 3. Directors and Management [300 - 318] (Chapter 3 added by Stats. 1975, Ch. 682.)

300. (a) Subject to the provisions of this division and any limitations in the articles relating to action required to be approved by the shareholders (Section 153) or by the outstanding shares (Section 152), or by a less than majority vote of a class or series of preferred shares (Section 402.5), the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board. The board may delegate the management of the day-to-day operation of the business of the corporation to a management company or other person provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board.

(b) Notwithstanding subdivision (a) or any other provision of this division, but subject to subdivision (c), no shareholders’ agreement, which relates to any phase of the affairs of a close corporation, including but not limited to management of its business, division of its profits or distribution of its assets on liquidation, shall be invalid as between the parties thereto on the ground that it so relates to the conduct of the affairs of the corporation as to interfere with the discretion of the board or that it is an attempt to treat the corporation as if it were a partnership or to arrange their relationships in a manner that would be appropriate only between partners. A transferee of shares covered by such an agreement which is filed with the secretary of the corporation for inspection by any prospective purchaser of shares, who has actual knowledge thereof or notice thereof by a notation on the certificate pursuant to Section 418, is bound by its provisions and is a party thereto for the purposes of subdivision (d). Original issuance of shares by the corporation to a new shareholder who does not become a party to the agreement terminates the agreement, except that if the agreement so provides it shall continue to the extent it is enforceable apart from this subdivision. The agreement may not be modified, extended or revoked without the consent of such a transferee, subject to any provision of the agreement permitting modification, extension or revocation by less than unanimous agreement of the parties. A transferor of shares covered by such an agreement ceases to be a party thereto upon ceasing to be a shareholder of the corporation unless the transferor is a party thereto other than as a shareholder. An agreement made pursuant to this subdivision shall terminate when the corporation ceases to be a close corporation, except that if the agreement so provides it shall continue to the extent it is enforceable apart from this subdivision. This subdivision does not apply to an agreement authorized by subdivision (a) of Section 706.

(c) No agreement entered into pursuant to subdivision (b) may alter or waive any of the provisions of Sections 158, 417, 418, 500, 501, and 1111, subdivision (e) of Section 1201, Sections 2009, 2010, and 2011, or of Chapters 15 (commencing with Section 1500), 16 (commencing with Section 1600), 18 (commencing with Section 1800), and 22 (commencing with Section 2200). All other provisions of this division may be altered or waived as between the parties thereto in a shareholders’ agreement, except the required filing of any document with the Secretary of State.

(d) An agreement of the type referred to in subdivision (b) shall, to the extent and so long as the discretion or powers of the board in its management of corporate affairs is controlled by such agreement, impose upon each shareholder who is a party thereto liability for managerial acts performed or omitted by such person pursuant thereto that is otherwise imposed by this division upon directors, and the directors shall be relieved to that extent from such liability.

(e) The failure of a close corporation to observe corporate formalities relating to meetings of directors or shareholders in connection with the management of its affairs, pursuant to an agreement authorized by subdivision (b), shall not be considered a factor tending to establish that the shareholders have personal liability for corporate obligations.

(Amended by Stats. 1983, Ch. 1223, Sec. 3.)

301. (a) Except as provided in Section 301.5, at each annual meeting of shareholders, directors shall be elected to hold office until the next annual meeting. However, to effectuate a voting shift (Section 194.7) the articles may provide that directors hold office for a shorter term. The articles may provide for the election of one or more directors by the holders of the shares of any class or series voting as a class or series.

(b) Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified.

(Amended by Stats. 1989, Ch. 876, Sec. 1.)

301.3. (a) No later than the close of the 2019 calendar year, a publicly held domestic or foreign corporation whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California shall have a minimum of one female director on its board. A corporation may increase the number of directors on its board to comply with this section.

(b) No later than the close of the 2021 calendar year, a publicly held domestic or foreign corporation whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California shall comply with the following:

(1) If its number of directors is six or more, the corporation shall have a minimum of three female directors.

(2) If its number of directors is five, the corporation shall have a minimum of two female directors.

(3) If its number of directors is four or fewer, the corporation shall have a minimum of one female director.

(c) No later than July 1, 2019, the Secretary of State shall publish a report on its Internet Web site documenting the number of domestic and foreign corporations whose principal executive offices, according to the corporation’s SEC 10-K form, are located in California and who have at least one female director.

(d) No later than March 1, 2020, and annually thereafter, the Secretary of State shall publish a report on its Internet Web site regarding, at a minimum, all of the following:

(1) The number of corporations subject to this section that were in compliance with the requirements of this section during at least one point during the preceding calendar year.

(2) The number of publicly held corporations that moved their United States headquarters to California from another state or out of California into another state during the preceding calendar year.

(3) The number of publicly held corporations that were subject to this section during the preceding year, but are no longer publicly traded.

(e) (1) The Secretary of State may adopt regulations to implement this section. The Secretary of State may impose fines for violations of this section as follows:

(A) For failure to timely file board member information with the Secretary of State pursuant to a regulation adopted pursuant to this paragraph, the amount of one hundred thousand dollars ($100,000).

(B) For a first violation, the amount of one hundred thousand dollars ($100,000).

(2) For the purposes of this subdivision, each director seat required by this section to be held by a female, which is not held by a female during at least a portion of a calendar year, shall count as a violation.

(3) For purposes of this subdivision, a female director having held a seat for at least a portion of the year shall not be a violation.

(4) Fines collected pursuant to this section shall be available, upon appropriation by the Legislature, for use by the Secretary of State to offset the cost of administering this section.

(f) For purposes of this section, the following definitions apply:

(1) “Female” means an individual who self-identifies her gender as a woman, without regard to the individual’s designated sex at birth.

(2) “Publicly held corporation” means a corporation with outstanding shares listed on a major United States stock exchange.

(Added by Stats. 2018, Ch. 954, Sec. 2. (SB 826) Effective January 1, 2019.)

301.5. (a) A listed corporation may, by amendment of its articles or bylaws, adopt provisions to divide the board of directors into two or three classes to serve for terms of two or three years respectively, or to eliminate cumulative voting, or both. After the issuance of shares, a corporation that is not a listed corporation may, by amendment of its articles or bylaws, adopt provisions to be effective when the corporation becomes a listed corporation to divide the board of directors into two or three classes to serve for terms of two or three years respectively, or to eliminate cumulative voting, or both. An article or bylaw amendment providing for division of the board of directors into classes, or any change in the number of classes, or the elimination of cumulative voting may only be adopted by the approval of the board and the outstanding shares (Section 152) voting as a single class, notwithstanding Section 903.

(b) If the board of directors is divided into two classes pursuant to subdivision (a), the authorized number of directors shall be no less than six and one-half of the directors or as close an approximation as possible shall be elected at each annual meeting of shareholders. If the board of directors is divided into three classes, the authorized number of directors shall be no less than nine and one-third of the directors or as close an approximation as possible shall be elected at each annual meeting of shareholders. Directors of a listed corporation may be elected by classes at a meeting of shareholders at which an amendment to the articles or bylaws described in subdivision (a) is approved, but the extended terms for directors are contingent on that approval, and in the case of an amendment to the articles, the filing of any necessary amendment to the articles pursuant to Section 905 or 910.

(c) If directors for more than one class are to be elected by the shareholders at any one meeting of shareholders and the election is by cumulative voting pursuant to Section 708, votes may be cumulated only for directors to be elected within each class.

(d) For purposes of this section, a “listed corporation” means a corporation with outstanding shares listed on the New York Stock Exchange, the NYSE Amex, the NASDAQ Global Market, or the NASDAQ Capital Market.

(e) Subject to subdivision (h), if a listed corporation having a board of directors divided into classes pursuant to subdivision (a) ceases to be a listed corporation for any reason, unless the articles of incorporation or bylaws of the corporation provide for the elimination of classes of directors at an earlier date or dates, the board of directors of the corporation shall cease to be divided into classes as to each class of directors on the date of the expiration of the term of the directors in that class and the term of each director serving at the time the corporation ceases to be a listed corporation (and the term of each director elected to fill a vacancy resulting from the death, resignation, or removal of any of those directors) shall continue until its expiration as if the corporation had not ceased to be a listed corporation.

(f) Subject to subdivision (h), if a listed corporation having a provision in its articles or bylaws eliminating cumulative voting pursuant to subdivision (a) or permitting noncumulative voting in the election of directors pursuant to that subdivision, or both, ceases to be a listed corporation for any reason, the shareholders shall be entitled to cumulate their votes pursuant to Section 708 at any election of directors occurring while the corporation is not a listed corporation notwithstanding that provision in its articles of incorporation or bylaws.

(g) Subject to subdivision (i), if a corporation that is not a listed corporation adopts amendments to its articles of incorporation or bylaws to divide its board of directors into classes or to eliminate cumulative voting, or both, pursuant to subdivision (a) and then becomes a listed corporation, unless the articles of incorporation or bylaws provide for those provisions to become effective at some other time and, in cases where classes of directors are provided for, identify the directors who, or the directorships that, are to be in each class or the method by which those directors or directorships are to be identified, the provisions shall become effective for the next election of directors after the corporation becomes a listed corporation at which all directors are to be elected.

(h) If a corporation ceases to be a listed corporation on or after the record date for a meeting of shareholders and prior to the conclusion of the meeting, including the conclusion of the meeting after an adjournment or postponement that does not require or result in the setting of a new record date, then, solely for purposes of subdivisions (e) and (f), the corporation shall not be deemed to have ceased to be a listed corporation until the conclusion of the meeting of shareholders.

(i) If a corporation becomes a listed corporation on or after the record date for a meeting of shareholders and prior to the conclusion of the meeting, including the conclusion of the meeting after an adjournment or postponement that does not require or result in the setting of a new record date, then, solely for purposes of subdivision (g), the corporation shall not be deemed to have become a listed corporation until the conclusion of the meeting of shareholders.

(j) If an article amendment referred to in subdivision (a) is adopted by a listed corporation, the certificate of amendment shall include a statement of the facts showing that the corporation is a listed corporation within the meaning of subdivision (d). If an article or bylaw amendment referred to in subdivision (a) is adopted by a corporation which is not a listed corporation, the provision, as adopted, shall include the following statement or the substantial equivalent: “This provision shall become effective only when the corporation becomes a listed corporation within the meaning of Section 301.5 of the Corporations Code.”

(Amended by Stats. 2009, Ch. 131, Sec. 1. (AB 991) Effective January 1, 2010.)

301.7. (a) A listed corporation engaged in business limited to the operation and maintenance of a recreation venture having golf and tennis facilities and ancillary dining and beverage services may, by amendment of its articles or bylaws, adopt provisions allowing division of its board of directors into two classes, with one-half of the directors or as close an approximation as possible to be elected at each annual meeting of shareholders, provided that the corporation’s bylaws or articles limit each holder of the securities to no more than five shares and require some of those holders to occupy dwellings immediately contiguous to the real property of the corporation. An article or bylaw amendment providing for division of the board of directors into classes may only be adopted by the approval of the board and the outstanding shares (Section 152) voting as a single class, notwithstanding Section 903. Directors of a listed corporation that meet these conditions may be elected by classes at a meeting of shareholders at which an amendment to the articles or bylaws described in this paragraph is approved, but the extended terms for directors are contingent on that approval, and in the case of an amendment to the articles, the filing of any necessary amendment to the articles pursuant to Section 905 or 910.

(b) For purposes of this section, a “listed corporation” means a corporation described in subdivision (d) of Section 301.5.

(c) If an article amendment referred to in subdivision (a) is adopted by a listed corporation, the certificate of amendment shall include a statement of the facts showing that the corporation is a listed corporation within the meaning of subdivision (b).

(Amended by Stats. 2009, Ch. 131, Sec. 2. (AB 991) Effective January 1, 2010.)

301.9. Notwithstanding Section 301, a mutual water company organized under this division may elect directors to serve staggered four-year terms if authorized in the corporation’s 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.

(Added by Stats. 2011, Ch. 89, Sec. 1. (SB 918) Effective January 1, 2012.)

302. The board may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony.

(Repealed and added by Stats. 1975, Ch. 682.)

303. (a) Any or all of the directors may be removed without cause if the removal is approved by the outstanding shares (Section 152), subject to the following:

(1) Except for a corporation to which paragraph (3) is applicable, no director may be removed (unless the entire board is removed) when the votes cast against removal, or not consenting in writing to the removal, would be sufficient to elect the director if voted cumulatively at an election at which the same total number of votes were cast (or, if the action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of the director’s most recent election were then being elected.

(2) When by the provisions of the articles the holders of the shares of any class or series, voting as a class or series, are entitled to elect one or more directors, any director so elected may be removed only by the applicable vote of the holders of the shares of that class or series.

(3) A director of a corporation whose board of directors is classified pursuant to Section 301.5 may not be removed if the votes cast against removal of the director, or not consenting in writing to the removal, would be sufficient to elect the director if voted cumulatively (without regard to whether shares may otherwise be voted cumulatively) at an election at which the same total number of votes were cast (or, if the action is taken by written consent, all shares entitled to vote were voted) and either the number of directors elected at the most recent annual meeting of shareholders, or if greater, the number of directors for whom removal is being sought, were then being elected.

(b) Any reduction of the authorized number of directors or amendment reducing the number of classes of directors does not remove any director prior to the expiration of the director’s term of office.

(c) Except as provided in this section and Sections 302 and 304, a director may not be removed prior to the expiration of the director’s term of office.

(Amended by Stats. 1989, Ch. 876, Sec. 3.)

304. The superior court of the proper county may, at the suit of shareholders holding at least 10 percent of the number of outstanding shares of any class, remove from office any director in case of fraudulent or dishonest acts or gross abuse of authority or discretion with reference to the corporation and may bar from reelection any director so removed for a period prescribed by the court. The corporation shall be made a party to such action.

(Repealed and added by Stats. 1975, Ch. 682.)

305. (a) Unless otherwise provided in the articles or bylaws and except for a vacancy created by the removal of a director, vacancies on the board may be filled by approval of the board (Section 151) or, if the number of directors then in office is less than a quorum, by (1) the unanimous written consent of the directors then in office, (2) the affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice complying with Section 307 or (3) a sole remaining director. Unless the articles or a bylaw adopted by the shareholders provide that the board may fill vacancies occurring in the board by reason of the removal of directors, such vacancies may be filled only by approval of the shareholders (Section 153).

(b) The shareholders may elect a director at any time to fill any vacancy not filled by the directors. Any such election by written consent other than to fill a vacancy created by removal, which requires the unanimous consent of all shares entitled to vote for the election of directors, requires the consent of a majority of the outstanding shares entitled to vote.

(c) If, after the filling of any vacancy by the directors, the directors then in office who have been elected by the shareholders shall constitute less than a majority of the directors then in office, then both of the following shall be applicable:

(1) Any holder or holders of an aggregate of 5 percent or more of the total number of shares at the time outstanding having the right to vote for those directors may call a special meeting of shareholders, or

(2) The superior court of the proper county shall, upon application of such shareholder or shareholders, summarily order a special meeting of shareholders, to be held to elect the entire board. The term of office of any director shall terminate upon that election of a successor.

The hearing on any application filed pursuant to this subdivision shall be held on not less than 10 business days notice to the corporation. If the corporation intends to oppose the application, it shall file with the court a notice of opposition not later than five business days prior to the date set for the hearing. The application and any notice of opposition shall be supported by appropriate affidavits and the court’s determination shall be made on the basis of the papers in the record; but, for good cause shown, the court may receive and consider at the hearing additional evidence, oral or documentary, and additional points and authorities. The hearing shall take precedence over all other matters not of a similar nature pending on the date set for the hearing.

(d) Any director may resign effective upon giving written notice to the chairperson of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

(Amended by Stats. 2015, Ch. 98, Sec. 3. (SB 351) Effective January 1, 2016.)

306. If (a) a corporation has not issued shares and all the directors resign, die, or become incompetent, or (b) a corporation’s initial directors have not been named in the articles, and all the incorporators resign, die, or become incompetent prior to the election of the initial directors, the superior court of any county may appoint directors of the corporation upon application by any party in interest.

(Amended by Stats. 2000, Ch. 485, Sec. 6. Effective January 1, 2001.)

307. (a) Unless otherwise provided in the articles or, subject to paragraph (5) of subdivision (a) of Section 204, in the bylaws, all of the following apply:

(1) Meetings of the board may be called by the chairperson of the board or the president or any vice president or the secretary or any two directors.

(2) Regular meetings of the board may be held without notice if the time and place of the meetings are fixed by the bylaws or the board. Special meetings of the board shall be held upon four days’ notice by mail or 48 hours’ notice delivered personally or by telephone, including a voice messaging system or by electronic transmission by the corporation (Section 20). The articles or bylaws may not dispense with notice of a special meeting. A notice, or waiver of notice, need not specify the purpose of any regular or special meeting of the board.

(3) Notice of a meeting need not be given to a director who provides a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof in writing, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to that director. These waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

(4) A majority of the directors present, whether or not a quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than 24 hours, notice of an adjournment to another time or place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of the adjournment.

(5) Meetings of the board may be held at a place within or without the state that has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, designated in the bylaws or by resolution of the board.

(6) Members of the board may participate in a meeting through use of conference telephone, electronic video screen communication, or electronic transmission by and to the corporation (Sections 20 and 21). Participation in a meeting through use of conference telephone or electronic video screen communication pursuant to this subdivision constitutes presence in person at that meeting as long as all members participating in the meeting are able to hear one another. Participation in a meeting through electronic transmission by and to the corporation (other than conference telephone and electronic video screen communication), pursuant to this subdivision constitutes presence in person at that meeting if both of the following apply:

(A) Each member participating in the meeting can communicate with all of the other members concurrently.

(B) Each member is provided the means of participating in all matters before the board, including, without limitation, the capacity to propose, or to interpose an objection to, a specific action to be taken by the corporation.

(7) A majority of the authorized number of directors constitutes a quorum of the board for the transaction of business. The articles or bylaws may not provide that a quorum shall be less than one-third the authorized number of directors or less than two, whichever is larger, unless the authorized number of directors is one, in which case one director constitutes a quorum.

(8) An act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the board, subject to the provisions of Section 310 and subdivision (e) of Section 317. The articles or bylaws may not provide that a lesser vote than a majority of the directors present at a meeting is the act of the board. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

(b) An action required or permitted to be taken by the board may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action and if the number of members of the board serving at the time constitutes a quorum. The written consent or consents shall be filed with the minutes of the proceedings of the board. For purposes of this subdivision only, “all members of the board” shall include an “interested director” as described in subdivision (a) of Section 310 or a “common director” as described in subdivision (b) of Section 310 who abstains in writing from providing consent, where the disclosures required by Section 310 have been made to the noninterested or noncommon directors, as applicable, prior to their execution of the written consent or consents, the specified disclosures are conspicuously included in the written consent or consents executed by the noninterested or noncommon directors, and the noninterested or noncommon directors, as applicable, approve the action by a vote that is sufficient without counting the votes of the interested or common directors. If written consent is provided by the directors in accordance with the immediately preceding sentence and the disclosures made regarding the action that is the subject of the consent do not comply with the requirements of Section 310, the action that is the subject of the consent shall be deemed approved, but in any suit brought to challenge the action, the party asserting the validity of the action shall have the burden of proof in establishing that the action was just and reasonable to the corporation at the time it was approved.

(c) This section applies also to committees of the board and incorporators and action by those committees and incorporators, mutatis mutandis.

(Amended by Stats. 2015, Ch. 98, Sec. 4. (SB 351) Effective January 1, 2016.)

308. (a) If a corporation has an even number of directors who are equally divided and cannot agree as to the management of its affairs, so that its business can no longer be conducted to advantage or so that there is danger that its property and business will be impaired or lost, the superior court of the proper county may, notwithstanding any provisions of the articles or bylaws and whether or not an action is pending for an involuntary winding up or dissolution of the corporation, appoint a provisional director pursuant to this section. Action for such appointment may be brought by any director or by the holders of not less than 331/3 percent of the voting power.

(b) If the shareholders of a corporation are deadlocked so that they cannot elect the directors to be elected at an annual meeting of shareholders, the superior court of the proper county may, notwithstanding any provisions of the articles or bylaws, upon petition of a shareholder or shareholders holding 50 percent of the voting power, appoint a provisional director or directors pursuant to this section or order such other equitable relief as the court deems appropriate.

(c) A provisional director shall be an impartial person, who is neither a shareholder nor a creditor of the corporation, nor related by consanguinity or affinity within the third degree according to the common law to any of the other directors of the corporation or to any judge of the court by which such provisional director is appointed. A provisional director shall have all the rights and powers of a director until the deadlock in the board or among shareholders is broken or until such provisional director is removed by order of the court or by approval of the outstanding shares (Section 152). Such person shall be entitled to such compensation as shall be fixed by the court unless otherwise agreed with the corporation.

(d) This section does not apply to corporations subject to the Public Utilities Act (Part 1 (commencing with Section 201) of Division 1 of the Public Utilities Code).

(Amended by Stats. 1995, Ch. 154, Sec. 3. Effective January 1, 1996.)

309. (a) A director shall perform the duties of a director, including duties as a member of any committee of the board upon which the director may serve, in good faith, in a manner such director believes to be in the best interests of the corporation and its shareholders and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.

(b) In performing the duties of a director, a director shall be entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by any of the following:

(1) One or more officers or employees of the corporation whom the director believes to be reliable and competent in the matters presented.

(2) Counsel, independent accountants or other persons as to matters which the director believes to be within such person’s professional or expert competence.

(3) A committee of the board upon which the director does not serve, as to matters within its designated authority, which committee the director believes to merit confidence,

so long as, in any such case, the director acts in good faith, after reasonable inquiry when the need therefor is indicated by the circumstances and without knowledge that would cause such reliance to be unwarranted.

(c) A person who performs the duties of a director in accordance with subdivisions (a) and (b) shall have no liability based upon any alleged failure to discharge the person’s obligations as a director. In addition, the liability of a director for monetary damages may be eliminated or limited in a corporation’s articles to the extent provided in paragraph (10) of subdivision (a) of Section 204.

(Amended by Stats. 1987, Ch. 1203, Sec. 2. Effective September 27, 1987.)

310. (a) No contract or other transaction between a corporation and one or more of its directors, or between a corporation and any corporation, firm or association in which one or more of its directors has a material financial interest, is either void or voidable because such director or directors or such other corporation, firm or association are parties or because such director or directors are present at the meeting of the board or a committee thereof which authorizes, approves or ratifies the contract or transaction, if

(1) The material facts as to the transaction and as to such director’s interest are fully disclosed or known to the shareholders and such contract or transaction is approved by the shareholders (Section 153) in good faith, with the shares owned by the interested director or directors not being entitled to vote thereon, or

(2) The material facts as to the transaction and as to such director’s interest are fully disclosed or known to the board or committee, and the board or committee authorizes, approves or ratifies the contract or transaction in good faith by a vote sufficient without counting the vote of the interested director or directors and the contract or transaction is just and reasonable as to the corporation at the time it is authorized, approved or ratified, or

(3) As to contracts or transactions not approved as provided in paragraph (1) or (2) of this subdivision, the person asserting the validity of the contract or transaction sustains the burden of proving that the contract or transaction was just and reasonable as to the corporation at the time it was authorized, approved or ratified.

A mere common directorship does not constitute a material financial interest within the meaning of this subdivision. A director is not interested within the meaning of this subdivision in a resolution fixing the compensation of another director as a director, officer or employee of the corporation, notwithstanding the fact that the first director is also receiving compensation from the corporation.

(b) No contract or other transaction between a corporation and any corporation or association of which one or more of its directors are directors is either void or voidable because such director or directors are present at the meeting of the board or a committee thereof which authorizes, approves or ratifies the contract or transaction, if

(1) The material facts as to the transaction and as to such director’s other directorship are fully disclosed or known to the board or committee, and the board or committee authorizes, approves or ratifies the contract or transaction in good faith by a vote sufficient without counting the vote of the common director or directors or the contract or transaction is approved by the shareholders (Section 153) in good faith, or

(2) As to contracts or transactions not approved as provided in paragraph (1) of this subdivision, the contract or transaction is just and reasonable as to the corporation at the time it is authorized, approved or ratified.

This subdivision does not apply to contracts or transactions covered by subdivision (a).

(c) Interested or common directors may be counted in determining the presence of a quorum at a meeting of the board or a committee thereof which authorizes, approves or ratifies a contract or transaction.

(Amended by Stats. 1976, Ch. 641.)

311. The board may, by resolution adopted by a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board. The board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any such committee, to the extent provided in the resolution of the board or in the bylaws, shall have all the authority of the board, except with respect to:

(a) The approval of any action for which this division also requires shareholders’ approval (Section 153) or approval of the outstanding shares (Section 152).

(b) The filling of vacancies on the board or in any committee.

(d) The amendment or repeal of bylaws or the adoption of new bylaws.

(e) The amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable.

(f) A distribution (Section 166), except at a rate, in a periodic amount or within a price range set forth in the articles or determined by the board.

(g) The appointment of other committees of the board or the members thereof.

(Amended by Stats. 1983, Ch. 1223, Sec. 4.)

312. (a) A corporation shall have (1) a chairperson of the board, who may be given the title of chair of the board, chairperson of the board, chairman of the board, or chairwoman of the board, or a president or both, (2) a secretary, (3) a chief financial officer, and (4) such other officers with such titles and duties as shall be stated in the bylaws or determined by the board and as may be necessary to enable it to sign instruments and share certificates. The president, or if there is no president the chairperson of the board, is the general manager and chief executive officer of the corporation, unless otherwise provided in the articles or bylaws. Any number of offices may be held by the same person unless the articles or bylaws provide otherwise.

(b) Except as otherwise provided by the articles or bylaws, officers shall be chosen by the board and serve at the pleasure of the board, subject to the rights, if any, of an officer under any contract of employment. Any officer may resign at any time upon written notice to the corporation without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

(Amended by Stats. 2015, Ch. 98, Sec. 5. (SB 351) Effective January 1, 2016.)

313. Subject to the provisions of subdivision (a) of Section 208, any note, mortgage, evidence of indebtedness, contract, share certificate, initial transaction statement or written statement, conveyance, or other instrument in writing, and any assignment or endorsement thereof, executed or entered into between any corporation and any other person, when signed by the chairperson of the board, the president or any vice president and the secretary, any assistant secretary, the chief financial officer or any assistant treasurer of such corporation, is not invalidated as to the corporation by any lack of authority of the signing officers in the absence of actual knowledge on the part of the other person that the signing officers had no authority to execute the same.

(Amended by Stats. 2015, Ch. 98, Sec. 6. (SB 351) Effective January 1, 2016.)

314. The original or a copy in writing or in any other form capable of being converted into clearly legible tangible form of the bylaws or of the minutes of any incorporators’, shareholders’, directors’, committee or other meeting or of any resolution adopted by the board or a committee thereof, or shareholders, certified to be a true copy by a person purporting to be the secretary or an assistant secretary of the corporation, is prima facie evidence of the adoption of such bylaws or resolution or of the due holding of such meeting and of the matters stated therein.

(Amended by Stats. 2004, Ch. 254, Sec. 7. Effective January 1, 2005.)

315. (a) A corporation shall not make any loan of money or property to, or guarantee the obligation of, any director or officer of the corporation or of its parent, unless the transaction, or an employee benefit plan authorizing the loans or guaranties after disclosure of the right under such a plan to include officers or directors, is approved by a majority of the shareholders entitled to act thereon.

(b) Notwithstanding subdivision (a), if the corporation has outstanding shares held of record by 100 or more persons (determined as provided in Section 605) on the date of approval by the board, and has a bylaw approved by the outstanding shares (Section 152) authorizing the board alone to approve such a loan or guaranty to an officer, whether or not a director, or an employee benefit plan authorizing such a loan or guaranty to an officer, such a loan or guaranty or employee benefit plan may be approved by the board alone by a vote sufficient without counting the vote of any interested director or directors if the board determines that such a loan or guaranty or plan may reasonably be expected to benefit the corporation.

(c) A corporation shall not make any loan of money or property to, or guarantee the obligation of, any person upon the security of shares of the corporation or of its parent if the corporation’s recourse in the event of default is limited to the security for the loan or guaranty, unless the loan or guaranty is adequately secured without considering these shares, or the loan or guaranty is approved by a majority of the shareholders entitled to act thereon.

(d) Notwithstanding subdivision (a), a corporation may advance money to a director or officer of the corporation or of its parent for any expenses reasonably anticipated to be incurred in the performance of the duties of the director or officer, provided that in the absence of the advance the director or officer would be entitled to be reimbursed for the expenses by the corporation, its parent, or any subsidiary.

(e) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by the proceeds of the policy and its cash surrender value.

(f) This section does not apply to any of the following:

(1) Any transaction, plan, or agreement permitted under Section 408.

(2) Any depository institution, as defined in Section 202 of the Depository Institutions Management Interlocks Act (12 U.S.C. Sec. 3201).

(3) Any loan or guaranty made by a corporation that makes loans or guaranties in the ordinary course of its business if statutes or regulations pertaining to the corporation expressly regulate the making by the corporation of loans to its officers or directors or the undertaking of guaranties of the obligations of its officers or directors.

(g) For the purposes of subdivisions (a) and (c), “approval by a majority of the shareholders entitled to act” means either (1) written consent of a majority of the outstanding shares without counting as outstanding or as consenting any shares owned by any officer or director eligible to participate in the plan or transaction that is subject to this approval, (2) the affirmative vote of a majority of the shares present and voting at a duly held meeting at which a quorum is otherwise present, without counting for purposes of the vote as either present or voting any shares owned by any officer or director eligible to participate in the plan or transaction that is subject to the approval, or (3) the unanimous vote or written consent of the shareholders. In the case of a corporation which has more than one class or series of shares outstanding, the “shareholders entitled to act” within the meaning of this section includes only holders of those classes or series entitled under the articles to vote on all matters before the shareholders or to vote on the subject matter of this section, and includes a requirement for separate class or series voting, or for more or less than one vote per share, only to the extent required by the articles.

(Amended by Stats. 1984, Ch. 812, Sec. 1.)

316. (a) Subject to the provisions of Section 309, directors of a corporation who approve any of the following corporate actions shall be jointly and severally liable to the corporation for the benefit of all of the creditors or shareholders entitled to institute an action under subdivision (c):

(1) The making of any distribution to its shareholders to the extent that it is contrary to the provisions of Sections 500 to 503, inclusive.

(2) The distribution of assets to shareholders after institution of dissolution proceedings of the corporation, without paying or adequately providing for all known liabilities of the corporation, excluding any claims not filed by creditors within the time limit set by the court in a notice given to creditors under Chapters 18 (commencing with Section 1800), 19 (commencing with Section 1900) and 20 (commencing with Section 2000).

(3) The making of any loan or guaranty contrary to Section 315.

(b) A director who is present at a meeting of the board, or any committee thereof, at which action specified in subdivision (a) is taken and who abstains from voting shall be considered to have approved the action.

(c) Suit may be brought in the name of the corporation to enforce the liability (1) under paragraph (1) of subdivision (a) against any or all directors liable by the persons entitled to sue under subdivision (b) of Section 506, (2) under paragraph (2) or (3) of subdivision (a) against any or all directors liable by any one or more creditors of the corporation whose debts or claims arose prior to the time of any of the corporate actions specified in paragraph (2) or (3) of subdivision (a) and who have not consented to the corporate action, whether or not they have reduced their claims to judgment, or (3) under paragraph (3) of subdivision (a) against any or all directors liable by any one or more holders of shares outstanding at the time of any corporate action specified in paragraph (3) of subdivision (a) who have not consented to the corporate action, without regard to the provisions of Section 800.

(d) The damages recoverable from a director under this section shall be the amount of the illegal distribution (or if the illegal distribution consists of property, the fair market value of that property at the time of the illegal distribution) plus interest thereon from the date of the distribution at the legal rate on judgments until paid, together with all reasonably incurred costs of appraisal or other valuation, if any, of that property or loss suffered by the corporation as a result of the illegal loan or guaranty, as the case may be, but not exceeding the liabilities of the corporation owed to nonconsenting creditors at the time of the violation and the injury suffered by nonconsenting shareholders, as the case may be.

(e) Any director sued under this section may implead all other directors liable and may compel contribution, either in that action or in an independent action against directors not joined in that action.

(f) Directors liable under this section shall also be entitled to be subrogated to the rights of the corporation:

(1) With respect to paragraph (1) of subdivision (a), against shareholders who received the distribution.

(2) With respect to paragraph (2) of subdivision (a), against shareholders who received the distribution of assets.

(3) With respect to paragraph (3) of subdivision (a), against the person who received the loan or guaranty. Any director sued under this section may file a cross-complaint against the person or persons who are liable to the director as a result of the subrogation provided for in this subdivision or may proceed against them in an independent action.

(Amended by Stats. 1994, Ch. 1064, Sec. 1. Effective January 1, 1995.)

317. (a) For the purposes of this section, “agent” means any person who is or was a director, officer, employee or other agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise, or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the corporation or of another enterprise at the request of the predecessor corporation; “proceeding” means any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative; and “expenses” includes without limitation attorneys’ fees and any expenses of establishing a right to indemnification under subdivision (d) or paragraph (4) of subdivision (e).

(b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation to procure a judgment in its favor) by reason of the fact that the person is or was an agent of the corporation, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with the proceeding if that person acted in good faith and in a manner the person reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of the person was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in the best interests of the corporation or that the person had reasonable cause to believe that the person’s conduct was unlawful.

(c) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was an agent of the corporation, against expenses actually and reasonably incurred by that person in connection with the defense or settlement of the action if the person acted in good faith, in a manner the person believed to be in the best interests of the corporation and its shareholders.

No indemnification shall be made under this subdivision for any of the following:

(1) In respect of any claim, issue or matter as to which the person shall have been adjudged to be liable to the corporation in the performance of that person’s duty to the corporation and its shareholders, unless and only to the extent that the court in which the proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for expenses and then only to the extent that the court shall determine.

(2) Of amounts paid in settling or otherwise disposing of a pending action without court approval.

(3) Of expenses incurred in defending a pending action which is settled or otherwise disposed of without court approval.

(d) To the extent that an agent of a corporation has been successful on the merits in defense of any proceeding referred to in subdivision (b) or (c) or in defense of any claim, issue, or matter therein, the agent shall be indemnified against expenses actually and reasonably incurred by the agent in connection therewith.

(e) Except as provided in subdivision (d), any indemnification under this section shall be made by the corporation only if authorized in the specific case, upon a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth in subdivision (b) or (c), by any of the following:

(1) A majority vote of a quorum consisting of directors who are not parties to such proceeding.

(2) If such a quorum of directors is not obtainable, by independent legal counsel in a written opinion.

(3) Approval of the shareholders (Section 153), with the shares owned by the person to be indemnified not being entitled to vote thereon.

(4) The court in which the proceeding is or was pending upon application made by the corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not the application by the agent, attorney or other person is opposed by the corporation.

(f) Expenses incurred in defending any proceeding may be advanced by the corporation prior to the final disposition of the proceeding upon receipt of an undertaking by or on behalf of the agent to repay that amount if it shall be determined ultimately that the agent is not entitled to be indemnified as authorized in this section. The provisions of subdivision (a) of Section 315 do not apply to advances made pursuant to this subdivision.

(g) The indemnification authorized by this section shall not be deemed exclusive of any additional rights to indemnification for breach of duty to the corporation and its shareholders while acting in the capacity of a director or officer of the corporation to the extent the additional rights to indemnification are authorized in an article provision adopted pursuant to paragraph (11) of subdivision (a) of Section 204. The indemnification provided by this section for acts, omissions, or transactions while acting in the capacity of, or while serving as, a director or officer of the corporation but not involving breach of duty to the corporation and its shareholders shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of shareholders or disinterested directors, or otherwise, to the extent the additional rights to indemnification are authorized in the articles of the corporation. An article provision authorizing indemnification “in excess of that otherwise permitted by Section 317” or “to the fullest extent permissible under California law” or the substantial equivalent thereof shall be construed to be both a provision for additional indemnification for breach of duty to the corporation and its shareholders as referred to in, and with the limitations required by, paragraph (11) of subdivision (a) of Section 204 and a provision for additional indemnification as referred to in the second sentence of this subdivision. The rights to indemnity hereunder shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs, executors, and administrators of the person. Nothing contained in this section shall affect any right to indemnification to which persons other than the directors and officers may be entitled by contract or otherwise.

(h) No indemnification or advance shall be made under this section, except as provided in subdivision (d) or paragraph (4) of subdivision (e), in any circumstance where it appears:

(1) That it would be inconsistent with a provision of the articles, bylaws, a resolution of the shareholders, or an agreement in effect at the time of the accrual of the alleged cause of action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification.

(2) That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.

(i) A corporation shall have power to purchase and maintain insurance on behalf of any agent of the corporation against any liability asserted against or incurred by the agent in that capacity or arising out of the agent’s status as such whether or not the corporation would have the power to indemnify the agent against that liability under this section. The fact that a corporation owns all or a portion of the shares of the company issuing a policy of insurance shall not render this subdivision inapplicable if either of the following conditions are satisfied: (1) if the articles authorize indemnification in excess of that authorized in this section and the insurance provided by this subdivision is limited as indemnification is required to be limited by paragraph (11) of subdivision (a) of Section 204; or (2) (A) the company issuing the insurance policy is organized, licensed, and operated in a manner that complies with the insurance laws and regulations applicable to its jurisdiction of organization, (B) the company issuing the policy provides procedures for processing claims that do not permit that company to be subject to the direct control of the corporation that purchased that policy, and (C) the policy issued provides for some manner of risk sharing between the issuer and purchaser of the policy, on one hand, and some unaffiliated person or persons, on the other, such as by providing for more than one unaffiliated owner of the company issuing the policy or by providing that a portion of the coverage furnished will be obtained from some unaffiliated insurer or reinsurer.

(j) This section does not apply to any proceeding against any trustee, investment manager, or other fiduciary of an employee benefit plan in that person’s capacity as such, even though the person may also be an agent as defined in subdivision (a) of the employer corporation. A corporation shall have power to indemnify such a trustee, investment manager, or other fiduciary to the extent permitted by subdivision (f) of Section 207.

(Amended by Stats. 1995, Ch. 154, Sec. 4. Effective January 1, 1996.)

318. (a) The Secretary of State shall develop and maintain a registry of distinguished women and minorities who are available to serve on corporate boards of directors. As used in this section, “minority” means an ethnic person of color including American Indians, Asians (including, but not limited to, Chinese, Japanese, Koreans, Pacific Islanders, Samoans, and Southeast Asians), Blacks, Filipinos, and Hispanics.

(b) For each woman or minority who participates in the registry, the Secretary of State shall maintain information on his or her educational, professional, community service, and corporate governance background. That information may include, but is not limited to:

(1) Paid or volunteer employment.

(2) Service in elected public office or on public boards or commissions.

(3) Directorships, officerships, and trusteeships of business and nonprofit entities, including committee experience.

(4) Professional, academic, or community awards or honors.

(5) Publications.

(6) Government relations experience.

(7) Experience with corporate constituents.

(8) Any other areas of special expertise.

(c) In addition to the information subdivision (b) requires, each woman or minority who participates in the registry may disclose any number of personal attributes that may contribute to board diversity. Those attributes may include, but are not limited to, gender, physical disability, race, or ethnic origin.

(d) In addition to the information subdivision (b) requires, each woman or minority who participates in the registry may indicate characteristics of corporations for which he or she would consider, or is especially interested in, serving as a director. These characteristics may include, but are not limited to, company size, industry, geographic location, board meeting frequency, director time commitments, director compensation, director insurance or indemnification, or social policy concerns.

(e) Any woman or minority may nominate himself or herself to the registry by filing with the Secretary of State the information required by subdivision (b) on a form the secretary prescribes. Any registrant may attach a copy of his or her resume and up to two letters of recommendation to his or her registration form. Each registrant’s registration form, together with any attached resume or letters of recommendation, shall constitute his or her registry transcript.

(f) The Secretary of State shall make appropriate rules requiring registrants to renew or update their filings with the registry, as necessary to ensure continued accuracy of registry information.

(g) The Secretary of State shall assign each registrant a file number, then enter the information described in subdivisions (b), (c), and (d) into a data base, using the registrant’s file number to identify him or her. The registry data base shall not disclose any registrant’s name or street address, but may list the city, county, or ZIP Code of his or her business or residence address. The secretary shall make data base information available to those persons described in subdivisions (i) and (j). The secretary may provide that access either by permitting direct data base searches or by performing data base searches on written request.

(h) The Secretary of State may also make information contained in the registry data base available to any person or entity qualified to transact business in California that regularly engages in the business of providing data base access or search services; provided, that data base access will not be construed to entitle the user to access to any registrant’s transcript.

(i) The Secretary of State shall make information contained in a reasonable number of registrants’ transcripts available to any corporation or its representative. A “representative,” for purposes of this subdivision, may be an attorney, an accountant, or a retained executive recruiter. A “retained executive recruiter,” for purposes of this subdivision, is an individual or business entity engaged in the executive search business that is regularly retained to locate qualified candidates for appointment or election as corporate directors or executive officers.

(j) The Secretary of State may also grant access to a reasonable number of registrants’ transcripts to any other person who demonstrates to the secretary’s satisfaction that the person does both of the following:

(1) Seeks access to the registry in connection with an actual search for a corporate director.

(2) Intends to use any information obtained from the registry only for the purpose of finding qualified candidates for an open position on a corporate board of directors.

(k) The Secretary of State may employ reasonable means to verify that any party seeking access to registry transcript information is one of those specified in subdivision (i) or (j). To that end, the secretary may require a representative to identify its principal, but may not disclose that principal’s identity to any other person.

(l) Upon written request specifying the registrant’s file number, the Secretary of State shall provide any party entitled to access to registry transcripts with a copy of any registrant’s transcript. The secretary may by rule or regulation specify other reasonable means by which persons entitled thereto may order copies of registrants’ transcripts.

(m) Notwithstanding any other law, a person shall not be entitled to access to information the registry contains, except as this section specifically provides.

(n) The Secretary of State shall charge fees for registering with the registry, obtaining access to the registry data base, and obtaining copies of registrants’ transcripts. The Secretary of State, in consultation with the Senate Commission on Corporate Governance, Shareholder Rights, and Securities Transactions, shall fix those fees by regulation. Fees shall be fixed so that the aggregate amount of all fees collected shall be sufficient to cover the total cost of administering the registry program. Registration fees shall be fixed so as to encourage qualified women and minorities to participate. Fees shall be deposited into the Secretary of State’s Business Fee Fund.

(o) The Secretary of State may make any rule, regulation, guideline, or agreement the secretary deems necessary to carry out the purposes and provisions of this section.

(p) The Secretary of State may cooperate with the Commission on the Status of Women and Girls, the California Council to Promote Business Ownership by Women, the Senate Commission on Corporate Governance, Shareholder Rights, and Securities Transactions, women’s organizations, minority organizations, business and professional organizations, and any other individual or entity the secretary deems appropriate, for any of the following purposes:

(1) Promoting corporate use of the registry.

(2) Locating qualified women and minorities and encouraging them to participate in the registry.

(3) Educating interested parties on the purpose and most effective use of the registry.

The secretary may also prepare and distribute publications designed to promote informed use of the registry.

(q) The Secretary of State may seek registrants’ consent to be listed in a published directory of women and minorities eligible to serve as corporate directors, which will contain a summary of each listed registrant’s qualifications. The secretary may periodically publish, or cause to be published, such a directory. Only those registrants who so consent in writing may be included in the directory. The printed directory shall be provided to any person upon payment of a fee, which the Secretary of State will determine by regulation, in consultation with the Senate Commission on Corporate Governance, Shareholder Rights, and Securities Transactions.

(r) The Secretary of State shall implement this section no later than January 1, 1995.

(s) At least once in each three-year period during which the registry is available for corporate use, the Secretary of State, in consultation with the Senate Commission on Corporate Governance, Shareholder Rights, and Securities Transactions, shall report to the Legislature on the extent to which the registry has helped women and minorities progress toward achieving parity in corporate board appointments or elections.

(t) The Secretary of State shall notify each University of California campus and each California State University campus of the opportunity to maintain the registry created pursuant to this section. If more than one campus of the university or state university expresses interest in maintaining the registry, the Secretary of State shall select a campus based on a competitive selection process. If a campus is selected, the Secretary of State shall transfer the information contained in the registry, free of cost, to that campus. Any University of California or California State University campus selected to maintain the registry shall do so in a manner consistent with this section. Funds deposited in the Secretary of State’s Business Fees Fund pursuant to this section shall be transferred to the university selected to maintain the registry, and shall be used to administer the registry program. The Secretary of State shall maintain the registry until a University of California or California State University campus agrees to do so.

(Amended by Stats. 2012, Ch. 46, Sec. 2. (SB 1038) Effective June 27, 2012.)

Michael D. Kolodzi