CA Corporations Code

CALIFORNIA CORPORATIONS CODE
TABLE OF CONTENTS
GENERAL PROVISIONS ................................................... 1-21
TITLE 1. CORPORATIONS
DIVISION 1. GENERAL CORPORATION LAW
CHAPTER 1. GENERAL PROVISIONS AND DEFINITIONS ................... 100-195
CHAPTER 2. ORGANIZATION AND BYLAWS .............................. 200-213
CHAPTER 3. DIRECTORS AND MANAGEMENT ............................. 300-318
CHAPTER 4. SHARES AND SHARE CERTIFICATES ........................ 400-423
CHAPTER 5. DIVIDENDS AND REACQUISITIONS OF SHARES ............... 500-511
CHAPTER 6. SHAREHOLDERS' MEETINGS AND CONSENTS .................. 600-605
CHAPTER 7. VOTING OF SHARES ..................................... 700-711
CHAPTER 8. SHAREHOLDER DERIVATIVE ACTIONS ........................ 800
CHAPTER 9. AMENDMENT OF ARTICLES ................................ 900-911
CHAPTER 10. SALES OF ASSETS ................................... 1000-1002
CHAPTER 11. MERGER ............................................ 1100-1113
CHAPTER 11.5. CONVERSIONS ..................................... 1150-1160
CHAPTER 12. REORGANIZATIONS ................................... 1200-1203
CHAPTER 13. DISSENTERS' RIGHTS ................................ 1300-1313
CHAPTER 14. BANKRUPTCY REORGANIZATIONS AND ARRANGEMENTS ....... 1400-1403
CHAPTER 15. RECORDS AND REPORTS ............................... 1500-1512
CHAPTER 16. RIGHTS OF INSPECTION .............................. 1600-1605
CHAPTER 17. SERVICE OF PROCESS ................................ 1700-1702
CHAPTER 18. INVOLUNTARY DISSOLUTION ........................... 1800-1809
CHAPTER 19. VOLUNTARY DISSOLUTION ............................. 1900-1907
CHAPTER 20. GENERAL PROVISIONS RELATING TO DISSOLUTION ........ 2000-2011
CHAPTER 21. FOREIGN CORPORATIONS ............................ 2100-2117.1
CHAPTER 22. CRIMES AND PENALTIES .............................. 2200-2260
CHAPTER 23. TRANSITION PROVISIONS ............................. 2300-2319
DIVISION 2. NONPROFIT CORPORATION LAW .......................... 5000-5001
PART 1. GENERAL PROVISIONS AND DEFINITIONS GOVERNING PARTS 1
THROUGH 5 ............................................. 5002-5080
PART 2. NONPROFIT PUBLIC BENEFIT CORPORATIONS
CHAPTER 1. ORGANIZATION AND BYLAWS
Article 1. Title and Purposes ............................... 5110-5111
Article 2. Formation ........................................ 5120-5122
Article 3. Articles of Incorporation ........................ 5130-5134
Article 4. Powers ........................................... 5140-5142
Article 5. Bylaws ........................................... 5150-5153
Article 6. Location and Inspection of Articles and Bylaws ...... 5160
CHAPTER 2. DIRECTORS AND MANAGEMENT
Article 1. General Provisions ............................... 5210-5215
Article 2. Selection, Removal and Resignation of Directors .. 5220-5227
Article 3. Standards of Conduct ............................. 5230-5239
Article 4. Investments ...................................... 5240-5241
Article 5. Examination by Attorney General ..................... 5250
Article 6. Compliance With Internal Revenue Code ............... 5260
CHAPTER 3. MEMBERS
Article 1. Issuance of Memberships .......................... 5310-5313
Article 2. Transfer of Memberships ............................. 5320
Article 3. Types of Memberships ............................. 5330-5332
Article 4. Termination of Memberships ....................... 5340-5342
Article 5. Rights and Obligations of Members and Creditors .. 5350-5354
CHAPTER 4. DISTRIBUTIONS
Article 1. Limitations ......................................... 5410
Article 2. Liability of Members ................................ 5420
CHAPTER 5. MEETINGS AND VOTING
Article 2. Additional Provisions Relating to Election of
Directors ........................................ 5520-5527
CHAPTER 6. VOTING OF MEMBERSHIPS ............................. 5610-5617
CHAPTER 7. MEMBERS' DERIVATIVE ACTIONS .......................... 5710
CHAPTER 8. AMENDMENT OF ARTICLES ............................. 5810-5820
CHAPTER 9. SALES OF ASSETS
Article 2. Health Facilities ................................ 5914-5930
CHAPTER 10. MERGERS
Article 1. Merger ......................................... 6010-6019.1
Article 2. Effect of Merger ................................. 6020-6022
CHAPTER 11. BANKRUPTCY REORGANIZATIONS AND ARRANGEMENTS ......... 6110
CHAPTER 12. REQUIRED FILINGS BY CORPORATION OR ITS AGENT ..... 6210-6216
CHAPTER 13. RECORDS, REPORTS, AND RIGHTS OF INSPECTION
Article 2. Required Records, Reports to Directors and Members 6320-6325
Article 3. Rights of Inspection ............................. 6330-6338
CHAPTER 14. SERVICE OF PROCESS .................................. 6410
CHAPTER 15. INVOLUNTARY DISSOLUTION .......................... 6510-6519
CHAPTER 16. VOLUNTARY DISSOLUTION ............................ 6610-6618
CHAPTER 17. GENERAL PROVISIONS RELATING TO DISSOLUTION ....... 6710-6721
CHAPTER 18. CRIMES AND PENALTIES ............................. 6810-6815
CHAPTER 19. FOREIGN CORPORATIONS ................................ 6910
PART 3. NONPROFIT MUTUAL BENEFIT CORPORATIONS
Article 2. Formation ...................................... 7120-7122.3
Article 4. Powers ........................................... 7140-7142
Article 5. Bylaws ........................................... 7150-7153
CHAPTER 3. MEMBERS
Article 4. Termination of Memberships ....................... 7340-7341
Article 1. Limitations ...................................... 7410-7414
Directors ........................................ 7520-7527
CHAPTER 6. VOTING OF MEMBERSHIPS ............................. 7610-7616
CHAPTER 8. AMENDMENT OF ARTICLES ............................. 7810-7820
CHAPTER 9. SALES OF ASSETS ................................... 7910-7913
CHAPTER 10. MERGERS
Article 1. Merger ......................................... 8010-8019.1
Article 2. Effect of Merger ................................. 8020-8022
CHAPTER 12. REQUIRED FILINGS BY CORPORATION OR ITS AGENT ..... 8210-8217
CHAPTER 13. RECORDS, REPORTS, AND RIGHTS OF INSPECTION
Article 2. Required Records, Reports to Directors and Members 8320-8325
Article 3. Rights of Inspection ............................. 8330-8338
CHAPTER 15. INVOLUNTARY DISSOLUTION .......................... 8510-8519
CHAPTER 16. VOLUNTARY DISSOLUTION ............................ 8610-8618
CHAPTER 17. GENERAL PROVISIONS RELATING TO DISSOLUTION ....... 8710-8724
CHAPTER 18. CRIMES AND PENALTIES ............................. 8810-8817
PART 4. NONPROFIT RELIGIOUS CORPORATIONS
Article 2. Formation ........................................ 9120-9122
Article 4. Powers ........................................... 9140-9143
Article 5. Bylaws ........................................... 9150-9153
Article 5. Investments ...................................... 9250-9251
Article 6. Compliance with Internal Revenue Code ............... 9260
CHAPTER 3. MEMBERS
Article 4. Termination of Memberships .......................... 9340
CHAPTER 4. MEETINGS AND VOTING ............................... 9410-9421
CHAPTER 5. RECORDS, REPORTS AND RIGHTS OF INSPECTION ......... 9510-9514
CHAPTER 6. MISCELLANEOUS PROVISIONS
Article 1. Distributions ....................................... 9610
Article 2. Amendment of Articles ............................ 9620-9621
Article 3. Sale of Assets ................................... 9630-9633
Article 4. Mergers ............................................. 9640
Article 5. Bankruptcy Reorganizations and Arrangements ......... 9650
Article 6. Filings ............................................. 9660
Article 7. Service of Process .................................. 9670
Article 8. Dissolution ......................................... 9680
Article 9. Crimes and Penalties ................................ 9690
PART 5. TRANSITION PROVISIONS ................................. 9910-9928
PART 6. CORPORATIONS SOLE ................................... 10000-10015
PART 7. CORPORATIONS FOR CHARITABLE OR ELEEMOSYNARY PURPOSES ..... 10200
PART 8. TRUST FUNDS ......................................... 10250-10251
PART 9. SOCIETIES FOR PREVENTION OF CRUELTY TO CHILDREN AND
ANIMALS ............................................. 10400-10406
PART 10. PORT AND TERMINAL PROTECTION AND DEVELOPMENT
CORPORATIONS ....................................... 10700-10703
PART 11. NONPROFIT MEDICAL, HOSPITAL, OR LEGAL SERVICES
CORPORATIONS
Article 1. Nonprofit Corporations for Medical Services ..... 10810-10812
Article 2. Nonprofit Health Care Service Plans ............. 10820-10821
Article 3. Nonprofit Corporation to Administer System of
Defraying Cost of Professional Services of
Attorneys ....................................... 10830-10831
Article 4. Hospital Service Plans .......................... 10840-10841
DIVISION 3. CORPORATIONS FOR SPECIFIC PURPOSES
PART 1. CHAMBERS OF COMMERCE, BOARDS OF TRADE, MECHANICS'
INSTITUTES, ETC. ......................................... 12000
PART 2. CONSUMER COOPERATIVE CORPORATIONS
CHAPTER 1. GENERAL PROVISIONS, ORGANIZATION AND BYLAWS
Article 1. Title, Purposes and Application of Part ........ 12200-12203
Article 2. General Provisions and Definitions ............. 12210-12256
Article 3. Formation .................................... 12300-12302.1
Article 4. Articles of Incorporation ...................... 12310-12316
Article 5. Powers ......................................... 12320-12321
Article 6. Bylaws ......................................... 12330-12333
Article 1. General Provisions ............................. 12350-12355
Article 2. Selection, Removal and Resignation of Directors 12360-12364
Article 3. Standards of Conduct ........................... 12370-12377
CHAPTER 3. MEMBERS
Article 1. Issuance of Memberships ........................ 12400-12405
Article 3. Types of Memberships ........................... 12420-12422
Article 4. Termination of Memberships ..................... 12430-12431
Article 5. Rights and Obligations of Members and Creditors 12440-12446
Article 1. Limitations .................................... 12450-12454
Directors ...................................... 12470-12477
CHAPTER 6. VOTING OF MEMBERSHIPS ........................... 12480-12485
CHAPTER 8. AMENDMENT OF ARTICLES ........................... 12500-12510
CHAPTER 9. SALES OF ASSETS ................................. 12520-12522
CHAPTER 10. MERGERS
Article 1. Merger ....................................... 12530-12540.1
Article 2. Effect of Merger ............................... 12550-12552
CHAPTER 12. REQUIRED FILINGS BY CORPORATION OR ITS AGENT ... 12570-12576
CHAPTER 13. RECORDS, REPORTS AND RIGHTS OF INSPECTION
Article 2. Required Records, Reports to Directors and
Members ........................................ 12590-12594
Article 3. Rights of Inspection ........................... 12600-12608
CHAPTER 15. INVOLUNTARY DISSOLUTION ........................ 12620-12629
CHAPTER 16. VOLUNTARY DISSOLUTION .......................... 12630-12637
CHAPTER 17. GENERAL PROVISIONS RELATING TO DISSOLUTION ..... 12650-12663
CHAPTER 18. CRIMES AND PENALTIES ........................... 12670-12679
CHAPTER 20. TRANSITION PROVISIONS .......................... 12690-12704
PART 3. FISH MARKETING
CHAPTER 1. GENERAL PROVISIONS AND DEFINITIONS .............. 13200-13208
CHAPTER 2. FORMATION, ARTICLES, AND BY-LAWS
Article 1. Formation ........................................... 13220
Article 2. Articles of Incorporation ...................... 13225-13230
Article 3. By-laws ........................................ 13240-13251
CHAPTER 3. OFFICERS
Article 1. Generally ...................................... 13275-13279
Article 2. Removal of Officers ............................ 13290-13293
CHAPTER 4. MEMBERS ......................................... 13300-13304
CHAPTER 5. STOCK ........................................... 13310-13316
CHAPTER 6. POWERS .......................................... 13325-13335
CHAPTER 7. MARKETING CONTRACTS ............................. 13350-13356
PART 4. PROFESSIONAL CORPORATIONS ........................... 13400-13410
PART 5. SMALL BUSINESSES
CHAPTER 1. CALIFORNIA SMALL BUSINESS FINANCIAL DEVELOPMENT
CORPORATIONS
Article 1. Introduction ................................... 14000-14003
Article 2. Definitions ......................................... 14010
Article 3. Small Business Development Board ............... 14020-14024
Article 4. Executive Director ............................. 14025-14028
Article 5. Funds .......................................... 14030-14044
Article 6. New Corporations ............................... 14045-14052
Article 7. Corporation Board and Loan Committee ......... 14055-14060.6
Article 8. Corporations, Miscellaneous .................. 14061-14069.6
Article 9. Loans and Loan Guarantees ...................... 14070-14076
Article 11. Conflict of Interest .......................... 14085-14087
Article 12. Other Programs ................................ 14090-14091
PART 6. EMPLOYEE-OWNED BUSINESSES ................................ 14200
PART 7. GENERAL PROVISIONS APPLICABLE TO CERTAIN CORPORATIONS
CHAPTER 1. WATER COMPANIES ................................. 14300-14303
CHAPTER 2. MUTUAL WATER COMPANIES FORMED IN CONNECTION WITH
SUBDIVIDED LANDS ................................ 14310-14318
PART 8. BRIDGE, FERRY, WHARF, CHUTE, AND PIER CORPORATIONS .. 14350-14353
PART 9. CABLE TELEVISION CORPORATIONS ............................ 14400
PART 10. WATER AND CANAL CORPORATIONS ....................... 14450-14452
PART 11. SOCIETIES FOR THE PREVENTION OF CRUELTY TO ANIMALS 14500-14505
PART 12. NONPROFIT COOPERATIVE AGRICULTURAL MARKETING
ASSOCIATIONS ....................................... 14550-14551
TITLE 2. PARTNERSHIPS
CHAPTER 4. PROCESS AGENTS FOR CERTAIN FOREIGN CORPORATIONS ........ 15800
CHAPTER 5. UNIFORM PARTNERSHIP ACT OF 1994
Article 2. Nature of Partnership ............................ 16201-16204
Article 3. Relations of Partners to Persons Dealing with
Partnership ...................................... 16301-16310
Article 4. Relations of Partners to Each Other and to
Partnership ...................................... 16401-16406
Article 5. Transferees and Creditors of Partner ............. 16501-16504
Article 6. Partner's Dissociation ........................... 16601-16603
Article 7. Partner's Dissociation When Business Not Wound Up 16701-16705
Article 8. Winding Up Partnership Business .................. 16801-16807
Article 9. Conversions and Mergers .......................... 16901-16917
Article 10. Limited Liability Partnerships .................. 16951-16962
CHAPTER 5.5. UNIFORM LIMITED PARTNERSHIP ACT OF 2008
Article 1. General Provisions ............................ 15900-15901.17
Article 2. Formation; Certificate of Limited
Partnership and Other Filings .............. 15902.01-15902.09
Article 3. Limited Partners ........................... 15903.01-15903.07
Article 4. General Partners ........................... 15904.01-15904.09
Article 5. Contributions and Distributions ............ 15905.01-15905.09
Article 6. Dissociation ............................... 15906.01-15906.07
Article 7. Transferable Interests and Rights of
Transferees and Creditors .................. 15907.01-15907.04
Article 8. Dissolution ................................ 15908.01-15908.09
Article 9. Foreign Limited Partnership ................ 15909.01-15909.08
Article 10. Actions by Partners ....................... 15910.01-15910.06
Article 11. Conversion and Merger ..................... 15911.01-15911.19
Article 11.5. Dissenting Limited Partners' Rights ..... 15911.20-15911.33
Article 12. Miscellaneous Provisions .................. 15912.01-15912.07
TITLE 2.5. LIMITED LIABILITY COMPANIES
CHAPTER 1. GENERAL PROVISIONS ................................ 17000-17005
CHAPTER 2. FORMATION ......................................... 17050-17062
CHAPTER 3. MEMBERS ........................................... 17100-17107
CHAPTER 4. MANAGEMENT ........................................ 17150-17158
CHAPTER 5. FINANCE ........................................... 17200-17202
CHAPTER 6. DISTRIBUTIONS AND WITHDRAWALS ..................... 17250-17255
CHAPTER 7. INTEREST IN LIMITED LIABILITY COMPANY: ASSIGNMENT
OF INTERESTS ...................................... 17300-17304
CHAPTER 8. DISSOLUTION ....................................... 17350-17357
CHAPTER 9. PROFESSIONAL LIMITED LIABILITY COMPANIES: RESERVED ..... 17375
CHAPTER 10. FOREIGN LIMITED LIABILITY COMPANIES .............. 17450-17457
CHAPTER 11. CLASS ACTIONS AND DERIVATIVE ACTIONS ............. 17500-17501
CHAPTER 11.5. CONVERSION ................................. 17540.1-17540.9
CHAPTER 12. MERGER ........................................... 17550-17556
CHAPTER 13. DISSENTING MEMBERS' RIGHTS ....................... 17600-17613
CHAPTER 14. MISCELLANEOUS PROVISIONS ......................... 17650-17656
TITLE 3. UNINCORPORATED ASSOCIATIONS
PART 1. GENERAL PROVISIONS
CHAPTER 1. DEFINITIONS ...................................... 18000-18035
CHAPTER 2. APPLICATION OF TITLE ............................. 18055-18070
CHAPTER 3. PROPERTY ......................................... 18100-18135
CHAPTER 4. DESIGNATION OF AGENT FOR SERVICE OF PROCESS ...... 18200-18220
CHAPTER 5. LIABILITY AND ENFORCEMENT OF JUDGMENTS ........... 18250-18270
CHAPTER 6. GOVERNANCE
Article 1. [Reserved] ........................................... 18300
Article 2. Termination or Suspension of Membership ......... 18310-18320
Article 3. Member Voting ........................................ 18330
Article 4. Amendment of Governing Documents ..................... 18340
Article 5. Merger .......................................... 18350-18400
Article 6. Dissolution ..................................... 18410-18420
PART 2. NONPROFIT ASSOCIATIONS
CHAPTER 1. LIABILITY ........................................ 18605-18640
CHAPTER 3. MEDICAL ASSOCIATIONS .................................. 21200
CHAPTER 4. INSIGNIA ......................................... 21300-21310
CHAPTER 5. DEATH BENEFIT PAYMENTS BY FRATERNAL SOCIETIES .... 21400-21401
PART 3. JOINT STOCK ASSOCIATIONS ............................. 22000-22003
PART 4. REAL ESTATE INVESTMENT TRUSTS ........................ 23000-23006
PART 5. LIABILITY OF DIRECTOR OR OFFICER OF NONPROFIT MEDICAL
ASSOCIATION .............................................. 24001.5
TITLE 4. SECURITIES
DIVISION 1. CORPORATE SECURITIES LAW OF 1968
PART 1. DEFINITIONS ......................................... 25000-25023
PART 2. QUALIFICATION OF AND FILING REQUIREMENTS FOR THE
SALE OF SECURITIES
CHAPTER 1. EXEMPTIONS AND CERTAIN SECURITIES AND
TRANSACTIONS NOT SUBJECT TO QUALIFICATION ....... 25100-25105
CHAPTER 2. ISSUER TRANSACTIONS ............................. 25110-25118
CHAPTER 3. RECAPITALIZATIONS AND REORGANIZATIONS ........... 25120-25122
CHAPTER 4. NONISSUER TRANSACTIONS .......................... 25130-25134
CHAPTER 5. AUTHORITY OF THE COMMISSIONER ................... 25140-25151
CHAPTER 6. GENERAL PROVISIONS .............................. 25160-25166
PART 3. REGULATION AND NOTICE FILING REQUIREMENTS OF AGENTS,
BROKER-DEALERS, INVESTMENT ADVISER
REPRESENTATIVES, AND INVESTMENT ADVISERS
CHAPTER 1. EXEMPTIONS ...................................... 25200-25209
CHAPTER 2. LICENSING OF AGENTS AND BROKER-DEALERS .......... 25210-25221
CHAPTER 3. LICENSING AND NOTICE FILING REQUIREMENTS OF
INVESTMENT ADVISER REPRESENTATIVES AND
INVESTMENT ADVISERS ............................. 25230-25238
PART 4. ADVERTISING SECURITIES .............................. 25300-25302
PART 5. FRAUDULENT AND PROHIBITED PRACTICES ................. 25400-25404
PART 6. ENFORCEMENT
CHAPTER 1. CIVIL LIABILITY ................................. 25500-25510
CHAPTER 2. POWERS OF THE COMMISSIONER ...................... 25530-25536
CHAPTER 3. CRIMES .......................................... 25540-25542
CHAPTER 4. SERVICE OF PROCESS ................................... 25550
PART 7. ADMINISTRATION ...................................... 25600-25620
PART 8. GENERAL PROVISIONS .................................. 25700-25707
DIVISION 2. SECURITY OWNERS PROTECTION
CHAPTER 1. DEFINITIONS AND GENERAL PROVISIONS ............... 27000-27003
CHAPTER 2. UNLAWFUL AND FRAUDULENT CONDUCT .................. 27100-27101
CHAPTER 3. CIVIL LIABILITY AND CRIMES ....................... 27200-27202
DIVISION 3. CAPITAL ACCESS COMPANIES
CHAPTER 1. GENERAL PROVISIONS
Article 1. Short Title and Construction .................... 28000-28004
Article 2. Definitions ..................................... 28030-28049
CHAPTER 2. ADMINISTRATION ................................... 28100-28111
CHAPTER 3. LICENSING ........................................ 28150-28155
CHAPTER 4. ORGANIZATIONAL MATTERS
Article 1. Organization and Name ........................... 28200-28201
Article 2. Directors ....................................... 28210-28212
CHAPTER 5. OFFICES
Article 1. Establishing, Relocating, and Closing Offices ........ 28320
CHAPTER 6. TRANSACTION OF BUSINESS .......................... 28400-28405
CHAPTER 7. RECORDS, REPORTS, AND EXAMINATIONS ............... 28500-28505
CHAPTER 8. ACQUISITION OF CONTROL ........................... 28550-28552
CHAPTER 9. MERGER AND PURCHASE OR SALE OF BUSINESS .......... 28600-28604
CHAPTER 10. VOLUNTARY SURRENDER OF LICENSE .................. 28650-28651
CHAPTER 11. ENFORCEMENT ..................................... 28700-28716
CHAPTER 12. CRIMES AND CRIMINAL PENALTIES
Article 1. General Provisions .............................. 28800-28802
Article 2. Conflicts of Interest ........................... 28820-28821
Article 3. Criminal Penalties .............................. 28880-28881
CHAPTER 13. CIVIL PENALTIES ................................. 28900-28901
CHAPTER 14. MISCELLANEOUS PROVISIONS ........................ 28950-28958
DIVISION 4. BUCKET SHOP LAW
CHAPTER 2. PROHIBITED ACTIVITIES ............................ 29100-29105
CHAPTER 3. REQUIRED RECORDS AND STATEMENTS .................. 29200-29201
DIVISION 4.5. COMMODITIES
CHAPTER 2. UNLAWFUL COMMODITY TRANSACTIONS ....................... 29520
CHAPTER 3. EXEMPTIONS ....................................... 29530-29532
CHAPTER 4. UNLAWFUL ACTIVITIES AND FRAUDULENT CONDUCT ....... 29535-29538
CHAPTER 5. POWERS OF THE COMMISSIONER ....................... 29540-29546
CHAPTER 6. CRIMES AND CIVIL LIABILITY ....................... 29550-29555
CHAPTER 7. MISCELLANEOUS PROVISIONS ......................... 29560-29567
DIVISION 5. FRANCHISE INVESTMENT LAW
PART 1. DEFINITIONS ......................................... 31000-31019
PART 2. REGULATION OF THE SALE OF FRANCHISES
CHAPTER 1. EXEMPTIONS .................................... 31100-31109.1
CHAPTER 2. DISCLOSURE ...................................... 31110-31125
PART 3. FRAUDULENT AND PROHIBITED PRACTICES
CHAPTER 1. FRAUDULENT PRACTICES ............................ 31200-31204
CHAPTER 2. PROHIBITED PRACTICES ............................ 31210-31211
CHAPTER 3. UNFAIR PRACTICES ..................................... 31220
PART 4. ENFORCEMENT
CHAPTER 1. CIVIL LIABILITY ................................. 31300-31306
CHAPTER 2. POWERS OF THE COMMISSIONER ...................... 31400-31408
CHAPTER 3. CRIMES .......................................... 31410-31412
CHAPTER 4. SERVICE OF PROCESS ................................... 31420
PART 5. ADMINISTRATION ...................................... 31500-31506
PART 6. GENERAL PROVISIONS .................................. 31510-31516
TITLE 5. SUBVERSIVE ORGANIZATION REGISTRATION LAW
CHAPTER 1. DEFINITIONS AND GENERAL PROVISIONS ................ 35000-35007
CHAPTER 2. FILING INFORMATION AND DOCUMENTS .................. 35100-35105
CHAPTER 3. LITERATURE ............................................. 35200
CHAPTER 4. OFFENSES .......................................... 35300-35302
TITLE 10. REPEALS ........................................... 100000-100008
CORPORATIONS CODE
SECTION 1-21
1. This act shall be known as the Corporations Code.
2. The provisions of this code, insofar as they are substantially

the same as existing statutory provisions relating to the same
subject matter, shall be construed as restatements and continuations,
and not as new enactments.
3. All persons who, at the time this code goes into effect, hold
office under any of the acts repealed by this code, which offices are
continued by this code, continue to hold them according to their
former tenure.
4. No action or proceeding commenced before this code takes effect,

and no right accrued, is affected by the provisions of this code,
but all procedure thereafter taken therein shall conform to the
provisions of this code so far as possible.
5. Unless the provision or the context otherwise requires, these

general provisions, rules of construction, and definitions govern the
construction of this code.
6. Title, division, part, chapter, article, and section headings

contained herein do not in any manner affect the scope, meaning, or
intent of the provisions of this code.
7. Whenever, by the provisions of this code, a power is granted to,

or a duty imposed upon, a public officer, the power may be exercised
or the duty performed by a deputy of the officer or by a person
authorized, pursuant to law, by the officer, unless this code
expressly provides otherwise.
8. Writing includes any form of recorded message capable of

comprehension by ordinary visual means; and when used to describe
communications between a corporation, partnership, or limited
liability company and its shareholders, members, partners, directors,
or managers, writing shall include electronic transmissions by and
to a corporation (Sections 20 and 21), electronic transmissions by
and to a partnership (subdivisions (4) and (5) of Section 16101), and
electronic transmissions by and to a limited liability company
(paragraphs (1) and (2) of subdivision (o) of Section 17001).
Whenever any notice, report, statement, or record is required or
authorized by this code, it shall be made in writing in the English
language.
Wherever any notice or other communication is required by this
code to be mailed by registered mail by or to any person or
corporation, the mailing of such notice or other communication by
certified mail shall be deemed to be a sufficient compliance with the
requirements of law.
9. Whenever reference is made to any portion of this code or of any

other law of this State, the reference applies to all amendments and
additions now or hereafter made.
10. "Section" means a section of this code unless some other

statute is specifically mentioned. "Subdivision" means a subdivision
of the section in which the term appears unless some other section is
expressly mentioned.
11. The present tense includes the past and future tenses, and the
future tense includes the present.
12. The masculine gender includes the feminine and neuter.
13. The singular number includes the plural, and the plural number
includes the singular.
14. "County" includes "city and county."
15. "Shall" is mandatory and "may" is permissive.
16. "Oath" includes affirmation.
17. "Signature" includes mark when the signer cannot write, such
signer's name being written near the mark by a witness who writes his
own name near the signer's name; but a signature by mark can be
acknowledged or can serve as a signature to a sworn statement only
when two witnesses so sign their own names thereto.
17.1. (a) In addition to the definition set forth in Section 17,

the term "signature" includes a signature in a facsimile document
filed pursuant to this code or pursuant to regulations adopted under
this code, and presented to the Secretary of State.
(b) The terms "signed" and "executed," when used with respect to
the documents filed pursuant to this code or pursuant to regulations
adopted under this code, and presented to the Secretary of State,
include a document bearing a signature under subdivision (a).
(c) The Secretary of State shall accept facsimile signatures on
documents that are delivered by mail or by hand.
(d) A person on whose behalf a document bearing a facsimile
signature is submitted for filing to the Secretary of State shall
maintain the originally signed document for at least five years from
the date of filing.
(e) The Secretary of State may adopt procedures permitting the
direct electronic or facsimile presentation of the documents
specified in subdivisions (a) and (b). However, the Secretary of
State is not required to accept those direct electronic or facsimile
filings until procedures are adopted.
18. "Person" includes a corporation as well as a natural person.
19. If any provision of this code, or the application thereof to

any person or circumstance, is held invalid, the remainder of the
code, or the application of such provision to other persons or
circumstances, shall not be affected thereby.
20. "Electronic transmission by the corporation" means a

communication (a) delivered by (1) facsimile telecommunication or
electronic mail when directed to the facsimile number or electronic
mail address, respectively, for that recipient on record with the
corporation, (2) posting on an electronic message board or network
which the corporation has designated for those communications,
together with a separate notice to the recipient of the posting,
which transmission shall be validly delivered upon the later of the
posting or delivery of the separate notice thereof, or (3) other
means of electronic communication, (b) to a recipient who has
provided an unrevoked consent to the use of those means of
transmission for communications under or pursuant to this code, and
(c) that creates a record that is capable of retention, retrieval,
and review, and that may thereafter be rendered into clearly legible
tangible form. However, an electronic transmission under this code by
a corporation to an individual shareholder or member of the
corporation who is a natural person, and if an officer or director of
the corporation, only if communicated to the recipient in that
person's capacity as a shareholder or member, is not authorized
unless, in addition to satisfying the requirements of this section,
the consent to the transmission has been preceded by or includes a
clear written statement to the recipient as to (a) any right of the
recipient to have the record provided or made available on paper or
in nonelectronic form, (b) whether the consent applies only to that
transmission, to specified categories of communications, or to all
communications from the corporation, and (c) the procedures the
recipient must use to withdraw consent.
21. "Electronic transmission to the corporation" means a
mail address, respectively, which the corporation has provided from
time to time to shareholders or members and directors for sending
communications to the corporation, (2) posting on an electronic
message board or network which the corporation has designated for
those communications, and which transmission shall be validly
delivered upon the posting, or (3) other means of electronic
communication, (b) as to which the corporation has placed in effect
reasonable measures to verify that the sender is the shareholder or
member (in person or by proxy) or director purporting to send the
transmission, and (c) that creates a record that is capable of
retention, retrieval, and review, and that may thereafter be rendered
into clearly legible tangible form.
CORPORATIONS CODE
SECTION 100-195
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.
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.
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 which 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 which 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.
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.
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.
105. A corporation or association may be sued as provided in the

Code of Civil Procedure.
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.
107. No corporation, association or individual shall issue or put

in circulation, as money, anything but the lawful money of the United
States.
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.
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.
(c) A certificate of correction shall set forth the following:
(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.
109.5. (a) Provisions of the articles described in paragraph (3) of

subdivision (e) of Section 202 and subdivision (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.
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.
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.
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.
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 withheld from
filing for a period of time pursuant to a request by the party
submitting it for filing 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
155. "Board" means the board of directors of the corporation.
156. "Certificate of determination" means a certificate executed

and filed pursuant to Section 401.
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.
156.5. "Certificate of Redomestication" is the document by which

the appropriate official of another state approves the
redomestication of a California insurer.
157. "Chapter" refers to a chapter of this Division 1 of Title 1 of

the Corporations Code, unless otherwise expressly stated.
158. (a) "Close corporation" means a 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, a husband
and wife 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: 186, 202, 204, 300, 418, 421, 1111, 1201, 1800 and
1904.
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.
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.
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.
161.5. "Constituent limited partnership" means a limited

partnership which is merged with one or more corporations and
includes the surviving limited partnership.
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.
161.9. "Conversion" means a conversion pursuant to Chapter 11.5

(commencing with Section 1150).
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.
163. "Corporation subject to the Banking Law" (Division 1

(commencing with Section 99) of the Financial Code) means:
(a) Any corporation which, with the approval of the Commissioner
of Financial Institutions, is incorporated for the purpose of
engaging in, or which is authorized by the Commissioner of Financial
Institutions to engage in, the commercial banking business under
Division 1 (commencing with Section 99) of the Financial Code.
(b) Any corporation which, with the approval of the Commissioner
Institutions to engage in, the industrial banking business under
(c) Any corporation (other than a corporation described in
subdivision (d)) which, with the approval of the Commissioner of
Financial Institutions, is incorporated for the purpose of engaging
in, or which is authorized by the Commissioner of Financial
Institutions to engage in, the trust business under Division 1
(commencing with Section 99) of the Financial Code.
(d) Any corporation which is authorized by the Commissioner of
Financial Institutions 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
Institutions to engage in, business under Article 1 (commencing with
Section 3500), Chapter 19, Division 1 of the Financial Code.
163.1. For purposes of Section 503, "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.
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.
165. "Disappearing corporation" means a constituent corporation

which is not the surviving corporation.
165.5. "Disappearing limited partnership" means a constituent

limited partnership which is not the surviving limited partnership.
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.
167. "Domestic corporation" means a corporation formed under the

laws of this state.
167.3. "Domestic limited liability company" means a limited
liability company as defined in subdivision (t) of Section 17000.
167.5. "Domestic limited partnership" means any limited partnership

formed under the laws of this state.
167.7. "Domestic other business entity" means an other business

entity organized under the laws of this state.
167.8. "Disappearing other business entity" means a constituent

other business entity that is not the surviving other business
entity.
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.
169. "Filed", unless otherwise expressly provided, means filed in

the office of the Secretary of State.
170. "Foreign association" means a business association organized

as a trust under the laws of a foreign jurisdiction.
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.
171.03. "Foreign limited liability company" means a foreign limited

liability company as defined in subdivision (q) of Section 17001.
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.
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.
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.
171.3. "Limited liability company" means a limited liability

company as defined in subdivision (t) of Section 17001.
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.
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.
173. "Officers' certificate" means a certificate signed and

verified by the chairman 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.
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.
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.
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.
176. "Preferred shares" means shares other than common shares.
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.
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.
179. "Proxyholder" means the person or persons to whom a proxy is

given.
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.
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.
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").
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.
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.
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).
184. "Shares" means the units into which the proprietary interests
in a corporation are divided in the articles.
185. "Shareholder" means one who is a holder of record of shares.
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.
187. "Short-form merger" means a merger pursuant to Section 1110.
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.
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.
190. "Surviving corporation" means a corporation into which one or

more other corporations or one or more other business entities are
merged.
190.5. "Surviving limited partnership" means a limited partnership

into which one or more other limited partnerships or one or more
corporations are merged.
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.
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 contractural 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.
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.
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.
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.
194. "Vote" includes authorization by written consent, subject to

the provisions of subdivision (b) of Section 307 and subdivision (d)
of Section 603.
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.
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.
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.
CORPORATIONS CODE
SECTION 200-213
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.
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.
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
Financial Institutions 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 Financial
Institutions.
(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 section, Section 5122,
Section 7122, or Section 9122, 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.
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.
(c) Any applicant may, upon payment of the fee prescribed therefor
in 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, partnership, firm or
corporation; nor shall consecutive reservations be made by or for the
use or benefit of the same person, partnership, firm or corporation
of names so similar as to fall within the prohibitions of subdivision
(b).
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.
201.6. The Secretary of State shall file the certificate of

redomestication of an insurer for which articles of incorporation
have previously been filed if the Insurance Commissioner has approved
the redomestication under Section 709.5 of the Insurance Code.
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.
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:
(i) 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
(ii) 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, 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 address in this state of the corporation's
initial agent for service of process in accordance with subdivision
(b) of Section 1502.
(d) If the corporation is authorized to issue only one class of
shares, the total number of shares which the corporation is
authorized to issue.
(e) 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.
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.
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.
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.
(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.
(c) The names and addresses of the persons appointed to act as
initial directors.
(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.
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.
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.
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.
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.
(c) Qualify to do business in any other state, territory,
dependency or foreign country.
(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.
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.
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.
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.
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.
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 16 2/3 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.
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.
CORPORATIONS CODE
SECTION 300-318
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.
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.
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."
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).
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.
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.
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.
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 chairman 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.
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.
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 chair 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.
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 33 1/3 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).
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.
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
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
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
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.
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.
(c) The fixing of compensation of the directors for serving on the
board or on 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.
312. (a) A corporation shall have a chairman of the board or a

president or both, a secretary, a chief financial officer and 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 chairman 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.
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 chairman 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.
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.
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.
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.
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.
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.
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 provision of law, no person shall 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 California
Commission on the Status of Women, 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.
CORPORATIONS CODE
SECTION 400-423
400. (a) A corporation may issue one or more classes or series of

shares or both, with full, limited or no voting rights and with such
other rights, preferences, privileges and restrictions as are stated
or authorized in its articles. No denial or limitation of voting
rights shall be effective unless at the time one or more classes or
series of outstanding shares or debt securities, singly or in the
aggregate, are entitled to full voting rights; and no denial or
limitation of dividend or liquidation rights shall be effective
unless at the time one or more classes or series of outstanding
shares, singly or in the aggregate, are entitled to unlimited
dividend and liquidation rights.
(b) All shares of any one class shall have the same voting,
conversion and redemption rights and other rights, preferences,
privileges and restrictions, unless the class is divided into series.
If a class is divided into series, all the shares of any one series
shall have the same voting, conversion and redemption rights and
other rights, preferences, privileges and restrictions.
401. (a) Before any corporation issues any shares of any class or
series of which the rights, preferences, privileges, and
restrictions, or any of them, or the number of shares constituting
any series or the designation of the series, are not set forth in its
articles but are fixed in a resolution adopted by the board pursuant
to authority given by its articles, an officers' certificate shall
be executed and filed, setting forth: (1) a copy of the resolution;
(2) the number of shares of the class or series; and (3) that none of
the shares of the class or series has been issued.
(b) After any certificate of determination has been filed, but
before the corporation issues any shares of the class or series
covered thereby, the board may alter or revoke any right, preference,
privilege, or restriction fixed or determined by the resolution set
forth therein by the adoption of another resolution appropriate for
that purpose and the execution and filing of an officers' certificate
setting forth a copy of the resolution, and stating that none of the
shares of the class or the series affected has been issued.
(c) After any certificate of determination has been filed, the
board may, if authorized in the articles pursuant to subdivision (e)
of Section 202, increase or decrease the number of shares
constituting any series, by the adoption of another resolution
appropriate for that purpose and the execution and filing of an
officers' certificate setting forth a copy of the resolution, the
number of shares of the series then outstanding and the increase or
decrease in the number of shares constituting the series. If any
certificate of determination has been incorporated in restated
articles filed pursuant to Section 910, the action authorized by this
subdivision may, notwithstanding Section 902, be accomplished by an
amendment of the articles approved by the board alone.
(d) After shares of a class or series have been issued, the
provisions of the resolution set forth in a certificate of
determination may be amended only by the adoption and approval of an
amendment in accordance with Section 902, 903, or 904 and the filing
of a certificate of amendment in accordance with Sections 905 and
908. Notwithstanding the preceding sentence, a certificate to
increase or decrease the number of shares of a series also may be
filed as permitted by subdivision (c).
(e) A provision in a certificate of determination being amended
pursuant to subdivision (b), (c), or (d) shall be identified in the
amendment in accordance with subdivision (a) of Section 907.
(f) If a certificate is filed pursuant to subdivision (c) to
decrease the number of shares of a series to zero, the certificate of
determination whereby the series was established is thereupon no
longer in force and the series is no longer an authorized series of
the corporation.
(g) If the rights, preferences, privileges, and restrictions of
the class or series contain a supermajority vote provision, as
defined in subdivision (b) of Section 710, subject to Section 710,
the officers' certificate shall also state that the provision has
been approved by the shareholders in accordance with subdivision (c)
of Section 710.
402. (a) A corporation may provide in its articles for one or more
classes or series of shares which are redeemable, in whole or in
part, (1) at the option of the corporation or (2) to the extent and
upon the happening of one or more specified events, and not otherwise
except as herein provided. A corporation may provide in its articles
for one or more classes or series of preferred shares which are
redeemable, in whole or in part, (1) as specified above, (2) at the
option of the holder, or (3) upon the vote of at least a majority of
the outstanding shares of the class or series to be redeemed. An open
end investment company registered under the United States Investment
Company Act of 1940 may, if its articles so provide, issue shares
which are redeemable at the option of the holder at a price
approximately equal to the shares' proportionate interest in the net
assets of the corporation and a shareholder may compel redemption of
such shares in accordance with their terms.
(b) Any such redemption shall be effected at such price or prices,
within such time and upon such terms and conditions as are stated in
the articles. When the articles permit partial redemption of a class
or series of shares, the articles shall prescribe the method of
selecting the shares to be redeemed, which may be pro rata, by lot,
at the discretion of, or in a manner approved by, the board or upon
such other terms as are specified in the articles.
(c) No redeemable common shares, other than (1) shares issued by
an open end investment company registered under the United States
Investment Company Act of 1940, (2) shares of a corporation which has
a license or franchise from a governmental agency to conduct its
business or is a member corporation of a national securities exchange
registered under the United States Securities Exchange Act of 1934,
which license, franchise or membership is conditioned upon some or
all of the holders of its stock possessing prescribed qualifications,
to the extent necessary to prevent the loss of such license,
franchise or membership or to reinstate it, or (3) shares of a
professional corporation, as defined in Part 4 (commencing with
Section 13400) of Division 3 of Title 1, shall be issued or redeemed
unless the corporation at the time has outstanding a class of common
shares that is not subject to redemption.
(d) Any redemption by a corporation of its shares shall be subject
to the provisions of Chapter 5 (commencing with Section 500).
Nothing in this section shall prevent a corporation from creating a
sinking fund or similar provision for, or entering into an agreement
for, the redemption or purchase of its shares to the extent permitted
by Chapter 5, but unless such purchase or redemption is permitted
under Chapter 5, the holder of shares to be so purchased or redeemed
shall not become a creditor of the corporation.
402.5. The rights, preferences, privileges, and restrictions

granted to or imposed upon a class or series of preferred shares
(Section 176) the designation of which includes either the word
"preferred" or the word "preference" may:
(a) Notwithstanding paragraph (9) of subdivision (a) of Section
204, include a provision requiring a vote of a specified percentage
or proportion of the outstanding shares of the class or series that
is less than a majority of the class or series to approve any
corporate action, except where the vote of a majority or greater
proportion of the class or series is required by this division,
regardless of restrictions or limitations on the voting rights
thereof.
(b) Notwithstanding paragraph (5) of subdivision (a) of Section
204, provide that in addition to the requirement of subdivision (a)
of Section 1900 the corporation may voluntarily wind up and dissolve
only upon the vote of a specified percentage (which shall not exceed
66 2/3 percent) of such class or series.
(c) Provide that Section 502 or 503 not apply in whole or in part
with respect to distributions on shares junior to the class or
series.
403. (a) When so provided in the articles, a corporation may issue

shares convertible within the time or upon the happening of one or
more specified events and upon the terms and conditions that are
stated in the articles if any of the following conditions apply:
(1) At the option of the holder or automatically upon either the
vote of at least a majority of the outstanding shares of the class or
series to be converted or upon the happening of one or more
specified events, into shares of any class or series.
(2) If it is a corporation which has a license or franchise from a
governmental agency to conduct its business or a member corporation
of a national securities exchange registered under the United States
Securities Exchange Act of 1934, the license, franchise or membership
of which is conditioned upon some or all of the holders of its stock
possessing prescribed qualifications, to the extent necessary to
prevent the loss of such license, franchise or membership or to
reinstate it, at the option of the corporation, into shares of any
class or series or into any other security of the corporation.
(3) If the corporation is a "listed corporation" as defined in
subdivision (d) of Section 301.5, both at the time of the original
issuance of the convertible shares and at the time of the conversion,
at the option of the corporation into shares of any class or series
or into any other security of the corporation, provided that any such
securities received upon conversion are listed or qualified for
trading on a stock exchange or market system defined in subdivision
(d) of Section 301.5.
(b) Unless otherwise provided in the articles, a corporation may
issue its debt securities convertible into other debt securities or
into shares of the corporation within such time or upon the happening
of one or more specified events and upon such terms and conditions
as are fixed by the board.
404. Either in connection with the issue, subscription or sale of

any of its shares, bonds, debentures, notes or other securities or
independently thereof, a corporation may grant options to purchase or
subscribe for shares of any class or series upon such terms and
conditions as may be deemed expedient. Option rights may be
transferable or nontransferable and separable or inseparable from
other securities of the corporation.
405. (a) If at the time of granting option or conversion rights or

at any later time the corporation is not authorized by its articles
to issue all the shares required for the satisfaction of the rights,
if and when exercised, the additional number of shares required to be
issued upon the exercise of such option or conversion rights shall
be authorized by an amendment to the articles.
(b) If a corporation has obtained approval of the outstanding
shares (Section 152) for the issue of options to purchase shares or
of securities convertible into shares of the corporation, the board
may, without further approval of the outstanding shares (Section
152), amend the articles to increase the authorized shares of any
class or series to such number as will be sufficient from time to
time, when added to the previously authorized but unissued shares of
such class or series, to satisfy any such option or conversion
rights.
406. Unless the articles provide otherwise, the board may issue
shares, options or securities having conversion or option rights
without first offering them to shareholders of any class.
407. A corporation may, but is not required to, issue fractions of

a share originally or upon transfer. If it does not issue fractions
of a share, it shall in connection with any original issuance of
shares (a) arrange for the disposition of fractional interests by
those entitled thereto, (b) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive those
fractions are determined or (c) issue scrip or warrants in registered
form, as certificated securities or uncertificated securities, or
bearer form as certificated securities, which shall entitle the
holder to receive a certificate for a full share upon the surrender
of the scrip or warrants aggregating a full share; provided, however,
that if the fraction of a share that any person would otherwise be
entitled to receive in a merger, conversion, or reorganization is
less than one-half of 1 percent of the total shares that person is
entitled to receive, a merger, conversion, or reorganization
agreement may provide that fractions of a share will be disregarded
or that shares issuable in the merger or conversion will be rounded
off to the nearest whole share; and provided, further, that a
corporation may not pay cash for fractional shares if that action
would result in the cancellation of more than 10 percent of the
outstanding shares of any class. A determination by the board of the
fair value of fractions of a share shall be conclusive in the absence
of fraud. A certificate for a fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the
holder to exercise voting rights, to receive dividends thereon and to
participate in any of the assets of the corporation in the event of
liquidation. The board may cause scrip or warrants to be issued
subject to the condition that they shall become void if not exchanged
for full shares before a specified date or that the shares for which
scrip or warrants are exchangeable may be sold by the corporation
and the proceeds thereof distributed to the holder of the scrip or
warrants or any other condition that the board may impose.
408. (a) A corporation may adopt and carry out a stock purchase
plan or agreement or stock option plan or agreement providing for the
issue and sale for such consideration as may be fixed of its
unissued shares, or of issued shares acquired or to be acquired, to
one or more of the employees or directors of the corporation or of a
subsidiary or parent thereof or to a trustee on their behalf and for
the payment for such shares in installments or at one time, and may
provide for aiding any such persons in paying for such shares by
compensation for services rendered, promissory notes or otherwise.
(b) A stock purchase plan or agreement or stock option plan or
agreement may include, among other features, the fixing of
eligibility for participation therein, the class and price of shares
to be issued or sold under the plan or agreement, the number of
shares which may be subscribed for, the method of payment therefor,
the reservation of title until full payment therefor, the effect of
the termination of employment, an option or obligation on the part of
the corporation to repurchase the shares upon termination of
employment, subject to the provisions of Chapter 5, restrictions upon
transfer of the shares and the time limits of and termination of the
plan.
(c) Sections 406 and 407 of the Labor Code shall not apply to
shares issued by any foreign or domestic corporation to the following
persons:
(1) Any employee of the corporation or of any parent or subsidiary
thereof, pursuant to a stock purchase plan or agreement or stock
option plan or agreement provided for in subdivision (a).
(2) In any transaction in connection with securing employment, to
a person who is or is about to become an officer of the corporation
or of any parent or subsidiary thereof.
409. (a) Shares may be issued:

(1) For such consideration as is determined from time to time by
the board, or by the shareholders if the articles so provide,
consisting of any or all of the following: money paid; labor done;
services actually rendered to the corporation or for its benefit or
in its formation or reorganization; debts or securities canceled; and
tangible or intangible property actually received either by the
issuing corporation or by a wholly owned subsidiary; but neither
promissory notes of the purchaser (unless adequately secured by
collateral other than the shares acquired or unless permitted by
Section 408) nor future services shall constitute payment or part
payment for shares of the corporation; or
(2) As a share dividend or upon a stock split, reverse stock
split, reclassification of outstanding shares into shares of another
class, conversion of outstanding shares into shares of another class,
exchange of outstanding shares for shares of another class or other
change affecting outstanding shares.
(b) Except as provided in subdivision (d), shares issued as
provided in this section or Section 408 shall be declared and taken
to be fully paid stock and not liable to any further call nor shall
the holder thereof be liable for any further payments under the
provisions of this division. In the absence of fraud in the
transaction, the judgment of the directors as to the value of the
consideration for shares shall be conclusive.
(c) If the articles reserve to the shareholders the right to
determine the consideration for the issue of any shares, such
determination shall be made by approval of the outstanding shares
(Section 152).
(d) A corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the
consideration to be paid therefor. On the certificate issued to
represent any such partly paid shares or, for uncertificated
securities, on the initial transaction statement for such partly paid
shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be stated. Upon the declaration of
any dividend on fully paid shares, the corporation shall declare a
dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
(e) The board shall state by resolution its determination of the
fair value to the corporation in monetary terms of any consideration
other than money for which shares are issued. This subdivision does
not affect the accounting treatment of any transaction, which shall
be in conformity with generally accepted accounting principles.
410. (a) Every subscriber to shares and every person to whom shares
are originally issued is liable to the corporation for the full
consideration agreed to be paid for the shares.
(b) The full agreed consideration for shares shall be paid prior
to or concurrently with the issuance thereof, unless the shares are
issued as partly paid pursuant to subdivision (d) of Section 409, in
which case the consideration shall be paid in accordance with the
agreement of subscription or purchase.
411. A transferee of shares for which the full agreed consideration

has not been paid to the issuing corporation, who acquired them in
good faith, without knowledge that they were not paid in full or to
the extent stated on the certificate representing them or, in the
case of uncertificated securities, on the applicable initial
transaction statement, is liable only for the amount shown by the
certificate or statement to be unpaid on the shares represented
thereby, until the transferee transfers the shares to one who becomes
liable therefor; provided that the transferor shall remain
personally liable if so provided on the certificate or statement or
agreed upon in writing. The liability of any holder of such shares
who derives title through such a transferee and who is not a party to
any fraud affecting the issue of the shares is the same as that of
the transferee through whom title is derived.
412. Every transferee of partly paid shares who acquired them under
a certificate or initial transaction statement showing the fact of
part payment, and every transferee of such shares (other than a
transferee who derives title through a holder in good faith without
knowledge and who is not a party to any fraud affecting the issue of
such shares) who acquired them with actual knowledge that the full
agreed consideration had not been paid to the extent stated on the
certificate or initial transaction statement, is personally liable to
the corporation for installments of the amount unpaid becoming due
until the shares are transferred to one who becomes liable therefor;
provided that the transferor shall remain personally liable if so
provided on the certificate, initial transaction statement, or
written statement, or agreed upon in writing.
413. A person holding shares as pledgee, executor, administrator,

guardian, conservator, trustee, receiver or in any representative or
fiduciary capacity is not personally liable for any unpaid balance of
the subscription price of the shares because the shares are so held
but the estate and funds in the hands of such fiduciary or
representative are liable and the shares are subject to sale
therefor.
414. (a) No action shall be brought by or on behalf of any creditor

to reach and apply the liability, if any, of a shareholder to the
corporation to pay the amount due on such shareholder's shares unless
final judgment has been rendered in favor of the creditor against
the corporation and execution has been returned unsatisfied in whole
or in part or unless such proceedings would be useless.
(b) All creditors of the corporation, with or without reducing
their claims to judgment, may intervene in any such creditor's action
to reach and apply unpaid subscriptions and any or all shareholders
who hold partly paid shares may be joined in such action. Several
judgments may be rendered for and against the parties to the action
or in favor of a receiver for the benefit of the respective parties
thereto.
(c) All amounts paid by any shareholder in any such action shall
be credited on the unpaid balance due the corporation upon such
shareholder's shares.
415. Nothing in this division shall be construed as a derogation of

any rights or remedies which any creditor or shareholder may have
against any promoter, shareholder, director, officer or the
corporation because of participation in any fraud or illegality
practiced upon such creditor or shareholder by any such person or by
the corporation in connection with the issue or sale of shares or
other securities or in derogation of any rights which the corporation
may have by rescission, cancellation or otherwise because of any
fraud or illegality practiced on it by any such person in connection
with the issue or sale of shares or other securities.
416. (a) Every holder of shares in a corporation shall be entitled

to have a certificate signed in the name of the corporation by the
chairman or vice chairman of the board or the president or a vice
president and by the chief financial officer or an assistant
treasurer or the secretary or any assistant secretary, certifying the
number of shares and the class or series of shares owned by the
shareholder. Any or all of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were an officer,
transfer agent or registrar at the date of issue.
(b) Notwithstanding subdivision (a), a corporation may adopt a
system of issuance, recordation and transfer of its shares by
electronic or other means not involving any issuance of certificates,
including provisions for notice to purchasers in substitution for
the required statements on certificates under Sections 417, 418, and
1302, and as may be required by the commissioner in administering the
Corporate Securities Law of 1968, which system (1) has been approved
by the United States Securities and Exchange Commission, (2) is
authorized in any statute of the United States, or (3) is in
accordance with Division 8 (commencing with Section 8101) of the
Commercial Code. Any system so adopted shall not become effective as
to issued and outstanding certificated securities until the
certificates therefor have been surrendered to the corporation.
417. If the shares of the corporation are classified or if any

class of shares has two or more series, there shall appear on the
certificate or, in the case of uncertificated securities, the initial
transaction statement and written statements, one of the following:
(a) A statement of the rights, preferences, privileges and
restrictions granted to or imposed upon each class or series of
shares authorized to be issued and upon the holders thereof.
(b) A summary of such rights, preferences, privileges and
restrictions with reference to the provisions of the articles and any
certificates of determination establishing the same.
(c) A statement setting forth the office or agency of the
corporation from which shareholders may obtain, upon request and
without charge, a copy of the statement referred to in subdivision
(a).
418. (a) There shall also appear on the certificate, the initial
transaction statement, and written statements (unless stated or
summarized under subdivision (a) or (b) of Section 417) the
statements required by all of the following clauses to the extent
applicable:
(1) The fact that the shares are subject to restrictions upon
transfer.
(2) If the shares are assessable or are not fully paid, a
statement that they are assessable or the statements required by
subdivision (d) of Section 409 if they are not fully paid.
(3) The fact that the shares are subject to a voting agreement
under subdivision (a) of Section 706 or an irrevocable proxy under
subdivision (e) of Section 705 or restrictions upon voting rights
contractually imposed by the corporation.
(4) The fact that the shares are redeemable.
(5) The fact that the shares are convertible and the period for
conversion.
Any such statement or reference thereto (Section 174) on the face
of the certificate, the initial transaction statement, and written
statements required by paragraph (1) or (2) shall be conspicuous.
(b) Unless stated on the certificate, the initial transaction
statement, and written statements as required by subdivision (a), no
restriction upon transfer, no right of redemption and no voting
agreement under subdivision (a) of Section 706, no irrevocable proxy
under subdivision (e) of Section 705, and no voting restriction
imposed by the corporation shall be enforceable against a transferee
of the shares without actual knowledge of such restriction, right,
agreement or proxy. With regard only to liability to assessment or
for the unpaid portion of the subscription price, unless stated on
the certificate as required by subdivision (a), that liability shall
not be enforceable against a transferee of the shares. For the
purpose of this subdivision, "transferee" includes a purchaser from
the corporation.
(c) All certificates representing shares of a close corporation
shall contain in addition to any other statements required by this
section, the following conspicuous legend on the face thereof: "This
corporation is a close corporation. The number of holders of record
of its shares of all classes cannot exceed ____ Ýa number not in
excess of 35]. Any attempted voluntary inter vivos transfer which
would violate this requirement is void. Refer to the articles, bylaws
and any agreements on file with the secretary of the corporation for
further restrictions."
(d) Any attempted voluntary inter vivos transfer of the shares of
a close corporation which would result in the number of holders of
record of its shares exceeding the maximum number specified in its
articles is void if the certificate contains the legend required by
subdivision (c).
419. (a) A domestic or foreign corporation may issue a new share

certificate or a new certificate for any other security in the place
of any certificate theretofore issued by it, alleged to have been
lost, stolen or destroyed, and the corporation may require the owner
of the lost, stolen or destroyed certificate or the owner's legal
representative to give the corporation a bond (or other adequate
security) sufficient to indemnify it against any claim that may be
made against it (including any expense or liability) on account of
the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
(b) If a corporation refuses to issue a new share certificate or
other certificate in place of one theretofore issued by it, or by any
corporation of which it is the lawful successor, alleged to have
been lost, stolen or destroyed, the owner of the lost, stolen or
destroyed certificate or the owner's legal representative may bring
an action in the superior court of the proper county for an order
requiring the corporation to issue a new certificate in place of the
one lost, stolen or destroyed.
(c) If the court is satisfied that the plaintiff is the lawful
owner of the number of shares or other securities, or any part
thereof, described in the complaint and that the certificate therefor
has been lost, stolen or destroyed, and no sufficient cause has been
shown why a new certifcate should not be issued in place thereof, it
shall make an order requiring the corporation to issue and deliver
to the plaintiff a new certificate for such shares or other
securities. In its order the court shall direct that, prior to the
issuance and delivery to the plaintiff of such new certificate, the
plaintiff give the corporation a bond (or other adequate security) as
to the court appears sufficient to indemnify the corporation against
any claim that may be made against it (including any expense or
liability) on account of the alleged loss, theft or destruction of
any such certificate or the issuance of such new certificate.
420. Neither a domestic nor foreign corporation nor its transfer
agent or registrar is liable:
(a) For transferring or causing to be transferred on the books of
the corporation to the surviving joint tenant or tenants any share or
shares or other securities issued to two or more persons in joint
tenancy, whether or not the transfer is made with actual or
constructive knowledge of the existence of any understanding,
agreement, condition or evidence that the shares or securities were
held other than in joint tenancy or of a breach of trust by any joint
tenant.
(b) To a minor or incompetent person in whose name shares or other
securities are of record on its books or to any transferee of or
transferor to either for transferring the shares or other securities
on its books at the instance of or to the minor or incompetent or for
the recognition of or dealing with the minor or incompetent as a
shareholder or security holder, whether or not the corporation,
transfer agent or registrar had notice, actual or constructive, of
the nonage or incompetency, unless a guardian or conservator of the
property of the minor or incompetent has been appointed and the
corporation, transfer agent or registrar has received written notice
thereof.
(c) To any married person or to any transferee of such person for
transferring shares or other securities on its books at the instance
of the person in whose name they are registered, without the
signature of such person's spouse and regardless of whether the
registration indicates that the shares or other securities are
community property, in the same manner as if such person were
unmarried.
(d) For transferring or causing to be transferred on the books of
the corporation shares or other securities pursuant to a judgment or
order of a court which has been set aside, modified or reversed
unless, prior to the registration of the transfer on the books of the
corporation, written notice is served upon the corporation or its
transfer agent in the manner provided by law for the service of a
summons in a civil action, stating that an appeal or other further
court proceeding has been or is to be taken from or with regard to
such judgment or order. After the service of such notice neither the
corporation nor its transfer agent has any duty to register the
requested transfer until the corporation or its transfer agent has
received a certificate of the clerk of the court in which the
judgment or order was entered or made, showing that the judgment or
order has become final.
(e) The Commercial Code shall not affect the limitations of
liability set forth in this section. Section 1100 of the Family Code
shall be subject to the provisions of this section and shall not be
construed to prevent transfers, or result in liability to the
corporation, transfer agent or registrar permitting or effecting
transfers, which comply with this section.
421. Each holder of shares of a close corporation, whether original

or subsequent, by accepting the certificates for the shares which
contain the legend required by subdivision (c) of Section 418 agrees
and consents that such holder cannot make any transfer of shares
which would violate the provisions of subdivision (d) of Section 418
and waives any right which such holder might otherwise have under any
other law to sell such shares to a greater number of purchasers or
to demand any registration thereof under the Securities Act of 1933,
as now or hereafter amended, or as provided in any statute adopted in
substitution therefor, or otherwise, so long as the corporation is a
close corporation.
422. (a) When the articles are amended in any way affecting the
statements contained in the certificates for outstanding shares, or
it becomes desirable for any reason, in the discretion of the board,
to cancel any outstanding certificate for shares and issue a new
certificate therefor conforming to the rights of the holder, the
board may order any holders of outstanding certificates for shares to
surrender and exchange them for new certificates within a reasonable
time to be fixed by the board.
(b) The order may provide that a holder of any certificates so
ordered to be surrendered is not entitled to vote or to receive
dividends or exercise any of the other rights of shareholders until
the holder has complied with the order, but such order operates to
suspend such rights only after notice and until compliance. The duty
of surrender of any outstanding certificates may also be enforced by
civil action.
(c) When the articles are amended in any way affecting the
statements contained in the initial transaction statement or other
written statements for outstanding uncertificated securities, or it
becomes desirable for any reason, in the discretion of the board, to
amend, revise, or supersede outstanding initial transaction
statements or written statements, the board may order the issuance
and delivery to holders of record of amended, revised, or superseding
initial transaction statements or written statements.
423. (a) Shares are not assessable except as provided in this

section or as otherwise provided by a statute other than this
division. If the articles expresssly confer such authority upon the
corporation or the board, and subject to any limitations therein
contained, the board may in its discretion levy and collect
assessments upon all shares of any or all classes made subject to
assessment by the articles. This authority is in addition to the
right of the corporation to recover the unpaid subscription price of
shares or the remainder of the consideration to be paid therefor.
(b) Every levy of an assessment shall: specify the amount thereof
and to whom and where it is payable; fix, or if proceedings or
filings with any governmental or other agency for any qualification,
permit, registration or exemption therefrom are required as a
condition precedent to the levy or payment of an assessment provide
for the establishment of, a date on which the assessment is payable;
fix a date, not less than 30 nor more than 60 days from the date on
which the assessment is payable, on which such assessment becomes
delinquent if not paid; and fix a date, not less than 15 nor more
than 60 days from the date on which the unpaid assessment becomes
delinquent, for the sale of delinquent shares. The levy also shall
fix the hour and place of sale, which place shall be in the county
where the corporation is required to keep a copy of its bylaws
pursuant to Section 213, or if there is no such county, in
Sacramento.
(c) On or before the date an assessment is payable, the secretary
of the corporation shall give notice thereof in substantially the
following form:
(Name of corporation in full. Location of principal executive
office.)
Notice is hereby given that the board of directors on (date) has
levied an assessment of (amount) per share upon the (name or
designation of class or series of shares) of the corporation payable
(to whom and where). Any shares upon which this assessment remains
unpaid on (date fixed) will be delinquent. Unless payment is made
prior to delinquency, the said shares, or as many of them as may be
necessary, will be sold at (particular place) on (date) at (hour) of
such date, to pay the delinquent assessment, together with a penalty
of 5 percent of the amount of the assessment on such shares, or be
forfeited to the corporation. (Name of secretary with location of
office.)
(d) The notice shall be served personally upon each holder of
record of shares assessed; provided, however, that in lieu of
personal service the notice may be mailed to each such shareholder
addressed to the last address of the shareholder appearing on the
books of the corporation or given by the shareholder to the
corporation for the purpose of notice, or if no such address appears
or is given, at the place where the principal executive office of the
corporation is located, and published once in some newspaper of
general circulation in the county in which the principal executive
office of the corporation is located. If there is no such newspaper
in such county, the publication shall be made in some newspaper of
general circulation in an adjoining county.
(e) The assessment is a lien upon the shares assessed from the
time of personal service or the publication of the notice of
assessment, unless the articles provide for such lien from the time
of the levy. Unless otherwise provided by law, a transfer of the
shares on the books of the corporation after the lien of an
assessment has attached is a waiver of the lien unless a conspicuous
legend is placed on the face of any certificate issued upon such
transfer or, in the case of uncertificated securities, on the initial
transaction statement, setting forth the information contained in
the notice required by subdivision (c). Such legend shall be removed
if the assessment on the shares evidenced by the certificate is paid
or if the shares are sold to pay the assessment or forfeited for
nonpayment.
(f) The date of sale of delinquent shares fixed in any levy of an
assessment may be extended from time to time for not more than 30
days at a time by order of the board entered on the records of the
corporation, or when the sale is restrained by order of a court.
Notice of such extension shall be given by announcement by the
secretary, or other person authorized to conduct the sale, made at
the time and place of sale last theretofore fixed.
If a date of sale of delinquent shares is extended for more than
five days the corporation shall cause a notice to be mailed to the
shareholder or shareholders whose shares are to be the subject of
such sale setting forth the date and time to which the date of sale
has been extended.
(g) If payment is made after delinquency and before the sale, the
shareholder shall pay a penalty of 5 percent of the amount of the
assessment on the shares in addition to the assessment.
(h) At the place and time appointed in the notice of levy any
officer or an agent of the corporation, shall, unless otherwise
ordered by the board, sell or cause to be sold to the highest bidder
for cash as many shares of each delinquent holder of the assessed
shares as may be necessary to pay the assessment and charges thereon
according to the notice.
The person offering at the sale to pay the assessment and penalty
for the smallest number of shares is the highest bidder. The shares
purchased shall be transferred to the highest bidder on the share
register of the corporation on the payment of the assessment and
penalty and a new certificate or initial transaction statement
therefor issued to such highest bidder.
A corporation is not required to accept an offer for a fraction of
a share.
(i) If no bidder offers to pay the amount due on the shares,
together with the penalty of 5 percent thereof, the shares shall be
forfeited to the corporation in satisfaction of the assessment and
penalty thereon.
(j) After a sale or forfeiture of shares for nonpayment of an
assessment, the holder or owner of delinquent shares shall, if they
are certificated securities, surrender the certificate for such
shares to the corporation for cancellation or, if they are
uncertificated securities, have no further rights with respect to
such shares. This duty may be enforced by order or decree of court
and such holder or owner shall be liable for damages to the
corporation for failure to surrender the certificate for cancellation
upon demand without good cause or excuse.
Any certificate not so surrendered forthwith becomes null and void
and ceases to be evidence of the right or title of the holder or any
transferee to the shares purporting to be represented thereby, and
neither the corporation nor the purchaser of such shares incurs any
liability thereon to any such transferee.
The purchaser of any shares, at a sale for delinquent assessments
thereon, whenever made, is entitled to the issue of a new certificate
representing the shares so purchased.
(k) The certificate of the secretary or assistant secretary of the
corporation is prima facie evidence of the time and place of sale
and any postponement thereof, of the quantity and particular
description of the shares sold, to whom, for what price, and of the
fact of payment of the purchase money. The certificate shall be filed
in the office of the corporation, and copies of the certificate,
certified by the secretary or an assistant secretary of the
corporation, are prima facie evidence of the facts therein stated.
(l) An assessment is not invalidated by a failure to publish the
notice of assessment, nor by the nonperformance of any act required
in order to enforce the payment of the assessment; but in case of any
substantial error or omission in the course of proceedings for
collection of an assessment on any shares, all previous proceedings,
except the levy of the assessment, are void as to such shares, and
shall be taken anew.
(m) No action shall be maintained to recover shares sold for
delinquent assessments, upon the ground of irregularity in the
assessment, irregularity or defect of the notice of sale, or defect
or irregularity in the sale, unless the party seeking to maintain the
action first pays or tenders to the corporation, or the party
holding the shares sold, the sum for which the shares were sold,
together with all subsequent assessments which may have been paid
thereon and interest on such sums from the time they were paid. No
such action shall be maintained unless it is commenced by the filing
of a complaint and the issuing of a summons thereon within six months
after the sale was made.
(n) The only remedy for the collection of an assessment on fully
paid shares is sale or forfeiture of the shares unless (1) remedy by
action is expressly authorized in the original articles or by an
amendment of the articles adopted before August 21, 1933, or by an
amendment adopted on or after August 21, 1933, by unanimous consent
of the shareholders, and (2) unless a statement of such remedy
appears on the face of any share certificate issued on or after
August 21, 1933.
CORPORATIONS CODE
SECTION 500-511
500. Neither a corporation nor any of its subsidiaries shall make

any distribution to the corporation's shareholders (Section 166)
except as follows:
(a) The distribution may be made if the amount of the retained
earnings of the corporation immediately prior thereto equals or
exceeds the amount of the proposed distribution.
(b) The distribution may be made if immediately after giving
effect thereto:
(1) The sum of the assets of the corporation (exclusive of
goodwill, capitalized research and development expenses and deferred
charges) would be at least equal to 1 1/4 times its liabilities (not
including deferred taxes, deferred income and other deferred
credits); and
(2) The current assets of the corporation would be at least equal
to its current liabilities or, if the average of the earnings of the
corporation before taxes on income and before interest expense for
the two preceding fiscal years was less than the average of the
interest expense of the corporation for those fiscal years, at least
equal to 1 1/4 times its current liabilities; provided, however, that
in determining the amount of the assets of the corporation profits
derived from an exchange of assets shall not be included unless the
assets received are currently realizable in cash; and provided,
further, that for the purpose of this subdivision "current assets"
may include net amounts which the board has determined in good faith
may reasonably be expected to be received from customers during the
12-month period used in calculating current liabilities pursuant to
existing contractual relationships obligating those customers to make
fixed or periodic payments during the term of the contract or, in
the case of public utilities, pursuant to service connections with
customers, after in each case giving effect to future costs not then
included in current liabilities but reasonably expected to be
incurred by the corporation in performing those contracts or
providing service to utility customers. Paragraph (2) of subdivision
(b) is not applicable to a corporation which does not classify its
assets into current and fixed under generally accepted accounting
principles.
(c) The amount of any distribution payable in property shall, for
the purposes of this chapter, be determined on the basis of the value
at which the property is carried on the corporation's financial
statements in accordance with generally accepted accounting
principles.
(d) For the purpose of applying this section to a distribution by
a corporation of cash or property in payment by the corporation in
connection with the purchase of its shares, there shall be added to
retained earnings all amounts that had been previously deducted
therefrom with respect to obligations incurred in connection with the
corporation's repurchase of its shares and reflected on the
corporation's balance sheet, but not in excess of the principal of
the obligations that remain unpaid immediately prior to the
distribution. In addition, there shall be deducted from liabilities
all amounts that had been previously added thereto with respect to
the obligations incurred in connection with the corporation's
repurchase of its shares and reflected on the corporation's balance
sheet, but not in excess of the principal of the obligations that
will remain unpaid after the distribution, provided that no addition
to retained earnings or deduction from liabilities under this
subdivision shall occur on account of any obligation that is a
distribution to the corporation's shareholders (Section 166) at the
time the obligation is incurred.
(e) This section does not apply to a corporation licensed as a
broker-dealer under Chapter 2 (commencing with Section 25210) of Part
3 of Division 1 of Title 4, if immediately after giving effect to
any distribution the corporation is in compliance with the net
capital rules of the Commissioner of Corporations and the Securities
and Exchange Commission.

any distribution to the corporation's shareholders (Section 166) if
the corporation or the subsidiary making the distribution is, or as a
result thereof would be, likely to be unable to meet its liabilities
(except those whose payment is otherwise adequately provided for) as
they mature.

any distribution to the corporation's shareholders (Section 166) on
any shares of its stock of any class or series that are junior to
outstanding shares of any other class or series with respect to
distribution of assets on liquidation if, after giving effect
thereto, the excess of its assets (exclusive of goodwill, capitalized
research and development expenses and deferred charges) over its
liabilities (not including deferred taxes, deferred income and other
deferred credits) would be less than the liquidation preference of
all shares having a preference on liquidation over the class or
series to which the distribution is made; provided, however, that for
the purpose of applying this section to a distribution by a
corporation of cash or property in payment by the corporation in
connection with the purchase of its shares, there shall be deducted
from liabilities all amounts that had been previously added thereto
with respect to obligations incurred in connection with the
the obligations that will remain unpaid after the distribution;
provided, further, that no deduction from liabilities shall occur on
account of any obligation that is a distribution to the corporation's
shareholders (Section 166) at the time the obligation is incurred.
any distribution to the corporation's shareholders (Section 166) on
any shares of its stock of any class or series that are junior to
outstanding shares of any other class or series with respect to
payment of dividends, and as to which senior class or series the
corporation has cumulative dividends in arrears, unless the amount of
the retained earnings of the corporation immediately prior thereto
equals or exceeds the amount of the proposed distribution plus the
aggregate amount of the cumulative dividends in arrears on all shares
having a preference with respect to payment of dividends over the
class or series to which the distribution is made; provided, however,
that for the purpose of applying this section to a distribution by a
corporation of cash or property in payment by the corporation in
connection with the purchase of its shares, there shall be added to
retained earnings all amounts that had been previously deducted
therefrom with respect to obligations incurred in connection with the
the obligations that remain unpaid immediately prior to the
distribution; provided, further, that no addition to retained
earnings shall occur on account of any obligation that is a
distribution to the corporation's shareholders (Section 166) at the
time the obligation is incurred.
503.1. The provisions of Sections 500, 501, 502 and 503 shall not
apply to a purchase or redemption of shares of a deceased shareholder
from the proceeds of insurance on the life of such shareholder in
excess of the total amount of all premiums paid by the corporation
for such insurance, in order to carry out the provisions of an
agreement between the corporation and such shareholder to purchase or
redeem such shares upon the death of the shareholder.
503.2. The provisions of Sections 500, 501, 502, and 503 shall not
apply to the purchase or redemption of shares of a disabled
shareholder from the proceeds of disability insurance applicable to
the disabled shareholder in excess of the total amount of all
premiums paid by the corporation for the insurance, in order to carry
out the provisions of an agreement between the corporation and the
shareholder to purchase or redeem shares upon the disability of the
shareholder as defined within that policy.
For the purposes of this section, "disability insurance" means an
agreement of indemnification against the insured's loss of the
ability to work due to accident or illness.
504. (a) The provisions of Section 500 do not apply to a dividend

declared by either of the following:
(1) A regulated investment company, as defined in the federal
Internal Revenue Code, as amended, to the extent that the dividend is
necessary to maintain the status of the corporation as a regulated
investment company under the provisions of that code.
(2) A real estate investment trust, as defined in Part II of
Subchapter M of Chapter 1 of Subtitle A of the federal Internal
Revenue Code, as amended, to the extent that the dividend is
necessary to maintain the status of the corporation as a real estate
investment trust under the provisions of that code.
(b) The provisions of this chapter do not apply to any purchase or
redemption of shares redeemable at the option of the holder by a
registered open-end investment company under the United States
Investment Company Act of 1940, so long as the right of redemption
remains unsuspended under the provisions of that statute and the
articles and bylaws of the corporation.
505. Nothing in this chapter prohibits additional restrictions upon

the declaration of dividends or the purchase or redemption of a
corporation's own shares by provision in the articles or bylaws or in
any indenture or other agreement entered into by the corporation.
506. (a) Any shareholder who receives any distribution prohibited

by this chapter with knowledge of facts indicating the impropriety
thereof is liable to the corporation for the benefit of all of the
creditors or shareholders entitled to institute an action under
subdivision (b) for the amount so received by the shareholder with
interest thereon at the legal rate on judgments until paid, 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. For purposes of this
chapter, in the event that any shareholder receives any distribution
of the corporation's property that is prohibited by this chapter, the
shareholder receiving that illegal distribution shall be liable to
the corporation for an amount equal to the fair market value of the
property at the time of the illegal distribution plus interest
appraisal or other valuation, if any, of that property, 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.
(b) Suit may be brought in the name of the corporation to enforce
the liability (1) to creditors arising under subdivision (a) for a
violation of Section 500 or 501 against any or all shareholders
liable by any one or more creditors of the corporation whose debts or
claims arose prior to the time of the distribution to shareholders
and who have not consented thereto, whether or not they have reduced
their claims to judgment, or (2) to shareholders arising under
subdivision (a) for a violation of Section 502 or 503 against any or
all shareholders liable by any one or more holders of preferred
shares outstanding at the time of the distribution who have not
consented thereto, without regard to the provisions of Section 800.
(c) Any shareholder sued under this section may implead all other
shareholders liable under this section and may compel contribution,
either in that action or in an independent action against
shareholders not joined in that action.
(d) Nothing contained in this section affects any liability which
any shareholder may have under Chapter 1 (commencing with Section
3439) of Title 2 of Part 2 of Division 4 of the Civil Code.
507. Each dividend other than one chargeable to retained earnings
shall be identified in a notice to shareholders as being made from a
source other than retained earnings, stating the accounting treatment
thereof. The notice shall accompany the dividend or shall be given
within three months after the end of the fiscal year in which the
dividend is paid.
508. This chapter does not apply in connection with any proceeding
for winding up and dissolution under Chapter 18 or 19.
509. (a) A corporation may redeem any or all shares which are
redeemable at its option by (1) giving notice of redemption, and (2)
payment or deposit of the redemption price of the shares as provided
in its articles or deposit of the redemption price pursuant to
subdivision (d).
(b) Subject to any provisions in the articles with respect to the
notice required for redemption of shares, the corporation may give
notice of the redemption of any or all shares subject to redemption
by causing a notice of redemption to be published in a newspaper of
general circulation in the county in which the principal executive
office of the corporation is located at least once a week for two
successive weeks, in each instance on any day of the week, commencing
not earlier than 60 nor later than 20 days before the date fixed for
redemption. The notice of redemption shall set forth all of the
following:
(1) The class or series of shares or part of any class or series
of shares to be redeemed.
(2) The date fixed for redemption.
(3) The redemption price.
(4) If the shares are certificated securities, the place at which
the shareholders may obtain payment of the redemption price upon
surrender of their share certificates.
(c) If the corporation gives notice of redemption pursuant to
subdivision (b), it shall also mail a copy of the notice of
redemption to each holder of record of shares to be redeemed as of
the date of mailing or record date fixed in accordance with Section
701, addressed to the holder at the address of such holder appearing
on the books of the corporation or given by the holder to the
corporation for the purpose of notice, or if no such address appears
or is given at the place where the principal executive office of the
corporation is located, not earlier than 60 nor later than 20 days
before the date fixed for redemption. Failure to comply with this
subdivision does not invalidate the redemption of the shares.
(d) If, on or prior to any date fixed for redemption of redeemable
shares, the corporation deposits with any bank or trust company in
this state as a trust fund, (1) a sum sufficient to redeem, on the
date fixed for redemption thereof, the shares called for redemption,
(2) in the case of the redemption of any uncertificated securities,
an officer's certificate setting forth the holders thereof registered
on the books of the corporation and the number of shares held by
each, and (3) irrevocable instructions and authority to the bank or
trust company to publish the notice of redemption thereof (or to
complete publication if theretofore commenced) and to pay, on and
after the date fixed for redemption or prior thereto, the redemption
price of the shares to their respective holders upon the surrender of
their share certificates, in the case of certificated securities, or
the delivery of the officer's certificate in the case of
uncertificated securities, then from and after the date of the
deposit (although prior to the date fixed for redemption) the shares
called shall be redeemed and the dividends on those shares shall
cease to accrue after the date fixed for redemption. The deposit
shall constitute full payment of the shares to their holders and from
and after the date of the deposit the shares shall no longer be
outstanding and the holders thereof shall cease to be shareholders
with respect to the shares and shall have no rights with respect
thereto except the right to receive from the bank or trust company
payment of the redemption price of the shares without interest, upon
surrender of their certificates therefor, in the case of certificated
securities, and any right to convert the shares which may exist and
then continue for any period fixed by its terms.
In determining the holders of uncertificated securities, the bank
or trust company shall be entitled to rely on any officer's
certificate deposited with it in accordance with this subdivision.
510. (a) When a corporation reacquires its own shares, those shares
are restored to the status of authorized but unissued shares, unless
the articles prohibit the reissuance thereof.
(b) When a corporation reacquires authorized shares of a class or
series and the articles prohibit the reissuance of those shares:
(1) If all of the authorized shares of that class or series, as
the case may be, are reacquired, then (A) that class or series is
automatically eliminated, (B) in the case of reacquisition of all of
the authorized shares of a series, the authorized number of shares of
the class to which the shares belonged is reduced by the number of
shares so reacquired, and (C) the articles shall be amended to
eliminate any statement of rights, preferences, privileges, and
restrictions relating solely to that class or series.
(2) If less than all of the authorized shares but all of the
issued and outstanding shares of that class or series, as the case
may be, are reacquired, the authorized number of shares of the class
or series is automatically reduced by the number of shares so
reacquired, and the board shall determine either (A) to eliminate
that class or series, whereupon the articles shall be amended to
eliminate any statement of rights, preferences, privileges, and
restrictions relating solely to that class or series, or (B) not to
eliminate that class or series, whereupon the articles shall be
amended to reflect that reduction of the number of authorized shares
of that class or series by the shares so reacquired.
(3) If less than all of the authorized shares and less than all of
the issued and outstanding shares of a class or series, as the case
may be, are reacquired, the authorized number of shares of that class
or series shall be automatically reduced by the number of shares
reacquired, and the articles shall be amended to reflect that
reduction.
(c) When a corporation reacquires authorized shares of a series of
shares and the articles only prohibit the reissuance of those shares
as shares of the same series:
(1) If all of the authorized shares of that series are reacquired,
then that series is automatically eliminated, the articles shall be
amended to eliminate any statement of rights, preferences,
privileges, and restrictions relating solely to that series, and the
board shall determine either (A) to return those shares to the status
of authorized but undesignated shares of the class to which they
belong or (B) to eliminate those shares entirely, whereupon the
articles in either case shall be amended to reflect the reduction in
the authorized shares of that series and the effect, if any, on the
class to which that series belongs.
(2) If all of the issued and outstanding shares of that series
(but less than all of the authorized shares of that series) are
reacquired, the board shall determine either (A) to eliminate that
series, whereupon the articles shall be amended to eliminate any
statement of rights, preferences, privileges, and restrictions
relating solely to that series, or (B) not to eliminate that series,
whereupon the articles shall be amended to reflect the return of the
reacquired shares to the status of authorized but undesignated shares
of the class to which they belong.
(3) If less than all of the issued and outstanding shares of that
series are reacquired, the authorized number of shares of that series
shall be automatically reduced by the number of shares reacquired,
and the board shall determine either (A) to return those shares to
the status of authorized but undesignated shares of the class to
which they belong, or (B) to eliminate those shares entirely,
whereupon the articles in either case shall be amended to reflect the
reduction in the authorized shares of that series and the effect, if
any, on the class to which that series belongs.
(d) "Reacquires" as used in this section means that a corporation
purchases, redeems, acquires by way of conversion to another class or
series, or otherwise acquires its own shares or that issued and
outstanding shares cease to be outstanding.
(e) The provisions of this section are subject to any contrary or
inconsistent provision in the articles.
(f) A certificate of amendment shall be filed in accordance with
the requirements of Chapter 9 (commencing with Section 900)
reflecting any elimination or reduction of authorized shares set
forth in subdivisions (b) and (c), and any related elimination from
the articles of the designation and the rights, preferences,
privileges, and restrictions of any series or class of stock that is
eliminated, except that approval by the outstanding shares (Section
152) shall not be required to adopt any such amendment. Nothing
contained in this section is intended to alter or otherwise affect
the powers of the board to amend the articles as contemplated in
Sections 202 and 401.
511. Notwithstanding the provisions of this chapter, a negotiable

instrument issued by a corporation for the purchase or redemption of
shares shall be enforceable by a holder in due course (Section 3302
of the Commercial Code) without notice that it was issued for that
purpose or by a person who acquired the instrument through such a
holder.
CORPORATIONS CODE
SECTION 600-605
600. (a) Meetings of shareholders may be held at any place within

or without this state as may be stated in or fixed in accordance with
the bylaws. If no other place is stated or so fixed, shareholder
meetings shall be held at the principal executive office of the
corporation. Unless prohibited by the bylaws of the corporation, if
authorized by the board of directors in its sole discretion, and
subject to the requirement of consent in clause (b) of Section 20 and
those guidelines and procedures as the board of directors may adopt,
shareholders not physically present in person or by proxy at a
meeting of shareholders may, by electronic transmission by and to the
corporation (Sections 20 and 21) or by electronic video screen
communication, participate in a meeting of shareholders, be deemed
present in person or by proxy, and vote at a meeting of shareholders
whether that meeting is to be held at a designated place or in whole
or in part by means of electronic transmission by and to the
corporation or by electronic video screen communication, in
accordance with subdivision (e).
(b) An annual meeting of shareholders shall be held for the
election of directors on a date and at a time stated in or fixed in
accordance with the bylaws. However, if the corporation is a
regulated management company, a meeting of shareholders shall be held
as required by the Federal Investment Company Act of 1940 (15 U.S.C.
Sec. 80a-1, et seq.). Any other proper business may be transacted at
the annual meeting. For purposes of this subdivision, "regulated
management company" means a regulated investment company as defined
in Section 851 of the federal Internal Revenue Code.
(c) If there is a failure to hold the annual meeting for a period
of 60 days after the date designated therefor or, if no date has been
designated, for a period of 15 months after the organization of the
corporation or after its last annual meeting, the superior court of
the proper county may summarily order a meeting to be held upon the
application of any shareholder after notice to the corporation giving
it an opportunity to be heard. The shares represented at the
meeting, either in person or by proxy, and entitled to vote thereat
shall constitute a quorum for the purpose of the meeting,
notwithstanding any provision of the articles or bylaws or in this
division to the contrary. The court may issue any orders as may be
appropriate, including, without limitation, orders designating the
time and place of the meeting, the record date for determination of
shareholders entitled to vote, and the form of notice of the meeting.
(d) Special meetings of the shareholders may be called by the
board, the chairperson of the board, the president, the holders of
shares entitled to cast not less than 10 percent of the votes at the
meeting, or any additional persons as may be provided in the articles
or bylaws.
(e) A meeting of the shareholders may be conducted, in whole or in
part, by electronic transmission by and to the corporation or by
electronic video screen communication (1) if the corporation
implements reasonable measures to provide shareholders (in person or
by proxy) a reasonable opportunity to participate in the meeting and
to vote on matters submitted to the shareholders, including an
opportunity to read or hear the proceedings of the meeting
concurrently with those proceedings, and (2) if any shareholder votes
or takes other action at the meeting by means of electronic
transmission to the corporation or electronic video screen
communication, a record of that vote or action is maintained by the
corporation. Any request by a corporation to a shareholder pursuant
to clause (b) of Section 20 for consent to conduct a meeting of
shareholders by electronic transmission by and to the corporation
shall include a notice that, absent consent of the shareholder
pursuant to clause (b) of Section 20, the meeting shall be held at a
physical location in accordance with subdivision (a).
601. (a) Whenever shareholders are required or permitted to take

any action at a meeting a written notice of the meeting shall be
given not less than 10 (or, if sent by third-class mail, 30) nor more
than 60 days before the date of the meeting to each shareholder
entitled to vote thereat. That notice shall state the place, date and
hour of the meeting, the means of electronic transmission by and to
the corporation (Sections 20 and 21) or electronic video screen
communication, if any, by which shareholders may participate in that
meeting, and (1) in the case of a special meeting, the general nature
of the business to be transacted, and no other business may be
transacted, or (2) in the case of the annual meeting, those matters
that the board, at the time of the mailing of the notice, intends to
present for action by the shareholders, but subject to the provisions
of subdivision (f) any proper matter may be presented at the meeting
for that action. The notice of any meeting at which directors are to
be elected shall include the names of nominees intended at the time
of the notice to be presented by the board for election.
(b) Notice of a shareholders' meeting or any report shall be given
personally, by electronic transmission by the corporation, or by
first-class mail, or, in the case of a corporation with outstanding
shares held of record by 500 or more persons (determined as provided
in Section 605) on the record date for the shareholders' meeting,
notice may also be sent third-class mail, or other means of written
communication, addressed to the shareholder at the address of that
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice; or if no
address appears or is given, at the place where the principal
executive office of the corporation is located or by publication at
least once in a newspaper of general circulation in the county in
which the principal executive office is located. The notice or report
shall be deemed to have been given at the time when delivered
personally, sent by electronic transmission by the corporation,
deposited in the mail, or sent by other means of written
communication. An affidavit of mailing or electronic transmission by
the corporation of any notice or report in accordance with the
provisions of this division, executed by the secretary, assistant
secretary or any transfer agent, shall be prima facie evidence of the
giving of the notice or report.
If any notice or report addressed to the shareholder at the
address of that shareholder appearing on the books of the corporation
is returned to the corporation by the United States Postal Service
marked to indicate that the United States Postal Service is unable to
deliver the notice or report to the shareholder at that address, all
future notices or reports shall be deemed to have been duly given
without further mailing if the same shall be available for the
shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one year from the
date of the giving of the notice or report to all other
shareholders.
Notice given by electronic transmission by the corporation under
this subdivision shall be valid only if it complies with Section 20.
Notwithstanding the foregoing, notice shall not be given by
electronic transmission by the corporation under this subdivision
after either of the following:
(1) The corporation is unable to deliver two consecutive notices
to the shareholder by that means.
(2) The inability to so deliver the notices to the shareholder
becomes known to the secretary, any assistant secretary, the transfer
agent, or other person responsible for the giving of the notice.
(c) Upon request in writing to the corporation addressed to the
attention of the chairperson of the board, president, vice president
or secretary by any person (other than the board) entitled to call a
special meeting of shareholders, the officer forthwith shall cause
notice to be given to the shareholders entitled to vote that a
meeting will be held at a time requested by the person or persons
calling the meeting, not less than 35 nor more than 60 days after the
receipt of the request. If the notice is not given within 20 days
after receipt of the request, the persons entitled to call the
meeting may give the notice or the superior court of the proper
county shall summarily order the giving of the notice, after notice
to the corporation giving it an opportunity to be heard. The
procedure provided in subdivision (c) of Section 305 shall apply to
that application. The court may issue orders as may be appropriate,
including, without limitation, orders designating the time and place
of the meeting, the record date for determination of shareholders
entitled to vote and the form of notice.
(d) When a shareholders' meeting is adjourned to another time or
place, unless the bylaws otherwise require and except as provided in
this subdivision, notice need not be given of the adjourned meeting
if the time and place thereof (or the means of electronic
transmission by and to the corporation or electronic video screen
communication, if any, by which the shareholders may participate) are
announced at the meeting at which the adjournment is taken. At the
adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the
adjournment is for more than 45 days or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the
adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
(e) The transactions of any meeting of shareholders, however
called and noticed, and wherever held, are as valid as though had at
a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after
the meeting, each of the persons entitled to vote, not present in
person or by proxy, provides a waiver of notice or consent to the
holding of the meeting or an approval of the minutes thereof in
writing. All those waivers, consents and approvals shall be filed
with the corporate records or made a part of the minutes of the
meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at the meeting, except when the
person objects, at the beginning of the meeting, to the transaction
of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by this
division to be included in the notice but not so included, if the
objection is expressly made at the meeting. Neither the business to
be transacted at nor the purpose of any regular or special meeting of
shareholders need be specified in any written waiver of notice,
consent to the holding of the meeting or approval of the minutes
thereof, unless otherwise provided in the articles or bylaws, except
as provided in subdivision (f).
(f) Any shareholder approval at a meeting, other than unanimous
approval by those entitled to vote, pursuant to Section 310, 902,
1152, 1201, 1900 or 2007 shall be valid only if the general nature of
the proposal so approved was stated in the notice of meeting or in
any written waiver of notice.
602. (a) Unless otherwise provided in the articles, a majority of

the shares entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of the shareholders, but in no
event shall a quorum consist of less than one-third (or, in the case
of a mutual water company, 20 percent) of the shares entitled to vote
at the meeting or, except in the case of a close corporation, of
more than a majority of the shares entitled to vote at the meeting.
Except as provided in subdivision (b), 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) shall be the
act of the shareholders, unless the vote of a greater number or
voting by classes is required by this division or the articles.
(b) The shareholders present at a duly called or held meeting at
which a quorum is present may continue to transact business until
adjournment notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares
required to constitute a quorum or, if required by this division or
the articles, the vote of a greater number or voting by classes.
(c) In the absence of a quorum, any meeting of shareholders may be
adjourned from time to time by the vote of a majority of the shares
represented either in person or by proxy, but no other business may
be transacted, except as provided in subdivision (b).
603. (a) Unless otherwise provided in the articles, any action that
may be taken at any annual or special meeting of shareholders may be
taken without a meeting and without prior notice, if a consent in
writing, as specified in Section 195, setting forth the action so
taken, shall be provided by the holders of outstanding shares having
not less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares
entitled to vote thereon were present and voted.
(b) Unless the consents of all shareholders entitled to vote have
been solicited in writing, both of the following shall apply:
(1) Notice of any shareholder approval pursuant to Section 310,
317, 1152, 1201 or 2007 without a meeting by less than unanimous
written consent shall be given at least 10 days before the
consummation of the action authorized by that approval. Notice shall
be given as provided in subdivision (b) of Section 601.
(2) Prompt notice shall be given of the taking of any other
corporate action approved by shareholders without a meeting by less
than unanimous written consent, to those shareholders entitled to
vote who have not consented in writing. Notice shall be given as
provided in subdivision (b) of Section 601.
(c) Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal
representative of the shareholder or their respective proxyholders,
may revoke the consent personally or by proxy by a writing received
by the corporation prior to the time that written consents of the
number of shares required to authorize the proposed action have been
filed with the secretary of the corporation, but may not do so
thereafter. The revocation is effective upon its receipt by the
secretary of the corporation.
(d) Notwithstanding subdivision (a), directors may not be elected
by written consent except by unanimous written consent of all shares
entitled to vote for the election of directors; provided that the
shareholders may elect a director to fill a vacancy, other than a
vacancy created by removal, by the written consent of a majority of
the outstanding shares entitled to vote.
604. (a) Any form of proxy or written consent distributed to 10 or

more shareholders of a corporation with outstanding shares held of
record by 100 or more persons shall afford an opportunity on the
proxy or form of written consent to specify a choice between approval
and disapproval of each matter or group of related matters intended
to be acted upon at the meeting for which the proxy is solicited or
by such written consent, other than elections to office, and shall
provide, subject to reasonable specified conditions, that where the
person solicited specifies a choice with respect to any such matter
the shares will be voted in accordance therewith.
(b) In any election of directors, any form of proxy in which the
directors to be voted upon are named therein as candidates and which
is marked by a shareholder "withhold" or otherwise marked in a manner
indicating that the authority to vote for the election of directors
is withheld shall not be voted for the election of a director.
(c) Failure to comply with this section shall not invalidate any
corporate action taken, but may be the basis for challenging any
proxy at a meeting and the superior court may compel compliance
therewith at the suit of any shareholder.
(d) This section does not apply to any corporation with an
outstanding class of securities registered under Section 12 of the
Securities Exchange Act of 1934 or whose securities are exempted from
such registration by Section 12(g)(2) of that act.
605. (a) For the purpose of determining whether a corporation has

outstanding shares held of record by 100 or more persons, shares
shall be deemed to be "held of record" by each person who is
identified as the owner of such shares on the record of shareholders
maintained by or on behalf of the corporation, subject to the
following:
(1) In any case where the record of shareholders has not been
maintained in accordance with accepted practice, any additional
person who would be identified as such an owner on such record if it
had been maintained in accordance with accepted practice shall be
included as a holder of record.
(2) Shares identified as held of record by a corporation, a
partnership, a limited liability company, a trust, whether or not the
trustees are named, or other organization shall be included as so
held by one person.
(3) Shares identified as held of record by one or more persons as
trustees, executors, guardians, conservators, custodians or in other
fiduciary capacities with respect to a single trust, estate or
account shall be included as held of record by one person.
(4) Shares held by two or more persons as coowners shall be
included as held by one person.
(5) Shares registered in substantially similar names, where the
corporation (or other person soliciting proxies) has reason to
believe because of the address or other indications that such names
represent the same person, may be included as held of record by one
person.
(b) Notwithstanding subdivision (a):
(1) Shares held, to the knowledge of the corporation (or other
person soliciting proxies), subject to a voting trust, deposit
agreement or similar arrangement shall be included as held of record
by the recordholders of the voting trust certificates, certificates
of deposit, receipts or similar evidences of interest in such
securities; provided, however, that the corporation (or other person
soliciting proxies) may rely in good faith on such information as is
received in response to its request from a nonaffiliated issuer of
the certificates or evidences of interest.
(2) If the corporation (or other person soliciting proxies) knows
or has reason to know that the form of holding shares of record is
used primarily to circumvent the provisions of this section, the
beneficial owners of such shares shall be deemed to be the record
owners thereof.
CORPORATIONS CODE
SECTION 700-711
700. (a) Except as provided in Section 708 and except as may be

otherwise provided in the articles, each outstanding share,
regardless of class, shall be entitled to one vote on each matter
submitted to a vote of shareholders.
(b) Any holder of shares entitled to vote on any matter may vote
part of the shares in favor of the proposal and refrain from voting
the remaining shares or vote them against the proposal, other than
elections to office, but, if the shareholder fails to specify the
number of shares such shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with
respect to all shares such shareholder is entitled to vote.
701. (a) In order that the corporation may determine the

shareholders entitled to notice of any meeting or to vote or entitled
to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect
of any other lawful action, the board may fix, in advance, a record
date, which shall not be more than 60 nor less than 10 days prior to
the date of such meeting nor more than 60 days prior to any other
action.
(b) If no record date is fixed:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the
close of business on the business day next preceding the day on which
notice is given or, if notice is waived, at the close of business on
the business day next preceding the day on which the meeting is
held.
(2) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no
prior action by the board has been taken, shall be the day on which
the first written consent is given.
(3) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the
board adopts the resolution relating thereto, or the 60th day prior
to the date of such other action, whichever is later.
(c) A determination of shareholders of record entitled to notice
of or to vote at a meeting of shareholders shall apply to any
adjournment of the meeting unless the board fixes a new record date
for the adjourned meeting, but the board shall fix a new record date
if the meeting is adjourned for more than 45 days from the date set
for the original meeting.
(d) Shareholders at the close of business on the record date are
entitled to notice and to vote or to receive the dividend,
distribution or allotment of rights or to exercise the rights, as the
case may be, notwithstanding any transfer of any shares on the books
of the corporation after the record date, except as otherwise
provided in the articles or by agreement or in this division.
702. (a) Subject to subdivision (c) of Section 703, shares held by

an administrator, executor, guardian, conservator or custodian may be
voted by such holder either in person or by proxy, without a
transfer of such shares into the holder's name; and shares standing
in the name of a trustee may be voted by the trustee, either in
person or by proxy, but no trustee shall be entitled to vote shares
held by such trustee without a transfer of such shares into the
trustee's name.
(b) Shares standing in the name of a receiver may be voted by such
receiver; and shares held by or under the control of a receiver may
be voted by such receiver without the transfer thereof into the
receiver's name if authority to do so is contained in the order of
the court by which such receiver was appointed.
(c) Subject to the provisions of Section 705 and except where
otherwise agreed in writing between the parties, a shareholder whose
shares are pledged shall be entitled to vote such shares until the
shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so
transferred.
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by
the minor, in person or by proxy, whether or not the corporation has
notice, actual or constructive, of the nonage, unless a guardian of
the minor's property has been appointed and written notice of such
appointment given to the corporation.
(e) If authorized to vote the shares by the power of attorney by
which the attorney in fact was appointed, shares held by or under the
control of an attorney in fact may be voted and the corporation may
treat all rights incident thereto as exercisable by the attorney in
fact, in person or by proxy, without the transfer of the shares into
the name of the attorney in fact.
703. (a) Shares standing in the name of another corporation,

domestic or foreign, may be voted by an officer, agent, or
proxyholder as the bylaws of the other corporation may prescribe or,
in the absence of such provision, as the board of the other
corporation may determine or, in the absence of that determination,
by the chairman of the board, president or any vice president of the
other corporation, or by any other person authorized to do so by the
chairman of the board, president, or any vice president of the other
corporation. Shares which are purported to be voted or any proxy
purported to be executed in the name of a corporation (whether or not
any title of the person signing is indicated) shall be presumed to
be voted or the proxy executed in accordance with the provisions of
this subdivision, unless the contrary is shown.
(b) Shares of a corporation owned by its subsidiary shall not be
entitled to vote on any matter.
(c) Shares held by the issuing corporation in a fiduciary
capacity, and shares of an issuing corporation held in a fiduciary
capacity by its subsidiary, shall not be entitled to vote on any
matter, except as follows:
(1) To the extent that the settlor or beneficial owner possesses
and exercises a right to vote or to give the corporation binding
instructions as to how to vote such shares.
(2) Where there are one or more cotrustees who are not affected by
the prohibition of this subdivision, in which case the shares may be
voted by the cotrustees as if it or they are the sole trustee.
704. If shares stand of record in the names of two or more persons,

whether fiduciaries, members of a partnership, joint tenants,
tenants in common, husband and wife as community property, tenants by
the entirety, voting trustees, persons entitled to vote under a
shareholder voting agreement or otherwise, or if two or more persons
(including proxyholders) have the same fiduciary relationship
respecting the same shares, unless the secretary of the corporation
is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the
relationship wherein it is so provided, their acts with respect to
voting shall have the following effect:
(1) If only one votes, such act binds all;
(2) If more than one vote, the act of the majority so voting
binds all;
(3) If more than one vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows

that any such tenancy is held in unequal interests, a majority or
even split for the purpose of this section shall be a majority or
even split in interest.
705. (a) Every person entitled to vote shares may authorize another
person or persons to act by proxy with respect to such shares. Any
proxy purporting to be executed in accordance with the provisions of
this division shall be presumptively valid.
(b) No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy. Every proxy
continues in full force and effect until revoked by the person
executing it prior to the vote pursuant thereto, except as otherwise
provided in this section. Such revocation may be effected by a
writing delivered to the corporation stating that the proxy is
revoked or by a subsequent proxy executed by the person executing the
prior proxy and presented to the meeting, or as to any meeting by
attendance at such meeting and voting in person by the person
executing the proxy. The dates contained on the forms of proxy
presumptively determine the order of execution, regardless of the
postmark dates on the envelopes in which they are mailed.
(c) A proxy is not revoked by the death or incapacity of the maker
unless, before the vote is counted, written notice of such death or
incapacity is received by the corporation.
(d) Except when other provision shall have been made by written
agreement between the parties, the recordholder of shares which such
person holds as pledgee or otherwise as security or which belong to
another shall issue to the pledgor or to the owner of such shares,
upon demand therefor and payment of necessary expenses thereof, a
proxy to vote or take other action thereon.
(e) A proxy which states that it is irrevocable is irrevocable for
the period specified therein (notwithstanding subdivision (c)) when
it is held by any of the following or a nominee of any of the
following:
(1) A pledgee.
(2) A person who has purchased or agreed to purchase or holds an
option to purchase the shares or a person who has sold a portion of
such person's shares in the corporation to the maker of the proxy.
(3) A creditor or creditors of the corporation or the shareholder
who extended or continued credit to the corporation or the
shareholder in consideration of the proxy if the proxy states that it
was given in consideration of such extension or continuation of
credit and the name of the person extending or continuing credit.
(4) A person who has contracted to perform services as an employee
of the corporation, if a proxy is required by the contract of
employment and if the proxy states that it was given in consideration
of such contract of employment, the name of the employee and the
period of employment contracted for.
(5) A person designated by or under an agreement under Section
706.
(6) A beneficiary of a trust with respect to shares held by the
trust.
Notwithstanding the period of irrevocability specified, the proxy
becomes revocable when the pledge is redeemed, the option or
agreement to purchase is terminated or the seller no longer owns any
shares of the corporation or dies, the debt of the corporation or the
shareholder is paid, the period of employment provided for in the
contract of employment has terminated, the agreement under Section
706 has terminated, or the person ceases to be a beneficiary of the
trust. In addition to the foregoing clauses (1) through (5), a proxy
may be made irrevocable (notwithstanding subdivision (c)) if it is
given to secure the performance of a duty or to protect a title,
either legal or equitable, until the happening of events which, by
its terms, discharge the obligations secured by it.
(f) A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a transferee of shares without knowledge of the
existence of the provision unless the existence of the proxy and its
irrevocability appears, in the case of certificated securities, on
the certificate representing such shares, or in the case of
uncertificated securities, on the initial transaction statement and
written statements.
706. (a) Notwithstanding any other provision of this division, an

agreement between two or more shareholders of a corporation, if in
writing and signed by the parties thereto, may provide that in
exercising any voting rights the shares held by them shall be voted
as provided by the agreement, or as the parties may agree or as
determined in accordance with a procedure agreed upon by them, and
the parties may but need not transfer the shares covered by such an
agreement to a third party or parties with authority to vote them in
accordance with the terms of the agreement. Such an agreement shall
not be denied specific performance by a court on the ground that the
remedy at law is adequate or on other grounds relating to the
jurisdiction of a court of equity.
(b) Shares in any corporation may be transferred by written
agreement to trustees in order to confer upon them the right to vote
and otherwise represent the shares for such period of time, not
exceeding 10 years, as may be specified in the agreement. The
validity of a voting trust agreement, otherwise lawful, shall not be
affected during a period of 10 years from the date when it was
created or last extended as hereinafter provided by the fact that
under its terms it will or may last beyond such 10-year period. At
any time within two years prior to the time of expiration of any
voting trust agreement as originally fixed or as last extended as
provided in this subdivision, one or more beneficiaries under the
voting trust agreement may, by written agreement and with the written
consent of the voting trustee or trustees, extend the duration of
the voting trust agreement with respect to their shares for an
additional period not exceeding 10 years from the expiration date of
the trust as originally fixed or as last extended as provided in this
subdivision. A duplicate of the voting trust agreement and any
extension thereof shall be filed with the secretary of the
corporation and shall be open to inspection by a shareholder, a
holder of a voting trust certificate or the agent of either, upon the
same terms as the record of shareholders of the corporation is open
to inspection.
(c) No agreement made pursuant to subdivision (a) shall be held to
be invalid or unenforceable on the ground that it is a voting trust
that does not comply with subdivision (b) or that it is a proxy that
does not comply with Section 705.
(d) This section shall not invalidate any voting or other
agreement among shareholders or any irrevocable proxy complying with
subdivision (e) of Section 705, which agreement or proxy is not
otherwise illegal.
707. (a) In advance of any meeting of shareholders the board may

appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed,
or if any persons so appointed fail to appear or refuse to act, the
chairman of any meeting of shareholders may, and on the request of
any shareholder or a shareholder's proxy shall, appoint inspectors of
election (or persons to replace those who so fail or refuse) at the
meeting. The number of inspectors shall be either one or three. If
appointed at a meeting on the request of one or more shareholders or
proxies, the majority of shares represented in person or by proxy
shall determine whether one or three inspectors are to be appointed.
(b) The inspectors of election shall determine the number of
shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies, receive votes, ballots
or consents, hear and determine all challenges and questions in any
way arising in connection with the right to vote, count and tabulate
all votes or consents, determine when the polls shall close,
determine the result and do such acts as may be proper to conduct the
election or vote with fairness to all shareholders.
(c) The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as
expeditiously as is practical. If there are three inspectors of
election, the decision, act or certificate of a majority is effective
in all respects as the decision, act or certificate of all. Any
report or certificate made by the inspectors of election is prima
facie evidence of the facts stated therein.
708. (a) Except as provided in Sections 301.5 and 708.5, every

shareholder complying with subdivision (b) and entitled to vote at
any election of directors may cumulate such shareholder's votes and
give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the
shareholder's shares are normally entitled, or distribute the
shareholder's votes on the same principle among as many candidates as
the shareholder thinks fit.
(b) No shareholder shall be entitled to cumulate votes (i.e., cast
for any candidate a number of votes greater than the number of votes
that the shareholder normally is entitled to cast) unless the
candidate or candidates' names have been placed in nomination prior
to the voting and the shareholder has given notice at the meeting
prior to the voting of the shareholder's intention to cumulate the
shareholder's votes. If any one shareholder has given that notice,
all shareholders may cumulate their votes for candidates in
nomination.
(c) Except as provided in Section 708.5, in any election of
directors, the candidates receiving the highest number of affirmative
votes of the shares entitled to be voted for them up to the number
of directors to be elected by those shares are elected; votes against
the director and votes withheld shall have no legal effect.
(d) Subdivision (a) applies to the shareholders of any mutual
water company organized or existing for the purpose of delivering
water to its shareholders at cost on lands located within the
boundaries of one or more reclamation districts now or hereafter
legally existing in this state and created by or formed under the
provisions of any statute of this state, but does not otherwise apply
to the shareholders of mutual water companies unless their articles
or bylaws so provide.
(e) Elections for directors need not be by ballot unless a
shareholder demands election by ballot at the meeting and before the
voting begins or unless the bylaws so require.
708.5. (a) For purposes of this section,the following definitions
shall apply:
(1) "Uncontested election" means an election of directors in
which, at the expiration of the time fixed under the articles of
incorporation or bylaws requiring advance notification of director
candidates or, absent such a provision in the articles of
incorporation or bylaws, at a time fixed by the board of directors
that is not more than 14 days before notice is given of the meeting
at which the election is to occur, the number of candidates for
election does not exceed the number of directors to be elected by the
shareholders at that election.
(2) "Listed corporation" means a domestic corporation that
qualifies as a listed corporation under subdivision (d) of Section
301.5.
(b) Notwithstanding paragraph (5) of subdivision (a) of Section
204, a listed corporation that has eliminated cumulative voting
pursuant to subdivision (a) of Section 301.5 may amend its articles
of incorporation or bylaws to provide that, in an uncontested
election, approval of the shareholders, as specified in Section 153,
shall be required to elect a director.
(c) Notwithstanding subdivision (b) of Section 301, if an
incumbent director fails to be elected by approval of the
shareholders (Section 153) in an uncontested election of a listed
corporation that has amended its articles of incorporation or bylaws
pursuant to subdivision (b), then, unless the incumbent director has
earlier resigned, the term of the incumbent director shall end on the
date that is the earlier of 90 days after the date on which the
voting results are determined pursuant to Section 707 or the date on
which the board of directors selects a person to fill the office held
by that director pursuant to subdivision (d).
(d) Any vacancy on the board of directors resulting from any
failure of a candidate to be elected by approval of the shareholders
(Section 153) in an uncontested election of a listed corporation that
has amended its articles of incorporation or bylaws pursuant to
subdivision (b) shall be filled in accordance with the procedures set
forth in Section 305.
709. (a) Upon the filing of an action therefor by any shareholder

or by any person who claims to have been denied the right to vote,
the superior court of the proper county shall try and determine the
validity of any election or appointment of any director of any
domestic corporation, or of any foreign corporation if the election
was held or the appointment was made in this state. In the case of a
foreign corporation the action may be brought at the option of the
plaintiff in the county in which the corporation has its principal
office in this state or in the county in which the election was held
or the appointment was made.
(b) Upon the filing of the complaint, and before any further
proceedings are had, the court shall enter an order fixing a date for
the hearing, which shall be within five days unless for good cause
shown a later date is fixed, and requiring notice of the date for the
hearing and a copy of the complaint to be served upon the
corporation and upon the person whose purported election or
appointment is questioned and upon any person (other than the
plaintiff) whom the plaintiff alleges to have been elected or
appointed, in the manner in which a summons is required to be served,
or, if the court so directs, by registered mail; and the court may
make such further requirements as to notice as appear to be proper
under the circumstances.
(c) The court may determine the person entitled to the office of
director or may order a new election to be held or appointment to be
made, may determine the validity, effectiveness and construction of
voting agreements and voting trusts, the validity of the issuance of
shares and the right of persons to vote and may direct such other
relief as may be just and proper.
710. (a) This section applies to a corporation with outstanding

shares held of record by 100 or more persons (determined as provided
in Section 605) that files an amendment of articles or certificate of
determination containing a "supermajority vote" provision on or
after January 1, 1989. This section shall not apply to a corporation
that files an amendment of articles or certificate of determination
on or after January 1, 1994, if, at the time of filing, the
corporation has (1) outstanding shares of more than one class or
series of stock, (2) no class of equity securities registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, and
(3) outstanding shares held of record by fewer than 300 persons
determined as provided by Section 605.
(b) A "supermajority vote" is a requirement set forth in the
articles or in a certificate of determination authorized under any
provision of this division that specified corporate action or actions
be approved by a larger proportion of the outstanding shares than a
majority, or by a larger proportion of the outstanding shares of a
class or series than a majority, but no supermajority vote that is
subject to this section shall require a vote in excess of 66 2/3
percent of the outstanding shares or 66 2/3 percent of the
outstanding shares of any class or series of those shares.
(c) An amendment of the articles or a certificate of determination
that includes a supermajority vote requirement shall be approved by
at least as large a proportion of the outstanding shares (Section
152) as is required pursuant to that amendment or certificate of
determination for the approval of the specified corporate action or
actions.
(d) The amendments made to this section by the act amending this
section in the 2001-02 Regular Session shall not affect the rights of
minority shareholders existing under law.
711. (a) The Legislature finds and declares that:

Many of the residents of this state are the legal and beneficial
owners or otherwise the ultimate beneficiaries of shares of stock of
domestic and foreign corporations, title to which may be held by a
variety of intermediate owners as defined in subdivision (b). The
informed and active involvement of such beneficial owners and
beneficiaries in holding legal owners and, through them, management,
accountable in their exercise of corporate power is essential to the
interest of those beneficiaries and beneficial owners and to the
economy and well-being of this state.
The purpose of this section is to serve the public interest by
ensuring that voting records are maintained and disclosed as provided
in this section. In the event that by statute or regulation pursuant
to the federal Employee Retirement Income Security Act of 1974 (29
U.S.C. Sec. 1001 et seq.), there are imposed upon investment managers
as defined in Sec. 2(38) thereof, duties substantially the same as
those set forth in this section, compliance with those statutory or
regulatory requirements by persons subject to this section shall be
deemed to fulfill the obligations contained in this section.
This section shall be construed liberally to achieve that purpose.
(b) For purposes of this section, a person on whose behalf shares
are voted includes, but is not limited to:
(1) A participant or beneficiary of an employee benefit plan with
regard to shares held for the benefit of the participant or
beneficiary.
(2) A shareholder, beneficiary, or contract owner of any entity
(or of any portfolio of any entity) as defined in Section 3(a) of the
federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et
seq.), as amended, to the extent the entity (or portfolio) holds the
shares for which the record is requested.
(c) For the purposes of this section, a person on whose behalf
shares are voted does not include:
(1) A person who possesses the right to terminate or withdraw from
the shareholder, contract owner, participant, or beneficiary
relationship with any entity (or any portfolio of any entity) defined
in subdivision (b). This exclusion does not apply in the event the
right of termination or withdrawal cannot be exercised without
automatic imposition of a tax penalty. The right to substitute a
relationship with an entity or portfolio, the shares of which are
voted by or subject to the direction of the investment adviser (as
defined in Section 2 of the federal Investment Company Act of 1940
(15 U.S.C. Sec. 80a-1 et seq.), as amended), of the prior entity or
portfolio, or an affiliate of the investment adviser, shall not be
deemed to be a right of termination or withdrawal within the meaning
of this subdivision.
(2) A person entitled to receive information about a trust
pursuant to Section 16061 of the Probate Code.
(3) A beneficiary, participant, contract owner, or shareholder
whose interest is funded through the general assets of a life
insurance company authorized to conduct business in this state.
(d) Every person possessing the power to vote shares of stock on
behalf of another shall maintain a record of the manner in which the
shares were voted. The record shall be maintained for a period of 12
consecutive months from the effective date of the vote.
(e) Upon a reasonable written request, the person possessing the
power to vote shares of stock on behalf of another, or a designated
agent, shall disclose the voting record with respect to any matter
involving a specific security or securities in accordance with the
following procedures:
(1) Except as set forth in paragraph (2), disclosure shall be made
to the person making the request. The person making the disclosure
may require identification sufficient to identify the person making
the request as a person on whose behalf the shares were voted. A
request for identification, if made, shall be reasonable, shall be
made promptly, and may include a request for the person's social
security number.
(2) If the person possessing the power to vote shares on behalf of
another holds that power pursuant to an agreement entered into with
a party other than the person making the request for disclosure, the
person maintaining and disclosing the record pursuant to this section
may, instead, make the requested disclosure to that party.
Disclosure to that party shall be deemed compliance with the
disclosure requirement of this section. If disclosure is made to that
party and not to the person making the request, subdivision (i)
shall not apply. However, nothing herein shall prohibit that party
and the person possessing the power to vote on shares from entering
into an agreement between themselves for the payment or assessment of
a reasonable charge to defray expenses of disclosing the record.
(f) Where the entity subject to the requirements of this section
is organized as a unit investment trust as defined in Section 4(2) of
the federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et
seq.), the open-ended investment companies underlying the unit
investment trust shall promptly make available their proxy voting
records to the unit investment trust upon evidence of a bona fide
request for voting record information pursuant to subdivision (e).
(g) Signing a proxy on another's behalf and forwarding it for
disposition or receiving voting instructions does not constitute the
power to vote. A person forwarding proxies or receiving voting
instructions shall disclose the identity of the person having the
power to vote shares upon reasonable written request by a person
entitled to request a voting record under subdivision (c).
(h) For purposes of this section, if one or more persons has the
power to vote shares on behalf of another, unless a governing
instrument provides otherwise, the person or persons may designate an
agent who shall maintain and disclose the record in accordance with
subdivisions (b) and (c).
(i) Except as provided in paragraph (2) of subdivision (e), or as
otherwise provided by law or a governing instrument, a person
maintaining and disclosing a record pursuant to this section may
assess a reasonable charge to the requesting person in order to
defray expenses of disclosing the record in accordance with
subdivision (e). Disclosure shall be made within a reasonable period
after payment is received.
(j) Upon the petition of any person who successfully brings an
action pursuant to or to enforce this section, the court may award
costs and reasonable attorney's fees if the court finds that the
defendant willfully violated this section.
(k) The obligation to maintain and disclose a voting record in
accordance with subdivisions (b) and (c) shall commence January 1,
1990.
CORPORATIONS CODE
SECTION 800
800. (a) As used in this section, "corporation" includes an

unincorporated association; "board" includes the managing body of an
unincorporated association; "shareholder" includes a member of an
unincorporated association; and "shares" includes memberships in an
unincorporated association.
(b) No action may be instituted or maintained in right of any
domestic or foreign corporation by any holder of shares or of voting
trust certificates of the corporation unless both of the following
conditions exist:
(1) The plaintiff alleges in the complaint that plaintiff was a
shareholder, of record or beneficially, or the holder of voting trust
certificates at the time of the transaction or any part thereof of
which plaintiff complains or that plaintiff's shares or voting trust
certificates thereafter devolved upon plaintiff by operation of law
from a holder who was a holder at the time of the transaction or any
part thereof complained of; provided, that any shareholder who does
not meet these requirements may nevertheless be allowed in the
discretion of the court to maintain the action on a preliminary
showing to and determination by the court, by motion and after a
hearing, at which the court shall consider such evidence, by
affidavit or testimony, as it deems material, that (i) there is a
strong prima facie case in favor of the claim asserted on behalf of
the corporation, (ii) no other similar action has been or is likely
to be instituted, (iii) the plaintiff acquired the shares before
there was disclosure to the public or to the plaintiff of the
wrongdoing of which plaintiff complains, (iv) unless the action can
be maintained the defendant may retain a gain derived from defendant'
s willful breach of a fiduciary duty, and (v) the requested relief
will not result in unjust enrichment of the corporation or any
shareholder of the corporation; and
(2) The plaintiff alleges in the complaint with particularity
plaintiff's efforts to secure from the board such action as plaintiff
desires, or the reasons for not making such effort, and alleges
further that plaintiff has either informed the corporation or the
board in writing of the ultimate facts of each cause of action
against each defendant or delivered to the corporation or the board a
true copy of the complaint which plaintiff proposes to file.
(c) In any action referred to in subdivision (b), at any time
within 30 days after service of summons upon the corporation or upon
any defendant who is an officer or director of the corporation, or
held such office at the time of the acts complained of, the
corporation or the defendant may move the court for an order, upon
notice and hearing, requiring the plaintiff to furnish a bond as
hereinafter provided. The motion shall be based upon one or both of
the following grounds:
(1) That there is no reasonable possibility that the prosecution
of the cause of action alleged in the complaint against the moving
party will benefit the corporation or its shareholders.
(2) That the moving party, if other than the corporation, did not
participate in the transaction complained of in any capacity.
The court on application of the corporation or any defendant may,
for good cause shown, extend the 30-day period for an additional
period or periods not exceeding 60 days.
(d) At the hearing upon any motion pursuant to subdivision (c),
the court shall consider such evidence, written or oral, by witnesses
or affidavit, as may be material (1) to the ground or grounds upon
which the motion is based, or (2) to a determination of the probable
reasonable expenses, including attorneys' fees, of the corporation
and the moving party which will be incurred in the defense of the
action. If the court determines, after hearing the evidence adduced
by the parties, that the moving party has established a probability
in support of any of the grounds upon which the motion is based, the
court shall fix the amount of the bond, not to exceed fifty thousand
dollars ($50,000), to be furnished by the plaintiff for reasonable
expenses, including attorneys' fees, which may be incurred by the
moving party and the corporation in connection with the action,
including expenses for which the corporation may become liable
pursuant to Section 317. A ruling by the court on the motion shall
not be a determination of any issue in the action or of the merits
thereof. If the court, upon the motion, makes a determination that a
bond shall be furnished by the plaintiff as to any one or more
defendants, the action shall be dismissed as to the defendant or
defendants, unless the bond required by the court has been furnished
within such reasonable time as may be fixed by the court.
(e) If the plaintiff shall, either before or after a motion is
made pursuant to subdivision (c), or any order or determination
pursuant to the motion, furnish a bond in the aggregate amount of
fifty thousand dollars ($50,000) to secure the reasonable expenses of
the parties entitled to make the motion, the plaintiff has complied
with the requirements of this section and with any order for a bond
theretofore made, and any such motion then pending shall be dismissed
and no further or additional bond shall be required.
(f) If a motion is filed pursuant to subdivision (c), no pleadings
need be filed by the corporation or any other defendant and the
prosecution of the action shall be stayed until 10 days after the
motion has been disposed of.
CORPORATIONS CODE
SECTION 900-911
900. (a) By complying with the provisions of this chapter, a

corporation may amend its articles from time to time, in any and as
many respects as may be desired, so long as its articles as amended
contain only such provisions as it would be lawful to insert in
original articles filed at the time of the filing of the amendment
and, if a change in shares or the rights of shareholders or an
exchange, reclassification or cancellation of shares or rights of
shareholders is to be made, such provisions as may be necessary to
effect such change, exchange, reclassification or cancellation. It is
the intent of the Legislature in adopting this section to exercise
to the fullest extent the reserve power of the state over
corporations and to authorize any amendment of the articles covered
by the preceding sentence regardless of whether any provision
contained in the amendment was permissible at the time of the
original incorporation of the corporation.
(b) A corporation shall not amend its articles to alter any
statement which may appear in the original articles of the names and
addresses of the first directors, nor the name and address of the
initial agent, except to correct an error in the statement or to
delete either after the corporation has filed a statement under
Section 1502.
901. Before any shares have been issued, any amendment of the
articles may be adopted by a writing signed by a majority of the
incorporators, if directors were not named in the original articles
and have not been elected, or, if directors were named in the
original articles or have been elected, by a majority of the
directors.
902. (a) After any shares have been issued, amendments may be
adopted if approved by the board and approved by the outstanding
shares (Section 152), either before or after the approval by the
board.
(b) Notwithstanding subdivision (a), an amendment extending the
corporate existence or making the corporate existence perpetual may
be adopted by a corporation organized prior to August 14, 1929, with
approval by the board alone.
(c) Notwithstanding subdivision (a), unless the corporation has
more than one class of shares outstanding, an amendment effecting
only a stock split (including an increase in the authorized number of
shares in proportion thereto) may be adopted with approval by the
board alone.
(d) Notwithstanding subdivision (a), an amendment deleting the
names and addresses of the first directors or the name and address of
the initial agent may be adopted with approval by the board alone.
(e) Whenever the articles require for corporate action the vote of
a larger proportion or of all of the shares of any class or series,
or of a larger proportion or of all of the directors, than is
otherwise required by this division, the provision in the articles
requiring such greater vote shall not be altered, amended or repealed
except by such greater vote unless otherwise provided in the
articles.
(f) Notwithstanding subdivision (a), any amendment reducing the
vote required for an amendment pursuant to subdivision (c) of Section
158 may not be adopted unless approved by the affirmative vote of at
least two-thirds of each class of outstanding shares or such other
vote as may then be specified by the articles of the corporation.
903. (a) A proposed amendment must be approved by the outstanding

shares (Section 152) of a class, whether or not such class is
entitled to vote thereon by the provisions of the articles, if the
amendment would:
(1) Increase or decrease the aggregate number of authorized shares
of such class, other than an increase as provided in either
subdivision (b) of Section 405 or subdivision (c) of Section 902.
(2) Effect an exchange, reclassification, or cancellation of all
or part of the shares of such class, including a reverse stock split
but excluding a stock split.
(3) Effect an exchange, or create a right of exchange, of all or
part of the shares of another class into the shares of such class.
(4) Change the rights, preferences, privileges or restrictions of
the shares of such class.
(5) Create a new class of shares having rights, preferences or
privileges prior to the shares of such class, or increase the rights,
preferences or privileges or the number of authorized shares of any
class having rights, preferences or privileges prior to the shares of
such class.
(6) In the case of preferred shares, divide the shares of any
class into series having different rights, preferences, privileges or
restrictions or authorize the board to do so.
(7) Cancel or otherwise affect dividends on the shares of such
class which have accrued but have not been paid.
(b) Different series of the same class shall not constitute
different classes for the purpose of voting by classes except when a
series is adversely affected by an amendment in a different manner
than other shares of the same class.
(c) In addition to approval by a class as provided in subdivision
(a), a proposed amendment must also be approved by the outstanding
voting shares (Section 152).
904. (a) Except as provided in subdivision (b), if any amendment of

the articles would make shares assessable or would authorize remedy
by action for the collection of an assessment on fully paid shares,
it shall be approved by all of the outstanding shares affected
regardless of limitations or restrictions on the voting rights
thereof.
(b) If a corporation is a mutual water company within the meaning
of Section 2705 of the Public Utilities Code, an amendment of the
articles to make the shares assessable or to amend prior article
provisions authorizing assessment of shares shall be approved by the
holders of at least two-thirds of the outstanding shares of any class
affected by the amendment regardless of limitations or restrictions
on the voting rights thereof. However, if the amendment would
authorize remedy by action for the collection of an assessment on
fully paid shares, the amendment shall be approved pursuant to
subdivision (a).
905. In the case of amendments adopted after the corporation has

issued any shares, the corporation shall file a certificate of
amendment, which shall consist of an officers' certificate stating:
(a) The wording of the amendment or amended articles in accordance
with Section 907;
(b) That the amendment has been approved by the board;
(c) If the amendment is one for which the approval of the
outstanding shares (Section 152) is required, that the amendment was
approved by the required vote of shareholders in accordance with
Section 902, 903 or 904; the total number of outstanding shares of
each class entitled to vote with respect to the amendment; and that
the number of shares of each class voting in favor of the amendment
equaled or exceeded the vote required, specifying the percentage vote
required of each class entitled to vote; and
(d) If the amendment is one which may be adopted with approval by
the board alone, a statement of the facts entitling the board alone
to adopt the amendment.
In the event of an amendment of the articles pursuant to a merger,
the filing of the officers' certificate and agreement pursuant to
Section 1103 or a certificate of ownership pursuant to subdivision
(d) of Section 1110 shall be in lieu of any filing required under
this chapter.
906. In the case of amendments adopted by the incorporators or the

board under Section 901, the corporation shall file a certificate of
amendment signed and verified by a majority of the incorporators or
of the board, as the case may be, which shall state that the signers
thereof constitute at least a majority of the incorporators or of the
board, that the corporation has issued no shares and that they adopt
the amendment or amendments therein set forth. In the case of
amendments adopted by the incorporators, the certificate shall also
state that directors were not named in the original articles and have
not been elected.
In the case of amendments adopted by the board under Section 901,
the corporation may file a certificate of amendment pursuant to
Section 905 in lieu of a certificate of amendment pursuant to this
section.
907. (a) The certificate of amendment shall establish the wording

of the amendment or amended articles by one or more of the following
means:
(1) By stating that the articles shall be amended to read as
therein set forth in full.
(2) By stating that any provision of the articles, which shall be
identified by the numerical or other designation given it in the
articles or by stating the wording thereof, shall be stricken from
the articles or shall be amended to read as set forth in the
certificate.
(3) By stating that the provisions set forth therein shall be
added to the articles.
(b) If the purpose of the amendment is to effect a stock split or
reverse stock split or to reclassify, cancel, exchange, or otherwise
change outstanding shares, the amended articles shall state the
effect thereof on outstanding shares.
(c) In the event of an amendment to change the statement of
authorized shares from a single class of shares to two classes, the
shares outstanding immediately prior to the amendment are
automatically considered to be the same number of shares of the
common stock class. If the designation of only one of the two classes
includes "common," that class is the common stock class. If the
designation of both classes or of neither class includes "common" but
one of the two classes has limited or no voting rights, the class
whose voting rights are not limited is the common stock class for the
purpose of this subdivision. This subdivision has no application if
the amendment of articles includes a statement of the effect of the
amendment on outstanding shares pursuant to subdivision (b).
(d) An amendment which adds or eliminates a stated par value or
changes the stated par value and which does not also state the effect
of the amendment on outstanding shares is not thereby subject to
subdivision (b).
908. Upon the filing of the certificate of amendment, the articles

shall be amended in accordance with the certificate and any stock
split, reverse stock split, reclassification, cancellation, exchange
or other change in shares shall be effected, and a copy of the
certificate, certified by the Secretary of State, is prima facie
evidence of the performance of the conditions necessary to the
adoption of the amendment.
909. A corporation formed for a limited period may at any time

subsequent to the expiration of the term of its corporate existence,
if it has continuously acted as a corporation and done business as
such, extend the term of its existence by an amendment to its
articles removing any provision limiting the term of its existence
and providing for perpetual existence. If the filing of the
certificate of amendment providing for perpetual existence would be
prohibited if it were original articles by the provisions of Section
201, the Secretary of State shall not file such certificate unless by
the same or a concurrently filed certificate of amendment the
articles of such corporation are amended to adopt a new available
name. For the purpose of the adoption of any such amendment, persons
who have been functioning as directors of such corporation shall be
considered to have been validly elected even though their election
may have occurred after the expiration of the original term of the
corporate existence. The certificate of amendment shall set forth
that the corporation continuously acted as a corporation and did
business as such from the expiration of its term of corporate
existence to the date of the amendment.
910. (a) A corporation may restate in a single certificate the

entire text of its articles as amended by filing an officers'
certificate or, in circumstances where incorporators or the board may
amend a corporation's articles pursuant to Sections 901 and 906, a
certificate signed and verified by a majority of the incorporators or
the board, as applicable, entitled "Restated Articles of
Incorporation of (insert name of corporation)" which shall set forth
the articles as amended to the date of the filing of the certificate,
except that the signatures and acknowledgments of the articles by
the incorporators and any statements regarding the effect of any
prior amendment upon outstanding shares and any provisions of
agreements of merger (other than amendments to the articles of the
surviving corporation) and the names and addresses of the first
directors and of the initial agent for service of process shall be
omitted (except that the names and addresses of the initial agent for
service of process and, if previously set forth in the articles, the
initial directors, shall not be omitted prior to the time that the
corporation has filed a statement under Section 1502). Such omissions
are not alterations or amendments of the articles. The certificate
may also itself alter or amend the articles in any respect, in which
case the certificate must comply with Section 905 or 906, as the case
may be, and Section 907.
(b) If the certificate does not itself alter or amend the articles
in any respect, it shall be approved by the board or, prior to the
issuance of any shares and the naming and election of directors, by a
majority of the incorporators, and shall be subject to the
provisions of this chapter relating to an amendment of the articles
not requiring any approval of the outstanding shares (Section 152).
If the certificate does itself alter or amend the articles, it shall
be subject to the provisions of this chapter relating to the
amendment or amendments so made and, except for certificates approved
by a majority of the incorporators, the certificate shall also state
that the board has approved the restated articles.
(c) Certificates of determination are a part of the articles
within the meaning of this section. The provisions of such a
certificate shall be given an article designation in the restated
articles.
(d) Restated articles of incorporation filed pursuant to this
section shall supersede for all purposes the original articles and
all amendments and certificates of determination filed prior thereto.
911. (a) A corporation may, by amendment of its articles pursuant

to this section, convert to a nonprofit public benefit corporation,
nonprofit mutual benefit corporation, nonprofit religious
corporation, or cooperative corporation.
(b) The amendment of the articles to convert to a nonprofit
corporation shall revise the statement of purpose, delete the
authorization for shares and any other provisions relating to
authorized or issued shares, make such other changes as may be
necessary or desired, and, if any shares have been issued, provide
either for the cancellation of those shares or for the conversion of
those shares to memberships of the nonprofit corporation. The
amendment of the articles to convert to a cooperative corporation
shall revise the statement of purpose, make such other changes as may
be necessary or desired, and, if any shares have been issued,
provide for the cancellation of those shares or for the conversion of
those shares to memberships of the cooperative corporation, if
necessary.
(c) If shares have been issued, an amendment to convert to a
nonprofit corporation shall be approved by all of the outstanding
shares of all classes regardless of limitations or restrictions on
the voting rights thereof and an amendment to convert to a
cooperative corporation shall be approved by the outstanding shares
(Section 152) of each class regardless of limitations or restrictions
on the voting rights thereof.
(d) If an amendment pursuant to this section is included in a
merger agreement, the provisions of this section apply, except that
any provision for cancellation or conversion of shares shall be in
the merger agreement rather than in the amendment of the articles.
(e) Notwithstanding subdivision (c), if a corporation is a mutual
water company within the meaning of Section 2705 of the Public
Utilities Code and under the terms of the conversion each outstanding
share is converted to a membership of a nonprofit mutual benefit
corporation, an amendment to convert to a nonprofit mutual benefit
corporation shall be approved by the outstanding shares (Section 152)
of each class regardless of limitations or restrictions on the
voting rights thereof.
CORPORATIONS CODE
SECTION 1000-1002
1000. Any mortgage, deed of trust, pledge or other hypothecation of

all or any part of the corporation's property, real or personal, for
the purpose of securing the payment or performance of any contract
or obligation may be approved by the board. Unless the articles
otherwise provide, no approval of shareholders (Section 153) or of
the outstanding shares (Section 152) shall be necessary for such
action.
1001. (a) A corporation may sell, lease, convey, exchange,

transfer, or otherwise dispose of all or substantially all of its
assets when the principal terms are approved by the board, and,
unless the transaction is in the usual and regular course of its
business, approved by the outstanding shares (Section 152), either
before or after approval by the board and before or after the
transaction. A transaction constituting a reorganization (Section
181) is subject to the provisions of Chapter 12 (commencing with
Section 1200) and not this section (other than subdivision (d)). A
transaction constituting a conversion (Section 161.9) is subject to
the provisions of Chapter 11.5 (commencing with Section 1150) and not
this section.
(b) Notwithstanding approval of the outstanding shares (Section
152), the board may abandon the proposed transaction without further
action by the shareholders, subject to the contractual rights, if
any, of third parties.
(c) The sale, lease, conveyance, exchange, transfer or other
disposition may be made upon those terms and conditions and for that
consideration as the board may deem in the best interests of the
corporation. The consideration may be money, securities, or other
property.
(d) If the acquiring party in a transaction pursuant to
subdivision (a) of this section or subdivision (g) of Section 2001 is
in control of or under common control with the disposing
corporation, the principal terms of the sale must be approved by at
least 90 percent of the voting power of the disposing corporation
unless the disposition is to a domestic or foreign corporation or
other business entity in consideration of the nonredeemable common
shares or nonredeemable equity securities of the acquiring party or
its parent.
(e) Subdivision (d) does not apply to any transaction if the
Commissioner of Corporations, the Commissioner of Financial
Institutions, the Insurance Commissioner or the Public Utilities
Commission has approved the terms and conditions of the transaction
and the fairness of those terms and conditions pursuant to Section
25142, Section 696.5 of the Financial Code, Section 838.5 of the
Insurance Code, or Section 822 of the Public Utilities Code.
1002. Any deed or instrument conveying or otherwise transferring

any assets of a corporation may have annexed to it the certificate of
the secretary or an assistant secretary of the corporation, setting
forth that the transaction has been validly approved by the board and
(a) stating that the property described in said deed or instrument
is less than substantially all of the assets of the corporation or
that the transfer is in the usual and regular course of the business
of the corporation, if such be the case, or (b) if such property
constitutes all or substantially all of the assets of the corporation
and the transfer is not in the usual and regular course of the
business of the corporation, stating the fact of approval thereof by
the outstanding shares (Section 152) pursuant to this chapter or
Chapter 12, as the case may be, or that such approval is not required
by Chapter 12. Such certificate is prima facie evidence of the
existence of the facts authorizing such conveyance or other transfer
of the assets and conclusive evidence in favor of any innocent
purchaser or encumbrancer for value.
CORPORATIONS CODE
SECTION 1100-1113
1100. Any two or more corporations may be merged into one of those
corporations. A corporation may merge with one or more domestic
corporations (Section 167), foreign corporations (Section 171), or
other business entities (Section 174.5) pursuant to this chapter.
Mergers in which a foreign corporation but no other business entity
is a constituent party are governed by Section 1108, and mergers in
which an other business entity is a constituent party are governed by
Section 1113.
1101. The board of each corporation which desires to merge shall

approve an agreement of merger. The constituent corporations shall be
parties to the agreement of merger and other persons, including a
parent party (Section 1200), may be parties to the agreement of
merger. The agreement shall state all of the following:
(a) The terms and conditions of the merger.
(b) The amendments, subject to Sections 900 and 907, to the
articles of the surviving corporation to be effected by the merger,
if any. If any amendment changes the name of the surviving
corporation the new name may be the same as or similar to the name of
a disappearing domestic or foreign corporation, subject to
subdivision (b) of Section 201.
(c) The name and place of incorporation of each constituent
corporation and which of the constituent corporations is the
surviving corporation.
(d) The manner of converting the shares of each of the constituent
corporations into shares or other securities of the surviving
corporation and, if any shares of any of the constituent corporations
are not to be converted solely into shares or other securities of
the surviving corporation, the cash, rights, securities, or other
property which the holders of those shares are to receive in exchange
for the shares, which cash, rights, securities, or other property
may be in addition to or in lieu of shares or other securities of the
surviving corporation, or that the shares are canceled without
consideration.
(e) Other details or provisions as are desired, if any, including,
without limitation, a provision for the payment of cash in lieu of
fractional shares or for any other arrangement with respect thereto
consistent with the provisions of Section 407.
Each share of the same class or series of any constituent
corporation (other than the cancellation of shares held by a
constituent corporation or its parent or a wholly owned subsidiary of
either in another constituent corporation) shall, unless all
shareholders of the class or series consent and except as provided in
Section 407, be treated equally with respect to any distribution of
cash, rights, securities, or other property. Notwithstanding
subdivision (d), except in a short-form merger, and in the merger of
a corporation into its subsidiary in which it owns at least 90
percent of the outstanding shares of each class, the nonredeemable
common shares or nonredeemable equity securities of a constituent
corporation may be converted only into nonredeemable common shares of
the surviving party or a parent party if a constituent corporation
or its parent owns, directly or indirectly, prior to the merger
shares of another constituent corporation representing more than 50
percent of the voting power of the other constituent corporation
prior to the merger, unless all of the shareholders of the class
consent and except as provided in Section 407.
1101.1. Subdivision (c) of Section 1113 and the last two sentences
of Section 1101 do not apply to any transaction if the Commissioner
of Corporations, the Commissioner of Financial Institutions, the
Insurance Commissioner or, the Public Utilities Commission has
approved the terms and conditions of the transaction and the fairness
of those terms and conditions pursuant to Section 25142 or Section
696.5, 5750, or 5802 of the Financial Code, Section 838.5 of the
Insurance Code, or Section 822 of the Public Utilities Code.
1102. Each corporation shall sign the agreement by its chairman of

the board, president or a vice president and secretary or an
assistant secretary acting on behalf of their respective
corporations.
1103. After approval of a merger by the board and any approval of

the outstanding shares (Section 152) required by Chapter 12
(commencing with Section 1200), the surviving corporation shall file
a copy of the agreement of merger with an officers' certificate of
each constituent corporation attached stating the total number of
outstanding shares of each class entitled to vote on the merger, that
the principal terms of the agreement in the form attached were
approved by that corporation by a vote of a number of shares of each
class which equaled or exceeded the vote required, specifying each
class entitled to vote and the percentage vote required of each
class, or that the merger agreement was entitled to be and was
approved by the board alone under the provisions of Section 1201. If
equity securities of a parent of a constituent corporation are to be
issued in the merger, the officers' certificate of that constituent
corporation shall state either that no vote of the shareholders of
the parent was required or that the required vote was obtained. The
merger and any amendment of the articles of the surviving corporation
contained in the merger agreement shall thereupon be effective
(subject to subdivision (c) of Section 110 and subject to the
provisions of Section 1108) and the several parties thereto shall be
one corporation. The Secretary of State may certify a copy of the
merger agreement separate from the officers' certificates attached
thereto.
1104. Any amendment to the agreement may be adopted and the

agreement so amended may be approved by the board and, if it changes
any of the principal terms of the agreement, by the outstanding
shares (Section 152) (if required by Chapter 12) of any constituent
corporation in the same manner as the original agreement. If the
agreement so amended is approved by the board and the outstanding
shares (if required) of each of the corporations, the agreement so
amended shall then constitute the agreement of merger.
1105. The board may, in its discretion, abandon a merger, subject
to the contractual rights, if any, of third parties, including other
constituent corporations, without further approval by the outstanding
shares (Section 152), at any time before the merger is effective.
1106. A copy of an agreement of merger certified on or after the

effective date by an official having custody thereof has the same
force in evidence as the original and, except as against the state,
is conclusive evidence of the performance of all conditions precedent
to the merger, the existence on the effective date of the surviving
corporation and the performance of the conditions necessary to the
adoption of any amendment to the articles contained in the agreement
of merger.
1107. (a) Upon merger pursuant to this chapter the separate

existence of the disappearing corporations ceases and the surviving
corporation shall succeed, without other transfer, to all the rights
and property of each of the disappearing corporations and shall be
subject to all the debts and liabilities of each in the same manner
as if the surviving corporation had itself incurred them.
(b) For purposes of subdivision (a), a surviving corporation may
succeed without the payment of any local agency transfer fee to all
licenses, permits, registrations, and other privileges granted by any
local agency provided the merger does not result in a change of
ownership. Examples of mergers that do not result in a change of
ownership are mergers between any of the following: (1) a corporation
and its wholly owned subsidiary; (2) a corporation and the wholly
owned subsidiary of that corporation's wholly owned subsidiary; or
(3) two wholly owned subsidiaries of the same parent corporation. The
surviving corporation shall be subject to the same duties and
obligations in connection with the license, permit, registration, or
other privileges acquired from the disappearing corporations.
(c) All rights of creditors and all liens upon the property of
each of the constituent corporations shall be preserved unimpaired,
provided that any liens upon property of a disappearing corporation
shall be limited to the property affected thereby immediately prior
to the time the merger is effective.
(d) Any action or proceeding pending by or against any
disappearing corporation may be prosecuted to judgment, which shall
bind the surviving corporation, or the surviving corporation may be
proceeded against or substituted in its place.
(e) Nothing in subdivision (b) shall limit or restrict a tax
assessor from reassessing real property upon transfer of title.
Privileges granted by any local agency do not include property tax
assessments.
(f) Nothing in subdivision (b) shall limit or restrict a local
agency from reevaluating privileges received by a successor
corporation from disappearing corporations if the local agency
determines in its sole discretion that the reevaluation is necessary
for public health, safety, or welfare purposes.
(g) For purposes of this section, "local agency" means a county,
city, city and county, political subdivision, district, or municipal
corporation.
1107.5. (a) Upon merger pursuant to this chapter, a surviving
domestic or foreign corporation or other business entity shall be
deemed to have assumed the liability of each disappearing domestic or
foreign corporation or other business entity that is taxed under
Part 10 (commencing with Section 17001) of, or under Part 11
(commencing with Section 23001) of, Division 2 of the Revenue and
Taxation Code for the following:
(1) To prepare and file, or to cause to be prepared and filed, tax
and information returns otherwise required of that disappearing
entity as specified in Chapter 2 (commencing with Section 18501) of
Part 10.2 of Division 2 of the Revenue and Taxation Code.
(2) To pay any tax liability determined to be due.
(b) If the surviving entity is a domestic limited liability
company, domestic corporation, or registered limited liability
partnership or a foreign limited liability company, foreign limited
liability partnership, or foreign corporation that is registered or
qualified to do business in California, the Secretary of State shall
notify the Franchise Tax Board of the merger.
1108. (a) The merger of any number of domestic corporations with

any number of foreign corporations may be effected if the foreign
corporations are authorized by the laws under which they are formed
to effect the merger. The surviving corporation may be any one of the
constituent corporations and shall continue to exist under the laws
of the state or place of its incorporation.
(b) If the surviving corporation is a domestic corporation, the
merger proceedings with respect to that corporation and any domestic
disappearing corporation shall conform to the provisions of this
chapter governing the merger of domestic corporations, but if the
surviving corporation is a foreign corporation, then, subject to the
requirements of subdivision (d) and of Section 407 and Chapters 12
(commencing with Section 1200) and 13 (commencing with Section 1300)
(with respect to any domestic constituent corporations), the merger
proceedings may be in accordance with the laws of the state or place
of incorporation of the surviving corporation.
(c) If the surviving corporation is a domestic corporation, the
agreement and the officers' certificate of each domestic or foreign
constituent corporation shall be filed as provided in Section 1103,
or the certificate of ownership shall be filed as provided in Section
1110, and thereupon, subject to subdivision (c) of Section 110, the
merger shall be effective as to each domestic constituent
corporation; and each foreign disappearing corporation that is
qualified for the transaction of intrastate business shall by virtue
of the filing, subject to subdivision (c) of Section 110,
automatically surrender its right to transact intrastate business.
(d) If the surviving corporation is a foreign corporation, the
merger shall become effective in accordance with the law of the
jurisdiction in which it is organized, but, except as provided in
subdivision (e), the merger shall be effective as to any domestic
disappearing corporation as of the time of effectiveness in the
foreign jurisdiction upon the filing in this state as required by
this subdivision. There shall be filed as to the domestic
disappearing corporation or corporations the documents described in
any one of the following paragraphs:
(1) A copy of the agreement, certificate or other document filed
by the surviving foreign corporation in the state or place of its
incorporation for the purpose of effecting the merger, which copy
shall be certified by the public officer having official custody of
the original.
(2) An executed counterpart of the agreement, certificate or other
document filed by the surviving foreign corporation in the state or
place of its incorporation for the purpose of effecting the merger.
(3) A copy of the agreement of merger with an officers'
certificate of the surviving foreign corporation and of each
constituent domestic corporation attached, which officers'
certificates shall conform to the requirements of Section 1103.
(4) A certificate of ownership pursuant to Section 1110.
(e) If the date of the filing in this state pursuant to
subdivision (d) is more than six months after the time of the
effectiveness in the foreign jurisdiction, or if the powers of the
domestic corporation are suspended at the time of effectiveness in
the foreign jurisdiction, the merger shall be effective as to the
domestic disappearing corporation or corporations as of the date of
filing in this state. Each foreign disappearing corporation that is
qualified for the transaction of intrastate business shall, by virtue
of the filing pursuant to subdivision (d), automatically surrender
its right to transact intrastate business as of the date of filing in
this state regardless of the time of effectiveness as to a domestic
disappearing corporation.
(f) The provisions of the last two sentences of Section 1101 and
Chapter 12 (commencing with Section 1200) and Chapter 13 (commencing
with Section 1300) apply to the rights of the shareholders of any of
the constituent corporations that are domestic corporations and of
any domestic corporation that is a parent party of any foreign
constituent corporation.
1109. Whenever a domestic or foreign corporation or domestic or

foreign other business entity having any real property in this state
merges or consolidates with another domestic or foreign corporation
or other business entity pursuant to the laws of this state or of the
state or place in which any constituent party to the merger was
incorporated or organized, and the laws of the state or place of
incorporation or organization (including this state) of any
disappearing party to the merger provide substantially that the
making and filing of the agreement of merger or consolidation or
certificate of ownership or certificate of merger vests in the
surviving or consolidated party to the merger all the real property
of any disappearing party to the merger, 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 that disappearing party to the merger is
located of a copy of the agreement of merger or consolidation or
certificate of ownership or certificate of merger, certified by the
Secretary of State or an authorized public official of the state or
place pursuant to the laws of which the merger or consolidation is
effected, shall evidence record ownership in the surviving or
consolidated party to the merger, of all interest of the disappearing
party to the merger in and to the real property located in that
county.
1110. (a) If a domestic corporation owns all the outstanding

shares, or owns less than all the outstanding shares but at least 90
percent of the outstanding shares of each class, of a corporation or
corporations, domestic or foreign, the merger of the subsidiary
corporation or corporations into the parent corporation or the merger
into the subsidiary corporation of the parent corporation and any
other subsidiary corporation or corporations, may be effected by a
resolution or plan of merger adopted and approved by the board of the
parent corporation and the filing of a certificate of ownership as
provided in subdivision (e). The resolution or plan of merger shall
provide for the merger and shall provide that the surviving
corporation assumes all the liabilities of each disappearing
corporation and shall include any other provisions required by this
section.
(b) If the parent corporation owns less than all the outstanding
shares but at least 90 percent of the outstanding shares of each
class of the subsidiary corporation that is a party to the merger,
the resolution or plan of merger also shall set forth the securities,
cash, property, or rights to be issued, paid, delivered, or granted
upon surrender of each outstanding share of the subsidiary
corporation not owned by the parent corporation and the entire
resolution or plan of merger as well as the consideration to be
received for each share of the subsidiary corporation not owned by
the parent corporation, shall be approved by the board of that
subsidiary corporation.
(c) If the parent corporation is to be merged into one of its
subsidiary corporations, the resolution or plan of merger also shall
provide for the pro rata conversion of the outstanding shares of the
parent corporation into shares of the surviving subsidiary
corporation. In this case, the entire resolution or plan of merger
shall be approved by the board of the surviving subsidiary
corporation and, if the merger, but for the operation of this
section, would be a merger reorganization (Section 181) the principal
terms of which would be required to be approved by the outstanding
shares (Section 152) of any class of the parent corporation pursuant
to subdivision (d) of Section 1201, the principal terms of the
resolution or plan of merger shall be approved by the outstanding
shares (Section 152) of that same class of the parent corporation.
(d) In any merger pursuant to this section, the resolution or plan
of merger may provide for the amendment of the articles of the
surviving corporation to change its name, subject to Section 201,
regardless of whether the name so adopted is the same as or similar
to that of one of the disappearing corporations. The provision shall
establish the wording of the amendment pursuant to paragraph (2) of
subdivision (a) of Section 907 and the resolution or plan of merger
shall not provide for the amendment of the articles of the surviving
corporation other than to change its name.
(e) After the required approval or approvals of the resolution or
plan of merger, a certificate of ownership consisting of an officers'
certificate of the parent corporation shall be filed, and a copy
thereof for each domestic subsidiary corporation and qualified
foreign disappearing subsidiary corporation which is a party to the
merger shall also be filed. The certificate of ownership shall:
(1) Identify the parent and subsidiary corporation or
corporations.
(2) Set forth the share ownership by the parent corporation of
each subsidiary corporation as 100 percent of the outstanding shares
or as at least 90 percent of the outstanding shares of each class, as
the case may be.
(3) Set forth the resolution or plan of merger.
(4) Set forth approval of the resolution or plan of merger by the
board of the parent corporation.
(5) Set forth other approvals of the resolution or plan of merger
as required under subdivision (b) or (c), if applicable.
(f) Upon the filing of the certificate of ownership, the merger
shall be effective and any amendment of the articles of the surviving
corporation set forth in the certificate shall be effective.
(g) A merger pursuant to this section may be effected if the
parent corporation is a foreign corporation and if at least one
subsidiary corporation is a domestic corporation but in such a case
the certificate of ownership prepared as in subdivision (e) or the
document required by subdivision (d) of Section 1108 shall be filed
as to each domestic and qualified foreign subsidiary corporation, but
no filing shall be made as to the foreign parent corporation. No
merger into or with a foreign corporation may be effected as provided
by this section unless the laws of the state or place of its
incorporation permit that action.
(h) In the event all of the outstanding shares of a subsidiary
domestic corporation party to a merger effected under this section
are not owned by the parent corporation immediately prior to the
merger, the parent corporation shall, at least 20 days before the
effective date of the merger, give notice to each shareholder of such
subsidiary corporation that the merger will become effective on or
after a specified date. The notice shall contain a copy of the
resolution or plan of merger and the information required by
subdivision (a) of Section 1301. The notice shall be sent by mail
addressed to the shareholder at the address of the shareholder as it
appears on the records of the corporation. The shareholder shall have
the right to demand payment of cash for the shares of the
shareholder pursuant to Chapter 13 (commencing with Section 1300).
(i) If an agreement of merger is entered into between a parent
corporation and one or more of its subsidiary corporations and the
share ownership requirements of subdivision (a) are met, the
agreement of merger may be filed as a plan of merger with a
certificate of ownership in accordance with the requirements of this
section, in which case Sections 1101, 1102, 1103, 1200, 1201, and
1202 shall not apply; or the agreement of merger may be filed
pursuant to Section 1103, in which case this section shall not apply.
1111. If any disappearing corporation in a merger is a close

corporation and the surviving corporation is not a close corporation,
the merger shall be approved by the affirmative vote of at least
two-thirds of each class of the outstanding shares of such
disappearing corporation; provided, however, that the articles may
provide for a lesser vote, but not less than a majority of the
outstanding shares of each class.
1112. If a disappearing corporation in a merger is a corporation

governed by this division and the surviving corporation is a
nonprofit public benefit corporation, a nonprofit mutual benefit
corporation, or a nonprofit religious corporation, the merger shall
be approved by all of the outstanding shares of all classes of the
disappearing corporation, regardless of limitations or restrictions
on the voting rights thereof, notwithstanding any provision of
Chapter 12 (commencing with Section 1200).
1113. (a) Any one or more corporations may merge with one or more
other business entities (Section 174.5). One or more domestic
corporations (Section 167) not organized under this division and one
or more foreign corporations (Section 171) may be parties to the
merger. Notwithstanding the provisions of this section, the merger of
any number of corporations with any number of other business
entities may be effected only if:
(1) In a merger in which a domestic corporation not organized
under this division or a domestic other business entity is a party,
it is authorized by the laws under which it is organized to effect
the merger.
(2) In a merger in which a foreign corporation is a party, it is
authorized by the laws under which it is organized to effect the
merger.
(3) In a merger in which a foreign other business entity is a
party, it is authorized by the laws under which it is organized to
effect the merger.
(b) Each corporation and each other party which desires to merge
shall approve, and shall be a party to, an agreement of merger. Other
persons, including a parent party (Section 1200), may be parties to
the agreement of merger. The board of each corporation which desires
to merge, and, if required the shareholders, shall approve the
agreement of merger. The agreement of merger shall be approved on
behalf of each party by those persons required to approve the merger
by the laws under which it is organized. The agreement of merger
shall state:
(1) The terms and conditions of the merger.
(2) The name and place of incorporation or organization of each
party to the merger and the identity of the surviving party.
(3) The amendments, if any, subject to Sections 900 and 907, to
the articles of the surviving corporation, if applicable, to be
effected by the merger. If any amendment changes the name of the
surviving corporation, if applicable, the new name may be, subject to
subdivision (b) of Section 201, the same as or similar to the name
of a disappearing party to the merger.
(4) The manner of converting the shares of each constituent
corporation into shares, interests, or other securities of the
surviving party. If any shares of any constituent corporation are not
to be converted solely into shares, interests or other securities of
the surviving party, the agreement of merger shall state (i) the
cash, rights, securities, or other property which the holders of
those shares are to receive in exchange for the shares, which cash,
rights, securities, or other property may be in addition to or in
lieu of shares, interests or other securities of the surviving party,
or (ii) that the shares are canceled without consideration.
(5) Any other details or provisions required by the laws under
which any party to the merger is organized, including, if a public
benefit corporation or a religious corporation is a party to the
merger, Section 6019.1, or, if a mutual benefit corporation is a
party to the merger, Section 8019.1, or, if a consumer cooperative
corporation is a party to the merger, Section 12540.1, or, if a
domestic limited partnership is a party to the merger, Section
15678.2 or 15911.12, or, if a domestic partnership is a party to the
merger, Section 16911, or, if a domestic limited liability company is
a party to the merger, Section 17551.
(6) Any other details or provisions as are desired, including,
without limitation, a provision for the payment of cash in lieu of
fractional shares or for any other arrangement with respect thereto
consistent with the provisions of Section 407.
(c) Each share of the same class or series of any constituent
corporation (other than the cancellation of shares held by a party to
the merger or its parent, or a wholly owned subsidiary of either, in
another constituent corporation) shall, unless all shareholders of
the class or series consent and except as provided in Section 407, be
treated equally with respect to any distribution of cash, rights,
securities, or other property. Notwithstanding paragraph (4) of
subdivision (b), the unredeemable common shares of a constituent
corporation may be converted only into unredeemable common shares of
a surviving corporation or a parent party (Section 1200) or
unredeemable equity securities of a surviving party other than a
corporation if another party to the merger or its parent owns,
directly or indirectly, prior to the merger shares of that
corporation representing more than 50 percent of the voting power of
that corporation, unless all of the shareholders of the class consent
and except as provided in Section 407.
(d) Notwithstanding its prior approval, an agreement of merger may
be amended prior to the filing of the agreement of merger or the
certificate of merger, as is applicable, if the amendment is approved
by the board of each constituent corporation and, if the amendment
changes any of the principal terms of the agreement, by the
outstanding shares (Section 152), if required by Chapter 12
(commencing with Section 1200), in the same manner as the original
agreement of merger. If the agreement of merger as so amended and
approved is also approved by each of the other parties to the
agreement of merger, the agreement of merger as so amended shall then
constitute the agreement of merger.
(e) The board of a constituent corporation may, in its discretion,
abandon a merger, subject to the contractual rights, if any, of
third parties, including other parties to the agreement of merger,
without further approval by the outstanding shares (Section 152), at
any time before the merger is effective.
(f) Each constituent corporation shall sign the agreement of
merger by its chairperson of the board, president or a vice president
and also by its secretary or an assistant secretary acting on behalf
of their respective corporations.
(g) (1) If the surviving party is a corporation or a foreign
corporation, or if a public benefit corporation (Section 5060), a
mutual benefit corporation (Section 5059), a religious corporation
(Section 5061), or a corporation organized under the Consumer
Cooperative Corporation Law (Section 12200) is a party to the merger,
after required approvals of the merger by each constituent
corporation through approval of the board (Section 151) and any
approval of the outstanding shares (Section 152) required by Chapter
12 (commencing with Section 1200) and by the other parties to the
merger, the surviving party shall file a copy of the agreement of
merger with an officers' certificate of each constituent domestic and
foreign corporation attached stating the total number of outstanding
shares or membership interests of each class entitled to vote on the
merger (and identifying any other person or persons whose approval
is required), that the agreement of merger in the form attached or
its principal terms, as required, were approved by that corporation
by a vote of a number of shares or membership interests of each class
that equaled or exceeded the vote required, specifying each class
entitled to vote and the percentage vote required of each class and,
if applicable, by that other person or persons whose approval is
required, or that the merger agreement was entitled to be and was
approved by the board alone (as provided in Section 1201, in the case
of corporations subject to that section). If equity securities of a
parent party (Section 1200) are to be issued in the merger, the
officers' certificate of that controlled party shall state either
that no vote of the shareholders of the parent party was required or
that the required vote was obtained. In lieu of an officers'
certificate, a certificate of merger, on a form prescribed by the
Secretary of State, shall be filed for each constituent other
business entity. The certificate of merger shall be executed and
acknowledged by each domestic constituent limited liability company
by all managers of the limited liability company (unless a lesser
number is specified in its articles of organization or operating
agreement) and by each domestic constituent limited partnership by
all general partners (unless a lesser number is provided in its
certificate of limited partnership or partnership agreement) and by
each domestic constituent general partnership by two partners (unless
a lesser number is provided in its partnership agreement) and by
each foreign constituent limited liability company by one or more
managers and by each foreign constituent general partnership or
foreign constituent limited partnership by one or more general
partners, and by each constituent reciprocal insurer by the
chairperson of the board, president, or vice president, and by the
secretary or assistant secretary, or, if a constituent reciprocal
insurer has not appointed those officers, by the chairperson of the
board, president, or vice president, and by the secretary or
assistant secretary of the constituent reciprocal insurer's
attorney-in-fact, and by each other party to the merger by those
persons required or authorized to execute the certificate of merger
by the laws under which that party is organized, specifying for that
party the provision of law or other basis for the authority of the
signing persons. The certificate of merger shall set forth, if a vote
of the shareholders, members, partners, or other holders of
interests of the constituent other business entity was required, a
statement setting forth the total number of outstanding interests of
each class entitled to vote on the merger and that the agreement of
merger in the form attached or its principal terms, as required, were
approved by a vote of the number of interests of each class that
equaled or exceeded the vote required, specifying each class entitled
to vote and the percentage vote required of each class, and any
other information required to be set forth under the laws under which
the constituent other business entity is organized, including, if a
domestic limited partnership is a party to the merger, subdivision
(a) of Section 15678.4 or subdivision (a) of Section 15911.14, if a
domestic partnership is a party to the merger, subdivision (b) of
Section 16915, and, if a domestic limited liability company is a
party to the merger, subdivision (a) of Section 17552. The
certificate of merger for each constituent foreign other business
entity, if any, shall also set forth the statutory or other basis
under which that foreign other business entity is authorized by the
laws under which it is organized to effect the merger. The merger and
any amendment of the articles of the surviving corporation, if
applicable, contained in the agreement of merger shall be effective
upon filing of the agreement of merger with an officer's certificate
of each constituent domestic and foreign corporation and a
certificate of merger for each constituent other business entity,
subject to subdivision (c) of Section 110 and subject to the
provisions of subdivision (j), and the several parties thereto shall
be one entity. If a domestic reciprocal insurer organized after 1974
to provide medical malpractice insurance is a party to the merger,
the agreement of merger or certificate of merger shall not be filed
until there has been filed the certificate issued by the Insurance
Commissioner approving the merger pursuant to Section 1555 of the
Insurance Code. The Secretary of State may certify a copy of the
agreement of merger separate from the officers' certificates and
certificates of merger attached thereto.
(2) If the surviving entity is an other business entity, and no
public benefit corporation (Section 5060), mutual benefit corporation
(Section 5059), religious corporation (Section 5061), or corporation
organized under the Consumer Cooperative Corporation Law (Section
12200) is a party to the merger, after required approvals of the
merger by each constituent corporation through approval of the board
(Section 151) and any approval of the outstanding shares (Section
152) required by Chapter 12 (commencing with Section 1200) and by the
other parties to the merger, the parties to the merger shall file a
certificate of merger in the office of, and on a form prescribed by,
the Secretary of State. The certificate of merger shall be executed
and acknowledged by each constituent domestic and foreign corporation
by its chairperson of the board, president or a vice president and
also by its secretary or an assistant secretary and by each domestic
constituent limited liability company by all managers of the limited
liability company (unless a lesser number is specified in its
articles of organization or operating agreement) and by each domestic
constituent limited partnership by all general partners (unless a
lesser number is provided in its certificate of limited partnership
or partnership agreement) and by each domestic constituent general
partnership by two partners (unless a lesser number is provided in
its partnership agreement) and by each foreign constituent limited
liability company by one or more managers and by each foreign
constituent general partnership or foreign constituent limited
partnership by one or more general partners, and by each constituent
reciprocal insurer by the chairperson of the board, president, or
vice president, and by the secretary or assistant secretary, or, if a
constituent reciprocal insurer has not appointed those officers, by
the chairperson of the board, president, or vice president, and by
the secretary or assistant secretary of the constituent reciprocal
insurer's attorney-in-fact. The certificate of merger shall be signed
by each other party to the merger by those persons required or
authorized to execute the certificate of merger by the laws under
which that party is organized, specifying for that party the
provision of law or other basis for the authority of the signing
persons. The certificate of merger shall set forth all of the
following:
(A) The name, place of incorporation or organization, and the
Secretary of State's file number, if any, of each party to the
merger, separately identifying the disappearing parties and the
surviving party.
(B) If the approval of the outstanding shares of a constituent
corporation was required by Chapter 12 (commencing with Section
1200), a statement setting forth the total number of outstanding
shares of each class entitled to vote on the merger and that the
principal terms of the agreement of merger were approved by a vote of
the number of shares of each class entitled to vote and the
percentage vote required of each class.
(C) The future effective date or time, not more than 90 days
subsequent to the date of filing of the merger, if the merger is not
to be effective upon the filing of the certificate of merger with the
office of the Secretary of State.
(D) A statement, by each party to the merger which is a domestic
corporation not organized under this division, a foreign corporation,
or an other business entity, of the statutory or other basis under
which that party is authorized by the laws under which it is
organized to effect the merger.
(E) Any other information required to be stated in the certificate
of merger by the laws under which each party to the merger is
organized, including, if a domestic limited liability company is a
party to the merger, subdivision (a) of Section 17552, if a domestic
partnership is a party to the merger, subdivision (b) of Section
16915, and, if a domestic limited partnership is a party to the
merger, subdivision (a) of Section 15678.4 or subdivision (a) of
Section 15911.14.
(F) Any other details or provisions that may be desired.
Unless a future effective date or time is provided in a
certificate of merger, in which event the merger shall be effective
at that future effective date or time, a merger shall be effective
upon the filing of the certificate of merger in the office of the
Secretary of State and the several parties thereto shall be one
entity. The surviving other business entity shall keep a copy of the
agreement of merger at its principal place of business which, for
purposes of this subdivision, shall be the office referred to in
Section 17057 if a domestic limited liability company, at the
business address specified in paragraph (5) of subdivision (a) of
Section 17552 if a foreign limited liability company, at the office
referred to in subdivision (a) of Section 16403 if a domestic general
partnership, at the business address specified in subdivision (f) of
Section 16911 if a foreign partnership, at the office referred to in
subdivision (a) of Section 15614 or in subdivision (a) of Section
15901.14 if a domestic limited partnership, or at the business
address specified in paragraph (5) of subdivision (a) of Section
15678.4 or paragraph (3) of subdivision (a) of Section 15909.02 if a
foreign limited partnership. Upon the request of a holder of equity
securities of a party to the merger, a person with authority to do so
on behalf of the surviving other business entity shall promptly
deliver to that holder, a copy of the agreement of merger. A waiver
by that holder of the rights provided in the foregoing sentence shall
be unenforceable. If a domestic reciprocal insurer organized after
1974 to provide medical malpractice insurance is a party to the
merger the agreement of merger or certificate of merger shall not be
filed until there has been filed the certificate issued by the
Insurance Commissioner approving the merger in accordance with
Section 1555 of the Insurance Code.
(h) (1) A copy of an agreement of merger certified on or after the
party to the merger and the performance of the conditions necessary
to the adoption of any amendment to the articles, if applicable,
contained in the agreement of merger.
(2) For all purposes for a merger in which the surviving entity is
a domestic other business entity and the filing of a certificate of
merger is required by paragraph (2) of subdivision (g), a copy of the
certificate of merger duly certified by the Secretary of State is
conclusive evidence of the merger of the constituent corporations,
either by themselves or together with the other parties to the
merger, into the surviving other business entity.
(i) (1) Upon a merger pursuant to this section, the separate
existences of the disappearing parties to the merger cease and the
surviving party to the merger shall succeed, without other transfer,
to all the rights and property of each of the disappearing parties to
the merger and shall be subject to all the debts and liabilities of
each in the same manner as if the surviving party to the merger had
itself incurred them.
(2) All rights of creditors and all liens upon the property of
each of the constituent corporations and other parties to the merger
shall be preserved unimpaired, provided that those liens upon
property of a disappearing party shall be limited to the property
affected thereby immediately prior to the time the merger is
effective.
(3) Any action or proceeding pending by or against any
disappearing corporation or disappearing party to the merger may be
prosecuted to judgment, which shall bind the surviving party, or the
surviving party may be proceeded against or substituted in its place.
(4) If a limited partnership or a general partnership is a party
to the merger, nothing in this section is intended to affect the
liability a general partner of a disappearing limited partnership or
general partnership may have in connection with the debts and
liabilities of the disappearing limited partnership or general
partnership existing prior to the time the merger is effective.
(j) (1) The merger of domestic corporations with foreign
corporations or foreign other business entities in a merger in which
one or more other business entities is a party shall comply with
subdivision (a) and this subdivision.
(2) If the surviving party is a domestic corporation or domestic
other business entity, the merger proceedings with respect to that
party and any domestic disappearing corporation shall conform to the
provisions of this section. If the surviving party is a foreign
corporation or foreign other business entity, then, subject to the
requirements of subdivision (c), and of Section 407 and Chapter 12
(commencing with Section 1200) and Chapter 13 (commencing with
Section 1300), and, if applicable, corresponding provisions of the
Nonprofit Corporation Law or the Consumer Cooperative Corporation
Law, with respect to any domestic constituent corporations, Chapter
13 (commencing with Section 17600) of Title 2.5 with respect to any
domestic constituent limited liability companies, Article 6
(commencing with Section 16601) of Chapter 5 of Title 2 with respect
to any domestic constituent general partnerships, and Article 7.6
(commencing with Section 15679.1) of Chapter 3, and Article 11.5
(commencing with Section 15911.20) of Chapter 5.5 of Title 2 with
respect to any domestic constituent limited partnerships, the merger
of incorporation or organization of the surviving party.
(3) If the surviving party is a domestic corporation or domestic
other business entity, the certificate of merger or the agreement of
merger with attachments shall be filed as provided in subdivision (g)
and thereupon, subject to subdivision (c) of Section 110 or
paragraph (2) of subdivision (g), as is applicable, the merger shall
be effective as to each domestic constituent corporation and domestic
constituent other business entity.
(4) If the surviving party is a foreign corporation or foreign
other business entity, the merger shall become effective in
accordance with the law of the jurisdiction in which the surviving
party is organized, but, except as provided in paragraph (5), the
merger shall be effective as to any domestic disappearing corporation
as of the time of effectiveness in the foreign jurisdiction upon the
filing in this state of a copy of the agreement of merger with an
officers' certificate of each constituent foreign and domestic
corporation and a certificate of merger of each constituent other
business entity attached, which officers' certificates and
certificates of merger shall conform to the requirements of paragraph
(1) of subdivision (g). If one or more domestic other business
entities is a disappearing party in a merger pursuant to this
subdivision in which a foreign other business entity is the surviving
entity, a certificate of merger required by the laws under which
that domestic other business entity is organized, including
subdivision (a) of Section 15678.4, subdivision (a) of Section
15911.14, subdivision (b) of Section 16915, or subdivision (a) of
Section 17552, as is applicable, shall also be filed at the same time
as the filing of the agreement of merger.
(5) If the date of the filing in this state pursuant to this
subdivision is more than six months after the time of the
effectiveness in the foreign jurisdiction, or if the powers of a
domestic disappearing corporation are suspended at the time of
effectiveness in the foreign jurisdiction, the merger shall be
effective as to the domestic disappearing corporation as of the date
of filing in this state.
(6) In a merger described in paragraph (3) or (4), each foreign
disappearing corporation that is qualified for the transaction of
intrastate business shall by virtue of the filing pursuant to this
subdivision, subject to subdivision (c) of Section 110, automatically
surrender its right to transact intrastate business in this state.
The filing of the agreement of merger or certificate of merger, as is
applicable, pursuant to this subdivision, by a disappearing foreign
other business entity registered for the transaction of intrastate
business in this state shall, by virtue of that filing, subject to
subdivision (c) of Section 110, automatically cancels the
registration for that foreign other business entity, without the
necessity of the filing of a certificate of cancellation.
CORPORATIONS CODE
SECTION 1150-1160
1150. For purposes of this chapter, the following definitions shall

apply:
(a) "Converted corporation" means a corporation that results from
a conversion of an other business entity or a foreign other business
entity or a foreign corporation pursuant to Section 1157.
(b) "Converted entity" means a domestic other business entity that
results from a conversion of a corporation under this chapter.
(c) "Converting corporation" means a corporation that converts
into a domestic other business entity pursuant to this chapter.
(d) "Converting entity" means an other business entity or a
foreign other business entity or foreign corporation that converts
into a corporation pursuant to Section 1157.
(e) "Domestic other business entity" has the meaning provided in
Section 167.7.
(f) "Foreign other business entity" has the meaning provided in
Section 171.07.
(g) "Other business entity" has the meaning provided in Section
174.5.
1151. (a) A corporation may be converted into a domestic other

business entity pursuant to this chapter if, pursuant to the proposed
conversion, (1) each share of the same class or series of the
converting corporation shall, unless all the shareholders of the
class or series consent, be treated equally with respect to any cash,
rights, securities, or other property to be received by, or any
obligations or restrictions to be imposed on, the holder of that
share, and (2) nonredeemable common shares of the converting
corporation shall be converted only into nonredeemable equity
securities of the converted entity unless all of the shareholders of
the class consent; provided, however, that clause (1) shall not
restrict the ability of the shareholders of a converting corporation
to appoint one or more managers, if the converted entity is a limited
liability company, or one or more general partners, if the converted
entity is a limited partnership, in the plan of conversion or in the
converted entity's governing documents.
(b) Notwithstanding this section, the conversion of a corporation
into a domestic other business entity may be effected only if both of
the following conditions are complied with:
(1) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
(2) The corporation complies with any and all other requirements
of any other law that applies to conversion to the converted entity.
1152. (a) A corporation that desires to convert to a domestic other

business entity shall approve a plan of conversion. The plan of
conversion shall state all of the following:
(1) The terms and conditions of the conversion.
(2) The jurisdiction of the organization of the converted entity
and of the converting corporation and the name of the converted
entity after conversion.
(3) The manner of converting the shares of each of the
shareholders of the converting corporation into securities of, or
interests in, the converted entity.
(4) The provisions of the governing documents for the converted
entity, including the partnership agreement or limited liability
company articles of organization and operating agreement, to which
the holders of interests in the converted entity are to be bound.
(5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the converting corporation.
(b) The plan of conversion shall be approved by the board of the
converting corporation (Section 151), and the principal terms of the
plan of the conversion shall be approved by the outstanding shares
(Section 152) of each class of the converting corporation. The
approval of the outstanding shares may be given before or after
approval by the board. Notwithstanding the foregoing, if a converting
corporation is a close corporation, the conversion shall be approved
by the affirmative vote of at least two-thirds of each class of
outstanding shares of that converting corporation; provided, however,
that the articles may provide for a lesser vote, but not less than a
majority of the outstanding shares of each class.
(c) If the corporation is converting into a general or limited
partnership or into a limited liability company, then in addition to
the approval of the shareholders set forth in subdivision (b), the
plan of conversion shall be approved by each shareholder who will
become a general partner or manager, as applicable, of the converted
entity pursuant to the plan of conversion unless the shareholders
have dissenters' rights pursuant to Section 1159 and Chapter 13
(d) Upon the effectiveness of the conversion, all shareholders of
the converting corporation, except those that exercise dissenters'
rights as provided in Section 1159 and Chapter 13 (commencing with
Section 1300), shall be deemed parties to any agreement or agreements
constituting the governing documents for the converted entity
adopted as part of the plan of conversion, irrespective of whether or
not a shareholder has executed the plan of conversion or those
governing documents for the converted entity. Any adoption of
governing documents made pursuant thereto shall be effective at the
effective time or date of the conversion.
(e) Notwithstanding its prior approval by the board and the
outstanding shares or either of them, a plan of conversion may be
amended before the conversion takes effect if the amendment is
approved by the board and, if it changes any of the principal terms
of the plan of conversion, by the shareholders of the converting
corporation in the same manner and to the same extent as was required
for approval of the original plan of conversion.
(f) A plan of conversion may be abandoned by the board of a
converting corporation, or by the shareholders of a converting
corporation if the abandonment is approved by the outstanding shares,
in each case in the same manner as required for approval of the plan
of conversion, subject to the contractual rights of third parties,
at any time before the conversion is effective.
(g) The converted entity shall keep the plan of conversion at (1)
the principal place of business of the converted entity if the
converted entity is a domestic partnership or (2) at the office at
which records are to be kept under Section 15614 or 15901.11 if the
converted entity is a domestic limited partnership or at the office
at which records are to be kept under Section 17057 if the converted
entity is a domestic limited liability company. Upon the request of a
shareholder of a converting corporation, the authorized person on
behalf of the converted entity shall promptly deliver to the
shareholder, at the expense of the converted entity, a copy of the
plan of conversion. A waiver by a shareholder of the rights provided
in this subdivision shall be unenforceable.
1153. (a) After the approval, as provided in Section 1152, of a

plan of conversion by the board and the outstanding shares of a
corporation converting into a domestic other business entity, the
converting corporation shall cause the filing of all documents
required by law to effect the conversion and create the converted
entity, which documents shall include a certificate of conversion or
a statement of conversion as required by Section 1155, and the
conversion shall thereupon be effective.
(b) A copy of the statement of partnership authority, certificate
of limited partnership, or articles of organization complying with
Section 1155, duly certified by the Secretary of State on or after
the effective date, is conclusive evidence of the conversion of the
corporation.
1155. (a) To convert a corporation:
(1) If the corporation is converting into a domestic limited
partnership, a statement of conversion shall be completed on the
certificate of limited partnership for the converted entity.
(2) If the corporation is converting into a domestic partnership,
a statement of conversion shall be completed on the statement of
partnership authority for the converted entity, or if no statement of
partnership authority is filed then a certificate of conversion
shall be filed separately.
(3) If the corporation is converting into a domestic limited
liability company, a statement of conversion shall be completed on
the articles of organization for the converted entity.
(b) Any statement or certificate of conversion of a converting
corporation shall be executed and acknowledged by those officers of
the converting corporation as would be required to sign an officers'
certificate (Section 173), and shall set forth all of the following:
(1) The name and the Secretary of State's file number of the
converting corporation.
(2) A statement of the total number of outstanding shares of each
class entitled to vote on the conversion, that the principal terms of
the plan of conversion were approved by a vote of the number of
shares of each class which equaled or exceeded the vote required
under Section 1152, specifying each class entitled to vote and the
(3) The name, form, and jurisdiction of organization of the
converted entity.
(c) For the purposes of this chapter, the certificate of
conversion shall be on a form prescribed by the Secretary of State.
(d) The filing with the Secretary of State of a statement of
conversion on an organizational document or a certificate of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of dissolution by the converting
corporation and no converting corporation that has made the filing is
required to file a certificate of election under Section 1901 or a
certificate of dissolution under Section 1905 as a result of that
conversion.
(e) The Secretary of State shall notify the Franchise Tax Board
and shall notify the Franchise Tax Board of the conversion. Upon the
effectiveness of a conversion pursuant to this chapter, a converted
entity that is a domestic partnership, domestic limited partnership
or domestic limited liability company shall be deemed to have assumed
the liability of the converting corporation (1) to prepare and file
or cause to be prepared and filed all tax and information returns
otherwise required of the converting corporation under the Bank and
Corporation Tax Law (Part 11 (commencing with Section 23001) of
Division 2 of the Revenue and Taxation Code) and (2) to pay any tax
liability determined to be due pursuant to that law.
1156. (a) Whenever a corporation or other business entity having

any real property in this state converts into a corporation or an
other business entity pursuant to the laws of this state or of the
state or place in which the corporation or other business entity was
organized, and the laws of the state or place of organization,
including this state, of the converting corporation or other
converting entity provide substantially that the conversion vests in
the converted corporation or other converted entity all the real
property of the converting corporation or other converting entity,
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
converting corporation or other converting entity is located of
either (1) a certificate of conversion or a statement of partnership
authority, certificate of limited partnership or articles of
organization containing a statement of conversion complying with
Section 1155 and certified on or after the effective date of the
conversion by the Secretary of State or (2) a copy of a certificate
of conversion or a statement of partnership authority, certificate of
limited partnership, articles of organization, articles of
incorporation, or other comparable organizing document evidencing the
creation of a foreign other business entity or foreign corporation,
containing a statement of conversion, meeting the requirements of
subdivision (b) and certified on or after the effective date of the
conversion by the Secretary of State or any other authorized public
official of the state or place pursuant to the laws of which the
converted entity is organized, shall evidence record ownership in the
converted corporation or other converted entity of all interest of
the converting corporation or other converting entity in and to the
real property located in that county.
(b) A filed and, if appropriate, recorded certificate of
conversion or a statement of partnership authority, certificate of
limited partnership, articles of organization, articles of
incorporation, or other comparable organizing document evidencing the
formation of a foreign other business entity or a foreign
corporation referred to in clause (2) of subdivision (a) above which
contains a statement of conversion, stating the name of the
converting corporation or other converting entity in whose name
property was held before the conversion and the name of the converted
entity or converted corporation, but not containing all of the other
information required by Section 1155, operates with respect to the
converted entity named to the extent provided in subdivision (a).
(c) Recording of a certificate of conversion or a statement of
partnership authority, certificate of limited partnership, articles
of organization, articles of incorporation, or other comparable
organizing document evidencing the creation of an other business
entity or a corporation, containing a statement of conversion, in
accordance with subdivision (a), shall create, in favor of bona fide
purchasers or encumbrances for value, a conclusive presumption that
the conversion was validly completed.
1157. (a) An other business entity or a foreign other business

entity or a foreign corporation may be converted into a corporation
pursuant to this chapter only if the converting entity is authorized
by the laws under which it is organized to effect the conversion.
(b) An other business entity or a foreign other business entity or
a foreign corporation that desires to convert into a corporation
shall approve a plan of conversion or other instrument as is required
to be approved to effect the conversion pursuant to the laws under
which that entity is organized.
(c) The conversion of an other business entity or a foreign other
business entity or a foreign corporation shall be approved by the
number or percentage of the partners, members, shareholders, or other
holders of interest of the converting entity that is required by the
laws under which that entity is organized, or a greater or lesser
percentage as may be set forth in the converting entity's partnership
agreement, articles of organization, operating agreement, articles
of incorporation, or other governing document in accordance with
applicable laws.
(d) The conversion by an other business entity or a foreign other
business entity or a foreign corporation shall be effective under
this chapter upon the filing with the Secretary of State of the
articles of incorporation of the converted corporation, containing a
statement of conversion that complies with subdivision (e).
(e) A statement of conversion of an entity converting into a
corporation pursuant to this chapter shall set forth all of the
following:
(1) The name, form, and jurisdiction of organization of the
converting entity.
(2) The Secretary of State's file number, if any, of the
converting entity.
(3) If the converting entity is a foreign other business entity or
a foreign corporation, the statement of conversion shall contain the
following:
(A) A statement that the converting entity is authorized to effect
the conversion by the laws under which it is organized.
(B) A statement that the converting entity has approved a plan of
conversion or other instrument as is required to be approved to
effect the conversion pursuant to the laws under which the converting
entity is organized.
(C) A statement that the conversion has been approved by the
number or percentage of the partners, members, shareholders, or other
holders of interest of the converting entity that is required by the
laws under which that entity is organized, or a greater or lesser
percentage as may be set forth in the converting entity's partnership
agreement, articles of organization, operating agreement, articles
of incorporation, or other governing document in accordance with
applicable laws.
(f) The filing with the Secretary of State of articles of
incorporation containing a statement pursuant to subdivision (e)
shall have the effect of the filing of a certificate of cancellation
by a converting foreign limited liability company or foreign limited
partnership, and no converting foreign limited liability company or
foreign limited partnership that has made the filing is required to
file a certificate of cancellation under Section 15696, 15909.07, or
17455 as a result of that conversion. If a converting entity is a
foreign corporation qualified to transact business in this state, the
foreign corporation shall, by virtue of the filing, automatically
surrender its right to transact intrastate business.
1158. (a) An entity that converts into another entity pursuant to

this chapter is for all purposes other than for the purposes of Part
10 (commencing with Section 17001) of, Part 10.20 (commencing with
Section 18401) of, and Part 11 (commencing with Section 23001) of,
Division 2 of the Revenue and Taxation Code, the same entity that
existed before the conversion.
(b) Upon a conversion taking effect, all of the following apply:
(1) All the rights and property, whether real, personal, or mixed,
of the converting entity or converting corporation are vested in the
converted entity or converted corporation.
(2) All debts, liabilities, and obligations of the converting
entity or converting corporation continue as debts, liabilities, and
obligations of the converted entity or converted corporation.
(3) All rights of creditors and liens upon the property of the
converting entity or converting corporation shall be preserved
unimpaired and remain enforceable against the converted entity or
converted corporation to the same extent as against the converting
entity or converting corporation as if the conversion had not
occurred.
(4) Any action or proceeding pending by or against the converting
entity or converting corporation may be continued against the
converted entity or converted corporation as if the conversion had
not occurred.
(c) A shareholder of a converting corporation is liable for:
(1) All obligations of the converting corporation for which the
shareholder was personally liable before the conversion, but only to
the extent that the shareholder was personally liable for the
obligations of the converting corporation before the conversion.
(2) All obligations of the converted entity incurred after the
conversion takes effect if (A) the shareholder becomes a general
partner of a converted entity that is a general or limited
partnership and, as a general partner, has liability under the laws
under which the converted entity is organized or under the converted
entity's governing documents or (B) the shareholder becomes a holder
of other interests in the converted entity and, as a holder, has
liability under the laws under which the converted entity is
organized or under the converted entity's governing documents.
(d) A shareholder of a converted corporation remains liable for
any and all obligations of the converting entity for which the
shareholder was personally liable before the conversion, but only to
the extent that the shareholder was personally liable for the
obligations of the converting entity prior to the conversion.
(e) If a party to a transaction with a converted corporation that
converted from a partnership reasonably believes when entering into
the transaction that a shareholder of the converted corporation
continues to be a general partner of the converting entity after the
conversion is effective, and the shareholder was a general partner of
the partnership that converted into the converted corporation, the
shareholder is liable for an obligation incurred by the converted
corporation within 90 days after the conversion takes effect. The
shareholder's liability for all other obligations of the converted
corporation incurred after the conversion takes effect is that of a
shareholder of a corporation.
(f) The converted entity shall cause written notice of the
conversion to be given by mail within 90 days after the effective
date of the conversion to all known creditors and claimants whose
addresses appear on the records of the converting entity. Failure to
comply with this subdivision shall not affect the validity of the
conversion, extend the 90-day period set forth in subdivision (e), or
otherwise affect the rights of a creditor or claimant under this
section.
1159. The shareholders of a converting corporation shall have all

of the rights under Chapter 13 (commencing with Section 1300) of the
shareholders of a corporation involved in a reorganization requiring
the approval of its outstanding shares (Section 152), and the
converting corporation shall have all of the obligations under
Chapter 13 (commencing with Section 1300) of a corporation involved
in the reorganization. Solely for purposes of applying the provisions
of Chapter 13 (and not for purposes of Chapter 12), a conversion
pursuant to Section 1151 or 1157 shall be deemed to constitute a
reorganization.
1160. (a) Notwithstanding any other provision of law, the Secretary

of State shall charge an entity a fee not to exceed one hundred
fifty dollars ($150) for its conversion made under this chapter.
(b) This section shall become operative on January 1, 2005.
CORPORATIONS CODE
SECTION 1200-1203
1200. A reorganization (Section 181) or a share exchange tender

offer (Section 183.5) shall be approved by the board of:
(a) Each constituent corporation in a merger reorganization;
(b) The acquiring corporation in an exchange reorganization;
(c) The acquiring corporation and the corporation whose property
and assets are acquired in a sale-of-assets reorganization;
(d) The acquiring corporation in a share exchange tender offer
(Section 183.5); and
(e) The corporation in control of any constituent or acquiring
domestic or foreign corporation or other business entity under
subdivision (a), (b) or (c) and whose equity securities are issued,
transferred, or exchanged in the reorganization (a "parent party").
1201. (a) The principal terms of a reorganization shall be approved

by the outstanding shares (Section 152) of each class of each
corporation the approval of whose board is required under Section
1200, except as provided in subdivision (b) and except that (unless
otherwise provided in the articles) no approval of any class of
outstanding preferred shares of the surviving or acquiring
corporation or parent party shall be required if the rights,
preferences, privileges and restrictions granted to or imposed upon
that class of shares remain unchanged (subject to the provisions of
subdivision (c)). For the purpose of this subdivision, two classes of
common shares differing only as to voting rights shall be considered
as a single class of shares.
(b) No approval of the outstanding shares (Section 152) is
required by subdivision (a) in the case of any corporation if that
corporation, or its shareholders immediately before the
reorganization, or both, shall own (immediately after the
reorganization) equity securities, other than any warrant or right to
subscribe to or purchase those equity securities, of the surviving
or acquiring corporation or a parent party (subdivision (d) of
Section 1200) possessing more than five-sixths of the voting power of
the surviving or acquiring corporation or parent party. In making
the determination of ownership by the shareholders of a corporation,
immediately after the reorganization, of equity securities pursuant
to the preceding sentence, equity securities which they owned
immediately before the reorganization as shareholders of another
party to the transaction shall be disregarded. For the purpose of
this section only, the voting power of a corporation shall be
calculated by assuming the conversion of all equity securities
convertible (immediately or at some future time) into shares entitled
to vote but not assuming the exercise of any warrant or right to
subscribe to or purchase those shares.
(c) Notwithstanding subdivision (b), the principal terms of a
reorganization shall be approved by the outstanding shares (Section
152) of the surviving corporation in a merger reorganization if any
amendment is made to its articles which would otherwise require that
approval.
(d) Notwithstanding subdivision (b), the principal terms of a
reorganization shall be approved by the outstanding shares (Section
152) of any class of a corporation which is a party to a merger or
sale-of-assets reorganization if holders of shares of that class
receive shares of the surviving or acquiring corporation or parent
party having different rights, preferences, privileges or
restrictions than those surrendered. Shares in a foreign corporation
received in exchange for shares in a domestic corporation have
different rights, preferences, privileges and restrictions within the
meaning of the preceding sentence.
(e) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the affirmative vote of at
least two-thirds of each class of the outstanding shares of any close
corporation if the reorganization would result in their receiving
shares of a corporation which is not a close corporation. However,
the articles may provide for a lesser vote, but not less than a
majority of the outstanding shares of each class.
(f) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the outstanding shares
(Section 152) of any class of a corporation which is a party to a
merger reorganization if holders of shares of that class receive
interests of a surviving other business entity in the merger.
(g) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by all shareholders of any
class or series if, as a result of the reorganization, the holders of
that class or series become personally liable for any obligations of
a party to the reorganization, unless all holders of that class or
series have the dissenters' rights provided in Chapter 13 (commencing
with Section 1300).
(h) Any approval required by this section may be given before or
after the approval by the board. Notwithstanding approval required by
this section, the board may abandon the proposed reorganization
without further action by the shareholders, subject to the
contractual rights, if any, of third parties.
1201.5. (a) The principal terms of a share exchange tender offer

(Section 183. 5) shall be approved by the outstanding shares (Section
152) of each class of the corporation making the tender offer or
whose shares are to be used in the tender offer, except as provided
in subdivision (b) and except that (unless otherwise provided in the
articles) no approval of any class of outstanding preferred shares of
either corporation shall be required, if the rights, preferences,
privileges, and restrictions granted to or imposed upon that class of
shares remain unchanged. For the purpose of this subdivision, two
classes of common shares differing only as to voting rights shall be
considered as a single class of shares.
(b) No approval of the outstanding shares (Section 152) is
required by subdivision (a) in the case of any corporation if the
corporation, or its shareholders immediately before the tender offer,
or both, shall own (immediately after the completion of the share
exchange proposed in the tender offer) equity securities, (other than
any warrant or right to subscribe to or purchase the equity
securities), of the corporation making the tender offer or of the
corporation whose shares were used in the tender offer, possessing
more than five-sixths of the voting power of either corporation. In
making the determination of ownership by the shareholders of a
corporation, immediately after the tender offer, of equity securities
pursuant to the preceding sentence, equity securities which they
owned immediately before the tender offer as shareholders of another
party to the transaction shall be disregarded. For the purpose of
this section only, the voting power of a corporation shall be
calculated by assuming the conversion of all equity securities
convertible (immediately or at some future time) into shares entitled
to vote but not assuming the exercise of any warrant or right to
subscribe to, or purchase, shares.
1202. (a) In addition to the requirements of Section 1201, the

principal terms of a merger reorganization shall be approved by all
the outstanding shares of a corporation if the agreement of merger
provides that all the outstanding shares of that corporation are
canceled without consideration in the merger.
(b) In addition to the requirements of Section 1201, if the terms
of a merger reorganization or sale-of-assets reorganization provide
that a class or series of preferred shares is to have distributed to
it a lesser amount than would be required by applicable article
provisions, the principal terms of the reorganization shall be
approved by the same percentage of outstanding shares of that class
or series which would be required to approve an amendment of the
article provisions to provide for the distribution of that lesser
amount.
(c) If a parent party within the meaning of Section 1200 is a
foreign corporation (other than a foreign corporation to which
subdivision (a) of Section 2115 is applicable), any requirement or
lack of a requirement for approval by the outstanding shares of the
foreign corporation shall be based, not on the application of
Sections 1200 and 1201, but on the application of the laws of the
state or place of incorporation of the foreign corporation.
1203. (a) If a tender offer, including a share exchange tender

offer (Section 183.5), or a written proposal for approval of a
reorganization subject to Section 1200 or for a sale of assets
subject to subdivision (a) of Section 1001 is made to some or all of
a corporation's shareholders by an interested party (herein referred
to as an "Interested Party Proposal"), an affirmative opinion in
writing as to the fairness of the consideration to the shareholders
of that corporation shall be delivered as follows:
(1) If no shareholder approval or acceptance is required for the
consummation of the transaction, the opinion shall be delivered to
the corporation's board of directors not later than the time that
consummation of the transaction is authorized and approved by the
board of directors.
(2) If a tender offer is made to the corporation's shareholders,
the opinion shall be delivered to the shareholders at the time that
the tender offer is first made in writing to the shareholders.
However, if the tender offer is commenced by publication and tender
offer materials are subsequently mailed or otherwise distributed to
the shareholders, the opinion may be omitted in that publication if
the opinion is included in the materials distributed to the
shareholders.
(3) If a shareholders' meeting is to be held to vote on approval
of the transaction, the opinion shall be delivered to the
shareholders with the notice of the meeting (Section 601).
(4) If consents of all shareholders entitled to vote are solicited
in writing (Section 603), the opinion shall be delivered at the same
time as that solicitation.
(5) If the consents of all shareholders are not solicited in
writing, the opinion shall be delivered to each shareholder whose
consent is solicited prior to that shareholder's consent being given,
and to all other shareholders at the time they are given the notice
required by subdivision (b) of Section 603.
For purposes of this section, the term "interested party" means a
person who is a party to the transaction and (A) directly or
indirectly controls the corporation that is the subject of the tender
offer or proposal, (B) is, or is directly or indirectly controlled
by, an officer or director of the subject corporation, or (C) is an
entity in which a material financial interest (subdivision (a) of
Section 310) is held by any director or executive officer of the
subject corporation. For purposes of the preceding sentence, "any
executive officer" means the president, any vice president in charge
of a principal business unit, division, or function such as sales,
administration, research, development, or finance, and any other
officer or other person who performs a policymaking function or has
the same duties as those of a president or vice president. The
opinion required by this subdivision shall be provided by a person
who is not affiliated with the offeror and who, for compensation,
engages in the business of advising others as to the value of
properties, businesses, or securities. The fact that the opining
person previously has provided services to the offeror or a related
entity or is simultaneously engaged in providing advice or assistance
with respect to the proposed transaction in a manner which makes its
compensation contingent on the success of the proposed transaction
shall not, for those reasons, be deemed to affiliate the opining
person with the offeror. Nothing in this subdivision shall limit the
applicability of the standards of review of the transaction in the
event of a challenge thereto under Section 310 or subdivision (c) of
Section 1312.
This subdivision shall not apply to an Interested Party Proposal
if the corporation that is the subject thereof does not have shares
held of record by 100 or more persons (determined as provided in
Section 605), or if the transaction has been qualified under Section
25113 or 25121 and no order under Section 25140 or subdivision (a) of
Section 25143 is in effect with respect to that qualification.
(b) If a tender of shares or a vote or written consent is being
sought pursuant to an Interested Party Proposal and a later tender
offer or written proposal for a reorganization subject to Section
1200 or sale of assets subject to subdivision (a) of Section 1001
that would require a vote or written consent of shareholders is made
to the corporation or its shareholders (herein referred to as a
"Later Proposal") by any other person at least 10 days prior to the
date for acceptance of the tendered shares or the vote or notice of
shareholder approval on the Interested Party Proposal, then each of
the following shall apply:
(1) The shareholders shall be informed of the Later Proposal and
any written material provided for this purpose by the later offeror
shall be forwarded to the shareholders at that offeror's expense.
(2) The shareholders shall be afforded a reasonable opportunity to
withdraw any vote, consent, or proxy previously given before the
vote or written consent on the Interested Party Proposal becomes
effective, or a reasonable time to withdraw any tendered shares
before the purchase of the shares pursuant to the Interested Party
Proposal. For purposes of this subdivision, a delay of 10 days from
the notice or publication of the Later Proposal shall be deemed to
provide a reasonable opportunity or time to effect that withdrawal.
CORPORATIONS CODE
SECTION 1300-1313
1300. (a) If the approval of the outstanding shares (Section 152)

of a corporation is required for a reorganization under subdivisions
(a) and (b) or subdivision (e) or (f) of Section 1201, each
shareholder of the corporation entitled to vote on the transaction
and each shareholder of a subsidiary corporation in a short-form
merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their
fair market value the shares owned by the shareholder which are
dissenting shares as defined in subdivision (b). The fair market
value shall be determined as of the day before the first announcement
of the terms of the proposed reorganization or short-form merger,
excluding any appreciation or depreciation in consequence of the
proposed action, but adjusted for any stock split, reverse stock
split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares
which come within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o)
of Section 25100, and the notice of meeting of shareholders to act
upon the reorganization summarizes this section and Sections 1301,
1302, 1303 and 1304; provided, however, that this provision does not
apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply
to any class of shares if demands for payment are filed with respect
to 5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not
voted in favor of the reorganization or, (B) if described in
paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or were held of record on the
effective date of a short-form merger; provided, however, that
subparagraph (A) rather than subparagraph (B) of this paragraph
applies in any case where the approval required by Section 1201 is
sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with
Section 1301.
(4) Which the dissenting shareholder has submitted for
endorsement, in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of
record.
1301. (a) If, in the case of a reorganization, any shareholders of

a corporation have a right under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, to require
the corporation to purchase their shares for cash, that corporation
shall mail to each such shareholder a notice of the approval of the
reorganization by its outstanding shares (Section 152) within 10 days
after the date of that approval, accompanied by a copy of Sections
1300, 1302, 1303, and 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of
the dissenting shares, and a brief description of the procedure to be
followed if the shareholder desires to exercise the shareholder's
right under those sections. The statement of price constitutes an
offer by the corporation to purchase at the price stated any
dissenting shares as defined in subdivision (b) of Section 1300,
unless they lose their status as dissenting shares under Section
1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300,
subject to compliance with paragraphs (3) and (4) of subdivision (b)
thereof, and who desires the corporation to purchase shares shall
make written demand upon the corporation for the purchase of those
shares and payment to the shareholder in cash of their fair market
value. The demand is not effective for any purpose unless it is
received by the corporation or any transfer agent thereof (1) in the
case of shares described subdivision (b) of Section 1300 (without
regard to the provisos in that paragraph), not later than the date of
the shareholders' meeting to vote upon the reorganization, or (2) in
any other case within 30 days after the date on which the notice of
the approval by the outstanding shares pursuant to subdivision (a) or
the notice pursuant to subdivision (i) of Section 1110 was mailed to
the shareholder.
(c) The demand shall state the number and class of the shares held
of record by the shareholder which the shareholder demands that the
corporation purchase and shall contain a statement of what that
shareholder claims to be the fair market value of those shares as of
the day before the announcement of the proposed reorganization or
short-form merger. The statement of fair market value constitutes an
offer by the shareholder to sell the shares at that price.
1302. Within 30 days after the date on which notice of the approval
by the outstanding shares or the notice pursuant to subdivision (i)
of Section 1110 was mailed to the shareholder, the shareholder shall
submit to the corporation at its principal office or at the office of
any transfer agent thereof, (a) if the shares are certificated
securities, the shareholder's certificates representing any shares
which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting
shares or to be exchanged for certificates of appropriate
denomination so stamped or endorsed or (b) if the shares are
uncertificated securities, written notice of the number of shares
which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the
corporation, the new certificates, initial transaction statement, and
other written statements issued therefor shall bear a like
statement, together with the name of the original dissenting holder
of the shares.
1303. (a) If the corporation and the shareholder agree that the
shares are dissenting shares and agree upon the price of the shares,
the dissenting shareholder is entitled to the agreed price with
interest thereon at the legal rate on judgments from the date of the
agreement. Any agreements fixing the fair market value of any
dissenting shares as between the corporation and the holders thereof
shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after
the amount thereof has been agreed or within 30 days after any
statutory or contractual conditions to the reorganization are
satisfied, whichever is later, and in the case of certificated
securities, subject to surrender of the certificates therefor, unless
provided otherwise by agreement.
1304. (a) If the corporation denies that the shares are dissenting
shares, or the corporation and the shareholder fail to agree upon the
fair market value of the shares, then the shareholder demanding
purchase of such shares as dissenting shares or any interested
corporation, within six months after the date on which notice of the
approval by the outstanding shares (Section 152) or notice pursuant
to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the
proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares
or both or may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or
be joined as defendants in any such action and two or more such
actions may be consolidated.
(c) On the trial of the action, the court shall determine the
issues. If the status of the shares as dissenting shares is in issue,
the court shall first determine that issue. If the fair market value
of the dissenting shares is in issue, the court shall determine, or
shall appoint one or more impartial appraisers to determine, the fair
market value of the shares.
1305. (a) If the court appoints an appraiser or appraisers, they

shall proceed forthwith to determine the fair market value per share.
Within the time fixed by the court, the appraisers, or a majority of
them, shall make and file a report in the office of the clerk of the
court. Thereupon, on the motion of any party, the report shall be
submitted to the court and considered on such evidence as the court
considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and
file a report within 10 days from the date of their appointment or
within such further time as may be allowed by the court or the report
is not confirmed by the court, the court shall determine the fair
market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to
the fair market value of each dissenting share multiplied by the
number of dissenting shares which any dissenting shareholder who is a
party, or who has intervened, is entitled to require the corporation
to purchase, with interest thereon at the legal rate from the date
on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated
securities, only upon the endorsement and delivery to the corporation
of the certificates for the shares described in the judgment. Any
party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to
the appraisers to be fixed by the court, shall be assessed or
apportioned as the court considers equitable, but, if the appraisal
exceeds the price offered by the corporation, the corporation shall
pay the costs (including in the discretion of the court attorneys'
fees, fees of expert witnesses and interest at the legal rate on
judgments from the date of compliance with Sections 1300, 1301 and
1302 if the value awarded by the court for the shares is more than
125 percent of the price offered by the corporation under subdivision
(a) of Section 1301).
1306. To the extent that the provisions of Chapter 5 prevent the

payment to any holders of dissenting shares of their fair market
value, they shall become creditors of the corporation for the amount
thereof together with interest at the legal rate on judgments until
the date of payment, but subordinate to all other creditors in any
liquidation proceeding, such debt to be payable when permissible
under the provisions of Chapter 5.
1307. Cash dividends declared and paid by the corporation upon the
dissenting shares after the date of approval of the reorganization by
the outstanding shares (Section 152) and prior to payment for the
shares by the corporation shall be credited against the total amount
to be paid by the corporation therefor.
1308. Except as expressly limited in this chapter, holders of

dissenting shares continue to have all the rights and privileges
incident to their shares, until the fair market value of their shares
is agreed upon or determined. A dissenting shareholder may not
withdraw a demand for payment unless the corporation consents
thereto.
1309. Dissenting shares lose their status as dissenting shares and
the holders thereof cease to be dissenting shareholders and cease to
be entitled to require the corporation to purchase their shares upon
the happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment
of the reorganization, the corporation shall pay on demand to any
dissenting shareholder who has initiated proceedings in good faith
under this chapter all necessary expenses incurred in such
proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for
conversion into shares of another class in accordance with the
articles.
(c) The dissenting shareholder and the corporation do not agree
upon the status of the shares as dissenting shares or upon the
purchase price of the shares, and neither files a complaint or
intervenes in a pending action as provided in Section 1304, within
six months after the date on which notice of the approval by the
outstanding shares or notice pursuant to subdivision (i) of Section
1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the
corporation, withdraws the shareholder's demand for purchase of the
dissenting shares.
1310. If litigation is instituted to test the sufficiency or

regularity of the votes of the shareholders in authorizing a
reorganization, any proceedings under Sections 1304 and 1305 shall be
suspended until final determination of such litigation.
1311. This chapter, except Section 1312, does not apply to classes
of shares whose terms and provisions specifically set forth the
amount to be paid in respect to such shares in the event of a
reorganization or merger.
1312. (a) No shareholder of a corporation who has a right under

this chapter to demand payment of cash for the shares held by the
shareholder shall have any right at law or in equity to attack the
validity of the reorganization or short-form merger, or to have the
reorganization or short-form merger set aside or rescinded, except in
an action to test whether the number of shares required to authorize
or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and
provisions specifically set forth the amount to be paid in respect to
them in the event of a reorganization or short-form merger is
entitled to payment in accordance with those terms and provisions or,
if the principal terms of the reorganization are approved pursuant
to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved
reorganization.
(b) If one of the parties to a reorganization or short-form merger
is directly or indirectly controlled by, or under common control
with, another party to the reorganization or short-form merger,
subdivision (a) shall not apply to any shareholder of such party who
has not demanded payment of cash for such shareholder's shares
pursuant to this chapter; but if the shareholder institutes any
action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside
or rescinded, the shareholder shall not thereafter have any right to
demand payment of cash for the shareholder's shares pursuant to this
chapter. The court in any action attacking the validity of the
reorganization or short-form merger or to have the reorganization or
short-form merger set aside or rescinded shall not restrain or enjoin
the consummation of the transaction except upon 10 days' prior
notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining
shareholder or the class of shareholders of which such shareholder is
a member.
(c) If one of the parties to a reorganization or short-form merger
is directly or indirectly controlled by, or under common control
with, another party to the reorganization or short-form merger, in
any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside
or rescinded, (1) a party to a reorganization or short-form merger
which controls another party to the reorganization or short-form
merger shall have the burden of proving that the transaction is just
and reasonable as to the shareholders of the controlled party, and
(2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and
reasonable as to the shareholders of any party so controlled.
1313. A conversion pursuant to Chapter 11.5 (commencing with

Section 1150) shall be deemed to constitute a reorganization for
purposes of applying the provisions of this chapter, in accordance
with and to the extent provided in Section 1159.
CORPORATIONS CODE
SECTION 1400-1403
1400. (a) Any domestic corporation with respect to which a

proceeding has been initiated under any applicable statute of the
United States, as now existing or hereafter enacted, relating to
reorganizations of corporations, has full power and authority to put
into effect and carry out any plan of reorganization and the orders
of the court or judge entered in such proceeding and may take any
proceeding and do any act provided in the plan or directed by such
orders, without further action by its board or shareholders. Such
power and authority may be exercised and such proceedings and acts
may be taken, as may be directed by such orders, by the trustee or
trustees of such corporation appointed in the reorganization
proceeding (or a majority thereof), or if none is appointed and
acting, by officers of the corporation designated or a master or
other representative appointed by the court or judge, with like
effect as if exercised and taken by unanimous action of the board and
shareholders of the corporation.
(b) Such corporation may, in the manner provided in subdivision
(a), but without limiting the generality or effect of subdivision
(a), alter, amend or repeal its bylaws; constitute or reconstitute
its board and name, constitute or appoint directors and officers in
place of or in addition to all or some of the directors or officers
then in office; amend its articles; make any change in its capital
stock; make any other amendment, change, alteration or provision
authorized by this division; be dissolved, transfer all or part of
its assets or merge as permitted by this division, in which case,
however, no shareholder shall have any statutory dissenter's rights;
change the location of its principal executive office or remove or
appoint an agent to receive service of process; authorize and fix the
terms, manner and conditions of the issuance of bonds, debentures or
other obligations, whether or not convertible into shares of any
class or bearing warrants or rights to purchase or subscribe to
shares of any class; or lease its property and franchises to any
corporation, if permitted by law.
1401. (a) A certificate of any amendment, change or alteration or

of dissolution or any agreement of merger made by such corporation
pursuant to Section 1400 and executed as provided in subdivision (b),
shall be filed and shall thereupon become effective in accordance
with its terms and the provisions of this chapter.
(b) Such certificate, agreement of merger or other instrument
shall be signed and verified, as may be directed by such orders of
the court or judge, by the trustee or trustees appointed in the
reorganization proceeding (or a majority thereof) or, if none is
appointed and acting, by officers of the corporation designated or by
a master or other representative appointed by the court or judge,
and shall state that provision for the making of such certificate,
agreement or instrument is contained in an order, identifying the
same, of a court or judge having jurisdiction of a proceeding under a
statute of the United States for the reorganization of such
corporation.
1402. The provisions of this chapter shall cease to apply to a

corporation upon the entry of a final decree in the reorganization
proceeding closing the case and discharging the trustee or trustees,
if any, whether or not jurisdiction may be retained thereafter by the
court for limited purposes which do not relate to the consummation
of the plan.
1403. For filing any certificate, agreement or other paper pursuant

to this chapter there shall be paid to the Secretary of State the
same fees as are payable by corporations not in reorganization
proceedings upon the filing of like certificates, agreements or other
papers.
CORPORATIONS CODE
SECTION 1500-1512
1500. Each corporation shall keep adequate and correct books and
records of account and shall keep minutes of the proceedings of its
shareholders, board and committees of the board and shall keep at its
principal executive office, or at the office of its transfer agent
or registrar, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of shares held
by each. Those minutes and other books and records shall be kept
either in written form or in another form capable of being converted
into clearly legible tangible form or in any combination of the
foregoing. When minutes and other books and records are kept in a
form capable of being converted into clearly legible paper form, the
clearly legible paper form into which those minutes and other books
and records are converted shall be admissible in evidence, and
accepted for all other purposes, to the same extent as an original
paper record of the same information would have been, provided that
the paper form accurately portrays the record.
1501. (a) (1) The board shall cause an annual report to be sent to
the shareholders not later than 120 days after the close of the
fiscal year, unless in the case of a corporation with less than 100
holders of record of its shares (determined as provided in Section
605) this requirement is expressly waived in the bylaws. Unless
otherwise provided by the articles or bylaws and if approved by the
board of directors, that report and any accompanying material sent
pursuant to this section may be sent by electronic transmission by
the corporation (Section 20). This report shall contain a balance
sheet as of the end of that fiscal year and an income statement and a
statement of cashflows for that fiscal year, accompanied by any
report thereon of independent accountants or, if there is no report,
the certificate of an authorized officer of the corporation that the
statements were prepared without audit from the books and records of
the corporation.
(2) Unless so waived, the report specified in paragraph (1) shall
be sent to the shareholders at least 15 (or, if sent by third-class
mail, 35) days prior to the annual meeting of shareholders to be held
during the next fiscal year, but this requirement shall not limit
the requirement for holding an annual meeting as required by Section
600.
(3) Notwithstanding Section 114, the financial statements of any
corporation with fewer than 100 holders of record of its shares
(determined as provided in Section 605) required to be furnished by
this subdivision and subdivision (c) are not required to be prepared
in conformity with generally accepted accounting principles if they
reasonably set forth the assets and liabilities and the income and
expense of the corporation and disclose the accounting basis used in
their preparation.
(4) The requirements described in paragraphs (1) and (2) shall be
satisfied if a corporation with an outstanding class of securities
registered under Section 12 of the Securities Exchange Act of 1934
complies with Section 240.14a-16 of Title 17 of the Code of Federal
Regulations, as it may be amended from time to time, with respect to
the obligation of a corporation to furnish an annual report to
shareholders pursuant to Section 240.14a-3(b) of Title 17 of the Code
of Federal Regulations.
(b) In addition to the financial statements required by
subdivision (a), the annual report of any corporation having 100 or
more holders of record of its shares (determined as provided in
Section 605) either not subject to the reporting requirements of
Section 13 of the Securities Exchange Act of 1934, or exempted from
those reporting requirements by Section 12(g)(2) of that act, shall
also describe briefly both of the following:
(1) Any transaction (excluding compensation of officers and
directors) during the previous fiscal year involving an amount in
excess of forty thousand dollars ($40,000) (other than contracts let
at competitive bid or services rendered at prices regulated by law)
to which the corporation or its parent or subsidiary was a party and
in which any director or officer of the corporation or of a
subsidiary or (if known to the corporation or its parent or
subsidiary) any holder of more than 10 percent of the outstanding
voting shares of the corporation had a direct or indirect material
interest, naming the person and stating the person's relationship to
the corporation, the nature of the person's interest in the
transaction and, where practicable, the amount of the interest;
provided that in the case of a transaction with a partnership of
which the person is a partner, only the interest of the partnership
need be stated; and provided further that no report need be made in
the case of any transaction approved by the shareholders (Section
153).
(2) The amount and circumstances of any indemnification or
advances aggregating more than ten thousand dollars ($10,000) paid
during the fiscal year to any officer or director of the corporation
pursuant to Section 317; provided that no report need be made in the
case of indemnification approved by the shareholders (Section 153)
under paragraph (2) of subdivision (e) of Section 317.
(c) If no annual report for the last fiscal year has been sent to
shareholders, the corporation shall, upon the written request of any
shareholder made more than 120 days after the close of that fiscal
year, deliver or mail to the person making the request within 30 days
thereafter the financial statements required by subdivision (a) for
that year. A shareholder or shareholders holding at least 5 percent
of the outstanding shares of any class of a corporation may make a
written request to the corporation for an income statement of the
corporation for the three-month, six-month, or nine-month period of
the current fiscal year ended more than 30 days prior to the date of
the request and a balance sheet of the corporation as of the end of
the period and, in addition, if no annual report for the last fiscal
year has been sent to shareholders, the statements referred to in
subdivision (a) for the last fiscal year. The statements shall be
delivered or mailed to the person making the request within 30 days
thereafter. A copy of the statements shall be kept on file in the
principal office of the corporation for 12 months and it shall be
exhibited at all reasonable times to any shareholder demanding an
examination of the statements or a copy shall be mailed to the
shareholder.
(d) The quarterly income statements and balance sheets referred to
in this section shall be accompanied by the report thereon, if any,
of any independent accountants engaged by the corporation or the
certificate of an authorized officer of the corporation that the
financial statements were prepared without audit from the books and
records of the corporation.
(e) In addition to the penalties provided for in Section 2200, the
superior court of the proper county shall enforce the duty of making
and mailing or delivering the information and financial statements
required by this section and, for good cause shown, may extend the
time therefor.
(f) In any action or proceeding under this section, if the court
finds the failure of the corporation to comply with the requirements
of this section to have been without justification, the court may
award an amount sufficient to reimburse the shareholder for the
reasonable expenses incurred by the shareholder, including attorney's
fees, in connection with the action or proceeding.
(g) This section applies to any domestic corporation and also to a
foreign corporation having its principal executive office in this
state or customarily holding meetings of its board in this state.
1502. (a) Every corporation shall file, within 90 days after the
filing of its original articles and annually thereafter during the
applicable filing period, on a form prescribed by the Secretary of
State, a statement containing all of the following:
(1) The names and complete business or residence addresses of its
incumbent directors.
(2) The number of vacancies on the board, if any.
chief executive officer, secretary, and chief financial officer.
(4) The street address of its principal executive office.
(5) The mailing address of the corporation, if different from the
street address of its principal executive office.
(6) If the address of its principal executive office is not in
this state, the street address of its principal business office in
this state, if any.
(7) A statement of the general type of business that constitutes
the principal business activity of the corporation (for example,
manufacturer of aircraft; wholesale liquor distributor; or retail
department store).
(b) The statement required by subdivision (a) shall also
designate, as the agent of the corporation for the purpose of service
of process, a natural person residing in this state or a corporation
that has complied with Section 1505 and whose capacity to act as an
agent has not terminated. If a natural person is designated, the
statement shall set forth that person's complete business or
residence street address. If a corporate agent is designated, no
address for it shall be set forth.
(c) If there has been no change in the information in the last
filed statement of the corporation on file in the Secretary of State'
s office, the corporation may, in lieu of filing the statement
required by subdivisions (a) and (b), advise the Secretary of State,
on a form prescribed by the Secretary of State, that no changes in
the required information have occurred during the applicable filing
period.
(d) For the purposes of this section, the applicable filing period
for a corporation shall be the calendar month during which its
original articles were filed and the immediately preceding five
calendar months. The Secretary of State shall mail a notice for
compliance with this section to each corporation approximately three
months prior to the close of the applicable filing period. The notice
shall state the due date for compliance and shall be mailed to the
last address of the corporation according to the records of the
Secretary of State. The failure of the corporation to receive the
notice is not an excuse for failure to comply with this section.
(e) Whenever any of the information required by subdivision (a) is
changed, the corporation may file a current statement containing all
the information required by subdivisions (a) and (b). In order to
change its agent for service of process or the address of the agent,
the corporation must file a current statement containing all the
information required by subdivisions (a) and (b). Whenever any
statement is filed pursuant to this section, it supersedes any
previously filed statement and the statement in the articles as to
the agent for service of process and the address of the agent.
(f) The Secretary of State may destroy or otherwise dispose of any
statement filed pursuant to this section after it has been
superseded by the filing of a new statement.
(g) This section shall not be construed to place any person
dealing with the corporation on notice of, or under any duty to
inquire about, the existence or content of a statement filed pursuant
to this section.
(h) The statement required by subdivision (a) shall be available
and open to the public for inspection. The Secretary of State shall
provide access to all information contained in this statement by
means of an online database.
(i) In addition to any other fees required, a corporation shall
pay a five-dollar ($5) disclosure fee when filing the statement
required by subdivision (a). One-half of the fee shall be utilized to
further the provisions of this section, including the development
and maintenance of the online database required by subdivision (h),
and one-half shall be deposited into the Victims of Corporate Fraud
Compensation Fund established in Section 1502.5.
(j) A corporation shall certify that the information it provides
pursuant to subdivisions (a) and (b) is true and correct. No claim
may be made against the state for inaccurate information contained in
the statements.
1502.1. (a) In addition to the statement required pursuant to

Section 1502, every publicly traded corporation shall file annually,
within 150 days after the end of its fiscal year, a statement, on a
form prescribed by the Secretary of State, that includes all of the
following information:
(1) The name of the independent auditor that prepared the most
recent auditor's report on the corporation's annual financial
statements.
(2) A description of other services, if any, performed for the
corporation during its two most recent fiscal years and the period
between the end of its most recent fiscal year and the date of the
statement by the foregoing independent auditor, by its parent
corporation, or by a subsidiary or corporate affiliate of the
independent auditor or its parent corporation.
(3) The name of the independent auditor employed by the
corporation on the date of the statement, if different from the
independent auditor listed pursuant to paragraph (1).
(4) The compensation for the most recent fiscal year of the
corporation paid to each member of the board of directors and paid to
each of the five most highly compensated executive officers of the
corporation who are not members of the board of directors, including
the number of any shares issued, options for shares granted, and
similar equity-based compensation granted to each of those persons.
If the chief executive officer is not among the five most highly
compensated executive officers of the corporation, the compensation
paid to the chief executive officer shall also be included.
(5) A description of any loan, including the amount and terms of
the loan, made to any member of the board of directors by the
corporation during the corporation's two most recent fiscal years at
an interest rate lower than the interest rate available from
unaffiliated commercial lenders generally to a similarly-situated
borrower.
(6) A statement indicating whether an order for relief has been
entered in a bankruptcy case with respect to the corporation, its
executive officers, or members of the board of directors of the
corporation during the 10 years preceding the date of the statement.
(7) A statement indicating whether any member of the board of
directors or executive officer of the corporation was convicted of
fraud during the 10 years preceding the date of the statement, if the
conviction has not been overturned or expunged.
(8) A description of any material pending legal proceedings, other
than ordinary routine litigation incidental to the business, to
which the corporation or any of its subsidiaries is a party or of
which any of their property is the subject, as specified by Item 103
of Regulation S-K of the Securities Exchange Commission (Section
229.103 of Title 12 of the Code of Federal Regulations). A
description of any material legal proceeding during which the
corporation was found legally liable by entry of a final judgment or
final order that was not overturned on appeal during the five years
preceding the date of the statement.
(b) For purposes of this section, the following definitions apply:
(1) "Publicly traded corporation" means a corporation, as defined
in Section 162, that is an issuer as defined in Section 3 of the
Securities Exchange Act of 1934, as amended (15 U.S.C. Sec. 78c), and
has at least one class of securities listed or admitted for trading
on a national securities exchange, on the OTC Bulletin Board, or on
the electronic service operated by Pink OTC Markets Inc.
(2) "Executive officer" means the chief executive officer,
president, any vice president in charge of a principal business unit,
division, or function, any other officer of the corporation who
performs a policymaking function, or any other person who performs
similar policymaking functions for the corporation.
(3) "Compensation" as used in paragraph (4) of subdivision (a)
means all plan and nonplan compensation awarded to, earned by, or
paid to the person for all services rendered in all capacities to the
corporation and to its subsidiaries, as the compensation is
specified by Item 402 of Regulation S-K of the Securities and
Exchange Commission (Section 229.402 of Title 17 of the Code of
Federal Regulations).
(4) "Loan" as used in paragraph (5) of subdivision (a) excludes an
advance for expenses permitted under subdivision (d) of Section 315,
the corporation's payment of life insurance premiums permitted under
subdivision (e) of Section 315, and an advance of expenses permitted
under Section 317.
(c) This statement shall be available and open to the public for
inspection. The Secretary of State shall provide access to all
information contained in this statement by means of an online
database.
(d) A corporation shall certify that the information it provides
pursuant to this section is true and correct. No claim may be made
against the state for inaccurate information contained in statements
filed under this section with the Secretary of State.
1502.5. The Victims of Corporate Fraud Compensation Fund is hereby
established in the State Treasury. The fund shall be administered by
the Secretary of State who shall adopt regulations regarding the
administration of the fund and the eligibility of victims to receive
compensation from the fund. The money in the fund shall be used for
the sole purpose of providing restitution to the victims of a
corporate fraud. Notwithstanding Section 13340 of the Government
Code, the money in the fund is continuously appropriated to the
Secretary of State for the purposes authorized by this section.
1503. (a) An agent designated for service of process pursuant to

Section 202, 1502, 2105, or 2117 may file a signed and acknowledged
written statement of resignation as such agent. Thereupon the
authority of the agent to act in such capacity shall cease and the
Secretary of State forthwith shall give written notice of the filing
of the statement of resignation by mail to the corporation addressed
to its principal executive office.
(b) Under regulations adopted by the Secretary of State, the
resignation of an agent may be effective if the agent disclaims
having been properly appointed as the agent. Similarly, a person
named as an officer or director may indicate that the person was
never properly appointed as the officer or director.
1504. If a natural person who has been designated agent for service
of process pursuant to Section 202, 1502, 2105, or 2117 dies or
resigns or no longer resides in the state or if the corporate agent
for such purpose resigns, dissolves, withdraws from the state,
forfeits its right to transact intrastate business, has its corporate
rights, powers and privileges suspended or ceases to exist, the
corporation shall forthwith file a designation of a new agent
conforming to the requirements of Section 1502 or 2117.
1505. (a) Any domestic or foreign corporation, before it may be

designated as the agent for the purpose of service of process of any
entity pursuant to any law which refers to this section, shall file a
certificate executed in the name of the corporation by an officer
thereof stating all of the following:
(1) The complete address of its office or offices in this state,
wherein any entity designating it as such agent may be served with
process.
(2) The name of each person employed by it at each such office to
whom it authorizes the delivery of a copy of any such process.
(3) Its consent that delivery thereof to any such person at the
office where the person is employed shall constitute delivery of any
such copy to it, as such agent.
(b) Any corporation which has filed the certificate provided for
in subdivision (a) may file any number of supplemental certificates
containing all the statements provided for in subdivision (a), which,
upon the filing thereof, shall supersede the statements contained in
the original or in any supplemental certificate previously filed.
(c) No domestic or foreign corporation may file a certificate
pursuant to this section unless it is currently authorized to engage
in business in this state and is in good standing on the records of
the Secretary of State.
1506. Upon request of an assessor, a domestic or foreign

corporation owning, claiming, possessing or controlling property in
this state subject to local assessment shall make available at the
corporation's principal office in California or at a place mutually
acceptable to the assessor and the corporation a true copy of
business records relevant to the amount, cost and value of all
property that it owns, claims, possesses or controls within the
county.
1507. Any officers, directors, employees or agents of a corporation

who do any of the following are liable jointly and severally for all
the damages resulting therefrom to the corporation or any person
injured thereby who relied thereon or to both:
(a) Make, issue, deliver or publish any prospectus, report,
circular, certificate, financial statement, balance sheet, public
notice or document respecting the corporation or its shares, assets,
liabilities, capital, dividends, business, earnings or accounts which
is false in any material respect, knowing it to be false, or
participate in the making, issuance, delivery or publication thereof
with knowledge that the same is false in a material respect.
(b) Make or cause to be made in the books, minutes, records or
accounts of a corporation any entry which is false in any material
particular knowing such entry is false.
(c) Remove, erase, alter or cancel any entry in any books or
records of the corporation, with intent to deceive.
1508. The Attorney General, upon complaint that a foreign or

domestic corporation is failing to comply with the provisions of this
chapter or Chapter 6 (commencing with Section 600), 7 (commencing
with Section 700) or 16 (commencing with Section 1600), may in the
name of the people of the State of California send to the principal
executive office of such corporation notice of the complaint. If the
answer is not satisfactory, the Attorney General may institute,
maintain or intervene in such suits, actions or proceedings of any
type in any court or tribunal of competent jurisdiction or before any
administrative agency for such relief by way of injunction, the
dissolution of entities, the appointment of receivers or any other
temporary, preliminary, provisional or final remedies as may be
appropriate to protect the rights of shareholders or to undo the
consequences of failure to comply with such requirements. In any such
action, suit or proceeding there may be joined as parties all
persons and entities responsible for or affected by such activity.
1509. For a period of 60 days following the conclusion of an

annual, regular, or special meeting of shareholders, a corporation
shall, upon written request from a shareholder, forthwith inform the
shareholder of the result of any particular vote of shareholders
taken at the meeting, including the number of shares voting for, the
number of shares voting against, and the number of shares abstaining
or withheld from voting. If the matter voted on was the election of
directors, the corporation shall report the number of shares (or
votes if voted cumulatively) cast for each nominee for director. If
more than one class or series of shares voted, the report shall state
the appropriate numbers by class and series of shares.
1510. (a) Any foreign corporation qualified to transact intrastate

business in this state shall provide the information specified in
Section 1509, at the request of a shareholder resident in this state.
(b) Any of the following shall be considered to be a shareholder
resident in this state:
(1) A natural person residing in this state.
(2) A bank organized under Division 1 (commencing with Section 99)
of the Financial Code, whether acting for itself, acting as a sole
fiduciary, or acting with one or more other persons as a fiduciary.
(3) A national bank having its head office in this state whether
acting for itself, acting as a sole fiduciary, or acting with one or
more other persons as a fiduciary.
(4) Any retirement fund for public employees established or
authorized by any law of this state.
1511. Any foreign corporation which is not qualified to transact

intrastate business in this state but has one or more subsidiaries
which are domestic corporations or foreign corporations qualified to
transact intrastate business in this state shall provide the
information specified in Section 1509, at the request of a
shareholder resident in this state, as defined by subdivision (b) of
Section 1510.
1512. (a) For the purposes of Sections 1509, 1510, and 1511, a
shareholder includes (1) any person named in a share certificate as a
shareholder or (2) any person named as a shareholder on the records
of a central depository, bank, or broker-dealer with respect to
shares which are subject to the control of the central depository,
bank, or broker-dealer.
(b) A beneficiary of a trust, a beneficiary of the estate of a
decedent, or an employee with respect to a pension, retirement, or
health care trust or fund is not a shareholder of any shares standing
in the name of the trust, the fund, the decedent, or the estate of
the decedent.
(c) A person who is a shareholder by reason of paragraph (2) of
subdivision (a) shall provide the corporation with a photocopy of a
receipt of a statement from the central depository, bank, or
broker-dealer showing the person to be a shareholder and the
corporation shall accept the photocopy as sufficient evidence
thereof.
CORPORATIONS CODE
SECTION 1600-1605
1600. (a) A shareholder or shareholders holding at least 5 percent

in the aggregate of the outstanding voting shares of a corporation or
who hold at least 1 percent of those voting shares and have filed a
Schedule 14A with the United States Securities and Exchange
Commission (or in case the corporation is a bank the deposits of
which are insured in accordance with the Federal Deposit Insurance
Act, have filed a Form F-6 with the appropriate federal bank
regulatory agency) shall have an absolute right to do either or both
of the following: (1) inspect and copy the record of shareholders'
names and addresses and shareholdings during usual business hours
upon five business days' prior written demand upon the corporation,
or (2) obtain from the transfer agent for the corporation, upon
written demand and upon the tender of its usual charges for such a
list (the amount of which charges shall be stated to the shareholder
by the transfer agent upon request), a list of the shareholders'
names and addresses, who are entitled to vote for the election of
directors, and their shareholdings, as of the most recent record date
for which it has been compiled or as of a date specified by the
shareholder subsequent to the date of demand. The list shall be made
available on or before the later of five business days after the
demand is received or the date specified therein as the date as of
which the list is to be compiled. A corporation shall have the
responsibility to cause its transfer agent to comply with this
subdivision.
(b) Any delay by the corporation or the transfer agent in
complying with a demand under subdivision (a) beyond the time limits
specified therein shall give the shareholder or shareholders properly
making the demand a right to obtain from the superior court, upon
the filing of a verified complaint in the proper county and after a
hearing, notice of which shall be given to such persons and in such
manner as the court may direct, an order postponing any shareholders'
meeting previously noticed for a period equal to the period of such
delay. Such right shall be in addition to any other legal or
equitable remedies to which the shareholder may be entitled.
(c) The record of shareholders shall also be open to inspection
and copying by any shareholder or holder of a voting trust
certificate at any time during usual business hours upon written
demand on the corporation, for a purpose reasonably related to such
holder's interests as a shareholder or holder of a voting trust
certificate.
(d) Any inspection and copying under this section may be made in
person or by agent or attorney. The rights provided in this section
may not be limited by the articles or bylaws. This section applies to
any domestic corporation and to any foreign corporation having its
principal executive office in this state or customarily holding
meetings of its board in this state.
1601. (a) The accounting books and records and minutes of

proceedings of the shareholders and the board and committees of the
board of any domestic corporation, and of any foreign corporation
keeping any such records in this state or having its principal
executive office in this state, shall be open to inspection upon the
written demand on the corporation of any shareholder or holder of a
voting trust certificate at any reasonable time during usual business
hours, for a purpose reasonably related to such holder's interests
as a shareholder or as the holder of such voting trust certificate.
The right of inspection created by this subdivision shall extend to
the records of each subsidiary of a corporation subject to this
subdivision.
(b) Such inspection by a shareholder or holder of a voting trust
certificate may be made in person or by agent or attorney, and the
right of inspection includes the right to copy and make extracts. The
right of the shareholders to inspect the corporate records may not
be limited by the articles or bylaws.
1602. Every director shall have the absolute right at any

reasonable time to inspect and copy all books, records and documents
of every kind and to inspect the physical properties of the
corporation of which such person is a director and also of its
subsidiary corporations, domestic or foreign. Such inspection by a
director may be made in person or by agent or attorney and the right
of inspection includes the right to copy and make extracts. This
section applies to a director of any foreign corporation having its
principal executive office in this state or customarily holding
meetings of its board in this state.
1603. (a) Upon refusal of a lawful demand for inspection, the

superior court of the proper county, may enforce the right of
inspection with just and proper conditions or may, for good cause
shown, appoint one or more competent inspectors or accountants to
audit the books and records kept in this state and investigate the
property, funds and affairs of any domestic corporation or any
foreign corporation keeping records in this state and of any
subsidiary corporation thereof, domestic or foreign, keeping records
in this state and to report thereon in such manner as the court may
direct.
(b) All officers and agents of the corporation shall produce to
the inspectors or accountants so appointed all books and documents in
their custody or power, under penalty of punishment for contempt of
court.
(c) All expenses of the investigation or audit shall be defrayed
by the applicant unless the court orders them to be paid or shared by
the corporation.
1604. In any action or proceeding under Section 1600 or Section

1601, if the court finds the failure of the corporation to comply
with a proper demand thereunder was without justification, the court
may award an amount sufficient to reimburse the shareholder or holder
of a voting trust certificate for the reasonable expenses incurred
by such holder, including attorneys' fees, in connection with such
action or proceedings.
1605. If any record subject to inspection pursuant to this chapter

is not maintained in written form, a request for inspection is not
complied with unless and until the corporation at its expense makes
such record available in written form.
CORPORATIONS CODE
SECTION 1700-1702
1700. In addition to the provisions of Chapter 4 (commencing with

Section 413. 10) of Title 5 of Part 2 of the Code of Civil Procedure,
process may be served upon domestic corporations as provided in this
chapter.
1701. Delivery by hand of a copy of any process against the

corporation (a) to any natural person designated by it as agent or
(b), if a corporate agent has been designated, to any person named in
the latest certificate of the corporate agent filed pursuant to
Section 1505 at the office of such corporate agent shall constitute
valid service on the corporation.
1702. (a) If an agent for the purpose of service of process has

resigned and has not been replaced or if the agent designated cannot
with reasonable diligence be found at the address designated for
personally delivering the process, or if no agent has been
designated, and it is shown by affidavit to the satisfaction of the
court that process against a domestic corporation cannot be served
with reasonable diligence upon the designated agent by hand in the
manner provided in Section 415.10, subdivision (a) of Section 415.20
or subdivision (a) of Section 415.30 of the Code of Civil Procedure
or upon the corporation in the manner provided in subdivision (a),
(b) or (c) of Section 416.10 or subdivision (a) of Section 416.20 of
the Code of Civil Procedure, the court may make an order that the
service be made upon the corporation by delivering by hand to the
Secretary of State, or to any person employed in the Secretary of
State's office in the capacity of assistant or deputy, one copy of
the process for each defendant to be served, together with a copy of
the order authorizing such service. Service in this manner is deemed
complete on the 10th day after delivery of the process to the
Secretary of State.
(b) Upon the receipt of any such copy of process and the fee
therefor, the Secretary of State shall give notice of the service of
the process to the corporation at its principal executive office, by
forwarding to such office, by registered mail with request for return
receipt, the copy of the process or, if the records of the Secretary
of State do not disclose an address for its principal executive
office, by forwarding such copy in the same manner to the last
designated agent for service of process who has not resigned. If the
agent for service of process has resigned and has not been replaced
and the records of the Secretary of State do not disclose an address
for its principal executive office, no action need be taken by the
Secretary of State.
(c) The Secretary of State shall keep a record of all process
served upon the Secretary of State under this chapter and shall
record therein the time of service and the Secretary of State's
action with reference thereto. The certificate of the Secretary of
State, under the Secretary of State's official seal, certifying to
the receipt of process, the giving of notice thereof to the
corporation and the forwarding of such process pursuant to this
section, shall be competent and prima facie evidence of the matters
stated therein.
(d) The court order pursuant to subdivision (a) that service of
process be made upon the corporation by delivery to the Secretary of
State may be a court order of a court of another state, or of any
federal court if the suit, action, or proceeding has been filed in
that court.
CORPORATIONS CODE
SECTION 1800-1809
1800. (a) A verified complaint for involuntary dissolution of a

corporation on any one or more of the grounds specified in
subdivision (b) may be filed in the superior court of the proper
county by any of the following persons:
(1) One-half or more of the directors in office.
(2) A shareholder or shareholders who hold shares representing not
less than 33 1/3 percent of (i) the total number of outstanding
shares (assuming conversion of any preferred shares convertible into
common shares) or (ii) the outstanding common shares or (iii) the
equity of the corporation, exclusive in each case of shares owned by
persons who have personally participated in any of the transactions
enumerated in paragraph (4) of subdivision (b), or any shareholder or
shareholders of a close corporation.
(3) Any shareholder if the ground for dissolution is that the
period for which the corporation was formed has terminated without
extension thereof.
(4) Any other person expressly authorized to do so in the
articles.
(b) The grounds for involuntary dissolution are that:
(1) The corporation has abandoned its business for more than one
year.
(2) The corporation has an even number of directors who are
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, and the holders of the voting shares of the corporation are
so divided into factions that they cannot elect a board consisting of
an uneven number.
(3) There is internal dissension and two or more factions of
shareholders in the corporation are so deadlocked that its business
can no longer be conducted with advantage to its shareholders or the
shareholders have failed at two consecutive annual meetings at which
all voting power was exercised, to elect successors to directors
whose terms have expired or would have expired upon election of their
successors.
(4) Those in control of the corporation have been guilty of or
have knowingly countenanced persistent and pervasive fraud,
mismanagement or abuse of authority or persistent unfairness toward
any shareholders or its property is being misapplied or wasted by its
directors or officers.
(5) In the case of any corporation with 35 or fewer shareholders
(determined as provided in Section 605), liquidation is reasonably
necessary for the protection of the rights or interests of the
complaining shareholder or shareholders.
(6) The period for which the corporation was formed has terminated
without extension of such period.
(c) At any time prior to the trial of the action any shareholder
or creditor may intervene therein.
(d) This section does not apply to any corporation subject to the
Banking Law (Division 1 (commencing with Section 99) of the Financial
Code), the Public Utilities Act (Part 1 (commencing with 201) of
Division 1 of the Public Utilities Code), the Savings and Loan
Association Law (Division 2 (commencing with Section 5000) of the
Financial Code) or Article 14 (commencing with Section 1010) of
Chapter 1 of Part 2 of Division 1 of the Insurance Code.
(e) For the purposes of this section, "shareholder" includes a
beneficial owner of shares who has entered into an agreement under
Section 300 or 706.
1801. (a) The Attorney General may bring an action against any
domestic corporation or purported domestic corporation in the name of
the people of this state, upon the Attorney General's own
information or upon complaint of a private party, to procure a
judgment dissolving the corporation and annulling, vacating or
forfeiting its corporate existence upon any of the following grounds:
(1) The corporation has seriously offended against any provision
of the statutes regulating corporations.
(2) The corporation has fraudulently abused or usurped corporate
privileges or powers.
(3) The corporation has violated any provision of law by any act
or default which under the law is a ground for forfeiture of
corporate existence.
(4) The corporation has failed to pay to the Franchise Tax Board
for a period of five years any tax imposed upon it by the Bank and
Corporation Tax Law.
(b) If the ground of the action is a matter or act which the
corporation has done or omitted to do that can be corrected by
amendment of its articles or by other corporate action, such suit
shall not be maintained unless (1) the Attorney General, at least 30
days prior to the institution of suit, has given the corporation
written notice of the matter or act done or omitted to be done and
(2) the corporation has failed to institute proceedings to correct it
within the 30-day period or thereafter fails to prosecute such
proceedings.
(c) In any such action the court may order dissolution or such
other or partial relief as it deems just and expedient. The court
also may appoint a receiver for winding up the affairs of the
corporation or may order that the corporation be wound up by its
board subject to the supervision of the court.
(d) Service of process on the corporation may be made pursuant to
Chapter 17 or by written notice to the president or secretary of the
corporation at the address indicated in the corporation's last tax
return filed pursuant to the Bank and Corporation Tax Law. The
Attorney General shall also publish one time in a newspaper of
general circulation in the proper county a notice to the shareholders
of the corporation.
1802. If the ground for the complaint for involuntary dissolution

of the corporation is a deadlock in the board as set forth in
subdivision (b)(2) of Section 1800, the court may appoint a
provisional director. The provisions of subdivision (c) of Section
308 apply to any such provisional director so appointed.
1803. If, at the time of the filing of a complaint for involuntary

dissolution or at any time thereafter, the court has reasonable
grounds to believe that unless a receiver of the corporation is
appointed the interests of the corporation and its shareholders will
suffer pending the hearing and determination of the complaint, upon
the application of the plaintiff, and after a hearing upon such
notice to the corporation as the court may direct and upon the giving
of security pursuant to Sections 566 and 567 of the Code of Civil
Procedure, the court may appoint a receiver to take over and manage
the business and affairs of the corporation and to preserve its
property pending the hearing and determination of the complaint for
dissolution.
1804. After hearing the court may decree a winding up and

dissolution of the corporation if cause therefor is shown or, with or
without winding up and dissolution, may make such orders and decrees
and issue such injunctions in the case as justice and equity
require.
1805. (a) Involuntary proceedings for winding up a corporation

commence when the order for winding up is entered under Section 1804.
(b) When an involuntary proceeding for winding up has commenced,
the board shall conduct the winding up of the affairs of the
corporation, subject to the supervision of the court, unless other
persons are appointed by the court, on good cause shown, to conduct
the winding up. The directors or such other persons may, subject to
any restrictions imposed by the court, exercise all their powers
through the executive officers without any order of court.
(c) When an involuntary proceeding for winding up has commenced,
the corporation shall cease to carry on business except to the extent
necessary for the beneficial winding up thereof and except during
such period as the board may deem necessary to preserve the
corporation's goodwill or going-concern value pending a sale of its
business or assets, or both, in whole or in part. The directors shall
cause written notice of the commencement of the proceeding for
involuntary winding up to be given by mail to all shareholders and to
all known creditors and claimants whose addresses appear on the
records of the corporation, unless the order for winding up has been
stayed by appeal therefrom or otherwise or the proceeding or the
execution of the order has been enjoined.
1806. When an involuntary proceeding for winding up has been

commenced, the jurisdiction of the court includes:
(a) The requirement of the proof of all claims and demands against
the corporation, whether due or not yet due, contingent,
unliquidated or sounding only in damages, and the barring from
participation of creditors and claimants failing to make and present
claims and proof as required by any order.
(b) The determination or compromise of all claims of every nature
against the corporation or any of its property, and the determination
of the amount of money or assets required to be retained to pay or
provide for the payment of claims.
(c) The determination of the rights of shareholders and of all
classes of shareholders in and to the assets of the corporation.
(d) The presentation and filing of intermediate and final accounts
of the directors or other persons appointed to conduct the winding
up and hearing thereon, the allowance, disallowance or settlement
thereof and the discharge of the directors or such other persons from
their duties and liabilities.
(e) The appointment of a commissioner to hear and determine any or
all matters, with such power or authority as the court may deem
proper.
(f) The filling of any vacancies on the board which the directors
or shareholders are unable to fill.
(g) The removal of any director if it appears that the director
has been guilty of dishonesty, misconduct, neglect or abuse of trust
in conducting the winding up or if the director is unable to act. The
court may order an election to fill the vacancy so caused, and may
enjoin, for such time as it considers proper, the reelection of the
director so removed; or the court, in lieu of ordering an election,
may appoint a director to fill the vacancy caused by such removal.
Any director so appointed by the court shall serve until the next
annual meeting of shareholders or until a successor is elected or
appointed.
(h) Staying the prosecution of any suit, proceeding or action
against the corporation and requiring the parties to present and
prove their claims in the manner required of other creditors.
(i) The determination of whether adequate provision has been made
for payment or satisfaction of all debts and liabilities not actually
paid.
(j) The making of orders for the withdrawal or termination of
proceedings to wind up and dissolve, subject to conditions for the
protection of shareholders and creditors.
(k) The making of an order, upon the allowance or settlement of
the final accounts of the directors or such other persons, that the
corporation has been duly wound up and is dissolved. Upon the making
of such order, the corporate existence shall cease except for
purposes of further winding up if needed.
(l) The making of orders for the bringing in of new parties as the
court deems proper for the determination of all questions and
matters.
1807. (a) All creditors and claimants may be barred from

participation in any distribution of the general assets if they fail
to make and present claims and proofs within such time as the court
may direct, which shall not be less than four nor more than six
months after the first publication of notice to creditors unless it
appears by affidavit that there are no claims, in which case the time
limit may be three months. If it is shown that a claimant did not
receive notice because of absence from the state or other cause, the
court may allow a claim to be filed or presented at any time before
distribution is completed.
(b) Such notice to creditors shall be published not less than once
a week for three consecutive weeks in a newspaper of general
circulation published in the county in which the proceeding is
pending or, if there is no such newspaper published in that county,
in such newspaper as may be designated by the court, directing
creditors and claimants to make and present claims and proofs to the
person, at the place and within the time specified in the notice. A
copy of the notice shall be mailed to each person shown as a creditor
or claimant on the books of the corporation, at such person's last
known address.
(c) Holders of secured claims may prove for the whole debt in
order to realize any deficiency. If such creditors fail to present
their claims they shall be barred only as to any right to claim
against the general assets for any deficiency in the amount realized
on their security.
(d) Before any distribution is made the amount of any unmatured,
contingent or disputed claim against the corporation which has been
presented and has not been disallowed, or such part of any such claim
as the holder would be entitled to if the claim were due,
established or absolute, shall be paid into court and there remain to
be paid over to the party when the party becomes entitled thereto
or, if the party fails to establish a claim, to be paid over or
distributed with the other assets of the corporation to those
entitled thereto; or such other provision for the full payment of
such claim, if and when established, shall be made as the court may
deem adequate. A creditor whose claim has been allowed but is not yet
due shall be entitled to its present value upon distribution.
(e) Suits against the corporation on claims which have been
rejected shall be commenced within 30 days after written notice of
rejection thereof is given to the claimant.
1808. (a) Upon the final settlement of the accounts of the

directors or other persons appointed pursuant to Section 1805 and the
determination that the corporation's affairs are in condition for it
to be dissolved, the court may make an order declaring the
corporation duly wound up and dissolved. The order shall declare:
(1) That the corporation has been duly wound up, that a final
franchise tax return, as described by Section 23332 of the Revenue
and Taxation Code, has been filed with the Franchise Tax Board as
required under Part 10.2 (commencing with Section 18401) of Division
2 of the Revenue and Taxation Code, and that its known debts and
liabilities have been paid or adequately provided for, or that those
debts and liabilities have been paid as far as its assets permitted,
as the case may be. If there are known debts or liabilities for
payment of which adequate provision has been made, the order shall
state what provision has been made, setting forth the name and
address of the corporation, person or governmental agency that has
assumed or guaranteed the payment, or the name and address of the
depositary with which deposit has been made or such other information
as may be necessary to enable the creditor or other person to whom
payment is to be made to appear and claim payment of the debt or
liability.
(2) That its known assets have been distributed to the persons
entitled thereto or that it acquired no known assets, as the case may
be.
(3) That the accounts of directors or such other persons have been
settled and that they are discharged from their duties and
liabilities to creditors and shareholders.
(4) That the corporation is dissolved.
The court may make such additional orders and grant such further
relief as it deems proper upon the evidence submitted.
(b) Upon the making of the order declaring the corporation
dissolved, corporate existence shall cease except for the purposes of
further winding up if needed; and the directors or such other
persons shall be discharged from their duties and liabilities, except
in respect to completion of the winding up.
1809. Whenever a corporation is dissolved or its existence

forfeited by order, decree or judgment of a court, a copy of the
order, decree or judgment, certified by the clerk of court, shall
forthwith be filed in the office of the Secretary of State. The
Secretary of State shall notify the Franchise Tax Board of the
dissolution.
CORPORATIONS CODE
SECTION 1900-1907
1900. (a) Any corporation may elect voluntarily to wind up and

dissolve by the vote of shareholders holding shares representing 50
percent or more of the voting power.
(b) Any corporation which comes within one of the following
descriptions may elect by approval by the board to wind up and
dissolve:
(1) A corporation as to which an order for relief has been entered
under Chapter 7 of the federal bankruptcy law.
(2) A corporation which has disposed of all of its assets and has
not conducted any business for a period of five years immediately
preceding the adoption of the resolution electing to dissolve the
corporation.
(3) A corporation which has issued no shares.
1900.5. (a) Notwithstanding any other provision of this division,

when a corporation has not issued shares, a majority of the
directors, or, if no directors have been named in the articles or
been elected, the incorporator or a majority of the incorporators may
sign and verify a certificate of dissolution stating the following:
(1) That the certificate of dissolution is being filed within 12
months from the date the articles of incorporation were filed.
(2) That the corporation does not have any debts or other
liabilities, except as provided in paragraph (3).
(3) That the tax liability will be satisfied on a taxes paid basis
or that a person or corporation or other business entity assumes the
tax liability, if any, of the dissolving corporation and is
responsible for additional corporate taxes, if any, that are assessed
and that become due after the date of the assumption of the tax
liability.
(4) That a final franchise tax return, as described by Section
23332 of the Revenue and Taxation Code, has been or will be filed
with the Franchise Tax Board as required under Part 10.2 (commencing
with Section 18401) of Division 2 of the Revenue and Taxation Code.
(5) That the corporation has not conducted any business from the
time of the filing of the articles of incorporation.
(6) That the known assets of the corporation remaining after
payment of, or adequately providing for, known debts and liabilities
have been distributed to the persons entitled thereto or that the
corporation acquired no known assets, as the case may be.
(7) That a majority of the directors, or, if no directors have
been named in the articles or been elected, the incorporator or a
majority of the incorporators authorized the dissolution and elected
to dissolve the corporation.
(8) That the corporation has not issued any shares, and if the
corporation has received payments for shares from investors, those
payments have been returned to those investors.
(b) A certificate of dissolution signed and verified pursuant to
subdivision (a) shall be filed with the Secretary of State. The
Secretary of State shall notify the Franchise Tax Board of the
dissolution.
(c) Upon filing a certificate of dissolution pursuant to
subdivision (b), a corporation shall be dissolved and its powers,
rights, and privileges shall cease.
1901. (a) Whenever a corporation has elected to wind up and

dissolve a certificate evidencing such election shall forthwith be
filed.
(b) The certificate shall be an officers' certificate or shall be
signed and verified by at least a majority of the directors then in
office or by one or more shareholders authorized to do so by
shareholders holding shares representing 50 percent or more of the
voting power and shall set forth:
(1) That the corporation has elected to wind up and dissolve.
(2) If the election was made by the vote of shareholders, the
number of shares voting for the election and that the election was
made by shareholders representing at least 50 percent of the voting
power.
(3) If the certificate is executed by a shareholder or
shareholders, that the subscribing shareholder or shareholders were
authorized to execute the certificate by shareholders holding shares
representing at least 50 percent of the voting power.
(4) If the election was made by the board pursuant to subdivision
(b) of Section 1900, the certificate shall also set forth the
circumstances showing the corporation to be within one of the
categories described in said subdivision.
(c) If an election to dissolve made pursuant to subdivision (a) of
Section 1900 is made by the vote of all the outstanding shares and a
statement to that effect is added to the certificate of dissolution
pursuant to Section 1905, the separate filing of the certificate of
election pursuant to this section is not required.
1902. (a) A voluntary election to wind up and dissolve may be

revoked prior to distribution of any assets by the vote of
shareholders holding shares representing a majority of the voting
power, or by approval by the board if the election was by the board
pursuant to subdivision (b) of Section 1900. Thereupon a certificate
evidencing the revocation shall be signed, verified and filed in the
manner prescribed by Section 1901.
(b) The certificate shall set forth:
(1) That the corporation has revoked its election to wind up and
dissolve.
(2) That no assets have been distributed pursuant to the election.
(3) If the revocation was made by the vote of shareholders, the
number of shares voting for the revocation and the total number of
outstanding shares the holders of which were entitled to vote on the
revocation.
(4) If the election and revocation was by the board, that shall be
stated.
1903. (a) Voluntary proceedings for winding up the corporation

commence upon the adoption of the resolution of shareholders or
directors of the corporation electing to wind up and dissolve, or
upon the filing with the corporation of a written consent of
shareholders thereto.
(b) When a voluntary proceeding for winding up has commenced, the
board shall continue to act as a board and shall have full powers to
wind up and settle its affairs, both before and after the filing of
the certificate of dissolution.
(c) When a voluntary proceeding for winding up has commenced, the
corporation shall cease to carry on business except to the extent
necessary for the beneficial winding up thereof and except during
such period as the board may deem necessary to preserve the
corporation's goodwill or going-concern value pending a sale of its
business or assets, or both, in whole or in part. The board shall
cause written notice of the commencement of the proceeding for
voluntary winding up to be given by mail to all shareholders (except
no notice need be given to the shareholders who voted in favor of
winding up and dissolving the corporation) and to all known creditors
and claimants whose addresses appear on the records of the
corporation.
1904. If a corporation is in the process of voluntary winding up,

the superior court of the proper county, upon the petition of (a) the
corporation, or (b) a shareholder or shareholders who hold shares
representing 5 percent or more of the total number of any class of
outstanding shares, or (c) any shareholder or shareholders of a close
corporation, or (d) three or more creditors, and upon such notice to
the corporation and to other persons interested in the corporation
as shareholders and creditors as the court may order, may take
jurisdiction over such voluntary winding up proceeding if that
appears necessary for the protection of any parties in interest. The
court, if it assumes jurisdiction, may make such orders as to any and
all matters concerning the winding up of the affairs of the
corporation and for the protection of its shareholders and creditors
as justice and equity may require. The provisions of Chapter 18
(commencing with Section 1800) (except Sections 1800 and 1801) shall
apply to such court proceedings.
1905. (a) When a corporation has been completely wound up without

court proceedings therefor, a majority of the directors then in
office shall sign and verify a certificate of dissolution stating:
(1) That the corporation has been completely wound up.
(2) That its known debts and liabilities have been actually paid,
or adequately provided for, or paid or adequately provided for as far
as its assets permitted, or that it has incurred no known debts or
liabilities, as the case may be. If there are known debts or
liabilities for payment of which adequate provision has been made,
the certificate shall state what provision has been made, setting
forth the name and address of the corporation, person or governmental
agency that has assumed or guaranteed the payment, or the name and
address of the depositary with which deposit has been made or any
other information that may be necessary to enable the creditor or
other person to whom payment is to be made to appear and claim
payment of the debt or liability.
be.
(5) If no certificate of election is to be filed pursuant to
subdivision (c) of Section 1901, that the election to dissolve was
made by the vote of all the outstanding shares.
with the Franchise Tax Board, as required under Part 10.2 (commencing
(b) The certificate of dissolution shall be filed with the
Secretary of State and thereupon the corporate powers, rights, and
privileges of the corporation shall cease. The Secretary of State
shall notify the Franchise Tax Board of the dissolution.
1905.1. If a corporation has filed a certificate of dissolution

with the Secretary of State on or after January 1, 1992, and before
the effective date of the act adding this section, pursuant to
Section 1905, prior to its amendment by the act adding this section,
and the Franchise Tax Board has not, as of that effective date, made
the determination required by subdivision (c) of Section 1905, prior
to its amendment by the act adding this section, then the corporation
shall be dissolved as of the date of filing the certificate of
dissolution and thereupon its corporate existence shall cease.
1906. Except as otherwise provided by law, if the term of existence

for which any corporation was organized expires without renewal or
extension thereof, the board shall terminate its business and wind up
its affairs; and when the business and affairs of the corporation
have been wound up a majority of the directors shall execute and file
a certificate conforming to the requirements of Section 1905.
1907. (a) The board, in lieu of filing the certificate of

dissolution, may petition the superior court of the proper county for
an order declaring the corporation duly wound up and dissolved. Such
petition shall be filed in the name of the corporation.
(b) Upon the filing of the petition, the court shall make an order
requiring all persons interested to show cause why an order should
not be made declaring the corporation duly wound up and dissolved and
shall direct that the order be served by notice to all creditors,
claimants and shareholders in the same manner as the notice given
under subdivision (b) of Section 1807.
(c) Any person claiming to be interested as shareholder, creditor
or otherwise may appear in the proceeding at any time before the
expiration of 30 days from the completion of publication of the order
to show cause and contest the petition, and upon failure to appear
such person's claim shall be barred.
(d) Thereafter an order shall be entered and filed and have the
effect as prescribed in Sections 1808 and 1809.
CORPORATIONS CODE
SECTION 2000-2011
2000. (a) Subject to any contrary provision in the articles, in any

suit for involuntary dissolution, or in any proceeding for voluntary
dissolution initiated by the vote of shareholders representing only
50 percent of the voting power, the corporation or, if it does not
elect to purchase, the holders of 50 percent or more of the voting
power of the corporation (the "purchasing parties") may avoid the
dissolution of the corporation and the appointment of any receiver by
purchasing for cash the shares owned by the plaintiffs or by the
shareholders so initiating the proceeding (the "moving parties") at
their fair value. The fair value shall be determined on the basis of
the liquidation value as of the valuation date but taking into
account the possibility, if any, of sale of the entire business as a
going concern in a liquidation. In fixing the value, the amount of
any damages resulting if the initiation of the dissolution is a
breach by any moving party or parties of an agreement with the
purchasing party or parties may be deducted from the amount payable
to such moving party or parties, unless the ground for dissolution is
that specified in paragraph (4) of subdivision (b) of Section 1800.
The election of the corporation to purchase may be made by the
approval of the outstanding shares (Section 152) excluding shares
held by the moving parties.
(b) If the purchasing parties (1) elect to purchase the shares
owned by the moving parties, and (2) are unable to agree with the
moving parties upon the fair value of such shares, and (3) give bond
with sufficient security to pay the estimated reasonable expenses
(including attorneys' fees) of the moving parties if such expenses
are recoverable under subdivision (c), the court upon application of
the purchasing parties, either in the pending action or in a
proceeding initiated in the superior court of the proper county by
the purchasing parties in the case of a voluntary election to wind up
and dissolve, shall stay the winding up and dissolution proceeding
and shall proceed to ascertain and fix the fair value of the shares
owned by the moving parties.
(c) The court shall appoint three disinterested appraisers to
appraise the fair value of the shares owned by the moving parties,
and shall make an order referring the matter to the appraisers so
appointed for the purpose of ascertaining such value. The order shall
prescribe the time and manner of producing evidence, if evidence is
required. The award of the appraisers or of a majority of them, when
confirmed by the court, shall be final and conclusive upon all
parties. The court shall enter a decree which shall provide in the
alternative for winding up and dissolution of the corporation unless
payment is made for the shares within the time specified by the
decree. If the purchasing parties do not make payment for the shares
within the time specified, judgment shall be entered against them and
the surety or sureties on the bond for the amount of the expenses
(including attorneys' fees) of the moving parties. Any shareholder
aggrieved by the action of the court may appeal therefrom.
(d) If the purchasing parties desire to prevent the winding up and
dissolution, they shall pay to the moving parties the value of their
shares ascertained and decreed within the time specified pursuant to
this section, or, in case of an appeal, as fixed on appeal. On
receiving such payment or the tender thereof, the moving parties
shall transfer their shares to the purchasing parties.
(e) For the purposes of this section, "shareholder" includes a
beneficial owner of shares who has entered into an agreement under
Section 300 or 706.
(f) For the purposes of this section, the valuation date shall be
(1) in the case of a suit for involuntary dissolution under Section
1800, the date upon which that action was commenced, or (2) in the
case of a proceeding for voluntary dissolution initiated by the vote
of shareholders representing only 50 percent of the voting power, the
date upon which that proceeding was initiated. However, in either
case the court may, upon the hearing of a motion by any party, and
for good cause shown, designate some other date as the valuation
date.
2001. The powers and duties of the directors (or other persons
appointed by the court pursuant to Section 1805) and officers after
commencement of a dissolution proceeding include, but are not limited
to, the following acts in the name and on behalf of the corporation:
(a) To elect officers and to employ agents and attorneys to
liquidate or wind up its affairs.
(b) To continue the conduct of the business insofar as necessary
for the disposal or winding up thereof.
(c) To carry out contracts and collect, pay, compromise and settle
debts and claims for or against the corporation.
(d) To defend suits brought against the corporation.
(e) To sue, in the name of the corporation, for all sums due or
owing to the corporation or to recover any of its property.
(f) To collect any amounts remaining unpaid on subscriptions to
shares or to recover unlawful distributions.
(g) To sell at public or private sale, exchange, convey or
otherwise dispose of all or any part of the assets of the corporation
for cash in an amount deemed reasonable by the board without
compliance with the provisions of Section 1001 (except subdivision
(d) thereof), or (subject to compliance with the provisions of
Sections 1001, 1200 and 1201, but Chapter 13 (commencing with Section
1300) shall not be applicable thereto) upon such other terms and
conditions and for such other considerations as the board deems
reasonable or expedient; and to execute bills of sale and deeds of
conveyance in the name of the corporation.
(h) In general, to make contracts and to do any and all things in
the name of the corporation which may be proper or convenient for the
purposes of winding up, settling and liquidating the affairs of the
corporation.
2002. A vacancy on the board may be filled during a winding up

proceeding in the manner provided in Section 305.
2003. When the identity of the directors or their right to hold

office is in doubt, or if they are dead or unable to act, or they
fail or refuse to act or their whereabouts cannot be ascertained, any
interested person may petition the superior court of the proper
county to determine the identity of the directors or, if there are no
directors, to appoint directors to wind up the affairs of the
corporation, after hearing upon such notice to such persons as the
court may direct.
2004. After determining that all the known debts and liabilities of
a corporation in the process of winding up have been paid or
adequately provided for, the board shall distribute all the remaining
corporate assets among the shareholders according to their
respective rights and preferences or, if there are no shareholders,
to the persons entitled thereto. If the winding up is by court
proceeding or subject to court supervision, the distribution shall
not be made until after the expiration of any period for the
presentation of claims which has been prescribed by order of the
court.
2005. The payment of a debt or liability, whether the whereabouts

of the creditor is known or unknown, has been adequately provided for
if the payment has been provided for by either of the following
means:
(a) Payment thereof has been assumed or guaranteed in good faith
by one or more financially responsible corporations or other persons
or by the United States government or any agency thereof, and the
provision (including the financial responsibility of such
corporations or other persons) was determined in good faith and with
reasonable care by the board to be adequate at the time of any
distribution of the assets by the board pursuant to this chapter.
(b) The amount of the debt or liability has been deposited as
provided in Section 2008.
This section does not prescribe the exclusive means of making
adequate provision for debts and liabilities.
2006. Distribution may be made either in money or in property or
securities and either in installments from time to time or as a
whole, if this can be done fairly and ratably and in conformity with
the provisions of the articles and the rights of the shareholders,
and shall be made as soon as reasonably consistent with the
beneficial liquidation of the corporate assets.
2007. (a) If the corporation in process of winding up has both

preferred and common shares outstanding, a plan of distribution of
the shares, obligations or securities of any other corporation,
domestic or foreign, or assets other than money which is not in
accordance with the liquidation rights of the preferred shares as
specified in the articles may nevertheless be adopted if approved by
(1) the board and (2) by approval of the outstanding shares (Section
152) of each class. The plan may provide that such distribution is in
complete or partial satisfaction of the rights of any of such
shareholders upon distribution and liquidation of the assets.
(b) A plan of distribution so approved shall be binding upon all
the shareholders except as provided in subdivision (c). The board
shall cause notice of the adoption of the plan to be given by mail
within 20 days after its adoption to all holders of shares having a
liquidation preference.
(c) Shareholders having a liquidation preference who dissent from
the plan of distribution are entitled to be paid the amount of their
liquidation preference in cash if they file written demand for
payment with the corporation within 30 days after the date of mailing
of the notice of the adoption of the plan of distribution, unless
the plan of distribution is abandoned. The demand shall state the
number and class of the shares held of record by the shareholder in
respect of which the shareholder claims payment.
(d) If any such demand for cash payment is filed, the board in its
discretion may abandon the plan without further approval by the
outstanding shares (Section 152), and all shareholders shall then be
entitled to distribution according to their rights and liquidation
preferences in the process of winding up.
(e) This section shall not apply to a distribution in accordance
with a reorganization the principal terms of which have been approved
pursuant to subdivision (b) of Section 1202.
2008. (a) If any shareholders or creditors are unknown or fail or

refuse to accept their payment, dividend, or distribution in cash or
property or their whereabouts cannot be ascertained after diligent
inquiry, or the existence or amount of a claim of a creditor or
shareholder is contingent, contested, or not determined, or if the
ownership of any shares of stock is in dispute, the corporation may
deposit any such payment, dividend, distribution, or the maximum
amount of the claim with the Controller in trust for the benefit of
those lawfully entitled to the payment, dividend, distribution, or
the amount of the claim. The payment, dividend, or distribution shall
be paid over by the depositary to the lawful owners, their
representatives or assigns, upon satisfactory proof of title.
(b) For the purpose of providing for the transmittal, receipt,
accounting for, claiming, management, and investment of all money or
other property deposited with the Controller under subdivision (a),
the money or other property shall be deemed to be paid or delivered
for deposit with the Controller under Chapter 7 (commencing with
Section 1500) of Title 10 of Part 3 of the Code of Civil Procedure,
and may be recovered in the manner prescribed in that chapter.
2009. (a) Whenever in the process of winding up a corporation any

distribution of assets has been made, otherwise than under an order
of court, without prior payment or adequate provision for payment of
any of the debts and liabilities of the corporation, any amount so
improperly distributed to any shareholder may be recovered by the
corporation. Any of such shareholders may be joined as defendants in
the same action or brought in on the motion of any other defendant.
the liability under subdivision (a) against any or all shareholders
receiving the distribution by any one or more creditors of the
corporation, whether or not they have reduced their claims to
judgment.
(c) Shareholders who satisfy any liability under this section
shall have the right of ratable contribution from other distributees
similarly liable. Any shareholder who has been compelled to return to
the corporation more than the shareholder's ratable share of the
amount needed to pay the debts and liabilities of the corporation may
require that the corporation recover from any or all of the other
distributees such proportion of the amounts received by them upon the
improper distribution as to give contribution to those held liable
under this section and make the distribution of the assets fair and
ratable, according to the respective rights and preferences of the
shares, after payment or adequate provision for payment of all the
debts and liabilities of the corporation.
(d) As used in this section, "process of winding up" includes
proceedings under Chapters 18 and 19 and also any other distribution
of assets to shareholders made in contemplation of termination or
abandonment of the corporate business.
2010. (a) A corporation which is dissolved nevertheless continues

to exist for the purpose of winding up its affairs, prosecuting and
defending actions by or against it and enabling it to collect and
discharge obligations, dispose of and convey its property and collect
and divide its assets, but not for the purpose of continuing
business except so far as necessary for the winding up thereof.
(b) No action or proceeding to which a corporation is a party
abates by the dissolution of the corporation or by reason of
proceedings for winding up and dissolution thereof.
(c) Any assets inadvertently or otherwise omitted from the winding
up continue in the dissolved corporation for the benefit of the
persons entitled thereto upon dissolution of the corporation and on
realization shall be distributed accordingly.
2011. (a) (1) Causes of action against a dissolved corporation,

whether arising before or after the dissolution of the corporation,
may be enforced against any of the following:
(A) Against the dissolved corporation, to the extent of its
undistributed assets, including, without limitation, any insurance
assets held by the corporation that may be available to satisfy
claims.
(B) If any of the assets of the dissolved corporation have been
distributed to shareholders, against shareholders of the dissolved
corporation to the extent of their pro rata share of the claim or to
the extent of the corporate assets distributed to them upon
dissolution of the corporation, whichever is less.
A shareholder's total liability under this section may not exceed
the total amount of assets of the dissolved corporation distributed
to the shareholder upon dissolution of the corporation.
(2) Except as set forth in subdivision (c), all causes of action
against a shareholder of a dissolved corporation arising under this
section are extinguished unless the claimant commences a proceeding
to enforce the cause of action against that shareholder of a
dissolved corporation prior to the earlier of the following:
(A) The expiration of the statute of limitations applicable to the
cause of action.
(B) Four years after the effective date of the dissolution of the
corporation.
(3) As a matter of procedure only, and not for purposes of
determining liability, shareholders of the dissolved corporation may
be sued in the corporate name of the corporation upon any cause of
action against the corporation. This section does not affect the
rights of the corporation or its creditors under Section 2009, or the
rights, if any, of creditors under the Uniform Fraudulent Transfer
Act, which may arise against the shareholders of a corporation.
(4) This subdivision applies to corporations dissolved on and
after January 1, 1992. Corporations dissolved prior to that date are
subject to the law in effect prior to that date.
(b) Summons or other process against such a corporation may be
served by delivering a copy thereof to an officer, director or person
having charge of its assets or, if no such person can be found, to
any agent upon whom process might be served at the time of
dissolution. If none of such persons can be found with due diligence
and it is so shown by affidavit to the satisfaction of the court,
then the court may make an order that summons or other process be
served upon the dissolved corporation by personally delivering a copy
thereof, together with a copy of the order, to the Secretary of
State or an assistant or deputy secretary of state. Service in this
manner is deemed complete on the 10th day after delivery of the
process to the Secretary of State.
(c) Every such corporation shall survive and continue to exist
indefinitely for the purpose of being sued in any quiet title action.
Any judgment rendered in any such action shall bind each and all of
its shareholders or other persons having any equity or other interest
in such corporation, to the extent of their interest therein, and
such action shall have the same force and effect as an action brought
under the provisions of Sections 410.50 and 410.60 of the Code of
Civil Procedure. Service of summons or other process in any such
action may be made as provided in Chapter 4 (commencing with Section
413.10) of Title 5 of Part 2 of the Code of Civil Procedure or as
provided in subdivision (b).
(d) Upon receipt of such process and the fee therefor, the
Secretary of State forthwith shall give notice to the corporation as
(e) For purposes of Article 4 (commencing with Section 19071) of
Chapter 4 of Part 10.2 of Division 2 of the Revenue and Taxation
Code, the liability described in this section shall be considered a
liability at law with respect to a dissolved corporation.
CORPORATIONS CODE
SECTION 2100-2117.1
2100. This chapter applies only to foreign corporations transacting

intrastate business, except as otherwise expressly provided.
2101. (a) Any foreign corporation (other than a foreign

association) not transacting intrastate business may register its
corporate name with the Secretary of State, provided its corporate
name would be available pursuant to Section 201 to a new corporation
organized under this division at the time of such registration.
(b) Such registration may be made by filing (1) an appliction for
registration signed by a corporate officer stating the name of the
corporation, the state or place under the laws of which it is
incorporated, the date of its incorporation, and that it desires to
register its name under this section; and (2) a certificate of an
authorized public official of the state or place in which it is
organized stating that such corporation is in good standing under
those laws. Such registration shall be effective until the close of
the calendar year in which the application for registration is filed.
(c) A corporation which has in effect a registration of its
corporate name may renew such registration from year to year by
annually filing an application for renewal setting forth the facts
required to be set forth in an original application for registration
and a certificate of good standing as required for the original
registration between the first day of October and the 31st day of
December in each year. Such renewal application shall extend the
registration for the following calendar year.
2102. A foreign corporation which has filed a designation of an

agent for the service of process, pursuant to the requirements of any
law relating to the qualification of foreign corporations in force
at the time of the filing, need not file the statement provided for
in Section 2105, but shall file an amended statement and designation
when required by Section 2107.
2103. Nothing in this chapter repeals, alters or amends the

provisions of Sections 1600 to 1607, inclusive, of the Insurance Code
or prevents any foreign insurance company from carrying out
contracts made before the surrender of its right to engage in
intrastate business or contracts made with citizens of other states
who subsequently become citizens of or residents in this state.
2104. Any foreign lending institution which has not qualified to do
business in this state and which engages in any of the activities
set forth in subdivision (d) of Section 191 shall be considered by
such activities to have appointed the Secretary of State as its agent
for service of process for any action arising out of any such
activities, and, on or before June 30th of each year, shall file a
statement showing the address to which any notice or process may be
sent in the manner and with the effect provided in Section 2111.
No foreign lending institution solely by reason of engaging in any
one or more of the activities set forth in subdivision (d) of
Section 191 shall be required to qualify to do business in this state
nor be subject to (a) any of the provisions of the Bank and
Corporation Tax Law (commencing with Section 23001) of the Revenue
and Taxation Code or (b) any of the provisions of this code or the
Financial Code or Insurance Code relating to qualifications for doing
or transacting business in this state or to requirements pertaining
thereto or to the effects or results of failure to qualify to do
business in this state.
2105. (a) A foreign corporation shall not transact intrastate

business without having first obtained from the Secretary of State a
certificate of qualification. To obtain that certificate it shall
file, on a form prescribed by the Secretary of State, a statement and
designation signed by a corporate officer stating:
(1) Its name and the state or place of its incorporation or
organization.
(2) The address of its principal executive office.
(3) The address of its principal office within this state, if any.
(4) The name of an agent upon whom process directed to the
corporation may be served within this state. The designation shall
comply with the provisions of subdivision (b) of Section 1502.
(5) (A) Its irrevocable consent to service of process directed to
it upon the agent designated and to service of process on the
Secretary of State if the agent so designated or the agent's
successor is no longer authorized to act or cannot be found at the
address given.
(B) Consent under this paragraph extends to service of process
directed to the foreign corporation's agent in California for a
search warrant issued pursuant to Section 1524.2 of the Penal Code,
or for any other validly issued and properly served search warrant,
for records or documents that are in the possession of the foreign
corporation and are located inside or outside of this state. This
subparagraph shall apply to a foreign corporation that is a party or
a nonparty to the matter for which the search warrant is sought. For
purposes of this subparagraph, "properly served" means delivered by
hand, or in a manner reasonably allowing for proof of delivery if
delivered by United States mail, overnight delivery service, or
facsimile to a person or entity listed in Section 2110 of the
Corporations Code.
(6) If it is a corporation which will be subject to the Insurance
Code as an insurer, it shall so state that fact.
(b) Annexed to that statement and designation shall be a
certificate by an authorized public official of the state or place of
incorporation of the corporation to the effect that the corporation
is an existing corporation in good standing in that state or place
or, in the case of an association, an officers' certificate stating
that it is a validly organized and existing business association
under the laws of a specified foreign jurisdiction.
(c) Before it may be designated by any foreign corporation as its
agent for service of process, any corporate agent must comply with
Section 1505.
2106. (a) Subject to the provisions of subdivision (b), upon

payment of the fees required by law the Secretary of State shall file
the statement and designation prescribed in Section 2105 and shall
issue to the corporation a certificate of qualification stating the
date of filing of said statement and designation and that the
corporation is qualified to transact intrastate business, subject,
however, to any licensing requirements otherwise imposed by the laws
of this state.
(b) No foreign corporation having a name which would not be
available pursuant to subdivision (b) of Section 201 to a new
corporation organized under this division shall transact intrastate
business in this state or qualify to do so under this chapter or file
an amended statement and designation containing such name unless
either: (1) it obtains and files an order from a court of competent
jurisdiction permanently enjoining the other corporation having a
conflicting name from doing business in this state under that name;
or (2) the Secretary of State finds, upon proof by affidavit or
otherwise as the Secretary of State may determine, that the business
to be conducted in this state by the foreign corporation is not the
same as or similar to the business being conducted by the corporation
(or to be conducted by the proposed corporation) with whose name it
may conflict and that the public is not likely to be deceived, and
the foreign corporation agrees that it will transact business in this
state under an assumed name disclosed to the Secretary of State and
that it will use such assumed name in all of its dealings with the
Secretary of State and in the conduct of its affairs in this state.
Such assumed name may be its name with the addition of some
distinguishing word or words acceptable to the Secretary of State or
a name available for the name of a domestic corporation pursuant to
subdivision (b) of Section 201. A corporation which has made such an
agreement with the Secretary of State shall not do business in this
state except under the name agreed upon, so long as the agreement
remains in effect.
This subdivision shall not apply to any corporation which is
subject to the Insurance Code as an insurer unless the insurer has
first obtained from the Insurance Commissioner a certificate
approving the assumed name.
2106.5. The Secretary of State shall not file any statement and
designation pursuant to Section 2106 or any amended statement and
designation pursuant to Section 2107, where it appears that the
business is that of an insurer subject to the Insurance Code unless a
certificate of the Insurance Commissioner approving the corporate
name is attached thereto.
2107. (a) If any foreign corporation (but not a foreign

association) qualified to transact intrastate business shall change
its name or make a change affecting an assumed name under Section
2106, it shall file, on a form prescribed by the Secretary of State,
an amended statement signed by a corporate officer setting forth the
change made. The amended statement shall set forth the name
relinquished as well as the new name assumed and there shall be
annexed to the amended statement a certificate of an authorized
public official of its state or place of incorporation that the
change of name was made in accordance with the laws of that state or
place. Upon the filing of the amended statement, the Secretary of
State shall issue a new certificate of qualification.
(b) If any foreign association qualified to transact intrastate
business shall change its name, the address of its principal office
in this state, the address of its principal executive office or its
agent for the service of process, or if the stated address of any
natural person designated as agent is changed, it shall file, on a
form prescribed by the Secretary of State, an amended statement and
designation signed by an officer setting forth the change or changes
made. In the case of a change of name, the amended statement and
designation shall set forth the name relinquished as well as the new
name assumed and there shall be annexed to the amended statement and
designation an officer's certificate stating that such change of name
was made in accordance with its declaration of trust. If the change
includes a change of name, or a change affecting an assumed name
pursuant to Section 2106, upon the filing of the amended statement,
the Secretary of State shall issue a new certificate of
qualification.
(c) If the change includes a change of name of an insurer subject
to the Insurance Code, the form shall include a statement that the
corporation is such an insurer if it does not already so appear.
(d) If a foreign corporation qualified to transact business in
this state shall change the address of its principal office in this
state, the address of its principal executive office, or its agent
for the service of process, or if the stated address of any natural
person designated as agent is changed, the filing of a statement
pursuant to Section 2117 shall supersede the statement and
designation with respect thereto.
2110. Delivery by hand of a copy of any process against a foreign

corporation (a) to any officer of the corporation or its general
manager in this state, or if the corporation is a bank to a cashier
or an assistant cashier, (b) to any natural person designated by it
as agent for the service of process, or (c), if the corporation has
designated a corporate agent, to any person named in the latest
certificate of the corporate agent filed pursuant to Section 1505
shall constitute valid service on the corporation. A copy of the
statement and designation, or a copy of the latest statement filed
pursuant to Section 2117, certified by the Secretary of State, is
sufficient evidence of the appointment of an agent for the service of
process.
2110.1. In addition to the provisions of Chapter 4 (commencing with

Section 413.10) of Title 5 of Part 2 of the Code of Civil Procedure,
process may be served upon a foreign corporation as provided in this
chapter.
2111. (a) If the agent designated for the service of process is a
natural person and cannot be found with due diligence at the address
stated in the designation or if the agent is a corporation and no
person can be found with due diligence to whom the delivery
authorized by Section 2110 may be made for the purpose of delivery to
the corporate agent, or if the agent designated is no longer
authorized to act, or if no agent has been designated and if no one
of the officers or agents of the corporation specified in Section
2110 can be found after diligent search and it is so shown by
affidavit to the satisfaction of the court, then the court may make
an order that service be made by personal delivery to the Secretary
of State or to an assistant or deputy secretary of state of two
copies of the process together with two copies of the order, except
that if the corporation to be served has not filed the statement
required to be filed by Section 2105 then only one copy of the
process and order need be delivered but the order shall include and
set forth an address to which the process shall be sent by the
Secretary of State. Service in this manner is deemed complete on the
10th day after delivery of the process to the Secretary of State.
(b) Upon receipt of the process and order and the fee therefor the
Secretary of State forthwith shall give notice to the corporation of
the service of the process by forwarding by registered or certified
mail, with request for return receipt, a copy of the process and
order to the address specified in the order if the corporation has
not filed the statement required by Section 2105 or to the two stated
addresses of the corporation set forth in the latest statement filed
pursuant to Section 2105 or 2117, or if only one address is set
forth in the latest statement, to the sole stated address of the
corporation.
(c) The Secretary of State shall keep a record of all process
served upon the Secretary of State and shall record therein the time
of service and the Secretary of State's action with respect thereto.
The certificate of the Secretary of State, under the Secretary of
State's official seal, certifying to the receipt of process, the
giving of notice thereof to the corporation, and the forwarding of
the process pursuant to this section, shall be competent and prima
facie evidence of the matters stated therein.
2112. (a) Subject to Section 2113, a foreign corporation which has

qualified to transact intrastate business may surrender its right to
engage in that business within this state by filing a certificate of
surrender signed by a corporate officer stating:
(1) The name of the corporation as shown on the records of the
Secretary of State, and the state or place of incorporation or
organization.
(2) That it revokes its designation of agent for service of
process.
(3) That it surrenders its authority to transact intrastate
business.
(4) That it consents that process against it in any action upon
any liability or obligation incurred within this state prior to the
filing of the certificate of withdrawal may be served upon the
Secretary of State.
(5) A post office address to which the Secretary of State may mail
a copy of any process against the corporation that is served upon
the Secretary of State, which address or the name to which the
process should be sent may be changed from time to time by filing a
statement signed by a corporate officer stating the new address or
name or both.
(6) Except in the case of a foreign association, that a final
and Taxation Code, has been or will be filed with the Franchise Tax
Board, as required under Part 10.2 (commencing with Section 18401) of
Division 2 of the Revenue and Taxation Code.
(b) The Secretary of State shall notify the Franchise Tax Board of
the surrender.
2113. (a) The filing of an agreement of merger of a foreign

disappearing corporation qualified to transact intrastate business in
this state pursuant to Section 1103, or the filing pursuant to
subdivision (d) of Section 1108 of an agreement, certificate, or
other document as to a merger that includes a disappearing foreign
corporation qualified to transact intrastate business, or the filing
of a certificate of ownership as to a foreign subsidiary corporation
qualified to transact intrastate business in this state pursuant to
Section 1110, or the filing by a foreign corporation qualified to
transact intrastate business in this state of an organizational
document containing a statement of conversion pursuant to Section
15677.8, 15911.08, 16908, or 17540.8, constitutes the surrender by
the foreign corporation of its right to engage in intrastate business
within this state.
(b) With respect to corporations for which documents have not been
filed as provided in subdivision (a), a certificate of surrender as
prescribed by Section 2112 shall be filed by a foreign corporation
qualified to transact intrastate business upon its merger into
another foreign corporation.
(c) In lieu of a signature as prescribed by Section 2112, a
certificate of surrender pursuant to subdivision (b) for a merged
foreign corporation may be signed in the name of the surviving
corporation by an officer thereof. In that case, the certificate of
surrender shall be accompanied by a certificate of an authorized
public official of the state or place of incorporation of the merged
foreign corporation stating that the corporation has been merged into
another foreign corporation and setting forth the name and state or
place of incorporation of the surviving foreign corporation.
2114. (a) A foreign corporation that has transacted intrastate

business and has thereafter withdrawn from business in this state may
be served with process in the manner provided in this chapter in any
action brought in this state arising out of that business, whether
or not it has ever complied with the requirements of this chapter.
(b) A foreign corporation that has surrendered its right to
transact intrastate business pursuant to Section 2112 or 2113 may be
served with process in any action upon a liability or obligation
incurred within this state prior to that surrender by delivery of the
process to the Secretary of State, or an assistant or a deputy to
the Secretary of State pursuant to this chapter and no court order
authorizing this service shall be required. The process shall be
mailed in the manner prescribed in this chapter except that it shall
be sent to the address to which process is authorized to be sent in
the certificate of surrender or to the address of the surviving
domestic corporation in the case of a surrender under Section 2113.
(c) If a foreign corporation that is qualified to transact
intrastate business has its right to transact such business forfeited
by the Franchise Tax Board pursuant to the Bank and Corporation Tax
Law (Part 11 (commencing with Section 23001) of Division 2 of the
Revenue and Taxation Code), service of process on that corporation
may be effected in the manner set forth in Sections 2110 and 2111, as
if the right to transact intrastate business had not been forfeited.
(d) The fact that a corporation ceases to transact intrastate
business without filing a certificate of surrender does not revoke
the appointment of any agent for the service of process.
2115. (a) A foreign corporation (other than a foreign association

or foreign nonprofit corporation but including a foreign parent
corporation even though it does not itself transact intrastate
business) is subject to the requirements of subdivision (b)
commencing on the date specified in subdivision (d) and continuing
until the date specified in subdivision (e) if:
(1) The average of the property factor, the payroll factor, and
the sales factor (as defined in Sections 25129, 25132, and 25134 of
the Revenue and Taxation Code) with respect to it is more than 50
percent during its latest full income year and
(2) more than one-half of its outstanding voting securities are
held of record by persons having addresses in this state appearing on
the books of the corporation on the record date for the latest
meeting of shareholders held during its latest full income year or,
if no meeting was held during that year, on the last day of the
latest full income year. The property factor, payroll factor, and
sales factor shall be those used in computing the portion of its
income allocable to this state in its franchise tax return or, with
respect to corporations the allocation of whose income is governed by
special formulas or that are not required to file separate or any
tax returns, which would have been so used if they were governed by
this three-factor formula. The determination of these factors with
respect to any parent corporation shall be made on a consolidated
basis, including in a unitary computation (after elimination of
intercompany transactions) the property, payroll, and sales of the
parent and all of its subsidiaries in which it owns directly or
indirectly more than 50 percent of the outstanding shares entitled to
vote for the election of directors, but deducting a percentage of
the property, payroll, and sales of any subsidiary equal to the
percentage minority ownership, if any, in the subsidiary. For the
purpose of this subdivision, any securities held to the knowledge of
the issuer in the names of broker-dealers, nominees for
broker-dealers (including clearing corporations), or banks,
associations, or other entities holding securities in a nominee name
or otherwise on behalf of a beneficial owner (collectively "nominee
holders"), shall not be considered outstanding. However, if the
foreign corporation requests all nominee holders to certify, with
respect to all beneficial owners for whom securities are held, the
number of shares held for those beneficial owners having addresses
(as shown on the records of the nominee holder) in this state and
outside of this state, then all shares so certified shall be
considered outstanding and held of record by persons having addresses
either in this state or outside of this state as so certified,
provided that the certification so provided shall be retained with
the record of shareholders and made available for inspection and
copying in the same manner as is provided in Section 1600 with
respect to that record. A current list of beneficial owners of a
foreign corporation's securities provided to the corporation by one
or more nominee holders or their agent pursuant to the requirements
of Rule 14b-1(b)(3) or 14b-2(b)(3) as adopted on January 6, 1992,
promulgated under the Securities Exchange Act of 1934, shall
constitute an acceptable certification with respect to beneficial
owners for the purposes of this subdivision.
(b) Except as provided in subdivision (c), the following chapters
and sections of this division shall apply to a foreign corporation as
defined in subdivision (a) (to the exclusion of the law of the
jurisdiction in which it is incorporated):
Chapter 1 (general provisions and definitions), to the extent
applicable to the following provisions;
Section 301 (annual election of directors);
Section 303 (removal of directors without cause);
Section 304 (removal of directors by court proceedings);
Section 305, subdivision (c) (filling of director vacancies where
less than a majority in office elected by shareholders);
Section 309 (directors' standard of care);
Section 316 (excluding paragraph (3) of subdivision (a) and
paragraph (3) of subdivision (f)) (liability of directors for
unlawful distributions);
Section 317 (indemnification of directors, officers, and others);
Sections 500 to 505, inclusive (limitations on corporate
distributions in cash or property);
Section 506 (liability of shareholder who receives unlawful
distribution);
Section 600, subdivisions (b) and (c) (requirement for annual
shareholders' meeting and remedy if same not timely held);
Section 708, subdivisions (a), (b), and (c) (shareholder's right
to cumulate votes at any election of directors);
Section 710 (supermajority vote requirement);
Section 1001, subdivision (d) (limitations on sale of assets);
Section 1101 (provisions following subdivision (e)) (limitations
on mergers);
Section 1151 (first sentence only) (limitations on conversions);
Section 1152 (requirements of conversions);
Chapter 12 (commencing with Section 1200) (reorganizations);
Chapter 13 (commencing with Section 1300) (dissenters' rights);
Sections 1500 and 1501 (records and reports);
Section 1508 (action by Attorney General);
Chapter 16 (commencing with Section 1600) (rights of inspection).
(c) This section does not apply to any corporation (1) with
outstanding securities listed on the New York Stock Exchange, the
NYSE Amex, the NASDAQ Global Market, or the NASDAQ Capital Market, or
(2) if all of its voting shares (other than directors' qualifying
shares) are owned directly or indirectly by a corporation or
corporations not subject to this section.
(d) For purposes of subdivision (a), the requirements of
subdivision (b) shall become applicable to a foreign corporation only
upon the first day of the first income year of the corporation (1)
commencing on or after the 135th day of the income year immediately
following the latest income year with respect to which the tests
referred to in subdivision (a) have been met or (2) commencing on or
after the entry of a final order by a court of competent jurisdiction
declaring that those tests have been met.
(e) For purposes of subdivision (a), the requirements of
subdivision (b) shall cease to be applicable to a foreign corporation
(1) at the end of the first income year of the corporation
immediately following the latest income year with respect to which at
least one of the tests referred to in subdivision (a) is not met or
(2) at the end of the income year of the corporation during which a
final order has been entered by a court of competent jurisdiction
declaring that one of those tests is not met, provided that a
contrary order has not been entered before the end of the income
year.
(f) Any foreign corporation that is subject to the requirements of
subdivision (b) shall advise any shareholder of record, any officer,
director, employee, or other agent (within the meaning of Section
317) and any creditor of the corporation in writing, within 30 days
of receipt of written request for that information, whether or not it
is subject to subdivision (b) at the time the request is received.
Any party who obtains a final determination by a court of competent
jurisdiction that the corporation failed to provide to the party
information required to be provided by this subdivision or provided
the party information of the kind required to be provided by this
subdivision that was incorrect, then the court, in its discretion,
shall have the power to include in its judgment recovery by the party
from the corporation of all court costs and reasonable attorneys'
fees incurred in that legal proceeding to the extent they relate to
obtaining that final determination.
2116. The directors of a foreign corporation transacting intrastate

business are liable to the corporation, its shareholders, creditors,
receiver, liquidator or trustee in bankruptcy for the making of
unauthorized dividends, purchase of shares or distribution of assets
or false certificates, reports or public notices or other violation
of official duty according to any applicable laws of the state or
place of incorporation or organization, whether committed or done in
this state or elsewhere. Such liability may be enforced in the courts
of this state.
2117. (a) Every foreign corporation (other than a foreign

association) qualified to transact intrastate business shall file,
annually during the applicable filing period, on a form prescribed by
the Secretary of State, a statement containing the following:
chief executive officer, secretary, and chief financial officer.
(2) The street address of its principal executive office.
(3) The mailing address of the corporation, if different from the
street address of its principal executive office.
(4) The street address of its principal business office in this
state, if any.
(5) A statement of the general type of business that constitutes
the principal business activity of the corporation (for example,
department store).
of process, a natural person residing in this state or a corporation
that has complied with Section 1505 and whose capacity to act as the
agent has not terminated. If a natural person is designated, the
statement shall set forth the person's complete business or residence
street address. If a corporate agent is designated, no address for
it shall be set forth.
(c) The statement required by subdivision (a) shall be available
and open to the public for inspection. The Secretary of State shall
provide access to all information contained in the statement by means
of an online database.
(d) In addition to any other fees required, a foreign corporation
shall pay a five-dollar ($5) disclosure fee upon filing the statement
required by subdivision (a). One-half of the fee shall be utilized
to further the provisions of this section, including the development
and maintenance of the online database required by subdivision (d),
and one-half shall be deposited into the Victims of Corporate Fraud
Compensation Fund established in Section 1502.5.
(e) Whenever any of the information required by subdivision (a) is
the corporation shall file a current statement containing all the
previously filed statement and the statement in the filing pursuant
to Section 2105.
(f) Subdivisions (c), (d), (f), and (g) of Section 1502 apply to
statements filed pursuant to this section, except that "articles"
shall mean the filing pursuant to Section 2105, and "corporation"
shall mean a foreign corporation.
2117.1. (a) In addition to the statement required pursuant to

Section 2117, every publicly traded foreign corporation shall file
annually, within 150 days after the end of its fiscal year, on a form
prescribed by the Secretary of State, a statement that includes all
of the following information:
(1) The name of the independent auditor that prepared the most
recent auditor's report on the publicly traded foreign corporation's
annual financial statements.
(2) A description of other services, if any, performed for the
publicly traded foreign corporation during its two most recent fiscal
years and the period between the end of its most recent fiscal year
and the date of the statement by the foregoing independent auditor,
by its parent corporation, or by a subsidiary or corporate affiliate
of the independent auditor or its parent corporation.
(3) The name of the independent auditor employed by the foreign
corporation on the date of the statement, if different from the
independent auditor listed pursuant to paragraph (1).
(4) The compensation for the most recent fiscal year of the
publicly traded foreign corporation paid to each member of the board
of directors and paid to each of the five most highly compensated
executive officers of the foreign corporation who are not members of
the board of directors, including the number of any shares issued,
options for shares granted, and similar equity-based compensation
granted to each of those persons. If the chief executive officer is
not among the five most highly compensated executive officers of the
corporation, the compensation paid to the chief executive officer
shall also be included.
(5) A description of any loan, including the amount and terms of
the loans, made to any member of the board of directors by the
publicly traded foreign corporation during the foreign corporation's
two most recent fiscal years at an interest rate lower than the
interest rate available from unaffiliated commercial lenders
generally to a similarly situated borrower.
(6) A statement indicating whether an order for relief has been
entered in a bankruptcy case with respect to the foreign corporation,
its executive officers, or members of the board of directors of the
foreign corporation during the 10 years preceding the date of the
statement.
(7) A statement indicating whether any member of the board of
directors or executive officer of the publicly traded foreign
corporation was convicted of fraud during the 10 years preceding the
date of the statement, which conviction has not been overturned or
expunged.
(8) A description of any material pending legal proceedings, other
than ordinary routine litigation incidental to the business, to
which the corporation or any of its subsidiaries is a party or of
which any of their property is the subject, as specified by Item 103
of Regulation S-K of the Securities Exchange Commission (Section
229.103 of Title 12 of the Code of Federal Regulations). A
description of any material legal proceeding during which the
corporation was found legally liable by entry of a final judgment or
final order that was not overturned on appeal during the five years
preceding the date of the statement.
(b) For purposes of this section, the following definitions apply:
(1) "Publicly traded foreign corporation" means a foreign
corporation, as defined in Section 171, that is an issuer as defined
in Section 3 of the Securities Exchange Act of 1934, as amended (15
U.S.C. Sec. 78c), and has at least one class of securities listed or
admitted for trading on a national securities exchange, on the OTC
Bulletin Board, or on the electronic service operated by Pink OTC
Markets Inc.
(2) "Executive officer" means the chief executive officer,
president, any vice president in charge of a principal business unit,
division, or function, any other officer of the corporation who
performs a policymaking function, or any other person who performs
similar policymaking functions for the corporation.
(3) "Compensation" as used in paragraph (4) of subdivision (a)
means all plan and nonplan compensation awarded to, earned by, or
paid to the person for all services rendered in all capacities to the
corporation and to its subsidiaries, as the compensation is
specified by Item 402 of Regulation S-K of the Securities and
Exchange Commission (Section 229.402 of Title 17 of the Code of
Federal Regulations).
(4) "Loan" as used in paragraph (5) of subdivision (a) excludes an
advance for expenses, the foreign corporation's payment of life
insurance premiums, and an advance of litigation expenses, in each
instance as permitted according to the applicable law of the state or
place of incorporation or organization of the foreign corporation.
(c) This statement shall be available and open to the public for
inspection. The Secretary of State shall provide access to all
information contained in this statement by means of an online
database.
(d) A foreign corporation shall certify that the information it
provides pursuant to this section is true and correct. No claim may
be made against the state for inaccurate information contained in
statements filed under this section with the Secretary of State.
CORPORATIONS CODE
SECTION 2200-2260
2200. Every corporation that neglects, fails, or refuses: (a) to

keep or cause to be kept or maintained the record of shareholders or
books of account required by this division to be kept or maintained,
(b) to prepare or cause to be prepared or submitted the financial
statements required by this division to be prepared or submitted, or
(c) to give any shareholder of record the advice required by
subdivision (f) of Section 2115, is subject to penalty as provided in
this section.
The penalty shall be twenty-five dollars ($25) for each day that
the failure or refusal continues, up to a maximum of one thousand
five hundred dollars ($1,500), beginning 30 days after receipt of the
written request that the duty be performed from one entitled to make
the request, except that, in the case of a failure to give advice
required by subdivision (f) of Section 2115, the 30-day period shall
run from the date of receipt of the request made pursuant to
subdivision (f) of Section 2115, and no additional request is
required by this section.
The penalty shall be paid to the shareholder or shareholders
jointly making the request for performance of the duty, and damaged
by the neglect, failure, or refusal, if suit therefor is commenced
within 90 days after the written request is made, including any
request made pursuant to subdivision (f) of Section 2115; but the
maximum daily penalty because of failure to comply with any number of
separate requests made on any one day or for the same act shall be
two hundred fifty dollars ($250).
2201. Any officer of a corporation charged with the duty of

entering a transfer of shares upon the books of the corporation and
issuing a share certificate or, with respect to uncertificated
securities, an initial transaction statement or written statements,
who unreasonably neglects, fails or refuses to perform such duty
after written request by any person entitled thereto is subject to a
penalty of one hundred dollars ($100) and the further penalty of ten
dollars ($10) for each day that such default continues, beginning
five days after receipt of the request, up to a maximum of five
hundred dollars ($500). The penalty shall be paid to each person
aggrieved. It may be enforced by action and shall be in addition to
all other remedies.
Every director or other officer unreasonably causing such neglect,
failure or refusal to make such entries upon the books of the
corporation or to issue a certificate or, with respect to
uncertificated securities, an initial transaction statement or
written statements, for shares to a person entitled thereto is
subject to a like penalty.
2202. Any penalty prescribed by Section 2200 or Section 2201 shall

be in addition to any remedy by injunction or action for damages or
by writ of mandate for the nonperformance of acts and duties enjoined
by law upon the corporation or its directors or officers.
The court in which an action for any such penalty is brought may
reduce, remit or suspend the penalty on such terms and conditions as
it may deem reasonable when it is made to appear that the neglect,
failure or refusal was inadvertent or excusable.
2203. (a) Any foreign corporation which transacts intrastate

business and which does not hold a valid certificate from the
Secretary of State may be subject to a penalty of twenty dollars
($20) for each day that unauthorized intrastate business is
transacted; and the foreign corporation, by transacting unauthorized
intrastate business, shall be deemed to consent to the jurisdiction
of the courts of California in any civil action arising in this state
in which the corporation is named a party defendant.
(b) The penalty established by subdivision (a) of this section
shall be assessed according to the number of days it is found that
the corporation has been willfully doing unauthorized intrastate
business. Prosecution under this section may be brought, and the
money penalty recovered thereby shall be paid, in the manner provided
by Section 2258 for a prosecution brought under that section. The
amount of the penalty assessed shall be determined by the court based
upon the circumstances, including the size of the corporation and
the willfulness of the violation.
(c) A foreign corporation subject to the provisions of Chapter 21
(commencing with Section 2100) which transacts intrastate business
without complying with Section 2105 shall not maintain any action or
proceeding upon any intrastate business so transacted in any court of
this state, commenced prior to compliance with Section 2105, until
it has complied with the provisions thereof and has paid to the
Secretary of State a penalty of two hundred fifty dollars ($250) in
addition to the fees due for filing the statement and designation
required by Section 2105 and has filed with the clerk of the court in
which the action is pending receipts showing the payment of the fees
and penalty and all franchise taxes and any other taxes on business
or property in this state that should have been paid for the period
during which it transacted intrastate business.
2204. (a) Upon the failure of a corporation to file the statement

required by Section 1502, the Secretary of State shall mail a notice
of that delinquency to the corporation. The notice shall also contain
information concerning the application of this section, advise the
corporation of the penalty imposed by Section 19141 of the Revenue
and Taxation Code for failure to timely file the required statement
after notice of delinquency has been mailed by the Secretary of
State, and shall advise the corporation of its right to request
relief from the Secretary of State because of reasonable cause or
unusual circumstances that justify the failure to file. If, within 60
days after the mailing of the notice of delinquency, a statement
pursuant to Section 1502 has not been filed by the corporation, the
Secretary of State shall certify the name of the corporation to the
Franchise Tax Board.
(b) Upon certification pursuant to subdivision (a), the Franchise
Tax Board shall assess against the corporation the penalty provided
in Section 19141 of the Revenue and Taxation Code.
(c) The penalty herein provided shall not apply to a corporation
that on or prior to the date of certification pursuant to subdivision
(a) has dissolved or has been merged into another corporation.
(d) The penalty herein provided shall not apply and the Secretary
of State need not mail a notice of delinquency to a corporation if
the corporate powers, rights, and privileges have been suspended by
the Franchise Tax Board pursuant to Section 23301, 23301.5, or 23775
of the Revenue and Taxation Code on or prior to, and remain suspended
on, the last day of the filing period pursuant to Section 1502. The
Secretary of State need not mail a form pursuant to Section 1502 to a
corporation if the corporate powers, rights and privileges have been
so suspended by the Franchise Tax Board on or prior to, and remain
suspended on, the day the Secretary of State prepares the forms for
mailing.
(e) If, after certification pursuant to subdivision (a), the
Secretary of State finds (1) the required statement was filed before
the expiration of the 60-day period after mailing of the notice of
delinquency, or (2) the failure to provide notice of delinquency was
due to an error of the Secretary of State, the Secretary of State
shall promptly decertify the name of the corporation to the Franchise
Tax Board. The Franchise Tax Board shall then promptly abate any
penalty assessed against the corporation pursuant to Section 19141 of
the Revenue and Taxation Code.
(f) If the Secretary of State determines that the failure of a
corporation to file the statement required by Section 1502 is
excusable because of reasonable cause or unusual circumstances that
justify the failure, the Secretary of State may waive the penalty
imposed by this section and by Section 19141 of the Revenue and
Taxation Code, in which case the Secretary of State shall not certify
the name of the corporation to the Franchise Tax Board, or if
already certified, the Secretary of State shall promptly decertify
the name of the corporation.
2205. (a) A corporation that (1) fails to file a statement pursuant

to Section 1502 for an applicable filing period, (2) has not filed a
statement pursuant to Section 1502 during the preceding 24 months,
and (3) was certified for penalty pursuant to Section 2204 for the
same filing period,is subject to suspension pursuant to this section
rather than to penalty pursuant to Section 2204.
(b) When subdivision (a) is applicable, the Secretary of State
shall mail a notice to the corporation informing the corporation that
its corporate powers, rights, and privileges will be suspended after
60 days if it fails to file a statement pursuant to Section 1502.
(c) After the expiration of the 60-day period without any
statement filed pursuant to Section 1502, the Secretary of State
shall notify the Franchise Tax Board of the suspension and mail a
notice of the suspension to the corporation, and thereupon, the
corporate powers, rights, and privileges of the corporation are
suspended, except for the purpose of filing an application for exempt
status or amending the articles of incorporation as necessary either
to perfect that application or to set forth a new name.
(d) A statement pursuant to Section 1502 may be filed
notwithstanding suspension of the corporate powers, rights, and
privileges pursuant to this section or Section 23301, 23301.5, or
23775 of the Revenue and Taxation Code. Upon the filing of a
statement pursuant to Section 1502 by a corporation that has suffered
suspension pursuant to this section, the Secretary of State shall
certify that fact to the Franchise Tax Board and the corporation may
thereupon be relieved from suspension unless the corporation is held
in suspension by the Franchise Tax Board by reason of Section 23301,
23301.5, or 23775 of the Revenue and Taxation Code.
2206. (a) Sections 2204 and 2205 apply to foreign corporations with
respect to the statements required to be filed by Section 2117. For
this purpose, the suspension of the corporate powers, rights, and
privileges of a domestic corporation shall mean the forfeiture of the
exercise of the corporate powers, rights, and privileges of a
foreign corporation in this state.
(b) A foreign nonprofit corporation which has suffered the
forfeiture of the exercise of the corporate powers, rights, and
privileges in this state may nevertheless file an application for
exempt status as specified in Section 23301 of the Revenue and
Taxation Code.
(c) The forfeiture of the exercise of the corporate powers,
rights, and privileges of a foreign corporation in this state as used
in subdivision (a) does not prohibit the transaction of business in
this state by a foreign corporation if the business transacted
subsequent to the forfeiture would not, considered as an entirety,
require the foreign corporation to obtain a certificate of
qualification pursuant to Sections 191 and 2105.
2207. (a) A corporation is liable for a civil penalty in an amount

not exceeding one million dollars ($1,000,000) if the corporation
does both of the following:
(1) Has actual knowledge that an officer, director, manager, or
agent of the corporation does any of the following:
(A) Makes, publishes, or posts, or has made, published, or posted,
either generally or privately to the shareholders or other persons,
either of the following:
(i) An oral, written, or electronically transmitted report,
exhibit, notice, or statement of its affairs or pecuniary condition
that contains a material statement or omission that is false and
intended to give the shares of stock in the corporation a materially
greater or a materially less apparent market value than they really
possess.
(ii) An oral, written, or electronically transmitted report,
prospectus, account, or statement of operations, values, business,
profits, or expenditures, that includes a material false statement or
omission intended to give the shares of stock in the corporation a
materially greater or a materially less apparent market value than
they really possess.
(B) Refuses or has refused to make any book entry or post any
notice required by law in the manner required by law.
(C) Misstates or conceals or has misstated or concealed from a
regulatory body a material fact in order to deceive a regulatory body
to avoid a statutory or regulatory duty, or to avoid a statutory or
regulatory limit or prohibition.
(2) Within 30 days after actual knowledge is acquired of the
actions described in paragraph (1), the corporation knowingly fails
to do both of the following:
(A) Notify the Attorney General or appropriate government agency
in writing, unless the corporation has actual knowledge that the
Attorney General or appropriate government agency has been notified.
(B) Notify its shareholders in writing, unless the corporation has
actual knowledge that the shareholders have been notified.
(b) The requirement for notification under this section is not
applicable if the action taken or about to be taken by the
corporation, or by an officer, director, manager, or agent of the
corporation under paragraph (1) of subdivision (a), is abated within
the time prescribed for reporting, unless the appropriate government
agency requires disclosure by regulation.
(c) If the action reported to the Attorney General pursuant to
this section implicates the government authority of an agency other
than the Attorney General, the Attorney General shall promptly
forward the written notice to that agency.
(d) If the Attorney General was not notified pursuant to
subparagraph (A) of paragraph (2) of subdivision (a), but the
corporation reasonably and in good faith believed that it had
complied with the notification requirements of this section by
notifying a government agency listed in paragraph (5) of subdivision
(e), no penalties shall apply.
(e) For purposes of this section:
(1) "Manager" means a person having both of the following:
(A) Management authority over a business entity.
(B) Significant responsibility for an aspect of a business that
includes actual authority for the financial operations or financial
transactions of the business.
(2) "Agent" means a person or entity authorized by the corporation
to make representations to the public about the corporation's
financial condition and who is acting within the scope of the agency
when the representations are made.
(3) "Shareholder" means a person or entity that is a shareholder
of the corporation at the time the disclosure is required pursuant to
subparagraph (B) of paragraph (2) of subdivision (a).
(4) "Notify its shareholders" means to give sufficient description
of an action taken or about to be taken that would constitute acts
or omissions as described in paragraph (1) of subdivision (a). A
notice or report filed by a corporation with the United States
Securities and Exchange Commission that relates to the facts and
circumstances giving rise to an obligation under paragraph (1) of
subdivision (a) shall satisfy all notice requirements arising under
paragraph (2) of subdivision (a), but shall not be the exclusive
means of satisfying the notice requirements, provided that the
Attorney General or appropriate agency is informed in writing that
the filing has been made together with a copy of the filing or an
electronic link where it is available online without charge.
(5) "Appropriate government agency" means an agency on the
following list that has regulatory authority with respect to the
financial operations of a corporation:
(A) Department of Corporations.
(B) Department of Insurance.
(C) Department of Financial Institutions.
(D) Department of Managed Health Care.
(E) United States Securities and Exchange Commission.
(6) "Actual knowledge of the corporation" means the knowledge an
officer or director of a corporation actually possesses or does not
consciously avoid possessing, based on an evaluation of information
provided pursuant to the corporation's disclosure controls and
procedures.
(7) "Refuse to make a book entry" means the intentional decision
not to record an accounting transaction when all of the following
conditions are satisfied:
(A) The independent auditors required recordation of an accounting
transaction during the course of an audit.
(B) The audit committee of the corporation has not approved the
independent auditor's recommendation.
(C) The decision is made for the primary purpose of rendering the
financial statements materially false or misleading.
(8) "Refuse to post any notice required by law" means an
intentional decision not to post a notice required by law when all of
the following conditions exist:
(A) The decision not to post the notice has not been approved by
the corporation's audit committee.
(B) The decision is intended to give the shares of stock in the
corporation a materially greater or a materially less apparent market
value than they really possess.
(9) "Misstate or conceal material facts from a regulatory body"
means an intentional decision not to disclose material facts when all
of the following conditions exist:
(A) The decision not to disclose material facts has not been
approved by the corporation's audit committee.
(B) The decision is intended to give the shares of stock in the
corporation a materially greater or a materially less apparent market
(10) "Material false statement or omission" means an untrue
statement of material fact or an omission to state a material fact
necessary in order to make the statements made under the
circumstances under which they were made not misleading.
(11) "Officer" means any person as set forth in Rule 16A-1
promulgated under the Securities Exchange Act of 1934 or any
successor regulation thereto, except an officer of a subsidiary
corporation who is not also an officer of the parent corporation.
(f) This section only applies to corporations that are issuers, as
defined in Section 2 of the Sarbanes-Oxley Act of 2002 (15 U.S.C.
Sec. 7201 and following).
(g) An action to enforce this section may only be brought by the
Attorney General or a district attorney or city attorney in the name
of the people of the State of California.
2251. Any promoter, director or officer of a corporation who

knowingly and willfully issues or consents to the issuance of
certificates for certificated securities, or initial transaction
statements or written statements for uncertificated securities, in
violation of this division with intent to defraud present or future
shareholders, subscribers, purchasers of shares or creditors is
guilty of a misdemeanor punishable by a fine of not more than one
thousand dollars ($1,000) or imprisonment for not more than one year
or both.
2252. Every person (a) who signs the name of a fictitious person to
any subscription for or agreement to take stock in any domestic or
foreign corporation, existing or proposed, or (b) who signs to any
subscription or agreement the name of any person, knowing that the
person has no means or does not intend in good faith to comply with
all the terms thereof or that there is any understanding or agreement
that the terms of the subscription or agreement are not to be
complied with or enforced, is guilty of a misdemeanor.
2253. Any director of a stock corporation, domestic or foreign, who
concurs in any vote or act of the directors of the corporation or
any of them, knowingly and with dishonest or fraudulent purpose, to
make any dividend or distribution of assets except in the cases and
in the manner allowed by law, either with the design of defrauding
creditors or shareholders or of giving a false appearance to the
value of the stock and thereby defrauding subscribers or purchasers,
is guilty of a misdemeanor, punishable by a fine of not more than one
thousand dollars ($1,000) or imprisonment for not more than one year
or both.
2254. Every director, officer or agent of any corporation, domestic

or foreign, is guilty of a felony (a) who knowingly concurs in
making, publishing or posting either generally or privately to the
shareholders or other persons (1) any written report, exhibit,
statement of its affairs or pecuniary condition or notice containing
any material statement which is false, or (2) any untrue or willfully
or fraudulenty exaggerated report, prospectus, account, statement of
operations, values, business, profits, expenditures or prospects, or
(3) any other paper or document intend to produce or give, or having
a tendency to produce or give, the shares of stock in such
corporation a greater value or a less apparent or market value than
they really possess, or (b) who refuses to make any book entry or
post any notice required by the law in manner required by law.
2255. (a) Every director, officer or agent of any corporation,

domestic or foreign, who knowingly receives or acquires possession of
any property of the corporation, otherwise than in payment of a just
demand, and, with intent to defraud, omits to make, or to cause or
direct to be made, a full and true entry thereof in the books or
accounts of the corporation is guilty of a public offense.
(b) Every director, officer, agent or shareholder of any
corporation, domestic or foreign, who, with intent to defraud,
destroys, alters, mutilates or falsifies any of the books, papers,
writings or securities belonging to the corporation or makes or
concurs in omitting to make any material entry in any book of
accounts or other record or document kept by the corporation is
guilty of a public offense.
(c) Each public offense specified in this section is punishable by
imprisonment in a state prison, or by imprisonment in a county jail
for not exceeding one year, or a fine not exceeding one thousand
dollars ($1,000), or by both such fine and imprisonment.
2256. Every officer, agent or clerk of any corporation, domestic or

foreign, or any person proposing to organize such a corporation or
to increase the capital stock of any such corporation, who knowingly
exhibits any false, forged or altered book, paper, voucher, security
or other instrument of evidence to any public officer or board
authorized by law to examine the organization of such corporation or
to investigate its affairs or to allow an increase of its capital,
with intent to deceive such officer or board in respect thereto, is
punishable by imprisonment in a state prison, or by imprisonment in a
county jail for not exceeding one year.
2257. Every person who, without being authorized so to do,
subscribes the name of another to or inserts the name of another in
any prospectus, circular or other advertisement or announcement of
any corporation, domestic or foreign, whether existing or intended to
be formed, with intent to permit the document to be published and
thereby to lead persons to believe that the person whose name is so
subscribed is an officer, agent, shareholder or promoter of such
corporation, when in fact no such relationship exists to the
knowledge of such person, is guilty of a misdemeanor.
2258. Any foreign corporation subject to the provisions of Chapter

21 which transacts intrastate business without complying therewith is
guilty of a misdemeanor, punishable by fine of not less than five
hundred dollars ($500) nor more than one thousand dollars ($1,000),
to be recovered in any court of competent jurisdiction.
Prosecution under this section may be brought by the Attorney
General or by any district attorney. If brought by the latter,
one-half of the fine collected shall be paid to the treasurer of the
county in which the conviction was had and one-half to the State
Treasurer. If brought by the Attorney General the entire amount of
fine collected shall be paid to the State Treasurer to the credit of
the General Fund of the state.
2259. Any person who transacts intrastate business on behalf of a

foreign corporation which is not authorized to transact such business
in this state, knowing that it is not so authorized, is guilty of a
misdemeanor punishable by fine of not less than fifty dollars ($50)
nor more than six hundred dollars ($600).
2260. In a prosecution for a violation of Section 2252, 2253, 2254,

2255, 2256 or 2257, the fact that the corporation was a foreign
corporation is not a defense, if it was carrying on business or
keeping an office therefor within this state.
CORPORATIONS CODE
SECTION 2300-2319
2300. As used in this chapter, the term "new law" means this
division of the Corporations Code as amended by act of the California
Legislature, 1975-76 Regular Session, effective January 1, 1977, and
as in effect on that date; the term "prior law" means the applicable
law as in effect prior to January 1, 1977; and the term "effective
date" means January 1, 1977.
2301. (a) Except as otherwise expressly provided in this chapter,
the provisions of the new law apply on and after the effective date
to all corporations referred to in Section 162 existing on the
effective date and to all actions taken by the directors or
shareholders of such corporations on and after the effective date.
(b) Except as otherwise expressly provided in this chapter, all of
the sections of the new law governing acts, contracts or other
transactions by a corporation or its directors or shareholders apply
only to such acts, contracts or transactions occurring on or after
the effective date and the prior law governs such acts, contracts or
transactions occurring prior thereto.
(c) Except as otherwise expressly provided in this chapter, any
vote or consent by the directors or shareholders of a corporation
prior to the effective date in accordance with the prior law shall be
effective in accordance with the prior law and if any certificate or
document is required to be filed in any public office of this state
relating to such action, it may be filed after the effective date in
accordance with the prior law.
2302. The provisions of Sections 202, 204 (other than subdivision

(a) thereof) and 205 of the new law relating to the contents of
articles do not apply to corporations existing on the effective date
unless and until an amendment of the articles is filed stating that
the corporation elects to be governed by all of the provisions of the
new law not otherwise applicable to it under this chapter. Such
amendment may be adopted by approval of the board alone, except that,
if any such amendment makes any change in the articles other than
conforming the statement of purposes and powers to subdivision (b) of
Section 202 and the deletion of any references to par value and
location of principal office and deleting any statement regarding the
number of directors or conforming any such statement to Section 212
(subject to Section 2304), it shall also be approved by the
outstanding shares (Section 152) if such approval is otherwise
required for the changes made. The amendment shall not name the
corporation's initial agent for service of process if a report
required by Section 1502 has been filed.
2302.1. The provisions of subdivision (a) of Section 204, insofar

as they require the inclusion of certain provisions in the articles,
do not apply to the provisions of bylaws in effect on the effective
date and valid under the prior law, unless and until an amendment is
filed pursuant to Section 2302.
2302.5. The absence of any reference to par value in the articles

of a corporation which is subject to the prior law relating to the
contents of articles as specified in Section 2302 is equivalent to a
statement that the shares of stock are to be without par value.
2303. Sections 206 and 207 of the new law apply to corporations
existing on the effective date, but any statement in the articles of
such corporation, prior to an amendment thereof pursuant to Section
2302, relating to the purposes or powers of the corporation shall not
be construed as a limitation unless it is expressly stated as such.
2304. The effect of a difference between the articles and bylaws in

the statement of the number of directors shall not be governed by
subdivision (a) of Section 212 of the new law for a corporation
existing on the effective date, which shall continue to be governed
by the prior law, unless and until an amendment of its articles is
filed pursuant to Section 2302. If such amendment makes any change in
the number of directors or the maximum or minimum number of
directors or makes a change from a fixed to a variable board or vice
versa, it shall also be approved by the outstanding shares (Section
152).
2305. Subdivision (a) of Section 312 of the new law applies to a

corporation existing on the effective date, but the "treasurer" of
such corporation shall be deemed to be the "chief financial officer."
2306. Section 317 of the new law governs any proposed

indemnification by a corporation after the effective date, whether
the events upon which the indemnification is based occurred before or
after the effective date. Any statement relating to indemnification
contained in the articles or bylaws of a corporation on the effective
date shall not be construed as limiting the indemnification
permitted by Section 317 unless it is expressly stated as so
intended.
2307. Sections 417 and 418 of the new law relating to required
statements on certificates representing shares apply to certificated
representing shares of corporations existing on the effective date
only if the shares are originally issued after the effective date,
and the prior law shall continue to govern the certificates
representing shares originally issued prior to the effective date,
unless and until an amendment of the articles filed pursuant to
Section 2302, and the certificate is presented for transfer.
2308. Chapter 5 of the new law applies to any distribution to its

shareholders made after the effective date by a corporation existing
on the effective date, except that any such distribution effected
pursuant to a contract for the purchase or redemption of shares
entered into by the corporation prior to the effective date may be
made if permissible under Chapter 5 or under the prior law in effect
at the time the contract was entered into.
2309. Subdivision (a) of Section 510 of the new law applies only to
shares acquired after the effective date.
2310. The provisions of Chapter 6 (commencing with Section 600) and
Chapter 7 (commencing with Section 700) (other than Section 706) of
the new law apply to any meeting of shareholders held after the
effective date and to any action by shareholders pursuant to written
consent which becomes effective after the effective date and to any
vote cast at such a meeting or consent given for such action (whether
or not a proxy or consent was executed by the shareholder prior to
the effective date); provided, however, that the prior law shall
apply to any such meeting of shareholders and to any vote cast at
such a meeting if such meeting was initially called for a date prior
to the effective date and notice thereof was given to shareholders
entitled to vote thereat.
2311. Section 706 of the new law applies to agreements and voting
trusts entered into after the effective date and prior law governs
such agreements or trusts entered into prior thereto unless the
agreement or trust is amended or extended thereafter, in which event
the new law applies.
2312. Section 800 of the new law applies to actions commenced after
the effective date and prior law governs actions pending on the
effective date.
2313. Chapters 10 (commencing with Section 1000), 11 (commencing

with Section 1100), 12 (commencing with Section 1200) and 13
(commencing with Section 1300) of the new law apply to transactions
consummated after the effective date, unless a required approval of
the outstanding shares (Section 152) has been given prior to the
effective date or has been given after the effective date but at a
meeting of shareholders initially called for a date prior to the
effective date, in which case the transaction shall be governed by
the prior law.
2314. Chapters 18 (commencing with Section 1800) and 20 (commencing

with Section 2000) of the new law apply to actions for involuntary
dissolution commenced after the effective date, but the prior law
governs any such action pending on the effective date.

with Section 2000) of the new law apply to any voluntary dissolution
proceeding initiated by the filing of an election after the
effective date, but the prior law governs any such proceeding so
initiated prior to the effective date.
2316. A foreign association which has transacted intrastate

business in this state prior to the effective date and which is
required by Section 2105 of the new law to obtain a certificate of
qualification from the Secretary of State shall not be subject to any
direct or indirect penalty as a result of failure to obtain such
certificate of qualification if the certificate of qualification is
obtained no later than four months after the effective date.
2317. When any corporate agent for service of process has been
designated prior to the effective date and such designation of agent
included a name of a city, town or village wherein the corporate
agent maintained an office, service on such agent may be effected at
any office of the agent set forth in the certificate of the corporate
agent filed pursuant to Section 1505 of the new law or filed
pursuant to Section 3301.5, 3301.6, 6403.5 or 6403.6 of the prior
law, whether or not such office is in said city, town or village.
2318. Any corporation existing on the first day of January, 1873,

formed under the laws of this state, and still existing, which has
not already elected to continue its existence under the prior law,
may, at any time, elect to continue its existence under the
provisions of this code applicable thereto by the unanimous vote of
all its directors, or such election may be made at any annual meeting
of the shareholders, or at any meeting called by the directors
especially for considering the subject, if voted by shareholders
representing a majority of the voting power, or may be made by the
directors upon the written consent of that number of the
shareholders.
A certificate of the action of the directors, signed by them and
their secretary, when the election is made by their unanimous vote,
or upon the written consent of the shareholders, or a certificate of
the proceedings of the meeting of the shareholders, when the election
is made at any such meeting, signed by the chairman and secretary of
the meeting and a majority of the directors, shall be filed in the
office of the Secretary of State, and thereafter the corporation
continues its existence under the provisions of this code which are
applicable thereto, and possesses all the rights, and powers, and is
subject to all the obligations, restrictions, and limitations
prescribed thereby.
2319. If the corporate rights, privileges and powers of a

corporation have been suspended and are still suspended immediately
prior to the effective date pursuant to Sections 5700 through 5908 of
the old law and provisions of law there referred to, said sections
and provisions continue to apply to such a corporation until
restoration by the Controller pursuant to said sections.
CORPORATIONS CODE
SECTION 5000-5001
5000. This division shall be known and may be cited as the
Nonprofit Corporation Law.
5001. This division of the Nonprofit Corporation Law, or any part,

chapter, article or section thereof, may at any time be amended or
repealed.
CORPORATIONS CODE
SECTION 5002-5080
5002. Unless the provisions or the context otherwise requires, the

general provisions and definitions set forth in this part govern the
construction of this part and of Part 2 (commencing with Section
5110), Part 3 (commencing with Section 7110), Part 4 (commencing with
Section 9110), and Part 5 (commencing with Section 9910) of this
division.
5003. (a) The provisions of this part apply to:

(1) Corporations organized under Part 2, Part 3, and Part 4 of
this division;
(2) Corporations expressly subject to Part 2, Part 3 or Part 4 of
this division pursuant to a particular provision of this division or
Division 3 (commencing with Section 12000) or other specific
statutory provision;
(3) Corporations which pursuant to the express provisions of Part
1, Division 2 (commencing with Section 9000) in effect immediately
prior to January 1, 1980, are subject to the provisions of Part 1 of
Division 2 and which, on or after January 1, 1980, are subject to the
Nonprofit Public Benefit Corporation Law, the Nonprofit Mutual
Benefit Corporation Law or the Nonprofit Religious Corporation Law,
pursuant to Section 9912.
(4) Corporations expressly subject to Part 1, Division 2
(commencing with Section 9000) in effect immediately prior to January
1, 1980, pursuant to a particular provision of this division or
Division 3 (commencing with Section 12000) or other specific
statutory provision in effect immediately prior to January 1, 1980,
and which, on or after January 1, 1980, are subject to the Nonprofit
Public Benefit Corporation Law, the Nonprofit Mutual Benefit
Corporation Law, or the Nonprofit Religious Corporation Law, pursuant
to Section 9912; and
(5) Corporations incorporated as permitted by subdivision (d) of
Section 9911.
of enactment or reenactment of this part, Part 2, Part 3, Part 4 or
Part 5 shall not be affected by the enactment or reenactment of such
parts or by any change in the requirements for the formation of
corporations or 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 part or of Part 2, Part 3, Part 4 or Part 5, nor the
amendment thereof shall impair or take away any existing liability or
cause of action against any corporation, its members, directors or
officers incurred prior to the time of such enactment, reenactment or
amendment.
5004. A corporation may be sued as provided in the Code of Civil

Procedure.
5005. Any corporation 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.
5005.1. (a) Except for a liability which may be insured against

pursuant to Division 4 (commencing with Section 3200) of the Labor
Code, an authorized corporation may do any of the following:
(1) Insure itself against all or any part of any tort liability.
(2) Insure any employee of the corporation against all or any part
of his or her liability for injury resulting from an act or omission
in the scope of employment.
(3) Insure any board member, officer, or volunteer of the
corporation against any liability that may arise from any act or
omission in the scope of participation with the corporation.
(4) Insure itself against any loss arising from physical damage to
motor vehicles owned or operated by the corporation.
(b) The insurance authorized pursuant to this section shall only
be available to an authorized corporation where that corporation has
joined with two or more other authorized corporations in an
arrangement providing for the pooling of self-insured claims or
losses. The pooling arrangement shall not be considered insurance nor
be subject to regulation under the Insurance Code.
(c) Nothing in this section shall be construed to authorize a
corporation organized pursuant to this division to pay for, or to
insure, contract, or provide for payment for, any part of a claim or
judgment against an employee of the corporation for punitive or
exemplary damages.
(d) Any insurance pool established pursuant to this section shall
have initial pooled resources of not less than two hundred fifty
thousand dollars ($250,000).
(e) All participating corporations in any pool established
pursuant to this section must agree to pay premiums or make other
mandatory financial contributions or commitments necessary to ensure
a financially sound risk pool.
(f) For the purpose of this section, an authorized "corporation"
means any corporation that meets all of the following criteria:
(1) Is organized chiefly to provide or fund health or human
services, but does not include a hospital.
(2) Is exempt from taxation under paragraph (3) of subsection (c)
of Section 501 of the United States Internal Revenue Code.

5007. Any agreement, certificate or other instrument relating to a

domestic corporation, a foreign corporation, or a foreign business
corporation filed pursuant to the provisions of this part, Part 2,
Part 3, Part 4 or Part 5 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 the corporation or
corporations)"; provided, however, that no such certificate of
correction shall alter the wording of any resolution which was in
fact adopted by the board or the members or delegates or effect a
corrected amendment of articles which amendment as so corrected would
not in all respects have complied with the requirements of this
part, Part 2, Part 3, Part 4 or Part 5 at the time of filing of the
agreement, certificate or other instrument being corrected. Such
certificate of correction shall be signed and verified or
acknowledged as provided in this part with respect to the agreement,
certificate or other instrument being corrected. It shall set forth
the following:
(a) The name or names of the corporation or corporations.
(b) The date the agreement, certificate or other instrument being
(c) The provision in the agreement, certificate or other
it was defective.
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
shall be extinguished by such filing if the person having such right

for filing pursuant to this part, Part 2, Part 3, Part 4 or Part 5,
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 6210, 8210, or 9660 the
date of filing shall be the date the instrument is received by the
Secretary of State unless withheld from filing for a period of time
pursuant to a request by the party submitting it for filing 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 such fee does not exceed the limits
established by the policy of the Secretary of State for extending
credit in such cases.
resubmitted accompanied by a written opinion of a 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 Section 5122,
7122, or 9122), upon such written opinion in determining whether the
instrument conforms to law. The date of filing in such case shall be
the date the instrument is received on resubmission.
specified effective date. In the case of a merger agreement, such
behalf of one of the constituent corporations. If no such revocation
specified.
5008.5. The Secretary of State may cancel the filing of articles 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.
5008.6. (a) A corporation that (1) fails to file a statement

pursuant to Section 6210, 8210, or 9660 for an applicable filing
period, (2) has not filed a statement pursuant to Section 6210, 8210,
or 9660 during the preceding 24 months, and (3) was certified for
penalty pursuant to Section 6810, 8810, or 9690 for the same filing
period, shall be subject to suspension pursuant to this section
rather than to penalty under Section 6810 or 8810.
its corporate powers, rights, and privileges will be suspended 60
days from the date of the notice if the corporation does not file the
statement required by Section 6210, 8210, or 9660.
(c) If the 60-day period expires without the delinquent
corporation filing the required statement, the Secretary of State
shall notify the Franchise Tax Board of the suspension, and mail a
notice of the suspension to the corporation. Thereupon, except for
the purpose of filing an application for exempt status or amending
the articles of incorporation as necessary either to perfect that
application or to set forth a new name, the corporate powers, rights,
and privileges of the corporation are suspended.
(d) A statement required by Section 6210, 8210, or 9660 may be
filed, notwithstanding suspension of the corporate powers, rights,
and privileges under this section or under provisions of the Revenue
and Taxation Code. Upon the filing of a statement under Section 6210,
8210, or 9660, by a corporation that has suffered suspension under
this section, the Secretary of State shall certify that fact to the
Franchise Tax Board and the corporation may thereupon be relieved
from suspension, unless the corporation is held in suspension by the
Franchise Tax Board because of Section 23301, 23301.5, or 23775 of
5009. Except as otherwise required, any reference in this part,

Part 2, Part 3, Part 4 or Part 5 to mailing means first-, second-, or
third-class mail, postage prepaid, unless registered mail is
specified. Registered mail includes certified mail.
5010. If the articles or bylaws provide for more or less than one
vote for any membership on any matter, the references in Sections
5033 and 5034 to a majority or other proportion of memberships mean,
as to those matters, a majority or other proportion of the votes
entitled to be cast. Whenever in Part 2 (commencing with Section
5110) or Part 3 (commencing with Section 7110) members are
disqualified from voting on any matter, their memberships shall not
be counted 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 Part 2 (commencing with Section 5110) or Part
3 (commencing with Section 7110) or the articles or bylaws.
5011. All references in Part 3 (commencing with Section 7110) to

the voting of memberships include the voting of securities given
voting rights in the articles pursuant to paragraph (3) of
5012. All references in this part, Part 2 (commencing with Section

5110), Part 3 (commencing with Section 7110), or Part 4 (commencing
with Section 9110) to financial statements of a corporation mean
statements prepared in conformity with generally accepted accounting
principles or some other basis of accounting which reasonably sets
forth the assets and liabilities and the income and expenses of the
corporation and discloses the accounting basis used in their
preparation.
5013. As used in this part, Part 2 (commencing with Section 5110),
Part 3 (commencing with Section 7110), or Part 4 (commencing with
Section 9110), "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.
5014. Any requirement in Part 3 (commencing with Section 7110) for

a vote of each class of members means such a vote regardless of
limitations or restrictions upon the voting rights thereof, unless
expressly limited to voting memberships.
5015. Any reference in this part, Part 2 (commencing with Section

5110), Part 3 (commencing with Section 7110), Part 4 (commencing with
Section 9110), or Part 5 (commencing with Section 9910) to the time
a notice is given or sent means, unless otherwise expressly provided,
(a) the time a written notice by mail is deposited in the United
States mails, postage prepaid; or (b) the time any other written
notice, including facsimile, telegram, or other 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; or
(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 such a system, or to a person at the office of the
5016. A notice or report mailed or delivered as part of a

newsletter, magazine or other organ regularly sent to members shall
constitute written notice or report pursuant to this division when
addressed and mailed or delivered to the member, or in the case of
members who are residents of the same household and who have the same
address on the books of the corporation, when addressed and mailed
or delivered to one of such members, at the address appearing on the
books of the corporation.

the Civil Code; or
5031. 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.

not within the competence of the committee under Section 5212,
Section 7212, or Section 9212.
5033. "Approval by (or approval of) a majority of all members"

means approval by an affirmative vote (or written ballot in
conformity with Section 5513, Section 7513, or Section 9413) of a
majority of the votes entitled to be cast. Such approval shall
include the affirmative vote of a majority of the outstanding
memberships of each class, unit, or grouping of members entitled, by
any provision of the articles or bylaws or of Part 2, Part 3, Part 4
or Part 5 to vote as a class, unit, or grouping of members on the
subject matter being voted upon and shall also include the
affirmative vote of such greater proportion, including all, of the
votes of the memberships of any class, unit, or grouping of members
if such greater proportion is required by the bylaws (subdivision (e)
of Section 5151, subdivision (e) of Section 7151, or subdivision (e)
of Section 9151) or Part 2, Part 3, Part 4 or Part 5.
5034. "Approval by (or approval of) the members" means approved or

ratified by the affirmative vote of a majority of the votes
present (which affirmative votes also constitute a majority of the
required quorum) or written ballot in conformity with Section 5513,
7513, or 9413 or by the affirmative vote or written ballot of such
greater proportion, including all of the votes of the memberships of
any class, unit, or grouping of members as may be provided in the
bylaws (subdivision (e) of Section 5151, subdivision (e) of Section
7151, or subdivision (e) of Section 9151) or in Part 2, Part 3, Part
4 or Part 5 for all or any specified member action.
5035. "Articles" includes the articles of incorporation, amendments

thereto, amended articles, restated articles, and certificates of
incorporation.
5036. (a) Except as provided in subdivision (b) or (c), "authorized

number" means 5 percent of the voting power.
(b) Where (disregarding any provision for cumulative voting which
would otherwise apply) the total number of votes entitled to be cast
for a director is 1,000 or more, but less than 5,000 the authorized
number shall be 2 1/2 percent of the voting power, but not less than
50.
(c) Where (disregarding any provision for cumulative voting which
would otherwise apply) the total number of votes entitled to be cast
for a director is 5,000 or more, the authorized number shall be
one-twentieth of 1 percent of the voting power, but not less than
125.
(d) Any right under Part 2, Part 3, or Part 4 which may be
exercised by the authorized number, or some multiple thereof, may be
exercised by a member with written authorizations obtained within any
11-month period from members who, in the aggregate, hold the
equivalent voting power. Any such authorization shall specify the
right to be exercised thereunder and the duration thereof (which
shall not exceed three years).
(e) Where any provision of Part 2, Part 3, or Part 4 specifies
twice the authorized number, that means two times the number
calculated according to subdivision (a), (b) or (c).
5037. "Bylaws" includes amendments thereto and amended bylaws.
5039. "Business corporation" means a corporation as defined in

Section 162 of the General Corporation Law.
5039.5. The term "chair" includes "chairperson," "chairman," and

"chairwoman." All references in this division to "chairman" shall be
deemed to refer to "chair."
5040. "Chapter" refers to a chapter of Part 2 (commencing with

Section 5110), Part 3 (commencing with Section 7110), or Part 4
(commencing with Section 9110) unless otherwise expressly stated.
5041. "Class" refers to those memberships which: (a) are identified

in the articles or bylaws as being a different type of membership;
or (b) have the same rights with respect to voting, dissolution,
redemption and transfer. For the purpose of this section, rights
shall be considered the same if they are determined by a formula
applied uniformly.
5043. "Common shares," as used in Part 3 (commencing with Section

7110), 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.
5044. "Constituent corporation" means a corporation which is merged

with one or more other corporations and includes the surviving
corporation.
5045. "Control" means the possession, direct or indirect, of the

power to direct or cause the direction of the management and policies
of a corporation.
5046. (a) "Corporation" as used in this part and Part 5 (commencing

with Section 9910), refers to corporations defined in subdivisions
(b), (c), and (d).
(b) "Corporation," as used in Part 2 (commencing with Section
5110), means a nonprofit public benefit corporation as defined in
Section 5060.
(c) "Corporation," as used in Part 3 (commencing with Section
7110) means a nonprofit mutual benefit corporation as defined in
Section 5059.
(d) "Corporation," as used in Part 4 (commencing with Section
9110), including those provisions of Part 2 (commencing with Section
5110) made applicable pursuant to Chapter 6 (commencing with Section
9610) of Part 4, means a nonprofit religious corporation as defined
in Section 5061.
5047. Except where otherwise expressly provided, "directors" means

natural persons, designated in the articles or bylaws or elected by
the incorporators, and their successors and natural persons
designated, elected or appointed by any other name or title to act as
members of the governing body of the corporation. A person who does
not have authority to act as a member of the governing body of the
corporation, including through voting rights as a member of the
governing body, is not a director as that term is used in this
division regardless of title. However, if the articles or bylaws
designate that a natural person is a director or a member of the
governing body of the corporation by reason of occupying a specified
position within or outside the corporation, that person shall be a
director for all purposes and shall have the same rights and
obligations, including voting rights, as the other directors.
5047.5. (a) The Legislature finds and declares that the services of
directors and officers of nonprofit corporations who serve without
compensation are critical to the efficient conduct and management of
the public service and charitable affairs of the people of
California. The willingness of volunteers to offer their services has
been deterred by a perception that their personal assets are at risk
for these activities. The unavailability and unaffordability of
appropriate liability insurance makes it difficult for these
corporations to protect the personal assets of their volunteer
decisionmakers with adequate insurance. It is the public policy of
this state to provide incentive and protection to the individuals who
perform these important functions.
(b) Except as provided in this section, no cause of action for
monetary damages shall arise against any person serving without
compensation as a director or officer of a nonprofit corporation
subject to Part 2 (commencing with Section 5110), Part 3 (commencing
with Section 7110), or Part 4 (commencing with Section 9110) of this
division on account of any negligent act or omission occurring (1)
within the scope of that person's duties as a director acting as a
board member, or within the scope of that person's duties as an
officer acting in an official capacity; (2) in good faith; (3) in a
manner that the person believes to be in the best interest of the
corporation; and (4) is in the exercise of his or her policymaking
judgment.
(c) This section shall not limit the liability of a director or
officer for any of the following:
(1) Self-dealing transactions, as described in Sections 5233 and
9243.
(2) Conflicts of interest, as described in Section 7233.
(3) Actions described in Sections 5237, 7236, and 9245.
(4) In the case of a charitable trust, an action or proceeding
against a trustee brought by a beneficiary of that trust.
(5) Any action or proceeding brought by the Attorney General.
(6) Intentional, wanton, or reckless acts, gross negligence, or an
action based on fraud, oppression, or malice.
(7) Any action brought under Chapter 2 (commencing with Section
16700) of Part 2 of Division 7 of the Business and Professions Code.
(d) This section only applies to nonprofit corporations organized
to provide religious, charitable, literary, educational, scientific,
social, or other forms of public service that are exempt from federal
income taxation under Section 501(c)(3) or 501(c)(6) of the Internal
Revenue Code.
(e) This section applies only if the nonprofit corporation
maintains a liability insurance policy with an amount of coverage of
at least the following amounts:
(1) If the corporation's annual budget is less than fifty thousand
dollars ($50,000), the minimum required amount is five hundred
(2) If the corporation's annual budget equals or exceeds fifty
thousand dollars ($50,000), the minimum required amount is one
million dollars ($1,000,000).
This section applies only if the claim against the director or
officer can also be made directly against the corporation and a
liability insurance policy is applicable to the claim. If that policy
is found to cover the damages caused by the director or officer, no
cause of action as provided in this section shall be maintained
against the director or officer.
(f) For the purposes of this section, the payment of actual
expenses incurred in attending meetings or otherwise in the execution
of the duties of a director or officer shall not constitute
compensation.
(g) Nothing in this section shall be construed to limit the
liability of a nonprofit corporation for any negligent act or
omission of a director, officer, employee, agent, or servant
occurring within the scope of his or her duties.
(h) This section does not apply to any corporation that unlawfully
restricts membership, services, or benefits conferred on the basis
of political affiliation, age, or any characteristic listed or
defined in subdivision (b) or (e) of Section 51 of the Civil Code.
(i) This section does not apply to any volunteer director or
officer who receives compensation from the corporation in any other
capacity, including, but not limited to, as an employee.

5049. "Distribution" means the distribution of any gains, profits

or dividends to any member as such. As used in this section, "member"
means any person who is a member as defined in Section 5056 and any
person who is referred to as a member as authorized by subdivision
(a) of Sections 5332, 7333 and 9332.

laws of this state.
5051. "Filed," unless otherwise expressly provided, means filed in

the office of the Secretary of State.
5052. "Foreign business corporation," as used in Part 3 (commencing

with Section 7110), means a foreign corporation as defined in
Section 171 except that it does not include a foreign corporation as
defined in Section 5053.
5053. "Foreign corporation" means any corporation incorporated in a

jurisdiction other than California pursuant to that jurisdiction's
law for the incorporation of nonprofit corporations; except that as
used in subdivision (b) of Section 5122, in subdivision (c) of
Section 7122, and in subdivision (b) of Section 9122, "foreign
corporation" means a corporation described in Section 171.
5054. "Incentive and benefit plans," as used in Section 5140, in

Section 7140, and in Section 9140 includes, but is not limited to,
any plan or agreement under which the compensation of officers or
employees is fixed, in full or in part, by reference to the financial
performance of the corporation.
5055. "Liquidating price" or "liquidation preference," as used in

Part 3 (commencing with Section 7110), means amounts payable on
memberships of any class, upon voluntary or involuntary dissolution,
winding up or distribution of the entire assets of the corporation,
in priority to amounts payable to members of another class or
classes.
5056. (a) "Member" means any person who, pursuant to a specific
provision of a corporation's articles or bylaws, has the right to
vote for the election of a director or directors or on a disposition
of all or substantially all of the assets of a corporation or on a
merger or on a dissolution unless the provision granting such right
to vote is only effective as a result of paragraph (2) of subdivision
(a) of Section 7132. "Member" also means any person who is
designated in the articles or bylaws as a member and, pursuant to a
specific provision of a corporation's articles or bylaws, has the
right to vote on changes to the articles or bylaws.
(b) The articles or bylaws may confer some or all of the rights of
a member, set forth in this part and in Parts 2 through 5 of this
division, upon any person or persons who do not have any of the
voting rights referred to in subdivision (a).
(c) Where a member of a corporation is not a natural person, such
member may authorize in writing one or more natural persons to vote
on its behalf on any or all matters which may require a vote of the
members.
(d) A person is not a member by virtue of any of the following:
(1) Any rights such person has as a delegate.
(2) Any rights such person has to designate or select a director
or directors.
(3) Any rights such person has as a director.
5057. A "membership" refers to the rights a member has pursuant to

a corporation's articles, bylaws and this division.
5058. "Membership certificate," as used in Part 3 (commencing with

Section 7110), means a document evidencing a transferable property
interest in a corporation.
5059. "Nonprofit mutual benefit corporation" or "mutual benefit

corporation" means a corporation which is organized under Part 3
(commencing with Section 7110), or subject to Part 3 under the
provisions of subdivision (a) of Section 5003.
5060. "Nonprofit public benefit corporation" or "public benefit

corporation" means a corporation which is organized under Part 2
(commencing with Section 5110) or subject to Part 2 under the
provisions of subdivision (a) of Section 5003.
5061. "Nonprofit religious corporation" or "religious corporation"

means a corporation which is organized under Part 4 (commencing with
Section 9110) or subject to Part 4 pursuant to subdivision (a) of
Section 5003.
5062. "Officer's certificate" means a certificate signed and

verified by the chair 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.
5063. "On the certificate," as used in Part 3 (commencing with

Section 7110), means that a statement appears on the face of a
certificate or on the reverse thereof with a reference thereto on the
face.
5063.5. "Other business entity" means a domestic or foreign limited

liability company, limited partnership, general partnership,
business trust, real estate investment trust, unincorporated
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 (9) 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.
5064. A "parent" of a specified corporation is an affiliate

controlling such corporation directly or indirectly through one or
more intermediaries.
5064.5. "Parent party" means the corporation in control of any

constituent domestic or foreign corporation or other business entity
and whose equity securities are issued, transferred, or exchanged in
a merger pursuant to Section 6019.1 or 8019.1.
5065. "Person," in addition to those entities specified in Section

18 and unless otherwise expressly provided, includes any association,
business corporation, company, corporation, corporation sole,
domestic corporation, estate, foreign corporation, foreign business
corporation, individual, joint stock company, joint venture, mutual
benefit corporation, public benefit corporation, religious
corporation, partnership, government or political subdivision, agency
or instrumentality of a government.
5067. "Preferred shares," as used in Part 3 (commencing with

Section 7110), means shares other than common shares.
5068. "Proper county" means the county where the corporation's

principal office in this state is located or, if the corporation has
no such office, the County of Sacramento.
5069. "Proxy" means a written authorization signed by a member or

the member's attorney in fact giving another person or persons power
to vote on behalf of such member. "Signed" for the purpose of this
section means the placing of the member's name on the proxy (whether
by manual signature, typewriting, telegraphic transmission or
otherwise) by the member or such member's attorney in fact.
5070. "Proxyholder" means the person or persons to whom a proxy is

given.
5071. "Shareholder," as used in Part 3 (commencing with Section

7110), means one who is a holder of record of shares.
5072. "Shares," as used in Part 3 (commencing with Section 7110),

means the units into which the proprietary interests in a business
corporation or foreign business corporation are divided in the
articles.
5073. (a) Except as provided in subdivision (b), "subsidiary" of a

specified corporation means a corporation more than 50 percent of the
voting power of which is owned directly, or indirectly through one
or more subsidiaries, by the specified corporation.
(b) For the purpose of Section 7315, "subsidiary" of a specified
corporation means a corporation more than 25 percent of the voting
power of which is owned directly, or indirectly through one or more
subsidiaries as defined in subdivision (a), by the specified
corporation.
5074. "Surviving corporation" means a corporation into which one or

more other corporations are merged.
authorized position of director which is not then filled, whether the
vacancy is caused by death, resignation, removal, change in the
number of directors authorized in the articles or bylaws (by the
board or the members) or otherwise.

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
5077. "Vote" includes, but is not limited to, authorization by

written consent pursuant to subdivision (b) of Section 5211,
subdivision (b) of Section 7211, or subdivision (b) of Section 9211
and authorization by written ballot pursuant to Section 5513, Section
7513, or Section 9413.
5078. "Voting power" means the power to vote for the election of
different classes of memberships 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
memberships in question (whether of one or more classes) have the
power to elect in an election at which all memberships then entitled
to vote for the election of any directors are voted.
5079. "Written" or "in writing" includes facsimile, telegraphic,

and other electronic communication as authorized by this code,
including an electronic transmission by a corporation that satisfies
the requirements of Section 20.
5080. "Written ballot" does not include a ballot distributed at a

special or regular meeting of members.
CORPORATIONS CODE
SECTION 5110-5111
5110. This part shall be known and may be cited as the Nonprofit
Public Benefit Corporation Law.
5111. Subject to any other provisions of law of this state applying

to the particular class of corporation or line of activity, a
corporation may be formed under this part for any public or
charitable purposes.
CORPORATIONS CODE
SECTION 5120-5122
5120. (a) One or more persons may form a corporation under this
part by executing and filing articles of incorporation.
be signed by one or more persons who thereupon are the incorporators
of the corporation.
(d) At the time of filing pursuant to this section, a corporation
shall furnish an additional copy of its articles to the Secretary of
State who shall forward that copy to the Attorney General.
(e) If the corporation was created by the elected legislative body
in order to exercise authority that may lawfully be delegated by the
elected governing body to a private corporation or other entity, the
corporation shall furnish an additional copy of its articles to the
Secretary of State, who shall forward the additional copy to the
Controller.
5121. (a) In the case of an existing unincorporated association,

the association may change its status to that of a corporation upon a
proper authorization for such by the association in accordance with
its rules and procedures.
(c) The articles filed pursuant to this section shall be
accompanied by a verified statement of any two officers or governing
board members of the association stating that the incorporation of
the association by means of the articles to which the verified
statement is attached has been approved by the association in
accordance with its rules and procedures.
(d) Upon the change of status of an unincorporated association to
a corporation pursuant to subdivision (a), the property of the
association becomes the property of the corporation and the members
of the association who had any voting rights of the type referred to
in Section 5056 become members of the corporation.
filed pursuant to this section, certified by the Secretary of State
county.
(f) 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 unincorporated association may be
(g) If a corporation is organized by a person who is or was an
officer, director or member of an unincorporated association and such
corporation is not organized pursuant to subdivision (a), the
unincorporated association may continue to use its name and the
corporation may not use a name which is the same as or similar to the
name of the unincorporated association.
forth a name in which "bank," "trust," "trustee" or related words
Financial Institutions is attached thereto.
assumed under subdivision (b) of Section 2106 or a name which will
delayed effective date pursuant to subdivision (c) of Section 110, or
subdivision (c) of Section 5008, or a name which is under
reservation pursuant to this section, Section 201, Section 7122, or
Section 9122, except that a corporation may adopt a name that is
substantially the same as an existing domestic 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 corporation and a finding by the Secretary of State that
under the circumstances the public is not likely to be misled.
Secretary of State.
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
(b).
CORPORATIONS CODE
SECTION 5130-5134
5130. The articles of incorporation of a corporation formed under
this part shall set forth:
(a) The name of the corporation.
(b) The following statement:
"This corporation is a nonprofit public benefit corporation and
is not organized for the private gain of any person. It is organized
under the Nonprofit Public Benefit Corporation Law for (public or
charitable Ýinsert one or both]) purposes."
ÝIf the purposes include "public" purposes, the articles shall,
and in all other cases the articles may, include a further
description of the corporation's purposes.]
5131. The articles of incorporation may set forth a further

statement limiting the purposes or powers of the corporation.
5132. (a) The articles of incorporation may set forth any or all of
the following provisions, which shall not be effective unless
expressly provided in the articles:
(2) In the case of a subordinate corporation instituted or created
under the authority of a head organization, a provision setting
forth either or both of the following:
(A) That the subordinate corporation shall dissolve whenever its
charter is surrendered to, taken away by, or revoked by the head
organization granting it.
(B) That in the event of its dissolution pursuant to an article
provision allowed by subparagraph (A) or in the event of its
dissolution for any reason, any assets of the corporation after
compliance with the applicable provisions of Chapters 15 (commencing
with Section 6510), 16 (commencing with Section 6610) and 17
(commencing with Section 6710) shall be distributed to the head
organization.
(b) Nothing contained in subdivision (a) shall affect the
(c) The articles of incorporation may set forth any or all of the
following provisions:
(1) The names and addresses of the persons appointed to act as
initial directors.
(2) The classes of members, if any, and if there are two or more
classes, the rights, privileges, preferences, restrictions and
conditions attaching to each class.
(3) A provision that would allow any member to have more or less
than one vote in any election or other matter presented to the
members for a vote.
(4) A provision that requires an amendment to the articles, as
provided in subdivision (a) of Section 5812, or to the bylaws, and
any amendment or repeal of that amendment, to be approved in writing
by a specified person or persons other than the board or the members.
However, this approval requirement, unless the articles specify
otherwise, shall not apply if any of the following circumstances
exist:
(A) The specified person or persons have died or ceased to exist.
(B) If the right of the specified person or persons to approve is
in the capacity of an officer, trustee, or other status and the
office, trust, or status has ceased to exist.
(C) If the corporation has a specific proposal for amendment or
repeal, and the corporation has provided written notice of that
proposal, including a copy of the proposal, to the specified person
or persons at the most recent address for each of them, based on the
corporation's records, and the corporation has not received written
approval or nonapproval within the period specified in the notice,
which shall not be less than 10 nor more than 30 days commencing at
least 20 days after the notice has been provided.
(5) Any other provision, not in conflict with law, for the
management of the activities and for the conduct of the affairs of
the corporation, including any provision that is required or
permitted by this part to be stated in the bylaws.
CORPORATIONS CODE
SECTION 5140-5142
5140. Subject to any limitations contained in the articles or

bylaws and to compliance with other provisions of this division and
any other applicable laws, a corporation, in carrying out its
activities, shall have all of the powers of a natural person,
including, without limitation, the power to:
(a) Adopt, use, and at will alter a corporate seal, but failure to
(b) Adopt, amend, and repeal bylaws.
(c) Qualify to conduct its activities in any other state,
territory, dependency or foreign country.
(d) Issue, purchase, redeem, receive, take or otherwise acquire,
own, sell, lend, exchange, transfer or otherwise dispose of, pledge,
use and otherwise deal in and with its own bonds, debentures, notes
and debt securities.
(e) Issue memberships.
(f) Pay pensions, and establish and carry out pension, deferred
compensation, saving, thrift and other retirement, incentive and
benefit plans, trusts and provisions for any or all of its directors,
officers, employees, and persons providing services to it or any of
its subsidiary or related or associated corporations, and to
indemnify and purchase and maintain insurance on behalf of any
fiduciary of such plans, trusts, or provisions.
(g) Levy dues, assessments, and admission fees.
(h) Make donations for the public welfare or for community funds,
hospital, charitable, educational, scientific, civic, religious or
similar purposes.
(i) Assume obligations, enter into contracts, including contracts
of guarantee or suretyship, incur liabilities, borrow or lend money
or 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 and income.
(j) 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.
(k) Act as trustee under any trust incidental to the principal
objects of the corporation, and receive, hold, administer, exchange,
and expend funds and property subject to such trust.
(l) Carry on a business at a profit and apply any profit that
results from the business activity to any activity in which it may
lawfully engage.
(m) Pay the reasonable value of services rendered in this state to
the corporation before January 1, 1975, and not previously paid, by
any person who performed such services on a full-time basis under the
direction of a religious organization in connection with the
religious tenets of the organization. Such person shall have relied
solely on the religious organization for his or her financial support
for a minimum of five years. A payment shall not be made if such
person or religious organization waives the payment or receipt of
compensation for such services in writing. Payment may be made to
such religious organization to reimburse it for maintenance of any
person who rendered such services and to assist it in providing
future support and maintenance; however, payment shall not be made
from any funds or assets acquired with funds donated by or traceable
to gifts made to the corporation by any person, organization or
governmental agency other than the members, immediate families of
members and affiliated religious organizations of the religious
organization under whose direction the services were performed.
5141. Subject to Section 5142:

(a) No limitation upon the activities, purposes, or powers of the
corporation or upon the powers of the members, officers, or
implied by the articles or by Chapters 15 (commencing with Section
6510), 16 (commencing with Section 6610), and 17 (commencing with
Section 6710) shall be asserted as between the corporation or member,
officer or director and any third person, except in a proceeding:
(1) by a member or the state to enjoin the doing or continuation of
unauthorized activities by the corporation or its officers, or both,
in cases where third parties have not acquired rights thereby, (2) to
dissolve the corporation, or (3) by the corporation or by a member
suing in a representative suit against the officers or directors of
the corporation for violation of their authority.
which is authorized or ratified by the board or is done within the
scope of authority, actual or apparent, conferred by the board or
board's authority is limited by law other than this part, binds the
corporation, and the corporation acquires rights thereunder whether
the contract is executed or wholly or in part executory.
5142. (a) Notwithstanding Section 5141, any of the following may

bring an action to enjoin, correct, obtain damages for or to
otherwise remedy a breach of a charitable trust:
(1) The corporation, or a member in the name of the corporation
(2) An officer of the corporation.
(3) A director of the corporation.
(4) A person with a reversionary, contractual, or property
interest in the assets subject to such charitable trust.
(5) The Attorney General, or any person granted relator status by
the Attorney General.
The Attorney General shall be given notice of any action brought
by the persons specified in paragraphs (1) through (4), and may
intervene.
(b) In an action under this section, the court may not rescind or
enjoin the performance of a contract unless:
(1) All of the parties to the contract are parties to the action;
(2) No party to the contract has, in good faith, and without
actual notice of the trust restriction, parted with value under the
contract or in reliance upon it; and
(3) It is equitable to do so.
CORPORATIONS CODE
SECTION 5150-5153
5150. (a) Except as provided in subdivision (c), and Sections 5151,

5220, 5224, 5512, 5613, and 5616, bylaws may be adopted, amended or
repealed by the board unless the action would materially and
adversely affect the rights of members as to voting or transfer.
(b) Bylaws may be adopted, amended or repealed by approval of
members (Section 5034); provided, however, that such adoption,
amendment or repeal also requires approval by the members of a class
if that action would materially and adversely affect the rights of
that class as to voting or transfer in a manner different than that
action affects another class.
(c) The articles or bylaws may restrict or eliminate the power of
the board to adopt, amend or repeal any or all bylaws, subject to
subdivision (e) of Section 5151.
(d) Bylaws may also provide that repeal or amendment of those
bylaws, or the repeal or amendment of specified portions of those
bylaws, may occur only with the approval in writing of a specified
person or persons other than the board or members. However, this
approval requirement, unless the bylaws specify otherwise, shall not
apply if any of the following circumstances exist:
(1) The specified person or persons have died or ceased to exist.
(2) If the right of the specified person or persons to approve is
(3) If the corporation has a specific proposal for amendment or
5151. (a) The bylaws shall set forth (unless that provision is
corporation, or the method of determining 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 with the exact
number of directors to be fixed, within the limits specified, by
approval of the board or the members (Section 5034), in the manner
provided in the bylaws, subject to subdivision (e). The number or
minimum number of directors may be one or more.
(b) Once members have been admitted, 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 members (Section 5034).
(c) The bylaws may contain any provision, not in conflict with law
or the articles, for the management of the activities and for the
to:
(1) Any provision referred to in subdivision (c) of Section 5132.
notice of members', directors' and committee meetings, or of
conducting mail ballots.
time of their election; and the requirements of a quorum for
(4) The appointment and authority of committees.
(6) The mode of determination of members of record.
(7) The making of reports and financial statements to members.
(8) Setting, imposing and collecting dues, assessments and
admission fees.
(d) The bylaws may provide for the manner of admission,
withdrawal, suspension, and expulsion of members, consistent with the
requirements of Section 5341.
(e) The bylaws may require, for any or all corporate actions
(except as provided in paragraphs (1) and (2) of subdivision (a) of
Section 5222, subdivision (c) of Section 5616, and Section 6610), the
vote of a larger proportion of, or all of, the members or the
members of any class, unit, or grouping of members, or the vote of a
larger proportion of, or all of, the directors, than is otherwise
required by this part. Such a provision in the bylaws requiring such
greater vote shall not be altered, amended or repealed except by such
greater vote, unless otherwise provided in the bylaws.
(f) The bylaws may contain a provision limiting the number of
members, in total or of any class, which the corporation is
authorized to admit.
5152. A corporation may provide in its bylaws for delegates having

some or all of the authority of members. Where delegates are provided
for, the bylaws shall set forth delegates' terms of office, any
reasonable method for delegates' selection and removal, and any
reasonable method for calling, noticing and holding meetings of
delegates and may set forth the manner in which delegates may act by
written ballot similar to Section 5513 for written ballot of members.
Delegates may only act personally at a meeting or by written ballot
and may not act by proxy. Delegates may be given a name other than
"delegates."
5153. A corporation may provide in its bylaws for voting by its

members or delegates on the basis of chapter or other organizational
unit, or by region or other geographic grouping.
CORPORATIONS CODE
SECTION 5160
5160. Every corporation shall keep at its principal office in this

state the original or a copy of its articles and bylaws as amended to
date, which shall be open to inspection by the members at all
reasonable times during office hours. If the corporation has no
office in this state, it shall upon the written request of any member
furnish to such member a copy of the articles or bylaws as amended
to date.
CORPORATIONS CODE
SECTION 5210-5215
5210. Each corporation shall have a board of directors. Subject to

the provisions of this part and any limitations in the articles or
bylaws relating to action required to be approved by the members
(Section 5034), or by a majority of all members (Section 5033), the
activities and affairs of a corporation shall be conducted and all
corporate powers shall be exercised by or under the direction of the
board. The board may delegate the management of the activities of the
corporation to any person or persons, management company, or
committee however composed, provided that the activities and affairs
exercised under the ultimate direction of the board.
5211. (a) Unless otherwise provided in the articles or in the

bylaws, all of the following apply:
directors.
notice by first-class mail or 48 hours' notice delivered personally
or by telephone, including a voice messaging system or by electronic
provides a waiver of notice or consent to holding the meeting or an
corporate records or made a part of the minutes of the meetings.
of conference telephone, electronic video screen communication or
Participation in a meeting through use of 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:
(7) A majority of the number of directors authorized in or
pursuant to the articles or bylaws constitutes a quorum of the board
for the transaction of business. The articles or bylaws may require
the presence of one or more specified directors in order to
constitute a quorum of the board to transact business, as long as the
death of a director or the death or nonexistence of the person or
persons otherwise authorized to appoint or designate that director
does not prevent the corporation from transacting business in the
normal course of events. The articles or bylaws may not provide that
a quorum shall be less than one-fifth the number of directors
authorized in or pursuant to the articles or bylaws, or less than
two, whichever is larger, unless the number of directors authorized
in or pursuant to the articles or bylaws is one, in which case one
director constitutes a quorum.
(8) Subject to the provisions of Sections 5212, 5233, 5234, 5235,
and subdivision (e) of Section 5238, 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. 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, or a greater number required by this division, the articles
or the bylaws.
individually or collectively consent in writing to that action. The
written consent or consents shall be filed with the minutes of the
proceedings of the board. The action by written consent shall have
the same force and effect as a unanimous vote of the directors. For
purposes of this subdivision only, "all members of the board" does
not include an "interested director" as defined in Section 5233.
(c) Each director present and voting at a meeting shall have one
vote on each matter presented to the board of directors for action at
that meeting. No director may vote at any meeting by proxy.
(d) The provisions of this section apply also to incorporators, to
committees of the board, and to action by those incorporators or
committees mutatis mutandis.
5212. (a) The board may, by resolution adopted by a majority of the

number of directors then in office, provided that a quorum is
present, create one or more committees, each consisting of two or
more directors, to serve at the pleasure of the board. Appointments
to such committees shall be by a majority vote of the directors then
in office, unless the articles or bylaws require a majority vote of
the number of directors authorized in or pursuant to the articles or
bylaws. The bylaws may authorize one or more such committees, each
consisting of two or more directors, and may provide that a specified
officer or officers who are also directors of the corporation shall
be a member or members of such committee or committees. The board may
appoint one or more directors as alternate members of such
committee, who may replace any absent member at any meeting of the
committee. 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:
(1) The approval of any action for which this part also requires
approval of the members (Section 5034) or approval of a majority of
all members (Section 5033), regardless of whether the corporation has
members.
(2) The filling of vacancies on the board or in any committee
which has the authority of the board.
(3) The fixing of compensation of the directors for serving on the
(4) The amendment or repeal of bylaws or the adoption of new
bylaws.
(5) The amendment or repeal of any resolution of the board which
(6) The appointment of committees of the board or the members
thereof.
(7) The expenditure of corporate funds to support a nominee for
director after there are more people nominated for director than can
be elected.
(8) The approval of any self-dealing transaction except as
provided in paragraph (3) of subdivision (d) of Section 5233.
(b) A committee exercising the authority of the board shall not
include as members persons who are not directors. However, the board
may create other committees that do not exercise the authority of the
board and these other committees may include persons who are not
directors.
(c) Unless the bylaws otherwise provide, the board may delegate to
any committee powers as authorized by Section 5210, but may not
delegate the powers set forth in paragraphs (1) to (8), inclusive, of
subdivision (a).
5213. (a) A corporation shall have a chair of its board, who may be
given the title chair of the board, chairperson of the board,
chairman of the board, or chairwoman of the board, or a president or
both, a secretary, a treasurer or a chief financial officer or both,
and any other officers with any 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. The president, or if there is no
president the chair of the board, is the general manager and chief
executive officer of the corporation, unless otherwise provided in
the articles or bylaws. Unless otherwise specified in the articles or
the bylaws, if there is no chief financial officer, the treasurer is
the chief financial officer of the corporation. Any number of
offices may be held by the same person unless the articles or bylaws
provide otherwise, except that the secretary, the treasurer, or the
chief financial officer may not serve concurrently as the president
or chair of the board.
party.
(c) If the articles or bylaws provide for the election of any
officers by the members, the term of office of the elected officer
shall be one year unless the articles or bylaws provide for a
different term which shall not exceed three years.
5214. Subject to the provisions of subdivision (a) of Section 5141

and Section 5142, any note, mortgage, evidence of indebtedness,
contract, 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 any one of the
chairman of the board, the president or any vice president and by any
one of 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.
5215. 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', members', directors',
or a committee thereof, or members, 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
CORPORATIONS CODE
SECTION 5220-5227
5220. (a) Except as provided in subdivision (d), directors shall be

elected for the terms, not longer than four years, as are fixed in
the articles or bylaws. However, the terms of directors of a
corporation without members may be up to six years. In the absence of
any provision in the articles or bylaws, the term shall be one year.
The articles or bylaws may provide for staggering the terms of
directors by dividing the total number of directors into groups of
one or more directors. The terms of office of the several groups and
the number of directors in each group need not be uniform. No
amendment of the articles or bylaws may extend the term of a director
beyond that for which the director was elected, nor may any bylaw
provision increasing the terms of directors be adopted without
approval of the members (Section 5034).
(b) Unless the articles or bylaws otherwise provide, 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, unless the director has
been removed from office.
(c) The articles or bylaws may provide for the election of one or
more directors by the members of any class voting as a class.
(d) For the purposes of this subdivision, "designator" means one
or more designators. Subdivisions (a) through (c) notwithstanding,
all or any portion of the directors authorized in the articles or
bylaws of a corporation may hold office by virtue of designation or
selection by a specified designator as provided by the articles or
bylaws rather than by election. Such directors shall continue in
office for the term prescribed by the governing article or bylaw
provision, or, if there is no term prescribed, until the governing
article or bylaw provision is duly amended or repealed, except as
provided in subdivision (e) of Section 5222. A bylaw provision
authorized by this subdivision may be adopted, amended, or repealed
only by approval of the members (Section 5034) except as provided in
subdivision (d) of Section 5150. Unless otherwise provided in the
articles or bylaws, the entitlement to designate or select a director
or directors shall cease if any of the following circumstances
exist:
(1) The specified designator of that director or directors has
died or ceased to exist.
(2) If the entitlement of the specified designator of that
director or directors to designate is in the capacity of an officer,
trustee, or other status and the office, trust, or status has ceased
to exist.
(e) If a corporation has not issued memberships and (1) all the
directors resign, die, or become incompetent, or (2) a corporation's
initial directors have not been named in the articles and all
incorporators resign, die, or become incompetent before 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.
5221. (a) The board may declare vacant the office of a director who
has been declared of unsound mind by a final order of court, or
convicted of a felony, or been found by a final order or judgment of
any court to have breached any duty under Article 3 (commencing with
Section 5230), or, if at the time a director is elected, the bylaws
provide that a director may be removed for missing a specified number
of board meetings, fails to attend the specified number of meetings.
(b) As provided in paragraph (3) of subdivision (c) of Section
5151, the articles or bylaws may prescribe the qualifications of
directors. The board, by a majority vote of the directors who meet
all of the required qualifications to be a director, may declare
vacant the office of any director who fails or ceases to meet any
required qualification that was in effect at the beginning of that
director's current term of office.
5222. (a) Subject to subdivisions (b) and (f), any or all directors
may be removed without cause if:
(1) In a corporation with fewer than 50 members, the removal is
approved by a majority of all members (Section 5033).
(2) In a corporation with 50 or more members, the removal is
approved by the members (Section 5034).
(3) In a corporation with no members, the removal is approved by a
majority of the directors then in office.
(b) Except for a corporation having no members pursuant to Section
5310:
(1) In a corporation in which the articles or bylaws authorize
members to cumulate their votes pursuant to subdivision (a) of
Section 5616, no director may be removed (unless the entire board is
removed) if the votes cast against removal, or not consenting in
votes were cast (or, if the action is taken by written ballot, all
memberships entitled to vote were voted) and the entire number of
(2) If by the provisions of the articles or bylaws the members of
any class, voting as a class, are entitled to elect one or more
directors, any director so elected may be removed only by the
applicable vote of the members of that class.
(3) If by the provisions of the articles or bylaws the members
within a chapter or other organizational unit, or region or other
geographic grouping, voting as such, are entitled to elect one or
more directors, any director so elected may be removed only by the
applicable vote of the members within the organizational unit or
geographic grouping.
(c) Any reduction of the authorized number of directors or any
office unless the reduction or any amendment also provides for the
removal of one or more specified directors.
(d) Except as provided in this section and Sections 5221 and 5223,
a director may not be removed prior to the expiration of the
director's term of office.
(e) If a director removed under this section or Section 5221 or
5223 was chosen by designation pursuant to subdivision (d) of Section
5220, then:
(1) If a different person may be designated pursuant to a
governing article or bylaw provision, the new designation shall be
made.
(2) If the governing article or bylaw provision contains no
provision under which a different person may be designated, the
governing article or bylaw provision shall be deemed repealed.
(f) For the purposes of this subdivision, "designator" means one
or more designators. If by the provisions of the articles or bylaws a
designator is entitled to designate one or more directors, then:
(1) Unless otherwise provided in the articles or bylaws at the
time of designation, any director so designated may be removed
without cause by the designator of that director.
(2) Any director so designated may only be removed under
subdivision (a) with the written consent of the designator of that
director.
(3) Unless otherwise provided in the articles or bylaws, the right
to remove shall not apply if any of the following circumstances
exist:
(A) The designator entitled to that right has died or ceased to
exist.
(B) If that right is in the capacity of an officer, trustee, or
other status, and the office, trust, or status has ceased to exist.
5223. (a) The superior court of the proper county may, at the suit
of a director, or twice the authorized number (Section 5036) of
members or 20 members, whichever is less, remove from office any
director in case of fraudulent or dishonest acts or gross abuse of
authority or discretion with reference to the corporation or breach
of any duty arising under Article 3 (commencing with Section 5230) of
this chapter, 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.
(b) The Attorney General may bring an action under subdivision
(a), may intervene in such an action brought by any other party and
shall be given notice of any such action brought by any other party.

on the board may be filled by approval of the board (Section 5032)
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,
complying with Section 5211, or (3) a sole remaining director. Unless
the articles or a bylaw approved by the members (Section 5034)
provide that the board may fill vacancies occurring in the board by
reason of the removal of directors, or unless the corporation has no
members pursuant to Section 5310, such vacancies may be filled only
by approval of the members (Section 5034).
(b) The members may elect a director at any time to fill any
vacancy not filled by the directors.
(c) Any director may resign effective upon giving written notice

so that its activities can no longer be conducted to advantage or so
that there is danger that its property, activities, or 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 members holding not less than 33 1/3 percent of
the voting power.
(b) If the members of a corporation are deadlocked so that they
cannot elect the directors to be elected at the time prescribed
therefor, the superior court of the proper county may,
petition of members 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) Any person bringing an action under subdivision (a) or (b)
shall give notice to the Attorney General, who may intervene.
(d) The Attorney General may bring an action under subdivision (a)
or (b).
(e) A provisional director shall be an impartial person, who is
neither a member 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 members is broken
or until such provisional director is removed by order of the court
or by approval of a majority of all members (Section 5033). Such
person shall be entitled to such compensation as shall be fixed by
the court unless otherwise agreed with the corporation.
5226. Except upon notice to the Attorney General, no director may

resign where the corporation would then be left without a duly
elected director or directors in charge of its affairs.
5227. (a) Any other provision of this part notwithstanding, not

more than 49 percent of the persons serving on the board of any
corporation may be interested persons.
(b) For the purpose of this section, "interested persons" means
either:
(1) Any person currently being compensated by the corporation for
services rendered to it within the previous 12 months, whether as a
full- or part-time employee, independent contractor, or otherwise,
excluding any reasonable compensation paid to a director as director;
or
(2) Any brother, sister, ancestor, descendant, spouse,
brother-in-law, sister-in-law, son-in-law, daughter-in-law,
mother-in-law, or father-in-law of any such person.
(c) A person with standing under Section 5142 may bring an action
to correct any violation of this section. The court may enter any
order which shall provide an equitable and fair remedy to the
corporation, including, but not limited to, an order for the election
of additional directors, an order to enlarge the size of the board,
or an order for the removal of directors.
(d) The provisions of this section shall not affect the validity
or enforceability of any transaction entered into by a corporation.
CORPORATIONS CODE
SECTION 5230-5239
5230. (a) Any duties and liabilities set forth in this article
shall apply without regard to whether a director is compensated by
the corporation.
(b) Part 4 (commencing with Section 16000) of Division 9 of the
Probate Code does not apply to the directors of any corporation.

the director may serve, in good faith, in a manner that director
believes to be in the best interests of the corporation and with such
care, including reasonable inquiry, as an ordinarily prudent person
in a like position would use under similar circumstances.
prepared or presented by:
presented;
matters which the director believes to be within that person's
professional or expert competence; or
(3) A committee upon which the director does not serve that is
composed exclusively of any or any combination of directors, persons
described in paragraph (1), or persons described in paragraph (2), as
to matters within the committee's designated authority, which
committee the director believes to merit confidence, so long as, in
any 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 that reliance to be unwarranted.
(c) Except as provided in Section 5233, 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, including, without limiting
the generality of the foregoing, any actions or omissions which
exceed or defeat a public or charitable purpose to which a
corporation, or assets held by it, are dedicated.
5232. (a) Section 5231 governs the duties of directors as to any

acts or omissions in connection with the election, selection, or
nomination of directors.
(b) This section shall not be construed to limit the generality of
Section 5231.
5233. (a) Except as provided in subdivision (b), for the purpose of

this section, a self-dealing transaction means a transaction to
which the corporation is a party and in which one or more of its
directors has a material financial interest and which does not meet
the requirements of paragraph (1), (2), or (3) of subdivision (d).
Such a director is an "interested director" for the purpose of this
section.
(b) The provisions of this section do not apply to any of the
following:
(1) An action of the board fixing the compensation of a director
as a director or officer of the corporation.
(2) A transaction which is part of a public or charitable program
of the corporation if it: (i) is approved or authorized by the
corporation in good faith and without unjustified favoritism; and
(ii) results in a benefit to one or more directors or their families
because they are in the class of persons intended to be benefited by
the public or charitable program.
(3) A transaction, of which the interested director or directors
have no actual knowledge, and which does not exceed the lesser of 1
percent of the gross receipts of the corporation for the preceding
fiscal year or one hundred thousand dollars ($100,000).
(c) The Attorney General or, if the Attorney General is joined as
an indispensable party, any of the following may bring an action in
the superior court of the proper county for the remedies specified in
subdivision (h):
(1) The corporation, or a member asserting the right in the name
of the corporation pursuant to Section 5710.
(4) Any person granted relator status by the Attorney General.
(d) In any action brought under subdivision (c) the remedies
specified in subdivision (h) shall not be granted if:
(1) The Attorney General, or the court in an action in which the
Attorney General is an indispensable party, has approved the
transaction before or after it was consummated; or
(2) The following facts are established:
(A) The corporation entered into the transaction for its own
benefit;
(B) The transaction was fair and reasonable as to the corporation
at the time the corporation entered into the transaction;
(C) Prior to consummating the transaction or any part thereof the
board authorized or approved the transaction in good faith by a vote
of a majority of the directors then in office without counting the
vote of the interested director or directors, and with knowledge of
the material facts concerning the transaction and the director's
interest in the transaction. Except as provided in paragraph (3) of
this subdivision, action by a committee of the board shall not
satisfy this paragraph; and
(D) (i) Prior to authorizing or approving the transaction the
board considered and in good faith determined after reasonable
investigation under the circumstances that the corporation could not
have obtained a more advantageous arrangement with reasonable effort
under the circumstances or (ii) the corporation in fact could not
have obtained a more advantageous arrangement with reasonable effort
under the circumstances; or
(A) A committee or person authorized by the board approved the
transaction in a manner consistent with the standards set forth in
paragraph (2) of this subdivision;
(B) It was not reasonably practicable to obtain approval of the
board prior to entering into the transaction; and
(C) The board, after determining in good faith that the conditions
of subparagraphs (A) and (B) of this paragraph were satisfied,
ratified the transaction at its next meeting by a vote of the
majority of the directors then in office without counting the vote of
the interested director or directors.
(e) Except as provided in subdivision (f), an action under
subdivision (c) must be filed within two years after written notice
setting forth the material facts of the transaction and the director'
s interest in the transaction is filed with the Attorney General in
accordance with such regulations, if any, as the Attorney General may
adopt or, if no such notice is filed, within three years after the
transaction occurred, except for the Attorney General, who shall have
10 years after the transaction occurred within which to file an
action.
(f) In any action for breach of an obligation of the corporation
owed to an interested director, where the obligation arises from a
self-dealing transaction which has not been approved as provided in
subdivision (d), the court may, by way of offset only, make any order
authorized by subdivision (h), notwithstanding the expiration of the
applicable period specified in subdivision (e).
(g) Interested directors may be counted in determining the
presence of a quorum at a meeting of the board which authorizes,
approves or ratifies a contract or transaction.
(h) If a self-dealing transaction has taken place, the interested
director or directors shall do such things and pay such damages as in
the discretion of the court will provide an equitable and fair
remedy to the corporation, taking into account any benefit received
by the corporation and whether the interested director or directors
acted in good faith and with intent to further the best interest of
the corporation. Without limiting the generality of the foregoing,
the court may order the director to do any or all of the following:
(1) Account for any profits made from such transaction, and pay
them to the corporation;
(2) Pay the corporation the value of the use of any of its
property used in such transaction; and
(3) Return or replace any property lost to the corporation as a
result of such transaction, together with any income or appreciation
lost to the corporation by reason of such transaction, or account for
any proceeds of sale of such property, and pay the proceeds to the
corporation together with interest at the legal rate. The court may
award prejudgment interest to the extent allowed in Section 3287 or
3288 of the Civil Code. In addition, the court may, in its
discretion, grant exemplary damages for a fraudulent or malicious
violation of this section.
5234. (a) No contract or other transaction between a corporation

and any domestic or foreign corporation, firm 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:
directors; or
(b) This section does not apply to transactions covered by Section
5233.
5235. (a) The board may fix the compensation of a director, as

director or officer, and no obligation, otherwise valid, to pay such
compensation shall be voidable merely because the persons receiving
the compensation participated in the decision to pay it, unless it
was not just and reasonable as to the corporation at the time it was
authorized, ratified or approved.
(b) In the absence of fraud, any liability under this section
shall be limited to the amount by which the compensation exceeded
what was just and reasonable, plus interest from the date of payment.
5236. (a) A corporation shall not make any loan of money or
property to or guarantee the obligation of any director or officer,
unless approved by the Attorney General; provided, however, that a
corporation may advance money to a director or officer of the
corporation or of its parent or any subsidiary for expenses
reasonably anticipated to be incurred in the performance of the
duties of such officer or director, provided that in the absence of
such advance, such director or officer would be entitled to be
reimbursed for such expenses by such corporation, its parent, or any
subsidiary.
(b) 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.
(c) The provisions of subdivision (a) do not apply to a loan of
money to or for the benefit of an officer in circumstances where the
loan is necessary, in the judgment of the board, to provide financing
for the purchase of the principal residence of the officer in order
to secure the services or continued services of the officer and the
loan is secured by real property located in the state.

be jointly and severally liable to the corporation for:
(1) The making of any distribution.
(2) The distribution of assets 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 15 (commencing with
Section 6510), 16 (commencing with Section 6610) and 17 (commencing
with Section 6710).
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 5420;
(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 the corporate action
who have not consented to the corporate action, whether or not they
have reduced their claims to judgment;
(3) Under paragraph (1), (2) or (3) of subdivision (a), by the
Attorney General.
shall be the amount of the illegal distribution, or if the illegal
property at the time of the illegal distribution, plus interest
appraisal or other valuation, if any, of that property, or the loss
guaranty.
action.
persons who received the distribution.
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.
5238. (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
of the corporation or of another enterprise at the request of such
subdivision (e).
procure a judgment in its favor, an action brought under Section
5233, or an action brought by the Attorney General or a person
granted relator status by the Attorney General for any breach of duty
relating to assets held in charitable trust) by reason of the fact
that such person is or was an agent of the corporation, against
expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with such proceeding if such
person acted in good faith and in a manner such 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 such 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
pending or completed action by or in the right of the corporation,
or brought under Section 5233, or brought by the Attorney General or
a person granted relator status by the Attorney General for breach of
duty relating to assets held in charitable trust, to procure a
judgment in its favor by reason of the fact that such person is or
was an agent of the corporation, against expenses actually and
reasonably incurred by such person in connection with the defense or
settlement of such action if such person acted in good faith, in a
manner such person believed to be in the best interests of the
corporation and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances. No indemnification shall be made under this
subdivision:
(1) In respect of any claim, issue or matter as to which such
the performance of such person's duty to the corporation, unless and
only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall
determine;
threatened or pending action, with or without court approval; or
(3) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval unless it is settled with the approval of the Attorney
General.
subdivision (b) or (c) or in defense of any claim, issue or matter
subdivision (b) or (c), by:
not parties to such proceeding;
(2) Approval of the members (Section 5034), with the persons to be
indemnified not being entitled to vote thereon; or
(3) The court in which such proceeding is or was pending upon
whether or not such application by the agent, attorney or other
person is opposed by the corporation.
by the corporation prior to the final disposition of such proceeding
such amount unless it shall be determined ultimately that the agent
is entitled to be indemnified as authorized in this section. The
provisions of subdivision (a) of Section 5236 do not apply to
advances made pursuant to this subdivision.
(g) No provision made by a corporation to indemnify its or its
subsidiary's directors or officers for the defense of any proceeding,
whether contained in the articles, bylaws, a resolution of members
or directors, an agreement or otherwise, shall be valid unless
consistent with this section. Nothing contained in this section shall
affect any right to indemnification to which persons other than such
directors and officers may be entitled by contract or otherwise.
articles, bylaws, a resolution of the members or an agreement in
effect at the time of the accrual of the alleged cause of action
indemnification; or
liability asserted against or incurred by the agent in such capacity
corporation would have the power to indemnify the agent against such
liability under the provisions of this section; provided, however,
that a corporation shall have no power to purchase and maintain such
insurance to indemnify any agent of the corporation for a violation
of Section 5233.
trustee, investment manager or other fiduciary of an employee benefit
plan in such person's capacity as such, even though such person may
also be an agent as defined in subdivision (a) of the employer
corporation. A corporation shall have power to indemnify such
trustee, investment manager or other fiduciary to the extent
5239. (a) There shall be no personal liability to a third party for

monetary damages on the part of a volunteer director or volunteer
executive officer of a nonprofit corporation subject to this part,
caused by the director's or officer's negligent act or omission in
the performance of that person's duties as a director or officer, if
all of the following conditions are met:
(1) The act or omission was within the scope of the director's or
executive officer's duties.
(2) The act or omission was performed in good faith.
(3) The act or omission was not reckless, wanton, intentional, or
grossly negligent.
(4) Damages caused by the act or omission are covered pursuant to
a liability insurance policy issued to the corporation, either in the
form of a general liability policy or a director's and officer's
liability policy, or personally to the director or executive officer.
In the event that the damages are not covered by a liability
insurance policy, the volunteer director or volunteer executive
officer shall not be personally liable for the damages if the board
of directors of the corporation and the person had made all
reasonable efforts in good faith to obtain available liability
insurance.
(b) "Volunteer" means the rendering of services without
compensation. "Compensation" means remuneration whether by way of
salary, fee, or other consideration for services rendered. However,
the payment of per diem, mileage, or other reimbursement expenses to
a director or executive officer does not affect that person's status
as a volunteer within the meaning of this section.
(c) "Executive officer" means the president, vice president,
secretary, or treasurer of a corporation, or such other individual
who serves in like capacity, who assists in establishing the policy
of the corporation.
(d) Nothing in this section shall limit the liability of the
corporation for any damages caused by acts or omissions of the
volunteer director or volunteer executive officer.
(e) This section does not eliminate or limit the liability of a
director or officer for any of the following:
(1) As provided in Section 5233 or 5237.
(2) In any action or proceeding brought by the Attorney General.
(f) Nothing in this section creates a duty of care or basis of
liability for damage or injury caused by the acts or omissions of a
director or officer.
(g) This section is only applicable to causes of action based upon
acts or omissions occurring on or after January 1, 1988.
(h) As used in this section as applied to nonprofit public benefit
corporations which have an annual budget of less than twenty-five
thousand dollars ($25,000) and that are exempt from federal income
taxation under Section 501(c)(3) of the Internal Revenue Code, the
condition of making "all reasonable efforts in good faith to obtain
available liability insurance" shall be satisfied by the corporation
if it makes at least one inquiry per year to purchase a general
liability insurance policy and that insurance was not available at a
cost of less than 5 percent of the previous year's annual budget of
the corporation. If the corporation is in its first year of
operation, this subdivision shall apply for as long as the budget of
the corporation does not exceed twenty-five thousand dollars
($25,000) in its first year of operation.
An inquiry pursuant to this subdivision shall obtain premium costs
for a general liability policy with an amount of coverage of at
least five hundred thousand dollars ($500,000).
CORPORATIONS CODE
SECTION 5240-5241
5240. (a) This section applies to all assets held by the

corporation for investment. Assets which are directly related to the
corporation's public or charitable programs are not subject to this
section.
(b) Except as provided in subdivision (c), in investing,
reinvesting, purchasing, acquiring, exchanging, selling and managing
the corporation's investments, the board shall do the following:
(1) Avoid speculation, looking instead to the permanent
disposition of the funds, considering the probable income, as well as
the probable safety of the corporation's capital.
(2) Comply with additional standards, if any, imposed by the
articles, bylaws or express terms of an instrument or agreement
pursuant to which the assets were contributed to the corporation.
(c) No investment violates this section where it conforms to
provisions authorizing the investment contained in an instrument or
agreement pursuant to which the assets were contributed to the
corporation. No investment violates this section or Section 5231
where it conforms to provisions requiring the investment contained in
an instrument or agreement pursuant to which the assets were
contributed to the corporation.
(d) In carrying out duties under this section, each director shall
act as required by subdivision (a) of Section 5231, may rely upon
others as permitted by subdivision (b) of Section 5231, and shall
have the benefit of subdivision (c) of Section 5231, and the board
may delegate its investment powers as permitted by Section 5210.
(e) Nothing in this section shall be construed to preclude the
application of the Uniform Prudent Management of Institutional Funds
Act (Part 7 (commencing with Section 18501) of Division 9 of the
Probate Code) if that act would otherwise be applicable, but nothing
in the Uniform Prudent Management of Institutional Funds Act alters
the status of governing boards, or the duties and liabilities of
directors, under this part.
5241. Nothing in Section 5240 shall abrogate or restrict the power

of the appropriate court in proper cases to direct or permit a
corporation to deviate from the terms of a trust or agreement
regarding the making or retention of investments. Notice of such
action or proceeding shall be given to the Attorney General who may
intervene.
CORPORATIONS CODE
SECTION 5250
5250. A corporation is subject at all times to examination by the

Attorney General, on behalf of the state, to ascertain the condition
of its affairs and to what extent, if at all, it fails to comply with
trusts which it has assumed or has departed from the purposes for
which it is formed. In case of any such failure or departure the
Attorney General may institute, in the name of the state, the
proceeding necessary to correct the noncompliance or departure.
CORPORATIONS CODE
SECTION 5260
5260. Any other provision of law notwithstanding, every

corporation, during any period or periods such corporation is deemed
to be a "private foundation" as defined in Section 509 of the
Internal Revenue Code of 1954 as amended by Section 101 of the Tax
Reform Act of 1969 (all references in this section to the Internal
Revenue Code shall refer to such code as amended by such act), shall
distribute its income for each taxable year (and principal, if
necessary) at such time and in such manner as not to subject such
corporation to tax under Section 4942 of such code, (as modified by
paragraph 3 of subsection (1) of Section 101 of the Tax Reform Act of
1969), and such corporation shall not engage in any act of
self-dealing as defined in subsection (d) of Section 4941 of such
code (as modified by paragraph (2) of subsection (1) of Section 101
of the Tax Reform Act of 1969), retain any excess business holdings
as defined in subsection (c) of Section 4943 of such code, make any
investments in such manner as to subject such corporation to tax
under Section 4944 of such code, or make any taxable expenditure as
defined in subsection (d) of Section 4945 of such code (as modified
by paragraph (5) of subsection (1) of Section 101 of the Tax Reform
Act of 1969).
This section shall apply to any such corporation and any provision
contained in its articles of incorporation or other governing
instrument inconsistent with this section or to the contrary thereof
shall be without effect.
CORPORATIONS CODE
SECTION 5310-5313
5310. (a) A corporation may admit persons to membership, as

provided in its articles or bylaws, or may provide in its articles or
bylaws that it shall have no members. In the absence of any
provision in its articles or bylaws providing for members, a
corporation shall have no members.
(b) In the case of a corporation which has no members, any action
for which there is no specific provision of this part applicable to a
corporation which has no members and which would otherwise require
approval by a majority of all members (Section 5033) or approval by
the members (Section 5034) shall require only approval of the board,
any provision of this part or the articles or bylaws to the contrary
notwithstanding.
(c) Reference in this part to a corporation which has no members
includes a corporation in which the directors are the only members.
5311. Subject to the articles or bylaws, memberships may be issued

by a corporation for no consideration or for such consideration as is
5312. No person may hold more than one membership, and no

fractional memberships may be held, provided, however, that:
(a) Two or more persons may have an indivisible interest in a
single membership when authorized by, and in such manner or under the
circumstances prescribed by, the articles or bylaws subject to
Section 5612; and
(b) If the articles or bylaws provide for classes of membership
and if the articles or bylaws permit a person to be a member of more
than one class, a person may hold a membership in one or more
classes.
5313. Except as provided in its articles or bylaws, a corporation

may admit any person to membership.
CORPORATIONS CODE
SECTION 5320
5320. (a) Subject to Section 5613, and unless otherwise provided in

the corporation's articles or bylaws:
(1) No member may transfer a membership or any right arising
therefrom.
(2) All rights of membership cease upon the member's death or
dissolution.
(b) Notwithstanding subdivision (a), no member may transfer for
value a membership or any right arising therefrom.
(c) Notwithstanding subdivisions (a) and (b), this section does
not prohibit or restrict the transfer, purchase, or sale of a
membership in a limited equity housing cooperative, provided that the
transfer, purchase, or sale is consistent with Section 33007.5 of
the Health and Safety Code.
CORPORATIONS CODE
SECTION 5330-5332
5330. A corporation may issue memberships having different rights,

privileges, preferences, restrictions or conditions, as authorized by
its articles or bylaws.
5331. Except as provided in or authorized by the articles or

bylaws, all memberships shall have the same rights, privileges,
preferences, restrictions and conditions.
5332. (a) A corporation may refer to persons associated with it as

"members" even though such persons are not members within the meaning
of Section 5056; but references to members in this part mean members
as defined in Section 5056.
(b) A corporation may benefit, serve, or assist persons who are
not members within the meaning of Section 5056 for such
consideration, if any, as the board may determine or as is authorized
or provided for in the articles or bylaws.
CORPORATIONS CODE
SECTION 5340-5342
5340. (a) A member may resign from membership at any time.

(b) This section shall not relieve the resigning member from any
obligation for charges incurred, services or benefits actually
rendered, dues, assessments or fees, or arising from contract or
otherwise, and this section shall not diminish any right of the
corporation to enforce any such obligation or obtain damages for its
breach.
(c) A membership issued for a period of time shall expire when
such period of time has elapsed unless the membership is renewed.
5341. (a) No member may be expelled or suspended, and no membership

or membership rights may be terminated or suspended, except
according to procedures satisfying the requirements of this section.
An expulsion, termination or suspension not in accord with this
section shall be void and without effect.
(b) Any expulsion, suspension or termination must be done in good
faith and in a fair and reasonable manner. Any procedure which
conforms to the requirements of subdivision (c) is fair and
reasonable, but a court may also find other procedures to be fair and
reasonable when the full circumstances of the suspension,
termination, or expulsion are considered.
(c) A procedure is fair and reasonable when:
(1) The provisions of the procedure have been set forth in the
articles or bylaws, or copies of such provisions are sent annually to
all the members as required by the articles or bylaws;
(2) It provides the giving of 15 days prior notice of the
expulsion, suspension or termination and the reasons therefor; and
(3) It provides an opportunity for the member to be heard, orally
or in writing, not less than five days before the effective date of
the expulsion, suspension or termination by a person or body
authorized to decide that the proposed expulsion, termination or
suspension not take place.
(d) Any notice required under this section may be given by any
method reasonably calculated to provide actual notice. Any notice
given by mail must be given by first-class or registered mail sent to
the last address of the member shown on the corporation's records.
(e) Any action challenging an expulsion, suspension or termination
of membership, including any claim alleging defective notice, must
be commenced within one year after the date of the expulsion,
suspension or termination. In the event such an action is successful
the court may order any relief, including reinstatement, it finds
equitable under the circumstances, but no vote of the members or of
the board may be set aside solely because a person was at the time of
the vote wrongfully excluded by virtue of the challenged expulsion,
suspension or termination, unless the court finds further that the
wrongful expulsion, suspension or termination was in bad faith and
for the purpose, and with the effect, of wrongfully excluding the
member from the vote or from the meeting at which the vote took
place, so as to affect the outcome of the vote.
(f) This section governs only the procedures for expulsion,
suspension or termination and not the substantive grounds therefor.
An expulsion, suspension or termination based upon substantive
grounds which violate contractual or other rights of the member or
are otherwise unlawful, is not made valid by compliance with this
section.
(g) A member who is expelled or suspended or whose membership is
terminated shall be liable for any charges incurred, services or
benefits actually rendered, dues, assessments or fees incurred before
the expulsion, suspension or termination or arising from contract or
otherwise.
5342. (a) An amendment of the articles or bylaws which would

terminate all memberships or any class of memberships shall meet the
requirements of this part and this section.
(b) Before such an amendment is adopted the corporation shall give
written notice to members not less than 45 nor more than 90 days
prior to any vote by the members on the amendment. The written notice
shall describe the effect of the amendment on the corporation and
the members. However, written notice need not be given at least 45
days prior to any vote by the members on the amendment if all members
entitled to vote receive a written notice prior to the vote setting
forth the information described in the preceding sentence and sign a
written waiver of 45 days notice.
(c) Any such amendment shall be approved by the members (Section
5034).
(d) The articles or bylaws may impose additional requirements
regarding termination of all memberships or any class of memberships.
(e) Upon request of a member the corporation shall provide at its
option the rights set forth in either paragraph (1) or (2) of
subdivision (a) of Section 6330 as soon as reasonably possible to
allow the member to communicate with other members regarding the
proposed amendment.
(f) Any such amendment shall terminate the rights members have
pursuant to this part as members (Section 5056).
(g) The provisions of Section 5341 shall not apply to termination
of all memberships or any class of memberships pursuant to an
amendment of the articles or bylaws.
CORPORATIONS CODE
SECTION 5350-5354
5350. (a) A member of a corporation is not, as such, personally
liable for the debts, liabilities, or obligations of the corporation.
(b) No person is liable for any obligation arising from
membership unless the person was admitted to membership upon the
person's application or with the person's consent.
5351. A corporation may levy dues, assessments or fees upon its

members pursuant to its articles or bylaws, but a member upon
learning of them may avoid liability for them by promptly resigning
from membership, except where the member is, by contract or
otherwise, liable for them. Article or bylaw provisions authorizing
such dues, assessments or fees do not, of themselves, create such
liability.
5352. (a) No action shall be brought by or on behalf of any

creditor to reach and apply the liability, if any, of a member to the
corporation to pay the amount due on such member's membership or
otherwise due to the corporation unless final judgment has been
rendered in favor of the creditor against the corporation and
execution has been returned unsatisfied in whole or in part or unless
such proceedings would be useless.
to reach and apply unpaid amounts due the corporation and any or all
members who owe amounts to the corporation may be joined in such
action. Several judgments may be rendered for and against the parties
to the action or in favor of a receiver for the benefit of the
respective parties thereto.
(c) All amounts paid by any member in any such action shall be
credited on the unpaid balance due the corporation by such member.
5353. Nothing in this part shall be construed as in derogation of

any rights or remedies which any creditor or member may have against
any promoter, member, director, officer or the corporation because of
participation in any fraud or illegality practiced upon such
creditor or member by any such person or by the corporation in
connection with the issue or sale of memberships or securities or in
derogation of any rights which the corporation may have by
rescission, cancellation or otherwise because of any fraud or
illegality practiced on it by any such person in connection with the
issue or sale of memberships or securities.
5354. A person holding a membership as executor, administrator,

guardian, trustee, receiver or in any representative or fiduciary
capacity is not personally liable for any unpaid balance of the
purchase price of the membership, or for any amounts owing to the
corporation by the member, because the membership is so held; but the
estate and funds in the hands of such fiduciary are liable therefor.
CORPORATIONS CODE
SECTION 5410
5410. No corporation shall make any distribution. This section

shall not apply to the purchase of a membership in a limited-equity
housing cooperative, as defined in Section 33007.5 of the Health and
Safety Code, which is organized as a public benefit corporation.
CORPORATIONS CODE
SECTION 5420
5420. (a) Any person who receives any distribution is liable to the
corporation for the amount so received by such person with interest
thereon at the legal rate on judgments until paid.
(b) Suit may be brought in the name of a corporation by a
creditor, a director, the Attorney General, or, subject to meeting
the requirements of Section 5710, a member. In any such action in
addition to the remedy provided in subdivision (a), the court may
award punitive damages for the benefit of the corporation against any
director, officer, member or other person who with intent to defraud
the corporation caused, received or aided and abetted in the making
of any distribution.
(c) Any person sued under this section may implead all other
persons liable under this section and may in the absence of fraud by
such moving party compel contribution, either in that action or in an
independent action against persons not joined in the action.
(d) Nothing contained in this section affects any liability which
any person may have under Sections 3439 to 3439.12, inclusive, of the
Civil Code.
CORPORATIONS CODE
SECTION 5510-5517
5510. (a) Meetings of members may be held at a place within or

without this state as may be stated in or fixed in accordance with
the bylaws. If no other place is stated or so fixed, meetings of
members shall be held at the principal executive office of the
members not physically present in person (or, if proxies are
allowed, by proxy) at a meeting of members may, by electronic
transmission by and to the corporation (Sections 20 and 21) or by
electronic video screen communication, participate in a meeting of
members, be deemed present in person (or, if proxies are allowed, by
proxy), and vote at a meeting of members whether that meeting is to
be held at a designated place or in whole or in part by means of
electronic transmission by and to the corporation or by electronic
video screen communication, in accordance with subdivision (f).
(b) A regular meeting of members shall be held on a date and time,
and with the frequency stated in or fixed in accordance with the
bylaws, but in any event in each year in which directors are to be
elected at that meeting for the purpose of conducting such election,
and to transact any other proper business which may be brought before
the meeting.
(c) If a corporation with members is required by subdivision (b)
to hold a regular meeting and fails to hold the regular meeting for a
period of 60 days after the date designated therefor or, if no date
has been designated, for a period of 15 months after the formation of
the corporation, or after its last regular meeting, or if the
corporation fails to hold a written ballot for a period of 60 days
after the date designated therefor, then the superior court of the
proper county may summarily order the meeting to be held or the
ballot to be conducted upon the application of a member or the
Attorney General, after notice to the corporation giving it an
opportunity to be heard.
(d) The votes represented, either in person (or, if proxies are
allowed, by proxy), at a meeting called or by written ballot ordered
pursuant to subdivision (c), and entitled to be cast on the business
to be transacted shall constitute a quorum, notwithstanding any
provision of the articles or bylaws or in this part to the contrary.
The court may issue such orders as may be appropriate including,
without limitation, orders designating the time and place of the
meeting, the record date for determination of members entitled to
vote, and the form of notice of the meeting.
(e) Special meetings of members for any lawful purpose may be
called by the board, the chairman of the board, the president, or
such other persons, if any, as are specified in the bylaws. In
addition, special meetings of members for any lawful purpose may be
called by 5 percent or more of the members.
(f) A meeting of the members may be conducted, in whole or in
implements reasonable measures to provide members in person (or, if
proxies are allowed, by proxy) a reasonable opportunity to
participate in the meeting and to vote on matters submitted to the
members, including an opportunity to read or hear the proceedings of
the meeting substantially concurrently with those proceedings, and
(2) if any member votes or takes other action at the meeting by means
of electronic transmission to the corporation or electronic video
screen communication, a record of that vote or action is maintained
by the corporation. Any request by a corporation to a member pursuant
members by electronic transmission by and to the corporation, shall
include a notice that absent consent of the member pursuant to clause
(b) of Section 20, the meeting shall be held at a physical location
in accordance with subdivision (a).
5511. (a) Whenever members are required or permitted to take any
action at a meeting, a written notice of the meeting shall be given
not less than 10 nor more than 90 days before the date of the meeting
to each member who, on the record date for notice of the meeting, is
entitled to vote thereat; provided, however, that if notice is given
by mail, and the notice is not mailed by first-class, registered, or
certified mail, that notice shall be given not less than 20 days
before the meeting. Subject to subdivision (f), and subdivision (b)
of Section 5512, that notice shall state the place, date and time of
the meeting, the means of electronic transmission by and to the
corporation (Sections 20 and 21) or electronic video screen
communication, if any, by which members may participate in that
transacted, or (2) in the case of the regular meeting, those matters
which the board, at the time the notice is given, intends to present
for action by the members, but, except as provided in subdivision (b)
of Section 5512, any proper matter may be presented at the meeting
for such action. The notice of any meeting at which directors are to
be elected shall include the names of all those who are nominees at
the time the notice is given to members.
(b) Notice of a members' meeting or any report shall be given
personally, by electronic transmission by the corporation, or by mail
or other means of written communication, addressed to the member at
the address of such member appearing on the books of the corporation
or given by the member to the corporation for purpose of notice; or
if no such address appears or is given, at the place where the
principal office of the corporation is located or by publication at
which the principal office is located. An affidavit of giving of any
notice or report in accordance with the provisions of this part,
executed by the secretary, assistant secretary or any transfer agent,
shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to a member at the address of
such member appearing on the books of the corporation is returned to
the corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver
the notice or report to the member at such address, all future
notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available for the member upon
written demand of the member at the principal office of the
corporation for a period of one year from the date of the giving of
the notice or report to all other members.
to the member by that means.
(2) The inability to so deliver the notices to the member becomes
known to the secretary, any assistant secretary, the transfer agent,
or other person responsible for the giving of the notice.
attention of the chairman of the board, president, vice president or
secretary by any person (other than the board) entitled to call a
special meeting of members, the officer forthwith shall cause notice
to be given to the members entitled to vote that a meeting will be
held at a time fixed by the board, not less than 35 nor more than 90
days after the receipt of the request. If the notice is not given
within 20 days after receipt of the request, the persons entitled to
call the meeting may give the notice or the superior court of the
proper county shall summarily order the giving of the notice, after
notice to the corporation giving it an opportunity to be heard. The
court may issue such orders as may be appropriate, including, without
limitation, orders designating the time and place of the meeting,
the record date for determination of members entitled to vote and the
form of notice.
(d) When a members' meeting is adjourned to another time or place,
unless the bylaws otherwise require and except as provided in this
subdivision, notice need not be given of the adjourned meeting if the
time and place thereof (or the means of electronic transmission by
and to the corporation or electronic video screen communication, if
any, by which members may participate) are announced at the meeting
at which the adjournment is taken. No meeting may be adjourned for
more than 45 days. At the adjourned meeting the corporation may
transact any business which might have been transacted at the
original meeting. If after the adjournment a new record date is fixed
for notice or voting, a notice of the adjourned meeting shall be
given to each member who, on the record date for notice of the
meeting, is entitled to vote at the meeting.
(e) The transactions of any meeting of members, however called and
noticed, and wherever held, are as valid as though had at a meeting
duly held after regular call and notice, if a quorum is present
either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person
or by proxy, provides a waiver of notice or consent to the holding of
the meeting or an approval of the minutes thereof in writing. All
such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute a waiver of
notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and
except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters required by this part to be
included in the notice but not so included, if such objection is
expressly made at the meeting. Neither the business to be transacted
at nor the purpose of any regular or special meeting of members need
be specified in any written waiver of notice, consent to the holding
of the meeting or approval of the minutes thereof, unless otherwise
provided in the articles or bylaws, except as provided in subdivision
(f).
(f) Any approval of the members required under Section 5222, 5224,
5812, or 6610, other than unanimous approval by those entitled to
vote, shall be valid only if the general nature of the proposal so
approved was stated in the notice of meeting or in any written waiver
of notice.
(g) A court may find that notice not given in conformity with this
section is still valid, if it was given in a fair and reasonable
manner.
5512. (a) One-third of the voting power, represented in person or

by proxy, shall constitute a quorum at a meeting of members, but,
subject to subdivisions (b) and (c), a bylaw may set a different
quorum. Any bylaw amendment to increase the quorum may be adopted
only by approval of the members (Section 5034). If a quorum is
present, the affirmative vote of the majority of the voting power
represented at the meeting, entitled to vote, and voting on any
matter shall be the act of the members, unless the vote of a greater
number or voting by classes is required by this part or the articles
or bylaws.
(b) Where a bylaw authorizes a corporation to conduct a meeting
with a quorum of less than one-third of the voting power, then the
only matters that may be voted upon at any regular meeting actually
attended, in person or by proxy, by less than one-third of the voting
power are matters notice of the general nature of which was given,
pursuant to the first sentence of subdivision (a) of Section 5511.
(c) Subject to subdivision (b), the members present at a duly
called or held meeting at which a quorum is present may continue to
transact business until adjournment notwithstanding the withdrawal of
enough members to leave less than a quorum, if any action taken
(other than adjournment) is approved by at least a majority of the
members required to constitute a quorum or, if required by this
division or the articles or the bylaws, the vote of a greater number
or voting by classes.
(d) In the absence of a quorum, any meeting of members may be
adjourned from time to time by the vote of a majority of the votes
be transacted, except as provided in subdivision (c).
5513. (a) Subject to subdivision (e), and unless prohibited in the

articles or bylaws, any action which may be taken at any regular or
special meeting of members may be taken without a meeting if the
corporation distributes a written ballot to every member entitled to
vote on the matter. Unless otherwise provided by the articles or
bylaws and if approved by the board of directors, that ballot and any
related material may be sent by electronic transmission by the
corporation (Section 20) and responses may be returned to the
corporation by electronic transmission to the corporation (Section
21). That ballot shall set forth the proposed action, provide an
opportunity to specify approval or disapproval of any proposal, and
provide a reasonable time within which to return the ballot to the
corporation.
(b) Approval by written ballot pursuant to this section shall be
valid only when the number of votes cast by ballot within the time
period specified equals or exceeds the quorum required to be present
at a meeting authorizing the action, and the number of approvals
equals or exceeds the number of votes that would be required to
approve at a meeting at which the total number of votes cast was the
same as the number of votes cast by ballot.
(c) Ballots shall be solicited in a manner consistent with the
requirements of subdivision (b) of Section 5511, and Section 5514.
All such solicitations shall indicate the number of responses needed
to meet the quorum requirement and, with respect to ballots other
than for the election of directors, shall state the percentage of
approvals necessary to pass the measure submitted. The solicitation
must specify the time by which the ballot must be received in order
to be counted.
(d) Unless otherwise provided in the articles or bylaws, a written
ballot may not be revoked.
(e) Directors may be elected by written ballot under this section,
where authorized by the articles or bylaws, except that election by
written ballot may not be authorized where the directors are elected
by cumulative voting pursuant to Section 5616.
(f) When directors are to be elected by written ballot and the
articles or bylaws prescribe a nomination procedure, the procedure
may provide for a date for the close of nominations prior to the
printing and distributing of the written ballots.
5514. (a) Any form of proxy or written ballot distributed to 10 or

more members of a corporation with 100 or more members shall afford
an opportunity on the proxy or form of written ballot to specify a
choice between approval and disapproval of each matter or group of
related matters intended, at the time the written ballot or proxy is
distributed, to be acted upon at the meeting for which the proxy is
solicited or by such written ballot, and shall provide, subject to
reasonable specified conditions, that where the person solicited
specifies a choice with respect to any such matter the vote shall be
cast in accordance therewith.
(b) In any election of directors, any form of proxy or written
ballot in which the directors to be voted upon are named therein as
candidates and which is marked by a member "withhold" or otherwise
marked in a manner indicating that the authority to vote for the
election of directors is withheld shall not be voted either for or
against the election of a director.
proxy at a meeting or written ballot and the superior court may
compel compliance therewith at the suit of any member.
5515. (a) If for any reason it is impractical or unduly difficult

for any corporation to call or conduct a meeting of its members,
delegates, or directors, or otherwise obtain their consent, in the
manner prescribed by its articles or bylaws, or this part, then the
superior court of the proper county, upon petition of a director,
officer, delegate, member or the Attorney General, may order that
such a meeting be called or that a written ballot or other form of
obtaining the vote of members, delegates, or directors be authorized,
in such a manner as the court finds fair and equitable under the
circumstances.
(b) The court shall, in an order issued pursuant to this section,
provide for a method of notice reasonably designed to give actual
notice to all parties who would be entitled to notice of a meeting
held pursuant to the articles, bylaws and this part, whether or not
the method results in actual notice to every such person, or conforms
to the notice requirements that would otherwise apply. In a
proceeding under this section the court may determine who the members
or directors are.
(c) The order issued pursuant to this section may dispense with
any requirement relating to the holding of and voting at meetings or
obtaining of votes, including any requirement as to quorums or as to
the number or percentage of votes needed for approval, that would
otherwise be imposed by the articles, bylaws, or this part.
(d) Wherever practical any order issued pursuant to this section
shall limit the subject matter of the meetings or other forms of
consent authorized to items, including amendments to the articles or
bylaws, the resolution of which will or may enable the corporation to
continue managing its affairs without further resort to this
section; provided, however, that an order under this section may also
authorize the obtaining of whatever votes and approvals are
necessary for the dissolution, merger, sale of assets or
reorganization of the corporation.
(e) Any meeting or other method of obtaining the vote of members,
delegates, or directors conducted pursuant to an order issued under
this section, and which complies with all the provisions of such
order, is for all purposes a valid meeting or vote, as the case may
be, and shall have the same force and effect as if it complied with
every requirement imposed by the articles, bylaws and this part.
5516. Any action required or permitted to be taken by the members

may be taken without a meeting, if all members shall individually or
collectively consent in writing to the action. The written consent or
consents shall be filed with the minutes of the proceedings of the
members. The action by written consent shall have the same force and
effect as the unanimous vote of the members.
5517. (a) If the name signed on a ballot, consent, waiver, or proxy

appointment corresponds to the name of a member, the corporation if
acting in good faith is entitled to accept the ballot, consent,
waiver, or proxy appointment and give it effect as the act of the
member.
(b) If the name signed on a ballot, consent, waiver, or proxy
appointment does not correspond to the record name of a member, the
corporation if acting in good faith is nevertheless entitled to
accept the ballot, consent, waiver, or proxy appointment and give it
effect as the act of the member if any of the following occur:
(1) The member is an entity and the name signed purports to be
that of an officer or agent of the entity.
(2) The name signed purports to be that of an attorney-in-fact of
the member and if the corporation requests, evidence acceptable to
the corporation of the signatory's authority to sign for the member
has been presented with respect to the ballot, consent, waiver, or
proxy appointment.
(3) Two or more persons hold the membership as cotenants or
fiduciaries and the name signed purports to be the name of at least
one of the coholders and the person signing appears to be acting on
behalf of all the coholders.
(c) The corporation is entitled to reject a ballot, consent,
waiver, or proxy appointment if the secretary or other officer or
agent authorized to tabulate votes, acting in good faith, has a
reasonable basis for doubt concerning the validity of the signature
or the signatory's authority to sign for the member.
(d) The corporation and any officer or agent thereof who accepts
or rejects a ballot, consent, waiver, or proxy appointment in good
faith and in accordance with the standards of this section shall not
be liable in damages to the member for the consequences of the
acceptance or rejection.
(e) Corporate action based on the acceptance or rejection of a
ballot, consent, waiver, or proxy appointment under this section is
valid unless a court of competent jurisdiction determines otherwise.
CORPORATIONS CODE
SECTION 5520-5527
5520. (a) As to directors elected by members, there shall be

available to the members reasonable nomination and election
procedures given the nature, size and operations of the corporation.
(b) If a corporation complies with all of the provisions of
Sections 5521, 5522, 5523, and 5524 applicable to a corporation with
the same number of members, the nomination and election procedures of
that corporation shall be deemed reasonable. However, those sections
do not prescribe the exclusive means of making available to the
members reasonable procedures for nomination and election of
directors. A corporation may make available to the members other
reasonable nomination and election procedures given the nature, size,
and operations of the corporation.
5521. A corporation with 500 or more members may provide that,

except for directors who are elected as authorized by Section 5152 or
5153, and except as provided in Section 5522, any person who is
qualified to be elected to the board of directors of the corporation
may be nominated:
(a) By any method authorized by the bylaws, or if no method is set
forth in the bylaws by any method authorized by the board.
(b) By petition delivered to an officer of the corporation, signed
within 11 months preceding the next time directors will be elected,
by members representing the following number of votes:
Number of Votes Eligible

to be Cast for Director
Disregarding any Provision
for Cumulative Voting Number of Votes
Under 5,000............. 2 percent of voting
power
one-twentieth of 1
percent of
5,000 or more........... voting power but not
less than
100, nor more than 500.
(c) If there is a meeting to elect directors, by any member

present at the meeting in person or by proxy if proxies are
permitted.
5522. A corporation with 5,000 or more members may provide that, in

any election of a director or directors by members of the
corporation except for an election authorized by Section 5152 or
5153.
(a) The corporation's articles or bylaws shall set a date for the
close of nominations for the board. The date shall not be less than
50 nor more than 120 days before the day directors are to be elected.
No nominations for the board can be made after the date set for the
close of nominations.
(b) If more people are nominated for the board than can be
elected, the election shall take place by means of a procedure which
allows all nominees a reasonable opportunity to solicit votes and all
members a reasonable opportunity to choose among the nominees.
(c) A nominee shall have a reasonable opportunity to communicate
to the members the nominee's qualifications and the reasons for the
nominee's candidacy.
(d) If after the close of nominations the number of people
nominated for the board is not more than the number of directors to
be elected, the corporation may without further action declare that
those nominated and qualified to be elected have been elected.
5523. A corporation with 500 or more members may provide that where
it distributes any written election material soliciting a vote for
any nominee for director at the corporation's expense, it shall make
available, at the corporation's expense to each other nominee, in or
with the same material, the same amount of space that is provided any
other nominee, with equal prominence, to be used by the nominee for
a purpose reasonably related to the election.
5524. A corporation with 500 or more members may provide that upon
written request by any nominee for election to the board and the
payment with such request of the reasonable costs of mailing
(including postage) the corporation shall within 10 business days
after such request (provided payment has been made) mail to all
members, or such portion of them as the nominee may reasonably
specify, any material, which the nominee may furnish and which is
reasonably related to the election, unless the corporation within
five business days after the request allows the nominee, at the
corporation's option, the rights set forth in either paragraph (1) or
(2) of subdivision (a) of Section 6330.
5525. (a) This section shall apply to corporations publishing or

mailing materials on behalf of any nominee in connection with
procedures for the nomination and election of directors.
(b) Neither the corporation, nor its agents, officers, directors,
or employees, may be held criminally liable, liable for any
negligence (active or passive) or otherwise liable for damages to any
person on account of any material which is supplied by a nominee for
director and which it mails or publishes in procedures intended to
comply with Section 5520 or pursuant to Section 5523 or 5524, but the
nominee on whose behalf such material was published or mailed shall
be liable and shall indemnify and hold the corporation, its agents,
officers, directors and employees and each of them harmless from all
demands, costs, including reasonable legal fees and expenses, claims,
damages and causes of action arising out of such material or any
such mailing or publication.
(c) Nothing in this section shall prevent a corporation or any of
its agents, officers, directors, or employees from seeking a court
order providing that the corporation need not mail or publish
material tendered by or on behalf of a nominee under this article on
the ground the material will expose the moving party to liability.
5526. Without authorization of the board, no corporate funds may be

expended to support a nominee for director after there are more
people nominated for director than can be elected.
5527. An action challenging the validity of any election,

appointment or removal of a director or directors must be commenced
within nine months after the election, appointment or removal. If no
such action is commenced, in the absence of fraud, any election,
appointment or removal of a director is conclusively presumed valid
nine months thereafter.
CORPORATIONS CODE
SECTION 5610-5617
5610. Except as provided in a corporation's articles or bylaws or

Section 5616, each member shall be entitled to one vote on each
matter submitted to a vote of the members. Single memberships in
which two or more persons have an indivisible interest shall be voted
as provided in Section 5612.
5611. (a) The bylaws may provide or, in the absence of such
provision, the board may fix, in advance, a date as the record date
for the purpose of determining the members entitled to notice of any
meeting of members. Such record date shall not be more than 90 nor
less than 10 days before the date of the meeting. If no record date
is fixed, members at the close of business on the business day
preceding the day on which notice is given or, if notice is waived,
at the close of business on the business day preceding the day on
which the meeting is held are entitled to notice of a meeting of
members. A determination of members entitled to notice of a meeting
of members shall apply to any adjournment of the meeting unless the
board fixes a new record date for the adjourned meeting.
(b) The bylaws may provide or, in the absence of such provision,
the board may fix, in advance, a date as the record date for the
purpose of determining the members entitled to vote at a meeting of
members. Such record date shall not be more than 60 days before the
date of the meeting. Such record date shall also apply in the case of
an adjournment of the meeting unless the board fixes a new record
date for the adjourned meeting. If no record date is fixed, members
on the day of the meeting who are otherwise eligible to vote are
entitled to vote at the meeting of members or, in the case of an
adjourned meeting, members on the day of the adjourned meeting who
are otherwise eligible to vote are entitled to vote at the adjourned
meeting of members.
(c) The bylaws may provide or, in the absence of such provision,
purpose of determining the members entitled to cast written ballots
(Section 5513). Such record date shall not be more than 60 days
before the day on which the first written ballot is mailed or
solicited. If no record date is fixed, members on the day the first
written ballot is mailed or solicited who are otherwise eligible to
vote are entitled to cast written ballots.
(d) The bylaws may provide or, in the absence of such provision,
purpose of determining the members entitled to exercise any rights in
respect of any other lawful action. Such record date shall not be
more than 60 days prior to such other action. If no record date is
fixed, members at the close of business on the day on which the board
adopts the resolution relating thereto, or the 60th day prior to the
date of such other action, whichever is later, are entitled to
exercise such rights.
5612. If a membership stands of record in the names of two or more

persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, husband and wife as community property,
tenants by the entirety, or otherwise, or if two or more persons
(including proxyholders) have the same fiduciary relationship
respecting the same membership, unless the secretary of the
corporation is given written notice to the contrary and is furnished
with a copy of the instrument or order appointing them or creating
the relationship wherein it is so provided, their acts with respect
to voting shall have the following effect:
(a) If only one votes, such act binds all;
(b) If more than one vote, the act of the majority so voting binds
all.
5613. (a) Any member may authorize another person or persons to act
by proxy with respect to such membership, except that this right may
be limited or withdrawn by the articles or bylaws, subject to
subdivision (e). Any proxy purported to be executed in accordance
with the provisions of this part shall be presumptively valid.
the date thereof unless otherwise provided in the proxy, except that
the maximum term of any proxy shall be three years from the date of
execution. Every proxy continues in full force and effect until
revoked by the person executing it prior to the vote pursuant
thereto. Such revocation may be effected by a writing delivered to
the corporation stating that the proxy is revoked or by a subsequent
proxy executed by the person executing the prior proxy and presented
to the meeting, or as to any meeting by attendance at such meeting
and voting in person by the person executing the proxy. The dates
contained on the forms of proxy presumptively determine the order of
execution, regardless of the postmark dates on the envelopes in which
they are mailed.
or the termination of a membership as a result thereof unless,
before the vote is counted, written notice of such death or
(d) The proxy of a member may not be irrevocable.
(e) Subdivision (a) notwithstanding, no amendment of the articles
or bylaws repealing, restricting, creating or expanding proxy rights
may be adopted without approval by the members (Section 5034).
(f) Anything to the contrary notwithstanding, any proxy covering
matters requiring a vote of the members pursuant to Section 5222,
Section 5224, subdivision (e) of this section, Section 5812,
paragraph (2) of subdivision (a) of Section 5911, Section 6012,
subdivision (a) of Section 6015, or Section 6610 is not valid as to
such matters unless it sets forth the general nature of the matter to
be voted on, or, in the event of a vote pursuant to Section 5220,
unless the proxy lists those nominated at the time the notice of the
vote is given to members.
5614. A voting agreement or voting trust agreement entered into by

a member or members of a corporation shall not be enforced.
5615. (a) In advance of any meeting of members the board may

chairman of any meeting of members may, and on the request of any
member or a member's proxy shall, appoint inspectors of election (or
persons to replace those who so fail or refuse) at the meeting. The
number of inspectors shall be either one or three. If appointed at a
meeting on the request of one or more members or proxies, the
majority of members represented in person or by proxy shall determine
whether one or three inspectors are to be appointed. In the case of
any action by written ballot (Section 5513), the board may similarly
appoint inspectors of election to act with powers and duties as set
forth in this section.
memberships outstanding and the voting power of each, the number
represented at the meeting, the existence of a quorum and the
way arising in connection with the right to vote, count and tabulate
election or vote with fairness to all members.
5616. (a) If the articles or bylaws authorize cumulative voting,

but not otherwise, every member entitled to vote at any election of
directors may cumulate the member's votes and give one candidate a
number of votes equal to the number of directors to be elected
multiplied by the number of votes to which the member is entitled, or
distribute the member's votes on the same principle among as many
candidates as the member thinks fit. An article or bylaw provision
authorizing cumulative voting may be repealed or amended only by
approval of the members (Section 5034), except that the governing
article or bylaw provision may require the vote of a greater
proportion of the members, or of the members of any class, for its
repeal.
(b) No member shall be entitled to cumulate votes for a candidate
or candidates unless the candidate's name or candidates' names have
been placed in nomination prior to the voting and a member has given
notice at the meeting prior to the voting of the member's intention
to cumulate votes. If any one member has given this notice, all
members may cumulate their votes for candidates in nomination.
(c) In any election of directors by cumulative voting, the
candidates receiving the highest number of votes are elected, subject
to any lawful provision specifying election by classes.
(d) In any election of directors not governed by subdivision (c),
unless otherwise provided in the articles or bylaws, the candidates
receiving the highest number of votes are elected.
(e) Elections for directors need not be by ballot unless a member
demands election by ballot at the meeting and before the voting
begins or unless the bylaws so require.
5617. (a) Upon the filing of an action therefor by any director or

member, or by any person who had the right to vote in the election at
issue, the superior court of the proper county shall determine the
corporation.
(b) Any person bringing an action under this section shall give
notice of the action to the Attorney General, who may intervene.
(c) Upon the filing of the complaint, and before any further
(d) The court, consistent with the provisions of this part and in
conformity with the articles and bylaws to the extent feasible, may
determine the person entitled to the office of director or may order
a new election to be held or appointment to be made, may determine
the validity of the issuance of memberships and the right of persons
to vote and may direct such other relief as may be just and proper.
CORPORATIONS CODE
SECTION 5710
5710. (a) Subdivisions (c) through (f) notwithstanding, no motion
to require a bond shall be granted in an action brought by 100
members or the authorized number (Section 5036), whichever is less.
(b) No action may be instituted or maintained in the right of any
corporation by any member of such corporation unless both of the
following conditions exist:
member at the time of the transaction or any part thereof of which
plaintiff complains; and
(c) Subject to subdivision (a), in any action referred to in
subdivision (b), at any time within 30 days after service of summons
upon the corporation or upon any defendant who is an officer or
director of the corporation, or held such office at the time of the
acts complained of, the corporation or such defendant may move the
court for an order, upon notice and hearing, requiring the plaintiff
to furnish a bond as hereinafter provided. The motion shall be based
upon one or both of the following grounds:
party will benefit the corporation or its members, economically or
otherwise.
thereof. If the court, upon the motion, makes a determination that a
bond shall be furnished by the plaintiff as to any one or more
defendants, the action shall be dismissed as to such defendant or
pursuant to the motion, furnish a bond or bonds in the aggregate
amount of fifty thousand dollars ($50,000) to secure the reasonable
expenses of the parties entitled to make the motion, the plaintiff
has complied with the requirements of this section and with any order
for a bond theretofore made, and any such motion then pending shall
be dismissed and no further or additional bond shall be required.
CORPORATIONS CODE
SECTION 5810-5820

original articles filed at the time of the filing of the amendment or
as authorized by Section 5813.5 and, if a change in the rights of
members or an exchange, reclassification or cancellation of
memberships is to be made, such provisions as may be necessary to
Section 6210.
5811. Except as provided in Section 5813.5, any amendment of the

articles may be adopted by a writing signed by a majority of the
incorporators, so long as:
(a) No directors were named in the original articles;
(b) No directors have been elected; and
(c) The corporation has no members.
5812. (a) Except as provided in this section or Section 5813.5,

amendments may be adopted if approved by the board and approved by
the members (Section 5034) and approved by such other person or
persons, if any, as required by the articles. The approval by the
members or other person or persons may be before or after the
approval by the board.
(b) Notwithstanding subdivision (a), the following amendments may
be adopted by approval of the board alone:
(1) An amendment extending the corporate existence or making the
corporate existence perpetual, if the corporation was organized prior
to August 14, 1929.
(2) An amendment deleting the names and addresses of the first
directors or the name and address of the initial agent.
(3) Any amendment, at a time the corporation has no members;
provided, however, that if the articles require approval by any
person for an amendment, that an amendment may not be adopted without
such approval.
(4) An amendment adopted pursuant to Section 9913.
(c) Whenever the articles require for corporate action the
approval of a particular class of members or of a larger proportion
of, or all of, the votes of any class, or of a larger proportion of,
or all of, the directors, than is otherwise required by this part,
the provision in the articles requiring such greater vote shall not
be altered, amended or repealed except by such class or such greater
vote, unless otherwise provided in the articles.
5813. An amendment must also be approved by the members (Section

5034) of a class, whether or not such class is entitled to vote
thereon by the provisions of the articles or bylaws, if the amendment
would materially and adversely affect the rights of that class as to
voting or transfer in a manner different than such action affects
another class.
5813.5. (a) A public benefit corporation may amend its articles to

change its status to that of a mutual benefit corporation, a
religious corporation, a business corporation, or a cooperative
corporation by complying with this section and the other sections of
this chapter.
The Secretary of State shall notify the Franchise Tax Board, in
the manner and at the times agreed upon by the Secretary of State and
the Franchise Tax Board, of any amendments to a public benefit
corporation's articles.
(b) If the public benefit corporation has any assets, an amendment
to change its status to a mutual benefit corporation, business
corporation, or cooperative corporation shall be approved in advance
in writing by the Attorney General. If the public benefit corporation
has no assets, the Attorney General shall be given a copy of the
amendment at least 20 days before the amendment is filed.
(c) Amended articles authorized by this section shall include the
provisions which would have been required (other than the name of the
initial agent for service of process if a statement has been filed
pursuant to Section 6210), and may in addition only include those
provisions which would have been permitted, in original articles
filed by the type of corporation (mutual benefit, religious,
business, or cooperative) into which the public benefit corporation
is changing its status.
(d) In the case of a change of status to a business corporation or
cooperative corporation, if the Franchise Tax Board has issued a
determination exempting the corporation from tax as provided in
Section 23701 of the Revenue and Taxation Code, the corporation shall
be subject to Section 23221 of the Revenue and Taxation Code upon
filing the certificate of amendment.
5814. (a) Except for amendments adopted by the incorporators

pursuant to Section 5811, upon adoption of an amendment, the
corporation shall file a certificate of amendment, which shall
consist of an officers' certificate stating:
(1) The wording of the amendment or amended articles in accordance
with Section 5816;
(2) That the amendment has been approved by the board;
(3) If the amendment is one for which the approval of the members
(Section 5034) is required, that the amendment was approved by the
required vote of members; and
(4) If the amendment is one which may be adopted with approval by
(5) If the amendment is one for which the approval of a person or
persons other than the incorporators, directors, or members is
required, that the approval of such person or persons has been
obtained.
(b) In the event of an amendment of the articles pursuant to a
merger, the filing of the officers' certificate and agreement
pursuant to Section 6014 shall be in lieu of any filing required
under this chapter.
5815. In the case of amendments adopted by the incorporators under

Section 5811, the corporation shall file a certificate of amendment
signed and verified by a majority of the incorporators which shall
state that the signers thereof constitute at least a majority of the
incorporators, that directors were not named in the original articles
and have not been elected, that the corporation has no members and
that they adopt the amendment or amendments therein set forth.
5816. The certificate of amendment shall establish the wording of

the amendment or amended articles by one or more of the following
means:
(a) By stating that the articles shall be amended to read as
(b) By stating that any provision of the articles, which shall be
certificate.
(c) By stating that the provisions set forth therein shall be
If the purpose of the amendment is to reclassify, cancel,
exchange, or otherwise change outstanding memberships, the amended
articles shall state the effect thereof on outstanding memberships.

shall be amended in accordance with the certificate and any change,
reclassification or cancellation of memberships shall be effected,
and a copy of the certificate, certified by the Secretary of State,
is prima facie evidence of the performance of the conditions
necessary to the adoption of the amendment. A corporation shall
furnish an additional copy of the certificate of amendment to the
Secretary of State who shall forward that copy to the Attorney
General.

extend the term of its existence by an amendment to its articles
removing any provision limiting the term of its existence and
providing for perpetual existence. If the filing of the certificate
of amendment providing for perpetual existence would be prohibited if
it were original articles by the provisions of Section 5122, the
Secretary of State shall not file such certificate unless, by the
same or a concurrently filed certificate of amendment, the articles
of such corporation are amended to adopt a new available name. For
the purpose of the adoption of any such amendment, persons who have
been functioning as directors of such corporation shall be considered
to have been validly elected even though their election may have
occurred after the expiration of the original term of the corporate
existence.

certificate signed and verified by a majority of the incorporators
or the board, as applicable, entitled "Restated Articles of
Incorporation of (insert name of corporation)" that shall set forth
the articles as amended to the date of filing of the certificate,
except that the signatures and acknowledgments of the articles by the
incorporators and any statements regarding the effect of any prior
amendment upon memberships and any provisions of agreements of merger
(other than amendments to the articles of the surviving corporation)
and the names and addresses of the first directors and of the
initial agent for service of process shall be omitted (except that
the names and addresses of the initial agent for service of process
and, if previously set forth in the articles, the initial directors,
shall not be omitted prior to the time that the corporation has filed
a statement under Section 6210). Those omissions are not alterations
or amendments of the articles. The certificate may also itself alter
or amend the articles in any respect, in which case the certificate
must comply with Section 5814 or 5815, as the case may be, and
Section 5816.
issuance of any memberships and the naming and election of directors,
by a majority of the incorporators, and shall be subject to the
not requiring approval of the members (Section 5034). If the
certificate does itself alter or amend the articles, it shall be
subject to the provisions of this chapter relating to the amendment
or amendments so made.
(c) Restated articles of incorporation filed pursuant to this
all amendments filed prior thereto.
5820. (a) Amendment of the articles of a corporation, pursuant to
this chapter, does not, of itself, abrogate any requirement or
limitation imposed upon the corporation, or any property held by it,
by virtue of the trust under which such property is held by the
corporation.
(b) The Attorney General may, at the corporation's request, and
pursuant to such regulations as the Attorney General may issue, give
rulings as to whether the Attorney General will or may oppose a
proposed action, or article amendment, as inconsistent with or
proscribed by the requirements of a charitable trust.
CORPORATIONS CODE
SECTION 5910-5913

or obligation may be approved by the board. Unless the articles or
bylaws otherwise provide, no approval of the members (Section 5034)
shall be necessary for such action.
5911. (a) Subject to the provisions of Section 5142, a corporation

may sell, lease, convey, exchange, transfer or otherwise dispose of
all or substantially all of its assets when the principal terms are:
(1) Approved by the board; and
(2) Unless the transaction is in the usual and regular course of
its activities, approved by the members (Section 5034) and by any
other person or persons whose approval is required by the articles,
either before or after approval by the board and before or after the
transaction.
(b) Notwithstanding approval by the members (Section 5034) or such
other person, the board may abandon the proposed transaction without
further action by the members, subject to the contractual rights, if
any, of third parties.
(c) Subject to the provisions of Section 5142, such sale, lease,
conveyance, exchange, transfer or other disposition may be made upon
such terms and conditions and for such consideration as the board may
deem in the best interests of the corporation. The consideration may
be money, property, or securities of any domestic corporation,
foreign corporation, or foreign business corporation or any of them.

forth that the transaction has been validly approved by the board,
that the notice, if any, required by Section 5913 has been given and
(a) stating that the property described in such deed or instrument is
less than substantially all of the assets of the corporation or that
the transfer is in the usual and regular course of the business of
the corporation, if such be the case, or (b) if such property
the members (Section 5034). Such certificate is prima facie evidence
of the existence of the facts authorizing such conveyance or other
transfer of the assets and conclusive evidence in favor of any
purchaser or encumbrancer for value who, without notice of any trust
restriction applicable to the property or any failure to comply
therewith, in good faith parted with value.
5913. Except for an agreement or transaction subject to Section

5914 or 5920, a corporation shall give written notice to the Attorney
General 20 days before it sells, leases, conveys, exchanges,
transfers or otherwise disposes of all or substantially all of its
assets unless the transaction is in the usual and regular course of
its activities or unless the Attorney General has given the
corporation a written waiver of this section as to the proposed
transaction.
CORPORATIONS CODE
SECTION 5914-5930
5914. (a) (1) Any nonprofit corporation that is defined in Section

5046 and operates or controls a health facility, as defined in
Section 1250 of the Health and Safety Code, or operates or controls a
facility that provides similar health care, shall be required to
provide written notice to, and to obtain the written consent of, the
Attorney General prior to entering into any agreement or transaction
to do either of the following:
(A) Sell, transfer, lease, exchange, option, convey, or otherwise
dispose of, its assets to a for-profit corporation or entity or to a
mutual benefit corporation or entity when a material amount of the
assets of the nonprofit corporation are involved in the agreement or
transaction.
(B) Transfer control, responsibility, or governance of a material
amount of the assets or operations of the nonprofit corporation to
any for-profit corporation or entity or to any mutual benefit
corporation or entity.
(2) The substitution of a new corporate member or members that
transfers the control of, responsibility for, or governance of the
nonprofit corporation shall be deemed a transfer for purposes of this
article. The substitution of one or more members of the governing
body, or any arrangement, written or oral, that would transfer voting
control of the members of the governing body, shall also be deemed a
transfer for purposes of this article.
(b) The notice to the Attorney General provided for in this
section shall include and contain the information the Attorney
General determines is required. The notice, including any other
information provided to the Attorney General under this article, and
that is in the public file, shall be made available by the Attorney
General to the public in written form, as soon as is practicable
after it is received by the Attorney General.
(c) This section shall not apply to a nonprofit corporation if the
agreement or transaction is in the usual and regular course of its
activities or if the Attorney General has given the corporation a
written waiver of this section as to the proposed agreement or
transaction.
(d) This section shall apply to any foreign nonprofit corporation
that operates or controls a health facility, as defined in Section
1250 of the Health and Safety Code, or a facility that provides
similar health care.
5915. Within 60 days of the receipt of the written notice required

by Section 5914, the Attorney General shall notify the public benefit
corporation in writing of the decision to consent to, give
conditional consent to, or not consent to the agreement or
transaction. The Attorney General may extend this period for one
additional 45-day period if any of the following conditions are
satisfied:
(a) The extension is necessary to obtain information pursuant to
(b) The proposed agreement or transaction is substantially
modified after the first public meeting conducted by the Attorney
General in accordance with Section 5916.
(c) The proposed agreement or transaction involves a multifacility
health system serving multiple communities, rather than a single
facility.
5916. Prior to issuing any written decision referred to in Section

5915, the Attorney General shall conduct one or more public meetings,
one of which shall be in the county in which the facility is
located, to hear comments from interested parties. At least 14 days
before conducting the public meeting, the Attorney General shall
provide written notice of the time and place of the meeting through
publication in one or more newspapers of general circulation in the
affected community and to the board of supervisors of the county in
which the facility is located. If a substantive change in the
proposed agreement or transaction is submitted to the Attorney
General after the initial public meeting, the Attorney General may
conduct an additional public meeting to hear comments from interested
parties with respect to that change.
5917. The Attorney General shall have discretion to consent to,

give conditional consent to, or not consent to any agreement or
transaction described in subdivision (a) of Section 5914. In making
the determination, the Attorney General shall consider any factors
that the Attorney General deems relevant, including, but not limited
to, whether any of the following apply:
(a) The terms and conditions of the agreement or transaction are
fair and reasonable to the nonprofit corporation.
(b) The agreement or transaction will result in inurement to any
private person or entity.
(c) Any agreement or transaction that is subject to this article
is at fair market value. In this regard, "fair market value" means
the most likely price that the assets being sold would bring in a
competitive and open market under all conditions requisite to a fair
sale, the buyer and seller, each acting prudently, knowledgeably and
in their own best interest, and a reasonable time being allowed for
exposure in the open market.
(d) The market value has been manipulated by the actions of the
parties in a manner that causes the value of the assets to decrease.
(e) The proposed use of the proceeds from the agreement or
transaction is consistent with the charitable trust on which the
assets are held by the health facility or by the affiliated nonprofit
health system.
(f) The agreement or transaction involves or constitutes any
breach of trust.
(g) The Attorney General has been provided, pursuant to Section
5250, with sufficient information and data by the nonprofit
corporation to evaluate adequately the agreement or transaction or
the effects thereof on the public.
(h) The agreement or transaction may create a significant effect
on the availability or accessibility of health care services to the
affected community.
(i) The proposed agreement or transaction is in the public
interest.
5917.5. The Attorney General shall not consent to a health facility

agreement or transaction pursuant to Section 5914 or Section 5920 in
which the seller restricts the type or level of medical services
that may be provided at the health facility that is the subject of
the agreement or transaction.
5918. The Attorney General may adopt regulations implementing this

article.
5919. (a) Within the time periods designated in Section 5915 and
relating to those factors specified in Section 5917, the Attorney
General may do the following:
(1) Contract with, consult, and receive advice from any state
agency on those terms and conditions that the Attorney General deems
appropriate.
(2) In his or her sole discretion, contract with experts or
consultants to assist in reviewing the proposed agreement or
transaction.
(b) Contract costs shall not exceed an amount that is reasonable
and necessary to conduct the review and evaluation. Any contract
entered into under this section shall be on a noncompetitive bid
basis and shall be exempt from Chapter 2 (commencing with Section
10290) of Part 2 of Division 2 of the Public Contract Code. The
nonprofit corporation, upon request, shall pay the Attorney General
promptly for all contract costs.
(c) The Attorney General shall be entitled to reimbursement from
the nonprofit corporation for all actual, reasonable, direct costs
incurred in reviewing, evaluating, and making the determination
referred to in this article, including administrative costs. The
nonprofit corporation shall promptly pay the Attorney General, upon
request, for all of those costs.
(d) (1) In order to monitor effectively ongoing compliance with
the terms and conditions of any sale or transfer of assets subject to
Section 5914, including, but not limited to, the ongoing use of the
charitable assets in a manner consistent with the trust pursuant to
which they are held, the Attorney General may, in his or her sole
discretion, contract with experts and consultants to assist in this
regard.
(2) Contract costs shall not exceed an amount that is reasonable
nonprofit corporation shall pay the Attorney General promptly for all
contract costs.
(3) The Attorney General shall be entitled to reimbursement from
either the selling or the acquiring corporation, depending upon which
one the burden of compliance falls, for all actual, reasonable, and
direct costs incurred in monitoring ongoing compliance with the terms
and conditions of the sale or transfer of assets, including contract
and administrative costs. The Attorney General may bill either the
selling or the acquiring corporation and the corporation billed by
the Attorney General shall promptly pay for all of those costs.
5920. (a) (1) Any nonprofit corporation that is defined in Section

5046 and operates or controls a health care facility, as defined in
Section 1250 of the Health and Safety Code, or operates or controls a
facility that provides similar health care, shall be required to
provide written notice to, and to obtain the written consent of, the
Attorney General prior to entering into any agreement or transaction
to do either of the following:
(A) Sell, transfer, lease, exchange, option, convey, or otherwise
dispose of, its assets to another nonprofit corporation or entity
when a material amount of the assets of the nonprofit corporation are
involved in the agreement or transaction.
(B) Transfer control, responsibility, or governance of a material
amount of the assets or operations of the nonprofit corporation to
another nonprofit corporation or entity.
(2) The substitution of a new corporate member or members that
transfers the control of, responsibility for, or governance of the
nonprofit corporation, the substitution of one or more members of the
governing body that would transfer voting control of the members of
the governing body, or any arrangement, written or oral, that would
transfer voting control of the entity shall be deemed a transfer for
purposes of this article.
(b) The notice to the Attorney General provided for in this
section shall contain the information the Attorney General determines
is required. The notice, including any other information provided to
the Attorney General under this article, and that is the public
file, shall be made available by the Attorney General to the public
in written form, as soon as is practicable after it is received by
(c) This section shall not apply to a nonprofit corporation if the
agreement or transaction is in the usual and regular course of its
activities or if the Attorney General has given the corporation a
written waiver of this section as to the proposed agreement or
transaction.
(d) This section shall apply to any foreign nonprofit corporation
that operates or controls a health facility, as defined in Section
1250 of the Health and Safety Code, or a facility that provides
similar health care.
(e) This section shall not apply to an agreement or transaction if
the other party to the agreement or transaction is an affiliate, as
defined in Section 5031, of the transferring nonprofit corporation or
entity, and the corporation or entity has given the Attorney General
20 days advance notice of the agreement or transaction.
5921. Within 60 days of the receipt of the written notice required

by Section 5920, the Attorney General shall notify the nonprofit
corporation in writing of the decision to consent to, give
conditional consent to, or not consent to the agreement or
transaction. The Attorney General may extend this period for one
additional 45-day period if any of the following conditions are
satisfied:
(a) The extension is necessary to obtain relevant information from
any state agency, experts, or consultants.
(b) The proposed agreement or transaction is substantially
modified after the first public meeting conducted by the Attorney
General in accordance with Section 5922.
(c) The proposed agreement or transaction involves a multifacility
health system serving multiple communities, rather than a single
facility.
5922. Prior to issuing any written decision referred to in Section

5921, the Attorney General shall conduct one or more public meetings,
one of which shall be in the county in which the facility is
located, to hear comments from interested parties. At least 14 days
before conducting the public meeting, the Attorney General shall
provide written notice of the time and place of the meeting through
publication in one or more newspapers of general circulation in the
affected community and to the board of supervisors of the county in
which the facility is located. If a substantive change in the
proposed agreement or transaction is submitted to the Attorney
General after the initial public meeting, the Attorney General may
conduct an additional public meeting to hear comments from interested
parties with respect to that change.
5923. The Attorney General shall have discretion to consent to,

give conditional consent to, or not consent to any agreement or
transaction described in subdivision (a) of Section 5920. In making
the determination, the Attorney General shall consider any factors
that the Attorney General deems relevant, including, but not limited
to, whether any of the following apply:
(a) The terms and conditions of the agreement or transaction are
fair and reasonable to the nonprofit corporation.
(b) The agreement or transaction will result in inurement to any
private person or entity.
(c) Fair market value of the agreement or transaction, meaning the
most likely price that the assets being sold would bring in a
competitive and open market under all conditions requisite to a fair
sale, the buyer and seller, each acting prudently, knowledgeably, and
in their own best interest, and a reasonable time being allowed for
exposure in the open market.
(d) The market value has been manipulated by the actions of the
parties in a manner that causes the value of the assets to decrease.
(e) The proposed use of the proceeds from the agreement or
transaction is consistent with the charitable trust on which the
assets are held by the health facility or by the affiliated nonprofit
health system.
(f) The agreement or transaction involves or constitutes any
breach of trust.
(g) The Attorney General has been provided, pursuant to Section
5250, with sufficient information and data by the nonprofit public
benefit corporation to evaluate adequately the agreement or
transaction or the effects thereof on the public.
(h) The agreement or transaction may create a significant effect
on the availability or accessibility of health care services to the
affected community.
(i) The proposed agreement or transaction is in the public
interest.
5924. (a) Within the time periods designated in Section 5921 and
relating to those factors specified in Section 5923, the Attorney
General may do the following:
(1) Contract with, consult, and receive advice from any state
agency on those terms and conditions that the Attorney General deems
appropriate.
(2) In his or her sole discretion, contract with experts or
consultants to assist in reviewing the proposed agreement or
transaction.
(b) Contract costs shall not exceed an amount that is reasonable
selling nonprofit corporation, upon request, shall pay the Attorney
General promptly for all contract costs.
(c) The Attorney General shall be entitled to reimbursement from
the selling nonprofit corporation for all actual, reasonable, direct
costs incurred in reviewing, evaluating, and making the determination
referred to in Section 5921, including administrative costs. The
selling nonprofit corporation shall promptly pay the Attorney
General, upon request, for all of those costs.
(d) (1) In order to effectively monitor ongoing compliance with
the terms and conditions of any sale or transfer of assets subject to
Section 5920, including, but not limited to, the ongoing use of the
charitable assets in a manner consistent with the trust pursuant to
which they are held, the Attorney General may, in his or her sole
discretion, contract with experts and consultants to assist in this
regard.
(2) Contract costs shall not exceed an amount that is reasonable
selling nonprofit corporation shall pay the Attorney General promptly
for all contract costs.
(3) The Attorney General shall be entitled to reimbursement from
either the selling or the acquiring nonprofit corporation, depending
upon which one the burden of compliance falls, for all actual,
reasonable, and direct costs incurred in monitoring ongoing
compliance with the terms and conditions of the sale or transfer of
assets, including contract and administrative costs. The Attorney
General shall be entitled to this reimbursement for a period of time
not to exceed two years after any time period specified in the terms
or conditions of sale or transfer of assets. The Attorney General may
bill either the selling or the acquiring corporation and the
corporation billed by the Attorney General shall promptly pay for all
of those costs.
5925. The Attorney General may adopt regulations implementing

Sections 5920 to 5924, inclusive.
5930. (a) The Attorney General shall prepare a plan for an

evaluation of whether additional standards for charitable care and
community benefits should be established for private, not-for-profit
corporations that operate or control a general acute care hospital as
defined in Section 1250 of the Health and Safety Code.
(b) In preparing the plan, the Attorney General shall consult with
representatives of interested parties, including, but not limited
to, all of the following:
(1) Health facility associations.
(2) Physician organizations.
(3) Consumer groups.
(4) Health care employee organizations.
(5) Community groups.
(6) The Office of Statewide Health Planning and Development.
(c) The plan shall provide for the evaluation of all of the
following:
(1) The degree to which private, not-for-profit hospitals provide
charitable care and community benefits, including the nature of the
benefits, the definition of the community, and a comparison of the
cost of providing the benefit with the value of the benefits given to
the community.
(2) The implications of the relationships among private
not-for-profit hospitals and affiliated entities, as defined in
Section 5031 of the Corporations Code, for purposes of determining
community benefits.
(3) The role of the board of directors of private, not-for-profit
hospitals in ensuring benefit to the community.
(d) The plan shall be submitted to the appropriate policy and
fiscal committees of the Legislature by March 1, 2001.
CORPORATIONS CODE
SECTION 6010-6019.1
6010. (a) A public benefit corporation may merge with any domestic
corporation, foreign corporation (Section 171), or other business
entity (Section 5063.5). However, without the prior written consent
of the Attorney General, a public benefit corporation may only merge
with another public benefit corporation or a religious corporation or
a foreign nonprofit corporation the articles of which provide that
its assets are irrevocably dedicated to charitable, religious, or
public purposes.
(b) At least 20 days prior to consummation of any merger allowed
by subdivision (a), the Attorney General must be provided with a copy
of the proposed agreement of merger.
(c) Without the prior written consent of the Attorney General,
when a merger occurs pursuant to subdivision (a), each member of a
constituent corporation may only receive or keep a membership in the
surviving corporation for or as a result of the member's membership
in the constituent corporation.
6011. The board of each corporation which desires to merge shall

parties to the agreement of merger and other persons may be parties
to the agreement of merger. The agreement shall state:
(a) The terms and conditions of the merger;
if any; if any amendment changes the name of the surviving
corporation, the new name may be the same as or similar to the name
of a disappearing corporation, subject to subdivision (b) of Section
5122;
(c) The amendments to the bylaws of the surviving corporation to
be effected by the merger, if any;
(d) The name and place of incorporation of each constituent
surviving corporation;
(e) The manner, if any, of converting memberships of the
constituent corporations into memberships of the surviving
corporation; and
(f) Such other details or provisions as are desired, if any.
6012. The principal terms of the merger shall be approved by the

members (Section 5034) of each constituent corporation and by each
other person or persons whose approval of an amendment of articles is
required by the articles; and the approval by the members (Section
5034) or such other person or persons required by this section may be
given before or after the approval by the board.
6013. Each constituent corporation shall sign the agreement by the

chairman of its board, president or a vice president and secretary or
an assistant secretary acting on behalf of their respective
corporations.
6014. After approval of a merger by the board and any approval by

the members (Section 5034) or other person or persons required by
Section 6012, the surviving corporation shall file a copy of the
agreement of merger with an officers' certificate of each constituent
corporation attached stating the total number of memberships of each
class entitled to vote on the merger, identifying any other person
or persons whose approval is required, and stating that the principal
terms of the agreement in the form attached were duly approved by
the required vote of the members and (if applicable) such other
person or persons. The merger and any amendment of the articles of
the surviving corporation contained in the merger agreement shall
thereupon be effective (subject to subdivision (c) of Section 5008
and subject to the provisions of Section 6018) and the several
parties thereto shall be one surviving corporation. The Secretary of
State may certify a copy of the merger agreement separate from the
officers' certificates attached thereto.
6015. (a) Any amendment to the agreement may be adopted and the
any of the principal terms of the agreement, by the members (Section
5034) or other person or persons, as required by Section 6012, of any
constituent corporation in the same manner as the original
agreement.
(b) If the agreement so amended is approved as provided in
subdivision (a), the agreement so amended shall then constitute the

constituent corporations, without further approval by the members
(Section 5034) or other persons entitled to approve the merger at any
time before the merger is effective.

of merger.
6018. (a) Subject to the provisions of Section 6010, the merger of

any number of corporations with any number of foreign corporations
may be effected if the foreign corporations are authorized by the
laws under which they are formed to effect the merger. The surviving
corporation may be any one of the constituent corporations and shall
continue to exist under the laws of the state or place of its
incorporation.
(b) If the surviving corporation is a public benefit corporation
or a religious corporation, the merger proceedings with respect to
that corporation and any disappearing corporation shall conform to
the provisions of this chapter governing the merger of corporations,
but if the surviving corporation is a foreign corporation, then,
subject to the requirements of subdivision (d) and Section 6012, the
merger proceedings may be in accordance with the laws of the state or
place of incorporation of the surviving corporation.
(c) If the surviving corporation is a public benefit corporation
or a religious corporation, the agreement and the officers'
certificate of each constituent corporation shall be filed as
provided in Section 6014 and thereupon, subject to subdivision (c) of
Section 5008, the merger shall be effective as to each corporation;
and each foreign disappearing corporation that is qualified for the
transaction of intrastate business shall by virtue of the filing
jurisdiction in which it is organized, but shall be effective as to
any disappearing corporation as of the time of effectiveness in the
(1) A copy of the agreement, certificate, or other document filed
the original.
(2) An executed counterpart of the agreement, certificate, or
other document filed by the surviving corporation in the state or
qualified for the transaction of intrastate business shall
automatically by the filing pursuant to subdivision (d) surrender its
right to transact intrastate business as of the date of filing in
6019. If an agreement of merger is entered into between a nonprofit

corporation and a business corporation: (i) Sections 6011, 6012,
6014, and 6015 shall apply to any constituent public benefit
corporation; (ii) Sections 8011, 8011.5, 8012, 8014, and 8015 shall
apply to any constituent mutual benefit corporation; (iii) Sections
6014 and 6015 and subdivisions (c) and (d) of Section 9640 shall
apply to any constituent religious corporation; and (iv) Sections
1101, 1101.1, 1103, and 1104 shall apply to any constituent business
corporation.
6019.1. (a) Subject to the provisions of Sections 6010 and 9640,

any one or more corporations may merge with one or more other
business entities (Section 5063.5). One or more other domestic
corporations and foreign corporations (Section 5053) may be parties
to the merger. Notwithstanding the provisions of this section, such a
merger may be effected only if:
(1) In a merger in which a domestic corporation or domestic other
business entity is a party, it is authorized by the laws under which
it is organized to effect the merger.
merger.
effect the merger.
shall approve an agreement of merger. The board and the members
(Section 5034) of each corporation which desires to merge, and each
other person or persons, if any, whose approval of an amendment of
the articles of that corporation is required by the articles or
bylaws shall approve the agreement of merger. The agreement of merger
shall be approved on behalf of each other party by those persons
authorized or required to approve the merger by the laws under which
it is organized. The parties desiring to merge shall be parties to
the agreement of merger and other persons, including a parent party
(Section 5064.5), may be parties to the agreement of merger. The
agreement of merger shall state all of the following:
party and the identity of the surviving party.
effected by the merger. The name of the surviving corporation may be,
subject to subdivision (b) of Section 5122 and subdivision (b) of
Section 9122, the same as, or similar to, the name of a disappearing
party to the merger.
(4) The manner, if any, of converting the memberships of each of
the constituent corporations into shares, memberships, interests, or
other securities of the surviving party; and, if any memberships of
any of the constituent corporations are not to be converted solely
into shares, memberships, interests, or other securities of the
surviving party, the cash, rights, securities, or other property
which the holders of those memberships are to receive in exchange for
the memberships, which cash, rights, securities, or other property
may be in addition to, or in lieu of, shares, memberships, interests,
or other securities of the surviving corporation or surviving other
business entity.
which any party to the merger is organized, including, if a domestic
limited partnership is a party to the merger, subdivision (a) of
Section 15678.2 or 15911.12, if a domestic general partnership is a
party to the merger, subdivision (a) of Section 16911, or, if a
domestic limited liability company is a party to the merger,
(6) Any other details or provisions as are desired.
(c) Notwithstanding its prior approval, an agreement of merger may
be amended prior to the filing of the agreement of merger if the
amendment is approved by each constituent corporation in the same
manner as the original agreement of merger. If the agreement of
merger as so amended and approved is also approved by each of the
other parties to the agreement of merger, as so amended it shall then
(d) The board of a constituent corporation may, in its discretion,
without further approval by the members (Section 5034) or other
persons, at any time before the merger is effective.
(e) Each constituent corporation shall sign the agreement of
merger by its chairperson of the board, president or a vice
president, and also by its secretary or an assistant secretary acting
on behalf of their respective corporations.
(f) After required approvals of the merger by each constituent
corporation and each other party to the merger, the surviving party
shall file a copy of the agreement of merger with an officers'
certificate of each constituent domestic and foreign corporation
attached stating the total number of outstanding shares or membership
interests of each class, if any, entitled to vote on the merger (and
identifying any other person or persons whose approval is required),
that the agreement of merger in the form attached or its principal
terms, as required, were approved by that corporation by a vote of a
number of shares or membership interests of each class entitled to
vote, if any, which equaled or exceeded the vote required, specifying
each class entitled to vote and the percentage vote required of each
class, and, if applicable, by that other person or persons whose
approval is required.
If equity securities of a parent party (Section 5064.5) are to be
issued in the merger, the officers' certificate or certificate of
merger of the controlled party shall state either that no vote of the
shareholders of the parent party was required or that the required
vote was obtained. The merger and any amendment of the articles of
the surviving corporation, if applicable, contained in the agreement
of merger shall be effective upon the filing of the agreement of
merger, subject to the provisions of subdivision (h). If a domestic
reciprocal insurer organized after 1974 to provide medical
malpractice insurance is a party to the merger, the agreement of
merger or certificate of merger shall not be filed until there has
been filed the certificate issued by the Insurance Commissioner
approving the merger pursuant to Section 1555 of the Insurance Code.
In lieu of an officers' certificate, a certificate of merger, on a
form prescribed by the Secretary of State, shall be filed for each
constituent other business entity. The certificate of merger shall be
executed and acknowledged by each domestic constituent limited
liability company by all of the managers of the limited liability
company (unless a lesser number is specified in its articles of
organization or operating agreement) and by each domestic constituent
limited partnership by all general partners (unless a lesser number
is provided in its certificate of limited partnership or partnership
agreement) and by each domestic constituent general partnership by
two partners (unless a lesser number is provided in its partnership
agreement) and by each foreign constituent limited liability company
by one or more managers and by each foreign constituent general
partnership or foreign constituent limited partnership by one or more
general partners, and by each constituent reciprocal insurer by the
chairperson of the board, president, or vice president, and also by
the secretary or assistant secretary, or, if a constituent reciprocal
insurer has not appointed such officers, by the chairperson of the
board, president, or vice president, and also by the secretary or
by the laws under which that party is organized, specifying for such
signing persons.
The certificate of merger shall set forth, if a vote of the
shareholders, members, partners, or other holders of interests of a
constituent other business entity was required, a statement setting
forth the total number of outstanding interests of each class
entitled to vote on the merger and that the agreement of merger or
its principal terms, as required, were approved by a vote of the
number of interests of each class which equaled or exceeded the vote
required, specifying each class entitled to vote and the percentage
vote required of each class, and any other information required to be
set forth under the laws under which the constituent other business
entity is organized, including, if a domestic limited partnership is
a party to the merger, subdivision (a) of Section 15678.4 or
15911.14, if a domestic general partnership is a party to the merger,
subdivision (b) of Section 16915, and, if a domestic limited
liability company is a party to the merger, subdivision (a) of
Section 17552. The certificate of merger for each constituent foreign
other business entity, if any, shall also set forth the statutory or
other basis under which that foreign other business entity is
merger.
The Secretary of State may certify a copy of the agreement of
merger separate from the officers' certificates and certificates of
merger attached thereto.
(g) A copy of an agreement of merger certified on or after the
party to the merger, the performance of the conditions necessary to
the adoption of any amendment to the articles, if applicable,
contained in the agreement of merger, and the merger of the
constituent corporations, either by themselves or together with other
constituent parties, into the surviving party to the merger.
(h) (1) The merger of domestic corporations with foreign
subdivisions (a) and (f) and this subdivision.
(2) Subject to subdivision (c) of Section 5008 and paragraph (3),
the merger shall be effective as to each domestic constituent
corporation and domestic constituent other business entity upon
filing of the agreement of merger with attachments as provided in
subdivision (f).
other business entity, except as provided in paragraph (4), the
officers' certificate of the surviving foreign corporation and of
each constituent foreign and domestic corporation and a certificate
of merger of each constituent other business entity attached, which
officers' certificates and certificates of merger shall conform to
the requirements of subdivision (f).
If one or more domestic other business entities is a disappearing
party in a merger pursuant to this subdivision in which a foreign
other business entity is the surviving entity, a certificate of
merger required by the laws under which each domestic other business
entity is organized, including subdivision (a) of Section 15678.4 or
Section 17552, if applicable, shall also be filed at the same time as
the filing of the agreement of merger.
(5) Each foreign disappearing corporation that is qualified for
the transaction of intrastate business shall automatically by the
filing pursuant to subdivision (f) surrender its right to transact
intrastate business as of the date of filing in this state or, if
later, the effective date of the merger. With respect to each foreign
disappearing other business entity previously registered for the
transaction of intrastate business in this state, the filing of the
agreement of merger pursuant to subdivision (f) automatically has the
effect of a cancellation of registration for that foreign other
business entity as of the date of filing in this state or, if later,
the effective date of the merger, without the necessity of the filing
of a certificate of cancellation.
CORPORATIONS CODE
SECTION 6020-6022

each and trust obligations upon the property of a disappearing party
in the same manner as if incurred by the surviving party to the
merger.
(b) All rights of creditors and all liens and trusts upon or
arising from the property of each of the constituent corporations and
other parties to the merger shall be preserved unimpaired, provided
that the liens and trust obligations upon property of a disappearing
party shall be limited to the property affected thereby immediately
prior to the time the merger is effective.
(c) Any action or proceeding pending by or against any
disappearing corporation or other party to the merger may be
prosecuted to judgment, which shall bind the surviving party to the
merger, or the surviving party to the merger may be proceeded against
or substituted in its place.

6021. Whenever a domestic or foreign corporation or other business

entity (Section 5063.5) having any real property in this state merges
with another domestic or foreign corporation or other business
entity pursuant to the laws of this state or of the state or place in
which any constituent party to the merger was organized, and the
laws of the state or place of organization (including this state) of
any disappearing party to the merger provide substantially that the
making and filing of the agreement of merger vests in the surviving
party to the merger all the real property of any disappearing party
to the merger, 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 disappearing party to the merger is located of either
(a) a certificate prescribed by the Secretary of State, or (b) a
copy of the agreement of merger or certificate of merger, certified
by the Secretary of State or an authorized public official of the
state or place pursuant to the laws of which the merger is effected,
shall evidence record ownership in the surviving party to the merger
of all interest of that disappearing party to the merger in and to
the real property located in that county.
6022. Any bequest, devise, gift, grant, or promise contained in a

will or other instrument of donation, subscription, or conveyance,
which is made to a constituent corporation and which takes effect or
remains payable after the merger, inures to the surviving party to
the merger.
CORPORATIONS CODE
SECTION 6110
6110. Any proceeding, initiated with respect to a corporation,

under any applicable statute of the United States, as now existing or
hereafter enacted, relating to reorganizations of corporations,
shall be governed by the provisions of Chapter 14 (commencing with
Section 1400) of Division 1 of Title 1, and for this purpose the
reference in Chapter 14 to "shareholders" shall be deemed to be a
reference to members and the reference to "this division" shall be
deemed to be a reference to this part.
CORPORATIONS CODE
SECTION 6210-6216
6210. (a) Every corporation shall, within 90 days after the filing
of its original articles and biennially thereafter during the
applicable filing period, file, on a form prescribed by the Secretary
of State, a statement containing: (1) the names and complete
business or residence addresses of its chief executive officer,
secretary, and chief financial officer; (2) the street address of its
principal office in this state, if any; and (3) the mailing address
of the corporation, if different from the street address of its
principal executive office or if the corporation has no principal
office address in this state.
of process, a natural person residing in this state or any domestic
or foreign or foreign business corporation that has complied with
Section 1505 and whose capacity to act as an agent has not
terminated. If a natural person is designated, the statement shall
set forth the person's complete business or residence street address.
If a corporate agent is designated, no address for it shall be set
forth.
(c) For the purposes of this section, the applicable filing period
Secretary of State. Neither the failure of the Secretary of State to
mail the notice nor the failure of the corporation to receive it is
an excuse for failure to comply with this section.
(d) Whenever any of the information required by subdivision (a) is
(e) The Secretary of State may destroy or otherwise dispose of any
(f) This section shall not be construed to place any person
to this section.

Section 6210 may file a signed and acknowledged written statement of
resignation as that agent. Thereupon the authority of the agent to
act in that capacity shall cease and the Secretary of State forthwith
shall give written notice of the filing of the statement of
resignation by mail to the corporation addressed to its principal
office.
of process pursuant to Section 6210 dies or resigns or no longer
resides in the state or if the corporate agent for such purpose
resigns, dissolves, withdraws from the state, forfeits its right to
transact intrastate business, has its corporate rights, powers and
privileges suspended or ceases to exist, the corporation shall
forthwith file a designation of a new agent conforming to the
6214. Upon request of an assessor, a corporation owning, claiming,

possessing or controlling property in this state subject to local
assessment shall make available at the corporation's principal office
in California or at a place mutually acceptable to the assessor and
the corporation a true copy of business records relevant to the
amount, cost and value of all property that it owns, claims,
possesses or controls within the county.

injured thereby who relied thereupon or to both:
(a) Make, issue, deliver or publish any report, circular,
certificate, financial statement, balance sheet, public notice or
document respecting the corporation or its memberships, assets,
liabilities, business, earnings or accounts which is false in any
material respect, knowing it to be false, or participate in the
making, issuance, delivery or publication thereof with knowledge that
the same is false in a material respect.
6216. (a) The Attorney General, upon complaint of a member,
director or officer, that a corporation is failing to comply with the
provisions of this chapter, Chapter 5 (commencing with Section
5510), Chapter 6 (commencing with Section 5610) or Chapter 13
(commencing with Section 6310), may, in the name of the people of the
State of California, send to the principal office of such
corporation, (or, if there is no such office, to the office or
residence of the chief executive officer or secretary, of the
corporation, as set forth in the most recent statement filed pursuant
to Section 6210) notice of the complaint. If the answer is not
satisfactory, or if there is no answer within 30 days, the Attorney
General may institute, maintain or intervene in such suits, actions,
or proceedings of any type in any court or tribunal of competent
jurisdiction or before any administrative agency for such relief by
way of injunction, the dissolution of entities, the appointment of
receivers or any other temporary, preliminary, provisional or final
remedies as may be appropriate to protect the rights of members or to
undo the consequences of failure to comply with such requirements.
In any such action, suit or proceeding there may be joined as parties
all persons and entities responsible for or affected by such
activity.
(b) The Attorney General may bring an action under subdivision (a)
without having received a complaint, and without first giving notice
of a complaint.
CORPORATIONS CODE
SECTION 6310-6313

such record available in written form. For the purposes of this
chapter "written" or "in writing" also includes cathode ray tube and
similar electronic communications methods.
6311. Any inspection under this chapter may be made in person or by

agent or attorney and the right of inspection includes the right to
copy and make extracts.
6312. Any right of inspection created by this chapter extends to

the records of each subsidiary of a corporation.
6313. The rights of members provided in this chapter may not be

limited by contract or the articles or bylaws.
CORPORATIONS CODE
SECTION 6320-6325
6320. (a) Each corporation shall keep:

(1) Adequate and correct books and records of account;
(2) Minutes of the proceedings of its members, board and
committees of the board; and
(3) A record of its members giving their names and addresses and
the class of membership held by each.
(b) Those minutes and other books and records shall be kept either
in written form or in any other form capable of being converted into
clearly legible tangible form or in any combination of the
6321. (a) Except as provided in subdivision (c), (d), or (f), the

board shall cause an annual report to be sent to the members not
later than 120 days after the close of the corporation's fiscal year.
Unless otherwise provided by the articles or bylaws and if approved
by the board of directors, that report and any accompanying material
sent pursuant to this section may be sent by electronic transmission
by the corporation (Section 20). That report shall contain in
appropriate detail the following:
(1) The assets and liabilities, including the trust funds, of the
corporation as of the end of the fiscal year.
(2) The principal changes in assets and liabilities, including
trust funds, during the fiscal year.
(3) The revenue or receipts of the corporation, both unrestricted
and restricted to particular purposes, for the fiscal year.
(4) The expenses or disbursements of the corporation, for both
general and restricted purposes, during the fiscal year.
(5) Any information required by Section 6322.
(b) The report required by subdivision (a) shall be accompanied by
any report thereon of independent accountants, or, if there is no
such report, the certificate of an authorized officer of the
corporation that such statements were prepared without audit from the
books and records of the corporation.
(c) Subdivision (a) does not apply to any corporation which
receives less than twenty-five thousand dollars ($25,000) in gross
revenues or receipts during the fiscal year.
(d) Where a corporation has provided, pursuant to Section 5510,
for regular meetings of members less often than annually, then the
report required by subdivision (a) need be made to members only with
the frequency with which regular membership meetings are required,
unless the articles or bylaws require a report more often.
(e) Subdivisions (c) and (d) notwithstanding, a report with the
information required by subdivision (a) shall be furnished annually
to:
(1) All directors of the corporation; and
(2) Any member who requests it in writing.
(f) A corporation which in writing solicits contributions from 500
or more persons need not send the report otherwise required by
subdivision (a) if it does all of the following:
(i) Includes with any written material used to solicit
contributions a written statement that its latest annual report will
be mailed upon request and that such request may be sent to the
corporation at a name and address which is set forth in the
statement.
The term "annual report" as used in this subdivision refers to the
report required by subdivision (a).
(ii) Promptly mails a copy of its latest annual report to any
person who requests a copy thereof; and
(iii) Causes its annual report to be published not later than 120
days after the close of its fiscal year in a newspaper of general
circulation in the county in which its principal office is located.
6322. (a) Any provision of the articles or bylaws notwithstanding,

every corporation shall furnish annually to its members and directors
a statement of any transaction or indemnification of a kind
described in subdivision (d) or (e), if any such transaction or
indemnification took place. If the corporation issues an annual
report to all members, this subdivision shall be satisfied by
including the required information in the annual report. A
corporation which does not issue an annual report to all members,
pursuant to subdivision (c) or (d) of Section 6321, shall satisfy
this section by mailing or delivering to its members the required
statement within 120 days after the close of the corporation's fiscal
year. Unless otherwise provided by the articles or bylaws and if
approved by the board of directors, that statement may be sent by
electronic transmission by the corporation (Section 20).
(b) Except as provided in subdivision (c), a covered transaction
under this section is a transaction in which the corporation, its
parent, or its subsidiary was a party, and in which either of the
following had a direct or indirect material financial interest:
(1) Any director or officer of the corporation, or its parent or
subsidiary.
(2) Any holder of more than 10 percent of the voting power of the
corporation, its parent or its subsidiary.
For the purpose of subdivision (d), an "interested person" is any
person described in paragraph (1) or (2) of this subdivision.
(c) For the purpose of subdivision (b), a mere common directorship
is not a material financial interest.
(d) The statement required by subdivision (a) shall describe
briefly:
(1) Any covered transaction during the previous fiscal year
involving more than fifty thousand dollars ($50,000), or which was
one of a number of covered transactions in which the same interested
person had a direct or indirect material financial interest, and
which transactions in the aggregate involved more than fifty thousand
dollars ($50,000).
(2) The names of the interested persons involved in such
transactions, stating such person's relationship to the corporation,
the nature of such person's interest in the transaction and, where
practicable, the amount of such interest; provided, that in the case
of a transaction with a partnership of which such person is a
partner, only the interest of the partnership need be stated.
(e) The statement required by subdivision (a) shall describe
briefly the amount and circumstances of any indemnifications or
advances aggregating more than ten thousand dollars ($10,000) paid
during the fiscal year to any officer or director of the corporation
pursuant to Section 5238; provided that no such report need be made
in the case of indemnification approved by the members (Section 5034)
under paragraph (2) of subdivision (e) of Section 5238.
6323. (a) The superior court of the proper county shall enforce the
duty of making and mailing or delivering the information and
financial statements required by this article and, for good cause
shown, may extend the time therefor.
(b) In any action or proceeding under this section, if the court
of this article to have been without justification, the court may
award the member reasonable expenses, including attorneys' fees, in
connection with such action or proceeding.
6324. (a) Nothing in this part relieves a corporation from the

requirements of Article 7 (commencing with Section 12580) of Chapter
6 of Part 2 of Division 3 of the Government Code. If a report sent to
the Attorney General in compliance with the requirements of Article
7 (commencing with Section 12580) of Chapter 6 of Part 2 of Division
3 of the Government Code includes the information required in the
annual report, then the corporation may furnish a copy of its report
to the Attorney General in lieu of the annual report, whenever it is
required to furnish an annual report.
(b) A corporation shall furnish any member who so requests a copy
of any report filed by the corporation pursuant to Article 7
of the Government Code. The corporation may impose reasonable charges
for copying and mailing a report furnished under this subdivision.

annual, regular, or special meeting of members, a corporation shall,
upon written request from a member, forthwith inform the member of
the result of any particular vote of members taken at the meeting,
including the number of memberships voting for, the number of
memberships voting against, and the number of memberships abstaining
directors, the corporation shall report the number of memberships, or
votes if voted cumulatively, cast for each nominee for director. If
more than one class or series of memberships voted, the report shall
state the appropriate numbers by class and series of memberships.
CORPORATIONS CODE
SECTION 6330-6338
6330. (a) Subject to Sections 6331 and 6332, and unless the
corporation provides a reasonable alternative pursuant to subdivision
(c), a member may do either or both of the following as permitted by
subdivision (b):
(1) Inspect and copy the record of all the members' names,
addresses and voting rights, at reasonable times, upon five business
days' prior written demand upon the corporation which demand shall
state the purpose for which the inspection rights are requested; or
(2) Obtain from the secretary of the corporation, upon written
demand and tender of a reasonable charge, an alphabetized list of the
names, addresses, and voting rights of those members entitled to
vote for the election of directors, as of the most recent record date
for which it has been compiled or as of a date specified by the
member subsequent to the date of demand. The demand shall state the
purpose for which the list is requested. The membership list shall be
made available on or before the later of 10 business days after the
demand is received or after the date specified therein as the date as
of which the list is to be compiled.
(b) The rights set forth in subdivision (a) may be exercised by:
(1) Any member, for a purpose reasonably related to the person's
interest as a member. Where the corporation reasonably believes that
the information will be used for another purpose, or where it
provides a reasonable alternative pursuant to subdivision (c), it may
deny the member access to the list. In any subsequent action brought
by the member under Section 6336, the court shall enforce the rights
set forth in subdivision (a) unless the corporation proves that the
member will allow use of the information for purposes unrelated to
the person's interest as a member or that the alternative method
offered reasonably achieves the proper purpose set forth in the
demand.
(2) The authorized number of members for a purpose reasonably
related to the members' interest as members.
(c) The corporation may, within 10 business days after receiving a
demand under subdivision (a), deliver to the person or persons
making the demand a written offer of an alternative method of
achieving the purpose identified in the demand without providing
access to or a copy of the membership list. An alternative method
which reasonably and in a timely manner accomplishes the proper
purpose set forth in a demand made under subdivision (a) shall be
deemed a reasonable alternative, unless within a reasonable time
after acceptance of the offer the corporation fails to do those
things which it offered to do. Any rejection of the offer shall be in
writing and shall indicate the reasons the alternative proposed by
the corporation does not meet the proper purpose of the demand made
pursuant to subdivision (a).
6331. (a) Where the corporation, in good faith, and with a

substantial basis, believes that the membership list, demanded under
Section 6330 by the authorized number (Section 5036), will be used
for a purpose not reasonably related to the interests as members of
the person or persons making the demand (hereinafter called the
requesting parties) as members or provides a reasonable alternative
pursuant to subdivision (c) of Section 6330, it may petition the
superior court of the proper county for an order setting aside the
demand.
(b) Except as provided in subdivision (c), a petition for an order
to show cause why a protective order pursuant to subdivision (d)
should not issue shall be filed within 10 business days after the
demand by the authorized number under Section 6330 or receipt of a
written rejection by the authorized number of an offer made pursuant
to subdivision (c) of Section 6330, whichever is later. The petition
shall be accompanied by an application for a hearing on the petition.
Upon the filing of the petition, the court shall issue a protective
order staying production of the list demanded until the hearing on
the order to show cause. The court shall set the hearing on the order
to show cause not more than 20 days from the date of the filing of
the petition. The order to show cause shall be granted unless the
court finds that there is no reasonable probability that the
corporation will make the showing required under subdivision (f).
(c) A corporation may file a petition under this section more than
10 business days after the demand or rejection under Section 6330,
but only upon a showing the delay was caused by excusable neglect. In
no event, however, may any petition under this section be considered
if filed more than 30 days after the requesting parties' demand or
rejection, whichever is later.
(d) Upon the return day of the order to show cause, the court may
issue a protective order staying production of the list demanded
until final adjudication of the petition filed pursuant to this
section. No protective order shall issue under this subdivision
unless the court finds that the rights of the requesting parties can
reasonably be preserved and that the corporation is likely to make
the showing required by subdivision (f) or the court is likely to
issue a protective order pursuant to subdivision (g).
(e) If the corporation fails to file a petition within the time
allowed by subdivision (b) or (c), whichever is applicable, or fails
to obtain a protective order under subdivision (d), then the
corporation shall comply with the demand, and no further action may
be brought by the corporation under this section.
(f) The court shall issue the final order setting aside the demand
only if the corporation proves:
(1) That there is a reasonable probability that the requesting
parties will permit use of the membership list for a purpose
unrelated to their interests as members; or
(2) That the method offered by the corporation is a reasonable
alternative in that it reasonably achieves the proper purpose set
forth in the requesting parties' demand and that the corporation
intends and is able to effectuate the reasonable alternative.
(g) In the final order, the court may, in its discretion, order an
alternative mechanism for achieving the proper purposes of the
requesting parties, or impose just and proper conditions upon the use
of the membership list which reasonably assures compliance with
Sections 6330 and 6338.
(h) The court shall award reasonable costs and expenses, including
reasonable attorneys' fees, to requesting parties who successfully
oppose any petition or application filed pursuant to this section.
(i) Where the corporation has neither, within the time allowed,
complied with a demand by the authorized number (Section 5036) under
Section 6330, nor obtained a protective order staying production of
the list, or a final order setting aside the demand, which is then in
effect, the requesting parties may petition the superior court of
the proper county for a writ of mandamus pursuant to Section 1085 of
the Code of Civil Procedure compelling the corporation to comply with
the demand. At the hearing, the court shall hear the parties
summarily, by affidavit or otherwise, and shall issue a peremptory
writ of mandamus unless it appears that the demand was not made by an
authorized number (Section 5036), that the demand has been complied
with, that the corporation, pursuant to subdivision (c) of Section
6330, made an offer which was not rejected in writing within a
reasonable time, or that a protective or final order properly issued
under subdivision (d), (f) or (g) is then in effect. No inquiry may
be made in such proceeding into the use for which the authorized
number seek the list. The court shall award reasonable costs and
expenses, including reasonable attorneys' fees, to persons granted an
order under this subdivision.
(j) Nothing in this section shall be construed to limit the right
of the corporation to obtain damages for any misuse of a membership
list obtained under Section 6330, or otherwise, or to obtain
injunctive relief necessary to restrain misuse of a member list. A
corporation shall be entitled to recover reasonable costs and
expenses, including reasonable attorneys' fees, incurred in
successfully bringing any such action.
6332. (a) Upon petition of the corporation or any member, the

superior court of the proper county may limit or restrict the rights
set forth in Section 6330 where, and only where such limitation or
restriction is necessary to protect the rights of any member under
the Constitution of the United States or the Constitution of the
State of California. An order issued pursuant to this subdivision
shall provide, insofar as possible, for alternative mechanisms by
which the persons seeking to exercise rights under Section 6330 may
communicate with members for purposes reasonably related to their
interests as members.
(b) Upon the filing of a petition under subdivision (a), the court
may, if requested by the person making the petition, issue a
temporary order suspending the running of any time limit specified in
Section 6330 for compliance with that section. Such an order may be
extended, after notice and hearing, until final adjudication of the
petition, wherever it appears that the petitioner may prevail on the
merits, and it is otherwise equitable to do so.
6333. The accounting books and records and minutes of proceedings

of the members and the board and committees of the board shall be
open to inspection upon the written demand on the corporation of any
member at any reasonable time, for a purpose reasonably related to
such person's interests as a member.

corporation of which such person is a director.
6335. Where the proper purpose of the person or persons making a

demand pursuant to Section 6330 is frustrated by (1) any delay by the
corporation in complying with a demand under Section 6330 beyond the
time limits specified therein, or (2) any delay caused by the filing
of a petition under Section 6331 or Section 6332, or (3) any delay
caused by the alternative proposed under subdivision (c) of Section
6330, the person or persons properly making the demand shall have, in
the discretion of the court, a right to obtain from the superior
court an order postponing any members' meeting previously noticed for
a period equal to the period of such delay. The members may obtain
such an order in a proceeding brought pursuant to Section 6331 upon
manner as the court may direct. Such right shall be in addition to
any other legal or equitable remedies to which the member may be
entitled.
6336. (a) Upon refusal of a lawful demand for inspection under this
chapter, or a lawful demand pursuant to Section 6330 or Section
6333, the superior court of the proper county, or the county where
the books or records in question are kept, may enforce the demand or
right of inspection with just and proper conditions or may, for good
cause shown, appoint one or more competent inspectors or independent
accountants to audit the financial statements kept in this state and
investigate the property, funds and affairs of any corporation and of
any subsidiary corporation thereof, domestic or foreign, keeping
records in this state and to report thereon in such manner as the
court may direct.
court.
the corporation.
6337. In any action or proceeding under this article, and except as

required by Section 6331, if the court finds the failure of the
corporation to comply with a proper demand thereunder was without
justification, the court may award the member reasonable costs and
expenses, including reasonable attorneys' fees, in connection with
such action or proceeding.
6338. (a) A membership list is a corporate asset. Without consent

of the board a membership list or any part thereof may not be
obtained or used by any person for any purpose not reasonably related
to a member's interest as a member. Without limiting the generality
of the foregoing, without the consent of the board a membership list
or any part thereof may not be:
(1) Used to solicit money or property unless such money or
property will be used solely to solicit the vote of the members in an
election to be held by their corporation.
(2) Used for any purpose which the user does not reasonably and in
good faith believe will benefit the corporation.
(3) Used for any commercial purpose or purpose in competition with
the corporation.
(4) Sold to or purchased by any person.
(b) Any person who violates the provisions of subdivision (a)
shall be liable for any damage such violation causes the corporation
and shall account for and pay to the corporation any profit derived
as a result of such violation. In addition, a court in its discretion
may award exemplary damages for a fraudulent or malicious violation
of subdivision (a).
(c) Nothing in this article shall be construed to limit the right
of a corporation to obtain injunctive relief necessary to restrain
misuse of a membership list or any part thereof.
(d) In any action or proceeding under this section, a court may
award the corporation reasonable costs and expenses, including
reasonable attorneys' fees, in connection with such action or
proceeding.
(e) As used in this section, the term "membership list" means the
record of the members' names and addresses.
CORPORATIONS CODE
SECTION 6410
6410. Service of process upon a corporation shall be governed by

Chapter 17 (commencing with Section 1700) of Division 1 of Title 1.
CORPORATIONS CODE
SECTION 6510-6519
6510. (a) A complaint for involuntary dissolution of a corporation

on any one or more of the grounds specified in subdivision (b) may be
filed in the superior court of the proper county by any of the
following persons:
(2) A person or persons holding or authorized in writing by
persons holding not less than 33 1/3 percent of the voting power
exclusive of memberships held by persons who have personally
participated in any of the transactions enumerated in paragraph (5)
of subdivision (b).
(3) Any member if the ground for dissolution is that the period
for which the corporation was formed has terminated without extension
thereof.
articles.
(5) The Attorney General.
(6) The head organization under whose authority the corporation
was created, where the corporation's articles include the provision
authorized by subdivision (a), paragraph (2), clause (i), of Section
5132.
(1) The corporation has abandoned its activity for more than one
year.
that there is danger that its property will be impaired or lost or
its activities impaired and the members are so divided into factions
that they cannot elect a board consisting of an uneven number.
members in the corporation are so deadlocked that its activities can
no longer be conducted with advantage.
(4) When during any four-year period or when all voting power has
been exercised at two consecutive meetings or in two written ballots
for the election of directors, whichever period is shorter, the
members have failed to elect successors to directors whose terms have
expired or would have expired upon election of their successors.
mismanagement or abuse of authority or the corporation's property is
being misapplied or wasted by its directors or officers.
(6) Liquidation is reasonably necessary as the corporation is
failing and has continuously failed to carry out its purposes.
(8) The corporation is required to dissolve under the terms of any
article provision adopted pursuant to subdivision (a), paragraph
(2), clause (i), of Section 5132.
(c) At any time prior to the trial of the action any creditor or
the authorized number (Section 5036) of members may intervene
therein.
(d) In any action brought pursuant to subdivision (a), the
Attorney General shall be an indispensable party.
corporation or purported corporation in the name of the people of
this state, upon the Attorney General's own information or upon
complaint of a private party, to procure a judgment dissolving the
corporation and annulling, vacating or forfeiting its corporate
existence upon any of the following grounds:
of the statutes regulating corporations or charitable organizations.
within the 30-day period or thereafter fails to duly and properly
make such amendment or take the corrective corporate action.
Chapter 17 (commencing with Section 1700) of Division 1 or by written
notice to the president or secretary of the corporation at the
address indicated in the corporation's last tax return filed pursuant
to the Bank and Corporation Tax Law. The Attorney General shall also
publish one time in a newspaper of general circulation in the proper
county a notice to the members of the corporation.

paragraph (2) of subdivision (b) of Section 6510, the court may
appoint a provisional director. The provisions of subdivision (e) of
Section 5225 apply to any such provisional director so appointed.

appointed the interests of the corporation or the public or
charitable purpose of the corporation will suffer pending the hearing
and determination of the complaint, upon the application of the
plaintiff, and after a hearing upon such notice to the corporation as
the court may direct and upon the giving of security pursuant to
Sections 566 and 567 of the Code of Civil Procedure, the court may
appoint a receiver to take over and manage the affairs of the
corporation and to preserve its property pending the hearing and
determination of the complaint for dissolution.

require.

the corporation shall cease to conduct its activities except to the
extent necessary for the beneficial winding up thereof and except
during such period as the board may deem necessary to preserve the
corporation's goodwill or going concern value, pending a sale or
other disposition of its assets, or both, in whole or in part. The
directors shall cause written notice of the commencement of the
proceeding for involuntary winding up to be given by mail to all
members and to all known creditors and claimants whose addresses
appear on the records of the corporation, unless the order for
winding up has been stayed by appeal therefrom or otherwise or the
proceeding or the execution of the order has been enjoined.

(c) The presentation and filing of intermediate and final accounts
(d) The appointment of a commissioner to hear and determine any or
proper.
(e) The filling of any vacancies on the board which the directors
or members are unable to fill.
(f) The removal of any director if it appears that the director
has been guilty of dishonesty, misconduct, neglect or breach of trust
in conducting the winding up or if the director is unable to act.
The court may order an election to fill the vacancy so caused, and
may enjoin, for such time as it considers proper, the reelection of
the director so removed; or the court, in lieu of ordering an
election, may appoint a director to fill the vacancy caused by such
removal. Any director so appointed by the court shall serve until the
next regular meeting of members or until a successor is elected or
appointed.
(g) The staying of the prosecution of any suit, proceeding or
action against the corporation and requiring the parties to present
and prove their claims in the manner required of other creditors.
(h) The determination of whether adequate provision has been made
paid.
(i) The making of orders for the withdrawal or termination of
proceedings, to windup and dissolve, subject to conditions for the
protection of creditors.
(j) The making of an order, upon the allowance or settlement of
(k) The making of orders for the bringing in of new parties as the
matters.
(l) The disposition of assets held in charitable trust.

known address.
on their security.

and Taxation Code, has been filed with the Franchise Tax Board, as
2 of the Revenue and Taxation Code and that its known debts and
liability.
be.
liabilities to creditors and members.
(b) In an action brought by, and at the request of, the Attorney
General, the court may make an order declaring that a corporation is
wound up and dissolved without meeting the requirements in
subdivision (a), upon a finding by the court that it is impossible or
impracticable to meet some or all of those requirements.
(c) The court may make such additional orders and grant such
further relief as it deems proper upon the evidence submitted.
(d) Upon the making of the order declaring the corporation
as otherwise ordered by the court and in respect to completion of
the winding up.

forthwith be filed. The Secretary of State shall notify the Franchise
Tax Board of the dissolution.
CORPORATIONS CODE
SECTION 6610-6618

dissolve (1) by approval of a majority of all members (Section 5033)
or (2) by approval of the board and approval of the members (Section
5034).
descriptions may elect by approval of the board to wind up and
dissolve:
(1) A corporation which has been the subject of an order for
relief in bankruptcy.
not conducted any activity for a period of five years immediately
corporation.
(3) A corporation which has no members.
(4) A corporation which is required to dissolve under provisions
of its articles adopted pursuant to subparagraph (A) of paragraph (2)
of subdivision (a), of Section 5132.
(c) If a corporation comes within one of the descriptions in
subdivision (b) and the number of directors then in office is less
than a quorum, the corporation may elect to voluntarily wind up and
dissolve by any of the following:
(1) The unanimous 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 waiver of notice by those
directors complying with subdivision (a) of Section 5211.
(3) The vote of a sole remaining director.
(d) If a corporation elects to voluntarily wind up and dissolve
pursuant to subdivision (c), references to the board in this chapter
and Chapter 17 (commencing with Section 6710) shall be deemed to be
to a board consisting solely of those directors or that sole director
and action by the board shall require at least the same consent or
vote as would be required under subdivision (c) for an election to
wind up and dissolve.

dissolve a certificate evidencing that election shall forthwith be
filed and a copy thereof filed with the Attorney General.
office or by one or more members authorized to do so by approval of a
majority of all members (Section 5033) and shall set forth:
(2) If the election was made by the vote of members alone, the
number of votes for the election and that the election was made by a
majority of all members (Section 5033).
(3) If the election was made by the board and members pursuant to
paragraph (2) of subdivision (a) of Section 6610, the certificate
shall state that it was made by the board and the members in
accordance with Section 5034.
(4) If the certificate is executed by a member or members, that
the subscribing person or persons were authorized to execute the
certificate by a majority of all members (Section 5033).
(b) of Section 6610, the circumstances showing the corporation to be
within one of the categories described in that subdivision.
Section 6610 is made by the vote of all the members of a corporation
with members or by all members of the board of a corporation without
members and a statement to that effect is added to the certificate
of dissolution pursuant to Section 6611, the separate filing of the
certificate of election pursuant to this section is not required.

revoked prior to distribution of any assets: (1) if the election was
made pursuant to paragraph (1) of subdivision (a) of Section 6610, by
the vote of a majority of all members (Section 5033); or (2) if the
election was made pursuant to paragraph (2) of subdivision (a) of
Section 6610, by the approval of the board and the members (Section
5034); or (3) if the election was by the board pursuant to
subdivision (b) of Section 6610, by approval of the board. Thereupon
a certificate evidencing the revocation shall be signed, verified and
filed in the manner prescribed by Section 6611 and a copy thereof
filed with the Attorney General.
dissolve.
(3) If the revocation was made by the vote of members alone, the
number of votes for the revocation and that the revocation was made
by a majority of all members (Section 5033).
(4) If the revocation was made by the board and members pursuant
to paragraph (2) of subdivision (a) of Section 6612, the certificate
shall so state.
(5) If the revocation was made by the board alone, the certificate
shall so state.

commence upon the adoption of the resolution required by Section 6610
by the members, by the board and members, or by the board alone,
electing to wind up and dissolve.
corporation shall cease to conduct its activities except to the
extent necessary for the beneficial winding up thereof, to the extent
necessary to carry out its purposes and except during such period as
the board may deem necessary to preserve the corporation's goodwill
or going-concern value pending a sale or other disposition of its
assets, or both, in whole or in part. The board shall cause written
notice of the commencement of the proceeding for voluntary winding up
to be given by mail to all its members (except no notice need be
given to the members who voted in favor of winding up and dissolving
the corporation), to all known creditors and claimants whose
addresses appear on the records of the corporation, and to the
Attorney General.

corporation, or (b) the authorized number (Section 5036), or (c) the
Attorney General, or (d) three or more creditors, and upon such
notice to the corporation and to other persons interested in the
corporation as members and creditors as the court may order, may take
appears necessary for the protection of any parties in interest or if
it appears necessary to protect the purpose or purposes served by
the corporation. The court, if it assumes jurisdiction, may make such
orders as to any and all matters concerning the winding up of the
affairs of the corporation and the protection of its creditors, its
assets and its purpose or purposes as justice and equity may require.
The provisions of Chapter 15 (commencing with Section 6510) (except
Sections 6510 and 6511) shall apply to such court proceedings.

court proceedings, a majority of the directors then in office shall
sign and verify a certificate of dissolution stating:
address of the depositary with which deposit has been made or other
information as may be necessary to enable the creditor or other
person to whom payment is to be made to appear and claim payment of
the debt or liability.
(b) One of the following documents issued by the Attorney General
shall be attached to the certificate of dissolution:
(1) A written waiver of objections to the distribution of the
corporation's assets pursuant to subdivision (c) of Section 6716.
(2) A written confirmation that the corporation has no assets.
(c) The certificate of dissolution and attachment described in
subdivision (b) shall be filed with the Secretary of State who shall
not accept a certificate of dissolution for filing without this
attachment. The corporate existence shall cease upon the acceptance
of the filing of the certificate of dissolution and attachment by the
Secretary of State, except for the purpose of further winding up if
needed. The Secretary of State shall notify the Franchise Tax Board
of the dissolution.

extension thereof, the board shall terminate its activities and wind
up its affairs; and when the affairs of the corporation have been
wound up a majority of the directors shall execute and file a
certificate conforming to the requirements of Section 6615.

requiring all persons, including the Attorney General, interested to
show cause why an order shall not be made declaring the corporation
duly wound up and dissolved and shall direct that the order be served
by notice to all creditors, claimants and members in the same manner
as the notice given under subdivision (b) of Section 6517. Notice
shall be served upon the Attorney General.
(c) Any person claiming to be interested as creditor or otherwise
may appear in the proceeding at any time before the expiration of 30
days from the completion of publication of the order to show cause
and contest the petition, and upon failure to appear such person's
claim shall be barred.
6618. (a) A corporation in the process of voluntary winding up may

dispose of the known claims against it by following the procedure
described in this section.
(b) The written notice to known creditors and claimants required
by subdivision (c) of Section 6613 shall comply with all of the
following requirements:
(1) Describe any information that must be included in a claim.
(2) Provide a mailing address where a claim may be sent.
(3) State the deadline, which may not be fewer than 120 days from
the effective date of the written notice, by which the corporation
must receive the claim.
(4) State that the claim will be barred if not received by the
deadline.
(c) A claim against the corporation is barred if any of the
following occur:
(1) A claimant who has been given the written notice under
subdivision (b) does not deliver the claim to the corporation by the
deadline.
(2) A claimant whose claim was rejected by the corporation does
not commence a proceeding to enforce the claim within 90 days from
the effective date of the rejection notice.
(d) For purposes of this section "claim" does not include a
contingent liability or a claim based on an event occurring after the
effective date of dissolution.
CORPORATIONS CODE
SECTION 6710-6721
(b) To continue the conduct of the affairs of the corporation
insofar as necessary for the disposal or winding up thereof.
(f) To collect any amounts remaining unpaid on memberships or to
recover unlawful distributions.
(g) Subject to the provisions of Section 5142, to sell at public
or private sale, exchange, convey or otherwise dispose of all or any
part of the assets of the corporation for an amount deemed reasonable
by the board without compliance with the provisions of Section 5911,
and to execute bills of sale and deeds of conveyance in the name of
the corporation.
corporation.


interested person, including the Attorney General, may petition the
superior court of the proper county to determine the identity of the
directors or, if there are no directors, to appoint directors to wind
up the affairs of the corporation, after hearing upon such notice to
such persons as the court may direct.
6713. (a) After determining that all the known debts and
liabilities of a corporation in the process of winding up have been
paid or adequately provided for, the board shall distribute all the
remaining corporate assets in the manner provided in Sections 6715
and 6716.
(b) If the winding up is by court proceeding or subject to court
supervision, the distribution shall not be made until after the
expiration of any period for the presentation of claims that has been
prescribed by order of the court.
(c) Anything to the contrary notwithstanding, assets, if any,
which are not subject to attachment, execution or sale for the
corporation's debts and liabilities may be distributed pursuant to
Sections 6715 and 6716 even though all debts and liabilities have not
been paid or adequately provided for.

means:
by one or more financially responsible persons or by the United
States government or any agency thereof, and the provision (including
the financial responsibility of such persons) was determined in good
faith and with reasonable care by the board to be adequate at the
time of any distribution of the assets by the board pursuant to this
chapter.
6715. After complying with the provisions of Section 6713, assets

held by a corporation upon a valid condition requiring return,
transfer, or conveyance, which condition has occurred or will occur
by reason of the dissolution, shall be returned, transferred, or
conveyed in accordance with the condition.
6716. After complying with the provisions of Section 6713:

(a) Except as provided in Section 6715, all of a corporation's
assets shall be disposed of on dissolution in conformity with its
articles or bylaws subject to complying with the provisions of any
trust under which such assets are held.
(b) Except as provided in subdivision (c), the disposition
required in subdivision (a) shall be made by decree of the superior
court of the proper county in proceedings to which the Attorney
General is a party. The decree shall be made upon petition therefor
by the Attorney General or, upon 30 days' notice to the Attorney
General, by any person concerned in the dissolution.
(c) The disposition required in subdivision (a) may be made
without the decree of the superior court, subject to the rights of
persons concerned in the dissolution, if the Attorney General makes a
written waiver of objections to the disposition.
6717. Subject to the provisions of any trust under which assets to

be distributed are held, distribution may be made either in money or
in property or securities and either in installments from time to
time or as a whole, if this can be done fairly and ratably and in
conformity with the provisions of the articles and bylaws and shall
be made as soon as reasonably consistent with the beneficial
liquidation of the corporation's assets.
6718. (a) If any creditors or other persons are unknown or fail or

refuse to accept their payment or distribution in cash or property or
their whereabouts cannot be ascertained after diligent inquiry, or
the existence or amount of a claim of a creditor or other person is
contingent, contested, or not determined, the corporation may deposit
any such payment, distribution, or the maximum amount of the claim
with the Controller in trust for the benefit of those lawfully
entitled to the payment, distribution, or the amount of the claim.
The payment or distribution shall be paid over by the depositary to
the lawful owners, their representatives or assigns, upon
satisfactory proof of title.

improperly distributed to any person may be recovered by the
corporation. Any of such persons may be joined as defendants in the
same action or be brought in on the motion of any other defendant.
the liability under subdivision (a) against any or all persons
receiving the distribution by the Attorney General or by any one or
more creditors of the corporation, whether or not they have reduced
their claims to judgment.
(c) As used in this section, "process of winding up" includes
proceedings under Chapters 15 (commencing with Section 6510) and 16
(commencing with Section 6610) and also any other distribution of
assets to persons made in contemplation of termination or abandonment
of the corporate business.

and divide its assets, but not for the purpose of continuing its
activities except so far as necessary for the winding up thereof.
6721. (a) In all cases where a corporation has been dissolved, any
person to whom assets were distributed upon dissolution may be sued
in the corporate name upon any cause of action against the
corporation arising prior to its dissolution. Notice of such action
shall be given to the Attorney General who may intervene. This
section is procedural in nature and is not intended to determine
liability.
(b) Summons or other process against such a corporation may be
served by delivering a copy thereof to an officer, director or person
having charge of its assets or, if no such person can be found, to
any agent upon whom process might be served at the time of
dissolution. If none of such persons can be found with due diligence
State or an assistant or deputy secretary of state. Service in this
manner is deemed complete on the 10th day after the delivery of
process to the Secretary of State. A copy of any summons or other
process shall be served on the Attorney General.
(c) Every such corporation shall survive and continue to exist
Any judgment rendered in any such action shall bind each and every
person having an interest in such corporation, to the extent of their
interest therein, and such action shall have the same force and
effect as an action brought under the provisions of Sections 410.50
and 410.60 of the Code of Civil Procedure. Service of summons or
other process in any such action may be made as provided in Chapter 4
(commencing with Section 413.10) of Title 5 of Part 2 of the Code of
Civil Procedure or as provided in subdivision (b).
(d) Upon receipt of such process and the fee therefor, the
CORPORATIONS CODE
SECTION 6810-6815

of that delinquency to the corporation. The notice shall also contain
information concerning the application of this section, and advise
the corporation of the penalty imposed by Section 19141 of the
Revenue and Taxation Code for failure to timely file the required
statement after notice of delinquency has been mailed by the
Secretary of State. If, within 60 days after the mailing of the
notice of delinquency, a statement pursuant to Section 6210 has not
been filed by the corporation, the Secretary of State may pursuant to
regulation certify the name of the corporation to the Franchise Tax
Board.
Tax Board shall assess against the corporation a penalty of fifty
dollars ($50) pursuant to Section 19141 of the Revenue and Taxation
Code.
that on or prior to the date of certification pursuant to subdivision
(a) has dissolved or has been merged into another corporation.
of State need not mail a notice of delinquency to a corporation the
corporate powers, rights, and privileges of which have been suspended
by the Franchise Tax Board pursuant to Section 23301, 23301.5, or
23775 of the Revenue and Taxation Code on or prior to, and remain
suspended on, the last day of the filing period pursuant to Section
6210. The Secretary of State need not mail a form pursuant to Section
6210 to a corporation the corporate powers, rights, and privileges
of which have been so suspended by the Franchise Tax Board on or
prior to, and remain suspended on, the day the Secretary of State
prepares the forms for mailing.
(e) If, after certification pursuant to subdivision (a), the
Secretary of State finds the required statement was filed before the
expiration of the 60-day period after mailing of the notice of
delinquency, the Secretary of State shall promptly decertify the name
of the corporation to the Franchise Tax Board. The Franchise Tax
Board shall then promptly abate any penalty assessed against the
corporation pursuant to Section 19141 of the Revenue and Taxation
Code.
corporation to file a statement required by Section 6210 is excusable
because of reasonable cause or unusual circumstances that justify
the failure, the Secretary of State may waive the penalty imposed by
this section and by Section 19141 of the Revenue and Taxation Code,
in which case the Secretary of State shall not certify the name of
the corporation to the Franchise Tax Board, or if already certified,
the Secretary of State shall promptly decertify the name of the
corporation.
6811. Any director of any corporation who concurs in any vote or

act of the directors of the corporation or any of them, knowingly and
with dishonest or fraudulent purpose, to make any distribution with
the design of defrauding creditors, members, or the corporation, is
guilty of a crime. Each such crime is punishable by imprisonment in a
state prison or by a fine of not more than one thousand dollars
($1,000) or imprisonment in county jail for not more than one year,
or both such fine and imprisonment.
6812. (a) Every director or officer of any corporation is guilty of

a crime if such director or officer knowingly concurs in making or
publishing, either generally or privately, to members or other
persons (1) any materially false report or statement as to the
financial condition of the corporation, or (2) any willfully or
fraudulently exaggerated report, account or statement of operations
or financial condition, intended to induce and having a tendency to
induce, contributions or donations to the corporation by members or
other persons.
(b) Every director or officer of any corporation is guilty of a
crime who refuses to make or direct to be made any book entry or the
posting of any notice required by law in the manner required by law.
(c) A violation of subdivision (a) or (b) of this section shall be
punishable by imprisonment in state prison or by a fine of not more
than one thousand dollars ($1,000) or imprisonment in the county jail
for not more than one year or both such fine and imprisonment.
6813. (a) Every director, officer or agent of any corporation, who

knowingly receives or acquires possession of any property of the
corporation, otherwise than in payment of a just demand, and, with
intent to defraud, omits to make, or to cause or direct to be made, a
full and true entry thereof in the books or accounts of the
corporation is guilty of a crime.
(b) Every director, officer, agent or member of any corporation
who, with intent to defraud, destroys, alters, mutilates or falsifies
any of the books, papers, writings or securities belonging to the
corporation or makes or concurs in omitting to make any material
entry in any book of accounts or other record or document kept by the
(c) Each crime specified in this section is punishable by
imprisonment in state prison, or by imprisonment in a county jail for
not exceeding one year, or a fine not exceeding one thousand dollars
($1,000), or by both such fine and imprisonment.
6814. Every director, officer or agent of any corporation, or any

person proposing to organize such a corporation, who knowingly
to investigate its affairs, with intent to deceive such officer or
board in respect thereto, is punishable by imprisonment in a state
prison, or by imprisonment in a county jail for not more than one
year.
6815. Nothing in this chapter limits the power of the state to

punish any person for any conduct which constitutes a crime under any
other statute.
CORPORATIONS CODE
SECTION 6910
6910. Foreign corporations transacting intrastate business shall

comply with Chapter 21 (commencing with Section 2100) of Division 1,
except as to matters specifically otherwise provided for in this part
and except that Section 2115 shall not be applicable.
CORPORATIONS CODE
SECTION 7110-7111
Mutual Benefit Corporation Law.
7111. Subject to any other provision of law of this state applying

corporation may be formed under this part for any lawful purpose;
provided that a corporation all of the assets of which are
irrevocably dedicated to charitable, religious, or public purposes
and which as a matter of law or according to its articles or bylaws
must, upon dissolution, distribute its assets to a person or persons
carrying on a charitable, religious, or public purpose or purposes
may not be formed under this part.
CORPORATIONS CODE
SECTION 7120-7122.3
of the corporation.

association is located, of a copy of the articles of incorporation
county.
(b) The Secretary of State shall not file articles pursuant to
this part setting forth a name which may create the impression that
the purpose of the corporation is public, charitable or religious or
that it is a charitable foundation.
(c) The Secretary of State shall not file articles which set forth
delayed effective date pursuant to subdivision (c) of Section 110, or
subdivision (c) of Section 5008, or a name which is under
reservation pursuant to this section, Section 201, Section 5122, or
Section 9122 except that a corporation may adopt a name that is
Secretary of State.
(d) Any applicant may, upon payment of the fee prescribed therefor
(c), and upon the issuance of the certificate the name stated therein
(c).
7122.3. The Secretary of State shall not file articles for a

corporation the name of which would fall within the prohibitions of
Section 18104 of the Financial Code. This section shall not apply to
articles filed for a corporation organized in accordance with Section
18100 of the Financial Code.
CORPORATIONS CODE
SECTION 7130-7135

this part shall set forth the following:
(b) (1) Except as provided in paragraph (2), the following
statement:
"This corporation is a nonprofit mutual benefit corporation organized
under the Nonprofit Mutual Benefit Corporation Law. The purpose of
this corporation is to engage in any lawful act or activity, other
than credit union business, for which a corporation may be organized
under such law."
(2) In the case of a corporation formed under this part that is
subject to the California Credit Union Law, the articles shall set
forth a statement of purpose that is prescribed in the applicable
provisions of the California Credit Union Law.
(3) The articles may include a further definition of the
corporation's purposes.

(2) A provision conferring upon the holders of any evidences of
indebtedness, issued or to be issued by a corporation the right to
vote in the election of directors and on any other matters on which
members may vote under this part even if the corporation does not
have members.
(3) A provision conferring upon members the right to determine the
consideration for which memberships shall be issued.
with Section 8510), 16 (commencing with Section 8610), and 17
(commencing with Section 8710) shall be distributed to the head
organization.
initial directors.
(2) Provisions concerning the transfer of memberships, in
(4) A provision which would allow any member to have more or less
members for a vote.
(5) A provision that requires an amendment to the articles, as
provided in subdivision (a) of Section 7812, or to the bylaws, and
any amendment or repeal of that amendment, to be approved in writing
by a specified person or persons other than the board or the members.
However, this approval requirement, unless the articles specify
exist:
the corporation, including any provision which is required or
7135. Nothing in Section 7130 or 7131 or in any provision of the

articles of a mutual benefit corporation shall be construed to limit
the equitable power of a court to impress a charitable trust upon any
or all of the assets of a mutual benefit corporation or otherwise
treat it as a public benefit corporation.
CORPORATIONS CODE
SECTION 7140-7142

use and otherwise deal in and with its own memberships, bonds,
debentures, notes and debt securities.
(e) Pay pensions, and establish and carry out pension, deferred
(f) Issue certificates evidencing membership in accordance with
the provisions of Section 7313 and issue identity cards.
(g) Levy dues, assessments, and admission and transfer fees.
similar purposes.
or to others.
lawfully engage.

8510), 16 (commencing with Section 8610), and 17 (commencing with
Section 8710) shall be asserted as between the corporation or member,
officer or director and any third person, except in a proceeding:
(1) by a member or the state to enjoin the doing or continuation of
unauthorized activities by the corporation or its officers, or both,
in cases where third parties have not acquired rights thereby, (2) to
dissolve the corporation, or (3) by the corporation or by a member
suing in a representative suit against the officers or directors of
the corporation for violation of their authority.
7142. (a) Notwithstanding Section 7141, in the case of a

corporation holding assets in charitable trust, any of the following
may bring an action to enjoin, correct, obtain damages for or to
otherwise remedy a breach of the charitable trust:
(1) The corporation, or a member in the name of the corporation
interest in the assets subject to such charitable trust.
(5) The Attorney General, or any person granted relator status by
The Attorney General shall be given notice of any action brought
by the persons specified in paragraphs (1) through (4), and may
intervene.
or
(2) No party to the contract has, in good faith, and without
actual notice of the trust restriction, parted with value, under the
contract or in reliance upon it; and
CORPORATIONS CODE
SECTION 7150-7153
7150. (a) Except as provided in subdivision (c) and Sections 7151,

7220, 7224, 7512, 7613, and 7615, bylaws may be adopted, amended or
repealed by the board unless the action would:
(1) Materially and adversely affect the rights of members as to
voting, dissolution, redemption, or transfer;
(2) Increase or decrease the number of members authorized in total
or for any class;
(3) Effect an exchange, reclassification or cancellation of all or
part of the memberships; or
(4) Authorize a new class of membership.
(b) Bylaws may be adopted, amended or repealed by approval of the
members (Section 5034); provided, however, that such adoption,
amendment or repeal also requires approval by the members of a class
if such action would:
(1) Materially and adversely affect the rights, privileges,
preferences, restrictions or conditions of that class as to voting,
dissolution, redemption, or transfer in a manner different than such
action affects another class;
(2) Materially and adversely affect such class as to voting,
dissolution, redemption, or transfer by changing the rights,
privileges, preferences, restrictions or conditions of another class;
(3) Increase or decrease the number of memberships authorized for
such class;
(4) Increase the number of memberships authorized for another
class;
part of the memberships of such class; or
(6) Authorize a new class of memberships.
(d) Bylaws may also provide that the repeal or amendment of those
approval requirement, unless the bylaws specify otherwise, shall not
apply if any of the following circumstances exist:
provided in the bylaws, subject to subdivision (e). The number or
minimum number of directors may be one or more.
be adopted by approval of the members (Section 5034).
to:
(4) The appointment of committees, composed of directors or
nondirectors or both, by the board or any officer and the authority
of any such committees.
(8) Setting, imposing and collecting dues, assessments, and
admission and transfer fees.
withdrawal, suspension, and expulsion of members, consistent with the
(except as provided in paragraphs (1) and (2) of subdivision (a) of
Section 7222, subdivision (c) of Section 7615, and Section 8610) the
vote of a larger proportion of, or all of, the members or the members
of any class, unit, or grouping of members or the vote of a larger
proportion of, or all of, the directors, than is otherwise required
by this part. Such a provision in the bylaws requiring such greater
vote shall not be altered, amended or repealed except by such greater
vote, unless otherwise provided in the bylaws.

some or all of the authority of members. Where delegates are provided
for, the bylaws shall set forth delegates' terms of office, any
reasonable method for delegates' selection and removal, and any
"delegates."

CORPORATIONS CODE
SECTION 7160

to date.
CORPORATIONS CODE
SECTION 7210-7215


directors.
provided a waiver of notice or consent to holding the meeting or an
if not stated in the notice or if there is no notice, designated in
the bylaws or by resolution of the board.
electronic video screen communication, pursuant to this subdivision
following apply:
the presence of one or more specified directors in order to
constitute a quorum of the board to transact business, as long as the
death of a director or the death or nonexistence of the person or
persons otherwise authorized to appoint or designate that director
does not prevent the corporation from transacting business in the
normal course of events. The articles or bylaws may not provide that
a quorum shall be less than one-fifth the number of directors
two, whichever is larger, unless the number of directors authorized
in or pursuant to the articles or bylaws is one, in which case one
director constitutes a quorum.
(8) Subject to the provisions of Sections 7212, 7233, 7234, and
subdivision (e) of Section 7237 and Section 5233, insofar as it is
made applicable pursuant to Section 7238, an act or decision done or
made by a majority of the directors present at a meeting duly held at
approved by at least a majority of the required quorum for that
meeting, or a greater number required by this division, the articles
or the bylaws.
the same force and effect as a unanimous vote of the directors. For
purposes of this subdivision only, "all members of the board" does
not include an "interested director" as defined in Section 5233,
insofar as it is made applicable pursuant to Section 7238.
(d) This section applies also to incorporators, to committees of
the board, and to action by those incorporators or committees mutatis
mutandis.
7212. (a) The board may, by resolution adopted by a majority of the

number of directors then in office, provided that a quorum is
the number of directors authorized in or pursuant to the articles or
bylaws. The bylaws may authorize one or more such committees, each
all members (Section 5033), regardless of whether the corporation has
members.
bylaws.
thereof.
be elected.
(8) With respect to any assets held in charitable trust, the
approval of any self-dealing transaction except as provided in
paragraph (3) of subdivision (d) of Section 5233.
directors.
any committee, appointed pursuant to paragraph (4) of subdivision
(c) of Section 7151 or otherwise, powers as authorized by Section
7210, but may not delegate the powers set forth in paragraphs (1) to
(8), inclusive, of subdivision (a).
7213. (a) A corporation shall have a chair of its board, who may be
given the title chair of the board, chairperson of the board,
both, a secretary, a treasurer or a chief financial officer and any
other officers with any 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. The president, or if there is no president
the chair of the board, is the general manager and chief executive
officer of the corporation, unless otherwise provided in the articles
or bylaws. Unless otherwise specified in the articles or the bylaws,
if there is no chief financial officer, the treasurer is the chief
financial officer of the corporation. Any number of offices may be
held by the same person unless the articles or bylaws provide
otherwise.
party.

chairman of the board, the president or any vice president and by any
one of 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
execute the same.

CORPORATIONS CODE
SECTION 7220-7225
7220. (a) Except as provided in subdivision (d), directors shall be

elected for such terms, not longer than four years, as are fixed in
the articles or bylaws. However, the terms of directors of a
corporation without members may be up to six years. In the absence of
any provision in the articles or bylaws, the term shall be one year.
The articles or bylaws may provide for staggering the terms of
directors by dividing the total number of directors into groups of
one or more directors. The terms of office of the several groups and
the number of directors in each group need not be uniform. No
amendment of the articles or bylaws may extend the term of a director
beyond that for which the director was elected, nor may any bylaw
provision increasing the terms of directors be adopted without
(c) The articles or bylaws may provide for the election of one or
more directors by the members of any class voting as a class.
provided in subdivision (e) of Section 7222. A bylaw provision
only by approval of the members (Section 5034), except as provided in
subdivision (d) of Section 7150. Unless otherwise provided in the
articles or bylaws, the entitlement to designate or select a director
or directors shall cease if any of the following circumstances
exist:
to exist.
interest.
convicted of a felony, or, in the case of a corporation holding
assets in charitable trust, has been found by a final order or
judgment of any court to have breached any duty arising as a result
of Section 7238, or, if at the time a director is elected, the bylaws
provide that a director may be removed for missing a specified
number of board meetings, fails to attend the specified number of
meetings.
7151, the articles or bylaws may prescribe the qualifications of the
directors. The board, by a majority vote of the directors who meet
all of the required qualifications to be a director, may declare
vacant the office of any director who fails or ceases to meet any
required qualification that was in effect at the beginning of that
director's current term of office.
7222. (a) Subject to subdivisions (b) and (f), any or all directors
may be removed without cause if:
(3) In a corporation with no members, the removal is approved by a
majority of the directors then in office.
(b) Except for a corporation having no members, pursuant to
Section 7310:
(1) In a corporation in which the articles or bylaws authorize
(2) When by the provisions of the articles or bylaws the members
of any class, voting as a class, are entitled to elect one or more
office unless the reduction or amendment also provides for the
(d) Except as provided in this section and Sections 7221 and 7223,
a director may not be removed prior to the expiration of the
(e) Where a director removed under this section or Section 7221 or
7223 was chosen by designation pursuant to subdivision (d) of
Section 7220, then:
(1) Where a different person may be designated pursuant to the
made.
(2) Where the governing article or bylaw provision contains no
(f) For the purposes of this subdivision, "designator" means one
(1) Unless otherwise provided in the articles or bylaws at the
director.
(3) Unless otherwise provided in the articles or bylaws, the right
to remove shall not apply if any of the following circumstances
exist:
exist.
of one of the parties specified in subdivision (b), remove from
office any director in case of fraudulent or dishonest acts or gross
abuse of authority or discretion with reference to the corporation or
breach of any duty arising as a result of Section 7238 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.
(b) An action under subdivision (a) may be instituted by any of
the following:
(1) A director.
(2) In the case of a corporation where the total number of votes
entitled to be cast for a director is less than 5,000, twice the
authorized number (Section 5036) of members, or 20 members, whichever
is less.
(3) In the case of a corporation where the total number of votes
entitled to be cast for a director is 5,000 or more, twice the
authorized number (Section 5036) of members, or 100 members,
whichever is less.
(c) In the case of a corporation holding assets in charitable
trust, the Attorney General may bring an action under subdivision

complying with Section 7211, or (3) a sole remaining director. Unless
the articles or a bylaw approved by the members (Section 5034)
provide that the board may fill vacancies occurring in the board by
reason of the removal of directors, or unless the corporation has no
members pursuant to Section 7310, such vacancies may be filled only
by approval of the members (Section 5034).

that there is danger that its property, activities, or 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 members holding not less than 33 1/3 percent of
the voting power.
(b) If the members of a corporation are deadlocked so that they
cannot elect the directors to be elected at the time prescribed
therefor, the superior court of the proper county may,
petition of members 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) In the case of a corporation holding assets in charitable
trust:
(1) Any person bringing an action under subdivision (a) or (b)
shall give notice to the Attorney General, who may intervene; and
(2) The Attorney General may bring an action under subdivision (a)
or (b).
(d) A provisional director shall be an impartial person, who is
neither a member 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 members is broken
or until such provisional director is removed by order of the court
or by approval of a majority of all members (Section 5033). Such
person shall be entitled to such compensation as shall be fixed by
the court unless otherwise agreed with the corporation.
CORPORATIONS CODE
SECTION 7230-7238
the corporation.

presented;
any 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.
alleged failure to discharge the person's obligations as a director,
including, without limiting the generality of the foregoing, any
actions or omissions which exceed or defeat a public or charitable
purpose to which assets held by a corporation are dedicated.
7231.5. (a) Except as provided in Section 7233 or 7236, there is no

monetary liability on the part of, and no cause of action for
damages shall arise against, any volunteer director or volunteer
executive officer of a nonprofit corporation subject to this part
based upon any alleged failure to discharge the person's duties as a
director or officer if the duties are performed in a manner that
meets all of the following criteria:
(1) The duties are performed in good faith.
(2) The duties are performed in a manner such director or officer
believes to be in the best interests of the corporation.
(3) The duties are performed with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances.
secretary, or treasurer of a corporation or other individual serving
in like capacity who assists in establishing the policy of the
corporation.
(d) This section shall apply only to trade, professional, and
labor organizations incorporated pursuant to this part which operate
exclusively for fraternal, educational, and other nonprofit purposes,
and under the provisions of Section 501(c) of the United States
Internal Revenue Code.
(e) This section shall not be construed to limit the provisions of
Section 7231.

Section 7231.

and one or more of its directors, or between a corporation and any
domestic or foreign 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, business 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:
director's interest are fully disclosed or known to the members and
such contract or transaction is approved by the members (Section
5034) in good faith, with any membership owned by any interested
director not being entitled to vote thereon;
ratified; or
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.
corporation, business corporation or association of which one or
more of its directors are directors is either void or voidable
directors or the contract or transaction is approved by the members
(Section 5034) in good faith; or
7234. Interested or common directors may be counted in determining

transaction as provided in Section 7233.
7235. (a) Unless prohibited by the articles or bylaws, a

corporation may loan money or property to, or guarantee the
obligation of, any director or officer of the corporation or of its
parent, affiliate or subsidiary, provided:
(1) The board determines the loan or guaranty may reasonably be
expected to benefit the corporation.
(2) Prior to consummating the transaction or any part thereof, the
loan or guaranty is either:
(A) Approved by the members (Section 5034), without counting the
vote of the director or officer, if a member, or
(B) Approved by the vote of a majority of the directors then in
office, without counting the vote of the director who is to receive
the loan or the benefit of the guaranty.
(b) Notwithstanding subdivision (a), a corporation may advance
money to a director or officer of the corporation or of its parent,
affiliate or subsidiary, for any expenses reasonably anticipated to
be incurred in the performance of the duties of the director or
officer of the corporation or of its parent, affiliate or subsidiary,
provided that in the absence of such an advance the director or
officer would be entitled to be reimbursed for these expenses by the
corporation, its parent, affiliate, or subsidiary.
(c) The provisions of subdivisions (a) and (b) do not apply to
credit unions, or 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, or to loans permitted under any statute regulating any special
class of corporations.

be jointly and severally liable to the corporation for the benefit
of all of the creditors entitled to institute an action under
paragraph (1) or (2) of subdivision (c) or to the corporation in an
action by the head organization or members under paragraph (1) or (3)
of subdivision (c):
(1) The making of any distribution contrary to Chapter 4
in a notice given to creditors under Chapter 15 (commencing with
Section 8510), Chapter 16 (commencing with Section 8610), and Chapter
17 (commencing with Section 8710).
committee thereof, at which an action specified in subdivision (a) is
the liability:
(1) Under paragraph (1) of subdivision (a), against any or all
directors liable by the persons entitled to sue under subdivision (c)
of Section 7420.
(2) Under paragraph (2) or (3) of subdivision (a), against any or
have reduced their claims to judgment.
(3) Under paragraph (3) of subdivision (a), against any or all
directors liable by any one or more members 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 7710.
guaranty, but not exceeding, in the case of an action for the benefit
of creditors, the liabilities of the corporation owed to
nonconsenting creditors at the time of the violation.
action.
subdivision (e).
procure a judgment in its favor, an action brought under Section 5233
of Part 2 (commencing with Section 5110) made applicable pursuant to
Section 7238, or an action brought by the Attorney General or a
person granted relator status by the Attorney General for any breach
of duty relating to assets held in charitable trust) by reason of the
fact that such person is or was an agent of the corporation, against
expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with such proceeding if such
person acted in good faith and in a manner such 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 such 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
or brought under Section 5233 of Part 2 (commencing with Section
5110) made applicable pursuant to Section 7238, or brought by the
Attorney General or a person granted relator status by the Attorney
General for breach of duty relating to assets held in charitable
trust, to procure a judgment in its favor by reason of the fact that
such person is or was an agent of the corporation, against expenses
actually and reasonably incurred by such person in connection with
the defense or settlement of such action if such person acted in good
faith, in a manner such person believed to be in the best interests
of the corporation and with such care, including reasonable inquiry,
as an ordinarily prudent person in a like position would use under
similar circumstances. No indemnification shall be made under this
subdivision:
determine;
approval unless such action concerns assets held in charitable trust
and is settled with the approval of the Attorney General.
is entitled to be indemnified as authorized in this section. The
provisions of subdivision (a) of Section 7235 do not apply to
advances made pursuant to this subdivision.
indemnification; or
liability under the provisions of this section.
7238. Where a corporation holds assets in charitable trust, the

conduct of its directors or of any person performing functions
similar to those performed by a director, shall, in respect to the
assets held in charitable trust, be governed by the standards of
conduct set forth in Article 3 (commencing with Section 5230) of
Chapter 2 of Part 2 for directors of nonprofit public benefit
corporations. This does not limit any additional requirements which
may be specifically set forth in this part regarding corporations
holding assets in charitable trust.
CORPORATIONS CODE
SECTION 7240
7240. A corporation holding assets in charitable trust is subject

at all times to examination by the Attorney General, on behalf of the
state, to ascertain to what extent, if at all, it has failed or is
failing to comply with trusts it has assumed. In case of any such
failure the Attorney General, in the name of the state, may institute
against any person or persons the proceedings necessary to correct
the failure.
CORPORATIONS CODE
SECTION 7310-7315

(b) In the case of a corporation which has no members:
(1) Any action for which there is no specific provision of this
part applicable to a corporation which has no members and which would
otherwise require approval by a majority of all members (Section
5033) or approval by the members (Section 5034) shall require only
approval of the board, any provision of this part or the articles or
bylaws to the contrary notwithstanding.
(2) All rights which would otherwise vest in the members to share
in a distribution upon dissolution shall vest in the directors.


fractional memberships may be held, except as follows:
single membership when authorized by, and in a manner or under the
circumstances prescribed by, the articles or bylaws subject to
Section 7612.
(b) If the articles or bylaws provide for classes of membership
and if the articles or bylaws permit a person to be a member of more
than one class, a person may hold a membership in one or more
classes.
(c) Any branch, division, or office of any person, which is not
formed primarily to be a member, may hold a separate membership.
(d) In the case of membership in an owners' association, created
in connection with any of the forms of development referred to in
Section 11004.5 of the Business and Professions Code, the articles or
bylaws may permit a person who owns an interest, or who has a right
of exclusive occupancy, in more than one lot, parcel, area,
apartment, or unit to hold a separate membership in the owners'
association for each lot, parcel, area, apartment, or unit.
(e) In the case of membership in a mutual water company, as
defined in Section 14300, the articles or bylaws may permit a person
entitled to membership by reason of the ownership, lease, or right of
occupancy of more than one lot, parcel, or other service unit to
hold a separate membership in the mutual water company for each lot,
parcel, or other service unit.
(f) In the case of membership in a mobilehome park acquisition
corporation, as described in Section 11010.8 of the Business and
Professions Code, a bona fide secured party who has, pursuant to a
security interest in a membership, taken title to the membership by
way of foreclosure, repossession, or voluntary repossession, and who
is actively attempting to resell the membership to a prospective
homeowner or resident of the mobilehome park, may own more than one
membership.
7313. (a) A corporation may, but is not required to, issue

membership certificates. Nothing in this section shall restrict a
corporation from issuing identity cards or similar devices to members
which serve to identify members qualifying to use facilities or
services of the corporation.
(b) Membership certificates issued by corporations shall state the
following on the certificate:
(1) The corporation is a nonprofit mutual benefit corporation
which may not make distributions to its members except upon
dissolution, or, if the articles or bylaws so provide, that it may
not make distributions to its members during its life or upon
dissolution.
(2) If there are restrictions upon the transferability, a
statement that a copy of the restrictions are on file with the
secretary of the corporation and are open for inspection by a member
on the same basis as the records of the corporation.
(c) If the membership certificates are transferable only with
consent of the corporation, or if there are no membership
certificates, then instead of complying with paragraph (2) of
subdivision (b) the corporation may, or if there are no membership
certificates, shall, give notice to the transferee, within a
reasonable time after the corporation is first notified of the
proposed transfer, and before the membership is transferred on the
books and records of the corporation, of the information that would
otherwise be provided by the legends required by paragraph (2) of
subdivision (b).
(d) If the articles or bylaws are amended so that any statement
required by subdivision (b) upon outstanding membership certificates
is no longer accurate, then the board may cancel the outstanding
certificates and issue in their place new certificates conforming to
the articles or bylaw amendments.
(e) Where new membership certificates are issued in accordance
with subdivision (d), the board may order holders of outstanding
certificates to surrender and exchange them for new certificates
within a reasonable time fixed by the board. The board may further
provide that the holder of a certificate so ordered to be surrendered
shall not be entitled to exercise any of the rights of membership
until the certificate is surrendered and exchanged, but rights shall
be suspended only after notice of such order is given to the holder
of the certificate and only until the certificate is exchanged. The
duty of surrender of any outstanding certificates may also be
enforced by civil action.
7314. (a) A corporation may issue a new membership certificate or a

new certificate for any security in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost,
stolen or destroyed certificate or the owner's legal representative
to give the corporation a bond (or other adequate security)
sufficient to indemnify it against any claim that may be made against
it (including any expense or liability) on account of the alleged
loss, theft or destruction of any such certificate or the issuance of
such new certificate.
(b) If a corporation refuses to issue a new membership certificate
or other certificate in place of one theretofore issued by it, or by
any corporation of which it is the lawful successor, alleged to have
7315. (a) Except as provided in subdivision (b), or in its articles
or bylaws, a corporation may admit any person to membership.
(b) A corporation may not admit its subsidiary (Section 5073) to
membership.
CORPORATIONS CODE
SECTION 7320

(a) Unless the articles or bylaws otherwise provide:
therefrom; and
(2) Subject to the provisions of subdivision (b), all rights as a
member of the corporation cease upon the member's death or
dissolution.
(b) The articles or bylaws may provide for, or may authorize the
board to provide for, the transfer of memberships, or of memberships
within any class or classes, with or without restriction or
limitation, including transfer upon the death, dissolution, merger,
or reorganization of a member.
(c) Where transfer rights have been provided, no restriction of
them shall be binding with respect to memberships issued prior to the
adoption of the restriction, unless the holders of such memberships
CORPORATIONS CODE
SECTION 7330-7333

privileges, preferences, restrictions, or conditions, as authorized
by its articles or bylaws.

preferences, restrictions and conditions.
7332. (a) A corporation may provide in its articles for one or more
classes of memberships which are redeemable, in whole or in part, at
the option of the corporation, or the member for such consideration
within such time or upon the happening of one or more specified
events and upon such terms and conditions as are stated in the
articles. However, no membership shall actually be redeemed if
prohibited by Chapter 4 (commencing with Section 7410).
(b) Nothing in this section shall prevent a corporation from
creating a sinking fund or similar provision for, or entering into an
agreement for, the redemption or purchase of its memberships to the
extent permitted by Chapter 4 (commencing with Section 7410).

CORPORATIONS CODE
SECTION 7340-7341
7340. (a) A member may resign from membership at any time, although
the articles or bylaws may require reasonable notice before the
resignation is effective.
rendered, dues, assessments or fees, or arising from contract, a
condition to ownership of land, an obligation arising out of the
ownership of land, or otherwise, and this section shall not diminish
any right of the corporation to enforce any such obligation or obtain
damages for its breach.
7341. (a) No member may be expelled or suspended, and no membership

or memberships may be terminated or suspended, except according to
procedures satisfying the requirements of this section. An expulsion,
termination or suspension not in accord with this section shall be
void and without effect.
(b) Any expulsion, suspension, or termination must be done in good
(2) It provides the giving of 15 days' prior notice of the
the last address of the members shown on the corporation's records.
are otherwise unlawful is not made valid by compliance with this
section.
the expulsion, suspension or termination or arising from contract or
otherwise.
CORPORATIONS CODE
SECTION 7350-7354

(b) No person is liable for any obligation arising from membership
unless the person was admitted to membership upon the person's
application or with the person's consent.
(c) The ownership of an interest in real property, when a
condition of its ownership is membership in a corporation, shall be
considered consent to such membership for the purpose of this
section.
7351. A corporation may levy dues, assessments, or fees upon its

from membership, except where the member is liable for them by
contract, as a condition to ownership of an interest in real
property, as an obligation arising out of the ownership of an
interest in real property, or otherwise. Article or bylaw provisions
authorizing such dues, assessments or fees do not, of themselves,
create such liability.
7352. A person holding a membership as pledgee or a membership as

executor, administrator, guardian, trustee, receiver or in any
representative or fiduciary capacity is not personally liable for any
unpaid balance of the purchase price of the membership, or for any
amount owing to the corporation by the member, because the membership
is so held, but the estate and funds in the hands of such fiduciary
or representative are liable and the membership subject to sale
therefor.


CORPORATIONS CODE
SECTION 7410-7414
7410. This chapter does not apply to any proceeding for winding up
and dissolution of corporations under Chapters 15 (commencing with
Section 8510), 16 (commencing with Section 8610), and 17 (commencing
with Section 8710).
7411. (a) Except as provided in subdivision (b), no corporation

shall make any distribution except upon dissolution.
(b) A corporation may, subject to meeting the requirements of
Sections 7412 and 7413 and any additional restrictions authorized by
Section 7414, purchase or redeem memberships.

a distribution if the corporation or the subsidiary making the
distribution is, or as a result thereof would be, likely to be unable
to meet its liabilities (except those whose payment is otherwise
adequately provided for) as they mature.
7413. Neither a corporation nor any of its subsidiaries shall

purchase or redeem a membership of the parent or subsidiary if the
articles of the corporation contain a provision authorized by
paragraph (4), clause (ii), of subdivision (a) of Section 7132 and
such corporation or the subsidiary making the purchase or redemption
is, or as a result thereof would be, likely to be unable to meet the
obligations resulting from such article provision.
7414. Nothing in this chapter prohibits additional restrictions

upon the purchase or redemption of a membership by provision in a
corporation's articles or bylaws or agreement entered into by the
corporation.
CORPORATIONS CODE
SECTION 7420
7420. (a) Any person who with knowledge of facts indicating the
impropriety thereof receives any distribution, including a payment in
redemption of a membership, prohibited by this chapter is liable to
the corporation for the amount so received by the person with
interest thereon at the legal rate on judgments until paid.
(b) Any person who with knowledge of facts indicating the
the corporation for the benefit of the head organization, or of all
of the creditors entitled to institute an action under subdivision
(c), for the amount so received by the person with interest thereon
at the legal rate on judgments until paid, but not exceeding the
obligations of the corporation owed to the head organization at the
time of the violation, or the liabilities of the corporation owed to
nonconsenting creditors at the time of the violation, as the case may
be.
the liability (1) to creditors arising under subdivision (b) for a
violation of Section 7411 or 7412 against any or all persons liable
by any one or more creditors of the corporation whose debts or claims
arose prior to the time of the distribution and who have not
consented thereto, whether or not they have reduced their claims to
judgment, or (2) to the head organization arising under subdivision
(b) for a violation of Section 7413 against any or all persons liable
by any head organization which pursuant to the corporation's
articles is entitled to a distribution of assets upon dissolution.
(d) Any person sued under subdivision (b) may implead all other
persons liable under subdivision (b) and may in the absence of fraud
by the moving party compel contribution, either in that action or in
an independent action against persons not joined in that action.
(e) Nothing contained in this section affects any liability which
any person may have under Sections 3439 to 3439.12, inclusive, of the
Civil Code.
CORPORATIONS CODE
SECTION 7510-7517

without this state as may be stated in or fixed in accordance with
the bylaws. If no other place is stated or so fixed, meetings of
members shall be held at the principal executive office of the
members not physically present in person (or, if proxies are
allowed, by proxy) at a meeting of members may, by electronic
transmission by and to the corporation (Sections 20 and 21) or by
members, be deemed present in person (or, if proxies are allowed, by
proxy), and vote at a meeting of members whether that meeting is to
be held at a designated place or in whole or in part by means of
electronic transmission by and to the corporation or by electronic
video screen communication, in accordance with subdivision (f).
(b) A regular meeting of members shall be held on a date and time,
and with the frequency stated in or fixed in accordance with the
bylaws, but in any event in each year in which directors are to be
elected at that meeting for the purpose of conducting such election,
and to transact any other proper business which may be brought before
the meeting.
(c) If a corporation with members is required by subdivision (b)
to hold a regular meeting and fails to hold the regular meeting for a
the corporation or after its last regular meeting, or if the
ballot to be conducted upon the application of a member or the
Attorney General, after notice to the corporation giving it an
opportunity to be heard.
(d) The votes represented, either in person (or, if proxies are
allowed, by proxy), at a meeting called or by written ballot ordered
pursuant to subdivision (c), and entitled to be cast on the business
to be transacted shall constitute a quorum, notwithstanding any
provision of the articles or bylaws or in this part to the contrary.
The court may issue such orders as may be appropriate including,
without limitation, orders designating the time and place of the
meeting, the record date for determination of members entitled to
vote, and the form of notice of the meeting.
implements reasonable measures to provide members in person (or, if
proxies are allowed, by proxy) a reasonable opportunity to
participate in the meeting and to vote on matters submitted to the
the meeting substantially concurrently with those proceedings, and
(2) if any member votes or takes other action at the meeting by means
of electronic transmission to the corporation or electronic video
screen communication, a record of that vote or action is maintained
by the corporation. Any request by a corporation to a member pursuant
members by electronic transmission by and to the corporation, shall
include a notice that absent consent of the member pursuant to clause
(b) of Section 20, the meeting shall be held at a physical location
in accordance with subdivision (a).

of Section 7512, the notice shall state the place, date and time of
for the action. The notice of any meeting at which directors are to
personally, by electronic transmission by a corporation, or by mail
or other means of written communication, addressed to a member at the
address of the member appearing on the books of the corporation or
given by the member to the corporation for purpose of notice; or if
no such address appears or is given, at the place where the principal
office of the corporation is located or by publication at least once
in a newspaper of general circulation in the county in which the
principal office is located. An affidavit of giving of any notice or
report in accordance with the provisions of this part, executed by
the secretary, assistant secretary or any transfer agent, shall be
prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of
the member appearing on the books of the corporation is returned to
indicate that the United States Postal Service is unable to deliver
the notice or report to the member at the address, all future notices
or reports shall be deemed to have been duly given without further
mailing if the same shall be available for the member upon written
demand of the member at the principal office of the corporation for a
period of one year from the date of the giving of the notice or
report to all other members.
attention of the chairman of the board, president, vice president, or
held at a time fixed by the board not less than 35 nor more than 90
the record date for determination of members entitled to vote, and
the form of notice.
at which the adjournment is taken. No meeting may be adjourned for
more than 45 days. At the adjourned meeting the corporation may
transact any business which might have been transacted at the
original meeting. If after the adjournment a new record date is fixed
for notice or voting, a notice of the adjourned meeting shall be
given to each member who, on the record date for notice of the
meeting, is entitled to vote at the meeting.
(e) The transactions of any meeting of members however called and
either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person
(or, if proxies are allowed, by proxy), provides a waiver of notice
or consent to the holding of the meeting or an approval of the
minutes thereof in writing. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall
constitute a waiver of notice of and presence at the meeting, except
when the person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully
called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters
required by this part to be included in the notice but not so
included, if the objection is expressly made at the meeting. Neither
the business to be transacted at nor the purpose of any regular or
special meeting of members need be specified in any written waiver of
notice, consent to the holding of the meeting or approval of the
minutes thereof, unless otherwise provided in the articles or bylaws,
except as provided in subdivision (f).
(f) Any approval of the members required under Section 7222, 7224,
7233, 7812, 8610, or 8719, other than unanimous approval by those
entitled to vote, shall be valid only if the general nature of the
proposal so approved was stated in the notice of meeting or in any
written waiver of notice.
manner.
7512. (a) One-third of the voting power, represented in person or

by proxy, shall constitute a quorum at a meeting of members, but,
subject to subdivisions (b) and (c), a bylaw may set a different
quorum. Any bylaw amendment to increase the quorum may be adopted
only by approval of the members (Section 5034). If a quorum is
present, the affirmative vote of the majority of the voting power
represented at the meeting, entitled to vote, and voting on any
matter shall be the act of the members unless the vote of a greater
number or voting by classes is required by this part or the articles
or bylaws.
(b) Where a bylaw authorizes a corporation to conduct a meeting
with a quorum of less than one-third of the voting power, then the
only matters that may be voted upon at any regular meeting actually
attended, in person or by proxy, by less than one-third of the voting
power are matters notice of the general nature of which was given,
pursuant to the first sentence of subdivision (a) of Section 7511.
division, or by the articles or the bylaws, the vote of the greater
number or voting by classes.
be transacted, except as provided in subdivision (c).

articles or bylaws, any action which may be taken at any regular or
corporation.
requirements of subdivision (b) of Section 7511 and Section 7514. All
such solicitations shall indicate the number of responses needed to
meet the quorum requirement and, with respect to ballots other than
for the election of directors, shall state the percentage of
to be counted.
(f) When directors are to be elected by written ballot and the
articles or bylaws prescribe a nomination procedure, the procedure
may provide for a date for the close of nominations prior to the
printing and distributing of the written ballots.
7514. (a) Any form of proxy or written ballot distributed to 10 or

more members of a corporation with 100 or more members shall afford
an opportunity on the proxy or form of written ballot to specify a
choice between approval and disapproval of each matter or group of
related matters intended, at the time the written ballot or proxy is
distributed, to be acted upon at the meeting for which the proxy is
solicited or by such written ballot, and shall provide, subject to
reasonable specified conditions, that where the person solicited
specifies a choice with respect to any such matter the vote shall be
cast in accordance therewith.
(b) In any election of directors, any form of proxy or written
ballot in which the directors to be voted upon are named therein as
candidates and which is marked by a member "withhold" or otherwise
marked in a manner indicating that the authority to vote for the
election of directors is withheld shall not be voted either for or
against the election of a director.
proxy at a meeting or written ballot and the superior court may
compel compliance therewith at the suit of any member.

delegates or directors, or otherwise obtain their consent, in the
officer, delegate or member, may order that such a meeting be called
or that a written ballot or other form of obtaining the vote of
members, delegates or directors be authorized, in such a manner as
the court finds fair and equitable under the circumstances.
or directors are.
delegates or directors conducted pursuant to an order issued under
every requirement imposed by the articles, bylaws, and this part.

waiver or proxy appointment and give it effect as the act of the
member.
proxy appointment.
(4) The name signed purports to be that of an administrator,
executor, guardian, or conservator representing the member and, if
the corporation requests, evidence of fiduciary status acceptable to
the corporation has been presented with respect to the ballot,
consent, waiver, or proxy appointment.
(5) The name signed purports to be that of a receiver or trustee
in bankruptcy of the member, and, if the corporation requests,
evidence of this status acceptable to the corporation has been
presented with respect to the ballot, consent, waiver, or proxy
appointment.
CORPORATIONS CODE
SECTION 7520-7527
7520. (a) As to directors elected by members, there shall be

available to the members reasonable nomination and election
procedures given the nature, size and operations of the corporation.
(b) If a corporation complies with all of the provisions of
Sections 7521, 7522, 7523, and 7524 applicable to a corporation with
the same number of members, the nomination and election procedures of
that corporation, shall be deemed reasonable. However, those
sections do not prescribe the exclusive means of making available to
the members reasonable procedures for nomination and election of
directors. A corporation may make available to the members other
reasonable nomination and election procedures given the nature, size,
and operations of the corporation.
(c) Subject to the provisions of subdivisions (a), (b), and (d) of
Section 7616, the superior court of the proper county shall enforce
the provisions of this section.
7521. A corporation with 500 or more members may provide that,

except for directors who are elected as authorized by Section 7152 or
7153, and except as provided in Section 7522, any person who is
qualified to be elected to the board of directors of the corporation
may be nominated:
(a) By any method authorized by the bylaws, or if no method is set
forth in the bylaws by any method authorized by the board.
(b) By petition delivered to an officer of the corporation, signed
within 11 months preceding the next time directors will be elected,
by members representing the following number of votes:
Number of Votes Eligible

to be Cast for Director
Disregarding any Provision
for Cumulative Voting Number of Votes
Under 5,000............. 2 percent of voting
power
one-twentieth of 1
percent of
5,000 or more........... voting power but not
less than
100.
This subdivision does not apply to a corporation described in

subdivision (c).
(c) In corporations with one million or more members engaged
primarily in the business of retail merchandising of consumer goods,
by petition delivered to an officer of the corporation, signed within
11 months preceding the next time directors will be elected, by such
reasonable number of members as is set forth in the bylaws, or if no
number is set forth in the bylaws, by such reasonable number of
members as is determined by the directors.
(d) If there is a meeting to elect directors, by any member
present at the meeting in person or by proxy if proxies are
permitted.
7522. A corporation with 5,000 or more members may provide that, in

any election of a director or directors by members of the
corporation except for an election authorized by Section 7152 or
7153:
(a) The corporation's articles or bylaws shall set a date for the
close of nominations for the board. The date shall not be less than
50 nor more than 120 days before the day directors are to be elected.
No nominations for the board can be made after the date set for the
close of nominations.
(b) If more people are nominated for the board than can be
elected, the election shall take place by means of a procedure which
allows all nominees a reasonable opportunity to solicit votes and all
members a reasonable opportunity to choose among the nominees.
(c) A nominee shall have a reasonable opportunity to communicate
to the members the nominee's qualifications and the reasons for the
nominee's candidacy.
(d) If after the close of nominations the number of people
nominated for the board is not more than the number of directors to
be elected, the corporation may without further action declare that
those nominated and qualified to be elected have been elected.
7523. Where a corporation with 500 or more members publishes any

material soliciting a vote for any nominee for director in any
publication owned or controlled by the corporation, the corporation
may provide that it shall make available to all other nominees, in
the same issue of the publication, an equal amount of space, with
equal prominence, to be used by the nominee for a purpose reasonably
related to the election.
7524. A corporation with 500 or more members may provide that upon
written request by any nominee for election to the board and the
payment of the reasonable costs of mailing (including postage), the
corporation shall within 10 business days after such request
(provided payment has been made) mail to all members, or such portion
of them as the nominee may reasonably specify, any material, which
the nominee may furnish and which is reasonably related to the
election, unless the corporation within five business days after the
request allows the nominee, at the corporation's option, the rights
set forth in either paragraph (1) or (2) of subdivision (a) of
Section 8330.
7525. (a) This section shall apply to corporations publishing or

mailing materials on behalf of any nominee in connection with
procedures for the nomination and election of directors.
director and which it mails or publishes in procedures intended to
comply with Section 7520 or pursuant to Section 7523 or 7524 but the
nominee on whose behalf such material was published or mailed shall
be liable and shall indemnify and hold the corporation, its agents,
officers, directors, and employees and each of them harmless from all
demands, costs, including reasonable legal fees and expenses,
claims, damages and causes of action arising out of such material or
any such mailing or publication.
order providing that the corporation need not mail or publish
material tendered by or on behalf of a nominee under this article on
the ground the material will expose the moving party to liability.
7526. Without authorization of the board, no corporation funds may

be expended to support a nominee for director after there are more

nine months thereafter.
CORPORATIONS CODE
SECTION 7610-7616
7610. Except as provided in a corporation's articles or bylaws or

Section 7615, each member shall be entitled to one vote on each
matter submitted to a vote of the members. Single memberships in
which two or more persons have an indivisible interest shall be voted
as provided in Section 7612.
an adjournment of the meeting unless the board fixes a new record
meeting of members.
7612. If a membership stands of record in the names of two or more

persons, whether fiduciaries, members of a partnership, joint
tenants, tenants in common, husband and wife as community property,
tenants by the entirety, persons entitled to vote under a voting
agreement or otherwise, or if two or more persons (including
proxyholders) have the same fiduciary relationship respecting the
same membership, unless the secretary of the corporation is given
written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship
wherein it is so provided, their acts with respect to voting shall
have the following effect:
(a) If only one votes, such act binds all; or
all.
by proxy with respect to such membership except that this right may
be limited or withdrawn by the articles or bylaws, subject to
subdivision (f). Any proxy purported to be executed in accordance
with the provisions of this part shall be presumptively valid.
thereto, except as otherwise provided in this section. Such
revocation may be effected by a writing delivered to the corporation
stating that the proxy is revoked or by a subsequent proxy executed
by the person executing the prior proxy and presented to the meeting,
or as to any meeting by attendance at such meeting and voting in
person by the person executing the proxy. The dates contained on the
forms of proxy presumptively determine the order of execution,
regardless of the postmark dates on the envelopes in which they are
mailed.
(d) Unless otherwise provided in the articles or bylaws, the proxy
of a member which states that it is irrevocable is irrevocable for
the period specified therein (notwithstanding subdivisions (b) and
(c)) when it is held by any of the following or a nominee of any of
the following:
(1) A person who has purchased or who has agreed to purchase the
membership;
(2) A creditor or creditors of the corporation or the member who
extended or continued credit to the corporation or the member in
consideration of the proxy if the proxy states that it was given in
consideration of such extension or continuation of credit and the
name of the person extending or continuing the credit; or
(3) A person who has contracted to perform services as an employee
of the corporation, if the proxy is required by the contract of
employment and if the proxy states that it was given in consideration
of such contract of employment, the name of the employee and the
period of employment contracted for.
Notwithstanding the period of irrevocability specified, the proxy
becomes revocable when the agreement to purchase is terminated; the
debt of the corporation or the member is paid; or the period of
employment provided for in the contract of employment has terminated.
In addition to the foregoing paragraphs (1) through (3), a proxy of
a member may be made irrevocable (notwithstanding subdivision (c)) if
it is given to secure the performance of a duty or to protect a
title, either legal or equitable, until the happening of events
which, by its terms, discharge the obligations secured by it.
(e) A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a transferee of a membership without knowledge of the
existence of the provision unless the existence of the proxy and its
irrevocability appears on the certificate representing the
membership.
(f) Subdivision (a) notwithstanding:
(1) No amendment of the articles or bylaws repealing, restricting,
creating or expanding proxy rights may be adopted without approval
by the members (Section 5034); and
(2) No amendment of the articles or bylaws restricting or limiting
the use of proxies may affect the validity of a previously issued
irrevocable proxy during the term of its irrevocability, so long as
it complied with applicable provisions, if any, of the articles or
bylaws at the time of its issuance, and is otherwise valid under this
section.
(g) Anything to the contrary notwithstanding, any revocable proxy
covering matters requiring a vote of the members pursuant to Section
7222; Section 7224; Section 7233; paragraph (1) of subdivision (f) of
this section; Section 7812; paragraph (2) of subdivision (a) of
Section 7911; Section 8012; subdivision (a) of Section 8015; Section
8610; or subdivision (a) of Section 8719 is not valid as to such
matters unless it sets forth the general nature of the matter to be
voted on.
7614. (a) In advance of any meeting of members, the board may

member or a member's proxy shall, appoint inspectors of election (or
persons to replace those who so fail or refuse) at the meeting. The
number of inspectors shall be either one or three. If appointed at a
meeting on the request of one or more members or proxies, the
majority of members represented in person or by proxy shall determine
whether one or three inspectors are to be appointed. In the case of
any action by written ballot (Section 7513), the board may similarly
appoint inspectors of election to act with powers and duties as set
forth in this section.
represented at the meeting, the existence of a quorum, and the
way arising in connnection with the right to vote, count and tabulate
election or vote with fairness to all members.

directors may cumulate the member's votes and give one candidate a
repeal.
or candidates unless the candidate's name or candidates' names have
been placed in nomination prior to the voting and the member has
given notice at the meeting prior to the voting of the member's
intention to cumulate votes. If any one member has given this notice,
all members may cumulate their votes for candidates in nomination.
(c) In any election of directors by cumulative voting, the
candidates receiving the highest number of votes are elected, subject
to any lawful provision specifying election by classes.
(d) In any election of directors not governed by subdivision (c),
unless otherwise provided in the articles or bylaws, the candidates
(e) Elections for directors need not be by ballot unless a member

member or by any person who had the right to vote in the election at
corporation.
(b) In the case of a corporation holding assets in charitable
trust, any person bringing an action under this section shall give
notice of the action to the Attorney General, who may intervene.
(c) Upon the filing of the complaint, and before any further
(d) The court, consistent with the provisions of this part and in
the validity, effectiveness and construction of voting agreements and
voting trusts, the validity of the issuance of memberships and the
right of persons to vote and may direct such other relief as may be
just and proper.
CORPORATIONS CODE
SECTION 7710

to require a bond shall be granted in an action brought by 100
members or the authorized number (Section 5036), whichever is less.
plaintiff complains, or that plaintiff's membership thereafter
devolved upon plaintiff by operation of law from a holder who was a
holder at the time of transaction or any part thereof complained of;
and
party will benefit the corporation or its members economically or
otherwise.
thereof. If the court, upon any such motion, makes a determination
that a bond shall be furnished by the plaintiff as to any one or more
defendants, the action shall be dismissed as to such defendant or
pursuant to such motion, furnish a bond or bonds in the aggregate
amount of fifty thousand dollars ($50,000) to secure the reasonable
expenses of the parties entitled to make the motion, the plaintiff
has complied with the requirements of this section and with any order
for a bond theretofore made, and any such motion then pending shall
be dismissed and no further or additional bond shall be required.
CORPORATIONS CODE
SECTION 7810-7820
as authorized by Section 7813.5 and, if a change in the rights of
Section 8210.
7811. Any amendment of the articles may be adopted by a writing

signed by a majority of the incorporators, so long as:
7812. (a) Except as provided in this section or Section 7813,

the members (Section 5034) and approved by such other person or
persons, if any, as required by the articles. The approval by the
members or other person or persons may be before or after the
approval by the board.
to August 14, 1929.
(3) Any amendment, at a time the corporation has no members;
provided, however, that if the articles require approval by any
person for an amendment, an amendment may not be adopted without such
approval.
(4) An amendment adopted pursuant to Section 9913.
thereon by the provisions of the articles or bylaws, if the amendment
would:
(a) Materially and adversely affect the rights, privileges,
dissolution, redemption or transfer in a manner different than such
action affects another class;
(b) Materially and adversely affect such class as to voting,
dissolution, redemption or transfer by changing the rights,
(c) Increase or decrease the number of memberships authorized for
such class;
(d) Increase the number of memberships authorized for another
class;
(e) Effect an exchange, reclassification or cancellation of all or
(f) Authorize a new class of memberships.
7813.5. (a) A mutual benefit corporation may amend its articles to

change its status to that of a public benefit corporation, a
religious corporation, a business corporation, or a cooperative
corporation by complying with this section and the other sections of
this chapter.
(b) Except as authorized by Section 7811 or unless the corporation
has no members, an amendment to change its status to a public
benefit corporation or religious corporation shall: (i) be approved
by the members (Section 5034), and the fairness of the amendment to
the members shall be approved by the Commissioner of Corporations
pursuant to Section 25142; (ii) be approved by the members (Section
5034) in an election conducted by written ballot pursuant to Section
7513 in which no negative votes are cast; or (iii) be approved by 100
percent of the voting power.
filed by the type of corporation (public benefit, religious,
business, or cooperative) into which the mutual benefit corporation
is changing its status.
(d) At the time of filing a certificate of amendment to change
status to a public benefit corporation, a corporation shall furnish
an additional copy of the certificate of amendment to the Secretary
of State who shall forward that copy to the Attorney General.
(e) In the case of a change of status to a business corporation or
a cooperative corporation, if the Franchise Tax Board has issued a
determination exempting the corporation from tax as provided in
Section 23701 of the Revenue and Taxation Code, the corporation shall
be subject to Section 23221 of the Revenue and Taxation Code upon
filing the certificate of amendment.
7814. (a) Except for amendments adopted by the incorporators

pursuant to Section 7811, upon adoption of an amendment, the
corporation shall file a certificate of amendment, which shall
consist of an officers' certificate stating:
(1) The wording of the amendment or amended articles in accordance
with Section 7816;
(Section 5034) or the approval of 100 percent of the voting power is
required, that the amendment was approved by the required vote of
members; and
(5) If the amendment is one for which the approval of a person or
persons other than the incorporators, directors or members is
required, that the approval of such person or persons has been
obtained.
under this chapter.


means:
certificate.
exchange, or otherwise change outstanding memberships the amended

shall be amended in accordance with the certificate and any change,
reclassification or cancellation of memberships shall be effected,
and a copy of the certificate, certified by the Secretary of State,
is prima facie evidence of the performance of the conditions
necessary to the adoption of the amendment.
existence.

certificate signed and verified by a majority of the incorporators
or the board, as applicable, entitled "Restated Articles of
Incorporation of (insert name of corporation)" which shall set forth
the articles as amended to the date of filing of the certificate,
except that the signatures and acknowledgments of the articles by the
incorporators and any statements regarding the effect of any prior
amendment upon memberships and any provisions of agreements of merger
(other than amendments to the articles of the surviving corporation)
and the names and addresses of the first directors and of the
initial agent for service of process shall be omitted (except that
the names and addresses of the initial agent for service of process
and, if previously set forth in the articles, the initial directors,
shall not be omitted prior to the time that the corporation has filed
a statement under Section 8210). Such omissions are not alterations
or amendments of the articles. The certificate may also itself alter
or amend the articles in any respect, in which case the certificate
must comply with Section 7814 or 7815, as the case may be, and
Section 7816.
issuance of any memberships and the naming and election of directors,
by a majority of the incorporators, and shall be subject to the
not requiring approval of the members (Section 5034). If the
certificate does itself alter or amend the articles, it shall be
subject to the provisions of this chapter relating to the amendment
or amendments so made.
7820. (a) Amendment of the articles of a corporation holding

property in charitable trust, pursuant to this chapter, does not, of
itself, abrogate any requirement or limitation imposed upon the
corporation, or any property held by it, by virtue of the trust under
which such property is held by the corporation.
(b) The Attorney General may, at the corporation's request, and
pursuant to such regulations as the Attorney General may issue, give
rulings as to whether the Attorney General will or may oppose a
proposed action, or article amendment, as inconsistent with or
proscribed by the requirements of a charitable trust.
CORPORATIONS CODE
SECTION 7910-7913

shall be necessary for such action.

its activities, approved by the members (Section 5034), either before
or after approval by the board and before or after the transaction.
(b) Notwithstanding approval by the members (Section 5034), the
board may abandon the proposed transaction without further action by
the members, subject to the contractual rights, if any, of third
parties.

(a) stating that the property described in such deed or instrument
the members (Section 5034) or all the members pursuant to this
chapter. Such certificate is prima facie evidence of the existence of
the facts authorizing such conveyance or other transfer of the
assets and conclusive evidence in favor of any purchaser or
encumbrancer for value who, without notice of any trust restriction
applicable to the property or any failure to comply therewith, in
good faith parted with value.
7913. A corporation holding assets in charitable trust must give

written notice to the Attorney General 20 days before it sells,
leases, conveys, exchanges, transfers or otherwise disposes of any or
all of the assets held in trust unless the Attorney General has
given the corporation a written waiver of this section as to the
proposed transaction.
CORPORATIONS CODE
SECTION 8010-8019.1
8010. A mutual benefit corporation may merge with any domestic

corporation, foreign corporation, foreign business corporation, or
other business entity (Section 5063.5). However, a merger with a
public benefit corporation or a religious corporation must have the
prior written consent of the Attorney General.
8011. The board of each corporation that desires to merge shall

to the agreement of merger. The agreement shall state all of the
following:
of a disappearing corporation, subject to subdivision (c) of Section
7122.
be effected by the merger, if any.
(e) The manner, if any, of converting memberships or securities of
the constituent corporations into memberships or securities of the
surviving corporation and, if any memberships or securities of any of
the constituent corporations are not to be converted solely into
memberships or securities of the surviving corporation, the cash,
property, rights or securities of any corporation that the holders of
those memberships or securities are to receive in exchange for the
memberships or securities, which cash, property, rights or securities
of any corporation may be in addition to or in lieu of memberships
or securities of the surviving corporation, or that the memberships
are to be canceled without consideration.
(f) Other details or provisions as are desired, if any, including,
without limitation, if not prohibited by this chapter, a provision
for the payment of cash in lieu of fractional memberships or for any
other arrangement with respect thereto.
8011.5. Each membership of the same class of any constituent

corporation (other than the cancellation of memberships held by a
surviving corporation or its parent or a wholly owned subsidiary of
either in a constituent corporation) shall be treated equally with
respect to any distribution of cash, property, rights or securities
unless: (i) all members of the class consent or (ii) the Commissioner
of Corporations has approved the terms and conditions of the
transaction and the fairness of such terms pursuant to Section 25142.
8012. The principal terms of the merger shall be approved by the

members (Section 5034) of each class of each constituent corporation
and by each other person or persons whose approval of an amendment of
articles is required by the articles; and the approval by the
members (Section 5034) or such other person or persons required by
this section may be given before or after the approval by the board.

chairman of its board, president or a vice president and secretary or
an assistant secretary acting on behalf of their respective
corporations.

the members (Section 5034) required by Section 8012, the surviving
corporation shall file a copy of the agreement of merger with an
officers' certificate of each constituent corporation attached
stating the total number of memberships of each class entitled to
vote on the merger, identifying any other person or persons whose
approval is required, and that the principal terms of the agreement
in the form attached were duly approved by the required vote of the
members and, if applicable, any other person or persons. The merger
and any amendment of the articles of the surviving corporation
contained in the merger agreement shall thereupon be effective
(subject to subdivision (c) of Section 5008 and subject to the
provisions of Section 8018) and the several parties thereto shall be
one corporation. The Secretary of State may certify a copy of the
merger agreement separate from the officers' certificates attached
thereto.
any of the principal terms of the agreement, by the members (Section
5034) or other person or persons, as required by Section 8012, of any
constituent corporation in the same manner as the original
agreement.

constituent corporations, without further approval by the members
(Section 5034) or other persons entitled to approve the merger at any
time before the merger is effective.

of merger.
8018. (a) Subject to the provisions of Section 8010, the merger of

any number of corporations with any number of foreign corporations,
foreign business corporations or domestic corporations may be
effected if the foreign corporations are authorized by the laws under
which they are formed to effect the merger. The surviving
incorporation.
(b) If the surviving corporation is a mutual benefit corporation,
the merger proceedings with respect to that corporation and any
domestic disappearing corporation shall conform to the provisions of
this chapter and other applicable laws of this state, but if the
surviving corporation is a foreign corporation, then, subject to the
requirements of subdivision (d) and Section 8012 the merger
(c) If the surviving corporation is a mutual benefit corporation,
the agreement and the officers' certificate of each constituent
corporation shall be filed as provided in Section 8014 and thereupon,
subject to subdivision (c) of Section 5008, the merger shall be
effective as to each corporation; and each foreign disappearing
corporation that is qualified for the transaction of intrastate
business shall, by virtue of the filing, automatically surrender its
right to transact intrastate business.
(d) If the surviving corporation is a foreign corporation, or
foreign business corporation, the merger shall become effective in
accordance with the law of the jurisdiction in which it is organized,
but shall be effective as to any disappearing corporation as of the
time of effectiveness in the foreign jurisdiction upon the filing in
this state as required by this subdivision. There shall be filed as
to the domestic disappearing corporation or corporations the
documents described in any one of the following paragraphs:
the original.
right to transact intrastate business as of the date of filing in
8019. If an agreement of merger is entered into between a nonprofit

corporation and a business corporation: (a) Sections 6011, 6012,
6014, and 6015 shall apply to any constituent public benefit
corporation; (b) Sections 8011, 8011.5, 8012, 8014, and 8015 shall
apply to any constituent mutual benefit corporation; (c) Sections
6014 and 6015 and subdivisions (c) and (d) of Section 9640 shall
apply to any constituent religious corporation; and (d) Sections
1101, 1101.1, 1103, and 1104 shall apply to any constituent business
corporation.
8019.1. (a) Subject to the provisions of Section 8010, any one or

more corporations may merge with one or more other business entities
(Section 5063.5). One or more other domestic corporations, foreign
corporations (Sections 5053), and foreign business corporations
(Section 5052) may be parties to the merger. Notwithstanding the
provisions of this section, such a merger may be effected only if:
(2) In a merger in which a foreign corporation or foreign business
corporation is a party, it is authorized by the laws under which it
is organized to effect the merger.
effect the merger.
shall approve an agreement of merger. The board and the members
(Section 5034) of each corporation which desires to merge, and each
other person or persons, if any, whose approval of an amendment of
the articles of that corporation is required by the articles or
bylaws shall approve the agreement of merger. The agreement of merger
shall be approved on behalf of each other constituent party by those
persons authorized or required to approve the merger by the laws
under which it is organized. The parties desiring to merge shall be
parties to the agreement of merger and other persons, including a
parent party (Section 5064.5), may be parties to the agreement of
merger. The agreement of merger shall state all of the following:
subject to subdivisions (b) and (c) of Section 7122, the same as or
similar to the name of a disappearing party to the merger.
(4) The manner, if any, of converting the memberships or
securities of each of the constituent corporations into shares,
memberships, interests, or other securities of the surviving party;
and, if any memberships or securities of any of the constituent
corporations are not to be converted solely into shares, memberships,
interests, or other securities of the surviving party, cash, rights,
securities, or other property which the holders of those memberships
or securities are to receive in exchange for the memberships or
securities, which cash, rights, securities, or other property may be
in addition to or in lieu of shares, memberships, interests, or other
securities of the surviving party.
Section 15678.2 or 15911.12, or, if a domestic general partnership is
a party to the merger, subdivision (a) of Section 16911, or, if a
(c) Each membership of the same class of any constituent
party to the merger or its parent or a wholly owned subsidiary of
either in another constituent corporation) shall be treated equally
with respect to any distribution of cash, property, rights, or
securities unless (i) all members of the class consent or (ii) the
commissioner has approved the terms and conditions of the transaction
and the fairness of those terms pursuant to Section 25142.
without further approval by the members (Section 5034) or other
persons, at any time before the merger is effective.
merger by its chairperson of the board, president, or a vice
president and also by its secretary or an assistant secretary acting
(g) After required approvals of the merger by each constituent
certificate of each constituent domestic corporation, foreign
corporation, and foreign business corporation attached stating the
total number of outstanding shares or membership interests of each
class entitled to vote on the merger (and identifying any other
person or persons whose approval is required), that the agreement of
merger in the form attached or its principal terms, as required, were
approved by that corporation by a vote of a number of shares or
membership interests of each class which equaled or exceeded the vote
required, specifying each class entitled to vote required of each
class, and, if applicable, by such other person or persons whose
approval is required.
merger, subject to the provisions of subdivision (i). If a domestic
agreement) and by each foreign constituent limited liability company
by one or more managers and by each foreign constituent general
partnership or foreign constituent limited partnership by one or more
signing persons.
shareholders, members, partners, or other holders of interests of a
entitled to vote on the merger and that the principal terms of the
agreement of merger were approved by a vote of the number of
interests of each class which equaled or exceeded the vote required,
specifying each class entitled to vote and the percentage vote
required of each class, and any other information required to be set
forth under the laws under which the constituent other business
subdivision (b) of Section 16915 and, if a domestic limited
merger.
(h) A copy of an agreement of merger certified on or after the
contained in the agreement of merger, and of the merger of the
(i) (1) The merger of domestic corporations with foreign
subdivisions (a) and (g) and this subdivision.
subdivision (g).
business corporation or foreign other business entity, except as
provided in paragraph (4), the merger shall be effective as to any
domestic disappearing corporation as of the time of effectiveness in
the foreign jurisdiction upon the filing in this state of a copy of
the agreement of merger with an officers' certificate of the
surviving foreign corporation or foreign business corporation and of
the requirements of subdivision (g).
filing pursuant to subdivision (g) surrender its right to transact
agreement of merger pursuant to subdivision (g) automatically has the
business entity as of the date of filing in this state or, if later,
the effective date of the merger, without the necessity of the filing
CORPORATIONS CODE
SECTION 8020-8022

merger.
that the liens and trust obligations upon property of a disappearing
party shall be limited to the property affected thereby immediately

8021. Whenever a domestic or foreign or foreign business

corporation or other business entity (Section 5063.5) having any real
property in this state merges with another domestic or foreign or
foreign business corporation or other business entity pursuant to the
laws of this state or of the state or place in which any constituent
party to the merger was organized, and the laws of the state or
place of organization (including this state) of any disappearing
party to the merger provide substantially that the making and filing
of the agreement of merger vests in the surviving party to the merger
all the real property of any disappearing party to the merger, 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 disappearing
party to the merger is located of either (a) a certificate prescribed
by the Secretary of State, or (b) a copy of the agreement of merger
or certificate of merger, certified by the Secretary of State or an
authorized public official of the state or place pursuant to the laws
of which the merger is effected, shall evidence record ownership in
the surviving party to the merger of all interest of such
disappearing party to the merger in and to the real property located
in that county.

the merger.
CORPORATIONS CODE
SECTION 8110

CORPORATIONS CODE
SECTION 8210-8217
of its original articles and biennially thereafter during the
applicable filing period, file, on a form prescribed by the Secretary
of State, a statement containing: (1) the names and complete
business or residence addresses of its chief executive officer,
secretary, and chief financial officer, (2) the street address of its
principal office in this state, if any, and (3) the mailing address
of the corporation, if different from the street address of its
principal executive office or if the corporation has no principal
office address in this state.
or foreign or foreign business corporation that has complied with
Section 1505 and whose capacity to act as an agent has not
terminated. If a natural person is designated, the statement shall
set forth the person's complete business or residence street address.
If a corporate agent is designated, no address for it shall be set
forth.
Secretary of State. Neither the failure of the Secretary of State to
mail the notice nor the failure of the corporation to receive it is
an excuse for failure to comply with this section.
to this section.

office.
of process pursuant to Section 8210 dies or resigns or no longer
resides in the state or if the corporate agent for such purpose
resigns, dissolves, withdraws from the state, forfeits its right to
transact intrastate business, has its corporate rights, powers and
privileges suspended or ceases to exist, the corporation shall
forthwith file a designation of a new agent conforming to the


injured thereby who relied thereupon or to both:
notice or document respecting the corporation or its memberships,
assets, liabilities, capital, dividends, business, earnings or
accounts which is false in any material respect, knowing it to be
false, or participate in the making, issuance, delivery or
publication thereof with knowledge that the same is false in a
material respect.
8216. (a) The Attorney General, upon complaint of a member,

director or officer, that a corporation is failing to comply with the
(commencing with Section 8310), may, in the name of the people of the
residence of the chief executive officer or secretary, of the
corporation, as set forth in the most recent statement filed pursuant
to Section 8210) notice of the complaint. If the answer is not
satisfactory, or if there is no answer within 30 days, the Attorney
General may institute, maintain or intervene in such suits, actions,
or proceedings of any type in any court or tribunal of competent
jurisdiction or before any administrative agency for such relief by
way of injunction, the dissolution of entities, the appointment of
receivers or any other temporary, preliminary, provisional or final
remedies as may be appropriate to protect the rights of members or to
undo the consequences of failure to comply with such requirements.
In any such action, suit or proceeding there may be joined as parties
all persons and entities responsible for or affected by such
activity.
(b) In the case of a corporation where the action concerns assets
held in charitable trust, the Attorney General may bring an action
under subdivision (a) without having received a complaint, and
without first giving notice of a complaint.
8217. (a) No corporation formed under this part for the sole
purpose of operating a single ridesharing vanpool vehicle designed
for transporting at least seven persons, including the driver, under
an arrangement in which ridesharing is incidental to another purpose
of the driver shall be subject to the payment of any fee under
provisions of the Government Code for any filing required by this
part.
(b) For purposes of this section, "ridesharing" shall have the
meaning specified in Section 522 of the Vehicle Code.
CORPORATIONS CODE
SECTION 8310-8313

such record available in written form. For the purposes of this
chapter "written" or "in writing" also includes cathode ray tube and
similar electronic communications methods.
8311. Any inspection under this chapter may be made in person or by

agent or attorney and the right of inspection includes the right to
copy and make extracts.


CORPORATIONS CODE
SECTION 8320-8325

(1) Adequate and correct books and records of account:
8321. (a) A corporation shall notify each member yearly of the

member's right to receive a financial report pursuant to this
subdivision. Except as provided in subdivision (c), upon written
request of a member, the board shall promptly cause the most recent
annual report to be sent to the requesting member. An annual report
shall be prepared not later than 120 days after the close of the
corporation's fiscal year. Unless otherwise provided by the articles
or bylaws and if approved by the board of directors, that report and
any accompanying material may be sent by electronic transmission by
the corporation (Section 20). That report shall contain in
appropriate detail the following:
(1) A balance sheet as of the end of that fiscal year and an
income statement and a statement of cashflows for that fiscal year.
(2) A statement of the place where the names and addresses of the
current members are located.
report, the certificate of an authorized officer of the corporation
that the statements were prepared without audit from the books and
(c) Subdivision (a) does not apply to any corporation that
receives less than ten thousand dollars ($10,000) in gross revenues
or receipts during the fiscal year.

every corporation shall furnish annually to its members and directors
a statement of any transaction or indemnification of a kind
pursuant to subdivision (c) of Section 8321, shall satisfy this
section by mailing or delivering to its members the required
subsidiary.
person described in paragraph (1) or (2) of this subdivision.
(c) Transactions approved by the members of a corporation (Section
5034), under subdivision (a) of Section 7233, are not covered
transactions. For the purpose of subdivision (b), a mere common
directorship is not a material financial interest.
briefly:
(1) Any covered transaction (excluding compensation of officers
and directors) during the previous fiscal year involving more than
fifty thousand dollars ($50,000), or which was one of a number of
covered transactions in which the same interested person had a direct
or indirect material financial interest, and which transactions in
the aggregate involved more than fifty thousand dollars ($50,000).
briefly the amount and circumstances of any loans, guaranties,
indemnifications or advances aggregating more than ten thousand
dollars ($10,000) paid or made during the fiscal year to any officer
or director of the corporation pursuant to Section 7237; provided
that no such report need be made in the case of a loan, guaranty, or
indemnification approved by the members (Section 5034) or a loan or
guaranty not subject to the provisions of subdivision (a) of Section
7235.
8323. (a) The superior court of the proper county shall enforce the
duty of making and mailing or delivering the information and
8324. (a) Nothing in this part relieves a corporation from the

requirements of Article 7 (commencing with Section 12580) of Chapter
6 of Part 2 of Division 3 of the Government Code as to any assets
held in charitable trust.
(b) A corporation shall furnish any member who so requests a copy
of any report filed by the corporation pursuant to Article 7
of the Government Code. The corporation may impose reasonable charges
for copying and mailing a report furnished under this subdivision.

CORPORATIONS CODE
SECTION 8330-8338
8330. (a) Subject to Sections 8331 and 8332, and unless the
subdivision (b):
demand and tender of a reasonable charge, a list of the names,
addresses and voting rights of those members entitled to vote for the
election of directors, as of the most recent record date for which
it has been compiled or as of a date specified by the member
subsequent to the date of demand. The demand shall state the purpose
for which the list is requested. The membership list shall be made
available on or before the later of ten business days after the
demand is received or after the date specified therein as the date as
of which the list is to be compiled.
(1) Any member, for a purpose reasonably related to such person's
interest as a member. Where the corporation reasonably believes that
the information will be used for another purpose, or where it
provides a reasonable alternative pursuant to subdivision (c), it may
deny the member access to the list. In any subsequent action brought
by the member under Section 8336, the court shall enforce the rights
set forth in subdivision (a) unless the corporation proves that the
demand.
(2) The authorized number of members for a purpose reasonably
related to the members' interest as members.
(c) The corporation may, within ten business days after receiving
a demand under subdivision (a), deliver to the person or persons
achieving the purpose identified in said demand without providing

substantial basis, believes that the membership list, demanded under
Section 8330 by the authorized number (Section 5036), will be used
for a purpose not reasonably related to the interests as members of
the person or persons making the demand (hereinafter called the
requesting parties) as members or provides a reasonable alternative
pursuant to subdivision (c) of Section 8330, it may petition the
superior court of the proper county for an order setting aside the
demand.
should not issue shall be filed within 10 business days after the
demand by the authorized number under Section 8330 or receipt of a
written rejection by the authorized number of an offer made pursuant
to subdivision (c) of Section 8330, whichever is later. The petition
10 business days after the demand or rejection under Section 8330,
if filed more than 30 days after the requesting parties' demand or
alternate mechanism for achieving the proper purposes of the
Section 8330 and Section 8338.
(h) The court shall award reasonable costs and expenses including
complied with a demand by the authorized number (Section 5036) under
Section 8330, nor obtained a protective order staying production of
the list, or a final order setting aside the demand, which is then in
effect, the requesting parties may petition the superior court of
the proper county for a writ of mandamus pursuant to Section 1085 of
the Code of Civil Procedure compelling the corporation to comply with
the demand. At the hearing, the court shall hear the parties
summarily, by affidavit or otherwise, and shall issue a peremptory
writ of mandamus unless it appears that the demand was not made by an
authorized number (Section 5036), that the demand has been complied
with, that the corporation, pursuant to subdivision (c) of Section
8330, made an offer which was not rejected in writing within a
reasonable time, or that a protective or final order properly issued
under subdivision (d), (f) or (g) is then in effect. No inquiry may
be made in such proceeding into the use for which the authorized
number seek the list. The court shall award reasonable costs and
expenses, including reasonable attorneys' fees, to persons granted an
order under this subdivision.

set forth in Section 8330 where, and only where, such limitation or



demand pursuant to Section 8330 is frustrated by (1) any delay by the
corporation in complying with a demand under Section 8330 beyond the
time limits specified therein, or (2) any delay caused by the filing
of a petition under Section 8331 or Section 8332, or (3) any delay
caused by the alternative proposed under subdivision (c) of Section
8330, the person or persons properly making the demand shall have, in
the discretion of the court, a right to obtain from the superior
court an order postponing any members' meeting previously noticed for
a period equal to the period of such delay. The members may obtain
such an order in a proceeding brought pursuant to Section 8331 upon
manner as the court may direct. Such right shall be in addition to
any other legal or equitable remedies to which the member may be
entitled.
chapter, or a lawful demand pursuant to Section 8330 or Section
court may direct.
court.
the corporation.
8337. In any action or proceeding under this article, and except as

required by Section 8331, if the court finds the failure of the

election to be held by their corporation.
good faith believe will benefit the corporation.
the corporation.
as a result of said violation. In addition, a court in its discretion
of subdivision (a).
reasonable attorneys' fees, in connection with such action or
proceeding.
record of the members' names and addresses.
CORPORATIONS CODE
SECTION 8410
CORPORATIONS CODE
SECTION 8510-8519

on any one or more of the grounds specified in subdivision (b) may be
filed in the superior court of the proper county by any of the
following persons:
of subdivision (b).
thereof.
articles.
(5) In the case of a corporation holding assets in charitable
trust, the Attorney General.
(6) The head organization under whose authority the corporation
was created, where the corporation's articles include the provision
authorized by subdivision (a), paragraph (4), clause (i), of Section
7132.
year.
its activities impaired and the members are so divided into factions
any member or the corporation's property is being misapplied or
wasted by its directors or officers.
(6) In the case of any corporation with 35 or fewer members,
liquidation is reasonably necessary for the protection of the rights
or interests of a complaining member or members.
(8) The corporation is required to dissolve under the terms of any
article provision adopted pursuant to subdivision (a), paragraph
(4), clause (i) of Section 7132.
(c) At any time prior to the trial of the action any member or
creditor may intervene therein.
(d) This section does not apply to any corporation subject to:
(1) The Public Utilities Act (Part 1 (commencing with Section 201)
of Division 1 of the Public Utilities Code) unless an order is
obtained from the Public Utilities Commission authorizing the
corporation either (a) to dispose of its assets as provided in
Section 851 of the Public Utilities Code or (b) to dissolve.
(2) The provisions of Article 14 (commencing with Section 1010) of
Chapter 1 of Part 2 of Division 1 of the Insurance Code when the
application authorized by Section 1011 of the Insurance Code has been
filed by the Insurance Commissioner unless the consent of the
Insurance Commissioner has been obtained.
(3) The California Credit Union Law (Chapter 1 (commencing with
Section 14000) of Division 5 of the Financial Code).
(e) In the case of a corporation holding assets in charitable
trust at the time of the filing of the complaint pursuant to
subdivision (a), a copy thereof shall be served on the Attorney
General who may intervene.

paragraph (2) of subdivision (b) of Section 8510, the court may
appoint a provisional director. The provisions of subdivision (d) of

appointed the interests of the corporation or its members will suffer
pending the hearing and determination of the complaint, upon the
application of the plaintiff, and after a hearing upon such notice to
the corporation as the court may direct and upon the giving of
security pursuant to Sections 566 and 567 of the Code of Civil
Procedure, the court may appoint a receiver to take over and manage
the affairs of the corporation and to preserve its property pending
the hearing and determination of the complaint for dissolution.

require.

corporation's goodwill or going-concern value, pending a sale or

(c) The determination of the rights of members and of all classes
of members in and to the assets of the corporation.
proper.
(f) The filling of any vacancies on the board which the directors
or the members are unable to fill.
has been guilty of dishonesty, misconduct, neglect or breach of trust
in conducting the winding up or if the director is unable to act.
The court may order an election to fill the vacancy so caused, and
may enjoin, for such time as it considers proper, the reelection of
the director so removed; or the court, in lieu of ordering an
appointed.
(h) The staying of the prosecution of any suit, proceeding or
paid.
proceedings, to wind up and dissolve, subject to conditions for the
protection of members and creditors.
matters.
(m) The disposition of assets held in charitable trust.
known address.
on their security.

liability.
be.
(b) The court may make such additional orders and grant such
(c) Upon the making of the order declaring the corporation

CORPORATIONS CODE
SECTION 8610-8618

dissolve (1) by approval of a majority of all members (Section 5033),
5034).
dissolve:
corporation.
(4) A corporation which is required to dissolve under provisions
of its articles adopted pursuant to subparagraph (A) of paragraph (4)
of subdivision (a) of Section 7132.
subdivision (b) and if the number of directors then in office is less
than a quorum, it may elect to voluntarily wind up and dissolve by
any of the following:
directors complying with paragraph (3) of subdivision (a) of Section
7211.

filed. A copy of that certificate shall be filed with the Attorney
General if the corporation holds assets in charitable trust or has a
charitable dissolution clause.
number of votes for the election and that the election was made by a
majority of all members (Section 5033).
(3) If the election was made by the board and the members pursuant
to paragraph (2) of subdivision (a) of Section 8610, the certificate
shall state that it was made by the board and the members in
certificate a majority of all members (Section 5033).
(b) of Section 8610, the circumstances showing the corporation to be
within one of the categories described in that subdivision.
Section 8610 is made by the vote of all the members of a corporation
with members or by all members of the board of a corporation without
members and a statement to that effect is added to the certificate
of dissolution pursuant to Section 8611, the separate filing of the
certificate of election pursuant to this section is not required.

made pursuant to subdivision (a) of Section 8610, by the vote of
members representing a majority of the voting power; or (2) if the
election was by the board pursuant to subdivision (b) of Section
8610, by approval of the board. Thereupon a certificate evidencing
the revocation shall be signed, verified and filed in the manner
prescribed by Section 8611 and a copy thereof filed with the Attorney
General.
dissolve.
by persons representing at least a majority of the voting power.
shall so state.

commence upon the adoption of the resolution required by Section 8610
by the members, by the board and members, or by the board alone,
electing to wind up and dissolve.
necessary to carry out its purposes, and except during such period
as the board may deem necessary to preserve the corporation's
goodwill or going-concern value pending a sale or other disposition
of its assets, or both, in whole or in part. The board shall cause
written notice of the commencement of the proceeding for voluntary
winding up to be given by mail to all its members (except no notice
need be given to the members who voted in favor of winding up and
dissolving the corporation), to all known creditors and claimants
whose addresses appear on the records of the corporation, and in the
case of a corporation holding assets in charitable trust to the
Attorney General.

corporation, or (b) the authorized number (Section 5036), or (c) in
the case of a corporation holding assets in charitable trust, the
Attorney General, or (d) three or more creditors, and upon such
appears necessary for the protection of any parties in interest or in
the case of a corporation holding assets in charitable trust, for
the protection of such assets. The court, if it assumes jurisdiction,
may make such orders as to any and all matters concerning the
winding up of the affairs of the corporation and the protection of
its members, creditors and in the case of a corporation holding
assets in charitable trust, for the protection of such assets, as
justice and equity may require. The provisions of Chapter 15
(commencing with Section 8510) (except Sections 8510 and 8511) shall
apply to such court proceedings.

address of the depositary with which deposit has been made or such
other information as may be necessary to enable the creditor or other
be.
(b) The certificate of dissolution shall be filed and thereupon
the corporate existence shall cease, except for the purpose of
further winding up if needed. The Secretary of State shall notify the
Franchise Tax Board of the dissolution.

extension thereof, the board shall terminate its activities and wind
up its affairs; and when the affairs of the corporation have been
wound up a majority of the directors shall execute and file a
certificate conforming to the requirements of Section 8615.

requiring all interested persons, including the Attorney General in
the case of a corporation holding assets in charitable trust, to show
cause why an order shall not be made declaring the corporation duly
wound up and dissolved and shall direct that the order be served by
notice to all creditors, claimants, and members in the same manner as
the notice given under subdivision (b) of Section 8517.
(c) Any person claiming to be interested as member, creditor or
otherwise may appear in the proceeding at any time before the
8618. (a) A corporation in the process of voluntary winding up may

dispose of the known claims against it by following the procedure
described in this section.
deadline.
following occur:
deadline.
CORPORATIONS CODE
SECTION 8710-8724
(g) To sell at public or private sale, exchange, convey or
for an amount deemed reasonable by the board without compliance with
the provisions of Section 7911 and to execute bills of sale and
deeds of conveyance in the name of the corporation.
corporation.

interested person, including the Attorney General in the case of
corporations holding assets in charitable trust, may petition the
superior court of the proper county to determine the identity of the
directors or, if there are no directors, to appoint directors to wind
up the affairs of the corporation, after hearing upon such notice to
such persons as the court may direct.
remaining corporate assets in the manner provided in Sections 8715 to
8717, inclusive.
Sections 8715 to 8717, inclusive, even though all debts and
liabilities have not been paid or adequately provided for.

means:
chapter.
8715. After complying with the provisions of Section 8713, assets

transfer, or conveyance, which condition has occurred or will occur,
shall be returned, transferred, or conveyed in accordance with the
condition.
8716. After complying with the provisions of Section 8713:

(a) Except as provided in Section 8715 those assets held by a
corporation in a charitable trust shall be disposed of on dissolution
in conformity with its articles or bylaws subject to complying with
the provisions of any trust under which such assets are held.
(b) Except as provided in subdivision (c), the disposition
required in subdivision (a) shall be made by decree of the superior
court of the proper county in proceedings to which the Attorney
General is a party. The decree shall be made upon petition therefor
by the Attorney General or, upon 30 days' notice to the Attorney
General, by any person concerned in the dissolution.
(c) The disposition required in subdivision (a) may be made
8717. After complying with the provisions of Section 8713 and

except as otherwise provided in Sections 8715 and 8716, assets held
by a corporation shall be disposed of on dissolution as follows:
(a) If the articles or bylaws provide the manner of disposition,
the assets shall be disposed of in that manner.
(b) If the articles or bylaws do not provide the manner of
disposition, the assets shall be distributed among the members in
accordance with their respective rights therein.
8718. Subject to the provisions of any trust under which assets to

be distributed are held, distribution may be made either in money or
in property or securities and either in installments from time to
time or as a whole, if this can be done fairly and ratably and in
conformity with the provisions of the articles and bylaws and shall
be made as soon as reasonably consistent with the beneficial
liquidation of the corporation assets.
8719. (a) If a corporation in process of winding up has more than

one class of memberships outstanding, a plan of distribution of the
memberships, obligations or securities of any other corporation,
accordance with the liquidation rights of any class or classes as
specified in the articles or bylaws may nevertheless be adopted if
approved by (1) the board and (2) by approval by the members (Section
5034) of each class. The plan may provide that such distribution is
in complete or partial satisfaction of the rights of any of such
members upon distribution and liquidation of the assets.
the members. The board shall cause notice of the adoption of the plan
to be given by mail within 20 days after its adoption to all holders
of memberships having a liquidation preference.
8720. (a) If any members, creditors, or other persons are unknown

or fail or refuse to accept their payment or distribution in cash or
inquiry, or the existence or amount of a claim of a creditor, member
or other person is contingent, contested, or not determined, or if
the ownership of any memberships is in dispute, the corporation may
deposit any such payment, distribution, or the maximum amount of the
claim with the Controller in trust for the benefit of those lawfully

judgment.
(c) Members who satisfy any liability under this section shall
have the right of ratable contribution from other distributees
similarly liable. Any member who has been compelled to return to the
corporation more than the member's ratable share of the amount needed
to pay the debts and liabilities of the corporation may require that
the corporation recover from any or all of the other distributees
such proportion of the amounts received by them upon the improper
distribution as to give contribution to those held liable under this
section and make the distribution of the assets fair and ratable,
according to the respective rights and preferences of the
memberships, after payment or adequate provision for payment of all
the debts and liabilities of the corporation.

and divide its assets, but not for the purpose of continuing its
activities except so far as necessary for the winding up thereof.

undistributed assets, including, without limitation, any insurance
claims.
distributed to other persons, against those persons to the extent of
their pro rata share of the claim or to the extent of the corporate
assets distributed to them upon dissolution of the corporation,
whichever is less.
The total liability of a person under this section may not exceed
to that person upon dissolution of the corporation.
against a person to whom assets were distributed arising under this
to enforce the cause of action against that person prior to the
earlier of the following:
cause of action.
corporation.
determining liability, persons to whom assets of a dissolved
corporation are distributed may be sued in the name of the
corporation upon any cause of action against the corporation. This
section does not affect the rights of the corporation or its
creditors under Section 2009, or the rights, if any, of creditors
under the Uniform Fraudulent Transfer Act, which may arise against
persons to whom those assets are distributed.
(4) This subdivision applies to corporations dissolved on or after
January 1, 2000. Corporations dissolved prior to that date are
(b) Summons or other process against the corporation may be served
by delivering a copy thereof to an officer, director or person
having charge of its assets or, if none of these persons can be
found, to any agent upon whom process might be served at the time of
dissolution. If none of those persons can be found with due diligence
State or an assistant or deputy secretary of state, with an
additional copy of the summons or other process and order being
delivered to the Attorney General in the case of a corporation that
at the commencement of the dissolution proceedings held assets in
charitable trust. Service in this manner is deemed complete on the
10th day after delivery of the process to the Secretary of State, or
in the case of a corporation that at the commencement of the
dissolution proceedings held assets in charitable trust, upon the
10th day after the later of delivery of process to the Secretary of
State or Attorney General.
(c) The corporation shall survive and continue to exist
Any judgment rendered in that action shall bind each of its members
or other persons having any equity or other interest in the
corporation, to the extent of their interest therein, and that action
shall have the same force and effect as an action brought under the
provisions of Sections 410.50 and 410.60 of the Code of Civil
Procedure. Service of summons or other process in that action may be
made as provided in Chapter 4 (commencing with Section 413.10) of
Title 5 of Part 2 of the Code of Civil Procedure or as provided in
subdivision (b).
(d) Upon receipt of that process and the fee therefor, the
8724. Without the approval of 100 percent of the members, any

contrary provision in this part or the articles or bylaws
notwithstanding, so long as there is any lot, parcel, area,
apartment, or unit for which an owners' association, created in
connection with any of the forms of development referred to in
Section 11004.5 of the Business and Professions Code, is obligated to
provide management, maintenance, preservation, or control, the
following shall apply:
(a) The owners' association or any person acting on its behalf
shall not do either of the following:
(1) Transfer all or substantially all of its assets.
(2) File a certificate of dissolution.
(b) No court shall enter an order declaring the owners'
association duly wound up and dissolved.
CORPORATIONS CODE
SECTION 8810-8817

of such delinquency to the corporation. The notice shall also contain
information concerning the application of this section, and advise
the corporation of the penalty imposed by Section 19141 of the
Revenue and Taxation Code for failure to timely file the required
statement after notice of delinquency has been mailed by the
regulation certify the name of such corporation to the Franchise Tax
Board.
Code.
which on or prior to the date of certification pursuant to
subdivision (a) has dissolved or has been merged into another
corporation.
corporate powers, rights and privileges of which have been suspended
8210. The Secretary of State need not mail a form pursuant to Section
8210, to a corporation the corporate powers, rights and privileges
of which have been so suspended by the Franchise Tax Board on or
prior to, and remain suspended on, the day the Secretary of State
prepares the forms for mailing.
(e) If, after certification pursuant to subdivision (a) the
Code.
corporation to file a statement required by Section 8210 is excusable
because of reasonable cause or unusual circumstances which justify
the failure, the Secretary of State may waive the penalty imposed by
this section and by Section 19141 of the Revenue and Taxation Code,
in which case the Secretary of State shall not certify the name of
the corporation to the Franchise Tax Board, or if already certified,
the Secretary of State shall promptly decertify the name of the
corporation.
8811. Any promoter, director, or officer of a corporation who

memberships or membership certificates with intent to defraud present
or future members or creditors is guilty of a misdemeanor punishable
by a fine of not more than one thousand dollars ($1,000) or by
imprisonment in county jail for not more than one year or by both
such fine and imprisonment.

with dishonest or fraudulent purpose, to make any distribution of
assets, except in the case and in the manner allowed by this part,
either with the design of defrauding creditors or members or of
giving a false appearance to the value of the membership and thereby
defrauding purchasers is guilty of a crime. Each such crime is
punishable by imprisonment in a state prison, or by a fine of not
more than one thousand dollars ($1,000) or imprisonment in county
jail for not more than one year, or by both such fine and
imprisonment.
8813. (a) Every director or officer of any corporation is guilty of
a crime if such director or officer knowingly concurs in making or
fraudulently exaggerated report, prospectus, account or statement of
operations, financial condition or prospects, or (3) any other paper
intended to give, and having a tendency to give, a membership in such
corporation a greater or lesser value than it really possesses.

any of the books, papers, writings or securities belonging to the
($1,000), or both such fine and imprisonment.

person proposing to organize such a corporation who knowingly
to investigate its affairs, with intent to deceive such officer or
board in respect thereto, is punishable by imprisonment in a state
prison, or by imprisonment in a county jail for not exceeding one
year.

any corporation, whether existing or intended to be formed, with
intent to permit the document to be published and thereby to lead
persons to believe that the person whose name is so subscribed is an
officer, agent or promoter of such corporation, when in fact no such
relationship exists to the knowledge of such person, is guilty of a
misdemeanor.
other statute.
CORPORATIONS CODE
SECTION 8910

CORPORATIONS CODE
SECTION 9110-9111
Religious Corporation Law.

corporation may be formed under this part primarily or exclusively
for any religious purposes.
CORPORATIONS CODE
SECTION 9120-9122
of the corporation.

(e) The filing for records in the office of the county recorder of
county.
assumed under subdivision (b) of Section 2106 or a name which will
delayed effective date pursuant to subdivision (c) of Section 110 or
subdivision (c) of Section 5008, or a name which is under reservation
pursuant to this section, Section 201, Section 5122, or Section
7122, except that a corporation may adopt a name that is
Secretary of State.
(b).
CORPORATIONS CODE
SECTION 9130-9134

"This corporation is a religious corporation and is not organized for
the private gain of any person. It is organized under the Nonprofit
Religious Corporation Law (primarily or exclusively Ýinsert one or
both]) for religious purposes." ÝThe articles may include a further
description of the corporation's purposes. ]
(b) of Section 6210 (made applicable pursuant to Section 9660).

with Section 6610) and 17 (commencing with Section 6710) (made
applicable pursuant to Section 9680) shall be distributed to the head
organization.
initial directors.
(3) A provision which would allow any member to have more or less
members for a vote.
(4) A provision that requires an amendment to the articles or to
the bylaws, and any amendment or repeal of that amendment, to be
approved in writing by a specified person or persons other than the
board or the members. However, this approval requirement, unless the
articles or the bylaws specify otherwise, shall not apply if any of
the following circumstances exist:
CORPORATIONS CODE
SECTION 9140-9143

use and otherwise deal in and with its own bonds, debentures, notes
and debt securities.
(e) Issue memberships.
(f) Pay pensions, and establish and carry out pension, deferred
benefit plans, trusts, and provisions for any or all of its
directors, officers, employees, and persons providing services to it
or any of its subsidiary or related or associated corporations, and
to indemnify and purchase and maintain insurance on behalf of any
(g) Levy dues, assessments, and fees.
similar purposes.
or to others.
lawfully engage.
(m) Pay the reasonable value of services rendered in this state to
the corporation before January 1, 1975, and not previously paid, by
any person who performed such services on a full-time basis under the
direction of a religious organization in connection with the
religious tenets of the organization. Such person shall have relied
solely on the religious organization for his or her financial support
for a minimum of five years. A payment shall not be made if such
person or religious organization waives the payment or receipt of
compensation for such services in writing. Payment may be made to
such religious organization to reimburse it for maintenance of any
person who rendered such services and to assist it in providing
future support and maintenance; however, payment shall not be made
from any funds or assets acquired with funds donated by or traceable
to gifts made to the corporation by any person, organization or
governmental agency other than the members, immediate families of
members and affiliated religious organizations of the religious
organization under whose direction the services were performed.

6610), and 17 (commencing with Section 6710) (made applicable
pursuant to Section 9680) shall be asserted as between the
corporation or member, officer or director and any third person,
except in a proceeding: (1) by the authorized number of members
(Section 5036), by any person authorized by the articles or bylaws to
bring an action, or by the state to enjoin the doing or continuation
of unauthorized activities by the corporation or its officers, or
both, in cases where third parties have not acquired rights thereby,
or (2) by the authorized number of members (Section 5036), by any
person authorized by the articles or bylaws to bring an action, by
any member suing in a representative suit, or by the corporation,
against the officers or directors of the corporation for violation of
their authority.
which is authorized or ratified by the board or is done within the
9142. (a) Notwithstanding Section 9141, any of the following may

bring an action to enjoin, correct, obtain damages for or to
otherwise remedy a breach of a trust under which any or all of the
assets of a corporation are held:
(1) The corporation, a member, or a former member asserting the
right in the name of the corporation, provided that for the purpose
of this paragraph the provisions of Section 5710 shall apply to such
action.
interest in the assets subject to such trust.
(2) No party to the contract has, in good faith and without actual
notice of the restriction, parted with value under the contract or
in reliance upon it; and
(c) No assets of a religious corporation are or shall be deemed to
be impressed with any trust, express or implied, statutory or at
common law unless one of the following applies:
(1) Unless, and only to the extent that, the assets were received
by the corporation with an express commitment by resolution of its
board of directors to so hold those assets in trust.
(2) Unless, and only to the extent that, the articles or bylaws of
the corporation, or the governing instruments of a superior
religious body or general church of which the corporation is a
member, so expressly provide.
(3) Unless, and only to the extent that, the donor expressly
imposed a trust, in writing, at the time of the gift or donation.
(d) Trusts created by paragraph (2) of subdivision (c) may be
amended or dissolved by amendment from time to time to the articles,
bylaws, or governing instruments creating the trusts. However,
nothing in this subdivision shall be construed to permit the
amendment of the articles to delete or to amend provisions required
by Section 214.01 of the Revenue and Taxation Code to a greater
extent than otherwise allowable by law.
9143. (a) Notwithstanding any other provision of this part to the

contrary, when property, received by a corporation, covered by this
part from a person directly affiliated with that corporation has been
contributed based upon an affirmative representation that it would
be used for a specific purpose other than the general support of the
corporation's activities and has been used in a manner contrary to
the specific purpose for which the property was contributed, an
action may be brought by the contributor or by any person listed in
paragraph (1), (2), or (3) of subdivision (a) of Section 9142, if
that person, before bringing an action, notifies the corporation, in
writing, that an action will be brought unless the corporation takes
immediate steps to correct any improper diversion of funds.
(b) In the event that it becomes impractical or impossible for the
corporation to devote the property to the specific purpose for which
it was contributed, or that the directors or members of the
corporation in good faith expressly conclude and record in writing
that the stated purpose for which the property was contributed is no
longer in accord with the policies or best interests of the
corporation, the directors or members of the corporation may, in good
faith, approve or ratify the use of the property for the general
purposes of the corporation rather than for the specific purpose for
which it was contributed.
(c) A public officer may not bring an action in an official
capacity under this section even on behalf of a private person.
CORPORATIONS CODE
SECTION 9150-9153
9150. (a) "Bylaws," as used in this part means the code or codes of
rules used, adopted, or recognized for the regulation or management
of the affairs of the corporation irrespective of the name or names
by which such rules are designated.
(b) Bylaws may be adopted, amended or repealed as provided in the
articles or bylaws and absent any provision, bylaws may be adopted,
amended or repealed by approval of the members (Section 5034) or the
board, except as provided in subdivision (c). The articles or bylaws
may restrict or eliminate the power of the board to adopt, amend or
repeal any or all bylaws subject to subdivision (e) of Section 9151.
(c) Subject to any provision in the articles or bylaws, the power
of the board to adopt, amend or repeal bylaws is subject to the
powers of members set forth in Section 9151.
provided in the bylaws, subject to subdivision (e) of Section 9151.
The number or minimum number of directors may be one or more.
(b) Except as otherwise provided in the articles or bylaws, once
members have been admitted, 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
to:
admissions and transfer fees.
withdrawal, suspension, and expulsion of members.
(except as provided in Section 9222 and subdivision (b) of Section
9680), the vote of a larger proportion of, or all of, the members or
the members of any class, unit, or grouping of members, or the vote
of a larger proportion of, or all of, the directors than is otherwise
required by this part. Such a provision in the bylaws requiring such
greater vote shall not be altered, amended or repealed except by
such greater vote, unless otherwise provided in the bylaws.
9152. Any corporation may provide in its bylaws for delegates

having some or all of the authority of members. Where delegates are
provided for, the bylaws shall set forth delegates' terms of office,
any reasonable method for delegates' selection and removal, and any
"delegates."

CORPORATIONS CODE
SECTION 9160

to date.
CORPORATIONS CODE
SECTION 9210-9215
9210. Subject to the provisions of this part and any provision in

the articles or bylaws:
(a) Each corporation shall have a board of directors. The
board.
(b) The board may delegate the management of the activities of the
corporation to any person or persons provided that the activities
and affairs of the corporation shall be managed and all corporate
powers shall be exercised under the ultimate direction of the board.

directors.
transmission by a corporation (Section 20). The articles or bylaws
provided a waiver of notice or consent to holding the meeting or an
is present, may adjourn any meeting to another time and place.
electronic transmission by and to the corporation. 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.
electronic video screen communication pursuant to this subdivision
constitutes presence in person at that meeting, if both of the
following apply:
for the transaction of business.
The articles or bylaws may require the presence of one or more
specified directors to constitute a quorum of the board to transact
business, as long as the death of a director or the death or
nonexistence of the person or persons otherwise authorized to appoint
or designate that director does not prevent the corporation from
transacting business in the normal course of events.
(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. 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, or a greater
number as is required by this division, the articles or bylaws.
the same force and effect as a unanimous vote of the directors.
(d) This section applies also to incorporators, to committees of
the board, and to action by those incorporators or committees mutatis
mutandis.
9212. (a) Subject to any provision in the articles or bylaws: (i)

the board may, by resolution adopted by a majority of the number of
directors then in office, provided that a quorum is present, create
one or more committees, each consisting of two or more directors, to
serve at the pleasure of the board; and (ii) appointments to such
committees shall be by a majority vote of the directors then in
office. The bylaws may authorize one or more such committees, each
all members (Section 5033) regardless of whether the corporation has
members.
bylaws.
thereof.
directors.
any committee powers as authorized by Section 9210, but may not
delegate the powers set forth in paragraphs (1) to (6), inclusive, of
subdivision (a).
9213. (a) A corporation shall have a chair of the board, who may be
given the title chair of the board, chairman of the board, or
chairwoman of the board, or a president or both, a secretary, a
treasurer or a chief financial officer and 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. The president, or if there is no president, the chair of
the board, is the general manager and chief executive officer of the
corporation, unless otherwise provided in the articles or bylaws. If
there is no chief financial officer, the treasurer is the chief
financial 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, except that
the secretary, the treasurer, or the chief financial officer may not
serve concurrently as the president or chair of the board.
party.

chairman of the board, the president, or any vice president and by
any one of 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
execute the same.

CORPORATIONS CODE
SECTION 9220-9226
9220. (a) The articles or bylaws may provide for the tenure,
election, selection, designation, removal, and resignation of
directors.
(b) In the absence of any provision in the articles or bylaws, the
term of directors shall be one year.
(c) Unless the articles or bylaws otherwise provide, each
(d) If a corporation has not issued memberships and (1) all the
interest.
convicted of a felony, or, if at the time a director is elected, the
bylaws provide that a director may be removed for missing a specified
number of board meetings, fails to attend the specified number of
meetings.
9151, the articles or bylaws may prescribe the qualifications of the
directors. Unless otherwise provided by the articles or bylaws, the
board, by a majority vote of the directors who meet all of the
required qualifications to be a director, may declare vacant the
office of any director who fails or ceases to meet any required
qualification that was in effect at the beginning of that director's
current term of office.
9222. (a) Except as provided in the articles or bylaws and subject

to subdivision (b) of this section, any or all directors may be
removed without cause if the removal is approved by the members
(Section 5034).
(b) Except for a corporation having no members pursuant to Section
9310:
office, unless the reduction or the amendment also provides for the
of a director, or twice the authorized number (Section 5036) of
members, remove from office any director in case of fraudulent acts
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.
(b) The Attorney General may bring an action under subdivision

except for a vacancy created by the removal of a director by the
members, vacancies on the board may be filled by approval of the
board (Section 5032) 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 9211, or (3) a sole
remaining director.
(b) Subject to any provision in the articles or bylaws, the
members may elect a director at any time to fill any vacancy not
filled by the directors.
9226. No director may resign where the corporation would then be

left without a duly elected director or directors in charge of its
affairs.
CORPORATIONS CODE
SECTION 9230
9230. (a) Except as the Attorney General is empowered to act in the

enforcement of the criminal laws of this state, and except as the
Attorney General is expressly empowered by subdivisions (b), (c) and
(d), the Attorney General shall have no powers with respect to any
corporation incorporated or classified as a religious corporation
under or pursuant to this code.
(b) The Attorney General shall have authority to institute an
action or proceeding under Section 803 of the Code of Civil
Procedure, to obtain judicial determination that a corporation is not
properly qualified or classified as a religious corporation under
the provisions of this part.
(c) The Attorney General shall have the authority (1) expressly
granted with respect to any subject or matter covered by Sections
9660 to 9690, inclusive; (2) to initiate criminal procedures to
prosecute violations of the criminal laws, and upon conviction seek
restitution as punishment; and (3) to represent as legal counsel any
other agency or department of the State of California expressly
empowered to act with respect to the status of religious
corporations, or expressly empowered to regulate activities in which
religious corporations, as well as other entities, may engage.
(d) Where property has been solicited and received from the
general public, based on a representation that it would be used for a
specific charitable purpose other than general support of the
corporation's activities, and has been used in a manner contrary to
that specific charitable purpose for which the property was
solicited, the Attorney General may institute an action to enforce
the specific charitable purpose for which the property was solicited;
provided (1) that before bringing such action the Attorney General
shall notify the corporation that an action will be brought unless
the corporation takes immediate steps to correct the improper
diversion of funds, and (2) that in the event it becomes impractical
or impossible for the corporation to devote the property to the
specified charitable purpose, or that the directors or members of the
corporation in good faith expressly conclude and record in writing
that the stated purpose for which the property was contributed is no
longer in accord with the policies of the corporation, then the
directors or members of the corporation may approve or ratify in good
faith the use of such property for the general purposes of the
corporation rather than for the specific purpose for which it was
contributed.
As used in this section, "solicited from the general public" means
solicitations directed to the general public, or to any individual
or group of individuals who are not directly affiliated with the
soliciting organization and includes, but is not limited to,
instances where property has been solicited on an individual basis,
such as door to door, direct mail, face to face, or similar
solicitations, as well as solicitations on a more general level to
the general public, or a portion thereof, such as through the media,
including newspapers, television, radio, or similar solicitations.
(e) Nothing in this section shall be construed to affect any
individual rights of action which were accorded under law in
existence prior to the enactment of Chapter 1324 of the Statutes of
1980.
As used in this section, "individual rights of action" include
only rights enforceable by private individuals and do not include any
right of action of a public officer in an official capacity
regardless of whether the officer brings the action on behalf of a
private individual.
(f) Nothing in this section shall be construed to require express
statutory authorization by the California Legislature of any
otherwise lawful and duly authorized action by any agency of local
government.
CORPORATIONS CODE
SECTION 9240-9247
the corporation.
(c) A director, in making a good faith determination, may consider
what the director believes to be:
(1) The religious purposes of the corporation; and
(2) Applicable religious tenets, canons, laws, policies, and
authority.

care, including reasonable inquiry, as is appropriate under the
circumstances.
entitled to rely on information, opinions, reports, or statements,
presented;
(2) Counsel, independent accountants, or other persons as to
matters which the director believes to be within that person's
professional or expert competence;
committee the director believes to merit confidence; or
(4) Religious authorities and ministers, priests, rabbis, or other
persons whose position or duties in the religious organization the
director believes justify reliance and confidence and whom the
presented, so long as, in any 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 that reliance
to be unwarranted.
(c) The provisions of this section, and not Section 9243, shall
govern any action or omission of a director in regard to the
compensation of directors, as directors or officers, or any loan of
money or property to or guaranty of the obligation of any director or
officer. No obligation, otherwise valid, shall be voidable merely
because directors who benefited by a board resolution to pay such
compensation or to make such loan or guaranty participated in making
such board resolution.
(d) Except as provided in Section 9243, 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
his or her obligations as a director, including, without limiting the
generality of the foregoing, any actions or omissions which exceed
or defeat any purpose to which the corporation, or assets held by it,
may be dedicated.

(b) This section shall not be construed to limit the provisions of
Section 9241.
9243. (a) Except as provided in subdivision (b), for the purpose of
this section, a self-dealing transaction means a transaction to
which the corporation is a party and in which one or more of its
directors has a material financial interest and which does not meet
the requirements of paragraph (1), (2), (3), or (4) of subdivision
(d). Such a director is an "interested director" for the purpose of
this section.
(b) This section does not apply to any of the following:
(1) An action of the board fixing the compensation of a director
as a director or officer of the corporation or making any loan of
money or property to, or guaranteeing the obligation of, any director
or officer.
(2) A transaction which is part of a public, charitable or
religious program of the corporation if it (A) is approved or
authorized by the corporation in good faith and without unjustified
favoritism, and (B) results in a benefit to one or more directors or
their families because they are in the class of persons intended to
be benefited by the public, charitable or religious program.
(3) A transaction, of which the interested director or directors
have no actual knowledge, and which does not exceed the lesser of 1
percent of the gross receipts of the corporation for the preceding
fiscal year or one hundred thousand dollars ($100,000).
(c) Any of the following may bring an action in the superior court
of the proper county for the remedies specified in subdivision (h):
(1) The corporation, or a member asserting the right in the name
of the corporation; however, for the purpose of this paragraph the
provisions of Section 5710 shall apply to the action.
(4) Any person authorized by the bylaws to bring an action.
(d) In any action brought under subdivision (c) the remedies
specified in subdivision (h) shall not be granted if:
(1) The Attorney General, or the court in an action in which the
Attorney General is an indispensable party, has approved the
transaction before or after it was consummated; or
(2) The transaction is approved or ratified in good faith by the
members (Section 5034) other than the directors, after notice and
disclosure to the members of the material facts concerning the
transaction and the director's interest in the transaction; or
(A) The corporation entered into the transaction for its own
benefit or for the benefit of the religious organization;
(B) The transaction was fair and reasonable as to the corporation
or was in furtherance of its religious purposes at the time the
corporation entered into the transaction;
(C) Prior to consummating the transaction or any part thereof, the
board authorized or approved the transaction in good faith by a vote
of a majority of the directors then in office without counting the
vote of the interested director or directors, and with knowledge of
the material facts concerning the transaction and the director's
interest in the transaction. Except as provided in paragraph (4),
action by a committee of the board shall not satisfy this paragraph;
and
(D) (i) Prior to authorizing or approving the transaction, the
board considered and in good faith determined after reasonable
investigation under the circumstances that either the corporation
could not have obtained a more advantageous arrangement with
reasonable effort under the circumstances or the transaction was in
furtherance of the corporation's religious purposes or (ii) in fact,
either the corporation could not have obtained a more advantageous
arrangement with reasonable effort under the circumstances or the
transaction was in furtherance of the corporation's religious
purposes; or
(A) A committee or person authorized by the board approved the
transaction in a manner consistent with the standards set forth in
paragraph (3).
(B) It was not reasonably practicable to obtain approval of the
board prior to entering into the transaction; and
(C) The board, after determining in good faith that the conditions
of subparagraphs (A) and (B) were satisfied, ratified the
transaction at its next meeting by a vote of the majority of the
directors then in office without counting the vote of the interested
director or directors.
(e) Except as provided in subdivision (f), an action under
subdivision (c) or Section 9230 shall be commenced within two years
after written notice setting forth the material facts of the
transaction is filed with the Attorney General in accordance with
such regulations, if any, as the Attorney General may adopt or if no
such notice is filed, five years after the cause of action has
accrued.
(f) In any action for breach of an obligation of the corporation
owed to an interested director, where the obligation arises from a
self-dealing transaction which has not been approved as provided in
subdivision (d), the court may, by way of offset only, make any order
authorized by subdivision (h), notwithstanding the expiration of the
applicable period specified in subdivision (e).
(g) Interested directors may be counted in determining the
presence of a quorum at a meeting of the board which authorizes,
approves or ratifies a contract or transaction.
(h) If a self-dealing transaction has taken place, the interested
director or directors shall do such things and pay such damages as in
the discretion of the court will provide an equitable and fair
remedy to the corporation, taking into account any benefit received
by the corporation and whether the interested director or directors
acted in good faith and with intent to further the best interest of
the corporation. Without limiting the generality of the foregoing,
the court may order the director to do any or all of the following:
(1) Account for any profits made from the transaction, and pay
them to the corporation.
(2) Pay the corporation the value of the use of any of its
property used in the transactions.
(3) Return or replace any property lost to the corporation as a
result of the transaction, together with any income or appreciation
lost to the corporation by reason of the transaction, or account for
any proceeds of sale of the property, and pay the proceeds to the
corporation together with interest at the legal rate.
The court may award prejudgment interest to the extent allowed in
Sections 3287 and 3288 of the Civil Code. In addition, the court may,
in its discretion, grant exemplary damages for a fraudulent or
malicious violation of this section.

and any domestic or foreign corporation, firm 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:
directors; or
just and reasonable as to the corporation, taking into account its
religious purposes, or is in furtherance of its religious purposes at
the time it is authorized, approved or ratified.
(b) This section does not apply to transactions covered by Section
9243.

be jointly and severally liable to the corporation for:
(1) The making of any distribution.
in a notice given to creditors under Section 9680 and those sections
made applicable to this part by Section 9680.
the liability:
directors liable by the persons entitled to sue under subdivision (b)
of Section 9610;
(c) The damages recoverable from a director under this section
guaranty.
(d) Any director sued under this section may implead all other
action.
(e) Directors liable under this section shall also be entitled to
be subrogated to the rights of the corporation as follows:
members who received the distribution.
members who received the distribution.
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 such precedessor 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 (3) of subdivision (e).
procure a judgment in its favor, an action brought under Section
9243, or an action brought by the Attorney General pursuant to
Section 9230) by reason of the fact that such person is or was an
agent of the corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in
connection with such proceeding if such person acted in good faith
and in a manner such person 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 such 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 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.
or brought under Section 9243, or brought by the Attorney General
pursuant to Section 9230, to procure a judgment in its favor by
reason of the fact that such person is or was an agent of the
corporation, against expenses actually and reasonably incurred by
such person in connection with the defense or settlement of such
action if the person acted in good faith, in a manner in which such
person believed to be in the best interests of the corporation and
with such care, including reasonable inquiry, as an ordinary prudent
person in a like position would use under similar circumstances. No
idemnification shall be made under this subdivision:
(1) In respect of any claim, issue, or matter as to which such
determine;
approval unless it is settled with the approval of the Attorney
General.
either subdivision (b) or (c) by:
is entitled to be indemnified as authorized in this section.
susidiary's directors or officers for the defense of any proceeding,
whether contained in the articles, bylaws, a resolution of members or
directors, an agreement or otherwise, shall be valid unless
subdivision (e), in any circumstance where it appears that:
(1) It would be inconsistent with a provision of the articles,
bylaws, a resolution of the members 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; or
(2) It would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
liability under the provisions of this section; provided, however,
that a corporation shall have no power to purchase and maintain such
insurance to indemnify any agent of the corporation for a violation
of Section 9243.
9247. (a) There shall be no personal liability for monetary damages

to a third party on the part of a volunteer director or volunteer
executive officer of a nonprofit corporation subject to this part,
caused by the director's or officer's negligent act or omission in
the performance of that person's duties as a director or officer, if
all of the following conditions are met:
(1) The act or omission was within the scope of the director's or
executive officer's duties.
(2) The act or omission was performed in good faith.
(3) The act or omission was not reckless, wanton, intentional, or
grossly negligent.
(4) Damages caused by the act or omission are covered pursuant to
a liability insurance policy issued to the corporation, either in the
form of a general liability policy or a director's or officer's
liability policy, or personally to the director or executive officer.
In the event that the damages are not covered by a liability
insurance policy, the volunteer director or volunteer executive
officer shall not be personally liable for the damages if the board
of directors of the corporation and the person had made all
reasonable efforts in good faith to obtain available liability
insurance.
secretary, or treasurer of a corporation, or other individual serving
in like capacity, who assists in establishing the policy of the
corporation.
(d) Nothing in this section shall limit the liability of the
corporation for any damages caused by acts or omissions of the
volunteer director or volunteer executive officer.
(e) This section does not eliminate or limit the liability of a
director or officer for any of the following:
(1) As provided in Section 9243 or 9245.
(2) In any action or proceeding brought by the Attorney General.
(f) Nothing in this section creates a duty of care or basis of
liability for damage or injury caused by the acts or omissions of a
director or officer.
(g) This section is only applicable to causes of action based upon
acts or omissions occurring on or after January 1, 1988.
CORPORATIONS CODE
SECTION 9250-9251
9250. In investing, reinvesting, purchasing, acquiring, exchanging,

selling, and managing a corporation's investments, the board shall
meet the standards set forth in Section 9241.
9251. Nothing in Section 9250 shall abrogate or restrict the power

of a court in proper cases to direct or permit a corporation to
deviate from the terms of a trust or agreement regarding the making
or retention of investments.
CORPORATIONS CODE
SECTION 9260
9260. Any other provision of law notwithstanding, every

corporation, during any period or periods that corporation is deemed
to be a "private foundation" as defined in Section 509 of the
Internal Revenue Code of 1954 as amended by Section 101 of the Tax
Reform Act of 1969, shall be subject to the requirements of Section
5260.
CORPORATIONS CODE
SECTION 9310-9313

(b) Subject to the articles or bylaws, in the case of a
corporation which has no members:
(1) Any action for which there is no specific provision of this
part applicable to a corporation which has no members and which would
otherwise require approval by a majority of all members (Section
5033) or approval by the members (Section 5034) shall require only
approval of the board.
(2) All rights which would otherwise vest under this part in the
members shall vest in the directors.


fractional memberships may be held, provided, however, that:
single membership when authorized by, and in such manner or under the
circumstances prescribed by, the articles or bylaws; and
(b) If the articles or bylaws provide for classes of membership in
which the differences are not merely the number of votes entitled to
be cast by members of the class, and if the articles or bylaws
permit a person to be a member of more than one class, a person may
hold a membership in one or more classes.
9313. Except as provided in its articles or bylaws, a corporation

may admit any person to membership.
CORPORATIONS CODE
SECTION 9320

(a) No member may transfer for value a membership or any right
arising therefrom; and
(b) Unless otherwise provided in the corporation's articles or
bylaws, all rights of membership cease upon the member's death or
dissolution.
CORPORATIONS CODE
SECTION 9330-9332

privileges, preferences, restrictions, or conditions, as authorized
by its articles or bylaws.

preferences, restrictions, and conditions.

CORPORATIONS CODE
SECTION 9340
9340. (a) A member may resign from membership at any time.

rendered, dues, assessments or fees, or arising from contract or
otherwise, and this section shall not diminish any right of the
corporation to enforce any such obligation or obtain damages for its
breach.
(c) Except as provided in subdivision (b) of Section 9320 or in
subdivision (a) of this section, a membership issued for a period of
time shall expire when such period of time has elapsed unless the
membership is renewed.
(d) A membership may be terminated as provided in the articles or
bylaws of the corporation.
CORPORATIONS CODE
SECTION 9350-9353


from membership, except where the member is, by contract or
otherwise, liable for them. Article or bylaw provisions authorizing
such dues, assessments, or fees do not, of themselves, create such
liability.

corporation to pay any amount due to the corporation unless final
judgment has been rendered in favor of the creditor against the
corporation and execution has been returned unsatisfied in whole or
in part or unless such proceedings would be useless.

CORPORATIONS CODE
SECTION 9410-9421
9410. (a) In the absence of a contrary provision in the articles or

bylaws, the provisions of this chapter shall apply to any regular or
special meeting of members or obtaining approval of members (Section
5034) or approval of a majority of members (Section 5033). The
articles or bylaws may provide any reasonable method of calling,
noticing, and holding such meetings or obtaining such approvals.
(b) Anything in subdivision (a) to the contrary notwithstanding,
the articles or bylaws may not vary the provisions of subdivision (e)
of Section 9411, subdivision (e) of Section 9417 (if proxies are
authorized), or Section 9418.
9411. (a) Subject to the provisions of this chapter, regular and

special meetings of members shall be called, noticed and held as may
be ordered by the board. Unless prohibited by the bylaws of the
corporation, if authorized by the board of directors in its sole
discretion, and subject to the requirement of consent in clause (b)
of Section 20 and those guidelines and procedures as the board of
directors may adopt, members not physically present in person (or, if
proxies are allowed, by proxy) at a meeting of members may, by
21) or by electronic video screen communication, participate in a
meeting of members, be deemed present in person (or, if proxies are
allowed, by proxy), and vote at a meeting of members whether that
meeting is to be held at a designated place or in whole or in part by
means of electronic transmission by and to the corporation or by
electronic video screen communication, in accordance with subdivision
(f).
(b) Special meetings of members for any lawful purpose may be
called by the board or the chairman of the board or the president. In
(c) Upon request in writing to the chairman of the board,
president, vice president or secretary by any person (other than the
board) entitled to call a special meeting of members, the board shall
expeditiously set a reasonable time and place for the meeting and
the officer forthwith shall cause notice to be given to the members
entitled to vote of the time and place of the meeting. If the notice
is not given within 20 days after receipt of the request, the persons
entitled to call the meeting may give the notice or the superior
court of the proper county shall summarily order the giving of the
notice, after notice to the corporation giving it an opportunity to
be heard. The court may issue such orders as may be appropriate,
of the meeting, the record date for determination of members entitled
to vote and the form of notice.
(d) The transactions of any meeting of members, however called and
either in person (or, if proxies are allowed, by proxy), and if,
either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy, signs a written waiver of
notice or a consent to the holding of the meeting or an approval of
the minutes thereof. All such waivers, consents and approvals shall
be filed with the corporate records or made a part of the minutes of
the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the
part to be included in the notice but not so included, if such
members need be specified in any written waiver of notice, consent
to the holding of the meeting or approval of the minutes thereof
except as provided in subdivision (e).
(e) Any member approval required under subdivision (b) of Section
9150, Section 9222, Section 5812 (made applicable pursuant to Section
9620), subdivision (a) of Section 9631, subdivision (c) of Section
9640, subdivision (a) of Section 6015 (made applicable pursuant to
Section 9640), or subdivision (b) of Section 9680, other than
unanimous approval by those entitled to vote, shall be valid only if
the general nature of the proposal so approved was stated in the
notice of meeting or in any written waiver of notice.
implements reasonable measures to provide members a reasonable
opportunity to participate in the meeting and to vote on matters
submitted to the members, including an opportunity to read or hear
the proceedings of the meeting concurrently with those proceedings,
and (2) if any member votes or takes other action at the meeting by
means of electronic transmission to the corporation or electronic
video screen communication, a record of that vote or action is
maintained by the corporation. Any request by a corporation to a
member pursuant to clause (b) of Section 20 for consent to conduct a
meeting of members by electronic transmission by and to the
corporation, shall include a notice that absent consent of the member
9412. (a) One-third of the voting power, represented in person, by

written ballot, or by proxy, shall constitute a quorum at a meeting
of members. If a quorum is present, the affirmative vote of the
majority of the voting power represented at the meeting, entitled to
vote, and voting on any matter shall be the act of the members.
(b) The members present at a duly called or held meeting at which
a quorum is present may continue to transact business until
adjournment notwithstanding the withdrawal of enough members to leave
less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the members required to constitute
a quorum or, if required by this division, or by the articles or the
bylaws, the vote of the greater number or voting by classes.
(c) In the absence of a quorum, any meeting of members may be
be transacted, except as provided in subdivision (b).
9413. (a) Any action which may be taken at any regular or special
meeting of members may be taken without a meeting if the written
ballot of every member is solicited, if the required number of signed
approvals in writing, setting forth the action so taken, is
received, and if the requirements of subdivision (c) are satisfied.
Unless otherwise provided by the articles or bylaws and if approved
by the board of directors, that ballot and any related material may
be sent by electronic transmission by the corporation (Section 20)
and responses may be returned to the corporation by electronic
transmission to the corporation (Section 21).
(b) All solicitations of ballots shall indicate the time by which
the ballot must be returned to be counted.
(c) Approval by written ballot pursuant to this section shall be
valid only when the number of ballots cast on or before the time the
ballot must be returned to be counted equals or exceeds the quorum
required to be present at a meeting authorizing the action, and the
number of approvals equals or exceeds the number of votes that would
be required to approve at a meeting at which the total number of
votes cast was the same as the number of ballots cast.
(d) A written ballot may not be revoked.

officer, delegate, or member, may order that such a meeting be called
or directors are.
every requirement imposed by the articles, bylaws and this part.

directors may cumulate such member's votes and give one candidate a
candidates as the member thinks fit.
or candidates unless such candidate's name or candidates' names have
intention to cumulate votes. If any one member has given such notice,
(c) In any election of directors, the candidates receiving the
highest number of votes are elected, subject to any lawful provision
specifying election by classes.
(d) Elections for directors need not be by ballot unless a member
by proxy with respect to such membership, except that this right may
be limited or withdrawn by the articles or bylaws. Any proxy
purported to be executed in accordance with the provisions of this
part shall be presumptively valid.
thereto. Such revocation may be effected by a writing delivered to
the corporation stating that the proxy is revoked or by a subsequent
proxy executed by the person executing the prior proxy and presented
to the meeting, or as to any meeting by attendance at such meeting
and voting in person by the person executing the proxy.
(d) The proxy of a member may not be irrevocable.
(e) Any proxy covering matters requiring a vote of the members
pursuant to Section 5812 (made applicable pursuant to Section 9620),
subdivision (a) of Section 9631, subdivision (c) of Section 9640,
subdivision (a) of Section 6015 (made applicable pursuant to Section
9640), or subdivision (b) of Section 9680 is not valid unless it sets
forth the general nature of the matter to be voted on.

member, or by any person who had the right to vote in the election at
issue after such director, member, or person has exhausted any
remedies provided in the articles or bylaws, the superior court of
the proper county shall determine the validity of any election or
appointment of any director of any corporation.
(c) The court, consistent with the provisions of this part and in
the validity of the issuance of memberships and the right of persons
to vote and may direct such other relief as may be just and proper.
9419. In the absence of fraud, any election, appointment or removal

of a director is conclusively presumed valid nine months thereafter
if the only defect in the election, appointment or removal is the
failure to give notice as provided in this part or in the corporation'
s articles or bylaws.


waiver, or proxy appointment and give it effect as the act of the
member.
proxy appointment.
CORPORATIONS CODE
SECTION 9510-9514

(1) Adequate and correct books and records of account.
committees of the board.
9511. Except as otherwise provided in the articles or bylaws, a

member may inspect and copy the record of all the members' names,
days' prior written demand upon the corporation for a purpose
reasonably related to the member's interest as a member.
9512. Except as otherwise provided in the articles or bylaws, the

accounting books and records and minutes of proceedings of the
members and the board and committees of the board shall be open to
inspection upon the written demand on the corporation of any member
at any reasonable time, for a purpose reasonably related to such
person's interests as a member.
9513. Every director shall have the right at any reasonable time to
inspect and copy all books, records and documents of every kind and
to inspect the physical properties of the corporation of which such
person is a director for a purpose reasonably related to such person'
s interests as a director.
chapter, the superior court of the proper county, or the county
where the books or records in question are kept, may enforce the
demand or right of inspection with just and proper conditions or may,
for good cause shown, appoint one or more competent inspectors or
independent accountants to audit the financial statements kept in
this state and investigate the property and funds of any corporation
and of any subsidiary corporation thereof, domestic or foreign,
keeping records in this state and to report thereon in such manner as
the court may direct.
court.
the corporation.
CORPORATIONS CODE
SECTION 9610
9610. (a) The provisions of Chapter 4 (commencing with Section

5410) of Part 2 apply to religious corporations except for
(b) Suit may be brought in the name of the corporation by a
creditor, a director, or the authorized number of members. In any
such action in addition to the remedy provided in subdivision (a) of
Section 5420, the court may award punitive damages for the benefit of
the corporation against any director, officer, member or other
person who with intent to defraud the corporation caused, received or
aided and abetted in the making of any distribution.
CORPORATIONS CODE
SECTION 9620-9621

5810) of Part 2 apply to religious corporations except for Section
5813.5, the second sentence of Section 5817, and Section 5818.
(b) A corporation formed for a limited period may at any time
it were original articles by the provisions of Section 9122 the
existence.
9621. (a) A religious corporation may amend its articles to change

its status to that of (1), a public benefit corporation, by complying
with this section and the other sections of Chapter 8 (commencing
with Section 5810) of Part 2 (made applicable pursuant to Section
9620) or (2), a mutual benefit corporation, business corporation, or
cooperative corporation by complying with Chapter 8 (commencing with
Section 5810) of Part 2.
(b) Amended articles authorized by this section shall include the
pursuant to Section 6210, made applicable pursuant to Section 9660)
and may in addition only include those provisions which would have
been permitted, in original articles filed by the type of corporation
(public benefit, mutual benefit, business, or cooperative) into
which the religious corporation is changing its status.
CORPORATIONS CODE
SECTION 9630-9633

or of any other person or persons shall be necessary for such action.

its activities, approved by the members (Section 5034) and by any
other person or persons whose approval is required by the articles or
bylaws either before or after approval by the board and before or
after the transaction.
(b) Subject to any provision in the articles or bylaws, the board
may, notwithstanding approval by the members (Section 5034) or such
other person, abandon the proposed transaction without further action
by the members, subject to the contractual rights, if any, of third
parties.

forth that the transaction has been validly approved by the board,
that the notice, if any, required by Section 9633 has been given and
(a) stating that the property described in such deed or instrument is
less than substantially all of the assets of the corporation or that
the transfer is in the usual and regular course of the business of
the corporation, if such be the case, or (b) if such property
the members (Section 5034). Such certificate is prima facie evidence
of the existence of the facts authorizing such conveyance or other
transfer of the assets and conclusive evidence in favor of any
purchaser or encumbrancer for value who, without notice of any trust
restriction applicable to the property or any failure to comply
therewith, in good faith parted with value.
9633. A corporation must give written notice to the Attorney

General 20 days before it sells, leases, conveys, exchanges,
transfers or otherwise disposes of all or substantially all of its
assets unless the Attorney General has given the corporation a
written waiver of this section as to the proposed transaction.
CORPORATIONS CODE
SECTION 9640

6010) of Part 2 apply to religious corporations except subdivision
(a) of Section 6010 and Sections 6011 and 6012.
(b) A corporation may merge with any domestic corporation, foreign
corporation, or other business entity (Section 5063.5). However,
without the prior written consent of the Attorney General, a
religious corporation may only merge with another religious
corporation or with a public benefit corporation or a foreign
nonprofit corporation the articles of which provide that its assets
are irrevocably dedicated to charitable, religious or public
purposes.
(c) The principal terms of the merger shall be approved by the
members (Section 5034) of each class of each constituent corporation
and by each other person or persons whose approval of an amendment of
the articles is required by the articles or bylaws; and the approval
by the members (Section 5034) or any other person or persons
required by this section may be given before or after the approval by
the board.
(d) The board of each corporation that desires to merge shall
following:
(2) The amendments, subject to Sections 5810 and 5816, to the
if any. If any amendment changes the name of the surviving
of a disappearing corporation, subject to subdivision (b) of Section
9122.
(3) The amendments to the bylaws of the surviving corporation to
(4) The name and place of incorporation of each constituent
(5) The manner, if any, of converting memberships of the
constituent corporations into memberships of the surviving
corporation.
(6) Any other details or provisions as are desired, if any.
CORPORATIONS CODE
SECTION 9650

CORPORATIONS CODE
SECTION 9660

6210) of Part 2 apply to religious corporations except for Section
6216.
(b) The Attorney General may bring an action in the proper county
to compel compliance with Chapter 12 (commencing with Section 6210)
made applicable to religious corporations by this section.
CORPORATIONS CODE
SECTION 9670

CORPORATIONS CODE
SECTION 9680
9680. (a) Chapters 16 (commencing with Section 6610) and 17

(commencing with Section 6710) of Part 2 apply to religious
corporations except for Sections 6610, 6614, 6710, 6711 and 6716.
(b) (1) Any corporation may elect voluntarily to wind up and
dissolve (A) by approval of a majority of all the members (Section
5033) or (B) by approval of the board and approval of the members
(Section 5034).
(2) Any corporation which comes within one of the following
dissolve:
(A) A corporation which has been the subject of an order for
(B) A corporation which has disposed of all its assets and has not
conducted any activity for a period of five years immediately
corporation.
(C) A corporation which has no members.
(D) A corporation which is required to dissolve under provisions
of its articles adopted pursuant to subparagraph (i) of paragraph (2)
of subdivision (a) of Section 9132.
(3) If a corporation comes within one of the descriptions in
paragraph (2) and if the number of directors then in office is less
(A) The unanimous consent of the directors then in office.
(B) The affirmative vote of a majority of the directors then in
directors complying with paragraph (3) of subdivision (a) of Section
9211.
(C) The vote of a sole remaining director.
(4) If a corporation elects to voluntarily wind up and dissolve
pursuant to paragraph (3), references to the board in this chapter
shall be deemed to be to a board consisting solely of those directors
or that sole director and action by the board shall require at least
the same consent or vote as would be required under paragraph (3)
for an election to wind up and dissolve.
(c) If a corporation is in the process of voluntary winding up,
the superior court of the proper county, upon the petition of (1) the
corporation, or (2) the authorized number (Section 5036), or (3) the
Attorney General, or (4) three or more creditors, and upon such
notice to the corporation and members and creditors as the court may
order, may take jurisdiction over the voluntary winding up proceeding
if that appears necessary for the protection of the assets of the
corporation. The court, if it assumes jurisdiction, may make such
orders as to any and all matters concerning the winding up of the
affairs of the corporation and the protection of its creditors and
its assets as justice and equity may require. Chapter 15 (commencing
with Section 6510) (except Sections 6510 and 6511) shall apply to
those court proceedings.
(d) The powers and duties of the directors (or other persons
(1) To elect officers and to employ agents and attorneys to
(2) To continue the conduct of the affairs of the corporation
(3) To carry out contracts and collect, pay, compromise, and
settle debts and claims for or against the corporation.
(4) To defend suits brought against the corporation.
(5) To sue, in the name of the corporation, for all sums due or
(6) To collect any amounts remaining unpaid on memberships or to
(7) Subject to the provisions of Section 9142, to sell at public
or private sale, exchange, convey, or otherwise dispose of all or any
part of the assets of the corporation in an amount deemed reasonable
by the board without compliance with Section 9631, and to execute
bills of sale and deeds of conveyance in the name of the corporation.
(8) In general, to make contracts and to do any and all things in
corporation.
(e) After complying with Section 6713:
(1) Except as provided in Section 6715, all of a corporation's
assets shall be disposed of on dissolution in conformity with its
articles or bylaws subject to complying with the provisions of any
trust under which such assets are held.
(2) Except as provided in subdivision (3), the disposition
required in subdivision (1) shall be made by decree of the superior
court of the proper county. The decree shall be made upon petition
therefor, upon 30 days' notice to the Attorney General, by any person
concerned in the dissolution.
(3) The disposition required in subdivision (1) may be made
(f) A vacancy on the board may be filled during a winding up
(g) Chapter 15 (commencing with Section 6510) does not apply to
religious corporations except to the extent its provisions apply
under subdivision (d) of Section 6617, subdivision (c) of Section
6719, or subdivision (c) or (d) of this section.
CORPORATIONS CODE
SECTION 9690
9690. The provisions of Chapter 18 (commencing with Section 6810)

of Part 2 apply to religious corporations. In so providing, the
Legislature encourages the criminal courts of this state in
sentencing persons convicted of fraudulent activities in the guise of
religious activity to exercise their authority to impose restitution
as a means of compensating the victims.
CORPORATIONS CODE
SECTION 9910-9928
9910. As used in Sections 9910 to 9927 of this part:

(a) "New public benefit, mutual benefit and religious corporation
law" means Part 1 (commencing with Section 5002), Part 2 (commencing
with Section 5110), Part 3 (commencing with Section 7110), Part 4
(commencing with Section 9110) and Part 5 (commencing with Section
9910), of Division 2 of Title 1 of the Corporations Code enacted by
the California Legislature during the 1977-1978 Regular Session and,
except as required by Section 9912, operative January 1, 1980.
(b) "New public benefit corporation law" means Part 2 of the new
public benefit, mutual benefit and religious corporation law.
(c) "New mutual benefit corporation law" means Part 3 of the new
public benefit, mutual benefit, and religious corporation law.
(d) "New religious corporation law" means Part 4 of the new public
benefit, mutual benefit and religious corporation law.
(e) "Prior nonprofit law" means Part 1, Division 2 (commencing
with Section 9000) of Title 1 of the Corporations Code in effect on
December 31, 1979.
(f) "Subject corporation" means any corporation described in
paragraphs (3) through (5), inclusive, of subdivision (a) of Section
5003 and subject to the prior nonprofit law.
9911. (a) The new public benefit corporation law applies to all
corporations which are incorporated on or after January 1, 1980,
under Part 2 of this division or which are expressly governed by Part
2 pursuant to a particular provision of this division, Division 3
(commencing with Section 12000) or other specific statutory
provision.
(b) The new mutual benefit corporation law applies to all
corporations which are incorporated on or after January 1, 1980,
under Part 3 of this division or which are expressly governed by Part
3 pursuant to a particular provision of this division or Division 3
(commencing with Section 12000) or other specific statutory
provision.
(c) The new religious corporation law applies to all corporations
which are incorporated on or after January 1, 1980, under Part 4 of
this division or which are expressly governed by Part 4 pursuant to a
particular provision of this division, Division 3 (commencing with
Section 12000) or other specific statutory provision.
(d) Notwithstanding subdivisions (a) through (c), if articles of
incorporation intended to and in fact meeting the requirements of the
prior nonprofit law have been initially received by the Secretary of
State prior to January 1, 1980, and the matter is still pending on
that date, then the entity may be incorporated pursuant to the prior
nonprofit law if its articles are filed prior to May 1, 1980.
(e) Except as otherwise expressly provided in this part, (i) the
new public benefit corporation law applies to all subject
corporations referred to in Section 5060 and to all actions taken by
the directors, officers or members of such corporation on or after
January 1, 1980; (ii) the new mutual benefit corporation law applies
to all subject corporations referred to in Section 5059 and to all
actions taken by the directors, officers or members of such
corporations on or after January 1, 1980; and (iii) the new religious
corporation law applies to all subject corporations referred to in
Section 5061 and to all actions taken by the directors, officers or
members of such corporations on or after January 1, 1980.
(f) Except as otherwise expressly provided in this part, all of
the sections of the new public benefit, mutual benefit and religious
corporation law governing acts, contracts or other transactions by a
corporation or its directors, officers or members, apply only to
acts, contracts, or transactions occurring on or after January 1,
1980; and the prior nonprofit law governs acts, contracts or
transactions occurring before January 1, 1980.
(g) Except as otherwise expressly provided in this part, any vote
or consent by the directors or members of a corporation prior to
January 1, 1980, in accordance with the prior nonprofit law shall be
effective in accordance with that law; and if any certificate or
document is required to be filed in any public office of this state
relating to such vote or consent, it may be filed on or after January
1, 1980, in accordance with the prior nonprofit law.
9912. (a) Each corporation which is subject (pursuant to the terms

of the prior nonprofit law or some other specific statutory
provision) to the prior nonprofit law shall, on and after January 1,
1980, be subject to the new public benefit corporation law, the new
mutual benefit corporation law, or the new religious corporation law
based on the following:
(1) Any corporation of a type designated by statute as being
subject to the new public benefit corporation law, the new mutual
benefit corporation law, or the new religious corporation law, shall
be subject to such law.
(2) Any corporation organized primarily or exclusively for
religious purposes shall be subject to the new religious corporation
law.
(3) Any corporation which does not come within paragraphs 1 or 2
of this subdivision but which has received an exemption under Section
23701d of the Revenue and Taxation Code, shall be subject to the new
public benefit corporation law.
(4) Any corporation which does not come within paragraphs 1, 2, or
3 of this subdivision and all of the assets of which are irrevocably
dedicated to charitable or public purposes and which according to
its articles or bylaws must upon dissolution distribute its assets to
a person or persons carrying on a similar purpose or purposes shall
be subject to the new public benefit corporation law.
(5) Any corporation which does not come within paragraphs 1, 2, 3
or 4 of this subdivision and which permits distribution of assets to
its members upon dissolution shall be subject to the new mutual
benefit corporation law.
(6) Any corporation not otherwise described in this subdivision
shall be subject to the new mutual benefit corporation law.
(b) Prior to January 1, 1980, the Secretary of State's office
shall send a nonbinding, advisory notice to each corporation covered
by subdivision (a) indicating the type of corporation it is, based on
the rules set forth in subdivision (a) of this section.
(c) Notwithstanding subdivision (a), assets held by a mutual
benefit corporation in charitable trust shall be administered in
compliance with the provisions of the trust and in accordance with
any standards applicable pursuant to Section 7238.
(d) A corporation may petition the superior court of the proper
county to determine its status as a public benefit, mutual benefit or
religious corporation in accordance with subdivision (a). Notice of
the proceeding shall be given as the court may direct. Any member may
intervene. Notice of the proceeding shall be served on the Attorney
General who may intervene. A certified copy of any final judgment in
any such proceeding shall be filed with the Secretary of State.
(e) The Secretary of State may, in carrying out any obligation
arising under this article, require any information necessary on
existing corporations from the Franchise Tax Board or other state
agency.
9913. (a) The provisions of Sections 5130, 5131 and 5132 of the new
Public Benefit Corporation Law relating to the contents of articles
of incorporation do not apply to subject corporations designated as
public benefit corporations unless and until an amendment of the
articles is filed stating that the corporation elects to be governed
by all of the provisions of the new law not otherwise applicable to
it under this part.
(b) The provisions of Sections 7130, 7131, and 7132 of the new
Mutual Benefit Corporation Law relating to the contents of articles
of incorporation do not apply to subject corporations governed by the
Mutual Benefit Corporation Law unless and until an amendment of the
articles of incorporation is filed stating that the corporation
elects to be governed by all of the provisions of the new law not
otherwise applicable to it under this part.
(c) The provisions of Sections 9130, 9131, and 9132 of the new
Religious Corporation Law relating to the contents of articles of
incorporation do not apply to subject corporations governed by the
Religious Corporation Law unless and until an amendment of the
it under this part.
(d) The amendment described in subdivision (a) may be adopted by
the board alone, except that if such amendment makes any change in
the articles other than conforming the statement of purposes of the
public benefit corporation to Section 5130 and the deletion of any
references to the location of principal office and deleting any
statement regarding the number of directors or conforming any such
statement to Section 5151 (subject to Section 9915), it shall also be
approved by the members (Section 5034) if such approval is otherwise
required for the changes made.
(e) The amendment described in subdivision (b) may be adopted by
mutual benefit corporation to subdivisions (a) and (b) of Section
7130 and the deletion of any references to the location of principal
office and deleting any statement regarding the number of directors
or conforming any such statement to Section 7151 (subject to Section
9915), it shall also be approved by the members (Section 5034) if
such approval is otherwise required for the changes made.
(f) The amendment described in subdivision (c) may be adopted by
religious corporation to Section 9130 and the deletion of any
references to the location of principal office and deleting any
statement regarding the number of directors or conforming any such
statement to Section 9151 (subject to Section 9915), it shall also be
approved by the members (Section 5034) if such approval is otherwise
required for the changes made.
(g) The amendment shall not name the corporation's initial agent
for service of process if a report required by Section 6210, 8210, or
6210 (made applicable by Section 9660), as the case may be, has been
filed.
9914. Section 5140 of the new public benefit corporation law

applies to subject corporations governed by the public benefit
corporation law, and Section 7140 of the new mutual benefit
corporation law applies to subject corporations governed by the
mutual benefit corporation law and Section 9140 of the new religious
religious corporation law; but any statement in the articles of such
corporations prior to an amendment thereof pursuant to Section 9913,
relating to the powers of the corporation shall not be construed as a
limitation unless it is expressly stated as such.
9915. (a) Subdivision (a) of Section 5151 of the new public benefit
corporation law does not apply to subject corporations governed by
the public benefit corporation law, subdivision (a) of Section 7151
of the new mutual benefit corporation law does not apply to subject
corporations governed by the mutual benefit corporation law, and
subdivision (a) of Section 9151 of the new religious corporation law
does not apply to subject corporations governed by the religious
corporation law, but those corporations shall continue to be governed
by the prior nonprofit law unless and until an amendment of the
articles is filed pursuant to Section 9913. If an amendment makes any
change in the number of directors or the maximum or minimum number
of directors or makes change from a fixed to a variable board or vice
versa, it shall also be approved by the members (Section 5034).
(b) Notwithstanding subdivision (a), the new public benefit
corporation law, the new mutual benefit corporation law, or the new
religious corporation law, as appropriate, rather than the provisions
of the prior nonprofit law apply with the respect to determining the
limits on the number of directors.
9916. Subdivision (a) of Section 5213 of the new public benefit

public benefit corporation law, subdivision (a) of Section 7213 of
the new mutual benefit corporation law apply to subject corporations
governed by the mutual benefit corporation law, and subdivision (a)
of Section 9213 of the new religious corporation law applies to
subject corporations governed by the religious corporation law; but
the "treasurer" of those corporations shall be deemed to be the
"chief financial officer," unless otherwise provided in the articles
or bylaws.
9916.5. Subdivisions (a) and (d) of Section 5220 apply to subject

corporations governed by the nonprofit public benefit corporation law
and subdivisions (a) and (d) of Section 7220 apply to subject
corporations governed by the nonprofit mutual benefit corporation
law, provided that:
(a) If a director on January 1, 1980, is serving a term in excess
of three years in duration, the director may continue to serve until
December 31, 1982, or until the expiration of the term whichever is
earlier.
(b) If, on January 1, 1980, more than one-third of the directors
of a corporation hold office by virtue of designation or selection,
they may continue to do so until December 31, 1982.
9917. Section 5238 governs any proposed indemnification by a public

benefit corporation, Section 7237 governs any proposed
indemnification by a mutual benefit corporation, and Section 9246
governs any proposed indemnification by a religious corporation,
after January 1, 1980, whether the events upon which the
indemnification is based occurred before or after January 1, 1980.
Any statement relating to indemnification contained in the articles
or bylaws of a subject corporation shall not be construed as limiting
the indemnification permitted by Section 5238, Section 7237, or
Section 9246 unless it is expressly stated as so intended.
9918. Section 7313 of the new mutual benefit corporation law

relating to membership certificates applies to the membership
certificates of a subject corporation if the certificates are issued
on or after January 1, 1980, and the prior nonprofit law shall
continue to govern certificates representing memberships issued prior
to January 1, 1980, unless and until an amendment of the articles is
filed pursuant to Section 9913.

5510) and Chapter 6 (commencing with Section 5610) of the new Public
Benefit Corporation Law apply to any meeting of members of a public
benefit corporation, the provisions of Chapter 5 (commencing with
Section 7510) and Chapter 6 (commencing with Section 7610) of the new
Mutual Benefit Corporation Law apply to any meeting of members of a
mutual benefit corporation, and the provisions of Chapter 4
(commencing with Section 9410) of the new Religious Corporation Law
apply to any meeting of members of a religious corporation, held on
or after January 1, 1980, and to any action by such members pursuant
to a written ballot, which becomes effective on or after January 1,
1980, and to any vote cast at such a meeting or ballot, given for
such action (whether or not a proxy or ballot was executed by the
member prior to January 1, 1980).
(b) Notwithstanding subdivision (a):
(1) The prior nonprofit law shall apply to any such meeting of
members and to any vote cast at such a meeting if such meeting was
initially called for a date prior to January 1, 1980, and notice
thereof was given to members entitled to vote thereat; and
(2) Where a proxy would be valid under the prior nonprofit law but
would not be valid for a public benefit corporation under the new
Public Benefit Corporation Law, for a mutual benefit corporation
under the new Mutual Benefit Corporation Law, or for a religious
corporation under the new Religious Corporation Law, and where the
proxy by its terms expires during or after 1980, such proxy may be
voted at meetings of members during 1980 (prior to its expiration
date) but not thereafter.
(3) Action taken by the board or the members after December 31,
1979, and before January 1, 1982, shall be valid if such action was
taken in compliance with the prior nonprofit law and the articles and
bylaws as they then existed, subject to the rights of any person who
acted in detrimental reliance upon the invalidity of such action
prior to Janaury 1, 1982. This subdivision does not validate any
provision in the articles or bylaws after December 31, 1981, which
does not comply with the then existing provisions of the new public
benefit, mutual benefit, or religious corporation law, as the case
may be.
9921. Section 5710 of the new public benefit corporation law

applies to actions commenced on or after January 1, 1980, with
respect to a public benefit corporation, and Section 7710 of the new
mutual benefit corporation law applies to actions commenced on or
after January 1, 1980, with respect to a mutual benefit corporation.
The prior nonprofit law governs actions commenced prior to but still
pending on January 1, 1980.

with Section 6010) of the new public benefit corporation law apply to
transactions consummated on or after January 1, 1980, by a public
benefit corporation or, subject to Sections 9630 and 9640, by a
religious corporation, and Chapters 9 (commencing with Section 7910)
and 10 (commencing with Section 8010) of the new mutual benefit
corporation law apply to transactions consummated on or after January
1, 1980, by a mutual benefit corporation, unless the approval
required by the prior nonprofit law has been given prior to January
1, 1980, or has been given on or after January 1, 1980, but at a
meeting of members initially called for a date prior to January 1,
1980, in which case the transaction shall be governed by the prior
nonprofit law.

with Section 6710) of the new public benefit corporation law apply
to acts for involuntary dissolution of a public benefit corporation
commenced on or after January 1, 1980, and Chapters 15 (commencing
with Section 8510) and 17 (commencing with Section 8710) of the new
mutual benefit corporation law apply to acts for involuntary
dissolution of a mutual benefit corporation commenced on or after
January 1, 1980; but the prior nonprofit law governs any such actions
commenced prior to but still pending on January 1, 1980.

with Section 6710) of the new public benefit corporation law apply
to any voluntary dissolution proceeding initiated with respect to a
public benefit corporation or, subject to Section 9680, with respect
to a religious corporation, by the filing on or after January 1,
1980, of an election to wind up and dissolve, and Chapters 16
of the new mutual benefit corporation law apply to any voluntary
dissolution proceeding initiated with respect to a mutual benefit
corporation by the filing on or after January 1, 1980, of an election
to wind up and dissolve; but the prior nonprofit law governs any
such proceeding so initiated prior to January 1, 1980.
9925. When any corporate agent for service of process has been
designated prior to January 1, 1980, and such designation of agent
included a name of a city, town or village wherein the corporate
agent maintained an office, service on such agent may be effected at
agent filed pursuant to Section 6213 of the new public benefit
corporation law (applicable to public benefit corporations and,
subject to Section 9660, to religious corporations), Section 8213 of
the new mutual benefit corporation law, Section 1505 of the
Corporations Code, or filed pursuant to Section 3301.5, 3301.6,
6403.5, or 6403.6 of the Corporations Code as in effect prior to
January 1, 1977.
9926. Any subject corporation that existed on the first day of

January, 1873, and was formed under the laws of this state, which
corporation has not already elected to continue its existence under
the prior nonprofit law, may at any time elect to continue its
existence under the provisions of this code applicable thereto by the
unanimous vote of all its directors, or such election may be made at
any annual meeting of the members, or at any meeting called by the
directors especially for considering the subject, if voted by members
representing a majority of the voting power, or may be made by the
directors upon the written consent of that number of the members.
A certificate of the action of the directors, signed by them and
their secretary, when the election is made by their unanimous votes
or upon the written consent of the members, or a certificate of the
proceedings of the meeting of the members when the election is made
at any such meeting, signed by the chairman and secretary of the
meeting and a majority of the directors, shall be filed in the office
of the Secretary of State, and thereafter the corporation continues
its existence under the provisions of this code which are applicable
thereto, and possesses all the rights, and powers, and is subject to
all the obligations, restrictions, and limitations prescribed
thereby.
9927. If the corporate rights, privileges and powers of a

prior to January 1, 1980, pursuant to the prior nonprofit law as a
result of its incorporation of Sections 5700 through 5908 of the
prior law (Section 2300), such sections and provisions continue to
apply to such a corporation until restoration by the Controller
pursuant to such sections.
9928. (a) A corporation which was organized prior to January 1,

1971, under any statutory provisions other than the General
Corporation Law as then in effect (Division 1 (commencing with
Section 100) of Title 1 of the Corporations Code or predecessor
statutory provisions), has never filed a statement pursuant to
Section 6210 or 8210, has never filed a statement pursuant to former
Section 3301 and is not under suspension by the Franchise Tax Board,
shall be subject to suspension by the Secretary of State pursuant to
this section.
(b) Prior to taking action to suspend, the Secretary of State
shall, in accordance with Section 6061 of the Government Code,
publish a notice one time in a newspaper of general circulation
published in the county in which the articles require the principal
office of the corporation to be located. The notice shall identify
the corporation by name and corporate number and shall state that the
corporation shall be subject to suspension without further notice if
a statement pursuant to Section 6210 or 8210 is not filed within 60
days after the date of publication of the notice.
(c) Not less than 61 days and not more than 180 days after the
date of the publication, the Secretary of State may act to suspend
the corporation in accordance with subdivisions (a) and (b).
(d) The Secretary of State shall notify the Franchise Tax Board of
the suspension and thereupon, except for the purpose of amending the
articles to set forth a new name, the corporate powers, rights, and
privileges of the corporation are suspended.
(e) A statement pursuant to Section 6210 or 8210 may be filed
notwithstanding suspension of the corporate powers, rights and
privileges pursuant to this section or Section 23301, 23301.5, or
23775 of the Revenue and Taxation Code. Upon the filing of a
statement pursuant to Section 6210 or 8210 by a corporation which has
suffered suspension pursuant to this section, the Secretary of State
shall certify that fact to the Franchise Tax Board and the
corporation may thereupon, in accordance with Section 23305a of the
Revenue and Taxation Code, be relieved from suspension unless the
corporation is held in suspension by the Franchise Tax Board by
reason of Section 23301, 23301.5, or 23775 of the Revenue and
Taxation Code.
CORPORATIONS CODE
SECTION 10000-10015
10000. The provisions of this part apply to all corporations sole

organized either before or after March 30, 1878, whether or not the
corporations organized before have elected to continue their
existence under the Civil Code or elect to continue their existence
under this code, except that Sections 10002, and 10012 to 10015,
inclusive, do not apply to corporations sole formed before March 30,
1878, unless they have elected to continue their existence under the
Civil Code or under this code.
10001. Any corporation sole formed prior to March 30, 1878, and
existing under the laws of this State may elect to continue its
existence under this part by filing a certificate to that effect,
under its corporate seal, if any, signed by its chief officer, or by
filing amended articles of incorporation in the form required in this
part.
10002. A corporation sole may be formed under this part by the

bishop, chief priest, presiding elder, or other presiding officer of
any religious denomination, society, or church, for the purpose of
administering and managing the affairs, property, and temporalities
thereof.
10003. The articles of incorporation shall state:

(b) That the officer forming the corporation is duly authorized by
the rules, regulations, or discipline of the religious denomination,
society, or church to take such action.
(c) The county in this State where the principal office for the
transaction of the business of the corporation is located.
(d) The manner in which any vacancy occurring in the office of the
bishop, chief priest, presiding elder, or other presiding officer is
required to be filled by the rules, regulations, or constitution of
the denomination, society, or church.
10004. The articles of incorporation may state any desired

provision for the regulation of the affairs of the corporation in a
manner not in conflict with law, including restrictions upon the
power to amend all or any part of the articles of incorporation.
10005. The articles shall be signed and verified by the bishop,

chief priest, presiding elder, or other presiding officer forming the
corporation and shall be submitted to the Secretary of State for
filing in his office. If they conform to law he shall file them and
endorse the date of filing thereon. Upon the filing of the articles
with the Secretary of State the corporation sole is formed.
10007. Every corporation sole may:

(a) Sue and be sued, and defend, in all courts and places, in all
matters and proceedings whatever.
(b) Contract in the same manner and to the same extent as a
natural person, for the purposes of the trust.
(c) Borrow money, and give promissory notes therefor, and secure
the payment thereof by mortgage or other lien upon property, real or
personal.
(d) Buy, sell, lease, mortgage, and in every way deal in real and
personal property in the same manner that a natural person may,
without the order of any court.
(e) Receive bequests and devises for its own use or upon trusts to
the same extent as natural persons may, subject, however, to the
laws regulating the transfer of property by will.
(f) Appoint attorneys in fact.
10008. Every corporation sole has perpetual existence and also has
continuity of existence, notwithstanding vacancies in the incumbency
thereof. During the period of any such vacancy, the corporation sole
has the same capacity and right to receive and take any gift,
bequest, devise, or conveyance of property, either as grantee for its
own use, or as trustee, and to be or be made the beneficiary of a
trust, as though there were no vacancy. No agency created by a
corporation sole by a written instrument which in express terms
provides that the agency thereby created shall not be terminated by a
vacancy in the incumbency of the corporation is terminated or
affected by the death of the incumbent of the corporation or by a
vacancy in the incumbency thereof, however caused.
10009. Any judge of the superior court in the county in which a

corporation sole has its principal office shall at all times have
access to the books of the corporation.
10010. The chief officer of a corporation sole may at any time

amend the articles of incorporation of the corporation changing its
name, the term of its existence, its territorial jurisdiction, or the
manner of filling any vacancy in the office thereof, and may by
amended articles of incorporation make provision for any act or thing
for which provision is authorized in original articles of
incorporation of corporations sole.
The chief officer of the corporation shall sign and verify a
statement setting forth the provisions of the amendment and stating
that it has been duly authorized by the religious organization
governed by the corporation.
The amendment shall be submitted to the Secretary of State for
filing in his office. If it conforms to law he shall file it and
endorse the date of filing thereon. Thereupon the articles are
amended in the manner set forth in the statement.
10012. A corporation sole may be dissolved and its affairs wound up

voluntarily by filing with the Secretary of State a declaration of
dissolution executed, signed, and verified by the chief officer of
the corporation.
10013. The declaration of dissolution shall set forth all of the

following:
(b) The reason for its dissolution or winding up.
(c) That dissolution of the corporation has been duly authorized
by the religious organization governed by the corporation sole.
(d) The names and addresses of the persons who are to supervise
the winding up of the affairs of the corporation.
10014. The declaration shall be submitted to the Secretary of State

for filing in his office. If it conforms to law he shall file it and
endorse the date of filing thereon. Thereupon the corporation shall
cease to carry on business, except for the purpose of adjusting and
winding up its affairs.
10015. After the debts and obligations of the corporation are paid
or adequately provided for, any assets remaining shall be transferred
to the religious organization governed by the corporation sole, or
to trustees in its behalf, or disposed of as may be decreed by the
superior court of the county in which the dissolved corporation had
its principal office upon petition therefor by the Attorney General
or any person connnected with the organization.
CORPORATIONS CODE
SECTION 10200
10200. Every corporation organized or existing under Part 3

(commencing with Section 10200) of Division 2 in effect on December
31, 1979, is subject to and deemed to be a nonprofit public benefit
corporation organized for charitable purposes under Part 2
(commencing with Section 5110) of the Nonprofit Corporation Law
(Division 2 (commencing with Section 5000) of this title) except if
the corporation is organized primarily or exclusively for religious
purposes, in which case it is subject to and deemed to be a nonprofit
religious corporation under Part 4 (commencing with Section 9110) of
the Nonprofit Corporation Law.
CORPORATIONS CODE
SECTION 10250-10251
10250. (a) Any corporation organized under the provisions of or for

the purposes set forth in Part 6 (commencing with Section 10000) of
this division or organized on or prior to December 31, 1979, under
the provisions of or for purposes set forth in Part 3 (commencing
with Section 10200) of this division, then in effect, or organized
under or subject to Part 2 (commencing with Section 5110), or
organized under or subject to Part 4 (commencing with Section 9110),
may, if authorized so to do by its articles of incorporation,
establish one or more common trust funds for the purpose of
furnishing investments to such corporation or to any church, parish,
congregation, society, chapel, mission, religious, beneficial,
charitable or educational institution affiliated with it, or to any
organization, society or corporation holding funds or property for
the benefit of any of the foregoing, or holding funds for the purpose
of supporting a bishop, priest, religious pastor, or teacher or any
building or buildings used by or owned by any of the foregoing,
whether holding such funds or property as fiduciary or otherwise.
Notwithstanding the provisions of any general or special law in any
way limiting the right of any of the foregoing or the officers or
directors thereof, as fiduciary or otherwise, to invest funds held by
them, it shall be lawful for any of the foregoing to invest any or
all of their funds or property in shares or interests of such common
trust fund or trust funds; provided, that, in the case of funds or
property held as fiduciary, such investment is not prohibited by the
wording of the will, deed or other instrument creating such fiduciary
relationship.
(b) The directors or trustees of any such common trust fund, or
trust funds, so organized, may employ such officers or agents as they
think best, define their duties, and fix their compensation. They
may also appoint a trust company or bank as custodian of the trust
estate and may employ an investment adviser or advisers, define their
duties, and fix their compensation. Securities which constitute part
or all of the trust estate may be deposited in a securities
depository, as defined in Section 30004 of the Financial Code, which
is licensed under Section 30200 of the Financial Code or exempted
from licensing thereunder by Section 30005 or 30006 of the Financial
Code, and such securities may be held by such securities depository
in the manner authorized by Section 775 of the Financial Code.
(c) The directors or trustees of any such common trust fund, or
trust funds, shall pay ratably among the holders of shares or
beneficial certificates then outstanding, semiannual dividends which
shall approximately equal, in each fiscal year, the net income of the
trust, or trusts.
(d) The provisions of the Corporate Securities Law (Division 1
(commencing with Section 25000) of Title 4) shall not apply to the
creation, administration, or termination of common trust funds
created hereunder, nor to participation therein.
10251. (a) "Educational institution," as used in this section,

means any nonprofit corporation organized under Chapter 4 (commencing
with Section 94400) or Chapter 7 (commencing with Section 94700) of
Part 59 of the Education Code or organized under Part 1 (commencing
with Section 9000) of this division in effect on December 31, 1979,
and designated on or after January 1, 1980, as a nonprofit public
benefit corporation, or organized for charitable or eleemosynary
purposes under Part 2 (commencing with Section 5110) of this
division, or Part 3 (commencing with Section 10200) of this division
in effect on December 31, 1979, and designated on or after January 1,
1980, as a nonprofit public benefit corporation for the purpose of
establishing, conducting or maintaining an institution offering
courses beyond high school and issuing or conferring a diploma or for
the purpose of offering or conducting private school instruction on
the high school or elementary school level and any charitable trust
organized for such purpose or purposes. "Educational institution," as
used in this section, also means the University of California, the
California State University, the California Community Colleges, and
any auxiliary organization, as defined in Section 89901 of the
Education Code, established for the purpose of receiving gifts,
property and funds to be used for the benefit of a state college.
(b) It shall be lawful for any educational institution to become a
member of a nonprofit corporation incorporated under the laws of any
state for the purpose of maintaining a common trust fund or similar
common fund in which nonprofit organizations may commingle their
funds and property for investment and to invest any and all of its
funds, whenever and however acquired, in the common fund or funds;
provided that, in the case of funds or property held as fiduciary,
the investment is not prohibited by the wording of the will, deed, or
other instrument creating the fiduciary relationship.
(c) An educational institution electing to invest in a common fund
or funds under this section may elect to receive distributions from
each fund in an amount not to exceed for each fiscal year the greater
of the income, as determined under the Uniform Principal and Income
Act, Chapter 3 (commencing with Section 16320) of Part 4 of Division
9 of the Probate Code, accrued on its interest in the fund or 10
percent of the value of its interest in the fund as of the last day
of its next preceding fiscal year. The educational institution may
expend the distribution or distributions for any lawful purpose
notwithstanding any general or special law characterizing the
distribution, or any part thereof, as principal or income; provided
that, in the case of funds or property invested as fiduciary, the
expenditure is not prohibited by the wording of the will, deed, or
other instrument creating the fiduciary relationship. No such
prohibition of expenditure shall be deemed to exist solely because a
will, deed, or other instrument, whether executed or in effect before
or after the effective date of this section, directs or authorizes
the use of only the "income," or "interest," or "dividends" or
"rents, issues or profits," or contains words of similar import.
(d) The Corporate Securities Law of 1968 shall not apply to the
creation, administration, or termination of common trust funds
authorized under this section, or to participation therein.
(e) This section shall become operative on January 1, 1997.
CORPORATIONS CODE
SECTION 10400-10406
10400. Corporations for the prevention of cruelty to animals may be

formed under the Nonprofit Public Benefit Corporation Law, Part 2
(commencing with Section 5110) of this division by 20 or more
persons, who shall be citizens and residents of this state. If the
corporation is formed on or after January 1, 2011, its articles of
incorporation shall specifically state that the corporation is being
formed pursuant to this section.
10403. Every such corporation may take by gift, purchase, devise,

or bequest, any property, real or personal, and hold it or dispose
thereof at its pleasure; but no such corporation shall hold real
property the annual income of which exceeds fifty thousand dollars
($50,000).
10404. Any such corporation, or humane officer thereof, may proffer

a complaint against any person, before any court or magistrate
having jurisdiction, for the violation of any law relating to or
affecting animals, and may aid in the prosecution of the offender
before the court or magistrate.
10405. All magistrates, sheriffs, and officers of police shall, as

occasion may require, aid any such corporation, its officers,
members, and agents, in the enforcement of all laws relating to or
affecting animals.
10406. This part applies to all corporations for the prevention of

cruelty to animals, whether formed prior to or after May 20, 1905,
but does not apply to any association, society, or corporation that
uses or specifies a name or style the same, or substantially the
same, as that of any previously existing society or corporation in
this state organized for a like purpose.
CORPORATIONS CODE
SECTION 10700-10703
10700. As used in this part, "public agency" includes every port

district, river port district, municipal port district, harbor
district, harbor improvement district, joint harbor improvement
district, Board of State Harbor Commissioners, board of harbor
commissioners, city, county, and city and county in this state.
10701. Every public agency owning or operating any port or marine

terminal and every public agency organized for such purposes may
associate itself with other public agencies, private corporations or
individuals owning or operating, or organized for the purpose of
owning or operating, ports or marine terminals located on the same
harbor, bay, or other waterway or on communicating or related
waterways, of this state and with other public agencies and with
private corporations and individuals, or any of them, in the
formation under the Nonprofit Mutual Benefit Corporation Law, Part 3
(commencing with Section 7110) of this division, and may become and
remain a member of a nonprofit corporation organized under the
Nonprofit Mutual Benefit Corporation Law for the purpose of, or the
principal powers and purposes of which include carrying on a program
of nonregulatory activities in the common interests of its members,
including but not limited to any or all of the following activities:
studies and research into traffic conditions, cargo volume, rate
structures, cost factors, commercial transportation practices, and
similar fields; the acquisition and dissemination of information
relative to the said and similar subjects; the representation of the
common interests of its members before federal, state, and local
legislative and administrative authorities; and service as a facility
for the cooperation of its members and the coordination of their
activities toward the maintenance and improvement of the commercial
welfare and competitive position of the ports and terminals owned or
operated by its members, the maintenance of equitable and
nondiscriminatory rate structures, and the elimination of
inequitable, unfair, or discriminatory trade practices adversely
affecting the interests of its members; and the undertaking or
coordination of any other program of related activities or in related
fields for the mutual benefit of its members as may be desired by
the membership. Every such public agency may pay the dues and
assessments required of its members by such nonprofit mutual benefit
corporation out of any funds available to it for that purpose or for
its support; may make contracts; may enter into agreements; may
appoint an individual as its representative to such nonprofit mutual
benefit corporation to exercise the voting power of such public
agency and to act in its behalf with respect to such nonprofit mutual
benefit corporation; and may do or perform all acts necessary and
proper to carry out the purposes of this part; but no public agency
shall become or remain a member of any such nonprofit mutual benefit
corporation unless the articles of incorporation or the bylaws of the
nonprofit mutual benefit corporation include at all times a
provision limiting the liability of members to assessments to a
specified or ascertainable amount.
10702. For the purposes of this part, of the Nonprofit Mutual

Benefit Corporation Law, and of the General Corporation Law of this
state, every public agency and private corporation qualifying under
this part shall be deemed to be a "person" and shall have the legal
capacity to act as incorporator and as member of any nonprofit mutual
benefit corporation formed under the provisions of this part.
10703. If, when, and during such times as public agencies or

individuals duly authorized to represent them and act in their behalf
constitute a majority of the incorporators or of the directors and
are entitled to exercise a majority of the voting power of a
nonprofit mutual benefit corporation pursuant to this part:
(a) The Corporate Securities Law (Division 1 (commencing with
Section 25000) of Title 4) shall not apply to memberships nor to
membership certificates issued by the corporation; and
(b) The corporation shall be exempt from payment of any taxes
under the Bank and Corporation Tax Law (Part 11 of Division 2 of the
Revenue and Taxation Code), except as provided in Article 2 of
Chapter 4 thereof.
CORPORATIONS CODE
SECTION 10810-10812
10810. A nonprofit corporation may be formed under Part 2

(commencing with Section 5110) or Part 3 (commencing with Section
7110) of this division for the purposes of defraying or assuming the
cost of professional services of licentiates under any chapter of
Division 2 (commencing with Section 500) of the Business and
Professions Code or of rendering any such services, but it may not
engage directly or indirectly in the performance of the corporate
purposes or objects unless all of the following requirements are met:
(a) At least one-fourth of all licentiates of the particular
profession residing in California become members.
(b) Membership in the corporation and an opportunity to render
professional services upon a uniform basis are available to all
licensed members of the particular profession.
(c) Voting by proxy and cumulative voting are prohibited.
(d) A certificate is issued to the corporation by the particular
professional board whose licentiates have become members, finding
compliance with the requirements of subdivisions (a), (b), and (c).
Any such corporation shall be subject to supervision by the
particular professional board under which its members are licensed
and shall also be subject to the part under which it is formed,
either Part 2 (commencing with Section 5110) or Part 3 (commencing
with Section 7110) of this division, except as to matters
specifically otherwise provided for in this article.
10811. Any nonprofit corporation described in Section 10810 which

defrays or assumes some portion or all of the costs of refractions or
eye appliances shall offer an equal opportunity to render
professional services upon a uniform basis to all licentiates
expressly authorized by law to render such services.
10812. The provisions of Sections 10810 and 10811 of this article

apply to corporations formed on or after January 1, 1980, under Part
2 or Part 3 of this division and pursuant to this article and to
corporations existing on December 31, 1979, and formed under Section
9201 or 9201.1 of the Corporations Code then in effect.
CORPORATIONS CODE
SECTION 10820-10821
10820. (a) "Health care service plan," as used in this section

means a corporation which is a health care service plan defined in
the Knox-Keene Health Care Service Plan Act of 1975 (Chapter 2.2
(commencing with Section 1340) of Division 2 of the Health and Safety
Code), other than a corporation which is exempted from that act by
subdivision (d) of Section 1343 of the Health and Safety Code.
(b) A health care service plan may be formed under or subject to
Part 2 (commencing with Section 5110) of this division or Part 3
(commencing with Section 7110) of this division.
10821. Notwithstanding any other provision of this division, as to

a health care service plan which is formed under or subject to Part 2
7110) of this division, all references to the Attorney General
contained in Part 2 or Part 3 of this division shall, in the case of
health care service plans, be deemed to refer to the Director of the
Department of Managed Health Care.
CORPORATIONS CODE
SECTION 10830-10831
10830. A nonprofit corporation may be formed under Part 3

(commencing with Section 7110) of this division for the purposes of
administering a system or systems of defraying the cost of
professional services of attorneys, but any such corporation may not
engage directly or indirectly in the performance of the corporate
purposes or objects unless all of the following requirements are met:
(a) The attorneys furnishing professional services pursuant to
such system or systems are acting in compliance with the Rules of
Professional Conduct of the State Bar of California concerning such
system or systems.
(b) Membership in the corporation and an opportunity to render
professional services upon a uniform basis are available to all
active members of the State Bar.
(c) Voting by proxy and cumulative voting are prohibited.
(d) A certificate is issued to the corporation by the State Bar of
California, finding compliance with the requirements of subdivisions
(a), (b) and (c).
Any such corporation shall be subject to supervision by the State
Bar of California and shall also be subject to Part 3 (commencing
with Section 7110) of this division except as to matters specifically
otherwise provided for in this article.
10831. The provisions of this article apply to corporations formed

on or after January 1, 1980, under Part 3 of this division and
pursuant to this article and to corporations existing on December 31,
1979, and formed under Section 9201.2 of the Corporations Code then
in effect.
CORPORATIONS CODE
SECTION 10840-10841
10840. (a) "Hospital service plan," as used in this section means a

corporation which is a nonprofit hospital service plan defined in
Chapter 11a (commencing with Section 11491) of Part 2 of Division 2
of the Insurance Code.
(b) A hospital service plan may be formed under or subject to Part
2 (commencing with Section 5110) or Part 3 (commencing with Section
7110).
10841. Notwithstanding any other provision of this division, as to

a hospital service plan which is formed under or subject to Part 2
7110) of this division, all references to the Attorney General
contained in Part 2 or Part 3 of this division shall, in the case of
hospital service plans, be deemed to refer to the Insurance
Commissioner.
CORPORATIONS CODE
SECTION 12000
12000. Every corporation organized or existing under Part 1

(commencing with Section 12000) in effect on December 31, 1979, is
subject to and deemed to be organized under:
(a) The General Corporation Law (Division 1 (commencing with
Section 100) of this title), if the corporation is organized with
capital stock.
(b) The Nonprofit Mutual Benefit Corporation Law (Part 3
(commencing with Section 7110) of Division 2 of this title) if the
corporation is organized without capital stock.
CORPORATIONS CODE
SECTION 12200-12203
12200. This part shall be known as the Consumer Cooperative

Corporation Law. This part is intended primarily to apply to the
organization and operation of consumer cooperatives. It is also
applicable to other cooperatives, including, but not limited to,
cooperatives formed for the purpose of recycling or treating
hazardous wastes, which elect to incorporate under it.

corporation may be formed under this part for any lawful purpose
provided that it shall be organized and shall conduct its business
primarily for the mutual benefit of its members as patrons of the
corporation. The earnings, savings, or benefits of the corporation
shall be used for the general welfare of the members or shall be
proportionately and equitably distributed to some or all of its
members or its patrons, based upon their patronage (Section 12243) of
the corporation, in the form of cash, property, evidences of
indebtedness, capital credits, memberships, or services.
Such corporations are democratically controlled and are not
organized to make a profit for themselves, as such, or for their
members, as such, but primarily for their members as patrons (Section
12243).
12202. (a) The provisions of this part apply to corporations

existing pursuant to Part 2 (commencing with Section 12200) of
Division 3 of Title 1 in effect immediately prior to January 1, 1984.
of enactment of this part shall not be affected by the enactment or
reenactment of this part or by any change in the requirements for the
formation of corporations or by the amendment or repeal of the laws
under which they were formed or created.
(c) Neither the repeal of Part 2 (commencing with Section 12200)
of Division 3 of Title 1 as in effect immediately prior to January 1,
1984, nor the reenactment or amendment of this part shall impair or
take away any existing liability or cause of action against any
corporation, its members, shareholders, directors, or officers
incurred prior to the enactment of this part.
12203. Unless the provisions or the context otherwise requires, the

definitions set forth in this part govern the construction of this
part.
CORPORATIONS CODE
SECTION 12210-12256
12210. A corporation may be sued as provided in the Code of Civil

Procedure.
12211. Any corporation 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.

12213. Any agreement, certificate, or other instrument filed

pursuant to the provisions of this part, 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 the name of the
corporation or corporations)." However, no such certificate of
correction shall alter the wording of any resolution which was in
fact adopted by the board or the members or delegates or effect a
corrected amendment of articles which amendment as so corrected would
not in all respects have complied with the requirements of this
part, at the time of filing of the agreement, certificate or other
instrument being corrected. Such certificate of correction shall be
signed and verified or acknowledged as provided in this part with
respect to the agreement, certificate or other instrument being
corrected. It shall set forth the following:
(a) The name or names of the corporation or corporations.
(b) The date the agreement, certificate or other instrument being
(c) The provision in the agreement, certificate or other
it was defective.
The filing of the certificate of correction shall not alter the
effective time of the agreement, certificate or other instrument
being corrected, which shall remain as its original effective time,
and such filing shall not affect any right or liability accrued or
shall be extinguished by such filing if the person having such right

for filing pursuant to this part, 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 12570 the date of filing shall be the date the instrument is
received by the Secretary of State unless withheld from filing for a
period of time pursuant to a request by the party submitting it for
filing 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 such
fee does not exceed the limits established by the policy of the
Secretary of State for extending credit in such cases.
resubmitted accompanied by a written opinion of a member of the State
Bar of California submitting the instrument, or representing the
person submitting it, to the effect that the specific provision of
disputed point of law (other than the application of Section 12302),
upon such written opinion in determining whether the instrument
conforms to law. The date of filing in such case shall be the date
the instrument is received on resubmission.
specified effective date. In the case of a merger agreement, such
behalf of one of the constituent corporations. If no such revocation
specified.
12214.5. The Secretary of State may cancel the filing of articles

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.
12214.6. (a) A corporation that (1) fails to file a statement

pursuant to Section 12570 for an applicable filing period, (2) has
not filed a statement pursuant to Section 12570 during the preceding
24 months, and (3) was certified for penalty pursuant to Section
12670 for the same filing period of the prior year, shall be subject
to suspension pursuant to this section rather than to a penalty under
Section 12670.
its corporate powers, rights, and privileges will be suspended 60
days from the date of the notice if the corporation does not file the
statement required by Section 12570.
(c) If the 60-day period expires without the delinquent
corporation filing the required statement, the Secretary of State
notice of the suspension to the corporation. Following completion of
these notification requirements, except for the purpose of amending
the articles of incorporation to set forth a new name or filing an
application for exempt status, the corporate powers, rights, and
privileges of the corporation are suspended.
(d) A statement required by Section 12570 may be filed,
notwithstanding suspension of the corporate powers, rights, and
privileges under this section or under provisions of the Revenue and
Taxation Code. Upon the filing of a statement under Section 12570, by
a corporation that has been suspended pursuant to this section, the
Secretary of State shall certify that fact to the Franchise Tax Board
and the corporation may, in accordance with Section 23305a of the
Revenue and Taxation Code, be relieved from suspension, unless the
corporation is held in suspension by the Franchise Tax Board pursuant
to Section 23301, 23301.5, or 23775 of the Revenue and Taxation
Code.
12215. Except as otherwise permitted, any reference in this part 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.
12216. If the articles provide for more than one vote for any
member on any matter, the references in Sections 12223 and 12224 to a
majority or other proportion of members mean, as to such matters, a
majority or other proportion of the votes entitled to be cast.
Whenever members are disqualified from voting on any matter, they
shall not be counted 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 part or the articles or
bylaws.
12217. All references in this part to financial statements of a

corporation mean statements prepared in conformity with generally
accepted accounting principles or some other basis of accounting
which reasonably sets forth the assets and liabilities and the income
and expenses of the corporation and discloses the accounting basis
used in their preparation.
12218. As used in this part, "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.
12219. Any reference in this part to the time a notice is given or

sent means, unless otherwise expressly provided, the time a written
notice by mail is deposited in the United States mails, postage
prepaid; or the time any other written notice 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; or the time any oral notice
is communicated, in person or by telephone or wireless, to the
recipient 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.
12220. A notice or report mailed or delivered as part of a

newsletter, magazine or other organ regularly sent to members shall
constitute written notice or report pursuant to this part when
addressed and mailed postage prepaid by first or second class mail or
delivered to the member, or in the case of members who are residents
of the same household and who have the same address on the books of
the corporation, when addressed and mailed postage prepaid by first
or second class mail or delivered to one of such members, at the
address appearing on the books of the corporation.

the Civil Code; or

not within the competence of the committee under Section 12352.
12223. "Approval by (or approval of) a majority of all members"

means approval by an affirmative vote (or written ballot in
conformity with Section 12463) of a majority of the votes entitled to
be cast. Such approval shall include the affirmative vote of a
majority of the outstanding memberships of each class, unit, or
grouping of members entitled, by any provision of the articles or
bylaws of this part to vote as a class, unit, or grouping of members
on the subject matter being voted upon and shall also include the
affirmative vote of such greater proportion, including all of the
votes of the memberships of any class, unit, or grouping of members
if such greater proportion is required by the bylaws or by this part.
12224. "Approval by (or approval of) the members" means approved or

ratified by the affirmative vote of a majority of the votes
present (which affirmative votes also constitute a majority of the
required quorum) or written ballot in conformity with Section 12463
or by the affirmative vote or written ballot of such greater
proportion of the votes of the memberships of any class, unit, or
grouping of members as may be provided in the bylaws or in this part
for all or any specified member action.
12225. "Articles" includes the articles of incorporation,

amendments thereto, amended articles, restated articles, and
certificates of incorporation.
12226. "Bylaws" includes amendments thereto and amended bylaws.
12228. "Business corporation" means a corporation as defined in

Section 162 of the General Corporation Law.
12228.5. The term "chair" includes "chairperson," "chairman," and

"chairwoman." For the purposes of this part, all references to
"chairman" shall be deemed to refer to "chair."
12229. "Chapter" refers to a chapter of this part unless otherwise

expressly stated.
12230. "Class" refers to those memberships which: (a) are

identified in the articles or bylaws as being a different type of
membership; or (b) have the same rights with respect to voting,
dissolution, redemption, distributions and transfer. For the purpose
of this section, rights shall be considered the same if they are
determined by a formula applied uniformly.
12231. "Constituent corporation" means a corporation which is

merged with one or more other corporations and includes the surviving
corporation.
12232. "Corporation" as used in this part means a corporation which

is organized under, or subject to this part, including a central
organization.
12233.

12235. "Distribution" means the distribution of any gains, profits

or dividends to any member as such, but does not include patronage
distributions.

laws of this state.
12237. "Foreign corporation" means a foreign corporation as defined
in Section 171.
12238. (a) "Member" means any person who, pursuant to a specific

provision of a corporation's articles or bylaws, has the right to
vote for the election of a director or directors, or possesses
proprietary interests in the corporation.
(b) The articles or bylaws may confer some or all of the rights of
a member, set forth in this part, upon any person or persons who do
not have any of the voting rights referred to in subdivision (a).
(c) Where a member of a corporation is not a natural person, such
member may authorize in writing one or more natural persons to vote
on its behalf on any or all matters which may require a vote of the
members.
(d) A person is not a member by virtue of any of the following:
(1) Any rights such person has as a delegate.
(2) Any rights such person has to designate or select a director
or directors.
(3) Any rights such person has as a director.
12239. A "membership" refers to the rights a member has pursuant to

a corporation's articles, bylaws and this part.
12240. "Membership certificate," as used in this part, means a

document evidencing a proprietary interest in a corporation.
12241. "Officers' certificate" means a certificate signed and

verified by the chair 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.
12242. "On the certificate," as used in this part means that a

statement appears on the face of a certificate or on the reverse
thereof with a reference thereto on the face.
12242.5. "Other business entity" means a domestic or foreign

limited liability company, limited partnership, general partnership,
business trust, real estate investment trust, unincorporated
association, or a domestic reciprocal insurer organized after 1974 to
provide medical malpractice insurance as set forth in Article 16
of the Insurance Code. As used herein, "general partnership" means a
"partnership" as defined in subdivision (9) 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.
12242.6. "Parent party" means the corporation in control of any

constituent domestic or foreign corporation or other business entity
and whose equity securities are issued, transferred, or exchanged in
a merger pursuant to Section 12540.1.
12243. If the corporation is organized to provide goods or services

to its members, the corporation's "patrons" are those who purchase
those types of goods from, or use those types of service of, the
corporation. If the corporation is organized to market, process or
otherwise handle its members' products or services, the corporation's
"patrons" are those persons whose products or services are so
marketed, processed, or handled by the corporation.
"Patronage" of a patron is measured by the volume or value, or
both, of a patron's purchases of such products from, and use of such
services furnished by, the corporation, and by such products and
services provided by the patron to the corporation for marketing.
12244. "Patronage distribution" means any transfer made to a patron

of the corporation the amount of which is computed with reference to
the patron's patronage of the corporation.
12245. "Person," unless otherwise expressly provided, includes any

association, company, domestic or foreign corporation, corporation
sole, estate, individual, joint stock company, joint venture,
partnership, domestic or foreign limited liability company,
government or political subdivision, agency or instrumentality of a
government.
12246. "Proper county" means the county where the corporation's

principal office in this state is located or, if the corporation has
no such office, the County of Sacramento.
12247. "Shareholder" shall have the same meaning as "member" as

defined in Section 12238.
12248. "Share certificate" shall have the same meaning as

"membership certificate" as defined in Section 12240.
12249. "Surviving corporation" means a corporation into which one
or more other corporations are merged.
authorized position of director which is not then filled, whether the
vacancy is caused by death, resignation, removal, change in the
number of directors authorized in the articles or bylaws (by the
board or the members), or otherwise.

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
12252. "Vote" includes, but is not limited to, authorization by

written consent pursuant to subdivision (b) of Section 12351 and
authorization by written ballot pursuant to Section 12463.
12253. "Voting power" means the power to vote for the election of
different classes of memberships 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
memberships in question (whether of one or more classes) have the
power to elect in an election at which all memberships then entitled
to vote for the election of any directors are voted.
12254. "Written" or "in writing" includes facsimile, telegraphic,

and other electronic communication as authorized by this code.
12255. "Written ballot" does not include a ballot distributed at a

special or regular meeting of members.
12256. A central organization is a corporation whose membership is
composed, in whole or in part, of other corporations organized under
this part.
CORPORATIONS CODE
SECTION 12300-12302.1
(b) Where initial directors are named in the articles, each
director named in the articles shall sign and acknowledge the
articles. Where initial directors are not named in the articles, the
articles shall be signed by a person or persons described in
subdivision (a) who thereupon are the incorporators of the
corporation.

of the association who have any voting rights of the type referred to
association is located, of a copy of the articles of incorporation
county.
delayed effective date pursuant to this title, or a name which is
under reservation pursuant to this title, except that a corporation
may adopt a name that is substantially the same as an existing
domestic 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 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
(c), and upon the issuance of the certificate the name stated therein
(c).
12302.1. The Secretary of State shall not file articles for a

corporation the name of which would fall within the prohibitions of
Section 18104 of the Financial Code. This section shall not apply to
articles filed for a corporation organized in accordance with Section
18100 of the Financial Code.
CORPORATIONS CODE
SECTION 12310-12316
"This corporation is a cooperative corporation organized under the
Consumer Cooperative Corporation Law. The purpose of this
corporation is to engage in any lawful act or activity for which a
corporation may be organized under such law."
ÝThe articles may include a further description of the corporation'
s purposes.]
(d) Whether the voting power or the proprietary interests of the
members are equal or unequal. If the voting power or proprietary
interests of the members are unequal, the articles shall state either
(i) the general rule or rules by which the voting power and
proprietary interests of the members shall be determined or (ii) that
such rule or rules shall be prescribed in the corporation's bylaws.
Equal voting power means voting power apportioned on the basis of one
vote for each member. Equal proprietary rights means property rights
apportioned on the basis of one proprietary unit for each member.
12311. (a) The names of all corporations formed under this part
shall include "cooperative." No corporation shall be formed under
this part unless there is affixed or prefixed to its name some word
or abbreviation which will indicate that it is a corporation, as
distinguished from a natural person, a firm, or an unincorporated
association.
(b) No person shall adopt or use the word "cooperative" or any
abbreviation or derivation thereof, or any word similar thereto, as
part of the name or designation under which it does business in this
state, unless incorporated as provided in this part or unless
incorporated as a nonprofit cooperative association under Chapter 1
(commencing with Section 54001) of Division 20 of the Food and
Agricultural Code, as a stock cooperative, as defined in Section
11003.2 of the Business and Professions Code, as a limited-equity
housing cooperative, as defined in Section 33007.5 of the Health and
Safety Code, as a credit union or organization owned for the mutual
benefit of credit unions, or under some other law of this state
enabling it to do so. However, the foregoing prohibition shall be
inapplicable to any credit union or organization owned for the mutual
benefit of credit unions, any housing cooperative, the financing of
which is insured, guaranteed, or provided, in whole or in part, by a
public or statutorily chartered entity pursuant to a program created
for housing cooperatives, a nonprofit corporation, a majority of
whose membership is composed of cooperative corporations, or an
academic institution that serves cooperative corporations.
(c) A domestic or foreign corporation or association which did
business in this state under a name or designation including the word
"cooperative" prior to September 19, 1939, and which conducts
business on a cooperative basis substantially as set forth in this
part, may continue to do business under that name or designation.
(d) Any person, firm, individual, partnership, trust, domestic
corporation, foreign corporation, or association which did business
in this state under a name or designation including the word
"cooperative" prior to September 19, 1939, but which does not conduct
business on a cooperative basis as contemplated by Section 12201 of
this part, may continue to do business under that name or designation
if the words "not organized under the law relating to cooperative
corporations" are always placed immediately after the name or
designation wherever it is used.
(e) Any foreign corporation, organized under and complying with
the cooperative law of the state or other jurisdiction of its
creation, may use the term "cooperative" in this state if it has
complied with the laws of this state applicable to foreign
corporations, insofar as those laws are applicable to it, and if it
is doing business on a cooperative basis as contemplated by Section
12201.

12313. (a) The articles of incorporation may set forth any or all
of the following provisions, which shall not be effective unless
(2) A provision providing for the distribution of the remaining
assets of the corporation, after payment or adequate provision for
all of its debts and liabilities, to a charitable trust.
initial directors.
(2) Provisions concerning the transfer of memberships, in
(5) A provision conferring upon members the right to determine the
consideration for which memberships shall be issued.
12314. The articles of incorporation of a central organization, as

defined in Section 12256, organized under or subject to this part may
provide for unequal voting power of its members based upon the
number of its members' members, the patronage of its members, or
both. In no event shall any member have less than one vote.
12316. If initial directors have not been named in the articles of

incorporation, the incorporators 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, until the directors are elected.
CORPORATIONS CODE
SECTION 12320-12321

bylaws and to compliance with other provisions of this part and any
other applicable laws, a corporation, in carrying out its activities,
shall have all of the powers of a natural person, including, without
limitation, the power to:
(c) Qualify to conduct its activites in any other state,
use and otherwise deal in and with its own memberships, bonds,
debentures, notes and debt securities.
(e) Pay pensions, and establish and carry out pension, deferred
(f) Issue certificates evidencing membership in accordance with
the provisions of Section 12401 and issue identity cards to identify
those persons eligible to use the corporation's facilities.
(g) Levy dues, assessments, and membership and transfer fees.
similar purposes.
or to others.
lawfully engage.
12321. (a) No limitation upon the activities, purposes, or powers

of the corporation or upon the powers of the members, officers, or
12620), 16 (commencing with Section 12630) and 17 (commencing with
Section 12650) shall be asserted as between the corporation or
member, officer or director and any third person, except in a
proceeding: (1) by a member or the state to enjoin the doing or
continuation of unauthorized activities by the corporation or its
officers, or both, in cases where third parties have not acquired
rights thereby, (2) to dissolve the corporation, or (3) by the
corporation or by a member suing in any representative suit against
the officers or directors of the corporation for violation of their
authority.
CORPORATIONS CODE
SECTION 12330-12333
12330. (a) Except as provided in subdivision (c) and Sections

12331, 12360, 12364, 12462, and 12484, bylaws may be adopted,
amended, or repealed by the board unless the action would:
(1) Materially and adversely affect the rights or obligations of
members as to voting, dissolution, redemption, transfer,
distributions, patronage distributions, patronage, property rights,
or rights to repayment of contributed capital;
(2) Increase or decrease the number or members authorized in total
or for any class;
part of the memberships; or
(4) Authorize a new class of membership.
(b) Bylaws may be adopted, amended or repealed by approval of the
members (Section 12224); provided, however, that adoption, amendment,
or repeal also requires approval by the members of a class if that
action would:
(1) Materially and adversely affect the rights or obligations of
that class as to voting, dissolution, redemption, transfer,
distributions, patronage distributions, patronage, property rights,
or rights to repayment of contributed capital, in a manner different
than such action affects another class;
(2) Materially and adversely affect such class as to voting,
dissolution, redemption, transfer, distributions, patronage
distributions, patronage, property rights, or rights to repayment of
contributed capital, by changing the rights, privileges, preferences,
restrictions or conditions of another class;
(3) Increase or decrease the number of memberships authorized for
such class;
(4) Increase the number of memberships authorized for another
class;
(6) Authorize a new class of memberships.
(d) Bylaws may also provide that repeal or amendment of those
approval requirement, unless the articles or the bylaws specify
exist:
than a stated minimum or more than a stated maximum with the exact
approval of the board or the members (Sections 12222 and 12224), in
the manner provided in the bylaws, subject to subdivision (e). The
number or minimum number of directors shall not be less than three.
Alternate directors may be permitted, in which event, the bylaws
shall specify the manner and times of their election and the
conditions to their service in place of a director.
be adopted by approval of the members.
to:
notice of members', directors', and committee meetings, or of
membership and transfer fees.
(9) The time and manner of patronage distributions consistent with
this part.
(d) The bylaws may provide for eligibility, the manner of
admission, withdrawal, suspension, and expulsion of members, and the
suspension or termination of memberships consistent with the
(e) The bylaws may require, for any or all corporate actions, the
vote of a larger proportion of, or all of, the members or the members
of any class, unit, or grouping of members or the vote of a larger
proportion of, or all of, the directors, than is otherwise required
by this part. Such a provision in the bylaws requiring such greater
vote shall not be altered, amended or repealed except by such greater
vote, unless otherwise provided in the bylaws.
(g) The bylaws may provide for the establishment by the
corporation of a program for the education of its members, officers,
employees and the general public in the principles and techniques of
cooperation.

some or all of the authority of members. Where delegates are
provided for, the bylaws shall set forth the delegates' terms of
office, any reasonable method for delegates' selection and removal,
and any reasonable method for calling, noticing and holding meetings
of delegates. Unless delegates are directly elected by the
membership, they shall be elected by a body or bodies directly
elected by the membership. Delegates may only act personally at a
meeting or by written ballot but may not act by proxy. Delegates may
be given a name other than "delegates."

CORPORATIONS CODE
SECTION 12340

state the original or a copy of its articles and bylaws as amended
to date, which shall be open to inspection by the members at all
to date.
CORPORATIONS CODE
SECTION 12350-12355


bylaws:
directors.
(3) Notice of a meeting need not be given to any director who
provides a waiver of notice or consent to holding the meeting or an
All waivers, consents, and approvals shall be filed with the
meeting is adjourned for more than 24 hours, notice of any
(5) Meetings of the board may be held at any place within or
without the state which has been designated in the notice of the
meeting or, if not stated in the notice or if there is no notice,
designated in the bylaws or by resolution of the board.
electronic video screen communication pursuant to this subdivision
following apply:
the presence of one or more specified directors to constitute a
quorum of the board to transact business, as long as the death of a
director or the death or nonexistence of the person or persons
otherwise authorized to appoint or designate a director does not
prevent the corporation from transacting business in the normal
course of events. The articles or bylaws may not provide that a
quorum shall be less than one-fifth the number of directors
two, whichever is larger.
(8) Subject to the provisions of Sections 12352, 12373, 12374, and
subdivision (e) of Section 12377, every act or decision done or made
by a majority of the directors present at a meeting duly held at
approved by at least a majority of the required quorum for the
meeting, or a greater number as is required by this division, the
articles or bylaws.
(b) Any action required or permitted to be taken by the board may
individually or collectively consent in writing to that action. Such
proceedings of the board.
The action by written consent shall have the same force and effect
as a unanimous vote of the directors.
12352. (a) The board may, by resolution adopted by a majority of
the number of directors then in office, provided that a quorum is
the number of directors authorized in the articles or bylaws. The
bylaws may authorize one or more such committees, each consisting of
two or more directors, and may provide that a specified officer or
officers who are also directors of the corporation shall be a member
or members of such committee or committees. The board may appoint one
or more directors as alternate members of such committee, who may
replace any absent member at any meeting of the committee. 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:
all members (Section 12223) regardless of whether the corporation has
members.
bylaws.
thereof.
be elected.
include as members persons who are not directors. The board may
create other committees that do not exercise the authority of the
directors.
any committee, appointed pursuant to paragraph (4) of subdivision
(c) of Section 12331 or otherwise, powers as authorized by Section
12350, but may not delegate the powers set forth in paragraphs (1)
through (7) of subdivision (a) of this section.
12353. (a) A corporation shall have a chair of the board, who may
be given the title chair of the board, chairperson of the board,
both, a secretary, a treasurer or a chief financial officer, or both,
and any other officers with any 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. The president, or if there is no
president the chair of the board, is the chief executive officer of
the corporation, unless otherwise provided in the articles or bylaws.
If there is no chief financial officer, the treasurer is the chief
financial officer of the corporation, unless otherwise provided for
in the articles or bylaws. Any number of offices may be held by the
same person unless the articles or bylaws provide otherwise. Either
the chair of the board or the president shall be elected from among
those board members elected by the membership of the corporation.
party.
12354. Subject to the provisions of subdivision (a) of Section

12321, any note, mortgage, evidence of indebtedness, contract,
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 any one of the chairman of the
board, the president or any vice president and by any one of 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.

CORPORATIONS CODE
SECTION 12360-12364
12360. (a) Except as provided in subdivision (d), directors shall

be elected for such terms, not longer than four years, as are fixed
in the articles or bylaws. In the absence of any provision in the
articles or bylaws, the terms shall be one year. No amendment of the
articles or bylaws may extend the term of a director beyond that for
which the director was elected, nor may any bylaw provision
increasing the terms of directors be adopted without approval of the
members.
(c) The articles or bylaws may prescribe requirements for
eligibility for election as a director.
provided in subdivision (f) of Section 12362. A bylaw provision
only by approval of the members (Section 12224), except as provided
in subdivision (d) of Section 12330. Unless otherwise provided in the
articles or bylaws, the entitlement to designate or select a
director or directors shall cease if any of the following
circumstances exist:
to exist.
interest.
12361. The board may declare vacant the office of a director whose
eligibility for election as a director has ceased, or who has been
declared of unsound mind by a final order of court, or convicted of a
felony, or, if at the time a director is elected, the bylaws provide
that a director may be removed for missing a specified number of
board meetings, fails to attend the specified number of meetings.
12362. (a) Subject to subdivisions (b), (c) and (g), any or all
directors may be removed without cause if one of the following
applies:
(b) In a corporation in which the articles or bylaws authorize
election were then being elected; and
(c) When by the provisions of the articles or bylaws the members
(d) Any reduction of the authorized number of directors or any
amendment reducing the number of class of directors does not remove
office, unless the reduction or amendment also provides for removal
of one or more specified directors.
(e) Except as provided in this section and Sections 12361 and
12363, a director may not be removed prior to the expiration of the
(f) Where a director removed under this section or Section 12361
or 12363 was chosen by designation pursuant to subdivision (d) of
Section 12360, then:
(1) Where a different person may be designated pursuant to the
made; or
(2) Where the governing article or bylaw provision contains no
(g) For the purposes of this subdivision, "designator" means one
(1) Unless as otherwise provided in the articles or bylaws at the
director.
(3) Unless as otherwise provided in the articles or bylaws, the
right to remove shall not apply if any of the following circumstances
exist:
exist.
12363. The superior court of the proper county may, at the suit of
a director, or members possessing 5 percent of the voting power,
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.

complying with Section 12351, or (3) a sole remaining director.
Unless the articles or a bylaw approved by the members (Section
12224) 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 members (Section 12224).
CORPORATIONS CODE
SECTION 12370-12377
12370. Any duties and liabilities set forth in this article shall
apply without regard to whether a director is compensated by the
corporation.

presented;
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.
alleged failure to discharge the persons's obligations as a director.
Section 12371.

and one or more of its directors, or between a corporation and any
domestic or foreign 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, business corporation, firm or association are parties or
director's interest are fully disclosed or known to the members and
such contract or transaction is approved by the members (Section
12224) in good faith, with any membership owned by any interested
director not being entitled to vote thereon;
ratified; or
paragraph (1) or (2), 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.
Neither a mere common directorship nor a member-patron
relationship on terms available to all members constitutes 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.
corporation, business corporation or association of which one or
more of its directors are directors is either void or voidable
directors or the contract or transaction is approved by the members
in good faith; or
paragraph (1), the contract or transaction is just and reasonable as
ratified.
12374. Interested or common directors may be counted in determining

transaction as provided in Section 12373.
12375. (a) Unless prohibited by the articles or bylaws, a

corporation may loan money or property to, or guarantee the
obligation of, any director or officer of the corporation or of its
parent, affiliate or subsidiary, provided:
(1) The board determines the loan or guaranty may reasonably be
expected to benefit the corporation.
(2) Prior to consummating the transaction or any part thereof, the
loan or guaranty is either:
(A) Approved by the members (Section 12224), without counting the
vote of the director or officer, if a member.
(B) Approved by the vote of a majority of the directors then in
office, without counting the vote of the director who is to receive
the loan or the benefit of the guaranty.
(b) Notwithstanding subdivision (a), a corporation may advance
money to a director or officer of the corporation or of its parent,
affiliate or subsidiary, for any expenses reasonably anticipated to
be incurred in the performance of the duties of the director or
officer of the corporation or of its parent, affiliate or subsidiary,
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 such an advance the director or officer would be
entitled to be reimbursed for these expenses by the corporation, its
parent, affiliate, or subsidiary.
(c) The provisions of subdivisions (a) and (b) do not apply to
credit unions, or 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, or to loans permitted under any statute regulating any special
class of corporations.
12376. (a) Subject to the provisions of Section 12371, directors of

a corporation who approve any of the following corporate actions are
jointly and severally liable to the corporation for the benefit of
all of the creditors entitled to institute an action under paragraph
(1) or (2) of subdivision (c) or to the corporation in an action by
members under paragraph (3) of subdivision (c):
(1) The making of any distribution or purchase or redemption of
memberships contrary to Chapter 4 (commencing with Section 12450).
in a notice given to creditors under Chapters 15 (commencing with
Section 12620), 16 (commencing with Section 12630), and 17
(3) The making of any loan or guarantee contrary to Section 12375.
the liability:
directors liable by the persons entitled to sue under subdivision (c)
of Section 12455.
directors liable by any one or more members 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 12490.
guarantee, but not exceeding, in the case of an action for the
benefit of creditors, the liabilities of the corporation owed to
nonconsenting creditors at the time of the violation.
action.
person who received the loan or guarantee.
subdivision (e).
procure a judgment in its favor) by reason of the fact that such
person is or was an agent of the corporation, against expenses,
judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding if such person
acted in good faith and in a manner such 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 such 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
to procure a judgment in its favor by reason of the fact that such
person is or was an agent of the corporation, against expenses
actually and reasonably incurred by such person in connection with
the defense or settlement of such action if such person acted in good
faith, in a manner such person believed to be in the best interests
of the corporation and with such care, including reasonable inquiry,
as an ordinarily prudent person in a like position would use under
similar circumstances. No indemnification shall be made under this
subdivision:
determine;
approval.
subdivision (b) or (c) or in defense of any claim, issue, or matter
(2) Approval of the members (Section 12224), with the persons to
be indemnified not being entitled to vote thereon; or
is entitled to be indemnified as authorized in this section.
indemnification; or
liability under the provisions of this section.
CORPORATIONS CODE
SECTION 12400-12405
by a corporation for no consideration or for such consideration as
is determined by the board.
12401. (a) A corporation may issue, but is not required to issue,

membership certificates. In the event that membership certificates
are issued, the certificates shall state the information required to
be contained in the disclosure document described in subdivision (b).
Nothing in this section shall restrict a corporation from issuing
identity cards or similar devices to members which serve to identify
members qualifying to use facilities or services of the corporation.
(b) Except as provided in subdivision (e), prior to issuing a
membership, the corporation shall provide the purchaser of a
membership with a disclosure document. The disclosure document may be
a prospectus, offering circular, brochure, or similar document, a
specimen copy of the membership certificate, or a receipt which the
corporation proposes to issue. The disclosure document shall contain
the following information:
(1) A statement that the corporation is a cooperative corporation.
(2) A statement that a copy of the corporation's articles and
bylaws will be furnished without charge to a member or prospective
member upon written request, and the address of the office of the
corporation and the address to which such a written request is to be
directed.
(3) If there are restrictions imposed by the corporation upon the
transfer of membership, a statement to that effect and the
restrictions imposed on transfer.
(4) If the corporation may levy dues, assessments, or membership
or transfer fees, a statement to that effect and the conditions under
which the corporation may make such a levy.
(5) If the member is required to contribute services to the
corporation, a statement to that effect and the amount and nature of
the services to be contributed to the corporation.
(6) Whether the membership is redeemable and the conditions under
which the membership may be redeemed at the option of the corporation
or the member.
(7) If the voting power or the proprietary interests of the
members is unequal, a statement to that effect and the rule or rules
by which the voting power and proprietary rights are to be
determined.
(8) In lieu of specifying verbatim in the disclosure document the
restrictions on the transfer of a membership, conditions of levy,
amount and nature of services to be contributed, conditions under
which memberships are redeemable, or the rules by which the voting
power and proprietary rights of members are to be determined, the
disclosure document may contain a statement that such information
will be provided free of charge to a member or prospective member who
requests it in writing. If the disclosure document contains such a
statement it shall also set forth the address of the office of the
corporation and the address to which such a request is to be
directed.
(c) If the articles or bylaws are amended so that any statement
required by subdivision (a) on outstanding membership certificates is
no longer accurate, the board may cancel the outstanding
certificates and issue in their place new certificates conforming to
the articles or bylaws amendments.
(d) When new membership certificates are issued in accordance with
subdivision (c), the board may order holders of outstanding
certificates to surrender and exchange them for new certificates
within a reasonable time fixed by the board. The board may further
provide that the holder of the certificate to be surrendered shall
not be entitled to exercise any of the rights of membership until the
certificate is surrendered, but such rights shall be suspended only
after notice of the order is given to the holder of the certificate
and only until the certificate is surrendered. The requirement to
surrender outstanding certificates may be enforced by civil action.
(e) A corporation shall issue a membership certificate, receipt,
or written advice of purchase to anyone purchasing a membership upon
the member's first purchase of a membership of any class. No
disclosure document need be provided to an existing member prior to
the purchase of additional memberships if that member has previously
been provided with a disclosure document which is accurate and
correct as of the date of the purchase of the additional memberships.
(f) If a corporation does not issue new certificates as
contemplated by subdivisions (c) and (d), and if a transferee of a
membership certificate has not previously been provided with a
disclosure statement which is accurate and correct as of the date of
registration of the transfer, then the corporation shall provide a
disclosure document to the transferee upon registration with the
corporation of the transfer of the certificate.
12402. (a) A corporation may issue a new membership certificate in

the place of any certificate theretofore issued by it, alleged to
have been lost, stolen or destroyed, and the corporation may require
the owner of the lost, stolen or destroyed certificate or the owner's
legal representative to give the corporation a bond (or other
adequate security) sufficient to indemnify it against any claim that
may be made against it (including any expense or liability) on
account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
(b) If a corporation refuses to issue a new membership certificate
or other certificate in place of one theretofore issued by it, or by
any corporation of which it is the lawful successor, alleged to have
12403. (a) Except as provided in subdivision (b), or in its

articles or bylaws, a corporation may admit any person to membership.
(b) A corporation may not admit its subsidiary to membership.
12404. Except as permitted in Section 12314, the voting power of

members having voting rights shall be equal.
12405. There shall be no voting by proxy.

CORPORATIONS CODE
SECTION 12410
12410. (a) Unless the articles or bylaws otherwise provide:

therefrom; and
(2) Subject to the provisions of subdivision (b), Section 12422,
and Section 12445, all rights as a member of the corporation cease
upon the member's death or dissolution or the dissolution of a member
which is a business entity.
(b) The articles or bylaws may provide for, or may authorize the
board to provide for, the transfer of memberships, or of memberships
within any class or classes, with or without restriction or
limitation, including transfer upon the death, dissolution, merger,
or reorganization of a member.
(c) Where transfer rights have been provided, no restriction of
them shall be binding with respect to memberships issued prior to the
adoption of the restriction, unless the holders of such memberships
CORPORATIONS CODE
SECTION 12420-12422

privileges, preferences, restrictions, or conditions, as provided in
its articles or bylaws.
12421. Except as provided in the articles or bylaws, all

memberships shall have the same rights, privileges, preferences,
restrictions and conditions.
12422. (a) Unless the corporation's articles or bylaws so provide,

memberships are not redeemable. A corporation may provide in its
articles for one or more classes of memberships which are redeemable,
in whole or in part, for such consideration within such time or upon
the happening of one or more specified events and upon such terms
and conditions as are stated in the articles. However, no membership
shall actually be redeemed if prohibited by Chapter 4 (commencing
with Section 12450).
(b) Nothing in this section shall prevent a corporation from
creating a sinking fund or similar provision for, or entering into an
agreement for, the redemption or purchase of its memberships to the
extent permitted by Chapter 4 (commencing with Section 12450).
CORPORATIONS CODE
SECTION 12430-12431
12430. (a) A member may resign from membership at any time,

although the articles or bylaws may require reasonable notice before
the resignation is effective.
rendered, dues, assessments or fees, or arising from contract, a
condition to ownership of land, an obligation arising out of the
ownership of land, or otherwise, and this section shall not diminish
any right of the corporation to enforce any such obligation or obtain
damages for its breach.
12431. (a) No member may be expelled or suspended, and no

membership or memberships may be terminated or suspended, except
according to procedures satisfying the requirements of this section.
An expulsion, termination or suspension not in accord with this
section shall be void and without effect.
(b) Any expulsion, suspension, or termination must be done in good
(2) It provides the giving of 15 days' prior notice of the
the last address of the members shown on the corporation's records.
are otherwise unlawful is not made valid by compliance with this
section.
expulsion, suspension or termination or arising from contract or
otherwise.
CORPORATIONS CODE
SECTION 12440-12446

(c) The ownership of an interest in real property, when a
condition of its ownership is membership in a corporation, shall be
considered consent to such membership for the purpose of this
section.

from membership, except where the member is liable for them by
contract, as a condition to ownership of an interest in real
property, as an obligation arising out of the ownership of an
interest in real property, or otherwise. Unless called to the
attention of the member and agreed to in writing by the member,
article or bylaw provisions authorizing such dues, assessments or
fees do not, of themselves, create such liability. No action shall be
brought by or on behalf of any creditor to levy or to require the
levy of dues, assessments or fees upon the members of the
corporation.
12442. A person holding a membership as pledgee or a membership as

executor, administrator, guardian, trustee, receiver or in any
representative or fiduciary capacity is not personally liable for any
unpaid balance of the purchase price of the membership, or for any
amount owing to the corporation by the member, because the membership
is so held, but the estate and funds in the hands of such fiduciary
or representative are liable and the membership subject to sale
therefor.

creditor or member by any such person or by the corporation or in
illegality practiced on it by any such person.
12445. The articles or bylaws shall prescribe:

(a) The manner of determining each member's share of the capital
of the corporation contributed by the members and, if repayable, the
time and manner for its repayment; and
(b) The manner of determining the value, if any, of the member's
interest in the corporation apart from contributed capital and the
time and manner of the corporation's purchase, if required, of such
interest from a terminated member.
12446. (a) Subject to the provisions of subdivision (b), the

provisions of Chapter 7 (commencing with Section 1500) of Title 10 of
Part 3 of the Code of Civil Procedure shall not apply to any
proprietary interest in a consumer cooperative corporation. Any
proprietary interest that would otherwise escheat to the state
pursuant to Chapter 7 (commencing with Section 1500) of Title 10 of
Part 3 of the Code of Civil Procedure shall instead become the
property of the corporation.
(b) Notwithstanding the provisions of subdivision (a), no
proprietary interest shall become the property of the corporation
under this section unless the following requirements are satisfied:
(1) The articles or bylaws shall specifically provide for the
transfer of ownership of the otherwise escheated proprietary
interests to the corporation.
(2) At least 60 days prior notice of the proposed transfer of the
proprietary interest to the corporation is given to the affected
member by first-class or second-class mail to the last address of the
member shown on the corporation's records, and by publication in a
newspaper of general circulation in the county in which the
corporation has its principal office. Notice given in the foregoing
manner shall be deemed actual notice.
(3) No proprietary interest shall become the property of the
corporation under this section if written notice objecting thereto is
received by the corporation from the affected member prior to the
date of the proposed transfer.
(c) For purposes of this section, a "proprietary interest" shall
mean and include any membership, membership certificate, membership
share, or share certificate of any class representing a proprietary
interest in, and issued by, the corporation together with all accrued
and unpaid dividends and patronage distributions relating thereto.
CORPORATIONS CODE
SECTION 12450-12454
12450. This chapter does not apply to any proceeding for winding up
and dissolution of corporations under Chapters 15 (commencing with
Section 12620), 16 (commencing with Section 12630), and 17
12451. Distributions (Section 12235) in any fiscal year shall not

exceed 15 percent, multiplied by contributions (whether by membership
fees, capital credits, or otherwise) to capital.
12452. A corporation may, subject to meeting the requirements of

Section 12453 and any additional restrictions authorized by Section
12454, purchase or redeem memberships.
12453. Neither a corporation nor any of its subsidiaries shall

purchase or redeem memberships, or make a patronage distribution to
members out of earnings of the corporation on nonmember patronage, or
make a distribution, if the corporation or the subsidiary purchasing
or redeeming memberships or making the distribution is, or as a
result thereof would be, likely to be unable to meet its liabilities
(except those whose payment is otherwise adequately provided for) as
they mature.
12454. Nothing in this chapter prohibits additional restrictions

upon the purchase or redemption of a membership, upon distributions,
or upon patronage distributions, by provision in a corporation's
articles or bylaws or agreement entered into by the corporation.
CORPORATIONS CODE
SECTION 12455
12455. (a) Any person who with knowledge of facts indicating the
the corporation for the amount so received by the person with
interest thereon at the legal rate on judgments until paid.
(b) Any person who with knowledge of facts indicating the
the corporation for the benefit of all of the creditors entitled to
institute an action under subdivision (c) for the amount so received
by the person with interest thereon at the legal rate on judgments
until paid, but not exceeding the liabilities of the corporation owed
to nonconsenting creditors at the time of the violation.
the liability to creditors arising under subdivision (b) for a
violation of Section 12452 or 12453 against any or all persons liable
by any one or more creditors of the corporation whose debts or
claims arose prior to the time of the distribution and who have not
consented thereto, whether or not they have reduced their claims to
judgment.
(d) Any person sued under subdivision (b) may implead all other
persons liable under subdivision (b) and may in the absence of fraud
by the moving party compel contribution, either in that action or in
an independent action against persons not joined in that action.
CORPORATIONS CODE
SECTION 12460-12466

without this state that is stated in or fixed in accordance with the
bylaws. If no other place is so stated or fixed, meetings of members
shall be held at the principal executive office of the corporation.
Unless prohibited by the bylaws of the corporation, if authorized by
the board of directors in its sole discretion, and subject to the
requirement of consent in clause (b) of Section 20 and those
guidelines and procedures as the board of directors may adopt,
members not physically present in person at a meeting of members may,
by electronic transmission by and to the corporation (Sections 20
and 21) or by electronic video screen communication, participate in a
meeting of members, be deemed present in person, and vote at a
meeting of members whether that meeting is to be held at a designated
place or in whole or in part by means of electronic transmission by
and to the corporation or by electronic video screen communication,
in accordance with subdivision (f).
(b) A regular meeting of members shall be held annually. In any
year in which directors are elected, the election shall be held at
the regular meeting unless the directors are chosen in some other
manner authorized by law. Any other proper business may be transacted
at the meeting.
(c) If a corporation fails to hold the regular meeting for a
the corporation or after its last regular meeting, or if the
ballot to be conducted upon the application of a member, after notice
to the corporation giving it an opportunity to be heard.
(d) The votes represented at a meeting called or by written ballot
ordered pursuant to subdivision (c) and entitled to be cast on the
business to be transacted shall constitute a quorum, notwithstanding
any provision of the articles or bylaws or in this part to the
contrary. The court may issue such orders as may be appropriate
of the meeting, the record date for determination of members entitled
to vote, and the form of notice of the meeting.
implements reasonable measures to provide members a reasonable
opportunity to participate in the meeting and to vote on matters
submitted to the members, including an opportunity to read or hear
the proceedings of the meeting concurrently with those proceedings,
and (2) if any member votes or takes other action at the meeting by
means of electronic transmission to the corporation or electronic
video screen communication, a record of that vote or action is
maintained by the corporation. Any request by a corporation to a
member pursuant to clause (b) of Section 20 for consent to conduct a
meeting of members by electronic transmission by and to the
corporation, shall include a notice that absent consent of the member

of Section 12462, that notice shall state the place, date and time of
for such action. The notice of any meeting at which directors are to
personally, by electronic transmission by the corporation, or by mail
or other means of written communication, addressed to a member at
the address of such member appearing on the books of the corporation
or given by the member to the corporation for purpose of notice; or
if no such address appears or is given, at the place where the
principal office of the corporation is located or by publication at
which the principal office is located. An affidavit of giving of any
notice or report in accordance with the provisions of this part,
executed by the secretary, assistant secretary or any transfer agent,
shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of
such member appearing on the books of the corporation is returned to
indicate the United States Postal Service is unable to deliver the
notice or report to the member at such address, all future notices or
reports shall be deemed to have been duly given without further
mailing if the same shall be available for the member upon written
demand of the member at the principal office of the corporation for a
period of one year from the date of the giving of the notice or
report to all other members.
attention of the chairman of the board, president, vice president or
held at a time fixed by the board not less than 35 nor more than 90
the record date for determination of members entitled to vote and the
form of notice.
at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more
than 45 days or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be
given to each member of record entitled to vote at the meeting.
(e) The transactions of any meeting of members however called and
duly held after regular call and notice, if a quorum is present, and
if, either before or after the meeting, each of the persons entitled
to vote, not present in person, provides a waiver of notice or
consent to the holding of the meeting or an approval of the minutes
thereof in writing. All such waivers, consents and approvals shall be
filed with the corporate records or made a part of the minutes of
the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the
part to be included in the notice but not so included, if such
members need be specified in any written waiver of notice, consent
to the holding of the meeting or approval of the minutes thereof,
unless otherwise provided in the articles or bylaws, except as
provided in subdivision (f).
(f) Any approval of the members required under Section 12362,
12364, 12373, 12502 or 12658 other than unanimous approval by those
entitled to vote, shall be valid only if the general nature of the
proposal so approved was stated in the notice of meeting or in any
written waiver of notice.
manner.
(h) Subject to the provisions of subdivision (i), and unless
prohibited by the articles or bylaws, prior to any regular or special
meeting of members, the board may authorize distribution of a
written ballot to every member entitled to vote at the meeting. Such
ballot shall set forth the action proposed to be taken at the
meeting, shall provide an opportunity to specify approval or
disapproval of the proposed action, and shall state that unless
revoked by the member voting in person at the meeting, the ballot
will be counted if received by the corporation on or before the time
of the meeting with respect to which it was sent. If ballots are so
distributed with respect to a meeting, the number of members voting
at the meeting by unrevoked written ballots shall be deemed present
at the meeting for purposes of determining the existence of a quorum
pursuant to subdivision (a) of Section 12462 but only with respect to
the proposed action referred to in the ballots. These ballots shall
be distributed in a manner consistent with the requirements of
subdivision (b) and Section 12464.
(i) Unless prohibited by the articles or bylaws, written ballots
may be distributed in a manner contemplated by subdivision (h) with
respect to the election of directors, except that no ballots may be
so distributed with respect to the election of directors if
cumulative voting is permitted pursuant to Section 12484.
12462. (a) The lesser of 250 members or members representing 5

percent of the voting power, shall constitute a quorum at a meeting
of members, but, subject to subdivisions (b) and (c), a bylaw may set
a different quorum. Any bylaw amendment to increase the quorum may
be adopted only by approval of the members (Section 12224). If a
quorum is present, the affirmative vote of the majority of the voting
power represented at the meeting, entitled to vote, and voting on
any matter shall be the act of the members unless the vote of a
greater number or voting by classes is required by this part or the
articles or bylaws.
(b) Where a corporation is authorized to conduct a meeting with a
quorum of less than one-third of the voting power, then the only
matters that may be voted upon at any regular meeting actually
attended by less than one-third of the voting power are matters
notice of the general nature of which was given, pursuant to the
first sentence of subdivision (a) of Section 12461.
division or the articles or the bylaws, the vote of the greater
number or voting by classes.
represented in person, but no other business may be transacted,
except as provided in subdivision (c).

articles or bylaws any action which may be taken at any regular or
corporation.
requirements of subdivision (b) of Section 12461 and Section 12464.
All such solicitations shall indicate the number of responses needed
to meet the quorum requirement and, with respect to ballots other
than for the election of directors, shall state the percentage of
to be counted.
by cumulative voting pursuant to Section 12484. When directors are to
be elected by written ballot and the articles or bylaws prescribe a
nomination procedure, the procedure may provide for a date for the
close of nominations prior to printing and distributing of the
written ballots.
(f) The secretary shall cause a vote to be taken by written ballot
upon any action or recommendation proposed in writing by 20 percent
of the members of the corporation.
12464. (a) Any form of written ballot distributed to 10 or more

members of a corporation with 100 or more members shall afford an
opportunity on the form of written ballot to specify a choice between
approval and disapproval of each matter or group of related matters
intended, at the time the written ballot is distributed, to be acted
upon by such written ballot, and shall provide, subject to reasonable
specified conditions, that where the person solicited specifies a
choice with respect to any such matter the vote shall be cast in
accordance therewith.
(b) In any election of directors, any form of written ballot in
which the directors to be voted upon are named therein as candidates
and which is marked by a member "withhold" or otherwise marked in a
manner indicating that the authority to vote for the election of
directors is withheld shall not be voted for the election of a
director.
written ballot and the superior court may compel compliance therewith
at the suit of any member.

officer, delegate or member, may order that such a meeting be called
or directors are.
section. However, an order under this section may also authorize the
obtaining of whatever votes and approvals are necessary for the
dissolution, merger, sale of assets or reorganization of the
corporation.
every requirement imposed by the articles, bylaws, and this part.
12466. (a) If the name signed on a ballot, consent or waiver

corresponds to the name of a member, the corporation if acting in
good faith is entitled to accept the ballot, consent, or waiver and
give it effect as the act of the member.
(b) If the name signed on a ballot, consent, or waiver does not
correspond to the record name of a member, the corporation if acting
in good faith is nevertheless entitled to accept the vote, consent,
or waiver and give it effect as the act of the member if any of the
following occur:
has been presented with respect to the vote, consent or waiver.
CORPORATIONS CODE
SECTION 12470-12477
12470. As to directors elected by members, there shall be available

to the members reasonable nomination and election procedures given
the nature, size and operations of the corporation.
12473. Where a corporation distributes any material soliciting a

vote for any nominee for director in any publication owned or
controlled by the corporation, it shall make available to each other
nominee, in the same material, an equal amount of space, with equal
prominence, to be used by the nominee for a purpose reasonably
related to the election.
12474. Upon written request by any nominee for election to the

board and the payment of the reasonable costs of mailing (including
postage), a corporation shall within 10 business days after such
request (provided payment has been made) mail to all members, or such
portion of them as the nominee may reasonably specify, any material,
which the nominee may furnish and which is reasonably related to the
election, unless the corporation within five business days after the
request allows the nominee, at the corporation's option, the rights
set forth in either paragraph (1) or (2) of subdivision (a) of
Section 12600.
12475. (a) Except as provided in subdivision (c), no corporation

may decline to publish or mail material, otherwise required to be
published or mailed on behalf of any nominee under this article, on
the basis of the content of such material.
director and which it mails or publishes pursuant to Section 12473
or 12474 but the nominee on whose behalf such material was published
or mailed shall be liable and shall indemnify and hold the
corporation, its agents, officers, directors, and employees and each
of them harmless from all demands, costs, including reasonable legal
fees and expenses, claims, damages and causes of action arising out
of such material or any such mailing or publication.
order relieving the corporation from its obligation under Section
12473 or 12474 on the ground the material will expose the moving
party to liability.
12476. Without authorization of the board, no corporation funds may

be expended to support a nominee for director after there are more
nine months thereafter if the only defect in the election,
appointment or removal is the failure to give notice as provided in
this part or in the corporation's articles or bylaws.
CORPORATIONS CODE
SECTION 12480-12485
12480. Except as provided in Sections 12314 and 12484, each member

entitled to vote shall be entitled to one vote on each matter
submitted to a vote of the members. Single memberships in which two
or more persons have an indivisible interest shall be voted as
an ajournment of the meeting unless the board fixes a new record
meeting of members.
12482. Unless otherwise provided in the articles or bylaws, if a

membership stands of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants
in common, husband and wife as community property, tenants by the
entirety, persons entitled to vote under a voting agreement or
otherwise, or if two or more persons have the same fiduciary
relationship respecting the same membership, unless the secretary of
the corporation is given written notice to the contrary and is
furnished with a copy of the instrument or order appointing them or
creating the relationship wherein it is so provided, their acts with
respect to voting shall have the following effect:
(a) If only one vote, such act binds all; or
all.
12483. (a) In advance of any meeting of members the board may

member shall, appoint inspectors of election (or persons to replace
those who so fail or refuse) at the meeting. The number of inspectors
shall be either one or three. If appointed at a meeting on the
request of one or more members, the majority of members represented
in person shall determine whether one or three inspectors are to be
appointed.
represented at the meeting, the existence of a quorum, receive votes,
ballots or consents, hear and determine all challenges and questions
in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close,
determine the result and do such acts as may be proper to conduct
the election or vote with fairness to all members.
12484. (a) Except in the case of a central organization, cumulative

voting shall not be permitted. In the case of a central
organization, if the articles or bylaws authorize cumulative voting,
directors may cumulate such member's votes and give one candidate a
repeal.
or candidates unless such candidate's name or candidates' names have
intention to cumulate votes. If any one member has given such notice,
(c) In any election of directors of a central organization by
cumulative voting, the candidates receiving the highest number of
votes are elected, subject to any lawful provision specifying
election by classes. In any other election of directors, unless
otherwise provided in the articles or bylaws, the candidates
(d) Elections for directors need not be by ballot unless a member

member or by any person who had the right to vote in the election at
corporation.
(c) The court, consistent with the provisions of this part and in
the validity, effectiveness and construction of voting agreements and
voting trusts, the validity of the issuance of memberships and the
right of persons to vote and may direct such other relief as may be
just and proper.
CORPORATIONS CODE
SECTION 12490

to require security shall be granted in an action brought by the
lesser of 100 members or 5 percent of the members.
plaintiff complains, or that plaintiff's membership thereafter
devolved upon plaintiff by operation of law from a holder who was a
holder at the time of transaction or any part thereof complained of;
and
to furnish security as hereinafter provided. The motion shall be
based upon one or both of the following grounds:
party will benefit the corporation or its members economically or
otherwise.
court shall fix the nature and amount of security, not to exceed
fifty thousand dollars ($50,000), to be furnished by the plaintiff
for reasonable expenses, including attorneys' fees, which may be
incurred by the moving party and the corporation in connection with
the action, including expenses for which the corporation may become
liable pursuant to Section 12377. A ruling by the court on the motion
shall not be a determination of any issue in the action or of the
merits thereof. The amount of the security may thereafter be
increased or decreased in the discretion of the court upon a showing
that the security provided has or may become inadequate or is
excessive, but the court may not in any event increase the total
amount of the security beyond fifty thousand dollars ($50,000) in the
aggregate for all defendants. If the court, upon any such motion,
makes a determination that security shall be furnished by the
plaintiff as to any one or more defendants, the action shall be
dismissed as to such defendant or defendants, unless the security
required by the court shall have been furnished within such
reasonable time as may be fixed by the court. The corporation and the
moving party shall have recourse to the security in such amount as
the court shall determine upon the termination of the action.
pursuant to such motion, post good and sufficient bond or bonds in
the aggregate amount of fifty thousand dollars ($50,000) to secure
the reasonable expenses of the parties entitled to make the motion,
the plaintiff has complied with the requirements of this section and
with any order for security theretofore made pursuant hereto, and any
such motion then pending shall be dismissed and no further or
additional bond or other security shall be required.
CORPORATIONS CODE
SECTION 12500-12510

as authorized by Section 12504 and, if a change in the rights of
addresses of the first directors, or the name and address of the
Section 12570.
12501. Any amendment of the articles may be adopted by a writing

signed by a majority of the incorporators so long as:
12502. (a) Except as provided in this section or Section 12503,

the members before or after the approval by the board.
to August 14, 1929.
(3) Any amendment, at a time the corporation has no members.

thereon by the provisions of the articles, if the amendment would:
(a) Materially and adversely affect the rights, privileges,
dissolution, redemption or transfer, or the obligations of that
class, in a manner different than such action affects another class;
(b) Materially and adversely affect such class as to voting,
dissolution, redemption or transfer by changing the rights,
(c) Increase the number of memberships authorized for such class;
(d) Increase the number of memberships authorized for another
class;
(e) Effect an exchange, reclassification or cancellation of all or
(f) Authorize a new class of memberships.
12504. (a) A corporation may amend its articles to change its

status to that of a nonprofit public benefit corporation, a nonprofit
mutual benefit corporation, a nonprofit religious corporation, or a
business corporation by complying with this section and the other
sections of this chapter.
(b) Except as authorized by Section 12501 or unless the
corporation has no members, an amendment to change its status to a
nonprofit public benefit corporation or a nonprofit religious
corporation shall: (1) be approved by the members (Section 12224),
and the fairness of the amendment to the members shall be approved by
the Commissioner of Corporations pursuant to Section 25142; or (2)
be approved by the members (Section 12224) in an election conducted
by written ballot pursuant to Section 12463 in which no negative
votes are cast; or (3) be approved by 100 percent of the voting
power.
filed by the type of corporation (nonprofit public benefit, nonprofit
mutual benefit, nonprofit religious, or business) into which the
corporation is changing its status.
(d) At the time of filing a certificate of amendment to change
status to a nonprofit public benefit corporation, a corporation shall
furnish an additional copy of the certificate of amendment to the
Secretary of State who shall forward that copy to the Attorney
General.
12505. (a) Upon adoption of an amendment, the corporation shall

file a certificate of amendment, which shall consist of an officers'
certificate stating:
(1) The wording of the amendment or amended articles is in
accordance with Section 12507;
(Section 12224) or the approval of 100 percent of the voting power is
required, that the amendment was approved by the required vote of
members; and
under this chapter.


means:
articles or by stating the wording thereof, shall be striken from the
articles or shall be amended to read as set forth in the
certificate.
exchange, or otherwise change outstanding memberships the amended
12508. Upon the filing of the certificate of amendment, the

articles shall be amended in accordance with the certificate and any
change, reclassification or cancellation of memberships shall be
effected, and a copy of the certificate, certified by the Secretary
of State, is prima facie evidence of the performance of the
conditions necessary to the adoption of the amendment.

subject to the expiration of the term of its corporate existence,
existence.

certificate entitled "Restated Articles of Incorporation of (insert
name of corporation)" which shall set forth the articles as amended
to the date of filing of the certificate, except that the signatures
and acknowledgments of the incorporators and any statements regarding
the effect of any prior amendment upon memberships and any
provisions of agreements of merger (other than amendments to the
articles of the surviving corporation) and the names, addresses,
signatures and acknowledgments of the first directors and of the
initial agent for service of process shall be omitted. Such omissions
are not alterations or amendments of the articles. The certificate
may also itself alter or amend the articles in any respect, in which
case the certificate must comply with Sections 12505 and 12506, as
the case may be, and Section 12507.
in any respect, it shall be approved by the board and shall be
subject to the provisions of this chapter relating to an amendment of
the articles not requiring approval of the members (Section 12224).
If the certificate does itself alter or amend the articles, it shall
be subject to the provisions of this chapter relating to the
amendment or amendments so made.
CORPORATIONS CODE
SECTION 12520-12522
12520. Any mortgage, deed of trust, pledge or other hypothecation

of all or any part of the corporation's property, real or personal,
for the purpose of securing the payment or performance of any
contract or obligation may be approved by the board. Unless the
articles or bylaws otherwise provide, no approval of the members
(Section 12224) shall be necessary for such action.
12521. (a) A corporation may sell, lease, convey, exchange,

transfer or otherwise dispose of all or substantially all of its
assets when the principal terms are:
its activities approved by the members (Section 12224) either before
or after approval by the board and before or after the transaction.
(b) Notwithstanding approval by the members (Section 12224), the
board may abandon the proposed transaction without further action by
the members, subject to the contractual rights, if any, of third
parties.
(c) Such sale, lease, conveyance, exchange, transfer or other
disposition may be made upon such terms and conditions and for such
consideration as the board may deem in the best interests of the
corporation.

(a) stating that the property described in such deed or instrument
the members (Section 12224) or all the members pursuant to this
chapter. Such certificate is prima facie evidence of the existence of
the facts authorizing such conveyance or other transfer of the
assets and conclusive evidence in favor of any purchaser or
encumbrancer for value who, without notice of any trust restriction
applicable to the property or any failure to comply therewith, in
good faith parted with value.
CORPORATIONS CODE
SECTION 12530-12540.1
12530. Any corporation may merge with another domestic corporation,

foreign corporation, or other business entity (Section 12242.5).
However, a merger with a public benefit corporation or a religious
corporation must have the prior written consent of the Attorney
General.
12531. The board of each corporation that desires to merge shall

following:
(b) The amendments, subject to Sections 12500 and 12505 to the
of a disappearing corporation, subject to subdivision (c) of Section
12302.
(e) The manner, if any, of converting memberships or securities of
the constituent corporations into memberships or securities of the
surviving corporation and, if any memberships or securities of any of
the constituent corporations are not to be converted solely into
memberships or securities of the surviving corporation, the cash,
property, rights or securities of any corporation that the holders of
those memberships or securities are to receive in exchange for the
memberships or securities, which cash, property, rights or securities
of any corporation may be in addition to or in lieu of memberships
or securities of the surviving corporation or that the memberships
are to be canceled without consideration.
(f) Other details or provisions as are desired, if any, including,
without limitation, if not prohibited by this chapter, a provision
for the payment of cash in lieu of fractional memberships or for any
other arrangement with respect thereto.
12532. Each membership of the same class of any constituent

surviving corporation or its parent or a wholly owned subsidiary of
either in a constituent corporation) shall be treated equally with
respect to any distribution of cash, property, rights or securities
unless: (a) all members of the class consent or (b) the Commissioner
of Corporations has approved the terms and conditions of the
transaction and the fairness of such terms pursuant to Section 25142.
12533. (a) The principal terms of the merger shall be approved by

the members (Section 12224) of each class of each corporation which
desires to merge. The approval by the members may be given before or
after the approval by the board.
(b) Any member of any constituent corporation who voted against
the merger may, without prior notice, but within 30 days following
the effective date of the merger, resign from membership and, in the
event of resignation, shall be:
(1) Thereafter excused from all contractual obligations to the
corporation which have not accrued prior to resignation; and
(2) Shall be entitled to the same rights as would have existed if
there had been no merger and the membership had been terminated.

chairman of its board, president or a vice president and secretary
or an assistant secretary acting on behalf of their respective
corporations.

the members under Section 12533, the surviving corporation shall file
a copy of the agreement of merger with an officers' certificate of
each constituent corporation attached stating the total number of
memberships of each class entitled to vote on the merger, and that
the principal terms of the agreement in the form attached were duly
approved by the required vote of the members. The merger and any
amendment of the articles of the surviving corporation contained in
the merger agreement shall thereupon be effective (subject to
subdivision (c) of Section 12214 and subject to the provisions of
Section 12539) and the several parties thereto shall be one
corporation. The Secretary of State may certify a copy of the merger
agreement separate from the officers' certificates attached thereto.
any of the principal terms of the agreement, by the members, as
required by Section 12533 of any constituent corporation in the same
manner as the original agreement.

constituent corporations, without further approval by the members at
any time before the merger is effective.

corporation, and the performance of the conditions necessary to the
of merger.
12539. (a) Subject to the provisions of Section 12530, the merger

of any number of corporations with any number of foreign
corporations, foreign business corporations, or domestic corporations
may be effected if the foreign corporations are authorized by the
laws under which they are formed to effect the merger. The surviving
incorporation.
(b) If the surviving corporation is a cooperative corporation, the
merger proceedings with respect to that corporation and any domestic
disappearing corporation shall conform to the provisions of this
chapter and other applicable laws of this state, but if the surviving
corporation is a foreign corporation, then, subject to the
requirements of subdivision (d) and Section 12533, the merger
(c) If the surviving corporation is a cooperative corporation, the
agreement and the officers' certificate of each constituent
corporation shall be filed as provided in Section 12535 and
thereupon, subject to subdivision (c) of Section 12214, the merger
shall be effective as to each corporation; and each foreign
disappearing corporation that is qualified for the transaction of
intrastate business shall, by virtue of the filing, automatically
surrender its right to transact intrastate business.
jurisdiction in which it is organized, but shall be effective as to
any disappearing corporation as of the time of effectiveness in the
by the surviving corporation in the state or place of its
the original.
constituent domestic corporation attached.
right to transact intrastate business as of the date of the filing
in this state regardless of the time of effectiveness as to a
domestic disappearing corporation.
12540. If an agreement of merger is entered into between a

cooperative corporation and one or more business or nonprofit
corporations, Sections 12531, 12532, 12533, 12535, and 12536 shall
apply to any constituent cooperative corporation. Sections 8011,
8011.5, 8012, and 8015 shall apply to any constituent mutual benefit
corporation. Sections 6011, 6012, 6014, and 6015 shall apply to any
constituent public benefit corporation. Sections 6014 and 6015 and
subdivisions (c) and (d) of Section 9640 shall apply to any
constituent religious corporation and Sections 1101, 1101.1, 1103,
and 1104 shall apply to any constituent business corporation.
12540.1. (a) Any one or more corporations may merge with one or
more other business entities (Section 12242.5). Subject to the
provisions of Section 12530, one or more other domestic corporations
or foreign corporations (Section 12237) may be parties to the merger.
Notwithstanding the provisions of this section, such a merger may
be effected only if:
merger.
effect the merger.
(b) Each corporation, other domestic corporation, foreign
corporation, and other business entity which desires to merge shall
approve an agreement of merger. The board and the members of each
corporation which desires to merge shall approve (Sections 12222 and
12224) the agreement of merger. The agreement of merger shall be
approved on behalf of each other constituent party by those persons
authorized or required to approve the merger by the laws under which
it is organized.
The parties desiring to merge shall be parties to the agreement of
merger and other persons, including a parent party (Section
12242.6), may be parties to the agreement of merger. The agreement of
merger shall state all of the following:
(3) The amendments, if any, subject to Sections 12500 and 12507,
to the articles of the surviving corporation, if applicable, to be
subject to subdivisions (b) and (c) of Section 12302, the same as,
or similar to, the name of a disappearing party to the merger.
(4) The manner, if any, of converting the memberships or
securities of each of the constituent corporations into shares,
memberships, interests, or other securities of the surviving party
and, if any memberships or securities of any of the constituent
corporations are not to be converted solely into shares, memberships,
interests, or other securities of the surviving party, the cash,
rights, securities, or other property which the holders of those
memberships or securities are to receive in exchange for the
memberships or securities, which cash, rights, securities, or other
property may be in addition to or in lieu of shares, memberships,
interests, or other securities of the surviving party.
Section 15678.2 or 15911.12, or, if a domestic general partnership is
a party to the merger, subdivision (a) of Section 16911, or, if a
(c) Each membership of the same class of any constituent
party to the merger or its parent or a wholly owned subsidiary of
either in another constituent corporation) shall be treated equally
with respect to any distribution of cash, property, rights, or
securities unless (i) all members of the class consent or (ii) the
commissioner has approved the terms and conditions of the transaction
and the fairness of those terms pursuant to Section 25142.
without further approval by the members (Section 12224), at any time
before the merger is effective.
merger by its chairperson of the board, president, or a vice
president and also by its secretary or an assistant secretary acting
(g) After required approvals of the merger by each constituent
certificate of each constituent domestic and foreign corporation
attached stating the total number of outstanding shares or membership
interests of each class entitled to vote on the merger (and
identifying any other person or persons whose approval is required),
that the agreement of merger in the form attached or its principal
terms, as required, were approved by that corporation by a vote of a
number of shares or membership interests of each class which equaled
or exceeded the vote required, specifying each class entitled to vote
and the percentage vote required of each class, and, if applicable,
by that other person or persons whose approval is required.
merger, subject to the provisions of subdivision (i). If a domestic
agreement) and by each foreign constituent general partnership or
foreign constituent limited liability company by one or more managers
and by each foreign constituent limited partnership by one or more
signing persons.
shareholders, members, partners, or other holders of interests of the
entitled to vote on the merger and that the agreement of merger or
its principal terms, as required, were approved by a vote of the
number of interests of each class which equaled or exceeded the vote
vote required of each class, and any other information required to be
set forth under the laws under which the constituent other business
subdivision (b) of Section 16915, and, if a domestic limited
merger.
(h) A copy of an agreement of merger certified on or after the
contained in the agreement of merger, and of the merger of the
(i) (1) The merger of domestic corporations with foreign
subdivisions (a) and (g) and this subdivision.
subdivision (g).
other business entity, except as provided in paragraph (4), the
officers' certificate of the surviving foreign corporation and of
the requirements of subdivision (g).
15911.14, subdivision (b) of Section 16915 or subdivision (a) of
filing pursuant to subdivision (g) surrender its right to transact
agreement of merger pursuant to subdivision (g) automatically has the
business entity without the necessity of the filing of a certificate
of cancellation.
CORPORATIONS CODE
SECTION 12550-12552

merger.
that these liens and trust obligations upon property of a
disappearing party shall be limited to the property affected thereby
immediately prior to the time the merger is effective.

12551. Whenever a domestic or foreign corporation or other business

entity (Section 12242.5) having any real property in this state
merges with another domestic or foreign corporation or other business
entity pursuant to the laws of this state or of the state or place
in which any constituent party to the merger was organized, and the
laws of the state or place of organization (including this state) of
any disappearing party to the merger provide substantially that the
making and filing of the agreement of merger vests in the surviving
party to the merger all the real property of any disappearing party
to the merger, the filing for record in the office of the county
property of the disappearing party to the merger is located of either
(a) a certificate prescribed by the Secretary of State, or (b) a
copy of the agreement of merger or certificate of merger, certified
by the Secretary of State or an authorized public official of the
state or place pursuant to the laws of which the merger is effected,
shall evidence record ownership in the surviving party to the merger
of all interest of the disappearing party to the merger in and to the

the merger.
CORPORATIONS CODE
SECTION 12560

CORPORATIONS CODE
SECTION 12570-12576
of its original articles and annually thereafter during the
applicable filing period in each year, file, on a form prescribed by
the Secretary of State, a statement containing: (1) the names and
complete business or residence addresses of its chief executive
officer or general manager, secretary, and chief financial officer;
and (2) the street address of its principal office in this state, if
any.
or foreign corporation which has complied with Section 1505 and whose
capacity to act as such agent has not terminated. If a natural
person is designated, the statement shall set forth the person's
complete business or residence address. If a corporate agent is
designated, no address for it shall be set forth.
calendar months. The Secretary of State shall mail a form for
months prior to the close of the applicable filing period. The form
shall state the due date thereof and shall be mailed to the last
address of the corporation according to the records of the Secretary
of State. Neither the failure of the Secretary of State to mail the
form nor the failure of the corporation to receive it is an excuse
for failure to comply with this section.
to this section.

office.
12572. If a natural person who has been designated agent for

service of process pursuant to Section 12570 dies or resigns or no
longer resides in the state or if the corporate agent for such
purpose resigns, dissolves, withdraws from the state, forfeits its
right to transact intrastate business, has its corporate rights,
powers and privileges suspended, or ceases to exist, the corporation
shall forthwith file a designation of a new agent conforming to the

12575. Any officers, directors, employees or agents of a
corporation who do any of the following are liable jointly and
severally for all the damages resulting therefrom to the corporation
or any person injured thereby who relied thereupon or to both:
notice, or document respecting the corporation or its memberships,
assets, liabilities, capital, dividends, distributions, patronage
distributions, business, earnings, or accounts which is false in any
material respect, knowing it to be false, or participate in the
making, issuance, delivery, or publication thereof with knowledge
that the same is false in a material respect.
(b) Make or cause to be made in the books, minutes, records, or
(c) Remove, erase, alter, or cancel any entry in any books or
12576. The Attorney General, upon complaint of a member, director,

or officer, that a corporation is failing to comply with the
(commencing with Section 12580) may, in the name of the people of the
residence of the chief executive officer, general manager, or
secretary, of the corporation, as set forth in the most recent
statement filed pursuant to Section 12570) notice of the complaint.
If the answer is not satisfactory, or if there is no answer within 30
days, the Attorney General may institute, maintain, or intervene in
such suits, actions, or proceedings of any type in any court or
tribunal of competent jurisdiction or before any administrative
agency for such relief by way of injunction, the dissolution of
entities, the appointment of receivers, or any other temporary,
preliminary, provisional, or final remedies as may be appropriate to
protect the rights of members or to undo the consequences of failure
to comply with such requirements. In any such action, suit or
proceeding there may be joined as parties all persons and entities
responsible for or affected by such activity.
CORPORATIONS CODE
SECTION 12580-12583

such record available in written form. For purposes of this chapter,
"written" or "in writing" includes cathode ray tube and similar
electronic communications methods.
12581. Any inspection under this chapter may be made in person or
by agent or attorney and the right of inspection includes the right
to copy and make extracts.


CORPORATIONS CODE
SECTION 12590-12594

(1) Adequate and correct books and records of account;
(2) Minutes of the proceedings of its members, board, and
the class of membership and number of membership units held by each.
12591. (a) A corporation shall notify each member yearly of the

member's right to receive a financial report pursuant to this
subdivision. Except as provided in subdivision (c), upon written
request of a member, the board shall promptly cause the most recent
annual report to be sent to the requesting member. An annual report
shall be prepared not later than 120 days after the close of the
corporation's fiscal year. Unless otherwise provided by the articles
or bylaws and if approved by the board of directors, that report and
any accompanying material sent pursuant to this section may be sent
by electronic transmission by the corporation (Section 20). That
report shall contain in appropriate detail the following:
(1) A balance sheet as of the end of that fiscal year and an
income statement and a statement of cashflows for that fiscal year.
(2) A statement of the place where the names and addresses of the
current members are located.
report, the certificate of an authorized officer of the corporation
that the statements were prepared without audit from the books and
(c) This section does not apply to corporations that do not have
more than 25 members at any time during the fiscal year.

every corporation shall furnish annually to its members and
directors a statement of any transaction or indemnification of a kind
pursuant to subdivision (c) of Section 12591, shall satisfy this
section by mailing or delivering to its members the required
subsidiary.
person described in paragraph (1) or (2).
(c) Transactions approved by the members of a corporation, under
subdivision (a) of Section 12373, are not covered transactions. For
the purpose of subdivision (b), neither a mere common directorship
nor a member-patron relationship on terms available to all members
constitutes a material financial interest.
briefly:
(1) Any covered transaction (excluding compensation of officers
and directors) during the previous fiscal year involving more than
one thousand dollars ($1,000), or which was one of a number of
covered transactions in which the same interested person had a direct
or indirect material financial interest, and which transactions in
the aggregate involved more than one thousand dollars ($1,000).
briefly the amount and circumstances of any loans, guaranties,
indemnifications, or advances aggregating more than one thousand
dollars ($1,000) paid or made during the fiscal year to any officer
or director of the corporation pursuant to Section 12377; provided
that no such report need be made in the case of a loan, guaranty, or
indemnification approved by the members under paragraph (2) of
subdivision (e) of Section 12377 or a loan or guaranty not subject to
the provisions of subdivision (a) of Section 12375.
12593. (a) The superior court of the proper county shall enforce
the duty of making and mailing or delivering the information and

CORPORATIONS CODE
SECTION 12600-12608
12600. (a) Subject to Sections 12601 and 12602 and unless the
subdivision (b):
addresses, and voting rights, at reasonable times, upon five business
demand and tender of a reasonable charge, a list of the names,
addresses, and voting rights of those members entitled to vote for
the election of directors, as of the most recent record date for
which it has been compiled or as of a date specified by the member
subsequent to the date of demand. The demand shall state the purpose
for which the list is requested. The membership list shall be made
available on or before the later of 10 business days after the demand
is received or after the date specified therein as the date as of
which the list is to be compiled.
(1) A member or members possessing 5 percent or more of the voting
power for a purpose reasonably related to the members' interest as
members. Where the corporation reasonably believes that the
information will be used for another purpose, or where it provides a
reasonable alternative pursuant to subdivision (c), it may deny the
member access to the list. In any subsequent action brought by the
member under Section 12606 the court shall enforce the rights set
forth in subdivision (a) unless the corporation proves that the
demand.
(c) The corporation may, within 10 business days after receiving a
demand under subdivision (a), deliver to the person or persons
achieving the purpose identified in the demand without providing

substantial basis, believes that the membership list, demanded by a
member or members under Section 12600, will be used for a purpose not
reasonably related to the interests as members of the person or
persons making the demand (hereinafter called the requesting parties)
or provides a reasonable alternative pursuant to subdivision (c) of
Section 12600 it may petition the superior court of the proper county
for an order setting aside the demand.
should not issue shall be filed within 10 business days after a
demand by a member or members under Section 12600 or receipt of a
written rejection by the member or members of an offer made pursuant
to subdivision (c) of Section 12600 whichever is later. The petition
10 business days after the demand or rejection under Section 12600
if filed more than 30 days after the requesting party's demand or
alternate mechanism for achieving the proper purposes of the
Section 12600 and Section 12608.
(h) The court shall award reasonable costs and expenses including
complied with a demand by a member or members under Section 12600,
nor obtained a protective order staying production of the list, or a
final order setting aside the demand, which is then in effect, the
requesting parties may petition the superior court of the proper
county for a writ of mandamus pursuant to Section 1085 of the Code of
Civil Procedure compelling the corporation to comply with the
demand. At the hearing, the court shall hear the parties summarily,
by affidavit or otherwise, and shall issue a peremptory writ of
mandamus unless it appears that the demand was not made by a member
or members possessing sufficient voting power, that the demand has
been complied with, that the corporation, pursuant to subdivision (c)
of Section 12600, made an offer which was not rejected in writing
within a reasonable time, or that a protective or final order
properly issued under subdivision (d), (f) or (g) is then in effect.
No inquiry may be made in such proceeding into the use for which the
list is sought.
The court shall award reasonable costs and expenses, including
reasonable attorneys' fees, to persons granted an order under this
subdivision.

set forth in Section 12600 where, and only where, such limitation or



demand pursuant to Section 12600 is frustrated by (a) any delay by
the corporation in complying with a demand under Section 12600 beyond
the time limits specified therein, or (b) any delay caused by the
filing of a petition under Section 12601 or Section 12602, or (c) any
delay caused by the alternative proposed under subdivision (c) of
Section 12600, the person or persons properly making the demand shall
have, in the discretion of the court, a right to obtain from the
superior court an order postponing any members' meeting previously
noticed for a period equal to the period of such delay. The members
may obtain such an order in a proceeding brought pursuant to Section
12601 upon the filing of a verified complaint in the proper county
and after a hearing, notice of which shall be given to such persons
and in such manner as the court may direct. Such right shall be in
addition to any other legal or equitable remedies to which the member
may be entitled.
12606. (a) Upon refusal of a lawful demand for inspection under

this chapter, or a lawful demand pursuant to Section 12600 or Section
court may direct.
court.
the corporation.
12607. In any action or proceeding under this article, and except

as required by Section 12601, if the court finds the failure of the

election to be held by their corporation; or
good faith believe will benefit the corporation; or
the corporation; or
as a result of said violation. In addition, a court in its discretion
of subdivision (a).
reasonable attorneys' fees in connection with such action or
proceeding.
record of all the members' names and addresses.
CORPORATIONS CODE
SECTION 12610
CORPORATIONS CODE
SECTION 12620-12629

on any one or more of the grounds specified in subdivision (b) may
be filed in the superior court of the proper county by any of the
following persons:
of subdivision (b).
thereof.
articles.
year.
its activities impaired, and the members are so divided into factions
any member or the corporation's property is being misapplied or
wasted by its directors or officers.
(c) At any time prior to the trial of the action any member or
creditor may intervene therein.
(d) This section does not apply to any corporation subject to:
(1) The Public Utilities Act (Part 1 (commencing with Section 201)
of Division 1 of the Public Utilities Code) unless an order is
obtained from the Public Utilities Commission authorizing the
corporation either (a) to dispose of its assets as provided in
Section 851 of the Public Utilities Code or (b) to dissolve.
(2) The provisions of Article 14 (commencing with Section 1010) of
Chapter 1 of Part 2 of Division 1 of the Insurance Code when the
application authorized by Section 1011 of the Insurance Code has been
filed by the Insurance Commissioner unless the consent of the
Insurance Commissioner has been obtained.
written notice of the matter or act done or omitted to be done; and

paragraph (2) of subdivision (b) of Section 12620 the court may
appoint a provisional director. The provisions of subdivision (d) of
appointed the interests of the corporation or its members will suffer
pending the hearing and determination of the complaint, upon the
application of the plaintiff, and after a hearing upon such notice to
the corporation as the court may direct and upon the giving of
security pursuant to Sections 566 and 567 of the Code of Civil
Procedure (except that the Attorney General shall not be required to
give security), the court may appoint a receiver to take over and
manage the affairs of the corporation and to preserve its property
pending the hearing and determination of the complaint for
dissolution.

require.

commence when the order for winding up is entered under Section
12624.
corporation's goodwill or going-concern value, pending a sale or

unliquidated, or sounding only in damages, and the barring from
(c) The determination of the rights of members and of all classes
of members in and to the assets of the corporation.
up and hearing thereon, the allowance, disallowance, or settlement
thereof, and the discharge of the directors or such other persons
from their duties and liabilities.
proper.
(f) The filing of any vacancies on the board which the directors
or the members are unable to fill.
has been guilty of dishonesty, misconduct, neglect, or breach of
trust in conducting the winding up or if the director is unable to
act. The court may order an election to fill the vacancy so caused,
and may enjoin, for such time as it considers proper, the reelection
of the director so removed; or the court, in lieu of ordering an
appointed.
(h) The staying of the prosecution of any suit, proceeding, or
paid.
proceedings, to wind up and dissolve, subject to conditions for the
protection of members and creditors.
matters.
(m) The disposition of assets held in charitable trust.

known address.
on their security.
established, or absolute, shall be paid into court and there remain
to be paid over to the party when the party becomes entitled thereto

directors or other persons appointed pursuant to Section 12625 and
the determination that the corporation's affairs are in condition for
it to be dissolved, the court may make an order declaring the
address of the corporation, person, or governmental agency that has
liability.
be.
(b) The court may make such additional orders and grant such
(c) Upon the making of the order declaring the corporation

forfeited by order, decree, or judgment of a court, a copy of the
CORPORATIONS CODE
SECTION 12630-12637

dissolve (1) by approval of a majority of all members (Section 12223)
12224).
dissolve:
corporation.
subdivision (b) and if the number of directors then in office is less
directors complying with subdivision (a) of Section 12351.

filed.
number of votes for the election and that the election was made by
persons holding at least a majority of the voting power.
certificate by persons representing at least a majority of the voting
power.
(b) of Section 12630, the certificate shall also set forth the
circumstances showing the corporation to be within one of the
categories described in that subdivision.
Section 12630 is made by the vote of all the members of a
corporation with members or by all members of the board of a
corporation without members and a statement to that effect is added
to the certificate of dissolution pursuant to Section 12631, the
separate filing of the certificate of election pursuant to this
section is not required.

made pursuant to paragraph (1) of subdivision (a) of Section 12630,
by the approval of a majority of all members; (2) if the election was
made pursuant to paragraph (2) of subdivision (a) of Section 12630,
by approval of the board and approval of the members; or (3) if the
election was by the board pursuant to subdivision (b) of Section
12630, by approval of the board. Thereupon a certificate evidencing
the revocation shall be signed, verified and filed in the manner
prescribed by Section 12631.
dissolve.
by persons representing at least a majority of the voting power.
(4) If the revocation was made by the approval of the board and
the approval of the members, the certificate shall so state.
shall so state.

commence upon the adoption of the resolution required by Section
12630 by the members or by the board, electing to wind up and
dissolve.
necessary to carry out its purposes, and except during such period
as the board may deem necessary to preserve the corporation's
goodwill or going-concern value pending a sale or other disposition
of its assets, or both, in whole or in part. The board shall cause
written notice of the commencement of the proceeding for voluntary
winding up to be given by mail to all its members (except no notice
need be given to the members who voted in favor of winding up and
dissolving the corporation), to all known creditors, and claimants
whose addresses appear on the records of the corporation.

corporation, or (b) a member or members possessing 5 percent or more
of the voting power, or (c) three or more creditors, and upon such
appears necessary for the protection of any parties in interest. The
court, if it assumes jurisdiction, may make such orders as to any and
all matters concerning the winding up of the affairs of the
corporation and the protection of its members and creditors as
justice and equity may require. The provisions of Chapter 15
(commencing with Section 12620) (except Sections 12620 and 12621)
shall apply to such court proceedings.

address of the depositary with which deposit has been made or such
other information as may be necessary to enable the creditor or other
be.
(b) The certificate of dissolution shall be filed and thereupon
the corporate existence shall cease, except for the purpose of
further winding up if needed. The Secretary of State shall notify the
Franchise Tax Board of the dissolution.
12636. Except as otherwise provided by law, if the term of
existence for which any corporation was organized expires without
renewal or extension thereof, the board shall terminate its
activities and wind up its affairs; and when the affairs of the
corporation have been wound up a majority of the directors shall
execute and file a certificate conforming to the requirements of
Section 12635.

requiring all interested persons to show cause why an order shall
not be made declaring the corporation duly wound up and dissolved and
shall direct that the order be served by notice to all creditors,
claimants, and members in the same manner as the notice given under
(c) Any person claiming to be interested as member, creditor, or
otherwise may appear in the proceeding at any time before the
12637. (a) A corporation in the process of winding up may dispose

of the known claims against it by following the procedure described
in this section.
deadline.
following occur:
deadline.
CORPORATIONS CODE
SECTION 12650-12663
(c) To carry out contracts and collect, pay, compromise, and
settle debts and claims for or against the corporation.
(g) To sell at public or private sale, exchange, convey, or
for an amount deemed reasonable by the board without compliance with
the provisions of Section 12521, and to execute bills of sale and
deeds of conveyance in the name of the corporation.
purposes of winding up, settling, and liquidating the affairs of the
corporation.


interested person may petition the superior court of the proper
county to determine the identity of the directors or, if there are no
directors, to appoint directors to wind up the affairs of the
corporation, after hearing upon such notice to such persons as the
court may direct.
remaining corporate assets in the manner provided in Sections 12655
and 12656.
Sections 12655 and 12656 even though all debts and liabilities have
not been paid or adequately provided for.

means:
chapter.
12655. After complying with the provisions of Section 12653 assets

transfer, or conveyance, which condition has occurred or will occur,
shall be returned, transferred, or conveyed in accordance with the
condition.
12656. After complying with the provisions of Section 12653 and

except as otherwise provided in Section 12655, assets held by a
corporation shall be disposed of on dissolution as follows:
(a) If the articles or bylaws provide the manner of disposition,
the assets shall be disposed of in that manner.
(b) If the articles or bylaws do not provide the manner of
disposition, the assets shall be distributed among the members in
accordance with their respective rights therein.
12657. Distribution may be made either in money or in property or

securities and either in installments from time to time or as a
whole, if this can be done fairly and ratably and in conformity with
the provisions of the articles and bylaws and shall be made as soon
as reasonably consistent with the beneficial liquidation of the
corporation assets.
12658. (a) If a corporation in process of winding up has more than

one class of memberships outstanding, a plan of distribution of the
memberships, obligations, or securities of any other corporation,
accordance with the liquidation rights of any class or classes as
specified in the articles or bylaws may nevertheless be adopted if
approved by (1) the board and (2) by approval by the members (Section
12224) of each class. The plan may provide that such distribution is
in complete or partial satisfaction of the rights of any of such
members upon distribution and liquidation of the assets.
the members. The board shall cause notice of the adoption of the plan
to be given by mail within 20 days after its adoption to all holders
of memberships having a liquidation preference.
12659. (a) If any members, creditors, or other persons are unknown

or fail or refuse to accept their payment or distribution in cash or
inquiry, or the existence or amount of a claim of a creditor, member,
or other person is contingent, contested, or not determined, or if
the ownership of any memberships is in dispute, the corporation may
deposit any such payment, distribution, or the maximum amount of the
claim with the Controller in trust for the benefit of those lawfully

judgment.
(c) Members who satisfy any liability under this section shall
have the right of ratable contribution from other distributees
similarly liable. Any member who has been compelled to return to the
corporation more than the member's ratable share of the amount needed
to pay the debts and liabilities of the corporation may require that
the corporation recover from any or all of the other distributees
such proportion of the amounts received by them upon the improper
distribution as to give contribution to those held liable under this
section and make the distribution of the assets fair and ratable,
according to the respective rights and preferences of the
memberships, after payment or adequate provision for payment of all
the debts and liabilities of the corporation.

defending actions by or against it, and enabling it to collect and
discharge obligations, dispose of and convey its property and
collect, and divide its assets, but not for the purpose of continuing
its activities except so far as necessary for the winding up
thereof.

undistributed assets; including, without limitation, any insurance
claims.
distributed to other persons, against those persons to the extent of
their pro rata share of the claim or to the extent of the corporate
assets distributed to them upon dissolution of the corporation,
whichever is less.
The total liability of a person under this section may not exceed
to that person upon dissolution of the corporation.
against a person to whom assets were distributed arising under this
to enforce the cause of action against that person prior to the
earlier of the following:
cause of action.
corporation.
determining liability, persons to whom assets of a dissolved
corporation are distributed may be sued in the name of the
corporation upon any cause of action against the corporation. This
section does not affect the rights of the corporation or its
creditors under Section 2009, or the rights, if any, of creditors
under the Uniform Fraudulent Transfer Act, which may arise against
persons to whom such assets are distributed.
This subdivision applies to corporations dissolved on or after
January 1, 2000. Corporations dissolved prior to that date are
(b) Summons or other process against a dissolved corporation may
be served by delivering a copy thereof to an officer, director or
person having charge of its assets or, if that person cannot be
found, to any agent upon whom process might be served at the time of
dissolution. If none of these persons can be found with due diligence
State or an assistant or deputy secretary of state.
(c) Every dissolved corporation shall survive and continue to
exist indefinitely for the purpose of being sued in any quiet title
action. Any judgment rendered in any quiet title action shall bind
each and all of its members or other persons having any equity or
other interest in that corporation, to the extent of their interest
therein, and that action shall have the same force and effect as an
action brought under the provisions of Sections 410.50 and 410.60 of
the Code of Civil Procedure. Service of summons or other process in
any quiet title action may be made as provided in Chapter 4
(d) Upon receipt of that process and the fee therefor, the
12663. Without the approval of 100 percent of the members, any

contrary provision in this part or the articles or bylaws
notwithstanding, so long as there is any lot, parcel, area, apartment
or unit for which an owners' association, created in connection with
any of the forms of development referred to in Section 11004.5 of
the Business and Professions Code, is obligated to provide
management, maintenance, preservation, or control, the following
shall apply:
(a) The owners' association or any person acting on its behalf
shall not do either of the following:
(1) Transfer all or substantially all of its assets.
(2) File a certificate of dissolution.
(b) No court shall enter an order declaring the owners'
association duly wound up and dissolved.
CORPORATIONS CODE
SECTION 12670-12679

of that delinquency to the corporation. The notice shall also
contain information concerning the application of this section, and
shall advise the corporation of the penalty imposed by Section 19141
of the Revenue and Taxation Code for failure to timely file the
required statement after notice of delinquency has been mailed by the
regulation certify the name of that corporation to the Franchise Tax
Board.
Code.
which on or prior to the date of certification pursuant to
subdivision (a) has dissolved or has been merged into another
corporation.
corporate powers, rights and privileges of which have been suspended
12570. The Secretary of State need not mail a form pursuant to
Section 12570, to a corporation the corporate powers, rights and
privileges of which have been so suspended by the Franchise Tax Board
on or prior to, and remain suspended on, the day the Secretary of
State prepares the forms for mailing.
Code.
corporation to file a statement required by Section 12570 is
excusable because of reasonable cause or unusual circumstances which
justify the failure, the Secretary of State may waive the penalty
imposed by this section and by Section 19141 of the Revenue and
Taxation Code, in which case the Secretary of State shall not certify
the name of the corporation to the Franchise Tax Board, or if
already certified, the Secretary of State shall promptly decertify
the name of the corporation.
12671. Any promoter, director, or officer of a corporation who

memberships or membership certificates with intent to defraud present
or future members or creditors is guilty of a misdemeanor punishable
by a fine of not more than one thousand dollars ($1,000) or by
imprisonment in county jail for not more than one year or by both

with dishonest or fraudulent purpose, to make any distribution of
assets, except in the case and in the manner allowed by this part,
either with the design of defrauding creditors or members or of
giving a false appearance to the value of the membership and thereby
defrauding purchasers is guilty of a crime. Each such crime is
punishable by imprisonment in a state prison, or by a fine of not
more than one thousand dollars ($1,000) or imprisonment in county
jail for not more than one year, or by both such fine and
imprisonment.
12673. (a) Every director or officer of any corporation is guilty

of a crime if such director or officer knowingly concurs in making or
fraudulently exaggerated report, prospectus, account, or statement of
operations, financial condition, or prospects, or (3) any other
paper intended to give, and having a tendency to give, a membership
in such corporation a greater or lesser value than it really
possesses.

any of the books, papers, writings, or securities belonging to the
($1,000), or both such fine and imprisonment.

person proposing to organize such a corporation who knowingly
exhibits any false, forged, or altered book, paper, voucher,
security, or other instrument of evidence to any public officer or
board authorized by law to examine the organization of such
corporation or to investigate its affairs, with intent to deceive
such officer or board in respect thereto, is punishable by
for not exceeding one year.

any corporation, whether existing or intended to be formed, with
intent to permit the document to be published and thereby to lead
officer, agent or promoter of such corporation, when in fact no such
relationship exists to the knowledge of such person, is guilty of a
misdemeanor.

other statute.
12678. Any person may be enjoined from violating the provisions of

Section 12311. Any corporation may be enjoined from carrying on
business outside of the purpose for which it was formed.
12679. Any person violating Section 12311, and any corporation

carrying on business outside the purpose for which it was formed, is
guilty of a misdemeanor punishable by a fine of five hundred dollars
($500), or by imprisonment for not more than one year, or by both
CORPORATIONS CODE
SECTION 12680

CORPORATIONS CODE
SECTION 12690-12704
12690. As used in Sections 12690 to 12704, inclusive, of this part:

(a) "New law" means Part 2 (commencing with Section 12200) of
Division 3 of Title 1 of the Corporations Code enacted by the
California Legislature during the 1981-82 Regular Session and
operative January 1, 1984.
(b) "Prior law" means Part 2 (commencing with Section 12220) of
Division 3 of Title 1 of the Corporations Code in effect on December
31, 1983.
(c) "Subject corporation" means any corporation described in
subdivision (a) of Section 12202 and subject to the prior law.
12691. (a) The new law shall apply to all corporations which are
incorporated on or after January 1, 1984, under Part 2 (commencing
with Section 12200) of this division or which are expressly governed
by Part 2 pursuant to a particular provision of this division or
other specific statutory provision.
(b) Except as otherwise expressly provided in this chapter, the
new law shall apply to all subject corporations and to all actions
taken by the directors, officers, or members of such corporations, on
or after January 1, 1984.
(c) Except as otherwise expressly provided in this chapter, all of
the sections of the new law governing acts, contracts, or other
transactions by a subject corporation or its directors, officers, or
members, shall apply only to the acts, contracts, or transactions
occurring on or after January 1, 1984, and the prior law shall govern
acts, contracts, or transactions occurring before January 1, 1984.
(d) Except as otherwise expressly provided in this chapter, any
vote or consent by the directors or members of a subject corporation
prior to January 1, 1984, in accordance with the prior law, shall be
effective in accordance with that law. If any certificate or document
is required to be filed in any public office of this state relating
to such vote or consent, it may be filed on or after January 1, 1984,
in accordance with the prior law.
12692. (a) The provisions of Sections 12310 and 12313 of the new
law relating to the contents of articles of incorporation do not
apply to subject corporations unless and until an amendment of the
it under this chapter.
(b) The amendment described in subdivision (a) may be adopted by
subject corporation to Section 12310, deleting any references to the
location of its principal office, deleting any statement of par value
or any statement regarding the number of directors, or conforming
any such statement to Section 12331 (subject to Section 12694), the
amendment shall also be approved by the members (Section 12224) if
such approval is otherwise required for the changes made.
(c) The amendment shall not name the corporation's initial agent
for service of process if a report required by Section 12570 has been
filed.
12693. Section 12320 of the new law shall apply to subject

corporations, but any statement in the articles of these corporations
prior to an amendment thereof pursuant to Section 12692, relating to
the powers of the corporation, shall not be construed as a
limitation unless it is expressly stated as such.
12694. Subdivision (a) of Section 12353 of the new law shall apply
to subject corporations, but the treasurer of these corporations
shall be deemed to be the chief financial officer unless otherwise
provided in the articles or bylaws.
12695. Section 12377 governs any proposed indemnification by a
subject corporation after January 1, 1984, whether the events upon
which the indemnification is based occurred before or after January
1, 1984. Any statement relating to indemnification contained in the
articles or bylaws of a subject corporation shall not be construed as
limiting the indemnification permitted by Section 12377, unless it
is expressly stated as so intended.

12460) and Chapter 6 (commencing with Section 12480) of the new law
shall apply to any meeting of members of a subject corporation, held
on or after January 1, 1984, and to any action by such members
pursuant to a written ballot, which becomes effective on or after
January 1, 1984, and to any vote cast at such a meeting or ballot,
given for such action, whether or not a ballot was executed by the
member prior to January 1, 1984.
(b) Notwithstanding subdivision (a), the prior law shall apply to
any meeting of members and to any vote cast at such a meeting if the
meeting was initially called for a date prior to January 1, 1984, and
notice thereof was given to members entitled to vote at the meeting.
12697. Section 12490 of the new law shall apply to actions

commenced on or after January 1, 1984, with respect to a subject
corporation. The prior law shall govern actions which are commenced
prior to January 1, 1984, but are still pending on January 1, 1984.
12698. Chapter 9 (commencing with Section 12520) and Chapter 10

(commencing with Section 12530) of the new law shall apply to
transactions consummated by a subject corporation on or after January
1, 1984, unless the approval required by the prior law has been
given prior to January 1, 1984, or has been given on or after January
1, 1984, at a meeting of members initially called for a date prior
to January 1, 1984, in which case the transaction shall be governed
by the prior law.

(commencing with Section 12650) of the new law shall apply to acts
for involuntary dissolution of a subject corporation commenced on or
after January 1, 1984. The prior law shall govern any of these
actions which are commenced prior to January 1, 1984, but are still
pending on January 1, 1984.

(commencing with Section 12650) of the new law shall apply to any
voluntary dissolution proceeding initiated with respect to a subject
corporation by the filing on or after January 1, 1984, of an election
to wind up and dissolve. The prior law shall govern any of these
proceedings so initiated prior to January 1, 1984.
12701. When any corporate agent has been designated for service of
process prior to January 1, 1984, and such designation of an agent
included a name of a city, town, or village where the corporate agent
maintained an office, service on such an agent may be effected at
agent filed pursuant to Section 1505, 6213, 8213, or 12573, or filed
pursuant to Section 3301.5, 3301.6, 6403.5, or 6403.6 as in effect
prior to January 1, 1977.
12702. Any subject corporation that existed on the first day of

January 1873, was formed under the laws of this state, and which has
not already elected to continue its existence under the prior law,
may at any time elect to continue its existence under the provisions
of this code applicable thereto, (1) by the unanimous vote of all its
directors, (2) by the vote of the members representing a majority of
the voting power of the corporation at an election held at any
annual meeting of the members or at any meeting called by the
directors for the express purpose of considering this subject, or (3)
by action of the directors upon the written consent of the members
representing a majority of the voting power of the corporation.
A certificate of the action of the directors, signed by the
directors and the secretary, shall be filed in the office of the
Secretary of State when the election is made by the unanimous vote of
the directors or upon the written consent of the members. A
certificate of the proceedings of the meeting of the members when the
election is made at any such meeting, signed by the chairman and
secretary of the meeting and a majority of the directors, shall be
filed in the office of the Secretary of State. Thereafter, the
corporation shall continue its existence under the provisions of this
code which are applicable thereto, and shall possess all the rights
and powers, and shall be subject to all the obligations,
restrictions, and limitations, prescribed thereby.
12704. If the corporate rights, privileges, and powers of a subject

prior to January 1, 1984 pursuant to the prior law, as a result of
its incorporation of the General Nonprofit Corporation Law
(commencing with Section 9000) in effect on December 31, 1979, and
the incorporation by the General Nonprofit Corporation Law of
Sections 5700 through 5908 of the prior law (Section 2300), such
sections and provisions continue to apply to such corporation until
restoration by the controller pursuant to such sections.
CORPORATIONS CODE
SECTION 13200-13208
13200. This part shall be known as "the Fish Marketing Act."
13201. This part is enacted in order to promote, foster, and

encourage the intelligent and orderly marketing of fish and fishery
products through cooperation; to eliminate speculation and waste; to
make the distribution of fish and fishery products between producer
and consumer as direct as can be efficiently done; and to stabilize
the marketing of fish and fishery products.
13202. As used in this part:

(a) "Fishery products" includes fish, crustaceans, mollusks, and
marine products for human consumption.
(b) "Member" includes members of associations without capital
stock and holders of common stock in associations organized with
shares of stock.
(c) "Association" means any corporation organized under this part.
13203. Associations shall be deemed "nonprofit," inasmuch as they

are not organized to make profit for themselves, as such, or for
their members, as such, but only for their members as producers of
fishery products.
13204. The provisions of the General Corporation Law and all powers
and rights thereunder, apply to associations, except where such
provisions are in conflict with or inconsistent with the express
provisions of this part.
13205. No association is subject in any manner to the terms of the

Corporate Securities Law and all associations may issue their
membership certificates or stock or other securities as provided in
this division without the necessity of any permit from the
Commissioner of Corporations.
13206. An association shall be deemed not to be a conspiracy nor a

combination in restraint of trade nor an illegal monopoly; nor an
attempt to lessen competition or to fix prices arbitrarily or to
create a combination or pool in violation of any law of the State;
and the marketing contracts and agreements between the association
and its members and any agreements authorized in this part shall be
considered not to be illegal nor in restraint of trade nor contrary
to the provisions of any statute enacted against pooling or
combinations.
13207. Any provisions of law which are in conflict with this part
shall not be construed as applying to associations. Any exemptions
under any laws applying to fishery products in the possession or
under the control of the individual producer shall apply similarly
and completely to such fishery products delivered by its members, in
the possession or under the control of the association.
13208. Any two or more associations may be merged into one such
constituent association or consolidated into a new association. Such
merger or consolidation shall be made in the manner prescribed by the
General Corporation Law for domestic corporations.
CORPORATIONS CODE
SECTION 13220
13220. Five or more persons, a majority of whom are residents of

this State, engaged in the production of fishery products, may form
an association, with or without shares of stock, under the provisions
of this division.
CORPORATIONS CODE
SECTION 13225-13230
13225. Articles of incorporation shall be signed, acknowledged, and

filed in the manner prescribed by the General Corporation Law for
domestic corporations.
13226. The articles of incorporation shall state:

(a) The name of the association.
(b) The purposes for which it is formed.
(c) The county where the principal office for the transaction of
business of the corporation is to be located.
(d) The number of directors thereof, which shall be not less than
three and may be any number in excess thereof; the term of office of
such directors; and the names and residence of those who are to serve
as directors for the first year, or until election and qualification
of their successors.
13227. If the association is organized with shares of stock, the

articles shall state the number of shares which may be issued and if
the shares are to have a par value, the par value of each share, and
the aggregate par value of all shares; and if the shares are to be
without par value it shall be so stated.
13228. If the shares are to be classified, the articles shall

contain a description of the classes of shares and a statement of the
number of shares of each kind or class and the nature and extent of
the preferences, rights, privileges and restrictions granted to or
imposed upon the holders of the respective classes of stock.
13229. If the association is organized without shares of stock, the

articles shall state whether the voting power and the property
rights and interest of each member are equal or unequal; and if
unequal the general rule or rules applicable to all members by which
the voting power and the property rights and interests, respectively,
of each member may be and are determined and fixed; and shall also
provide for the admission of new members who shall be entitled to
vote and to share in the property of the association with the old
members, in accordance with such general rule or rules.
13230. The articles of incorporation of any association may be

altered or amended in the manner and for the purposes prescribed by
the General Corporation Law for domestic corporations.
CORPORATIONS CODE
SECTION 13240-13251
13240. Each association shall within 30 days after its

incorporation, adopt for its government and management, a code of
by-laws, not inconsistent with this part. A majority vote of the
members or shares of stock issued and outstanding and entitled to
vote, or the written assent of a majority of the members or of
stockholders representing a majority of all the shares of stock
issued and outstanding and entitled to vote, is necessary to adopt
such by-laws and is effectual to repeal or amend any by-laws, or to
adopt additional by-laws. The power to repeal and amend the by-laws,
and adopt new by-laws, may, by a similar vote, or similar written
assent, be delegated to the board of directors, which authority may,
by a similar vote, or similar written assent, be revoked.
13241. The by-laws shall prohibit the transfer of the common stock
or membership certificates of the associations to persons not engaged
in the production of the products handled by the association.
13242. The by-laws may provide:

(a) The number of members constituting a quorum.
(b) The right of members to vote by proxy or by mail or both, and
the conditions, manner, form and effects of such votes; the right of
members to cumulate their votes and the prohibition, if desired, of
cumulative voting.
(c) The number of directors constituting a quorum.
(d) The qualifications, compensation and duties and term of office
of directors and officers and the time of their election.
(e) Penalties for violations of the by-laws.

(a) The amount of entrance, organization and membership fees, if
any; the manner and method of collection of the same; and the
purposes for which they may be used.
(b) The amount which each member shall be required to pay
annually, or from time to time, if at all, to carry on the business
of the association; the charge, if any, to be paid by each member for
services rendered by the association to him and the time of payment
and the manner of collection; and the marketing contract between the
association and its members which every member may be required to
sign.
(c) The amount of any dividends which may be declared on the stock
or membership capital, which dividends shall not exceed 8 percent
per annum and which dividends shall be in the nature of interest and
shall not affect the nonprofit character of any association organized
hereunder.

(a) The number and qualification of members of the association and
the conditions precedent to membership or ownership of common stock.
(b) The method, time and manner of permitting members to withdraw
or the holders of common stock to transfer their stock.
(c) The manner of assignment and transfer of the interest of
members and of the shares of common stock.
(d) The conditions upon which and time when membership of any
member shall cease.
(e) For the automatic suspension of the rights of a member when he
ceases to be eligible to membership in the association; and the
mode, manner and effect of the expulsion of a member.
(f) The manner of determining the value of a member's interest and
provision for its purchase by the association upon the death or
withdrawal of a member or upon the expulsion of a member or
forfeiture of his membership, or at the option of the association,
the purchase at a price fixed by conclusive appraisal by the board of
directors; and the conditions and terms for the repurchase by the
corporation from its stockholders of their stock upon their
disqualification as stockholders.
13245. The by-laws may provide for the time, place, and manner of
calling and conducting meetings of the association.
13246. The by-laws may provide that the territory in which the
association has members shall be divided into districts and that
directors shall be elected from the several districts. In such case,
the by-laws shall specify the number of directors to be elected by
each district, the manner and method of reapportioning the directors
and of redistricting the territory covered by the association.
13247. The by-laws may provide that the territory in which the
association has members shall be divided into districts, and that the
directors shall be elected by representatives or advisers, who
themselves have been elected by the members from the several
territorial districts. In such case, the by-laws shall specify the
number of representatives or advisers to be elected by each district,
the manner and method of reapportioning the representatives or
advisers and of redistricting the territory covered by the
association.
13248. The by-laws may provide that primary elections shall be held
to nominate directors. Where the by-laws provide that the territory
in which the association has members shall be divided into districts,
the by-laws may also provide that the results of the primary
elections in the various districts shall be final and shall be
ratified at the annual meeting of the association.
13249. The by-laws may provide that one or more directors may be
nominated by any public official or commission or by the other
directors selected by the members. Such directors shall represent
primarily the interest of the general public in such associations.
The directors so nominated need not be members of the association,
but shall have the same powers and rights as other directors. Such
directors shall not number more than one-fifth of the entire number
of directors.
13250. The by-laws may provide that directors shall be elected for
terms of from one to five years; provided, that at each annual
election the same fraction of the total number of directors shall be
elected as one year bears to the number of years of the term of
office.
13251. The by-laws may provide for an executive committee and may
allot to such committee all the functions and powers of the board of
directors, subject to the general direction and control of the board.
CORPORATIONS CODE
SECTION 13275-13279
13275. The affairs of the association shall be managed by a board

of not less than three directors, elected by the members from their
own number.
13276. Meetings of the board of directors may be held at any place
within or without the State fixed by a quorum thereof unless
otherwise provided in the articles of incorporation or by-laws.
13277. When a vacancy on the board of directors occurs other than

by expiration of term, the remaining members of the board, by a
majority vote, shall fill the vacancy, provided that when the by-laws
provide for an election of directors by districts, the vacancy shall
be filled by the election of a director from the district in which
the vacancy occurs; or the board of directors may call a special
meeting of the members in that district to fill the vacancy.
13278. The directors shall elect from their number a president and
one or more vice presidents. They shall also elect a secretary and a
treasurer, who need not be directors or members of the association;
and they may combine the two latter offices and unite both functions
and titles in one person. The treasurer may be a bank or any
depository and, as such, shall not be considered as an officer, but
as a function of the board of directors. In such case, the secretary
shall perform the usual accounting duties of the treasurer, excepting
that the funds shall be deposited only as and where authorized by
the board of directors. Any vacancy in any office, other than that of
director, shall be filled by the board of directors.
13279. An association may provide a fair remuneration for the time

actually spent by its officers and directors in its service and for
the service of the members of its executive committee.
CORPORATIONS CODE
SECTION 13290-13293
13290. Any member may bring charges against an officer or director

by filing them in writing with the secretary of the association,
together with a petition signed by 5 percent of the members,
requesting the removal of the officer or director in question.
13291. Except as provided in Section 13293, the removal shall be

voted upon at the next regular or special meeting of the association
and, by a vote of a majority of the members, the association may
remove the officer or director.
13292. The director or officer, against whom such charges have been
brought, shall be informed in writing of the charges previous to the
meeting and shall have an opportunity at the meeting to be heard in
person or by counsel and to present witnesses; and the person or
persons bringing the charges against him shall have the same
opportunity.
13293. If the by-laws provide for election of directors by

districts with primary elections in each district, the petition for
removal of a director shall be signed by 20 percent of the members
residing in the district from which he was elected. The board of
directors shall call a special meeting of the members residing in
that district to consider the removal of the director; and by a vote
of the majority of the members of that district, the director in
question shall be removed from office.
CORPORATIONS CODE
SECTION 13300-13304
13300. (a) Under the terms and conditions prescribed in the

by-laws, an association may admit as members, or issue common stock
to, only such persons as are engaged in the production of fishery
products to be handled by or through the association, including the
lessees and tenants of boats and equipment used for the production of
such fishery products and any lessors and landlords who receive as
rent all or part of the fish produced by such leased equipment.
(b) If a member of a nonstock association is other than a natural
person, such member may be represented by any individual duly
authorized in writing.
(c) One association may become a member or stockholder of any
other association.
13301. When a member of an association established without shares

of stock has paid his membership fee in full, he shall receive a
certificate of membership.
13302. No member shall be liable for the debts of the association

to an amount exceeding the sum remaining unpaid on his membership fee
or his subscription to the capital stock, including any unpaid
balance on any promissory note given in payment thereof.
13303. Meetings of members shall be held at the place as provided

in the by-laws; and if no provision is made, in the city where the
principal place of business is located at a place designated by the
board of directors.
13304. In case of the expulsion of a member, and where the by-laws
do not provide any procedure or penalty, the board of directors shall
equitably and conclusively appraise his property interest in the
association and shall fix the amount thereof in money, which shall be
paid to him within one year after such expulsion.
CORPORATIONS CODE
SECTION 13310-13316
13310. No association shall issue a certificate for stock to a

member until it has been fully paid for. The promissory notes of the
members may be accepted by the association as full or partial
payment. The association shall hold the stock as security for the
payment of the note; but such retention as security shall not affect
the member's right to vote. An association, in its by-laws, may limit
the amount of common stock which one member may own.
13311. One class of stock shall always be known as common stock and
voting power may be restricted to holders of common stock.
13312. There shall be printed upon each common stock certificate a

statement that the transfer thereof to any person not engaged in the
production of the products handled by the association is prohibited
by the by-laws of the association.
13313. Except as to the matters and things stated in the articles

of incorporation no distinction shall exist between classes of stock
or the holders thereof.
13314. If an association issues nonpar value stock the issuance of

such stock shall be governed by the terms of the General Corporation
Law covering the issuance of nonpar value stock in domestic
corporations.
13315. An association may, at any time, as specified in the

by-laws, except when the debts of the association exceed 50 percent
of its assets, buy in or purchase its common stock at the book value
thereof, as conclusively determined by the board of directors and pay
for it in cash within one year thereafter.
13316. Whenever an association, organized with preferred shares of

stock, purchases the stock or any property, or any interest in any
property of any person, it may discharge the obligations so incurred,
wholly or in part, by exchanging for the acquired interest, shares
of its preferred stock to an amount which at par value would equal
the fair market value of the stock or interest so purchased, as
determined by the board of directors. In that case the transfer to
the association of the stock or interest purchased shall be
equivalent to payment in cash for the shares of stock issued.
CORPORATIONS CODE
SECTION 13325-13335
13325. An association may:

Engage in any activity in connection with the marketing, selling,
preserving, harvesting, drying, processing, manufacturing, canning,
packing, grading, storing, handling, or utilization of any fishery
products produced or delivered to it by its members; or the
manufacturing or marketing of the by-products thereof; or any
activity in connection with the purchase, hiring, or use by its
members of supplies, machinery, or equipment, or in the financing of
any such activities.
13326. An association may borrow without limitation as to amount of

corporate indebtedness or liability and may make advances to
members.
13327. An association may act as the agent or representative of any

member or members in any of the two next preceding sections.
13328. An association may establish reserves and invest the funds

thereof in bonds or in such other property as may be provided in the
by-laws.
13329. An association may purchase or otherwise acquire, hold, own,

and exercise all rights of ownership in, sell, transfer, pledge, or
guarantee the payment of dividends or interest on, or the retirement
or redemption of, shares of the capital stock or bonds of any
corporation or association engaged in any related activity or in the
warehousing or handling or marketing or packing or manufacturing or
processing or preparing for market of any of the fishery products
handled by the association.
13330. An association may buy, hold and exercise all privileges or

ownership, over such real or personal property as may be necessary or
convenient for the conduct and operation of any of the business of
the association, or incidental thereto.
13331. An association may levy assessments in the manner and in the
amount provided in its by-laws.
13332. An association may do each and every thing necessary,

suitable or proper for the accomplishment of any one of the purposes
or the attainment of any one or more of the objects enumerated in
this article; or conducive to or expedient for the interest or
benefit of the association; and contract accordingly; and in addition
exercise and possess all powers, rights and privileges necessary or
incidental to the purposes for which the association is organized or
to the activities in which it is engaged; and, in addition, any other
rights, powers and privileges granted by the laws of this State to
ordinary corporations, except such as are inconsistent with the
express provisions of this act; and do any such thing anywhere.
13333. An association may use or employ any of its facilities for

any purpose; provided, the proceeds arising from such use and
employment go to reduce the cost of operation for its members; but
the fishery products of nonmembers shall not be dealt in to an amount
greater in value than such as are handled by it for its members.
13334. An association may organize, form, operate, own, control,

have an interest in, own stock of, or be a member of any other
corporation or corporations, with or without capital stock and
engaged in preserving, drying, processing, canning, packing, storing,
handling, shipping, utilizing, manufacturing, marketing, or selling
of the fishery products handled by the association, or the
by-products thereof.
If such corporations are warehousing corporations, they may issue
legal warehouse receipts to the association against the commodities
delivered by it, or to any other person and such legal warehouse
receipts shall be considered as adequate collateral to the extent of
the usual and current value of the commodity represented thereby. In
case such warehouse is licensed or licensed and bonded under the laws
of this State or the United States, its warehouse receipt delivered
to the association on commodities of the association or its members,
or delivered by the association or its members, shall not be
challeged or discriminated against because of ownership or control,
wholly or in part, by the association.
13335. Any association may, upon resolution adopted by its board of

directors, enter into all necessary and proper contracts and
agreements and make all necessary and proper stipulations, agreements
and contracts and arrangements with any other cooperative or other
corporation, association, or associations, formed in this or in any
other State, for the cooperative and more economical carrying on of
its business or any part or parts thereof. Any two or more
associations may, by agreement between them, unite in employing and
using or may separately employ and use the same personnel, methods,
means, and agencies for carrying on and conducting their respective
business.
CORPORATIONS CODE
SECTION 13350-13356
13350. An association and its members may make and execute

marketing contracts, requiring the members to sell, for any period of
time, not over 15 years, all or any specified part of their fishery
products or specified commodities exclusively to or through the
association or any facilities to be created by the association.
13351. If the members contract a sale to the association, it shall

be conclusively held that title to the products passes absolutely and
unreservedly, except for recorded liens, to the association upon
delivery or at any other time expressly and definitely specified in
the contract.
13352. The contract may provide that the association may sell or
resell the fishery products delivered by its members, with or without
taking title thereto; and pay over to its members the resale price,
after deducting all necessary selling, overhead, and other costs and
expenses, including interest on preferred stock, not exceeding 8
percent per annum, and reserves for retiring the stock, if any; and
other proper reserves; and interest not exceeding 8 percent per annum
upon common stock.
13353. The marketing contract may fix, as liquidated damages,

specific sums to be paid by the member to the association upon the
breach by him of any provision of the marketing contract regarding
the sale or delivery or withholding of fishery products; and may
further provide that the member will pay all costs, premiums for
bonds, expenses and fees, in case any action is brought upon the
contract by the association; and any such provisions shall be valid
and enforceable in the courts of this State; and such clauses
providing for liquidated damages shall be enforceable as such and
shall not be regarded as penalties.
13354. In the event of any such breach or threatened breach of such

marketing contract by a member the association shall be entitled to
an injunction to prevent the further breach of the contract and to a
decree of specific performance thereof. Pending the adjudication of
such an action and upon filing a verified complaint showing the
breach or threatened breach, and upon filing sufficient bond, the
association shall be entitled to a temporary restraining order and
preliminary injunction against the member.
13355. In any action upon such marketing agreements, it shall be

conclusively presumed that a landlord or lessor is able to control
the delivery of fishery products produced by his equipment by
tenants, or others, whose tenancy or possession or work on such
equipment or the terms of whose tenancy or possession or labor
thereon were created or changed after execution by the landlord or
lessor, of such a marketing agreement; and in such actions, the
foregoing remedies for nondelivery or breach shall lie and be
enforceable against such landlord or lessor.
13356. A contract entered into by a member of an association,

providing for the delivery to such association of products produced
or acquired by the member, may be specifically enforced by the
association to secure the delivery to it of such fishery products,
any provisions contained in the Civil Code to the contrary
notwithstanding.
CORPORATIONS CODE
SECTION 13400-13410
13400. This part shall be known and may be cited as the

"Moscone-Knox Professional Corporation Act."
13401. As used in this part:

(a) "Professional services" means any type of professional
services that may be lawfully rendered only pursuant to a license,
certification, or registration authorized by the Business and
Professions Code, the Chiropractic Act, or the Osteopathic Act.
(b) "Professional corporation" means a corporation organized under
the General Corporation Law or pursuant to subdivision (b) of
Section 13406 that is engaged in rendering professional services in a
single profession, except as otherwise authorized in Section
13401.5, pursuant to a certificate of registration issued by the
governmental agency regulating the profession as herein provided and
that in its practice or business designates itself as a professional
or other corporation as may be required by statute. However, any
professional corporation or foreign professional corporation
rendering professional services by persons duly licensed by the
Medical Board of California or any examining committee under the
jurisdiction of the board, the Osteopathic Medical Board of
California, the Dental Board of California, the California State
Board of Pharmacy, the Veterinary Medical Board, the California
Architects Board, the Court Reporters Board of California, the Board
of Behavioral Sciences, the Speech-Language Pathology and Audiology
Board, the Board of Registered Nursing, or the State Board of
Optometry shall not be required to obtain a certificate of
registration in order to render those professional services.
(c) "Foreign professional corporation" means a corporation
organized under the laws of a state of the United States other than
this state that is engaged in a profession of a type for which there
is authorization in the Business and Professions Code for the
performance of professional services by a foreign professional
corporation.
(d) "Licensed person" means any natural person who is duly
licensed under the provisions of the Business and Professions Code,
the Chiropractic Act, or the Osteopathic Act to render the same
professional services as are or will be rendered by the professional
corporation or foreign professional corporation of which he or she is
or intends to become, an officer, director, shareholder, or
employee.
(e) "Disqualified person" means a licensed person who for any
reason becomes legally disqualified (temporarily or permanently) to
render the professional services that the particular professional
corporation or foreign professional corporation of which he or she is
an officer, director, shareholder, or employee is or was rendering.
13401.3. As used in this part, "professional services" also means

any type of professional services that may be lawfully rendered only
pursuant to a license, certification, or registration authorized by
the Yacht and Ship Brokers Act (Article 2 (commencing with Section
700) of Chapter 5 of Division 3 of the Harbors and Navigation Code).
13401.5. Notwithstanding subdivision (d) of Section 13401 and any

other provision of law, the following licensed persons may be
shareholders, officers, directors, or professional employees of the
professional corporations designated in this section so long as the
sum of all shares owned by those licensed persons does not exceed 49
percent of the total number of shares of the professional corporation
so designated herein, and so long as the number of those licensed
persons owning shares in the professional corporation so designated
herein does not exceed the number of persons licensed by the
governmental agency regulating the designated professional
corporation:
(a) Medical corporation.
(1) Licensed doctors of podiatric medicine.
(2) Licensed psychologists.
(3) Registered nurses.
(4) Licensed optometrists.
(5) Licensed marriage and family therapists.
(6) Licensed clinical social workers.
(7) Licensed physician assistants.
(8) Licensed chiropractors.
(9) Licensed acupuncturists.
(10) Naturopathic doctors.
(b) Podiatric medical corporation.
(1) Licensed physicians and surgeons.
(c) Psychological corporation.
(d) Speech-language pathology corporation.
(1) Licensed audiologists.
(e) Audiology corporation.
(1) Licensed speech-language pathologists.
(f) Nursing corporation.
(g) Marriage and family therapy corporation.
(h) Licensed clinical social worker corporation.
(i) Physician assistants corporation.
(j) Optometric corporation.
(k) Chiropractic corporation.
(l) Acupuncture corporation.
(m) Naturopathic doctor corporation.
(7) Licensed physical therapists.
(9) Licensed marriage, family, and child counselors.
(n) Dental corporation.
(2) Dental assistants.
(3) Registered dental assistants.
(4) Registered dental assistants in extended functions.
(5) Registered dental hygienists.
(6) Registered dental hygienists in extended functions.
(7) Registered dental hygienists in alternative practice.
13402. (a) This part shall not apply to any corporation now in
existence or hereafter organized which may lawfully render
professional services other than pursuant to this part, nor shall
anything herein contained alter or affect any right or privilege,
whether under any existing or future provision of the Business and
Professions Code or otherwise, in terms permitting or not prohibiting
performance of professional services through the use of any form of
corporation permitted by the General Corporation Law.
(b) The conduct of a business in this state by a corporation
pursuant to a license or registration issued under any state law,
except laws relating to taxation, shall not be considered to be the
conduct of a business as a professional corporation if the business
is conducted by, and the license or registration is issued to, a
corporation which is not a professional corporation within the
meaning of this part, whether or not a professional corporation could
conduct the same business, or portions of the same business, as a
professional corporation.
13403. The provisions of the General Corporation Law shall apply to

professional corporations, except where such provisions are in
conflict with or inconsistent with the provisions of this part. A
professional corporation which has only one shareholder need have
only one director who shall be such shareholder and who shall also
serve as the president and treasurer of the corporation. The other
officers of the corporation in such situation need not be licensed
persons. A professional corporation which has only two shareholders
need have only two directors who shall be such shareholders. The two
shareholders between them shall fill the offices of president, vice
president, secretary and treasurer.
A professional medical corporation may establish in its articles
or bylaws the manner in which its directors are selected and removed,
their powers, duties, and compensation. Each term of office may not
exceed three years. Notwithstanding the foregoing, the articles or
bylaws of a professional medical corporation with more than 200
shareholders may provide that directors who are officers of the
corporation or who are responsible for the management of all medical
services at one or more medical centers may have terms of office, as
directors, of up to six years; however, no more than 50 percent of
the members of the board, plus one additional member of the board,
may have six-year terms of office.
13404. A corporation may be formed under the General Corporation

Law or pursuant to subdivision (b) of Section 13406 for the purposes
of qualifying as a professional corporation in the manner provided in
this part and rendering professional services. The articles of
incorporation of a professional corporation shall contain a specific
statement that the corporation is a professional corporation within
the meaning of this part. Except as provided in subdivision (b) of
Section 13401, no professional corporation shall render professional
services in this state without a currently effective certificate of
registration issued by the governmental agency regulating the
profession in which such corporation is or proposes to be engaged,
pursuant to the applicable provisions of the Business and Professions
Code or the Chiropractic Act expressly authorizing such professional
services to be rendered by a professional corporation.
13404.5. (a) A foreign professional corporation may qualify as a

foreign corporation to transact intrastate business in this state in
accordance with Chapter 21 (commencing with Section 2100) of Division
1. A foreign professional corporation shall be subject to the
provisions of the General Corporation Law applicable to foreign
corporations, except where those provisions are in conflict with or
inconsistent with the provisions of this part. The statement and
designation filed by the foreign professional corporation pursuant to
Section 2105 shall contain a specific statement that the corporation
is a foreign professional corporation within the meaning of this
part.
(b) No foreign professional corporation shall render professional
services in this state without a currently effective certificate of
registration issued by the governmental agency regulating the
profession in which that corporation proposes to be engaged, pursuant
to the applicable provisions of the Business and Professions Code
expressly authorizing those professional services to be rendered by a
foreign professional corporation.
(c) If the California board, commission, or other agency that
prescribes the rules or regulations governing a particular profession
either now or hereafter requires that the shareholders of the
professional corporation bear any degree of personal liability for
the acts of the corporation, either by personal guarantee or in some
other form that the governing agency prescribes, the shareholders of
a foreign corporation that has been qualified to do business in this
state in the same profession shall, as a condition of doing business
in this state, be subject, with regard to the rendering of
professional services by the professional corporation in California,
or for California residents, to the same degree of personal
liability, if any, as is prescribed by the governing agency for
shareholders of a California professional corporation rendering
services in the same profession.
(d) Each application by a foreign professional corporation to
qualify to do business in this state shall contain the following
statement:
"The shareholders of the undersigned foreign professional
corporation shall be subject, with regard to the rendering of
professional services by the professional corporation in California,
or for California residents, to the same degree of personal
liability, if any, in California as is from time to time prescribed
by the agency governing the profession in this state for shareholders
in a California professional corporation rendering services in the
same profession. This application accordingly constitutes a
submission to the jurisdiction of the courts of California to the
same extent, but only to the same extent, as applies to the
shareholders of a California professional corporation in the same
profession. The foregoing submission to jurisdiction is a condition
of qualification to do business in this state."
13405. (a) Subject to the provisions of Section 13404, a

professional corporation may lawfully render professional services in
this state, but only through employees who are licensed persons. The
corporation may employ persons not so licensed, but such persons
shall not render any professional services rendered or to be rendered
by that corporation in this state. A professional corporation may
render professional services outside of this state, but only through
employees who are licensed to render the same professional services
in the jurisdiction or jurisdictions in which the person practices.
Nothing in this section is intended to prohibit the rendition of
occasional professional services in another jurisdiction as an
incident to the licensee's primary practice, so long as it is
permitted by the governing agency that regulates the particular
profession in the jurisdiction. Nothing in this section is intended
to prohibit the rendition of occasional professional services in this
state as an incident to a professional employee's primary practice
for a foreign professional corporation qualified to render
professional services in this state, so long as it is permitted by
the governing agency that regulates the particular profession in this
state.
(b) Subject to Section 13404.5, a foreign professional corporation
qualified to render professional services in this state may lawfully
render professional services in this state, but only through
employees who are licensed persons, and shall render professional
services outside of this state only through persons who are licensed
to render the same professional services in the jurisdiction or
jurisdictions in which the person practices. The foreign professional
corporation may employ persons in this state who are not licensed in
this state, but those persons shall not render any professional
services rendered or to be rendered by the corporation in this state.
(c) Nothing in this section or in this part is intended to, or
shall, augment, diminish or otherwise alter existing provisions of
law, statutes or court rules relating to services by a California
attorney in another jurisdiction, or services by an out-of-state
attorney in California. These existing provisions, including, but not
limited to, admission pro hac vice and the taking of depositions in
a jurisdiction other than the one in which the deposing attorney is
admitted to practice, shall remain in full force and effect.
13406. (a) Subject to the provisions of subdivision (b), shares of

capital stock in a professional corporation may be issued only to a
licensed person or to a person who is licensed to render the same
professional services in the jurisdiction or jurisdictions in which
the person practices, and any shares issued in violation of this
restriction shall be void. Unless there is a public offering of
securities by a professional corporation or by a foreign professional
corporation in this state, its financial statements shall be treated
by the Commissioner of Corporations as confidential, except to the
extent that such statements shall be subject to subpoena in
connection with any judicial or administrative proceeding, and may be
admissible in evidence therein. No shareholder of a professional
corporation or of a foreign professional corporation qualified to
render professional services in this state shall enter into a voting
trust, proxy, or any other arrangement vesting another person (other
than another person who is a shareholder of the same corporation)
with the authority to exercise the voting power of any or all of his
or her shares, and any such purported voting trust, proxy or other
arrangement shall be void.
(b) A professional law corporation may be incorporated as a
nonprofit public benefit corporation under the Nonprofit Public
Benefit Corporation Law under either of the following circumstances:
(1) The corporation is a qualified legal services project or a
qualified support center within the meaning of subdivisions (a) and
(b) of Section 6213 of the Business and Professions Code.
(2) The professional law corporation otherwise meets all of the
requirements and complies with all of the provisions of the Nonprofit
Public Benefit Corporation Law, as well as all of the following
requirements:
(A) All of the members of the corporation, if it is a membership
organization as described in the Nonprofit Corporation Law, are
persons licensed to practice law in California.
(B) All of the members of the professional law corporation's board
of directors are persons licensed to practice law in California.
(C) Seventy percent of the clients to whom the corporation
provides legal services are lower income persons as defined in
Section 50079.5 of the Health and Safety Code, and to other persons
who would not otherwise have access to legal services.
(D) The corporation shall not enter into contingency fee contracts
with clients.
(c) A professional law corporation incorporated as a nonprofit
public benefit corporation that is a recipient in good standing as
defined in subdivision (c) of Section 6213 of the Business and
Professions Code shall be deemed to have satisfied all of the filing
requirements of a professional law corporation under Sections 6161.1,
6162, and 6163 of the Business and Professions Code.
13407. Shares in a professional corporation or a foreign

professional corporation qualified to render professional services in
this state may be transferred only to a licensed person, to a
shareholder of the same corporation, to a person licensed to practice
the same profession in the jurisdiction or jurisdictions in which
the person practices, or to a professional corporation, and any
transfer in violation of this restriction shall be void, except as
provided herein.
A professional corporation may purchase its own shares without
regard to any restrictions provided by law upon the repurchase of
shares, if at least one share remains issued and outstanding.
If a professional corporation or a foreign professional
corporation qualified to render professional services in this state
shall fail to acquire all of the shares of a shareholder who is
disqualified from rendering professional services in this state or of
a deceased shareholder who was, on his or her date of death,
licensed to render professional services in this state, or if such a
disqualified shareholder or the representative of such a deceased
shareholder shall fail to transfer said shares to the corporation, to
another shareholder of the corporation, to a person licensed to
practice the same profession in the jurisdiction or jurisdictions in
which the person practices, or to a licensed person, within 90 days
following the date of disqualification, or within six months
following the date of death of the shareholder, as the case may be,
then the certificate of registration of the corporation may be
suspended or revoked by the governmental agency regulating the
profession in which the corporation is engaged. In the event of such
a suspension or revocation, the corporation shall cease to render
professional services in this state.
Notwithstanding any provision in this part, upon the death or
incapacity of a dentist, any individual named in subdivision (a) of
Section 1625.3 of the Business and Professions Code may employ
licensed dentists and dental assistants and charge for their
professional services for a period not to exceed 12 months from the
date of death or incapacity of the dentist. The employment of
licensed dentists and dental assistants shall not be deemed the
practice of dentistry within the meaning of Section 1625 of the
Business and Professions Code, provided that all of the requirements
of Section 1625.4 of the Business and Professions Code are met. If an
individual listed in Section 1625.3 of the Business and Professions
Code is employing licensed persons and dental assistants, then the
shares of a deceased or incapacitated dentist shall be transferred as
provided in this section no later than 12 months from the date of
death or incapacity of the dentist.
13408. The following shall be grounds for the suspension or
revocation of the certificate of registration of a professional
corporation or a foreign professional corporation qualified to render
professional services in this state: (a) if all shareholders who are
licensed persons of such corporation shall at any one time become
disqualified persons, or (b) if the sole shareholder shall become a
disqualified person, or (c) if such corporation shall knowingly
employ or retain in its employment a disqualified person, or (d) if
such corporation shall violate any applicable rule or regulation
adopted by the governmental agency regulating the profession in which
such corporation is engaged, or (e) if such corporation shall
violate any statute applicable to a professional corporation or to a
foreign professional corporation, or (f) any ground for such
suspension or revocation specified in the Business and Professions
Code relating to the profession in which such corporation is engaged.
In the event of such suspension or revocation of its certificate of
registration such corporation shall cease forthwith to render
professional services in this state.
13408.5. No professional corporation may be formed so as to cause

any violation of law, or any applicable rules and regulations,
relating to fee splitting, kickbacks, or other similar practices by
physicians and surgeons or psychologists, including, but not limited
to, Section 650 or subdivision (e) of Section 2960 of the Business
and Professions Code. A violation of any such provisions shall be
grounds for the suspension or revocation of the certificate of
registration of the professional corporation. The Commissioner of
Corporations or the Director of the Department of Managed Health Care
may refer any suspected violation of such provisions to the
governmental agency regulating the profession in which the
corporation is, or proposes to be engaged.
13409. (a) A professional corporation may adopt any name permitted

by a law expressly applicable to the profession in which such
corporation is engaged or by a rule or regulation of the governmental
agency regulating such profession. The provisions of subdivision (b)
of Section 201 shall not apply to the name of a professional
corporation if such name shall contain and be restricted to the name
or the last name of one or more of the present, prospective, or
former shareholders or of persons who were associated with a
predecessor person, partnership or other organization or whose name
or names appeared in the name of such predecessor organization, and
the Secretary of State shall have no authority by reason of
subdivision (b) of Section 201 to refuse to file articles of
incorporation which set forth such a name; provided, however, that
such name shall not be substantially the same as the name of a
domestic corporation, the name of a foreign corporation qualified to
render professional services in this state which is authorized to
transact business in this state, or a name which is under reservation
for another corporation. The Secretary of State may require proof by
affidavit or otherwise establishing that the name of the
professional corporation complies with the requirements of this
section and of the law governing the profession in which such
professional corporation is engaged. The statements of fact in such
affidavits may be accepted by the Secretary of State as sufficient
proof of the facts.
(b) A foreign professional corporation qualified to render
professional services in this state may transact intrastate business
in this state by any name permitted by a law expressly applicable to
the profession in which the corporation is engaged, or by a rule or
regulation of the governmental agency regulating the rendering of
professional services in this state by the corporation. The
provisions of subdivision (b) of Section 201 shall not apply to the
name of a foreign professional corporation if the name contains and
is restricted to the name or the last name of one or more of the
present, prospective, or former shareholders or of persons who were
associated with a predecessor person, partnership, or other
organization, or whose name or names appeared in the name of the
predecessor organization, and the Secretary of State shall have no
authority by reason of subdivision (b) of Section 201 to refuse to
issue a certificate of qualification to a foreign professional
corporation that sets forth that name in its statement and
designation; provided, however, that such a name shall not be
substantially the same as the name of a domestic corporation, the
name of a foreign corporation qualified to render professional
services in the state, or a name that is under reservation for
another corporation. The Secretary of State may require proof by
affidavit or otherwise establishing that the name of the foreign
professional corporation qualified to render professional services in
this state complies with the requirements of this section and of the
law governing the profession in which the foreign professional
proposes to engage in this state. The statements of fact in such
affidavits may be accepted by the Secretary of State as sufficient
proof of the facts.
13410. (a) A professional corporation or a foreign professional

shall be subject to the applicable rules and regulations adopted by,
and all the disciplinary provisions of the Business and Professions
Code expressly governing the practice of the profession in this
state, and to the powers of, the governmental agency regulating the
profession in which such corporation is engaged. Nothing in this part
shall affect or impair the disciplinary powers of any such
governmental agency over licensed persons or any law, rule or
regulation pertaining to the standards for professional conduct of
licensed persons or to the professional relationship between any
licensed person furnishing professional services and the person
receiving such services.
(b) With respect to any foreign professional corporation qualified
to render professional services in this state, each such
governmental agency shall adopt rules, regulations, and orders as
appropriate to restrict or prohibit any disqualified person from
doing any of the following:
(1) Being a shareholder, director, officer, or employee of the
corporation.
(2) Rendering services in any profession in which he or she is a
disqualified person.
(3) Participating in the management of the corporation.
(4) Sharing in the income of the corporation.
CORPORATIONS CODE
SECTION 14000-14003
14000. This chapter shall be known and may be cited as the

"California Small Business Financial Development Corporation Law."
14001. The Legislature finds that:

(a) Unemployment in California is a matter of statewide concern
requiring concerted public and private action to develop employment
opportunities for the disadvantaged, youth, and unemployed persons.
(b) It is necessary to direct additional capital, general
management assistance, business education, and other resources to
encourage the development of small business opportunities,
particularly for minority, women, and disabled persons, to alleviate
unemployment.
(c) Many traditional and safety net health care providers of
Medi-Cal services are in need of financial assistance to ensure their
continued participation in Medi-Cal managed care networks and to
preserve geographic access to quality care for individuals in
underserved communities.
14002. It is the intention of the Legislature in enacting this part

to promote the economic development of small businesses by making
available capital, general management assistance, and other
resources, including loan services, personnel, and business education
to small business entrepreneurs, including women and minority owned
businesses, for the purpose of promoting the health, safety, and
social welfare of the citizens of California, to eliminate
unemployment of the economically disadvantaged of the state, and to
stimulate economic development, employment, minority group, women,
and disabled persons entrepreneurship. It is the further intent of
the Legislature to provide a flexible means to mobilize and commit
all available and potential resources in the various regions of the
state to fulfill these objectives. It is the further intent of the
Legislature that corporations operating pursuant to this law, shall
to the maximum extent feasible, coordinate with other job and
business development efforts within their region directed toward
implementing the purpose of this part. It is the further intent of
the Legislature to provide expanded resources allowing participation
by small and emerging contractors in state public works contracts.
Increased access to surety bonding resources will assist in
supporting participation by those firms in public works contracts,
and by stimulating increased participation by small firms, the state
will benefit from increased competition and lower bid costs.
14003. If any provision of this chapter or the application thereof

to any person or circumstances is held invalid, this invalidity shall
not affect other provisions or applications of the chapter which can
be given effect without the invalid provision or application, and to
this end the provisions of this chapter are severable.
CORPORATIONS CODE
SECTION 14010
14010. Unless the context otherwise requires, the definitions in

this section govern the construction of this part.
(a) "Corporation" or "the corporation" means any nonprofit
California small business financial development corporation created
pursuant to this part.
(b) "Financial institution" means banking organizations including
national banks and trust companies authorized to conduct business in
California and state-chartered commercial banks, trust companies, and
savings and loan associations.
(c) "Financial company" means banking organizations including
national banks and trust companies, savings and loan associations,
state insurance companies, mutual insurance companies, and other
banking, lending, retirement, and insurance organizations.
(d) "Expansion Fund" means the California Small Business Expansion
Fund.
(e) Unless otherwise defined by the director by regulation, "small
business loan" means a loan to a business defined as an eligible
small business as set forth in Section 121.3-10 of Part 121 of
Chapter 1 of Title 13 of the Code of Federal Regulations, including
those businesses organized for agricultural purposes that create or
retain employment as a result of the loan. From time to time, the
director shall provide guidelines as to the preferred ratio of jobs
created or retained to total funds borrowed for guidance to the
corporations.
(f) "Employment incentive loan" means a loan to a qualified
business, as defined in subdivision (h) of Section 7082 of the
Government Code, or to a business located within an enterprise zone,
as defined in subdivision (b) of Section 7072 of the Government Code.
(g) "Loan committee" means a committee appointed by the board of
directors of a corporation to determine the course of action on a
loan application pursuant to Section 14060.
(h) "Board of directors" means the board of directors of the
corporation.
(i) "Board" means the California Small Business Board.
(j) "Agency" means the Business, Transportation and Housing
Agency.
(k) "Director" means the person designated to this title by the
secretary.
(l) "Secretary" means the Secretary of Business, Transportation
and Housing Agency.
(m) "Trust fund" means the money from the expansion fund that is
held in trust by a financial institution or a financial company. A
trust fund is not a deposit of state funds and is not subject to the
requirements of Section 16506 of the Government Code.
(n) "Trust fund account" means an account within the trust fund
that is allocated to a particular small business financial
development corporation for the purpose of paying loan defaults and
claims on bond guarantees for a specific small business financial
development corporation.
(o) "Trustee" is the lending institution or financial company
selected by the office to hold and invest the trust fund. The
agreement between the agency and the trustee shall not be construed
to be a deposit of state funds.
CORPORATIONS CODE
SECTION 14020-14024
14020. There is in the agency the California Small Business Board.
14021. The board consists of the following membership:

(a) The Secretary of Business, Transportation and Housing or his
or her designee.
(b) Six members appointed by the Governor, one of whom will serve
as chair of the board, who are actively involved in the California
small business community.
(c) Two persons actively involved in the business or agricultural
communities, one appointed by the Speaker of the Assembly and one
appointed by the Senate Committee on Rules.
(d) Two Members of the Legislature or their designees, one
appointed by the Speaker of the Assembly and one appointed by the
Senate Committee on Rules, shall serve on the board insofar as it
does not conflict with the duties of the legislators.
14022. The board shall do each of the following:

(a) Advise the director on matters regarding this part.
(b) Select a vice chairperson of the board and adopt bylaws as are
required to govern the conduct and operation of the board.
(c) Approve new corporations recommended by the director, based on
an examination of each of the following:
(1) Review of the articles of incorporation and bylaws of the
corporation to determine whether they contain the provisions required
by this chapter and conform with the regulations adopted pursuant to
this part.
(2) Determination as to whether the legislative intent expressed
in Section 14002 shall be served by the proposed corporation.
(3) Determination as to whether the responsibility, character, and
general fitness of the individuals who will manage the corporation
are such as to command the confidence of the state and to warrant the
belief that the business of the proposed corporation will be
honestly and efficiently conducted in accordance with the intent and
purpose of this chapter and that they include representatives of the
financial and business community, as well as the economically
disadvantaged.
(d) Hold public hearings in order to carry out the objectives of
the agency in regards to its responsibilities as legislative advocate
and ombudsman for the state's small business community.
(e) Advise the Governor, the director, and the Small Business
Advocate regarding issues and programs affecting California's small
business community, including, but not limited to, business
innovation and expansion, export financing, state procurement,
management and technical assistance, venture capital, and financial
assistance.
14023. The public members of the board may, at the discretion of

the agency, be reimbursed per diem and travel expenses pursuant to
state law.
14024. The agency shall adopt regulations concerning the

implementation of this chapter and direct lending as emergency
regulations in accordance with Chapter 3.5 (commencing with Section
11340) of Part 1 of Division 3 of Title 2 of the Government Code. The
adoption of these regulations is an emergency and necessary for the
immediate preservation of the public peace, health and safety, or
general welfare within the meaning of subdivision (b) of Section
11346.1 of the Government Code. Notwithstanding subdivision (e) of
Section 11346.1 of the Government Code, the regulations shall not
remain in effect for more than 180 days unless the agency complies
with all provisions of Chapter 3.5 (commencing with Section 11340) of
Part 1 of Division 3 of Title 2 of the Government Code, as required
by subdivision (e) of Section 11346.1 of the Government Code. This
section also applies to any direct loan program administered by the
agency.
CORPORATIONS CODE
SECTION 14025-14028
14025. The director shall do all of the following:

(a) Administer this part.
(b) In accordance with program resources, stimulate the formation
of corporations and the use of branch offices for the purposes of
making this program accessible to all areas of the state.
(c) Expeditiously approve or disapprove the articles of
incorporation and any subsequent amendments to the articles of
incorporation of a corporation.
(d) Require each corporation to submit an annual written plan of
operation.
(e) Review reports from the Department of Financial Institutions
and inform corporations as to what corrective action is required.
(f) Examine, or cause to be examined, at any reasonable time, all
books, records, and documents of every kind, and the physical
properties of a corporation. The inspection shall include the right
to make copies, extracts, and search records.
14026. The director, following notification to the secretary, may

do all of the following:
(a) Contract for services entered into pursuant to this chapter.
(b) Hold public hearings.
(c) Act as liaison between corporations formed under this part,
other state and federal agencies, lenders, and the Legislature.
(d) Process and tabulate on a monthly basis all corporate reports.
(e) Attend board meetings.
(f) Attend and participate at corporation meetings. The director,
or his or her designee, shall be an ex officio, nonvoting
representative on the board of directors and loan committees of each
corporation. The director shall meet with the board of directors of
each corporation at least once each fiscal year, commencing July 1,
1999.
(g) Assist corporations in applying for federal grant
applications, and in obtaining program support from the business
community.
14027. The director shall have the accounts of each corporation

formed under this part audited as of the close of business on June
30, of each year. The director shall also have the portfolio of each
corporation audited a minimum of once a year. Material audit
exceptions that are not corrected by the corporation within a
reasonable period of time may result in the suspension of the
corporation pursuant to Section 14028.
14028. (a) Upon a finding by the director that irreparable harm may
occur if guarantee authority is not temporarily withdrawn from a
corporation, the director may temporarily withdraw guarantee
authority from a corporation. The notice of temporary withdrawal sent
to the corporation shall specify the reasons for the action. As used
in this section, "guarantee authority" means the authority to make
or guarantee any loan that encumbers funds in a trust fund account or
the expansion fund. The director shall make one of the
determinations specified in subdivision (c) within 30 days of the
effective date of the temporary withdrawal unless the corporation and
the director mutually agree to an extension. The corporation shall
have the opportunity to submit written material to the director
addressing the items stated in the temporary withdrawal notice. If
the director does not make any determinations within 30 days, the
temporary withdrawal shall be negated. The corporation's yearly
contract shall remain in effect during the period of temporary
withdrawal, and the corporation shall continue to receive
reimbursement of necessary operating expenses.
(b) Failure of a corporation to substantially comply with the
following may result in the suspension of a corporation:
(1) Regulations implementing the Small Business Development
Corporation Law.
(2) The plan of operation specified in subdivision (d) of Section
14025.
(3) Fiscal and portfolio requirements, as contained in the fiscal
and portfolio audits specified in Section 14027.
(4) Milestones and scope of work as contained in the annual
contract between the corporation and the agency.
(c) Pursuant to subdivision (a) or (b), the director may do the
following:
(1) Terminate the temporary withdrawal.
(2) Terminate the temporary withdrawal subject to the corporation'
s adoption of a specified remedial action plan.
(3) Temporarily withdraw, or continue to withdraw, guarantee
authority until a specified time. This determination by the director
requires a finding that the corporation has failed to comply with the
Small Business Development Corporation Law.
(4) Suspend the corporation.
(5) Suspend the corporation, with suspension stayed until the
corporation provides a remedial action plan to the director, and the
director decides whether to repeal or implement the stayed
suspension.
The determinations contained in paragraphs (4) and (5) require a
finding that irreparable harm will occur unless the corporation is
suspended.
(d) In considering a determination regarding the recommended
suspension and possible remedial action plans, the director shall
consider, along with other criteria as specified in subdivision (b),
the corporation's history and past performance.
(e) Upon suspension of a corporation, the director shall transfer
all funds, whether encumbered or not, in the trust fund account of
the suspended corporation into either the expansion fund or
temporarily transfer the funds to another corporation.
(f) If the director decides to take any action against the
corporation pursuant to paragraphs (2) to (5), inclusive, of
subdivision (c), the corporation shall be notified of the action 10
days before the effective date of the action. The corporation shall
have the right to appeal the director's decision to the board within
that 10-day period by sending notice to the director and to the chair
of the board. Once the director receives notice that the action is
being appealed, the director's action shall be stayed except for
temporary withdrawal of guarantee authority. Upon receipt of the
notice, the director shall schedule a properly noticed board meeting
within 30 days. The board may elect to take any of the actions listed
in subdivision (g). The temporary withdrawal of corporation
guarantee authority shall remain in effect until the board issues its
decision.
(g) Pursuant to subdivision (f), the board may do any of the
following:
(1) Terminate the action taken by the director.
(2) Modify the action taken by the director subject to the
adoption by the corporation of a specified remedial action plan.
(3) Affirm the action taken by the director.
(h) Following suspension, the corporation may continue its
existence as a nonprofit corporation pursuant to the Nonprofit Public
Benefit Corporation Law (Part 2 (commencing with Section 5110) of
Division 2) but shall no longer be registered with the Secretary of
State as a small business development corporation. A corporation
shall not enjoy any of the benefits of a small business development
corporation following suspension.
(i) The funds in the trust fund account of a corporation under
temporary withdrawal shall be transferred to the expansion fund. Upon
termination of the temporary withdrawal, unless the termination is
caused by suspension, the funds of the corporation that were
transferred to the expansion fund from the trust fund account shall
be returned to the corporation's trust fund account, notwithstanding
Section 14037. While the funds of a corporation's trust fund account
reside in the expansion fund, use of the principal on the funds shall
be governed by the implementing regulations specifying use of funds
in the expansion fund. Interest on the funds moved from a corporation'
s trust fund account upon temporary withdrawal shall be limited to
payment of the corporation's administrative expenses, as contained in
the contract between the corporation and the agency.
CORPORATIONS CODE
SECTION 14030-14044
14030. (a) There is hereby created in the State Treasury the

California Small Business Expansion Fund. All or a portion of the
funds in the expansion fund may be paid out, with the approval of the
Department of Finance, to a lending institution or financial company
that will act as trustee of the funds. The expansion fund and the
trust fund shall be used to pay for defaulted loan guarantees issued
pursuant to Article 9 (commencing with Section 14070), administrative
costs of corporations, and those costs necessary to protect a real
property interest in a defaulted loan or guarantee. The amount of
guarantee liability outstanding at any one time shall not exceed five
times the amount of funds on deposit in the expansion fund plus any
receivables due from funds loaned from the expansion fund to another
fund in state government as directed by the Department of Finance
pursuant to a statute enacted by the Legislature, including each of
the trust fund accounts within the trust fund.
(b) This section shall remain in effect only until January 1,
2013, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2013, deletes or extends
that date.
14030. (a) There is hereby created in the State Treasury the

California Small Business Expansion Fund. All or a portion of the
funds in the expansion fund may be paid out, with the approval of the
Department of Finance, to a lending institution or financial company
that will act as trustee of the funds. The expansion fund and the
trust fund shall be used to pay for defaulted loan guarantees issued
pursuant to Article 9 (commencing with Section 14070), administrative
costs of corporations, and those costs necessary to protect a real
property interest in a defaulted loan or guarantee. The amount of
guarantee liability outstanding at any one time shall not exceed four
times the amount of funds on deposit in the expansion fund plus any
receivables due from funds loaned from the expansion fund to another
fund in state government as directed by the Department of Finance
pursuant to a statute enacted by the Legislature, including each of
the trust fund accounts within the trust fund, unless the director
has permitted a higher leverage ratio for an individual corporation
(b) This section shall become operative on January 1, 2013.
14030.1. (a) There is hereby created in the State Treasury the

Small Business Disaster Recovery Loan Loss Reserve Account, as part
of the expansion fund. This account shall be used to pay for
unrecovered losses resulting from loan guarantees issued pursuant to
subdivision (a) of Section 14075 and subdivision (b) of this section
and disaster loan guarantees issued prior to the effective date of
this section that are in default. Any lending institution that issues
a low-interest loan that is guaranteed by resources in this account
shall be fully reimbursed for the guaranteed portion of principal and
interest that result from a loan or loans that are in default. If
there are insufficient funds in this account to fully satisfy all
claimants, the full faith of the resources in the General Fund are
pledged to satisfy the obligations of this account. This account may
only guarantee as much loan dollar value as is specifically
authorized by the Director of Finance with the concurrence of the
Governor. This account shall receive all moneys transferred pursuant
to Section 14037.5, and any unencumbered balances transferred to the
California Small Business Expansion Fund pursuant to Chapters 11 and
12 of the Statutes of 1989, First Extraordinary Session, and Chapter
1525 of the Statutes of 1990, as of July 1, 1992.
(b) The Governor should utilize this authority to prevent business
insolvencies and loss of employment in an area affected by a state
of emergency within the state and declared a disaster by the
President of the United States, or by the Administrator of the United
States Small Business Administration, or by the United States
Secretary of Agriculture or declared to be in a state of emergency by
the Governor of California.
14030.2. (a) The director may establish accounts within the

expansion fund for loan guarantees and surety bond guarantees,
including loan loss reserves. Each account is a legally separate
account, and shall not be used to satisfy loan or surety bond
guarantees or other obligations of another corporation. The director
shall recommend whether the expansion fund and trust fund accounts
are to be leveraged, and if so, by how much. Upon the request of the
corporation, the director's decision may be repealed or modified by a
board resolution.
(b) Annually, not later than January 1 of each year commencing
January 1, 1996, the director shall prepare a report regarding the
loss experience for the expansion fund for loan guarantees and surety
bond guarantees for the preceding fiscal year. At a minimum, the
report shall also include data regarding numbers of surety bond and
loan guarantees awarded through the expansion fund, including
ethnicity and gender data of participating contractors and other
entities, and experience of surety insurer participants in the bond
guarantee program. The director shall submit that report to the
Secretary of Business, Transportation and Housing for transmission to
the Governor and the Legislature.
14032. All money deposited in the expansion fund is hereby

continuously appropriated, without regard to fiscal years, for the
purposes of this article.
14033. The state shall not be liable or obligated in any way beyond
the state money which is allocated in the expansion fund from moneys
from the General Fund moneys appropriated for such purposes.
14034. (a) The director at his or her discretion, with the approval
of the Director of Finance, may request the trustee to invest those
funds in the trust fund in any of the securities described in Section
16430 of the Government Code. Returns from these investments shall
be deposited in the expansion fund and shall be used to support the
programs of this part.
(b) Any investments made in securities described in Section 16430
of the Government Code shall be governed by the statement of
investment policy prepared by the Treasurer pursuant to subdivision
(a) of Section 16481.2 of the Government Code.
14036. The expansion fund and trust fund are created solely for the
purpose of receiving state, federal, or local government money, and
other public or private money to make loans, guarantees, and
restricted investments pursuant to this article. Funds in the
expansion fund may be allocated by the director, with the approval of
the Department of Finance, to the trust fund accounts.
14037. (a) The state shall not be liable or obligated in any way
beyond the state money that is allocated and deposited in the trust
fund account from state money and that is appropriated for these
purposes.
(b) The director may reallocate funds held within a corporation's
trust fund account. The director shall reallocate funds based on
which corporation is most effectively using its guarantee funds. If
funds are withdrawn from a less effective corporation as part of a
reallocation, the office shall make that withdrawal only after giving
consideration to that corporation's fiscal solvency, its ability to
honor loan guarantee defaults, and its ability to maintain a viable
presence within the region it serves. Reallocation of funds shall
occur no more frequently than once per fiscal year. Any decision made
by the director pursuant to this subdivision may be appealed to the
board. The board has authority to repeal or modify any decision to
reallocate funds.(c) This section shall remain in effect only until
January 1, 2013, and as of that date is repealed, unless a later
enacted statute, that is enacted before January 1, 2013, deletes or
extends that date.
14037. (a) The state shall not be liable or obligated in any way
beyond the state money that is allocated and deposited in the trust
fund account from state money and that is appropriated for these
purposes.
(b) The director may reallocate funds held within a corporation's
trust fund account.
(1) The director shall reallocate funds based on which corporation
is most effectively using its guarantee funds. If funds are
withdrawn from a less effective corporation as part of a
reallocation, the office shall make that withdrawal only after giving
consideration to that corporation's fiscal solvency, its ability to
honor loan guarantee defaults, and its ability to maintain a viable
presence within the region it serves. Reallocation of funds shall
occur no more frequently than once per fiscal year. Any decision made
by the director pursuant to this subdivision may be appealed to the
board. The board has authority to repeal or modify any decision to
reallocate funds.
(2) The director may authorize a corporation to exceed the
leverage ratio specified in Section 14030, subdivision (b) of Section
14070, and subdivision (a) of Section 14076 pending the annual
reallocation of funds pursuant to this section. However, no
corporation shall be permitted to exceed an outstanding guarantee
liability of more than five times its portion of funds on deposit in
the expansion fund.
(c) This section shall become operative on January 1, 2013.
14037.5. The Director of Finance, with the approval of the

Governor, may transfer moneys in the Special Fund for Economic
Uncertainties to the Small Business Expansion Fund for use as
authorized by the director, in an amount necessary to make loan
guarantees pursuant to Chapter 1 (commencing with Section 14000) of
Part 5 of Division 3 of Title 1 of the Corporations Code.
14037.7. Within 60 days of the conclusion of the period for

guaranteeing loans under any small business disaster loan guarantee
program conducted for a disaster as authorized by Section 8684.2 of
the Government Code or Section 14075, the agency shall provide a
report to the Legislature on loan guarantees approved and rejected by
gender, ethnic group, type of business and location, and each
participating loan institution.
14038. (a) The funds in the expansion fund shall be paid out to
trust fund accounts by the Treasurer on warrants drawn by the
Controller and requisitioned by the director, pursuant to the
purposes of this chapter. The director may transfer funds allocated
from the expansion fund to accounts, established solely to receive
the funds, in lending institutions designated by the office to act as
trustee. The lending institutions so designated shall be approved by
the state for the receipt of state deposits. Interest earned on the
trust fund accounts in lending institutions may be utilized by the
corporations pursuant to the purposes of this chapter.
(b) Except as specified in subdivision (c), the director shall
allocate and transfer money to trust fund accounts based on
performance-based criteria. The criteria shall include, but not be
limited to, the following:
(1) The default record of the corporation.
(2) The number and amount of loans guaranteed by a corporation.
(3) The number and amount of loans made by a corporation if state
funds were used to make those loans.
(4) The number and amount of surety bonds guaranteed by a
corporation.
Any decision made by the director pursuant to this subdivision may
be appealed to the board within 15 days of notice of the proposed
action. The board may repeal or modify any reallocation and transfer
decisions made by the director.
(c) The criteria specified in subdivision (b) shall not apply to a
corporation that has been in existence for five years or less. The
director shall develop regulations specifying the basis for
transferring account funds to those corporations that have been in
existence for five years or less.
14039. Pursuant to this section and the regulations, the state has
residual interest in the funds deposited by the state to a trust fund
account and to the return on these funds from investments. On
dissolution or suspension of the corporation, these funds shall be
withdrawn by the director from the trust fund account and returned to
the expansion fund or temporarily transferred to another trust fund
account. This provision shall be contained in the trust instructions
to the trustee.
14040. Each trust fund account shall consist of a loan guarantee

account, and, upon recommendation by the director, a bond guarantee
account, each of which is a legally separate account, and the assets
of one account shall not be used to satisfy loan guarantees or other
obligations of another corporation. Not more than one-third of a
trust fund account shall be allocated to a bond guarantee account. No
corporation shall use trust fund accounts to secure a corporate
indebtedness. State funds deposited in the trust fund accounts, with
the exception of guarantees established pursuant to this chapter,
shall not be subject to liens or encumbrances of the corporation or
its creditors.
14041. (a) Except as provided in subdivisions (c) and (d) of

Section 14070, the trust fund account, shall be used solely to make
loans, guarantee bonds, and guarantee loans, approved by the
corporation, that meet the California Small Business Development
Corporation Law loan criteria. The state shall not be liable or
obligated in any way as a result of the allocation of state money to
a trust fund account beyond the state money that is allocated and
deposited in the fund pursuant to this chapter, and that is not
otherwise withdrawn by the state pursuant to this chapter.
(b) A summary of all loans and bonds to which a state guarantee is
attached shall be submitted to the director upon execution of the
loan agreement and periodically thereafter.
(c) A summary of all loans made by a corporation shall be
submitted to the director upon execution of the loan agreement and
periodically thereafter.
14043. The financial institution that is to act as trustee of the

trust fund shall be designated after review by the director. The
corporation shall not receive money on deposit to support guarantees
issued under the provisions of this chapter without the approval of
the director.
14044. (a) As of July 28, 2009, notwithstanding any other provision

of this chapter, a total of eight million three hundred thousand
dollars ($8,300,000) of state money in the expansion fund, or the
trust fund, or both, as determined by the Director of Finance, shall
not be available to corporations or to the state for any purposes
authorized by this chapter, and shall instead revert to the General
Fund.
(b) For purposes of this section, "state money" means money that
can be reverted to the General Fund.
(c) This section shall become inoperative as of the date upon
which the reversion pursuant to subdivision (a) is completed, and
shall be repealed on January 1 of the next succeeding calendar year.
CORPORATIONS CODE
SECTION 14045-14052
14045. Upon approval by the director to become a corporation, the

entity shall adopt or amend its articles of incorporation to comply
with the following:
(a) The name of the corporation shall include the words "small
business financial development corporation," except for those
corporations formed pursuant to this part prior to 2002, which may
also be called "small business development corporations," or those
formed prior to 1985, which may also be called "rural or urban
development corporations."
(b) The purposes for which the corporation is formed, which shall
be those specified in Section 14002. This requirement shall not be
deemed to preclude a statement of powers.
(c) A geographical description of the corporation's service area.
(d) The name and addresses of seven or more persons who are to act
in the capacity of directors until the selection of their
successors.
(e) That the corporation is organized pursuant to the California
Small Business Financial Development Corporation Law.
14046. If the board recommends acceptance upon the basis of the

facts disclosed by the investigation provided by subdivision (d) of
Section 14022 and finds that the proposed incorporation meets all the
requirements of this chapter, the director shall approve the
articles of incorporation and endorse the approval thereon and
forward the same to the Secretary of State for his or her approval
and filing. Likewise, the director shall recommend approval or
disapproval of all amendments to the articles. The director shall
endorse the approval on the amendatory document before the document
is forwarded to the Secretary of State for his or her approval and
filing.
14047. The corporation's existence as a small business development

corporation begins upon the filing of the articles with the Secretary
of State and continues perpetually, unless otherwise expressly
provided for by law.
14048. Any request for proposal for selection of a corporation
shall require the winning bidder to adopt or amend its bylaws to
include provisions governing the election and qualification of
directors; the establishment and functions of loan committees of the
corporation; and the method of selecting the representative of the
corporation on the board.
The bylaws shall provide for removal of officers only by a
two-thirds vote of the directors of the corporation.
14049. Each corporation shall have provisions establishing a

grievance procedure for employees, clients, or potential clients, to
appeal a decision or obtain redress of an action done by the staff or
loan committee of the corporation. The procedures shall be
established in writing during the probationary period of a new
corporation.
14050. The board may authorize the establishment of a new

corporation using a request for proposal process.
14051. The Nonprofit Public Benefit Corporation Law (Part 2

(commencing with Section 5110) of Division 2 of this title) applies
to corporations formed under this chapter, except as to matters
otherwise provided for in this chapter.
14052. For six months following the establishment of a corporation,

commencing upon filing of the articles of incorporation with the
Secretary of State, a corporation shall be on probation. While on
probation, a corporation may be suspended if suspension is
recommended by the director. This suspension is nonappealable and not
subject to the procedures for suspension applicable to a corporation
not on probation.
CORPORATIONS CODE
SECTION 14055-14060.6
14055. The corporate powers of a corporation shall be exercised by

the board of directors.
14056. A request for proposal for selection of a corporation shall

require the winning bidder to adopt or amend its bylaws to state
that:
(a) A person may not serve on a board of directors who is not a
resident of or person conducting business in the service area
described in the articles of incorporation.
(b) Each board of directors shall include representatives from all
of the following:
(1) The financial community.
(2) The business community.
(3) The economically disadvantaged.
(c) Not more than one employee of the corporation may serve on the
board of directors at any one time.
(d) A person who has a financial interest related to a matter over
which the board has authority may not make, participate in making,
or in any way attempt to influence that matter.
14057. If any director ceases to meet the qualifications

established in Section 14056, he or she shall immediately vacate his
or her position as a director and such position shall be deemed
vacant.
14058. If any vacancy occurs in the elective membership of the

board of directors through death, resignation, or otherwise, the
remaining directors shall elect a person representing the appropriate
category to fill the vacancy for the unexpired term.
14059. Unless delegated to its loan committee, the corporation's

board of directors, upon a recommendation from its loan committee:
(a) Shall emphasize consideration to applications that will
increase employment of disadvantaged, disabled, or unemployed
persons, or increase employment of youth residing in areas of high
youth unemployment and high youth delinquency.
(b) Shall give consideration to applications from traditional and
safety-net providers of Medi-Cal services that will promote access to
quality medical care for individuals enrolled in Medi-Cal managed
health care networks that are contracting with or owned or operated
by a county board of supervisors, a county health commission or a
county health authority organized pursuant to Sections 14018.7,
14087.31, 14087.35, 14087.36, 14087.38 or 14087.9605 of the Welfare
and Institutions Code.
(c) Shall not grant a loan or guarantee unless it determines that
the conditions of Section 14071 are satisfied.
14060. (a) A corporation shall establish one or more loan

committees, each of which shall be composed of five or more persons,
a majority of whom shall be experienced in banking and lending
operations.
(b) A loan committee shall review applications to the corporation
for a loan or guarantee and shall do each of the following:
(1) Determine the feasibility of the proposed transaction. The
loan committee shall recommend approval of the application only upon
a determination that there is a reasonable chance that the loan will
be repaid.
(2) On the basis of that determination, recommend to the board of
directors any action that the loan committee deems appropriate under
the circumstances, or, in the event that approval authority has been
delegated to the loan committee by the board of directors, approve or
disapprove the loan application.
(c) A loan committee shall expeditiously act to accept or reject
loan applications.
(d) A person who has a financial interest related to a matter over
which the loan committee has authority may not make, participate in
making, or in any way attempt to influence that matter.
14060.5. State funds may not be used to finance an expense incurred

by a corporation in a location not approved pursuant to a statewide
plan. The prohibition against use of state funds also applies to the
location of satellite offices, and the area served from a corporation
office.
14060.6. (a) The Legislature finds and declares that the Small
Business Loan Guarantee Program has enabled participating small
businesses that do not qualify for conventional business loans or
Small Business Administration loans to secure funds to expand their
businesses. These small businesses would not have been able to expand
their businesses in the absence of the program. The program has also
provided valuable technical assistance to small businesses to ensure
growth and stability. The study commissioned by Section 14069.6, as
added by Chapter 919 of the Statutes of 1997, documented the return
on investment of the program and the need for its services. The value
of the program has also been recognized by the Governor through
proposals contained in the May Revision to the Budget Act of 2000 for
the 2000-01 fiscal year.
(b) Notwithstanding Section 14060.5, the Business, Transportation
and Housing Agency shall establish new small business financial
development corporations pursuant to the procedures otherwise
established by this chapter in the following areas:
(1) San Jose.
(2) Santa Ana.
(3) San Fernando Valley.
(4) Ontario.
(c) Upon an appropriation in the annual Budget Act for this
purpose, the Secretary of Business, Transportation and Housing shall
establish a small business financial development corporation in
southeast Los Angeles.
(d) Each of the small business financial development corporations,
upon the recommendation of the board and at least once each year,
shall make a presentation and overview of the corporation's business
operations to the board.
CORPORATIONS CODE
SECTION 14061-14069.6
14061. Every corporation shall provide for and maintain a central

staff to perform all administrative requirements of the corporation
including all those functions required of a corporation by the
director.
14062. Reasonable costs incurred by a corporation in the creation

and maintenance of a central staff shall be paid to the corporation
from state funds including a portion of the interest earned on the
expansion fund and the corporation's trust fund account, if the
corporation has a trust fund account, otherwise, on the expansion
fund.
14064. The use of state funds paid out to the trust fund and the
return on those funds from investment pursuant to Section 14038 is
conditional pursuant to Sections 14028 and 14039. Each corporation
shall enter into a written signed agreement with the state at the
beginning of each fiscal year. The agreement shall govern the
activities in which the corporations engage, the investment of state
funds and its return, and the budgeted administrative expenses the
corporations may incur. In the event the state and corporation do not
reach an agreement, or the state finds the corporation has violated
the terms of an active agreement, the state may take action under
Sections 14028 and 14039 or other action as appropriate. In the event
the state and corporation do not reach agreement or the state finds
the corporation has violated the terms of an active agreement, the
corporation shall have no authority to withdraw or encumber the trust
fund or the return of those funds by the issuance of guarantees, by
incurring expenses against the fund and its return in any manner
whatsoever, and the state may take action under Sections 14028 and
14039 or other action as appropriate. Any guarantee or other
encumbrance made by the corporation in violation of this section
shall be null and void, and neither the state nor the trust fund will
be liable therefor.
14065. The corporations shall report to the director, or his or her

designated representative, all statistical and other reports
required by this part, responses to audit reports, budget
requirements, invoices submitted for payment by the state, and
information concerning loans made or guaranteed.
14066. The corporation shall make a report to the director, as of

the close of business on June 30, of each year describing the
corporation's activities and any additional information requested by
the director, on or before August 1 of each year.
14067. The office may establish a program through which the

corporations may assist small farms and rural and
agricultural-related businesses with respect to financing and other
assistance.
14068. To implement its responsibilities, the corporation shall
undertake a program that shall include, but not be limited to, the
following:
(a) Develop and implement a program of outreach to low-resource
businesses. The corporations located in rural areas shall give
priority to low-resource farmers, rural, and agriculturally related
businesses.
(b) Work with other organizations and lenders to locate, identify,
and assist those unable to obtain credit through conventional
sources because of reasons such as low equity, inadequate collateral,
unacceptable legal structure (such as a co-op or nonprofit
organization), management inadequacies, and language problems.
(c) To the extent possible, bring all possible financial resources
(low-interest lenders, BIDCOs, MESBICs, other guarantors, etc.) to
bear on borrower's problems.
(d) Provide assistance to businesses receiving loans or guarantees
that will maximize the probability of loan repayment.
(e) Develop and implement a program for increasing program
resources through private sector involvement and nonstate funds.
(f) Develop a program for collecting and liquidating defaulted
loans so that the corporations can qualify to become full-service
lenders under the Small Business Administration. Corporations located
in rural areas shall, in addition, try to qualify for lender status
under the Farmers Home Administration.
(g) Become an agent for other lenders and guarantors.
14069. In all their state-funded programs, the corporations shall,

to the extent practicable, be complementary to, and not competitive
with, commercial lenders and other state and federal programs.
14069.6. The Trade and Commerce Agency shall contract with an

entity to conduct an independent statewide assessment of capital
needs in California, as they pertain to the Small Business Financial
Development Corporation program established pursuant to this part,
and shall establish minimum standards for the siting of corporations,
and determine and rank the regions and subregions in California most
underserved by the financial development corporations. The
determinations and rankings shall be final upon approval of the
Office of Small Business. The assessment and the establishment of
standards shall be completed no later than June 30, 1998.
CORPORATIONS CODE
SECTION 14070-14076
14070. (a) The corporate guarantee shall be backed by funds on

deposit in the corporation's trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
(b) Loan guarantees shall be secured by a reserve of at least 20
percent to be determined by the director.
(c) The expansion fund and trust fund accounts shall be used
exclusively to guarantee obligations and pay the administrative costs
of the corporations. A corporation located in a rural area may
utilize the funds for direct lending to farmers as long as at least
90 percent of the corporate fund farm loans, calculated by dollar
amount, and all expansion fund farm loans are guaranteed by the
United States Department of Agriculture. The amount of funds
available for direct farm lending shall be determined by the
director. In its capacity as a direct lender, the corporation may
sell in the secondary market the guaranteed portion of each loan so
as to raise additional funds for direct lending. The agency shall
issue regulations governing these direct loans, including the maximum
amount of these loans.
(d) In furtherance of the purposes of this part, up to one-half of
the trust funds may be used to guarantee loans utilized to establish
a Business and Industrial Development Corporation (BIDCO) under
(e) To execute the direct loan programs established in this
chapter, the director may loan trust funds to a corporation located
in a rural area for the express purpose of lending those funds to an
identified borrower. The loan authorized by the director to the
corporation shall be on terms similar to the loan between the
corporation and the borrower. The amount of the loan may be in excess
of the amount of a loan to any individual farm borrower, but actual
disbursements pursuant to the agency loan agreement shall be required
to be supported by a loan agreement between the farm borrower and
the corporation in an amount at least equal to the requested
disbursement. The loan between the agency and the corporation shall
be evidenced by a credit agreement. In the event that any loan
between the corporation and borrower is not guaranteed by a
governmental agency, the portion of the credit agreement attributable
to that loan shall be secured by assignment of any note, executed in
favor of the corporation by the borrower to the agency. The terms
and conditions of the credit agreement shall be similar to the loan
agreement between the corporation and the borrower, which shall be
collateralized by the note between the corporation and the borrower.
In the absence of fraud on the part of the corporation, the liability
of the corporation to repay the loan to the agency is limited to the
repayment received by the corporation from the borrower except in a
case where the United States Department of Agriculture requires
exposure by the corporation in rule or regulation. The corporation
may use trust funds for loan repayment to the agency if the
corporation has exhausted a loan loss reserve created for this
purpose. Interest and principal received by the agency from the
corporation shall be deposited into the same account from which the
funds were originally borrowed.
(f) Upon the approval of the director, a corporation shall be
authorized to borrow trust funds from the agency for the purpose of
relending those funds to small businesses. A corporation shall
demonstrate to the director that it has the capacity to administer a
direct loan program, and has procedures in place to limit the default
rate for loans to startup businesses. Not more than 25 percent of
any trust fund account shall be used for the direct lending
established pursuant to this subdivision. A loan to a corporation
shall not exceed the amount of funds likely to be lent to small
businesses within three months following the loan to the corporation.
The maximum loan amount to a small business is fifty thousand
dollars ($50,000). In the absence of fraud on the part of the
corporation, the repayment obligation pursuant to the loan to the
corporation shall be limited to the amount of funds received by the
corporation for the loan to the small business and any other funds
received from the agency that are not disbursed. The corporation
shall be authorized to charge a fee to the small business borrower,
in an amount determined by the director pursuant to regulation. The
program provided for in this subdivision shall be available in all
geographic areas of the state.(g) This section shall remain in effect
only until January 1, 2013, and as of that date is repealed, unless
a later enacted statute, that is enacted before January 1, 2013,
deletes or extends that date.
14070. (a) The corporate guarantee shall be backed by funds on

deposit in the corporation's trust fund account, or by receivables
due from funds loaned from the corporation's trust fund account to
another fund in state government as directed by the Department of
Finance pursuant to a statute enacted by the Legislature.
(b) Loan guarantees shall be secured by a reserve of at least 25
percent to be determined by the director, unless the director
authorizes a higher leverage ratio for an individual corporation
(c) The expansion fund and trust fund accounts shall be used
exclusively to guarantee obligations and pay the administrative costs
of the corporations. A corporation located in a rural area may
utilize the funds for direct lending to farmers as long as at least
90 percent of the corporate fund farm loans, calculated by dollar
amount, and all expansion fund farm loans are guaranteed by the
United States Department of Agriculture. The amount of funds
available for direct farm lending shall be determined by the
director. In its capacity as a direct lender, the corporation may
sell in the secondary market the guaranteed portion of each loan so
as to raise additional funds for direct lending. The agency shall
issue regulations governing these direct loans, including the maximum
amount of these loans.
(d) In furtherance of the purposes of this part, up to one-half of
the trust funds may be used to guarantee loans utilized to establish
a Business and Industrial Development Corporation (BIDCO) under
(e) To execute the direct loan programs established in this
chapter, the director may loan trust funds to a corporation located
in a rural area for the express purpose of lending those funds to an
identified borrower. The loan authorized by the director to the
corporation shall be on terms similar to the loan between the
corporation and the borrower. The amount of the loan may be in excess
of the amount of a loan to any individual farm borrower, but actual
disbursements pursuant to the agency loan agreement shall be required
to be supported by a loan agreement between the farm borrower and
the corporation in an amount at least equal to the requested
disbursement. The loan between the agency and the corporation shall
be evidenced by a credit agreement. In the event that any loan
between the corporation and borrower is not guaranteed by a
governmental agency, the portion of the credit agreement attributable
to that loan shall be secured by assignment of any note, executed in
favor of the corporation by the borrower to the agency. The terms
and conditions of the credit agreement shall be similar to the loan
agreement between the corporation and the borrower, which shall be
collateralized by the note between the corporation and the borrower.
In the absence of fraud on the part of the corporation, the liability
of the corporation to repay the loan to the agency is limited to the
repayment received by the corporation from the borrower except in a
case where the United States Department of Agriculture requires
exposure by the corporation in rule or regulation. The corporation
may use trust funds for loan repayment to the agency if the
corporation has exhausted a loan loss reserve created for this
purpose. Interest and principal received by the agency from the
corporation shall be deposited into the same account from which the
funds were originally borrowed.
(f) Upon the approval of the director, a corporation shall be
authorized to borrow trust funds from the agency for the purpose of
relending those funds to small businesses. A corporation shall
demonstrate to the director that it has the capacity to administer a
direct loan program, and has procedures in place to limit the default
rate for loans to startup businesses. Not more than 25 percent of
any trust fund account shall be used for the direct lending
established pursuant to this subdivision. A loan to a corporation
shall not exceed the amount of funds likely to be lent to small
businesses within three months following the loan to the corporation.
The maximum loan amount to a small business is fifty thousand
dollars ($50,000). In the absence of fraud on the part of the
corporation, the repayment obligation pursuant to the loan to the
corporation shall be limited to the amount of funds received by the
corporation for the loan to the small business and any other funds
received from the agency that are not disbursed. The corporation
shall be authorized to charge a fee to the small business borrower,
in an amount determined by the director pursuant to regulation. The
program provided for in this subdivision shall be available in all
geographic areas of the state.
(g) This section shall become operative on January 1, 2013.
14071. In furtherance of the purposes set forth in Section 14002, a

corporation may do any one or more of the following activities, but
only to the extent that the activities are authorized pursuant to the
contract between the agency and corporation: guarantee, endorse, or
act as surety on the bonds, notes, contracts, or other obligations
of, or assist financially, any person, firm, corporation, or
association, and may establish and regulate the terms and conditions
with respect to any such loans or financial assistance and the
charges for interest and service connected therewith, except that the
corporation shall not make or guarantee any loan unless and until it
determines:
(a) There is no probability that the loan or other financial
assistance would be granted by a financial company under reasonable
terms or conditions, and the borrower has demonstrated a reasonable
prospect of repayment of the loan.
(b) The loan proceeds shall be used exclusively in this state.
(c) The loan qualifies as a small business loan or an employment
incentive loan.
(d) That the borrower has a minimum equity interest in the
business as determined by the director.
(e) As a result of the loan, the jobs generated or retained
demonstrate reasonable conformance to the regulations specifying
employment criteria.
14071.5. In addition to the authority granted by Section 14071,
upon approval of the director, a corporation may act as guarantor on
a surety bond for any small business contractor, including, but not
limited to, women, minority, and disabled veteran contractors.
The provisions of this section allowing a corporation to act as a
guarantor on surety bonds may be funded through appropriate federal
funding sources. Federal funds shall be deposited in the Federal
Trust Fund in the State Treasury in accordance with Section 16360 of
the Government Code, for transfer to the Small Business Expansion
Fund, as created by Section 14030 of the Corporations Code.
14072. A corporation may charge the borrower or financial

institution a loan fee on all loans made or guaranteed by the
corporation to defray the operating expenses of the corporation. The
amount of the fee shall be determined by the director.
14073. Corporations may grant energy efficiency improvement loans.
14074. The agency shall enter into an agreement with the California
Energy Extension Service of the Office of Planning and Research to
assist small business owners in reducing their energy costs through
low interest loans and by providing assistance and information.
14075. (a) A corporation may, in an area affected by a state of

emergency within the state and declared a disaster by the President
of the United States, or by the Administrator of the United States
Small Business Administration, or by the United States Secretary of
Agriculture or declared to be in a state of emergency by the Governor
of California, provide loan guarantees from funds allocated in
Section 14037.5 to small businesses, small farms, nurseries, and
agriculture-related enterprises that have suffered actual physical
damage or significant economic injury as a result of the disaster.
(b) The agency may adopt regulations to implement the loan
guarantee program authorized by this section. The agency may adopt
these regulations as emergency regulations in accordance with Chapter
3.5 (commencing with Section 11340) of Part 1 of Division 3 of the
Government Code, and for purposes of that chapter, including Section
11349.6 of the Government Code, the adoption of the regulations shall
be considered by the Office of Administrative Law to be necessary
for the immediate preservation of the public peace, health and
safety, and general welfare. Notwithstanding subdivision (e) of
Section 11346.1 of the Government Code, the regulations shall be
repealed within 180 days after their effective date unless the agency
complies with Chapter 3.5 (commencing with Section 11340) of Part 1
of Division 3 of the Government Code, as provided in subdivision (e)
of Section 11346.1 of the Government Code.
(c) Allocations pursuant to subdivision (a) shall be deemed to be
for extraordinary emergency or disaster response operations costs
incurred by the agency.
14076. (a) It is the intent of the Legislature that the

corporations make maximal use of their statutory authority to
guarantee loans and surety bonds, including the authority to secure
loans with a minimum loan loss reserve of only 20 percent, so that
the financing needs of small business may be met as fully as possible
within the limits of corporations' loan loss reserves. The agency
shall report annually to the Legislature on the financial status of
the corporations and their portfolio of loans and surety bonds
guaranteed.
(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans. The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared. Upon application of a corporation,
the director may waive or modify the rule for the corporation if the
corporation demonstrates that it made a good faith effort to comply
and failed to locate lending institutions in the region that the
corporation serves that are willing to make guaranteed loans in that
amount.
(c) This section shall remain in effect only until January 1,
that date.
14076. (a) It is the intent of the Legislature that the

corporations make maximal use of their statutory authority to
guarantee loans and surety bonds, including the authority to secure
loans with a minimum loan loss reserve of only 25 percent, unless the
agency authorizes a higher leverage ratio for an individual
corporation pursuant to subdivision (b) of Section 14037, so that the
financing needs of small business may be met as fully as possible
within the limits of corporations' loan loss reserves. The agency
shall report annually to the Legislature on the financial status of
the corporations and their portfolio of loans and surety bonds
guaranteed.
(b) Any corporation that serves an area declared to be in a state
of emergency by the Governor or a disaster area by the President of
the United States, the Administrator of the United States Small
Business Administration, or the United States Secretary of
Agriculture shall increase the portfolio of loan guarantees where the
dollar amount of the loan is less than one hundred thousand dollars
($100,000), so that at least 15 percent of the dollar value of loans
guaranteed by the corporation is for those loans. The corporation
shall comply with this requirement within one year of the date the
emergency or disaster is declared. Upon application of a corporation,
the director may waive or modify the rule for the corporation if the
corporation demonstrates that it made a good faith effort to comply
and failed to locate lending institutions in the region that the
corporation serves that are willing to make guaranteed loans in that
amount.
(c) This section shall become operative on January 1, 2013.
CORPORATIONS CODE
SECTION 14085-14087
14085. It shall be unlawful for the director or any person who is

an officer, director, or employee of a corporation, or who is a
member of a loan committee, or who is an employee of the agency to:
(a) Ask for, consent, or agree to receive, any commission,
emolument, gratuity, money, property, or thing of value for his or
her own use, benefit, or personal advantage, for procuring or
endeavoring to procure for any person, partnership, joint venture,
association, or corporation, any loan, guarantee, financial, or other
assistance from any corporation.
(b) Borrow money, property, or to benefit knowingly, directly or
indirectly, from the use of the money, credit, or property of any
corporation.
(c) Make, maintain, or attempt to make or maintain, a deposit of
the funds of a corporation with any other corporation or association
on condition, or with the understanding, expressed or implied, that
the corporation or association receiving the deposit shall pay any
money or make a loan or advance, directly or indirectly, to any
person, partnership, joint venture, association, or corporation,
other than to a corporation formed under this part.
14086. It shall be unlawful for the director or any person who is

an officer or director of a corporation, or who is an employee of the
agency, to purchase or receive, or to be otherwise interested in the
purchase or receipt, directly or indirectly, of any asset of a
corporation, without paying to the corporation the fair market value
of the asset at the time of the transaction.
14087. Violation of any provision of this article shall constitute

a felony.
CORPORATIONS CODE
SECTION 14090-14091
14090. (a) Corporations shall give high priority to the issuance of

loan guarantees to small business incubators, and to businesses that
lease space in incubators.
(b) For the purposes of this section, "incubator" means a facility
that allows new small businesses to increase their probability of
success by sharing needed capital equipment, services, and
facilities, which may include, but are not limited to, the following:
(1) Reception and meeting area.
(2) Secretarial services (i.e., collating, telephone answering,
mailhandling).
(3) Accounting and bookkeeping services.
(4) Research libraries.
(5) Onsite financial and management counseling.
(6) Parking.
(7) Flexible lease arrangements for flexible space.
(8) Computer/word processing facilities.
(9) Day care facilities.
(10) Office furniture rentals.
(11) A graduation policy sometimes requiring firms to leave after
three to five years in a subsidized, nurturing environment.
(12) Employee training and placement services.
14091. If a firm has received a Phase 1 or Phase 2 Small Business

Innovation Research (SBIR) grant awarded by a federal agency.
Corporations shall give high priority to marketing their services to
SBIR recipients and providing loan guarantees whenever possible.
CORPORATIONS CODE
SECTION 14200
14200. The Legislature finds and declares that the formation of

employee-owned businesses and the participation of employees in the
management of businesses in this state will promote the stabilization
of local economies, anchor business activity, and increase
productivity. The Legislature further finds that the encouragement of
employee-owned businesses will increase and broaden community
investments in this state and encourage new capital formation through
employee ownership.
CORPORATIONS CODE
SECTION 14300-14303
14300. Any corporation organized for or engaged in the business of

selling, distributing, supplying or delivering water for irrigation
purposes may provide, and any corporation organized for or engaged in
the business of selling, distributing, supplying, or delivering
water for domestic use shall provide, in its articles or bylaws that
water shall be sold, distributed, supplied or delivered only to
owners of its shares and that the shares shall be appurtenant to
certain lands when the same are described in the certificate issued
therefor; and when the certificate is so issued and a certified copy
of the articles or bylaws recorded in the office of the county
recorder in the county where the lands are situated the shares of
stock shall become appurtenant to the lands and shall only be
transferred therewith, except after sale or forfeiture for delinquent
assessments thereon as provided in Section 14303. Notwithstanding
this provision in its articles or bylaws, any such corporation may
sell water to the state, or any department or agency thereof, or to
any school district, or to any public agency, or, to any other mutual
water company or, during any emergency resulting from fire or other
disaster involving danger to public health or safety, to any person
at the same rates as to holders of shares of the corporations; and
provided further, that any corporation may enter into a contract with
a county fire protection district to furnish water to fire hydrants
and for fire suppression or fire prevention purposes at a flat rate
per hydrant or other connection. In the event lands to which any
stock is appurtenant are owned or purchased by the state, or any
department or agency thereof, or any school district, or public
agency, the stock shall be canceled by the secretary, but shall be
reissued to any person later acquiring title to the land from the
state department, agency, or school district, or public agency.
14301. A corporation, including a nonprofit corporation organized

for or engaged in the business of developing, distributing,
supplying, or delivering water for irrigation or domestic use, or
both, may provide in its articles, or may amend its articles to
provide, that its only purpose shall be to develop, distribute,
supply, or deliver water for irrigation or domestic use, or both, to
its members or shareholders, at actual cost plus necessary expenses.
The amendment of the articles may be accomplished by:
(a) The passage by a three-fourths vote of the members of the
board of directors of the corporation of a resolution adopting as the
purpose of the corporation the purpose set forth in this section.
(b) The signing, verification, and filing of a certificate setting
forth the resolution and the manner of its adoption.
The corporation shall not distribute any gains, profits, or
dividends to its members or shareholders except upon the dissolution
of the corporation.
14302. Whenever the owner of real property to which water stock by

the terms of the certificate thereof is appurtenant at the time of
conveyance, by properly executed conveyance, transfers to another the
real property with the appurtenances belonging to the property, or
whenever title to the property passes by execution sale, or by
foreclosure or probate proceedings, the secretary of the water
company that issued the stock shall, upon exhibition to him or her of
a deed of the land duly recorded, or the necessary court order duly
recorded, issue to the grantee named in the conveyance a new
certificate of stock for the number of shares appurtenant to the land
as shown by the books and records of the company. The secretary of
the water company shall enter the name of the grantee upon the books
of the company as the owner of the shares of stock and shall cancel
on the books the number of former shares of stock so appurtenant to
the land in the name of the grantor or of any previous owner of the
land, or of any other person.
14303. A corporation organized for or engaged in the business of

selling, distributing, supplying, or delivering water for irrigation
purposes or domestic use, and not as a public utility, may levy
assessments upon its shares, whether or not fully paid, unless
otherwise provided in its articles or bylaws. If any shares of the
corporation that have been made appurtenant to any land as provided
in this chapter, become delinquent in the payment of assessments, the
right to receive water or dividends thereon may be denied, and they
may be sold and transferred without those lands as if not appurtenant
thereto, and the purchaser shall acquire the right to receive water
as provided in the articles or bylaws of the corporation, or they may
be forfeited to the corporation.
CORPORATIONS CODE
SECTION 14310-14318
14310. (a) It is the intent of the Legislature to ensure both of

the following:
(1) That when a mutual water company is formed or is about to be
formed in connection with a subdivision, as defined in Sections 11000
and 11004.5 of the Business and Professions Code, an adequate
potable water supply and distribution system exists for domestic use
and fire protection.
(2) That adequate disclosure and protection to the security
holders exist with respect to rights and duties arising from their
security holdings in a mutual water company.
(b) For purposes of this chapter, the use of the term "subdivision"
has the same definition as "subdivision" as defined in Sections
11000 and 11004.5 of the Business and Professions Code.
14311. A mutual water company formed on or after January 1, 1998,

in connection with the offering for sale or lease, or with the sale
or lease, of lots within a subdivision and organized to sell,
distribute, supply, or deliver water for domestic use to owners of
lots in the subdivision shall meet all the requirements of this
chapter. A mutual water company described in this section and formed
before January 1, 1998, may elect to meet all the requirements of
this chapter.
14312. (a) Any person who intends to offer for sale or lease lots
within a subdivision within this state and to provide water for
domestic use to purchasers of the lots within a subdivision through
the formation of a mutual water corporation described in Section
14311, shall include as part of the application for a public report,
as described in Section 11010 of the Business and Professions Code, a
separate document containing all of the following information,
representations, and assurances:
(1) That the provisions of this chapter have been complied with.
(2) That the area in which the mutual water company proposes to
deliver water encompasses and includes the entire subdivision and,
when applicable, will include parcels to be annexed to the
subdivision.
(3) That the mutual water company has contacted the Public
Utilities Commission and the county local agency formation commission
to determine if the proposed area described in paragraph (2) will
overlap an existing water service area or if an existing water
service area could more appropriately serve the subdivision.
(4) That the mutual water company has a source of, and title to, a
water supply, distribution, and fire protection system sufficient to
satisfy expected demands for water from the subdivision.
(5) That copies of the contracts and other documents relating to
the acquisition by the mutual water company of the water supply,
distribution, and fire protection system have been delivered to, and
are on file with, the mutual water company and that these contracts
and documents evidence the mutual water company's title to the water
supply, distribution, and fire protection system.
(6) That the subdivider or applicant has executed and entered into
a written contract with the mutual water company wherein the
subdivider or applicant has agreed to pay monthly a proportional part
of the repair and replacement fund according to a ratio of the
number of lots owned or controlled by the subdivider or applicant to
the total number of lots in the subdivision.
(7) That an engineer's report has been prepared in accordance with
this chapter and Sections 260.504.2 to 260.504.2.4, inclusive, of
Title 10 of the California Code of Regulations and is on file with
the mutual water company.
(8) That the mutual water company will distribute potable water
for domestic use and has obtained, and has on file, a copy of the
certificate of the State Director of Health Services, as required by
Sections 116300 to 116385, inclusive, of the Health and Safety Code.
(9) That the securities of the mutual benefit water corporation
will be sold or issued only to purchasers of lots in the subdivision,
or to successors in interest of purchasers of lots in the
subdivision, and not sold or issued to the subdivider, applicant, or
to the successor in interest of the subdivider or applicant, and that
the securities will be sold or issued only after a public report for
the subdivision has been issued by the Real Estate Commissioner.
(10) That the securities to be issued by the mutual water company
are appurtenant to the land pursuant to Section 14300.
(11) That the water supply and distribution system will serve each
lot in the subdivision and be completed prior to the issuance of the
public report by the Real Estate Commissioner.
(12) That there is a statement, signed by either the engineer who
prepared the engineer's report referred to in paragraph (7) or a
person employed or acting on behalf of a public agency or other
independent qualified person, that the water supply and distribution
system has been examined and tested and that the water supply and
distribution system operates in accordance with the design standards
of the water supply and distribution system required by this chapter,
and that a copy of this statement is on file with the mutual water
company.
(13) That the articles of incorporation or bylaws of the mutual
water company contain all of the following:
(A) A statement to the effect that the mutual water company shall
provide water to all members or shareholders. If there will be an
owners' association of the subdivision, an additional statement that
water shall also be provided to the common areas.
(B) A provision directing the board of directors to establish a
rate structure that will result in the accumulation and maintenance
of a fund for the repair, administration, maintenance, and
replacement of the water supply, distribution, and fire protection
system, that the rate charged shall bear a reasonable relationship to
the cost of furnishing water and maintaining the system, and that
unimproved lots included within the area to be served shall bear a
proportionate share of the cost of repair and replacement of the
water supply, distribution, and fire protection system, as well as a
proportionate share of the cost of maintaining the fund.
(C) A statement evidencing a reasonable relationship between each
unit of the securities to be issued and each unit of the area to be
served, such as one share of common stock issued for each subdivision
lot purchased.
(D) A prohibition on the issuance of fractional shares or
securities.
(E) A statement, meeting the requirements of Section 14300, that
the securities are appurtenant to the land within the area to be
served.
(F) Provision for the transfer of the securities, voting rights of
the security holders, inspection of books and records by security
holders, necessary or contemplated expansion of the facilities of the
mutual water company, and further subdivision, where applicable, of
the area to be served.
(G) The limitation on the salaries paid to the persons operating,
or employed by, the mutual water company, including officers and
directors.
(H) A provision for annual meetings of the security holders
accompanied by a provision for adequate notice.
(I) A provision for the annual distribution to each security
holder of fiscal yearend financial statements within 105 days of the
close of the fiscal year.
(J) In the case of a mutual water company that purchases water for
distribution from a public utility, municipal water company, or
water district, a provision for charging all security holders a pro
rata amount of the cost of water supplied to an entity providing fire
protection service.
(K) A provision that a share certificate shall be issued to each
lot purchased.
(L) In the case of a mutual water company serving a residential
subdivision, the following statements: (i) the mutual water company
shall be a separate corporation formed and organized for the purpose
described in Section 14311; and (ii) if a shareholder becomes
delinquent in paying assessments, the right to receive water or
dividends may be denied or forfeited but those rights shall not be
sold or transferred without the land.
(14) That an offering circular has been prepared and will be used
in any offer and sale of the securities of the mutual water company.
(15) That the writings and documents evidencing compliance with
all of the above provisions of the subdivision are on file as part of
the permanent record of the mutual water company.
(b) The contracts and documents described in paragraph (5) of
subdivision (a) shall include all of the following:
(1) Any bill of sale transferring all personal property used and
usable in the operation of the mutual water company.
(2) A copy of any recorded deed to the wells and water tanks to be
used by the mutual water company in the supply, distribution, and
fire protection system.
(3) Copies of any recorded deeds granting easements for
construction, repair, maintenance, and improvements of the water
(c) The written contract described in paragraph (6) of subdivision
(a) shall provide that, in consideration of the transfer by the
subdivider or applicant to the mutual water company of the water
supply, distribution, and fire protection system, the mutual water
company agrees to do all of the following:
(1) Sell and issue securities to the purchasers of the remaining
lots in the subdivision on the same terms, except for the price if
the difference is justified, as for the initial purchasers.
(2) Cooperate with the subdivider or applicant in the operation,
maintenance, and improvement of the present and contemplated water
(3) Contract with the subdivider, applicant, or a successor in
interest, if a reasonable request is made to do so, for the
management of the mutual water company for as long as lots in the
subdivision remain unsold. The terms of the contract shall be subject
to approval by the board of directors of the mutual water company,
including terms related to the compensation to the subdivider,
applicant, or successor in interest, if any.
(d) The offering circular described in paragraph (14) of
subdivision (a) shall be delivered to each prospective purchaser of
the securities and shall include, among other things, all of the
following:
(1) A discussion of the water supply, distribution, and fire
protection system.
(2) A summary of the opinion of the engineer along with the
engineer's consent, as required by Sections 260.504.2 to 260.504.2.4,
inclusive, of Title 10 of the California Code of Regulations.
(3) The area in which the mutual water company intends to provide
water service.
(4) A discussion of the rights and duties of the security holders
of the mutual water company as set forth in its articles of
incorporation and bylaws, including the consequence of failure to pay
for water or assessments.
(5) The fact that the articles of incorporation or bylaws provide
that the shares or securities of the mutual water company may not be
sold separately from the right to water evidenced by the security of
the mutual water company and prohibit issuance of fractional shares
or securities of the mutual water company.
(6) A discussion of the certificate issued by the State Director
of Health Services certifying that the water is fit for domestic use.
(7) The limitation imposed on salaries to be paid to personnel
operating, or employed by, the mutual water company, including
officers and directors.
(8) A discussion of the transferability of the securities, the
voting rights of the security holders, access to books and records,
necessary or contemplated expansion of the facilities of the mutual
water company, and further subdivision of the area to be served, if
applicable.
(9) A discussion of the subdivider's duties with respect to
maintenance and repair or replacement of the water supply,
distribution, or fire protection system; and a discussion of the
establishment and maintenance of the operating, repair, and
replacement fund.
(e) The following exhibits shall also be attached to the offering
circular:
(1) A copy of the articles of incorporation and bylaws of the
mutual water company, including the articles or bylaws recorded under
Section 14300.
(2) A copy of financial statements of the mutual water company. If
the mutual water company has not yet commenced operations, a
detailed operating budget for the first six months of operations
should be included as an exhibit to the offering circular. The
operating budget must include estimated monthly fees to be charged to
the water users.
(3) A specimen certificate evidencing the security to be issued
and meeting the requirements of Section 14300.
(f) The Real Estate Commissioner shall prescribe the form and
content of the document required by this section.
14313. The engineer's report prepared pursuant to the document

under Section 14312 shall contain all relevant information pertaining
to the proposed water supply, distribution, and fire protection
system, including, but not limited to, the following:
(a) A system map of the area to be served showing all of the
following:
(1) The total acreage.
(2) The number and location of lots into which the area is or can
be subdivided and the location of the connection for water service.
(3) The location of all sources of supply, principal pumping
stations, diversion works, water treatment and filter plants, and
storage facilities.
(4) The size, character, and location of all mains and ditches.
(5) The location of all valves and gates, gauges, interconnections
with other systems, and fire hydrants.
(6) The location, size, and kind of each service pipe.
(7) The layout of all principal pumping stations and water
treatment and filter plants to show size, location, and character of
all major equipment, pipelines, connections, valves, and other
equipment used in connection therewith.
(8) The date of construction and condition of all principal items
of plant and extensions of all mains.
(b) A description of the sources of supply, including, in the case
of wells, information on the depth, diameter, and casing of the
well, and a statement indicating that the proposed water supply and
distribution system complies with this section, supported by reports
showing the sustained capacity of source of supply, or, if all or
some water is to be obtained from another source, copies of contracts
for obtaining such water, together with estimates of the present and
ultimate water consumption in the area to be served.
(c) A statement indicating in detail the cost of the water supply,
distribution, and fire protection system, and indicating the cost of
any required repairs or replacement.
(d) An opinion by the engineer to the effect that the water
supply, distribution, and fire protection system will adequately,
dependably, and safely meet the total requirements for all water
consumers under maximum consumption and will meet the requirements of
Section 14314. The opinion shall have attached to it the
calculations and data used in estimating the water requirements.
(e) A statement by the engineer of the estimated cost of
maintenance of the system, the estimated useful life of the
components of the system, the estimated cost of replacement of the
system, and the monthly or annual amount which should be charged to
establish a reasonable reserve for maintenance and replacement of the
system based on these estimates.
14314. The water supply and distribution system of a mutual water

company described in Section 14311 that proposes to distribute water
for domestic use pursuant to this chapter shall comply with all of
the following design standards:
(a) The system shall be adequate to maintain normal operating
pressure of not less than 25 pounds per square inch, nor more than
125 pounds per square inch, at the service connection; provided,
however, that during periods of hourly maximum demand, or at the time
of peak seasonal loads, the pressure may be reduced to not less than
20 pounds per square inch, and during periods of hourly minimum
demand the pressure may increase to not more than 150 pounds per
square inch. Variations in pressure under normal operation shall not
exceed 50 percent of the average operating pressure. The average
operating pressure shall be determined by computing the arithmetical
average of at least 24 consecutive hourly pressure readings.
(b) The quantity of water delivered to the distribution system
from all source facilities shall be sufficient to supply adequately,
dependably, and safely the total requirements of all water consumers
under maximum consumption, and shall be sufficient to maintain the
pressure specified by subdivision (a).
(c) The distribution system shall provide at least one connection
per service and, to the extent feasible, shall be designed in a
property segmented grid so as to do both of the following:
(1) Minimize the extent of interruption in water service when
repairs are necessary.
(2) Avoid dead ends in its water mains.
14315. (a) The mutual water company described in Section 14311

shall provide at least a minimum level of water service to its
customers for fire protection purposes as an inherent part of the
water system design in accordance with the standards set forth in
this section. The standards set forth in this section are the minimum
levels of water service that the mutual water company shall provide
and shall not preclude the mutual water company from designing a fire
protection system that meets higher standards, nor preclude any
governmental agency from setting higher standards in any area subject
to its jurisdiction. A mutual water company may request a fire
protection agency to approve a fire protection system that does not
meet the standards set forth in this chapter upon a showing by the
mutual water company that the proposed system is adequate for fire
protection purposes.
(b) In the initial construction, extension, or modification of a
water system, any one of which is required to serve (1) a new user or
(2) a change in use, the facilities constructed, extended, or
modified shall be designed to be capable of providing, for a
sustained period of at least two hours, in addition to the
requirements of the average daily demand within the area to be
served, the minimum flow requirements set forth below opposite the
classification of land use to be served:
Land Use Minimum Flow

1. Rural, residential with a lot
density of two or
fewer units per acre primarily for
recreational and retirement use .. 250 gpm
2. Lot density of less than one
single-family
residential unit per acre......... 500 gpm
3. Lot density of one or two
single-family
residential units per acre........ 750 gpm
4. Lot density of three or more
single-family
residential units per acre........ 1,000 gpm
5. Duplex residential units,
neighborhood
business of one story............. 1,500 gpm
6. Multiple residential, one and
two stories;
light commercial or light 2,000 gpm
industrial........................
7. Multiple residential, three
stories or higher;
heavy commercial or heavy 2,500 gpm
industrial........................
14316. The water supply and distribution system of a mutual water

company described in Section 14311 that proposes to distribute water
for domestic use shall be constructed to conform with currently
accepted engineering practices, and shall comply with the following
construction standards where possible:
(a) Water mains to be installed below the frost level or otherwise
protected to prevent freezing and shall not have less than 30 inches
of cover over the top of the pipe in public streets or alleys except
where such depth is rendered impossible by underground obstructions
or rocky or hardpan conditions.
(b) The size, design, material, and installation of service pipes
shall conform to the reasonable requirements of the mutual water
company; provided, however, that the minimum size of the pipe shall
be 3/4 inch or greater nominal size. Except where services are not
intended for use during freezing weather and arrangements are made to
drain service pipes prior to freezing weather, and except at
terminations in connection with the meter or water consumer's piping,
all service pipes shall be laid at a depth sufficient to prevent
freezing.
14317. The fire protection system of a mutual water company shall

be constructed to conform with currently accepted engineering
practices, and shall comply with the following construction
standards:
(a) The flows set forth in Section 14315 shall be calculated on
the basis of a residual pressure of 20 p.s.i.g. in the distribution
system under flowing conditions.
(b) Fire hydrants shall be attached to the distribution systems at
the locations designated by the entity responsible for their use for
firefighting purposes. Any new mains to which a hydrant may be
attached shall not be less than six inches in diameter.
(c) Each separately operated water system shall not have less than
two independent sources of supply.
14318. The mutual water company shall be financially responsible
for the maintenance, repair, or replacement of fire hydrants. A
mutual water company shall perform and record annual flow tests
pursuant to Section 14317 or, in lieu of the annual flow test under
Section 14317, any test to determine available flow performed by a
fire protection agency. The recorded test results shall become part
of the mutual water company's books and records.
CORPORATIONS CODE
SECTION 14350-14353
14350. A corporation may not construct, or take tolls on, a bridge,

ferry, wharf, chute, or pier until authority is granted therefor by
the board of supervisors, or other governing body, as appropriate.
14351. Every corporation that has heretofore or may hereafter be

incorporated may be dissolved under either of the following
conditions:
(a) If within one year from filing its articles of incorporation,
it has not obtained authority from the board of supervisors, or other
governing body, and if, within one year thereafter, it has not
commenced the construction of the bridge, wharf, chute, or pier, and
if, within two years after obtaining authority, there has not been
actually expended thereon a sum equal to at least 10 percent of the
issued capital stock of the corporation obtaining authority.
(b) If within seven years from the time that authority to
construct the bridge, wharf, chute, or pier was granted by the board
of supervisors, or within that further time as the board may lawfully
grant, the bridge, wharf, chute, or pier is not completed. However,
the board of supervisors may from time to time by order extend the
time of completion beyond seven years, if the actual and physical
work of constructing the bridge, wharf, chute, or pier has been
diligently prosecuted from the time of commencement thereof up to the
time that application for the extension or extensions beyond seven
years is presented to the board of supervisors.
(c) If, when the bridge, wharf, chute, or pier of the corporation
is destroyed, it is not reconstructed and ready for use within three
years thereafter.
(d) If the ferry of a corporation is not in running order within
one year after authority is obtained to establish it, or if at any
time thereafter it ceases for a like term consecutively to perform
the duties imposed by law.
14352. The president and secretary of every bridge, ferry, wharf,

chute, or pier corporation shall annually, under oath, report to the
board of supervisors, or other governing body having authority in
that behalf, of the county in which the articles of incorporation are
filed all of the following:
(a) The cost of constructing and providing all necessary
appendages and appurtenances for its bridge, ferry, wharf, chute, or
pier.
(b) The amount of all moneys expended thereon, since its
construction, for repairs and incidental expenses.
(c) The amount of its capital stock, how much paid in, and how
much actually expended thereof.
(d) The amount received during the year for tolls, and from all
other sources, stating each separately.
(e) The amount of dividends made, and the indebtedness of the
corporation, specifying for what it was incurred.
(f) Other facts and particulars respecting the business of the
corporation, as the board of supervisors or other governing body
having authority in that behalf may require.
The president and secretary shall cause this report to be
published for four weeks in a daily newspaper published nearest the
bridge, ferry, wharf, pier, or chute, if required by order of the
board of supervisors or other governing body having authority in that
behalf. A failure to make the report subjects the corporation to a
penalty of two hundred dollars ($200) and, for every week permitted
to elapse after that failure, an additional penalty of fifty dollars
($50), payable in each case to the county from which the authority of
the corporation was derived. All these cases shall be reported by
the board of supervisors, or other governing body having authority in
that behalf, to the district attorney or city attorney, who must
commence an action therefor.
14353. When a bridge, ferry, wharf, chute, or pier is constructed,

operated, or owned by a natural person, this part is applicable to
that person in like manner as it is applicable to corporations.
CORPORATIONS CODE
SECTION 14400
14400. Any person who willfully and maliciously does any injury to
any property of a cable television corporation is liable to the
corporation for three times the amount of actual damages sustained
thereby, to be recovered in any court of competent jurisdiction.
CORPORATIONS CODE
SECTION 14450-14452
14450. No corporation formed to supply any city, city and county,

or town with water shall do so unless previously authorized by an
ordinance of the authorities thereof, or unless it is done in
conformity with a contract entered into between the city, city and
county, or town and the corporation. Contracts so made are valid and
binding in law, but do not take from the city, city and county, or
town the right to regulate the rates for water, nor shall any
exclusive right be granted. No contract or grant shall be made for a
term exceeding 50 years.
14451. (a) All corporations formed to supply water to cities or

towns shall furnish pure freshwater to the inhabitants thereof, for
domestic uses, as long as the supply permits, at reasonable rates and
without distinction of persons, upon proper demand therefor, and
shall furnish water to the extent of their means, in case of fire or
other great necessity, free of charge. The board of supervisors, or
the proper city or town authorities, may prescribe proper rules
relating to the delivery of water, not inconsistent with the laws of
the state.
(b) (1) A corporation formed to supply water to cities or towns
shall not charge, levy, assess, fix, or collect any charge, tax, fee,
rate, assessment, or levy of any kind whatsoever in connection with
its water system on or from any entity providing fire protection
services to others for supplying water for those fire protection
purposes within the service area of the corporation or for any costs
of operation, installation, capital, maintenance, repair, alteration,
or replacement of facilities related to supplying water for the fire
protection purposes within the service area of the corporation,
except pursuant to a written agreement with the entity providing fire
protection services.
(2) Paragraph (1) of this subdivision does not restrict or limit a
corporation formed to supply water to cities or towns from levying
charges for water service or facilities, including water for fire
protection purposes, on any person, property, or entity, whether
public or private, other than on an entity providing fire protection
service.
These charges shall be collected from other persons, property, or
entities pursuant to existing provisions of law that authorize the
charges, or from an entity providing fire protection services only
pursuant to the written agreement authorizing the charges.
(3) For the purposes of this subdivision, "entity providing fire
protection service" means a city, county, or city and county, whether
general law or chartered, or a fire company, fire protection
district, or any other person, association, company, corporation,
district, municipal corporation, or any other public or private
entity, which public or private entity or person provides fire
protection services to any other public or private entity or person.
14452. Whenever any corporation, organized under the laws of this

state, furnishes water to irrigate lands that the corporation has
sold, the right to the flow and use of that water is and shall remain
a perpetual easement to the land so sold, at any rates and terms
that may be established by the corporation in pursuance of law.
Whenever any person who is cultivating land on the line and within
the flow of any ditch owned by the corporation, has been furnished
water by it with which to irrigate his or her land, that person shall
be entitled to the continued use of that water, upon the same terms
as those who have purchased their land from the corporation.
CORPORATIONS CODE
SECTION 14500-14505
14500. This title extends to all corporations heretofore formed and

existing for the prevention of cruelty to animals, but does not
extend or apply to any association, society, or corporation that uses
or specifies a name or style of the same, or substantially the same,
as that of any previously existing society or corporation in this
state organized for a like purpose.
14501. Every society, incorporated and organized for the prevention

of cruelty to animals may enter into a contract with any city, or
city and county, or county, where the society is located, to enforce
the provisions of laws of this state for the prevention of cruelty to
animals, or arresting, or prosecuting offenders thereunder or
preventing cruelty to animals. A humane society may perform those
actions in the absence of a contract with a city, city and county, or
county.
14502. (a) (1) (A) (i) On and after July 1, 1996, no entity, other
than a humane society or society for the prevention of cruelty to
animals, shall be eligible to petition for confirmation of an
appointment of any individual as a humane officer, the duty of which
shall be the enforcement of the laws for the prevention of cruelty to
animals.
(ii) On and after July 1, 1996, only a person who meets the
requirements of this section may be appointed as, or perform the
duties of, a humane officer.
(iii) Any person appointed as a humane officer prior to July 1,
1996, may continue to serve as a humane officer until the expiration
of the term of appointment only if the appointing society maintains
records pursuant to subparagraph (B) documenting that both the
appointing society and the humane officer meet the requirements of
this section.
(B) Each humane society or society for the prevention of cruelty
to animals for which an individual is acting as a humane officer
shall maintain complete and accurate records documenting that the
individual has successfully completed all requirements established in
this section and shall make those records available, upon request,
to the superior court, the Attorney General, or any entity duly
authorized to review that information, including the State Humane
Association of California. The records shall include the full name
and address of each humane officer.
(2) The humane society or society for the prevention of cruelty to
animals shall possess insurance of at least one million dollars
($1,000,000) for liability for bodily injury or property damage.
(3) Each appointment of a humane officer shall be by separate
resolution by the board of directors or trustees of the humane
society or society for the prevention of cruelty to animals duly
entered in its minutes. The resolution shall state the full name and
address of the principal office of the appointing society, the full
name of the person so appointed, the fact that he or she is a citizen
of the State of California, that he or she has met the training
requirements set forth in subdivision (h), and whether he or she is
authorized to carry a weapon pursuant to this section. The resolution
shall also designate the number of the badge to be allotted to the
officer, and the date on which the term of office shall expire.
(b) A humane society or a society for the prevention of cruelty to
animals seeking confirmation of a humane officer's appointment shall
comply with each of the following provisions:
(1) Prior to filing a Petition for Order Confirming Appointment of
a Humane Officer under paragraph (3), the humane society or society
for the prevention of cruelty to animals shall submit to the
Department of Justice fingerprint images and related information of
all humane officer applicants for the purposes of obtaining
information as to the existence and content of a record of state
convictions and state arrests and also information as to the
existence and content of a record of state arrests for which the
Department of Justice establishes that the person is free on bail or
on his or her own recognizance pending trial or appeal.
(A) The Department of Justice shall provide a state response to
the humane society or society for the prevention of cruelty to
animals pursuant to paragraph (1) of subdivision (p) of Section 11105
of the Penal Code.
(B) The humane society or society for the prevention of cruelty to
animals shall request from the Department of Justice subsequent
arrest notification service, as provided pursuant to Section 11105.2
of the Penal Code, for persons whose appointments are confirmed as
described in subdivision (c).
(C) The Department of Justice shall charge a fee sufficient to
cover the cost of processing the request described in this paragraph.
(2) Prior to filing a Petition for Order Confirming Appointment of
a Humane Officer under paragraph (3), the humane society or society
for the prevention of cruelty to animals shall serve a copy of the
petition on each of the following:
(A) The police department having jurisdiction in the city in which
the principal office of the appointing society is located.
(B) The sheriff's department having jurisdiction in the county in
which the principal office of the appointing society is located.
(C) The Department of the California Highway Patrol.
(D) The State Humane Association of California.
(E) The Department of Justice.
(3) The humane society or society for the prevention of cruelty to
animals shall file with the superior court in and for the county or
city and county in which the principal office of the humane society
is located a Petition for Order Confirming Appointment of a Humane
Officer, and shall attach to the petition all of the following:
(A) A copy of the resolution appointing the person, duly certified
to be correct by the president and secretary of the society and
attested by its seal.
(B) A copy of the criminal record offender information, if any,
obtained regarding the person pursuant to paragraph (1).
(C) Proof of the society's proper incorporation in compliance with
Part 9 (commencing with Section 10400) of Division 2, including the
date the articles of incorporation were filed with the Secretary of
State.
(D) A copy of the society's liability insurance policy for bodily
injury or property damage in the amount of at least one million
dollars ($1,000,000).
(E) Documentation establishing that the appointee has
satisfactorily completed the training requirements set forth in this
section.
(F) Documentation establishing that the society has a written
agreement with another entity, such as a public or private animal
shelter or licensed veterinary clinic, that (i) provides for the
humane care and treatment of any animals seized by the society, (ii)
is capable of preserving evidence that may be used to prosecute an
animal cruelty case, and (iii) is compliant with all applicable
federal, state, and local laws, including licensing laws.
Alternatively, the society may provide documentation that it is
operating its own animal shelter that meets the requirements of
clauses (i), (ii), and (iii).
(G) If the society has not previously appointed a humane officer:
(i) An affidavit signed under penalty of perjury from the
president of the society that demonstrates the society's competence
to appoint a humane officer by providing information, including, but
not limited to, the following:
(I) Partnerships or collaborations, if any, with other nonprofit
or community agencies.
(II) Cash reserve on hand, if any, to pay for veterinary expenses,
housing, food, and care of seized animals.
(III) Established donor base, if any.
(IV) Current or prior law enforcement, legal, or other relevant
experience, if any, of persons who will supervise the appointee.
(V) Current or prior experience of managers, if any, in operating
a society or other nonprofit organization.
(VI) Statement that each board member is in good standing in the
community and has not been convicted of a misdemeanor or felony
involving animals.
(VII) Ongoing training beyond the minimum required for appointment
of the humane officer, if any.
(VIII) The need for a humane officer in the society's county.
(IX) Any other documentation demonstrating compliance with
applicable federal, state, or local laws.
(ii) Affidavits, if any, from personnel of local animal control
agencies, law enforcement agencies, or other societies pertaining to
the appointee's fitness to act as a humane officer.
(H) As the last page, proof of service of a copy of the petition
upon those parties required to be served.
(4) Any party described in paragraph (2) may file an opposition to
the petition described in paragraph (3). All papers filed in
opposition to the petition and in reply to the opposition shall
conform to law and motion pleading requirements, pursuant to Rule
3.1113(d) of the California Rules of Court. An opposition shall not
exceed 15 pages and a reply shall not exceed 10 pages, excluding
exhibits and declarations. The opposition shall be limited to the
competency of the society to appoint and supervise a humane officer
and the qualifications, background, and fitness of the appointee that
are specific to the work of a humane officer.
(A) Any opposition shall be filed no later than 15 court days
after the petition is filed with the court. Any opposition shall be
served on all parties indicated on the proof of service attached to
the petition.
(B) The petitioner's reply, if any, to the opposition shall be
filed within 10 court days after service of the opposition. The reply
shall be served on all parties listed in the proof of service
attached to the petition and to any other person who has filed an
opposition.
(C) The court shall rule on the petition without a hearing unless
the court notifies the parties of an intention to hold a hearing.
(D) The petitioner shall serve a certified copy of the court's
order ruling on the petition on all parties listed in the proof of
service attached to the petition and to any other person or entity
who has filed an opposition.
(c) (1) Upon receipt of the Petition for Order Confirming
Appointment of a Humane Officer, the court shall first determine the
society's date of incorporation, and the length of time between the
date the society filed its articles of incorporation with the
Secretary of State and the date it filed the petition described in
paragraph (3) of subdivision (b) with the court. If the society was
incorporated on or after January 1, 2011, then the following shall
apply:
(A) For a petition to confirm appointment of a level 1 humane
officer, the court shall issue an order denying confirmation of the
appointment if a minimum of five years has not elapsed from the date
the society filed its articles of incorporation with the Secretary of
State to the date it filed the petition.
(B) For a petition to confirm appointment of a level 2 humane
officer, the court shall issue an order denying confirmation of the
appointment if a minimum of one year has not elapsed from the date
the society filed its articles of incorporation with the Secretary of
State to the date it filed the petition.
(C) For a petition to confirm appointment of either a level 1 or
level 2 humane officer, the court shall issue an order denying
confirmation of the appointment if the society has not established,
through submission of appropriate documentation, that the society is
either operating its own animal shelter or has a written agreement
with another entity, in compliance with subparagraph (F) of paragraph
(3) of subdivision (b).
(2) If the court has not issued an order denying the petition
pursuant to paragraph (1), then the court shall review the matter of
the appointee's qualifications and fitness to act as a humane
officer. The court shall also consider any documentation it has
received in support of, or in opposition to, the confirmation of the
person's appointment. If the court finds that the appointee is
qualified and fit to act as a humane officer, the court shall issue
an order confirming the appointment. The society shall thereupon file
a certified copy of the court order in the office of the county
clerk of the county or city and county in which the court is located.
The appointee shall, at the same time, take and subscribe the oath
of office prescribed for constables or other peace officers. The
society shall also provide a copy of the Order Confirming Appointment
to the State Humane Association of California and the Department of
Justice. The Department of Justice may charge a reasonable fee
sufficient to cover the costs of maintaining records of Orders
Confirming Appointment. If the court does not find the appointee
qualified and fit to act as a humane officer, the court shall issue
an order denying confirmation of the appointment.
(d) If the court grants the petition, the county clerk shall
immediately enter in a book to be kept in his or her office and
designated "Record of Humane Officers" the name of the officer, the
name of the society appointing him or her, the number of his or her
badge, the date of the filing, and the case number of the court order
confirming the appointment. At the time of the filing, the county
clerk shall collect from the society a fee of five dollars ($5),
which shall be full payment for all services to be performed by the
county clerk under this section.
(e) All appointments of humane officers shall automatically expire
if the society disbands or legally dissolves.
(f) (1) The society appointing an officer may revoke an
appointment at any time by filing in the office of the county clerk
in which the appointment of the officer is recorded a copy of the
revocation in writing under the letterhead of the society and duly
certified by its executive officer. Upon the filing the county clerk
shall enter the fact of the revocation and the date of the filing
thereof opposite the name of the officer in the record of humane
officers.
(2) Notwithstanding paragraph (1), any duly authorized sheriff or
local police agency or the State Humane Association of California may
initiate a revocation hearing by filing a petition to Revoke
Appointment of a Humane Officer. The petition shall show cause why an
appointment should be revoked and shall be made to the superior
court in the jurisdiction of the appointment. Filing, service, and
format of the petition and any oppositions and reply papers shall
conform to the law and motion requirements under the Code of Civil
Procedure, California Rules of Court, and this code. A proceeding
pursuant to this paragraph shall be a special proceeding within the
meaning of Section 23 of the Code of Civil Procedure.
(A) Notice of the hearing date and a copy of the petition shall be
served in the same manner as a summons upon the humane officer
subject to the petition, the society that appointed the officer, the
agencies and association described in paragraph (2) of subdivision
(b); except the party filing the petition shall not be required to
serve copies of those documents upon itself.
(B) Upon a finding of good cause, the court shall issue an order
granting the petition to revoke the appointment. The county clerk
shall immediately enter the revocation and the date of the court
order opposite the name of the officer in the record of humane
officers. The clerk of the superior court shall give notice of the
order to the parties described in subparagraph (A) and to the county
clerk-recorder.
(g) The society appointing the humane officer shall pay the
training expenses of the humane officer attending the training
required pursuant to this section.
(h) (1) (A) A level 1 humane officer is not a peace officer, but
may exercise the powers of a peace officer at all places within the
state in order to prevent the perpetration of any act of cruelty upon
any animal and to that end may summon to his or her aid any
bystander. A level 1 humane officer may use reasonable force
necessary to prevent the perpetration of any act of cruelty upon any
animal.
(B) A level 1 humane officer may make arrests for the violation of
any penal law of this state relating to or affecting animals in the
same manner as any peace officer and may serve search warrants.
(C) A level 1 humane officer is authorized to carry firearms while
exercising the duties of a humane officer, upon satisfactory
completion of the training specified in subparagraph (D), if the
requirements in subparagraph (F) are met.
(D) A level 1 humane officer shall, prior to appointment, provide
evidence satisfactory to the appointing society that he or she has
successfully completed the following requirements:
(i) At least 20 hours of a course of training in animal care
sponsored or provided by an accredited postsecondary institution or
any other provider approved by the California Veterinary Medical
Association the focus of which shall be the identification of
disease, injury, and neglect in domestic animals and livestock.
(ii) At least 40 hours of a course of training in the state humane
laws relating to the powers and duties of a humane officer,
sponsored or provided by an accredited postsecondary institution, law
enforcement agency, or the State Humane Association of California.
(iii) The basic training for a level 1 reserve officer by the
Commission on Peace Officer Standards and Training pursuant to
Section 13510.1 of the Penal Code.
(E) A person shall not be appointed as a level 1 humane officer
until he or she meets the criteria in Sections 1029, 1030, and 1031
of the Government Code. A humane society or society for the
prevention of cruelty to animals shall complete a background
investigation, using standards defined by the Commission on Peace
Officer Standards and Training as guidelines for all level 1 humane
officer appointments.
(F) (i) Notwithstanding any other provision of this section, a
level 1 humane officer may carry a firearm only if authorized by, and
only under the terms and conditions specified by, his or her
appointing society.
(ii) Notwithstanding any other provision of this section, a level
1 humane officer shall not be authorized to carry a firearm unless
and until his or her appointing society has adopted a policy on the
use of deadly force by its officers and the officer has been
instructed in that policy.
(2) (A) A level 2 humane officer is not a peace officer, but may
exercise the powers of a peace officer at all places within the state
in order to prevent the perpetration of any act of cruelty upon any
animal and to that end may summon to his or her aid any bystander. A
level 2 humane officer may use reasonable force necessary to prevent
the perpetration of any act of cruelty upon any animal.
(B) A level 2 humane officer may make arrests for the violation of
any penal law of this state relating to or affecting animals in the
same manner as any peace officer and may serve search warrants during
the course and within the scope of appointment, upon the successful
completion of a course relating to the exercise of the police powers
specified in Section 832 of the Penal Code, except the power to carry
and use firearms.
(C) A level 2 humane officer is not authorized to carry firearms.
(D) A level 2 humane officer shall, prior to appointment, provide
evidence satisfactory to the appointing society that he or she has
successfully completed courses of training in the following subjects:
(i) At least 20 hours of a course of training in animal care
sponsored or provided by an accredited postsecondary institution or
any other provider approved by the California Veterinary Medical
Association, the focus of which is the identification of disease,
injury, and neglect in domestic animals and livestock.
(ii) At least 40 hours of a course of training in the state humane
laws relating to the powers and duties of a humane officer,
sponsored or provided by an accredited postsecondary institution, law
enforcement agency, or the State Humane Association of California.
(E) A person shall not be appointed as a level 2 humane officer
until he or she has satisfied the requirements in Sections 1029,
1030, and 1031 of the Government Code. A humane society or society
for the prevention of cruelty to animals shall complete a background
investigation, using standards defined by the Commission on Peace
Officer Standards and Training as guidelines, for all level 2 humane
officer appointments.
(3) During each three-year period following the date on which the
certified copy of the court order confirming the appointment of a
humane officer was filed with the county clerk, the humane officer
shall complete 40 hours of continuing education and training relating
to the powers and duties of a humane officer, which education and
training shall be sponsored or provided by an accredited
postsecondary institution, law enforcement agency, or the State
Humane Association of California. A certificate of compliance shall
be served no later than 21 days after the expiration of each
three-year period on the Department of Justice with copies served on
the superior court, agencies, and associations described in paragraph
(2) of subdivision (b). The Department of Justice may charge a
reasonable fee sufficient to cover the costs of maintaining records
of certificates of compliance. The certificate of compliance shall
also include documentation that the humane society or society for the
prevention of cruelty to animals is in compliance with subparagraph
(F) of paragraph (2) of subdivision (b). Service on the Department of
Justice shall be in compliance with procedures set forth by the
Department of Justice. The Department of Justice shall post the
filing procedures, as they may be updated from time to time, on its
Internet Web site. Failure to file the certificate of compliance with
the Department of Justice no later than 21 days after the expiration
of a six-month period shall result in immediate revocation of the
appointment.
(4) If the humane officer is authorized to carry a firearm, he or
she shall complete ongoing weapons training and range qualifications
at least every six months pursuant to subdivision (t) of Section
830.3 of the Penal Code. A certificate of compliance pursuant to this
section shall be served no later than 21 days after the expiration
of a six-month period on the Department of Justice with copies served
on the superior court, and on the agencies and associations
described in paragraph (2) of subdivision (b). The Department of
Justice may charge a reasonable fee sufficient to cover the costs of
maintaining records of certificates of compliance. The certificate of
compliance shall also include documentation that the humane society
or society for the prevention of cruelty to animals is in compliance
with subparagraph (F) of paragraph (2) of subdivision (b). Service on
the Department of Justice shall be in compliance with procedures set
forth by the Department of Justice. The Department of Justice shall
post the filing procedures, as they may be updated from time to time,
on its Internet Web site. Failure to file the certificate of
compliance with the Department of Justice no later than 21 days after
the expiration of a six-month period shall result in immediate
revocation of the appointment.
(i) Every humane officer shall, when making an arrest, exhibit and
expose a suitable badge to be adopted by the society under this part
of which he or she is an appointee which shall bear its name and a
number. Uniforms worn by humane officers shall prominently display
the name of the appointing society. Humane officer uniforms shall not
display the words "state" or "California," except to the extent that
one or both of those words are part of the appointing society's
incorporated name.
(j) Any person resisting a humane officer in the performance of
his or her duty as provided in this section is guilty of a
misdemeanor. Any person who has not been appointed and qualified as a
humane officer as provided in this section, or whose appointment has
been revoked as provided in this section, or whose appointment,
having expired, has not been renewed as provided in this section, who
shall represent himself or herself to be or shall attempt to act as
an officer shall be guilty of a misdemeanor.
(k) No humane officer shall serve a search warrant without
providing prior notice to local law enforcement agencies operating
within that jurisdiction.
(l) Any humane society, society for the prevention of cruelty to
animals, or person, who knowingly provides a court with false or
forged documentation for the appointment of a humane officer, is
guilty of a misdemeanor and shall be punished by a fine of up to ten
(m) Except as otherwise provided by this section, a humane officer
shall serve only in the county in which the court that appointed him
or her sits. A humane officer may serve in another county if the
humane officer gives notice requesting consent to the sheriff of the
county in which he or she intends to serve, and acquires consent from
that sheriff of the county in which he or she intends to serve, or
from a person authorized by the sheriff to give that consent. A
sheriff shall promptly respond to any request by a humane officer to
serve in his or her jurisdiction and any request shall not be
unreasonably denied.
14503. The governing body of a local agency, by ordinance, may

authorize employees of public pounds, societies for the prevention of
cruelty to animals, and humane societies, who have qualified as
humane officers pursuant to Section 14502, and which societies or
pounds have contracted with such local agency to provide animal care
or protection services, to issue notices to appear in court pursuant
to Chapter 5c (commencing with Section 853.5) of Title 3 of Part 2 of
the Penal Code for violations of state or local animal control laws.
Those employees shall not be authorized to take any person into
custody even though the person to whom the notice is delivered does
not give his or her written promise to appear in court. The authority
of these employees is to be limited to the jurisdiction of the local
agency authorizing the employees.
14504. All humane societies and societies for the prevention of

cruelty to animals, and all humane officers shall be in full
compliance with Section 14502 on or before January 1, 2012.
Notwithstanding any other provision of this part, a level 1 or level
2 humane officer confirmed prior to January 1, 2012, shall not be
required to seek a new court order confirming his or her appointment.
However, a level 2 humane officer shall provide proof of compliance
with subparagraph (E) of paragraph (2) of subdivision (h) of Section
14502 by filing a certificate of compliance with the Department of
Justice on or before January 1, 2012, or that humane officer's
appointment shall be immediately revoked.
14505. Any law enforcement agency that is requested to provide

summary criminal history information pursuant to Section 13300 of the
Penal Code may charge the humane society or society for the
prevention of cruelty to animals a fee not to exceed the reasonable
costs of preparing reports and costs to maintain certificates of
compliance as required by Section 14502.
CORPORATIONS CODE
SECTION 14550-14551
14550. In order to promote, foster, and encourage the intelligent

and orderly marketing of agricultural products through cooperation;
to eliminate speculation and waste; to make the distribution of
agricultural products between producer and consumer as direct as can
be efficiently done; and to stabilize the marketing of agricultural
products, this act is passed.
14551. It is here recognized that agriculture is characterized by

individual production in contrast to the group or factory system that
characterizes other forms of industrial production; and that the
ordinary form of corporate organization permits industrial groups to
combine for the purpose of group production and the ensuing group
marketing; and that the public has an interest in permitting farmers
to bring their industry to the high degree of efficiency and
merchandising skill evidenced in the manufacturing industries; and
that the public interest urgently needs to prevent the migration from
the farm to the city in order to keep up farm production and to
preserve the agricultural supply of the nation; and that the public
interest demands that the farmer be encouraged to attain a superior
and more direct system of marketing in the substitution of
merchandising for the blind, unscientific, and speculative selling of
crops.
CORPORATIONS CODE
SECTION 15800
15800. (a) Every partnership, other than a foreign limited

partnership, subject to Chapter 3 (commencing with Section 15611) or
Chapter 5.5 (commencing with Section 15900), or a commercial or
banking partnership established and transacting business in a place
outside the United States, that is domiciled without this state and
has no regular place of business within this state, shall, within 40
days from the time it commences to do business in this state, file a
statement in the office of the Secretary of State in accordance with
Section 16309 designating some natural person or corporation as the
agent of the partnership upon whom process issued by authority of or
under any law of this state directed against the partnership may be
served. A copy of the designation, duly certified by the Secretary of
State, is sufficient evidence of the appointment.
(b) The process may be served in the manner provided in
subdivision (b) of Section 16310 on the person so designated, or, in
the event that no person has been designated, or if the agent
designated for the service of process is a natural person and cannot
be found with due diligence at the address stated in the designation,
or if the agent is a corporation and no person can be found with due
diligence to whom the delivery authorized by subdivision (b) of
Section 16310 may be made for the purpose of delivery to the
corporate agent, or if the agent designated is no longer authorized
to act, then service may be made by personal delivery to the
Secretary of State, Assistant Secretary of State, or a Deputy
Secretary of State of the process, together with a written statement
signed by the party to the action seeking the service, or by the
party's attorney, setting forth the last known address of the
partnership and a service fee as set forth in Section 12197 of the
Government Code. The Secretary of State shall immediately give notice
of the service to the partnership by forwarding the process to it by
registered mail, return receipt requested, at the address given in
the written statement.
(c) Service on the person designated, or personal delivery of the
process and statement of address together with a service fee as set
forth in Section 12197 of the Government Code to the Secretary of
State, Assistant Secretary of State, or a Deputy Secretary of State,
pursuant to this section is a valid service on the partnership. The
partnership so served shall appear within 30 days after service on
the person designated or within 30 days after delivery of the process
to the Secretary of State, Assistant Secretary of State, or a Deputy
Secretary of State.
CORPORATIONS CODE
SECTION 16100-16114
16100. This chapter may be cited as the Uniform Partnership Act of

1994.
16101. As used in this chapter, the following terms and phrases

have the following meanings:
(1) "Business" includes every trade, occupation, and profession.
(2) "Debtor in bankruptcy" means a person who is the subject of
(A) An order for relief under Title 11 of the United States Code
or a comparable order under a successor statute of general
application.
(B) A comparable order under federal, state, or foreign law
governing insolvency.
(3) "Distribution" means a transfer of money or other property
from a partnership to a partner in the partner's capacity as a
partner or to the partner's transferee.
(4) "Electronic transmission by the partnership" means a
partnership, (2) posting on an electronic message board or network
that the partnership has designated for those communications,
into clearly legible tangible form. However, an electronic
transmission by a partnership to an individual partner is not
authorized unless, in addition to satisfying the requirements of this
section, the transmission satisfies the requirements applicable to
consumer consent to electronic records as set forth in the Electronic
Signatures in Global and National Commerce Act (15 U.S.C. Sec. 7001
(c)(1)).
(5) "Electronic transmission to the partnership" means a
mail address, respectively, which the partnership has provided from
time to time to partners for sending communications to the
that the partnership has designated for those communications, and
which transmission shall be validly delivered upon the posting, or
(3) other means of electronic communication, (b) as to which the
partnership has placed in effect reasonable measures to verify that
the sender is the partner (in person or by proxy) purporting to send
the transmission, and (c) that creates a record that is capable of
(6) (A) "Foreign limited liability partnership" means a
partnership, other than a limited partnership, formed pursuant to an
agreement governed by the laws of another jurisdiction and
denominated or registered as a limited liability partnership or
registered limited liability partnership under the laws of that
jurisdiction (i) in which each partner is a licensed person or a
person licensed or authorized to provide professional limited
liability partnership services in a jurisdiction or jurisdictions
other than this state, (ii) which is licensed under the laws of the
state to engage in the practice of architecture, the practice of
public accountancy, the practice of engineering, the practice of land
surveying, or the practice of law, or (iii) which (I) is related to
a registered limited liability partnership that practices public
accountancy or, to the extent permitted by the State Bar, practices
law or is related to a foreign limited liability partnership and (II)
provides services related or complementary to the professional
limited liability partnership services provided by, or provides
services or facilities to, that registered limited liability
partnership or foreign limited liability partnership.
(B) For the purposes of clause (iii) of subparagraph (A), a
partnership is related to a registered limited liability partnership
or foreign limited liability partnership if (i) at least a majority
of the partners in one partnership are also partners in the other
partnership, or (ii) at least a majority in interest in each
partnership hold interests in or are members of another person,
except an individual, and each partnership renders services pursuant
to an agreement with that other person, or (iii) one partnership,
directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, the other
partnership.
(7) "Licensed person" means any person who is duly licensed,
authorized, or registered under the provisions of the Business and
Professions Code to provide professional limited liability
partnership services or who is lawfully able to render professional
limited liability partnership services in this state.
(8) (A) "Registered limited liability partnership" means a
agreement governed by Article 10 (commencing with Section 16951),
that is registered under Section 16953 and (i) each of the partners
of which is a licensed person or a person licensed or authorized to
provide professional limited liability partnership services in a
jurisdiction or jurisdictions other than this state, (ii) is licensed
under the laws of the state to engage in the practice of
architecture, the practice of public accountancy, the practice of
engineering, the practice of land surveying, or the practice of law,
or (iii)(I) is related to a registered limited liability partnership
that practices public accountancy or, to the extent permitted by the
State Bar, practices law or is related to a foreign limited liability
partnership and (II) provides services related or complementary to
the professional limited liability partnership services provided by,
or provides services or facilities to, that registered limited
liability partnership or foreign limited liability partnership.
partnership hold interests in or are members of another person, other
than an individual, and each partnership renders services pursuant
partnership.
(9) "Partnership" means an association of two or more persons to
carry on as coowners a business for profit formed under Section
16202, predecessor law, or comparable law of another jurisdiction,
and includes, for all purposes of the laws of this state, a
registered limited liability partnership, and excludes any
partnership formed under Chapter 2 (commencing with Section 15501),
Chapter 3 (commencing with Section 15611), or Chapter 5.5 (commencing
(10) "Partnership agreement" means the agreement, whether written,
oral, or implied, among the partners concerning the partnership,
including amendments to the partnership agreement.
(11) "Partnership at will" means a partnership in which the
partners have not agreed to remain partners until the expiration of a
definite term or the completion of a particular undertaking.
(12) "Partnership interest" or "partner's interest in the
partnership" means all of a partner's interests in the partnership,
including the partner's transferable interest and all management and
other rights.
(13) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited partnership, limited liability
partnership, limited liability company, association, joint venture,
government, governmental subdivision, agency, or instrumentality, or
any other legal or commercial entity.
(14) "Professional limited liability partnership services" means
the practice of architecture, the practice of public accountancy, the
practice of engineering, the practice of land surveying, or the
practice of law.
(15) "Property" means all property, real, personal, or mixed,
tangible or intangible, or any interest therein.
(16) "State" means a state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or any territory or
insular possession subject to the jurisdiction of the United States.
(17) "Statement" means a statement of partnership authority under
Section 16303, a statement of denial under Section 16304, a statement
of dissociation under Section 16704, a statement of dissolution
under Section 16805, a statement of conversion or a certificate of
conversion under Section 16906, a statement of merger under Section
16915, or an amendment or cancellation of any of the foregoing.
(18) "Transfer" includes an assignment, conveyance, lease,
mortgage, deed, and encumbrance.
(19) The inclusion of the practice of architecture as a
professional limited liability partnership service permitted by this
section shall extend only until January 1, 2012.
(20) This section shall remain in effect only until January 1,
that date.
16101. As used in this chapter, the following terms and phrases

have the following meanings:
(1) "Business" includes every trade, occupation, and profession.
(2) "Debtor in bankruptcy" means a person who is the subject of
(A) An order for relief under Title 11 of the United States Code
application.
(B) A comparable order under federal, state, or foreign law
(3) "Distribution" means a transfer of money or other property
from a partnership to a partner in the partner's capacity as a
partner or to the partner's transferee.
(4) "Electronic transmission by the partnership" means a
that the partnership has designated for those communications,
into clearly legible tangible form. However, an electronic
transmission by a partnership to an individual partner is not
authorized unless, in addition to satisfying the requirements of this
section, the transmission satisfies the requirements applicable to
consumer consent to electronic records as set forth in the Electronic
Signatures in Global and National Commerce Act (15 U.S.C. Sec. 7001
(c)(1)).
(5) "Electronic transmission to the partnership" means a
mail address, respectively, which the partnership has provided from
time to time to partners for sending communications to the
that the partnership has designated for those communications, and
which transmission shall be validly delivered upon the posting, or
(3) other means of electronic communication, (b) as to which the
partnership has placed in effect reasonable measures to verify that
the sender is the partner (in person or by proxy) purporting to send
the transmission, and (c) that creates a record that is capable of
(6) (A) "Foreign limited liability partnership" means a
agreement governed by the laws of another jurisdiction and
denominated or registered as a limited liability partnership or
registered limited liability partnership under the laws of that
jurisdiction (i) in which each partner is a licensed person or a
person licensed or authorized to provide professional limited
liability partnership services in a jurisdiction or jurisdictions
other than this state, (ii) which is licensed under the laws of the
state to engage in the practice of architecture, the practice of
public accountancy, or the practice of law, or (iii) which (I) is
related to a registered limited liability partnership that practices
public accountancy or, to the extent permitted by the State Bar,
practices law or is related to a foreign limited liability
partnership and (II) provides services related or complementary to
the professional limited liability partnership services provided by,
or provides services or facilities to, that registered limited
liability partnership or foreign limited liability partnership.
partnership hold interests in or are members of another person,
except an individual, and each partnership renders services pursuant
partnership.
(7) "Licensed person" means any person who is duly licensed,
authorized, or registered under the provisions of the Business and
Professions Code to provide professional limited liability
partnership services or who is lawfully able to render professional
limited liability partnership services in this state.
(8) (A) "Registered limited liability partnership" means a
agreement governed by Article 10 (commencing with Section 16951),
that is registered under Section 16953 and (i) each of the partners
of which is a licensed person or a person licensed or authorized to
provide professional limited liability partnership services in a
jurisdiction or jurisdictions other than this state, (ii) is licensed
under the laws of the state to engage in the practice of
architecture, practice of public accountancy, or the practice of law,
or (iii)(I) is related to a registered limited liability partnership
that practices public accountancy or, to the extent permitted by the
State Bar, practices law or is related to a foreign limited
liability partnership and (II) provides services related or
complementary to the professional limited liability partnership
services provided by, or provides services or facilities to, that
registered limited liability partnership or foreign limited liability
partnership.
partnership hold interests in or are members of another person, other
than an individual, and each partnership renders services pursuant
partnership.
(9) "Partnership" means an association of two or more persons to
carry on as coowners a business for profit formed under Section
16202, predecessor law, or comparable law of another jurisdiction,
and includes, for all purposes of the laws of this state, a
registered limited liability partnership, and excludes any
partnership formed under Chapter 2 (commencing with Section 15501),
Chapter 3 (commencing with Section 15611), or Chapter 5.5 (commencing
(10) "Partnership agreement" means the agreement, whether written,
oral, or implied, among the partners concerning the partnership,
including amendments to the partnership agreement.
(11) "Partnership at will" means a partnership in which the
partners have not agreed to remain partners until the expiration of a
definite term or the completion of a particular undertaking.
(12) "Partnership interest" or "partner's interest in the
partnership" means all of a partner's interests in the partnership,
including the partner's transferable interest and all management and
other rights.
(13) "Person" means an individual, corporation, business trust,
estate, trust, partnership, limited partnership, limited liability
partnership, limited liability company, association, joint venture,
government, governmental subdivision, agency, or instrumentality, or
any other legal or commercial entity.
(14) "Professional limited liability partnership services" means
the practice of architecture, the practice of public accountancy, or
the practice of law.
(15) "Property" means all property, real, personal, or mixed,
tangible or intangible, or any interest therein.
(16) "State" means a state of the United States, the District of
Columbia, the Commonwealth of Puerto Rico, or any territory or
insular possession subject to the jurisdiction of the United States.
(17) "Statement" means a statement of partnership authority under
Section 16303, a statement of denial under Section 16304, a statement
of dissociation under Section 16704, a statement of dissolution
under Section 16805, a statement of conversion or a certificate of
conversion under Section 16906, a statement of merger under Section
16915, or an amendment or cancellation of any of the foregoing.
(18) "Transfer" includes an assignment, conveyance, lease,
mortgage, deed, and encumbrance.
(19) The inclusion of the practice of architecture as a
professional limited liability partnership service permitted by this
section shall extend only until January 1, 2012.
(20) This section shall become operative on January 1, 2016.
16102. (a) A person knows a fact if the person has actual knowledge
of it.
(b) A person has notice of a fact if any of the following apply:
(1) The person knows of it.
(2) The person has received a notification of it.
(3) The person has reason to know it exists from all of the facts
known to the person at the time in question.
(4) Subdivision (f) of Section 16953 or subdivision (f) of Section
16959 as applicable.
(c) A person notifies or gives a notification to another by taking
steps reasonably required to inform the other person in ordinary
course, whether or not the other person knows of it.
(d) A person receives a notification when either of the following
apply:
(1) The person knows of the notification.
(2) The notification is duly delivered at the person's place of
business or at any other place held out by the person as a place for
receiving communications.
(e) Except as otherwise provided in subdivision (f), a person
other than an individual knows, has notice, or receives a
notification of a fact for purposes of a particular transaction when
the individual conducting the transaction knows, has notice, or
receives a notification of the fact, or in any event when the fact
would have been brought to the individual's attention if the person
had exercised reasonable diligence. The person exercises reasonable
diligence if it maintains reasonable routines for communicating
significant information to the individual conducting the transaction
and there is reasonable compliance with the routines. Reasonable
diligence does not require an individual acting for the person to
communicate information unless the communication is part of the
individual's regular duties or the individual has reason to know of
the transaction and that the transaction would be materially affected
by the information.
(f) A partner's knowledge, notice, or receipt of a notification of
a fact relating to the partnership is effective immediately as
knowledge by, notice to, or receipt of a notification by the
partnership, except in the case of a fraud on the partnership
committed by or with the consent of that partner.
16103. (a) Except as otherwise provided in subdivision (b),

relations among the partners and between the partners and the
partnership are governed by the partnership agreement. To the extent
the partnership agreement does not otherwise provide, this chapter
governs relations among the partners and between the partners and the
partnership.
(b) The partnership agreement may not do any of the following:
(1) Vary the rights and duties under Section 16105 except to
eliminate the duty to provide copies of statements to all of the
partners.
(2) Unreasonably restrict the right of access to books and records
under subdivision (b) of Section 16403, or the right to be furnished
with information under subdivision (c) of Section 16403.
(3) Eliminate the duty of loyalty under subdivision (b) of Section
16404 or paragraph (3) of subdivision (b) of Section 16603, but, if
not manifestly unreasonable, may do either of the following:
(A) The partnership agreement may identify specific types or
categories of activities that do not violate the duty of loyalty.
(B) All of the partners or a number or percentage specified in the
partnership agreement may authorize or ratify, after full disclosure
of all material facts, a specific act or transaction that otherwise
would violate the duty of loyalty.
(4) Unreasonably reduce the duty of care under subdivision (c) of
Section 16404 or paragraph (3) of subdivision (b) of Section 16603.
(5) Eliminate the obligation of good faith and fair dealing under
subdivision (d) of Section 16404, but the partnership agreement may
prescribe the standards by which the performance of the obligation is
to be measured, if the standards are not manifestly unreasonable.
(6) Vary the power to dissociate as a partner under subdivision
(a) Section 16602, except to require the notice under paragraph (1)
of Section 16601 to be in writing.
(7) Vary the right of a court to expel a partner in the events
specified in paragraph (5) of Section 16601.
(8) Vary the requirement to wind up the partnership business in
cases specified in paragraph (4), (5), or (6) of Section 16801.
(9) Restrict rights of third parties under this chapter.
(10) Vary the law applicable to a registered limited liability
partnership under subdivision (b) of Section 16106.
16104. (a) Unless displaced by particular provisions of this

chapter, the principles of law and equity supplement this chapter.
(b) If an obligation to pay interest arises under this chapter and
the rate is not specified, the rate is that specified in Section
3289 of the Civil Code.
16105. (a) A statement may be filed in the office of the Secretary

of State. A certified copy of a statement that is filed in an office
in another state may be filed in the office of the Secretary of
State. Either filing has the effect provided in this chapter with
respect to partnership property located in or transactions that occur
in this state.
(b) A certified copy of a statement that has been filed in the
office of the Secretary of State and recorded in the office for
recording transfers of real property has the effect provided for
recorded statements in this chapter. A recorded statement that is not
a certified copy of a statement filed in the office of the Secretary
of State does not have the effect provided for recorded statements
in this chapter.
(c) A statement filed by a partnership shall be executed by at
least two partners. Other statements shall be executed by a partner
or other person authorized by this chapter. An individual who
executes a statement as, or on behalf of, a partner or other person
named as a partner in a statement shall personally declare under
penalty of perjury that the contents of the statement are accurate.
(d) A person authorized by this chapter to file a statement may
amend or cancel the statement by filing an amendment or cancellation
that names the partnership, identifies the statement, and states the
substance of the amendment or cancellation.
(e) A person who files a statement pursuant to this section shall
promptly send a copy of the statement to every nonfiling partner and
to any other person named as a partner in the statement. Failure to
send a copy of a statement to a partner or other person does not
limit the effectiveness of the statement as to a person not a
partner.
(f) The Secretary of State may collect a fee for filing or
providing a certified copy of a statement. The officer responsible
for recording transfers of real property may collect a fee for
recording a statement.
16106. (a) Except as otherwise provided in subdivision (b) of this

section, or Section 16958, the law of the jurisdiction in which a
partnership has its chief executive office governs relations among
the partners and between the partners and the partnership.
(b) With respect to a registered limited liability partnership,
the law of this state shall govern relations among the partners and
between the partners and the partnership, and the liability of
partners for obligations of the partnership.
16107. A partnership governed by this chapter is subject to any

amendment to or repeal of this chapter.
16108. Except with respect to the provisions of this chapter

specifically relating to registered limited liability partnerships
and foreign limited liability partnerships, this chapter shall be
applied and construed to effectuate its general purpose to make
uniform the law with respect to the subject of this chapter among
states enacting it.
16109. The rights and duties of surviving partners, the legal

representatives of deceased partners, the creditors of such partners,
and the creditors of the partnership created by or defined in this
chapter shall be given full force and effect notwithstanding any
inconsistent provisions of the Probate Code, but nothing in this
chapter shall otherwise affect any provision of the Probate Code.
16110. If any provision of this chapter or its application to any

person or circumstance is held invalid, the invalidity does not
affect other provisions or applications of this chapter that can be
given effect without the invalid provision or application, and to
this end the provisions of this chapter are severable.
16111. (a) Except as provided in Section 16955.5, before January 1,

1999, this chapter governs only a partnership formed (1) on or after
the effective date of this chapter, unless that partnership is
continuing the business of a dissolved partnership under Section
15041, or (2) before the effective date of this chapter if that
partnership elects, in the manner provided in its partnership
agreement or by law for amending the partnership agreement, to be
governed by this chapter.
(b) On and after January 1, 1999, this chapter governs all
partnerships.
(c) Except with respect to the provisions of this chapter
specifically relating to registered limited liability partnerships
and foreign limited liability partnerships, the provisions of this
chapter relating to the liability of the partnership's partners to
third parties apply to limit those partners' liability to a third
party who had done business with the partnership within one year
preceding the partnership's election to be governed by this chapter,
only if the third party knows or has received a notification of the
partnership's election to be governed by this chapter.
16112. This chapter does not affect an action or proceeding

commenced or right accrued before this chapter takes effect.
16113. (a) The fee for filing a statement of partnership is seventy

dollars ($70).
(b) Unless another fee is specified by law or the law specifies
that no fee is to be charged, the fee for filing any partnership
statement pursuant to this chapter is thirty dollars ($30).
(c) There is no fee for filing a statement of dissolution for the
purposes of canceling a statement of partnership.
16114. Unless another fee is specified by law or the law specifies

that no fee is to be charged, the fee for acceptance of copies of
process against a surviving foreign partnership or limited
partnership pursuant to subdivision (b) of Section 16906 is fifty
dollars ($50) for each surviving foreign partnership or limited
partnership general partnership upon whom service is sought.
CORPORATIONS CODE
SECTION 16201-16204
16201. A partnership is an entity distinct from its partners.
16202. (a) Except as otherwise provided in subdivision (b), the

association of two or more persons to carry on as coowners a business
for profit forms a partnership, whether or not the persons intend to
form a partnership.
(b) An association formed under a statute other than this chapter,
a predecessor statute, or a comparable statute of another
jurisdiction is not a partnership under this chapter.
(c) In determining whether a partnership is formed, the following
rules apply:
(1) Joint tenancy, tenancy in common, tenancy by the entireties,
joint property, common property, or part ownership does not by itself
establish a partnership, even if the coowners share profits made by
the use of the property.
(2) The sharing of gross returns does not by itself establish a
partnership, even if the persons sharing them have a joint or common
right or interest in property from which the returns are derived.
(3) A person who receives a share of the profits of a business is
presumed to be a partner in the business, unless the profits were
received for any of the following reasons:
(A) In payment of a debt by installments or otherwise.
(B) In payment for services as an independent contractor or of
wages or other compensation to an employee.
(C) In payment of rent.
(D) In payment of an annuity or other retirement benefit to a
beneficiary, representative, or designee of a deceased or retired
partner.
(E) In payment of interest or other charge on a loan, even if the
amount of payment varies with the profits of the business, including
a direct or indirect present or future ownership of the collateral,
or rights to income, proceeds, or increase in value derived from the
collateral.
(F) In payment for the sale of the goodwill of a business or other
property by installments or otherwise.
16203. Property acquired by a partnership is property of the

partnership and not of the partners individually.
16204. (a) Property is partnership property if acquired in the name

of either of the following:
(1) The partnership.
(2) One or more partners with an indication in the instrument
transferring title to the property of the person's capacity as a
partner or of the existence of a partnership but without an
indication of the name of the partnership.
(b) Property is acquired in the name of the partnership by a
transfer to either of the following:
(1) The partnership in its name.
(2) One or more partners in their capacity as partners in the
partnership, if the name of the partnership is indicated in the
instrument transferring title to the property.
(c) Property is presumed to be partnership property if purchased
with partnership assets, even if not acquired in the name of the
partnership or of one or more partners with an indication in the
instrument transferring title to the property of the person's
capacity as a partner or of the existence of a partnership.
(d) Property acquired in the name of one or more of the partners,
without an indication in the instrument transferring title to the
property of the person's capacity as a partner or of the existence of
a partnership and without use of partnership assets, is presumed to
be separate property, even if used for partnership purposes.
CORPORATIONS CODE
SECTION 16301-16310
16301. Subject to the effect of a statement of partnership
authority under Section 16303 both of the following apply:
(1) Each partner is an agent of the partnership for the purpose of
its business. An act of a partner, including the execution of an
instrument in the partnership name, for apparently carrying on in the
ordinary course the partnership business or business of the kind
carried on by the partnership binds the partnership, unless the
partner had no authority to act for the partnership in the particular
matter and the person with whom the partner was dealing knew or had
received a notification that the partner lacked authority.
(2) An act of a partner that is not apparently for carrying on in
the ordinary course the partnership business or business of the kind
carried on by the partnership binds the partnership only if the act
was authorized by the other partners.
16302. (a) Partnership property may be transferred as follows:

(1) Subject to the effect of a statement of partnership authority
under Section 16303, partnership property held in the name of the
partnership may be transferred by an instrument of transfer executed
by a partner in the partnership name.
(2) Partnership property held in the name of one or more partners
with an indication in the instrument transferring the property to
them of their capacity as partners or of the existence of a
partnership, but without an indication of the name of the
partnership, may be transferred by an instrument of transfer executed
by the persons in whose name the property is held.
(3) Partnership property held in the name of one or more persons
other than the partnership, without an indication in the instrument
transferring the property to them of their capacity as partners or of
the existence of a partnership, may be transferred by an instrument
of transfer executed by the persons in whose name the property is
held.
(b) A partnership may recover partnership property from a
transferee only if it proves that execution of the instrument of
initial transfer did not bind the partnership under Section 16301 and
either of the following applies:
(1) As to a subsequent transferee who gave value for property
transferred under paragraph (1) or (2) of subdivision (a), proves
that the subsequent transferee knew or had received a notification
that the person who executed the instrument of initial transfer
lacked authority to bind the partnership.
(2) As to a transferee who gave value for property transferred
under paragraph (3) of subdivision (a), proves that the transferee
knew or had received a notification that the property was partnership
property and that the person who executed the instrument of initial
transfer lacked authority to bind the partnership.
(c) A partnership may not recover partnership property from a
subsequent transferee if the partnership would not have been entitled
to recover the property, under subdivision (b), from any earlier
transferee of the property.
(d) If a person holds all of the partners' interests in the
partnership, all of the partnership property vests in that person.
The person may execute a document in the name of the partnership to
evidence vesting of the property in that person and may file or
record the document.
16303. (a) A partnership may file a statement of partnership
authority, which is subject to all of the following:
(1) The statement shall include all of the following:
(A) The name of the partnership.
(B) The street address of its chief executive office and of one
office in this state, if there is one.
(C) The names and mailing addresses of all of the partners or of
an agent appointed and maintained by the partnership for the purpose
of subdivision (b).
(D) The names of the partners authorized to execute an instrument
transferring real property held in the name of the partnership.
(2) The statement may specify the authority, or limitations on the
authority, of some or all of the partners to enter into other
transactions on behalf of the partnership and any other matter.
(b) If a statement of partnership authority names an agent, the
agent shall maintain a list of the names and mailing addresses of all
of the partners and make it available to any person on request for
good cause shown.
(c) If a filed statement of partnership authority is executed
pursuant to subdivision (c) of Section 16105 and states the name of
the partnership but does not contain all of the other information
required by subdivision (a), the statement nevertheless operates with
respect to a person not a partner as provided in subdivisions (d)
and (e).
(d) A filed statement of partnership authority supplements the
authority of a partner to enter into transactions on behalf of the
partnership as follows:
(1) Except for transfers of real property, a grant of authority
contained in a filed statement of partnership authority is conclusive
in favor of a person who gives value without knowledge to the
contrary, so long as and to the extent that a limitation on that
authority is not then contained in another filed statement. A filed
cancellation of a limitation on authority revives the previous grant
of authority.
(2) A grant of authority to transfer real property held in the
name of the partnership contained in a certified copy of a filed
statement of partnership authority recorded in the office for
recording transfers of that real property is conclusive in favor of a
person who gives value without knowledge to the contrary, so long as
and to the extent that a certified copy of a filed statement
containing a limitation on that authority is not then of record in
the office for recording transfers of that real property. The
recording in the office for recording transfers of that real property
of a certified copy of a filed cancellation of a limitation on
authority revives the previous grant of authority.
(e) A person not a partner is deemed to know of a limitation on
the authority of a partner to transfer real property held in the name
of the partnership if a certified copy of the filed statement
containing the limitation on authority is of record in the office for
recording transfers of that real property.
(f) Except as otherwise provided in subdivisions (d) and (e) and
Sections 16704 and 16805, a person not a partner is not deemed to
know of a limitation on the authority of a partner merely because the
limitation is contained in a filed statement.
16304. A partner or other person named as a partner in a filed
statement of partnership authority or in a list maintained by an
agent pursuant to subdivision (b) of Section 16303 may file a
statement of denial stating the name of the partnership as filed with
the Secretary of State, any identification number issued by the
Secretary of State, and the fact that is being denied, that may
include denial of a person's authority or status as a partner. A
statement of denial is a limitation on authority as provided in
subdivisions (d) and (e) of Section 16303.
16305. (a) A partnership is liable for loss or injury caused to a

person, or for a penalty incurred, as a result of a wrongful act or
omission, or other actionable conduct, of a partner acting in the
ordinary course of business of the partnership or with authority of
the partnership.
(b) If, in the course of the partnership's business or while
acting with authority of the partnership, a partner receives or
causes the partnership to receive money or property of a person not a
partner, and the money or property is misapplied by a partner, the
partnership is liable for the loss.
16306. (a) Except as otherwise provided in subdivisions (b) and

(c), all partners are liable jointly and severally for all
obligations of the partnership unless otherwise agreed by the
claimant or provided by law.
(b) A person admitted as a partner into an existing partnership is
not personally liable for any partnership obligation incurred before
the person's admission as a partner.
(c) Notwithstanding any other section of this chapter, and subject
to subdivisions (d), (e), (f), and (h), a partner in a registered
limited liability partnership is not liable or accountable, directly
or indirectly, including by way of indemnification, contribution,
assessment, or otherwise, for debts, obligations, or liabilities of
or chargeable to the partnership or another partner in the
partnership, whether arising in tort, contract, or otherwise, that
are incurred, created, or assumed by the partnership while the
partnership is a registered limited liability partnership, by reason
of being a partner or acting in the conduct of the business or
activities of the partnership.
(d) Notwithstanding subdivision (c), all or certain specified
partners of a registered limited liability partnership, if the
specified partners agree, may be liable in their capacity as partners
for all or specified debts, obligations, or liabilities of the
registered limited liability partnership if the partners possessing a
majority of the interests of the partners in the current profits of
the partnership, or a different vote as may be required in the
partnership agreement, specifically agreed to the specified debts,
obligations, or liabilities in writing, prior to the debt,
obligation, or liability being incurred. That specific agreement may
be modified or revoked if the partners possessing a majority of the
interests of the partners in the current profits of the partnership,
or a different vote as may be required in the partnership agreement,
agree to the modification or revocation in writing; provided,
however, that a modification or revocation shall not affect the
liability of a partner for any debts, obligations, or liabilities of
a registered limited liability partnership incurred, created, or
assumed by the registered limited liability partnership prior to the
modification or revocation.
(e) Nothing in subdivision (c) shall be construed to affect the
liability of a partner of a registered limited liability partnership
to third parties for that partner's tortious conduct.
(f) The limitation of liability in subdivision (c) shall not apply
to claims based upon acts, errors, or omissions arising out of the
rendering of professional limited liability partnership services of a
registered limited liability partnership providing legal services
unless that partnership has a currently effective certificate of
registration issued by the State Bar.
(g) A partner in a registered limited liability partnership is not
a proper party to a proceeding by or against a registered limited
liability partnership in which personal liability for partnership
debts, obligations, or liabilities is asserted against the partner,
unless that partner is personally liable under subdivision (d) or
(e).
(h) Nothing in this section shall affect or impair the ability of
a partner to act as a guarantor or surety for, provide collateral for
or otherwise be liable for, the debts, obligations, or liabilities
of a registered limited liability partnership.
16307. (a) A partnership may sue and be sued in the name of the
partnership.
(b) Except as otherwise provided in subdivision (g) of Section
16306, an action may be brought against the partnership and any or
all of the partners in the same action or in separate actions.
(c) A judgment against a partnership is not by itself a judgment
against a partner. A judgment against a partnership may not be
satisfied from a partner's assets unless there is also a judgment
against the partner.
(d) A judgment creditor of a partner may not levy execution
against the assets of the partner to satisfy a judgment based on a
claim against the partnership unless any of the following apply:
(1) A judgment based on the same claim has been obtained against
the partnership and a writ of execution on the judgment has been
returned unsatisfied in whole or in part.
(2) The partnership is a debtor in bankruptcy.
(3) The partner has agreed that the creditor need not exhaust
partnership assets.
(4) A court grants permission to the judgment creditor to levy
execution against the assets of a partner based on a finding that
partnership assets subject to execution are clearly insufficient to
satisfy the judgment, that exhaustion of partnership assets is
excessively burdensome, or that the grant of permission is an
appropriate exercise of the court's equitable powers.
(5) Liability is imposed on the partner by law or contract
independent of the existence of the partnership.
(e) This section applies to any partnership liability or
obligation resulting from a representation by a partner or purported
partner under Section 16308.
16308. Except with respect to registered limited liability

partnerships and foreign limited liability partnerships:
(a) If a person, by words or conduct, purports to be a partner, or
consents to being represented by another as a partner, in a
partnership or with one or more persons not partners, the purported
partner is liable to a person to whom the representation is made, if
that person, relying on the representation, enters into a transaction
with the actual or purported partnership. If the representation,
either by the purported partner or by a person with the purported
partner's consent, is made in a public manner, the purported partner
is liable to a person who relies upon the purported partnership even
if the purported partner is not aware of being held out as a partner
to the claimant. If partnership liability results, the purported
partner is liable with respect to that liability as if the purported
partner were a partner. If no partnership liability results, the
purported partner is liable with respect to that liability jointly
and severally with any other person consenting to the representation.
(b) If a person is thus represented to be a partner in an existing
partnership, or with one or more persons not partners, the purported
partner is an agent of persons consenting to the representation to
bind them to the same extent and in the same manner as if the
purported partner were a partner, with respect to persons who enter
into transactions in reliance upon the representation. If all of the
partners of the existing partnership consent to the representation, a
partnership act or obligation results. If fewer than all of the
partners of the existing partnership consent to the representation,
the person acting and the partners consenting to the representation
are jointly and severally liable.
(c) A person is not liable as a partner merely because the person
is named by another in a statement of partnership authority.
(d) A person does not continue to be liable as a partner merely
because of a failure to file a statement of dissociation or to amend
a statement of partnership authority to indicate the partner's
dissociation from the partnership.
(e) Except as otherwise provided in subdivisions (a) and (b),
persons who are not partners as to each other are not liable as
partners to other persons.
16309. (a) The statement of partnership authority may designate an

agent for service of process. The agent may be an individual residing
in this state or a corporation that has complied with Section 1505
and whose capacity to act as an agent has not terminated. If an
individual is designated, the statement shall include that person's
complete business or residence address in this state.
(b) An agent designated for service of process may file with the
Secretary of State a signed and acknowledged written statement of
resignation as an agent. On filing of the statement of resignation,
the authority of the agent to act in that capacity shall cease and
the Secretary of State shall give written notice of the filing of the
statement of resignation by mail to the partnership, addressed to
its principal executive office.
(c) If an individual who has been designated agent for service of
process dies or resigns or no longer resides in the state, or if the
corporate agent for that purpose resigns, dissolves, withdraws from
the state, forfeits its right to transact intrastate business, has
its corporate rights, powers, and privileges suspended, or ceases to
exist, the partnership or foreign partnership shall promptly file an
amended statement of partnership authority, designating a new agent.
16310. (a) If a partnership has designated an agent for service of
process, process may be served on the partnership as provided in this
section and in Chapter 4 (commencing with Section 413.10) of Title 5
of Part 2 of the Code of Civil Procedure.
(b) Personal service of a copy of any process against the
partnership by delivery to an individual designated by it as agent,
or if the designated agent is a corporation, to a person named in the
latest certificate of the corporate agent filed pursuant to Section
1505 at the office of the corporate agent, shall constitute valid
service on the partnership.
(c) No change in the address of the agent for service of process
or appointment of a new agent for service of process shall be
effective until an amendment to the statement of partnership
authority is filed.
(d) (1) If an agent for service of process has resigned and has
not been replaced, or if the designated agent cannot with reasonable
diligence be found at the address designated for personal delivery of
the process, and it is shown by affidavit to the satisfaction of the
court that process against a partnership cannot be served with
reasonable diligence upon the designated agent by hand in the manner
provided in Section 415.10, subdivision (a) of Section 415.20, or
subdivision (a) of Section 415.30 of the Code of Civil Procedure, the
court may make an order that the service shall be made on a
partnership by delivering by hand to the Secretary of State, or to
any person employed in the Secretary of State's office in the
capacity of assistant or deputy, one copy of the process for each
defendant to be served, together with a copy of the order authorizing
the service. Service in this manner shall be deemed complete on the
(2) Upon receipt of the copy of process and the fee for service,
the Secretary of State shall give notice of the service of the
process to the partnership, at its principal executive office, by
forwarding to that office, by registered mail with request for return
receipt, the copy of the process.
(3) The Secretary of State shall keep a record of all process
served on the Secretary of State under this section and shall record
therein the time of service and the action taken by the Secretary of
State. A certificate under the Secretary of State's official seal,
certifying to the receipt of process, the giving of notice to the
partnership, and the forwarding of the process pursuant to this
section, shall be competent and prima facie evidence of the service
of process.
CORPORATIONS CODE
SECTION 16401-16406
16401. (a) Each partner is deemed to have an account that is

subject to both of the following:
(1) Credited with an amount equal to the money plus the value of
any other property, net of the amount of any liabilities, the partner
contributes to the partnership and the partner's share of the
partnership profits.
(2) Subject to Sections 16306 and 16957, charged with an amount
equal to the money plus the value of any other property, net of the
amount of any liabilities, distributed by the partnership to the
partner and the partner's share of the partnership losses.
(b) Each partner is entitled to an equal share of the partnership
profits and, subject to Sections 16306 and 16957, is chargeable with
a share of the partnership losses in proportion to the partner's
share of the profits.
(c) A partnership shall reimburse a partner for payments made and
indemnify a partner for liabilities incurred by the partner in the
ordinary course of the business of the partnership or for the
preservation of its business or property.
(d) A partnership shall reimburse a partner for an advance to the
partnership beyond the amount of capital the partner agreed to
contribute.
(e) A payment or advance made by a partner that gives rise to a
partnership obligation under subdivision (c) or (d) constitutes a
loan to the partnership that accrues interest from the date of the
payment or advance.
(f) Each partner has equal rights in the management and conduct of
the partnership business.
(g) A partner may use or possess partnership property only on
behalf of the partnership.
(h) A partner is not entitled to remuneration for services
performed for the partnership, except for reasonable compensation for
services rendered in winding up the business of the partnership.
(i) A person may become a partner only with the consent of all of
the partners.
(j) A difference arising as to a matter in the ordinary course of
business of a partnership may be decided by a majority of the
partners. An act outside the ordinary course of business of a
partnership and an amendment to the partnership agreement may be
undertaken only with the consent of all of the partners.
(k) This section does not affect the obligations of a partnership
to other persons under Section 16301.
16402. A partner has no right to receive, and may not be required

to accept, a distribution in kind.
16403. (a) A partnership shall keep its books and records, if any,
in writing or in any other form capable of being converted into
clearly legible tangible form, at its chief executive office.
(b) A partnership shall provide partners and their agents and
attorneys access to its books and records. It shall provide former
partners and their agents and attorneys access to books and records
pertaining to the period during which they were partners. The right
of access provides the opportunity to inspect and copy books and
records during ordinary business hours. A partnership may impose a
reasonable charge, covering the costs of labor and material, for
copies of documents furnished.
(c) Each partner and the partnership shall furnish to a partner,
and to the legal representative of a deceased partner or partner
under legal disability, both of the following, which may be
transmitted by electronic transmission by the partnership
(subdivision (4) of Section 16101):
(1) Without demand, any information concerning the partnership's
business and affairs reasonably required for the proper exercise of
the partner's rights and duties under the partnership agreement or
this chapter; and
(2) On demand, any other information concerning the partnership's
business and affairs, except to the extent the demand or the
information demanded is unreasonable or otherwise improper under the
circumstances.
16404. (a) The fiduciary duties a partner owes to the partnership

and the other partners are the duty of loyalty and the duty of care
set forth in subdivisions (b) and (c).
(b) A partner's duty of loyalty to the partnership and the other
partners includes all of the following:
(1) To account to the partnership and hold as trustee for it any
property, profit, or benefit derived by the partner in the conduct
and winding up of the partnership business or derived from a use by
the partner of partnership property or information, including the
appropriation of a partnership opportunity.
(2) To refrain from dealing with the partnership in the conduct or
winding up of the partnership business as or on behalf of a party
having an interest adverse to the partnership.
(3) To refrain from competing with the partnership in the conduct
of the partnership business before the dissolution of the
partnership.
(c) A partner's duty of care to the partnership and the other
partners in the conduct and winding up of the partnership business is
limited to refraining from engaging in grossly negligent or reckless
conduct, intentional misconduct, or a knowing violation of law.
(d) A partner shall discharge the duties to the partnership and
the other partners under this chapter or under the partnership
agreement and exercise any rights consistently with the obligation of
good faith and fair dealing.
(e) A partner does not violate a duty or obligation under this
chapter or under the partnership agreement merely because the partner'
s conduct furthers the partner's own interest.
(f) A partner may lend money to and transact other business with
the partnership, and as to each loan or transaction, the rights and
obligations of the partner regarding performance or enforcement are
the same as those of a person who is not a partner, subject to other
applicable law.
(g) This section applies to a person winding up the partnership
business as the personal or legal representative of the last
surviving partner as if the person were a partner.
16405. (a) A partnership may maintain an action against a partner

for a breach of the partnership agreement, or for the violation of a
duty to the partnership, causing harm to the partnership.
(b) A partner may maintain an action against the partnership or
another partner for legal or equitable relief, with or without an
accounting as to partnership business, to do any of the following:
(1) Enforce the partner's rights under the partnership agreement.
(2) Enforce the partner's rights under this chapter, including all
of the following:
(A) The partner's rights under Section 16401, 16403, or 16404.
(B) The partner's right on dissociation to have the partner's
interest in the partnership purchased pursuant to Section 16701 or
16701.5, or to enforce any other right under Article 6 (commencing
with Section 16601) or 7 (commencing with Section 16701).
(C) The partner's right to compel a dissolution and winding up of
the partnership business under Section 16801 or enforce any other
right under Article 8 (commencing with Section 16801).
(3) Enforce the rights and otherwise protect the interests of the
partner, including rights and interests arising independently of the
partnership relationship.
(c) The accrual of, and any time limitation on, a right of action
for a remedy under this section is governed by other law. A right to
an accounting upon a dissolution and winding up does not revive a
claim barred by law.
16406. (a) If a partnership for a definite term or particular

undertaking is continued, without an express agreement, after the
expiration of the term or completion of the undertaking, the rights
and duties of the partners remain the same as they were at the
expiration or completion, so far as is consistent with a partnership
at will.
(b) If the partners, or those of them who habitually acted in the
business during the term or undertaking, continue the business
without any settlement or liquidation of the partnership, they are
presumed to have agreed that the partnership will continue.
CORPORATIONS CODE
SECTION 16501-16504
16501. A partner is not a coowner of partnership property and has

no interest in partnership property that can be transferred, either
voluntarily or involuntarily.
16502. The only transferable interest of a partner in the

partnership is the partner's share of the profits and losses of the
partnership and the partner's right to receive distributions. The
interest is personal property.
16503. (a) A transfer, in whole or in part, of a partner's

transferable interest in the partnership is permissible. However, a
transfer does not do either of the following:
(1) By itself cause the partner's dissociation or a dissolution
and winding up of the partnership business.
(2) As against the other partners or the partnership, entitle the
transferee, during the continuance of the partnership, to participate
in the management or conduct of the partnership business, to require
access to information concerning partnership transactions, or to
inspect or copy the partnership books or records.
(b) A transferee of a partner's transferable interest in the
partnership has a right to all of the following:
(1) To receive, in accordance with the transfer, distributions to
which the transferor would otherwise be entitled.
(2) To receive upon the dissolution and winding up of the
partnership business, in accordance with the transfer, the net amount
otherwise distributable to the transferor.
(3) To seek under paragraph (6) of Section 16801 a judicial
determination that it is equitable to wind up the partnership
business.
(c) In a dissolution and winding up, a transferee is entitled to
an account of partnership transactions only from the date of the
latest account agreed to by all of the partners.
(d) Upon transfer, the transferor retains the rights and duties of
a partner other than the interest in distributions transferred.
(e) A partnership need not give effect to a transferee's rights
under this section until it has notice of the transfer.
(f) A transfer of a partner's transferable interest in the
partnership in violation of a restriction on transfer contained in
the partnership agreement is ineffective as to a person having notice
of the restriction at the time of transfer.
16504. (a) On application by a judgment creditor of a partner or of

a partner's transferee, a court having jurisdiction may charge the
transferable interest of the judgment debtor to satisfy the judgment.
The court may appoint a receiver of the share of the distributions
due or to become due to the judgment debtor in respect of the
partnership and make all other orders, directions, accounts, and
inquiries the judgment debtor might have made or that the
circumstances of the case may require.
(b) A charging order constitutes a lien on the judgment debtor's
transferable interest in the partnership. The court may order a
foreclosure of the interest subject to the charging order at any
time. The purchaser at the foreclosure sale has the rights of a
transferee.
(c) At any time before foreclosure, an interest charged may be
redeemed in any of the following manners:
(1) By the judgment debtor.
(2) With property other than partnership property, by one or more
of the other partners.
(3) With partnership property, by one or more of the other
partners with the consent of all of the partners whose interests are
not so charged.
(d) This chapter does not deprive a partner of a right under
exemption laws with respect to the partner's interest in the
partnership.
(e) This section provides the exclusive remedy by which a judgment
creditor of a partner or partner's transferee may satisfy a judgment
out of the judgment debtor's transferable interest in the
partnership.
CORPORATIONS CODE
SECTION 16601-16603
16601. A partner is dissociated from a partnership upon the

occurrence of any of the following events:
(1) The partnership's having notice of the partner's express will
to withdraw as a partner or on a later date specified by the partner.
(2) An event agreed to in the partnership agreement as causing the
partner's dissociation.
(3) The partner's expulsion pursuant to the partnership agreement.
(4) The partner's expulsion by the unanimous vote of the other
partners if any of the following apply:
(A) It is unlawful to carry on the partnership business with that
partner.
(B) There has been a transfer of all or substantially all of that
partner's transferable interest in the partnership, other than a
transfer for security purposes, or a court order charging the partner'
s interest, that has not been foreclosed.
(C) Within 90 days after the partnership notifies a corporate
partner that it will be expelled because it has filed a certificate
of dissolution or the equivalent, its charter has been revoked, or
its right to conduct business has been suspended by the jurisdiction
of its incorporation, there is no revocation of the certificate of
dissolution or no reinstatement of its charter or its right to
conduct business.
(D) A partnership, limited partnership, or limited liability
company that is a partner has been dissolved and its business is
being wound up.
(5) On application by the partnership or another partner, the
partner's expulsion by judicial determination because of any of the
following:
(A) The partner engaged in wrongful conduct that adversely and
materially affected the partnership business.
(B) The partner willfully or persistently committed a material
breach of the partnership agreement or of a duty owed to the
partnership or the other partners under Section 16404.
(C) The partner engaged in conduct relating to the partnership
business that makes it not reasonably practicable to carry on the
business in partnership with the partner.
(6) The partner's act or failure to act in any of the following
instances:
(A) By becoming a debtor in bankruptcy.
(B) By executing an assignment for the benefit of creditors.
(C) By seeking, consenting to, or acquiescing in the appointment
of a trustee, receiver, or liquidator of that partner or of all or
substantially all of that partner's property.
(D) By failing, within 90 days after the appointment, to have
vacated or stayed the appointment of a trustee, receiver, or
liquidator of the partner or of all or substantially all of the
partner's property obtained without the partner's consent or
acquiescence, or failing within 90 days after the expiration of a
stay to have the appointment vacated.
(7) In the case of a partner who is an individual, by any of the
following:
(A) The partner's death.
(B) The appointment of a guardian or general conservator for the
partner.
(C) A judicial determination that the partner has otherwise become
incapable of performing the partner's duties under the partnership
agreement.
(8) In the case of a partner that is a trust or is acting as a
partner by virtue of being a trustee of a trust, distribution of the
trust's entire transferable interest in the partnership, but not
merely by reason of the substitution of a successor trustee.
(9) In the case of a partner that is an estate or is acting as a
partner by virtue of being a personal representative of an estate,
distribution of the estate's entire transferable interest in the
partnership, but not merely by reason of the substitution of a
successor personal representative.
(10) Termination of a partner who is not an individual,
partnership, corporation, trust, or estate.
16602. (a) A partner has the power to dissociate at any time,

rightfully or wrongfully, by express will pursuant to paragraph (1)
of Section 16601.
(b) A partner's dissociation is wrongful only if any of the
following apply:
(1) It is in breach of an express provision of the partnership
agreement.
(2) In the case of a partnership for a definite term or particular
undertaking, before the expiration of the term or the completion of
the undertaking if any of the following apply:
(A) The partner withdraws by express will, unless the withdrawal
follows within 90 days after another partner's dissociation by death
or otherwise under paragraphs (6) to (10), inclusive, of Section
16601 or wrongful dissociation under this subdivision.
(B) The partner is expelled by judicial determination under
paragraph (5) of Section 16601.
(C) The partner is dissociated by becoming a debtor in bankruptcy.
(D) In the case of a partner who is not an individual, trust other
than a business trust, or estate, the partner is expelled or
otherwise dissociated because it willfully dissolved or terminated.
(c) A partner who wrongfully dissociates is liable to the
partnership and to the other partners for damages caused by the
dissociation. The liability is in addition to any other obligation of
the partner to the partnership or to the other partners.
16603. Upon a partner's dissociation, all of the following apply:

(1) The partner's right to participate in the management and
conduct of the partnership business terminates.
(2) The partner's duty of loyalty under paragraph (3) of
subdivision (b) of Section 16404 terminates.
(3) The partner's duty of loyalty under paragraphs (1) and (2) of
subdivision (b) of Section 16404 and duty of care under subdivision
(c) of Section 16404 continue only with regard to matters arising and
events occurring before the partner's dissociation.
CORPORATIONS CODE
SECTION 16701-16705
16701. Except as provided in Section 16701.5, all of the following

shall apply:
(a) If a partner is dissociated from a partnership, the
partnership shall cause the dissociated partner's interest in the
partnership to be purchased for a buyout price determined pursuant to
subdivision (b).
(b) The buyout price of a dissociated partner's interest is the
amount that would have been distributable to the dissociating partner
under subdivision (b) of Section 16807 if, on the date of
dissociation, the assets of the partnership were sold at a price
equal to the greater of the liquidation value or the value based on a
sale of the entire business as a going concern without the
dissociated partner and the partnership was wound up as of that date.
Interest shall be paid from the date of dissociation to the date of
payment.
(c) Damages for wrongful dissociation under Section 16602, and all
other amounts owing, whether or not presently due, from the
dissociated partner to the partnership, shall be offset against the
buyout price. Interest shall be paid from the date the amount owed
becomes due to the date of payment.
(d) A partnership shall indemnify a dissociated partner whose
interest is being purchased against all partnership liabilities,
whether incurred before or after the dissociation, except liabilities
incurred by an act of the dissociated partner under Section 16702.
(e) If no agreement for the purchase of a dissociated partner's
interest is reached within 120 days after a written demand for
payment, the partnership shall pay, or cause to be paid, in cash to
the dissociated partner the amount the partnership estimates to be
the buyout price and accrued interest, reduced by any offsets and
accrued interest under subdivision (c).
(f) If a deferred payment is authorized under subdivision (h), the
partnership may tender a written offer to pay the amount it
estimates to be the buyout price and accrued interest, reduced by any
offsets under subdivision (c), stating the time of payment, the
amount and type of security for payment, and the other terms and
conditions of the obligation.
(g) The payment or tender required by subdivision (e) or (f) shall
be accompanied by all of the following:
(1) A statement of partnership assets and liabilities as of the
date of dissociation.
(2) The latest available partnership balance sheet and income
statement, if any.
(3) An explanation of how the estimated amount of the payment was
calculated.
(4) Written notice that the payment is in full satisfaction of the
obligation to purchase unless, within 120 days after the written
notice, the dissociated partner commences an action to determine the
buyout price, any offsets under subdivision (c), or other terms of
the obligation to purchase.
(h) A partner who wrongfully dissociates before the expiration of
a definite term or the completion of a particular undertaking is not
entitled to payment of any portion of the buyout price until the
expiration of the term or completion of the undertaking, unless the
partner establishes to the satisfaction of the court that earlier
payment will not cause undue hardship to the business of the
partnership. A deferred payment shall be adequately secured and bear
interest.
(i) A dissociated partner may maintain an action against the
partnership, pursuant to subparagraph (B) of paragraph (2) of
subdivision (b) of Section 16405, to determine the buyout price of
that partner's interest, any offsets under subdivision (c), or other
terms of the obligation to purchase. The action shall be commenced
within 120 days after the partnership has tendered payment or an
offer to pay or within one year after written demand for payment if
no payment or offer to pay is tendered. The court shall determine the
buyout price of the dissociated partner's interest, any offset due
under subdivision (c), and accrued interest, and enter judgment for
any additional payment or refund. If deferred payment is authorized
under subdivision (h), the court shall also determine the security
for payment and other terms of the obligation to purchase. The court
may assess reasonable attorney's fees and the fees and expenses of
appraisers or other experts for a party to the action, in amounts the
court finds equitable, against a party that the court finds acted
arbitrarily, vexatiously, or not in good faith. The finding may be
based on the partnership's failure to tender payment or an offer to
pay or to comply with subdivision (g).
16701.5. (a) Section 16701 shall not apply to any dissociation that
occurs within 90 days prior to a dissolution under Section 16801.
(b) For dissociations occurring within 90 days prior to the
dissolution, both of the following shall apply:
(1) All partners who dissociated within 90 days prior to the
dissolution shall be treated as partners under Section 16807.
(2) Any damages for wrongful dissociation under Section 16602 and
all other amounts owed by the dissociated partner to the partnership,
whether or not presently due, shall be taken into account in
determining the amount distributable to the dissociated partner under
Section 16807.
16702. (a) For two years after a partner dissociates, the

partnership, including a surviving partnership under Article 9
(commencing with Section 16901), is bound by an act of the
dissociated partner that would have bound the partnership under
Section 16301 before dissociation only if at the time of entering
into the transaction all of the following apply to the other party:
(1) The other party reasonably believed that the dissociated
partner was then a partner.
(2) The other party did not have notice of the partner's
dissociation.
(3) The other party is not deemed to have had knowledge under
subdivision (e) of Section 16303 or notice under subdivision (c) of
Section 16704.
(b) A dissociated partner is liable to the partnership for any
damage caused to the partnership arising from an obligation incurred
by the dissociated partner after dissociation for which the
partnership is liable under subdivision (a).
16703. (a) A partner's dissociation does not of itself discharge

the partner's liability for a partnership obligation incurred before
dissociation. A dissociated partner is not liable for a partnership
obligation incurred after dissociation, except as otherwise provided
in subdivision (b).
(b) Except for registered limited liability partnerships and
foreign limited liability partnerships, a partner who dissociates is
liable as a partner to the other party in a transaction entered into
by the partnership, or a surviving partnership under Article 9
(commencing with Section 16901), within two years after the partner's
dissociation, only if at the time of entering into the transaction
all of the following apply to the other party:
(1) The other party reasonably believed that the dissociated
partner was then a partner.
(2) The other party did not have notice of the partner's
dissociation.
(3) The other party is not deemed to have had knowledge under
subdivision (e) of Section 16303 or notice under subdivision (c) of
Section 16704.
(c) By agreement with the partnership creditor and the partners
continuing the business, a dissociated partner may be released from
liability for a partnership obligation.
(d) A dissociated partner is released from liability for a
partnership obligation if a partnership creditor, with notice of the
partner's dissociation but without the partner's consent, agrees to a
material alteration in the nature or time of payment of a
partnership obligation.
16704. (a) A dissociated partner or the partnership may file a

statement of dissociation stating the name of the partnership as
filed with the Secretary of State, any identification number issued
by the Secretary of State, and that the partner is dissociated from
the partnership.
(b) A statement of dissociation is a limitation on the authority
of a dissociated partner for the purposes of subdivisions (d) and (e)
of Section 16303.
(c) For the purposes of paragraph (3) of subdivision (a) of
Section 16702 and paragraph (3) of subdivision (b) of Section 16703,
a person not a partner is deemed to have notice of the dissociation
90 days after the statement of dissociation is filed.
16705. Continued use of a partnership name, or a dissociated

partner's name as part thereof, by partners continuing the business
does not of itself make the dissociated partner liable for an
obligation of the partners or the partnership continuing the
business.
CORPORATIONS CODE
SECTION 16801-16807
16801. A partnership is dissolved, and its business shall be wound

up, only upon the occurrence of any of the following events:
(1) In a partnership at will, by the express will to dissolve and
wind up the partnership business of at least half of the partners,
including partners, other than wrongfully dissociating partners, who
have dissociated within the preceding 90 days, and for which purpose
a dissociation under paragraph (1) of Section 16601 constitutes an
expression of that partner's will to dissolve and wind up the
partnership business.
(2) In a partnership for a definite term or particular
undertaking, when any of the following occurs:
(A) After the expiration of 90 days after a partner's dissociation
by death or otherwise under paragraphs (6) to (10), inclusive, of
Section 16601, or a partner's wrongful dissociation under subdivision
(b) of Section 16602 unless before that time a majority in interest
of the partners, including partners who have rightfully dissociated
pursuant to subparagraph (A) of paragraph (2) of subdivision (b) of
Section 16602, agree to continue the partnership.
(B) The express will of all of the partners to wind up the
partnership business.
(C) The expiration of the term or the completion of the
undertaking.
(3) An event agreed to in the partnership agreement resulting in
the winding up of the partnership business.
(4) An event that makes it unlawful for all or substantially all
of the business of the partnership to be continued, but a cure of
illegality within 90 days after notice to the partnership of the
event is effective retroactively to the date of the event for
purposes of this section.
(5) On application by a partner, a judicial determination that any
(A) The economic purpose of the partnership is likely to be
unreasonably frustrated.
(B) Another partner has engaged in conduct relating to the
partnership business that makes it not reasonably practicable to
carry on the business in partnership with that partner.
(C) It is not otherwise reasonably practicable to carry on the
partnership business in conformity with the partnership agreement.
(6) On application by a transferee of a partner's transferable
interest, a judicial determination that it is equitable to wind up
the partnership business after the expiration of the term or
completion of the undertaking, if the partnership was for a definite
term or particular undertaking at the time of the transfer or entry
of the charging order that gave rise to the transfer.
16802. (a) Subject to subdivision (b), a partnership continues

after dissolution only for the purpose of winding up its business.
The partnership is terminated when the winding up of its business is
completed.
(b) At any time after the dissolution of a partnership and before
the winding up of its business is completed, all of the partners,
including any dissociating partner other than a wrongfully
dissociating partner, may waive the right to have the partnership's
business wound up and the partnership terminated. In that event both
(1) The partnership resumes carrying on its business as if
dissolution had never occurred, and any liability incurred by the
partnership or a partner after the dissolution and before the waiver
is determined as if dissolution had never occurred.
(2) The rights of a third party accruing under paragraph (1) of
Section 16804 or arising out of conduct in reliance on the
dissolution before the third party knew or received a notification of
the waiver may not be adversely affected.
16803. (a) After dissolution, a partner who has not dissociated may
participate in winding up the partnership's business, but on
application of any partner, partner's legal representative, or
transferee, the court, for good cause shown, may order judicial
supervision of the winding up.
(b) The legal representative of the last surviving partner may
wind up a partnership's business.
(c) A person winding up a partnership's business may preserve the
partnership business or property as a going concern for a reasonable
time, prosecute and defend actions and proceedings, whether civil,
criminal, or administrative, settle and close the partnership's
business, dispose of and transfer the partnership's property,
discharge the partnership's liabilities, distribute the assets of the
partnership pursuant to Section 16807, settle disputes by mediation
or arbitration, and perform other necessary acts.
16804. Subject to Section 16805, a partnership is bound by a

partner's act after dissolution that is either of the following:
(1) Appropriate for winding up the partnership business.
(2) Would have bound the partnership under Section 16301 before
dissolution, if the other party to the transaction did not have
notice of the dissolution.
16805. (a) After dissolution, a partner who has not wrongfully

dissociated may file a statement of dissolution stating the name of
the partnership as filed with the Secretary of State, any
identification number issued by the Secretary of State, and that the
partnership has dissolved and is winding up its business.
(b) A statement of dissolution cancels a filed statement of
partnership authority for the purposes of subdivision (d) of Section
16303 and is a limitation on authority for the purposes of
(c) For the purposes of Sections 16301 and 16804, a person not a
partner is deemed to have notice of the dissolution and the
limitation on the partners' authority as a result of the statement of
dissolution 90 days after it is filed.
(d) After filing and, if appropriate, recording a statement of
dissolution, a dissolved partnership may file and, if appropriate,
record a statement of partnership authority that will operate with
respect to a person not a partner as provided in subdivisions (d) and
(e) of Section 16303 in any transaction, whether or not the
transaction is appropriate for winding up the partnership business.
16806. (a) Except as otherwise provided in subdivision (b) and

except for registered limited liability partnerships and foreign
limited liability partnerships, after dissolution a partner is liable
to the other partners for the partner's share of any partnership
liability incurred under Section 16804.
(b) Except for registered limited liability partnerships and
foreign limited liability partnerships, a partner who, with knowledge
of the dissolution, incurs a partnership liability under paragraph
(2) of Section 16804 by an act that is not appropriate for winding up
the partnership business is liable to the partnership for any damage
caused to the partnership arising from the liability.
16807. (a) In winding up a partnership's business, the assets of

the partnership, including the contributions of the partners required
by this section, shall be applied to discharge its obligations to
creditors, including, to the extent permitted by law, partners who
are creditors. Any surplus shall be applied to pay in cash the net
amount distributable to partners in accordance with their right to
distributions under subdivision (b).
(b) Each partner is entitled to a settlement of all partnership
accounts upon winding up the partnership business. In settling
accounts among the partners, the profits and losses that result from
the liquidation of the partnership assets shall be credited and
charged to the partners' accounts. The partnership shall make a
distribution to a partner in an amount equal to any excess of the
credits over the charges in the partner's account. Except for
registered limited liability partnerships and foreign limited
liability partnerships, a partner shall contribute to the partnership
an amount equal to any excess of the charges over the credits in the
partner's account.
(c) If a partner fails to contribute the full amount that the
partner is obligated to contribute under subdivision (b), all of the
other partners shall contribute, in the proportions in which those
partners share partnership losses, the additional amount necessary to
satisfy the partnership obligations for which they are liable under
Section 16306. A partner or partner's legal representative may
recover from the other partners any contributions the partner makes
to the extent the amount contributed exceeds that partner's share of
the partnership obligations for which the partner is personally
liable under Section 16306.
(d) After the settlement of accounts, each partner shall
contribute, in the proportion in which the partner shares partnership
losses, the amount necessary to satisfy partnership obligations that
were not known at the time of the settlement and for which the
partner is personally liable under Section 16306.
(e) The estate of a deceased partner is liable for the partner's
obligation to contribute to the partnership.
(f) An assignee for the benefit of creditors of a partnership or a
partner, or a person appointed by a court to represent creditors of
a partnership or a partner, may enforce a partner's obligation to
contribute to the partnership.
CORPORATIONS CODE
SECTION 16901-16917
16901. In this article, the following terms have the following
meanings:
(1) "Constituent other business entity" means any other business
entity that is merged with or into one or more partnerships and
includes a surviving other business entity.
(2) "Constituent partnership" means a partnership that is merged
with or into one or more other partnerships or other business
entities and includes a surviving partnership.
(3) "Disappearing other business entity" means a constituent other
business entity that is not the surviving other business entity.
(4) "Disappearing partnership" means a constituent partnership
that is not the surviving partnership.
(5) "Domestic" means organized under the laws of this state when
used in relation to any partnership, other business entity, or person
(other than an individual).
(6) "Foreign other business entity" means any other business
entity formed under the laws of any state other than this state or
under the laws of the United States or of a foreign country.
(7) "Foreign partnership" means a partnership formed under the
laws of any state other than this state or under the laws of a
foreign country.
(8) "General partner" means a partner in a partnership and a
general partner in a limited partnership.
(9) "Limited liability company" means a limited liability company
created under Title 2.5 (commencing with Section 17000), or
comparable law of another jurisdiction.
(10) "Limited partner" means a limited partner in a limited
partnership.
(11) "Limited partnership" means a limited partnership created
under Chapter 3 (commencing with Section 15611) or Chapter 5.5
(commencing with Section 15900), predecessor law, or comparable law
of another jurisdiction.
(12) "Other business entity" means a limited partnership, limited
liability company, corporation, business trust, real estate
investment trust, or an unincorporated association (other than a
nonprofit association), but excluding a partnership.
(13) "Partner" includes both a general partner and a limited
partner.
(14) "Surviving other business entity" means an other business
entity into which one or more partnerships are merged.
(15) "Surviving partnership" means a partnership into which one or
more other partnerships or other business entities are merged.
16902. (a) A partnership, other than a registered limited liability

partnership, may be converted into a domestic other business entity
or a foreign other business entity pursuant to this article if, (1)
pursuant to a conversion into a domestic or foreign limited
partnership or limited liability company, each of the partners of the
converting partnership would receive a percentage interest in the
profits and capital of the converted other business entity equal to
the partner's percentage interest in profits and capital of the
converting partnership as of the effective time of the conversion,
and (2) pursuant to a conversion into an other business entity or
foreign other business entity not specified in clause (1) above, each
of the partnership interests of the same class is treated equally
with respect to any distribution of cash, property, rights,
interests, or securities of the converted other business entity
unless all partners of the same class consent.
(b) Notwithstanding this section, the conversion of a partnership
to a domestic or foreign other business entity may be effected only
if: (1) the law under which that domestic or foreign other business
entity will exist expressly permits the formation of that other
entity pursuant to a conversion; and (2) the partnership complies
with any and all other requirements of that other law that applies to
conversion of the other business entity.
16903. (a) A partnership that desires to convert to a domestic or

foreign other business entity shall approve a plan of conversion. The
plan of conversion shall state the following:
(2) The place of the organization of the converted entity and of
the converting partnership and the name of the converted entity after
conversion, if different from that of the converting partnership.
(3) The manner of converting the partnership interests of each of
the partners into shares of, securities of, or interests in the
converted entity.
entity, including the limited partnership agreement, limited
liability company articles of organization and operating agreement,
or articles or certificate of incorporation if the converted entity
is a corporation, to which the holders of interest in the converted
entity are to be bound.
(5) Any other details or provisions as are required by laws under
which the converted entity is organized.
(6) Any other details or provisions that are desired.
(b) The plan of conversion shall be approved by that number or
percentage of partners required by the partnership agreement to
approve a conversion of the partnership as set forth in the
partnership agreement. If the partnership agreement fails to specify
the required partner approval for a conversion of the partnership,
the plan of conversion shall be approved by that number or percentage
of partners required by the partnership agreement to approve an
amendment to the partnership agreement unless the conversion effects
a change for which the partnership agreement requires a greater
number or percentage of partners than that required to amend the
partnership agreement, in which case the plan of conversion shall be
approved by that greater number or percentage. If the partnership
agreement fails to specify the vote required to amend the partnership
agreement, the plan of conversion shall be approved by all partners.
(c) If the partnership is converting into a limited partnership,
in addition to the approval of the partners as set forth in
subdivision (b), the plan of conversion shall be approved by all
partners who will become general partners of the converted limited
partnership pursuant to the plan of conversion.
(d) All partners of the converting partnership except those that
dissociate upon effectiveness of the conversion pursuant to
subdivision (e) of Section 16909 shall be deemed parties to any
partnership or operating agreement, articles or certificate of
incorporation, or organic document for the converted entity adopted
as part of the plan of conversion, regardless of whether that partner
has executed the plan of conversion or the operating agreement,
articles or certificate of incorporation, partnership agreement, or
other organic document for the converted entity. Any adoption of a
new partnership or operating agreement, articles or certificate of
incorporation, or other organic document made pursuant to the
foregoing sentence shall be effective at the effective time or date
of the conversion.
(e) Notwithstanding its prior approval, a plan of conversion may
be amended before the conversion takes effect if the amendment is
approved by the partnership in the same manner, and by the same
number or percentage of partners, as was required for approval of the
original plan of conversion.
(f) The partners of a converting partnership may, at any time
before the conversion is effective, in their discretion, abandon a
conversion, without further approval by the partners, in the same
manner, and by the same number or percentage of partners, as was
required for approval of the original plan of conversion at any time
before the conversion is effective, subject to the contractual rights
of third parties.
(g) The converted entity shall keep the plan of conversion at: (1)
the principal place of business of the converted entity, if the
converted entity is a foreign other business entity or a corporation;
or (2) the office at which records are to be kept under Section
15614 or 15901.14 if the converted entity is a domestic limited
partnership, or at the office at which records are to be kept under
Section 17057 if the converted entity is a domestic limited liability
company. Upon the request of a partner of a converting partnership,
the authorized person on behalf of the converted entity shall
promptly deliver to the partner or the holder of interests or other
securities, at the expense of the converted entity, a copy of the
plan of conversion. A waiver by a partner of the rights provided in
this subdivision shall be unenforceable.
16904. (a) A conversion into a domestic other business entity shall

become effective upon the earliest date that all of the following
shall have occurred:
(1) The approval of the plan of conversion by the partners of the
converting partnership as provided in Section 16903.
(2) The filing of all documents required by law to create the
converted other business entity, which documents shall also contain a
statement of conversion, if required under Section 16906.
(3) The effective date, if set forth in the plan of conversion,
shall have occurred.
(b) A copy of the certificate of limited partnership, articles of
organization, or articles of incorporation, complying with Section
16906, if applicable, duly certified by the Secretary of State, is
conclusive evidence of the conversion of the partnership.
16905. (a) The conversion of a partnership into a foreign other

business entity shall comply with Section 16902.
(b) If the partnership is converting into a foreign other business
entity, then the conversion proceedings shall be in accordance with
the laws of the state or place of organization of the foreign other
business entity and the conversion shall become effective in
accordance with that law.
(c) (1) Unless a statement of conversion has been filed to effect
the conversion, the converted foreign other business entity shall
promptly notify the Secretary of State of the mailing address of its
agent for service of process, its chief executive office, and of any
change of address. To enforce an obligation of a partnership that has
converted to a foreign other business entity, the Secretary of State
shall only be the agent for service of process in an action or
proceeding against the converted foreign other business entity, if
the agent designated for the service of process for that entity is a
natural person and cannot be found with due diligence or if the agent
is a corporation and no person, to whom delivery may be made, may be
located with due diligence, or if no agent has been designated and
if no one of the officers, partners, managers, members, or agents of
that entity may be located after diligent search, and it is so shown
by affidavit to the satisfaction of the court. The court then may
make an order that service be made by personal delivery to the
Secretary of State or to an assistant or deputy Secretary of State of
two copies of the process together with two copies of the order, and
the order shall set forth an address to which the process shall be
sent by the Secretary of State. Service in this manner is deemed
complete on the 10th day after delivery of the process to the
Secretary of State.
(2) Upon receipt of the process and order and the fee set forth in
Section 12197 of the Government Code, the Secretary of State shall
provide notice to the entity of the service of the process by
forwarding by certified mail, return receipt requested, a copy of the
process and order to the address specified in the order.
providing of notice thereof to the entity, and the forwarding of the
process, shall be competent and prima facie evidence of the matters
stated therein.
16906. (a) If the converting partnership has filed a statement of

partnership authority under Section 16303 that is effective at the
time of the conversion, then upon conversion to a domestic limited
partnership, limited liability company, or corporation, the
certificate of limited partnership, articles of organization, or
articles of incorporation filed by the converted entity, as
applicable, shall contain a statement of conversion, in that form as
may be prescribed by the Secretary of State. If the converting
partnership has not filed a statement of partnership authority under
Section 16303 that is effective at the time of the conversion, upon
conversion to a domestic limited partnership, limited liability
company, or corporation, the converted entity may, but is not
required to file, on its certificate of limited partnership, articles
of organization, or articles of incorporation, a statement of
conversion. A statement of conversion shall set forth all of the
following:
(1) The name and the Secretary of State's file number, if any, of
the converting partnership.
(2) A statement that the principal terms of the plan of conversion
were approved by a vote of the partners, which equaled or exceeded
the vote required under Section 16903.
(b) A partnership converting to a foreign other business entity
that has filed a statement of partnership authority under Section
16303 that is effective at the time of conversion may file a
certificate of conversion with the Secretary of State. The
certificate of conversion shall contain the following:
(1) The names of the converting partnership and the converted
entity.
(2) The street address of the converted entity's chief executive
office and of an office in this state, if any.
(3) The form of organization of the converted entity.
(c) The filing with the Secretary of State of a certificate of
limited partnership, articles of organization, or articles of
incorporation containing a statement of conversion as set forth in
subdivision (a) or a certificate of conversion filed pursuant to
subdivision (b) shall have the effect of the filing of a cancellation
by the converting partnership of any statement of partnership
authority filed by it.
16907. (a) Whenever a partnership or other business entity having

any real property in this state converts into a partnership or an
other business entity pursuant to the laws of this state or of the
state or place in which the other business entity was organized, and
the laws of the state or place of organization (including this state)
of the converting partnership or other business entity provide
substantially that the conversion of a converting entity vests in the
converted partnership or other business entity all the real property
of the converting partnership or converting other business entity,
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
converting partnership or converting other business entity is located
of either (1) a certificate of conversion or a certificate of
limited partnership, articles of organization, or articles of
incorporation, complying with Section 16906, in the form prescribed
by the Secretary of State, certified by the Secretary of State, or
(2) a copy of a certificate of conversion or a certificate of limited
partnership, articles of organization, articles or certificate of
incorporation, or other certificate evidencing the creation of a
foreign other business entity by conversion, containing a statement
of conversion, certified by the Secretary of State or an authorized
public official of the state or place pursuant to the laws of which
the conversion is effected, shall evidence record ownership in the
converted partnership or converted other business entity of all
interest of the converting partnership or converting other business
entity in and to the real property located in that county.
conversion, certificate of limited partnership, articles of
organization, articles or certificate of incorporation, or other
certificate evidencing the creation of an other business entity by
conversion, containing a statement of conversion, executed and
declared to be accurate pursuant to subdivision (c) of Section 16105,
stating the name of the converting partnership or converting other
business entity in whose name property was held before the conversion
and the name of the converted entity, but not containing all of the
other information required by Section 16906, operates with respect to
the entities named to the extent provided in subdivision (a).
(c) Recording of a certificate of conversion, a certificate of
limited partnership, articles of organization, articles or
certificate of incorporation, or other certificate evidencing the
creation of another business entity by conversion, containing a
statement of conversion, in accordance with Section 16902 shall
create, in favor of bona fide purchasers or encumbrancers for value,
a conclusive presumption that the conversion was validly completed.
16908. (a) A domestic limited partnership, limited liability

company, or corporation, or a foreign other business entity may be
converted to a domestic partnership pursuant to this article, but
only if the converting entity is authorized by the laws under which
it is organized to effect the conversion.
(b) An entity that desires to convert into a domestic partnership
shall approve a plan of conversion or the instrument that is required
to be approved to effect the conversion pursuant to the laws under
which the entity is organized.
(c) The conversion of a domestic limited partnership, limited
liability company, or corporation, or foreign other business entity
shall be approved by the number or percentage of the partners,
members, shareholders, or holders of interest of the converting
entity as is required by the law under which the entity is organized,
or a greater or lesser percentage (subject to applicable laws) as
set forth in the limited partnership agreement, articles of
organization, operating agreement, or articles or certificate of
organization, or other governing document for the converting entity.
(d) The conversion by a domestic limited partnership, limited
liability company, or corporation, or a foreign other business entity
into a partnership shall be effective under this article at the time
that the conversion is effective under the laws under which the
converting entity is organized.
(e) The filing with the Secretary of State of a certificate of
conversion or a statement of partnership authority containing a
statement of conversion pursuant to subdivision (a) shall have the
effect of the filing of a certificate of cancellation by the
converting foreign limited partnership or foreign limited liability
company, and no converting foreign limited partnership or foreign
limited liability company that has made the filing is required to
file a certificate of cancellation under Section 15696, 15909.07, or
17455 as a result of that conversion. If a converting other business
entity is a foreign corporation qualified to transact business in
this state, the foreign corporation shall, by virtue of the filing,
16909. (a) An entity that converts into another entity pursuant to

this article is for all purposes the same entity that existed before
the conversion.
(b) When a conversion takes effect, all of the following apply:
of the converting entity remains vested in the converted entity.
entity continue as debts, liabilities, and obligations of the
converted entity.
converting entity shall be preserved unimpaired and remain
enforceable against the converted entity to the same extent as
against the converting entity as if the conversion had not occurred.
entity may be continued against the converted entity as if the
conversion had not occurred.
(c) A partner of a converting partnership is liable for:
(1) All obligations of the converting partnership for which the
partner was personally liable before the conversion.
conversion takes effect, but those obligations may be satisfied only
out of property of the entity if (A) the converted other business
entity is a limited partnership and the partner becomes a limited
partner, (B) the converted other business entity is a limited
liability company and the partner becomes a member, unless the
articles of organization or the operating agreement of the limited
liability company provide otherwise, or (C) the converted other
business entity is a corporation and the partner becomes a
shareholder.
(d) A partner of a partnership that converted from an other
business entity is liable for any and all obligations of the
converting other business entity for which the partner was personally
liable before the conversion, but only to the extent the partner was
liable for the obligation of the converting entity prior to the
conversion.
(e) A partner of a converting partnership, who does not vote in
favor of the conversion and does not agree to become a partner,
member, shareholder, or holder of interest of the converted other
business entity shall have the right to dissociate from the
partnership, as of the date the conversion takes effect. Within 10
days after the approval of the conversion by the partners as required
under this article, the converting partnership shall send notice of
the approval of the conversion to each partner that has not approved
the conversion, accompanied by copies of Section 16701 and a brief
description of the procedure to be followed under that section if the
partner wishes to dissociate from the partnership. A partner that
desires to dissociate from the converting partnership shall send
written notice of that dissociation within 30 days after the date of
the notice of the approval of the conversion. The converting
partnership shall cause the partner's interest in the entity to be
purchased under Section 16701. The converting partnership is bound
under Section 16702 by an act of a general partner dissociated under
this subdivision, and the partner is liable under Section 16703 for
transactions entered into by the converted entity after the
conversion takes effect. The dissociation of a partner in connection
with a conversion pursuant to the terms of this subdivision shall not
be deemed to be a wrongful dissociation under Section 16602.
16910. (a) The following entities may be merged pursuant to this

article:
(1) Two or more partnerships into one partnership.
(2) One or more partnerships and one or more other business
entities into one of those other business entities.
(3) One or more partnerships, other than a limited liability
partnership, and one or more other business entities into one
partnership.
(b) Notwithstanding subdivision (a), the merger of any number of
partnerships with any number of other business entities may be
effected only if the other business entities that are organized in
California are authorized by the laws under which they are organized
to effect the merger, and (1) if a domestic partnership is the
surviving partnership, the foreign other business entities are not
prohibited by the laws under which they are organized from effecting
that merger and (2) if a foreign partnership or foreign other
business entity is the survivor of the merger, the laws of the
jurisdiction under which the survivor is organized authorize that
merger.
16911. (a) Each partnership and other business entity which desires
to merge shall approve an agreement of merger. The agreement of
merger shall be approved by the number or percentage of partners
specified for merger in the partnership agreement of the constituent
partnership. If the partnership agreement fails to specify the
required partner approval for merger of the constituent partnership,
then the agreement of merger shall be approved by that number or
percentage of partners specified by the partnership agreement to
approve an amendment to the partnership agreement. However, if the
merger effects a change for which the partnership agreement requires
a greater number or percentage of partners than that required to
amend the partnership agreement, then the merger shall be approved by
that greater number or percentage. If the partnership agreement
contains no provision specifying the vote required to amend the
partnership agreement, then the agreement of merger must be approved
by all the partners. The agreement of merger shall be approved on
behalf of each constituent other business entity by those persons
required to approve the merger by the laws under which it is
organized. Other persons may be parties to the agreement of merger.
The agreement of merger shall state all of the following:
(2) The name and place of organization of the surviving
partnership or surviving other business entity, and of each
disappearing partnership and disappearing other business entity, and
the agreement of merger may change the name of the surviving
partnership, which new name may be the same as, or similar to, the
name of a disappearing partnership.
the constituent partnerships into interests or other securities of
the surviving partnership or surviving other business entity, and if
partnership interests of any of the constituent partnerships are not
to be converted solely into interest or other securities of the
surviving partnership or surviving other business entity, the cash,
property, rights, interests, or securities which the holders of the
partnership interest are to receive in exchange for the partnership
interests, which cash, property, rights, interests, or securities may
be in addition to or in lieu of interests or other securities of the
surviving partnership or surviving other business entity, or that
the partnership interests are canceled without consideration.
(4) Any other details or provisions as are required by the laws
under which any constituent other business entity is organized.
(5) Any other details or provisions that are desired, including,
without limitation, a provision for the treatment of fractional
partnership interests.
(b) If the partnership is merging into a limited partnership, then
in addition to the approval of the partners as set forth under
subdivision (a), the agreement of merger must be approved by all
partners who will become general partners of the surviving limited
partnership upon the effectiveness of the merger.
be amended before the merger takes effect if the amendment is
approved by the partners of each constituent partnership, in the same
manner as required for approval of the original agreement of merger,
and by each of the constituent other business entities.
(d) The partners of a constituent partnership may in their
discretion, abandon a merger, subject to the contractual rights, if
any, of third parties, including other constituent partnerships and
constituent other business entities, if the abandonment is approved
by the partners of the constituent partnership in the same manner as
required for approval of the original agreement of merger.
(e) An agreement of merger approved in accordance with subdivision
(a) may (1) effect any amendment to the partnership agreement of any
domestic constituent partnership or (2) effect the adoption of a new
partnership agreement for a domestic constituent partnership if it
is the surviving partnership in the merger. Any amendment to a
partnership agreement or adoption of a new partnership agreement made
pursuant to the foregoing sentence shall be effective at the
effective time or date of the merger.
(f) The surviving partnership or surviving other business entity
shall keep the agreement of merger at the principal place of business
of the surviving entity if the surviving entity is a partnership or
a foreign other business entity, at the office referred to in Section
1500 if the surviving entity is a domestic corporation, at the
office referred to in subdivision (a) of Section 15614 or 15901.14 if
the surviving entity is a domestic limited partnership or at the
office referred to in Section 17057 if the surviving entity is a
domestic limited liability company and, upon the request of a partner
of a constituent partnership or a holder of interests or other
securities of a constituent other business entity, the authorized
person on behalf of the partnership or the surviving other business
entity shall promptly deliver to the partner or the holder of
interests or other securities, at the expense of the surviving
partnership or surviving other business entity, a copy of the
agreement of merger. A waiver by a partner or holder of interests or
other securities of the rights provided in this subdivision shall be
unenforceable.
16912. (a) Unless a future effective date or time is provided in a

certificate of merger if a certificate of merger is required to be
filed under Section 16915 in which event the merger shall be
effective at the future effective date or time:
(1) A merger in which no domestic other business entity is a party
to the merger shall be effective upon the later of any of the
following:
(A) The approval of the agreement of merger by all parties to the
merger as provided in Section 16911.
(B) The filing of all documents required by law to be filed as a
condition to the effectiveness of the merger; or
(C) Any effective date specified in the agreement of merger; and
(2) A merger in which a domestic other business entity is a party
to the merger shall be effective upon the filing of the certificate
of merger in the office of the Secretary of State.
(b) For all mergers in which a certificate of merger is required
to be filed under Section 16915, a copy of the certificate of merger
duly certified by the Secretary of State is conclusive evidence of
the merger of (A) the constituent partnerships (either by themselves
or together with constituent other business entities) into the
surviving other business entity, or (B) the constituent partnerships
or the constituent other business entities, or both, into the
surviving partnership.
16913. (a) The merger of any number of domestic partnerships with

any number of foreign partnerships or foreign other business entities
shall be required to comply with Section 16910.
(b) If the surviving entity is a domestic partnership or a
domestic other business entity, the merger proceedings with respect
to that partnership or other business entity and any domestic
disappearing partnership shall conform to the provisions of this
chapter governing the merger of domestic partnerships, but if the
surviving entity is a foreign partnership or a foreign other business
entity, then, subject to the requirements of subdivision (d), the
merger proceedings may be in accordance with the laws of the state or
place of organization of the surviving partnership or surviving
other business entity.
(c) If the surviving entity is a domestic other business entity or
is a domestic partnership in a merger in which a domestic other
business entity is also a party, the certificate of merger shall be
filed as provided in subdivision (b) of Section 16915, and thereupon,
subject to subdivision (a) of Section 16912, the merger shall be
effective as to each domestic constituent partnership and domestic
constituent other business entity.
(d) If the surviving entity is a foreign partnership or foreign
other business entity, the merger shall become effective in
partnership or surviving other business entity is organized, but
shall be effective as to any domestic disappearing partnership as of
the time of effectiveness in the foreign jurisdiction in accordance
with Section 16912.
16914. (a) When a merger takes effect, all of the following apply:
(1) The separate existence of the disappearing partnerships and
disappearing other business entities ceases and the surviving
partnership or surviving other business entity shall succeed, without
other transfer, act, or deed, to all the rights and property whether
real, personal, or mixed, of each of the disappearing partnerships
and disappearing other business entities and shall be subject to all
the debts and liabilities of each in the same manner as if the
surviving partnership or surviving other business entity had itself
incurred them.
(2) All rights of creditors and all liens upon the property of
each of the constituent partnerships and constituent other business
entities shall be preserved unimpaired and may be enforced against
the surviving partnership or the surviving other business entity to
the same extent as if the debt, liability, or duty that gave rise to
that lien had been incurred or contracted by it, provided that those
liens upon the property of a disappearing partnership or disappearing
other business entity shall be limited to the property affected
thereby immediately prior to the time the merger is effective.
(3) Any action or proceeding pending by or against any
disappearing partnership or disappearing other business entity may be
prosecuted to judgment, which shall bind the surviving partnership
or surviving other business entity, or the surviving partnership or
surviving other business entity may be proceeded against or be
substituted in the disappearing partnership's or the disappearing
other business entity's place.
(b) (1) Unless a certificate of merger has been filed to effect
the merger, the surviving foreign entity shall promptly notify the
Secretary of State of the mailing address of its agent for service of
process and its chief executive office, and of any change of
address. To enforce an obligation of a partnership that has merged
with a foreign partnership or foreign other business entity, the
Secretary of State shall only be the agent for service of process in
an action or proceeding against the surviving foreign partnership or
foreign other business entity, if the agent designated for the
service of process for that entity is a natural person and cannot be
located with due diligence or if the agent is a corporation and no
person to whom delivery may be made can be located with due
diligence, or if no agent has been designated and if no one of the
officers, partners, managers, members, or agents of the entity can be
located after diligent search, and it is so shown by affidavit to
the satisfaction of the court. The court then may make an order that
service be made by personal delivery to the Secretary of State or to
an assistant or deputy Secretary of State of two copies of the
process together with two copies of the order, and the order shall
set forth an address to which the process shall be sent by the
Secretary of State. Service in this manner is deemed complete on the
subdivision (c) of Section 12197 of the Government Code, the
Secretary of State shall give notice to the entity of the service of
the process by forwarding by certified mail, return receipt
requested, a copy of the process and order to the address specified
in the order.
giving of notice thereof to the entity, and the forwarding of the
stated therein.
(c) A partner of the surviving partnership or surviving limited
partnership, a member of the surviving limited liability company, a
shareholder of the surviving corporation, or a holder of equity
securities of the surviving other business entity, is liable for all
of the following:
(1) All obligations of a party to the merger for which that person
was personally liable before the merger.
(2) All other obligations of the surviving entity incurred before
the merger by a party to the merger, but those obligations may be
satisfied only out of property of the entity.
(3) All obligations of the surviving entity incurred after the
merger takes effect, but those obligations may be satisfied only out
of property of the entity if that person is a limited partner, a
shareholder in a corporation, or, unless expressly provided otherwise
in the articles of organization or other constituent documents, a
member of a limited liability company or a holder of equity
securities in a surviving other business entity.
(d) If the obligations incurred before the merger by a party to
the merger are not satisfied out of the property of the surviving
partnership or surviving other business entity, the general partners
of that party immediately before the effective date of the merger, to
the extent that party was a partnership or a limited partnership,
shall contribute the amount necessary to satisfy that party's
obligations to the surviving entity in the manner provided in Section
16807 or in the limited partnership act of the jurisdiction in which
the party was formed, as the case may be, as if the merged party
were dissolved.
(e) A partner of a domestic disappearing partnership who does not
vote in favor of the merger and does not agree to become a partner,
member, shareholder, or holder of interest or equity securities of
the surviving partnership or surviving other business entity shall
have the right to dissociate from the partnership as of the date the
merger takes effect. Within 10 days after the approval of the merger
by the partners as required under this article, each domestic
disappearing partnership shall send notice of the approval of the
merger to each partner that has not approved the merger, accompanied
by a copy of Section 16701 and a brief description of the procedure
to be followed under that section if the partner wishes to dissociate
from the partnership. A partner that desires to dissociate from a
disappearing partnership shall send written notice of that
dissociation within 30 days after the date of the notice of the
approval of the merger. The disappearing partnership shall cause the
partner's interest in the entity to be purchased under Section 16701.
The surviving entity is bound under Section 16702 by an act of a
general partner dissociated under this subdivision, and the partner
is liable under Section 16703 for transactions entered into by the
surviving entity after the merger takes effect. The dissociation of a
partner in connection with a merger pursuant to the terms of this
subdivision shall not be deemed a wrongful dissociation under Section
16602.
16915. (a) In a merger involving a domestic partnership, in which

another partnership or a foreign other business entity is a party,
but in which no other domestic other business entity is a party, the
surviving partnership or surviving foreign other business entity may
file with the Secretary of State a statement that one or more
partnerships have merged into the surviving partnership or surviving
foreign other business entity, or that one or more partnerships or
foreign other business entities have merged into the surviving
domestic partnership. A statement of merger shall contain the
following:
(1) The name of each partnership or foreign other business entity
that is a party to the merger.
(2) The name of the surviving entity into which the other
partnerships or foreign other business entities were merged.
(3) The street address of the surviving entity's chief executive
office and of an office in this state, if any.
(4) Whether the surviving entity is a partnership or a foreign
other business entity, specifying the type of the entity.
(b) In a merger involving a domestic partnership in which a
domestic other business entity is also a party, after approval of the
merger by the constituent partnerships and any constituent other
business entities, the constituent partnerships and constituent other
business entities shall file a certificate of merger in the office
of, and on a form prescribed by, the Secretary of State, but if the
surviving entity is a domestic corporation or a foreign corporation
in a merger in which a domestic corporation is a constituent party,
the surviving corporation shall file in the office of the Secretary
of State a copy of the agreement of merger and attachments required
under paragraph (1) of subdivision (g) of Section 1113. The
certificate of merger shall be executed and acknowledged by each
domestic constituent partnership by two partners (unless a lesser
number is provided in the partnership agreement) and by each foreign
constituent partnership by one or more partners, and by each
constituent other business entity by those persons required to
execute the certificate of merger by the laws under which the
constituent other business entity is organized. The certificate of
merger shall set forth all of the following:
(1) The names and the Secretary of State's file numbers, if any,
of each of the constituent partnerships and constituent other
business entities, separately identifying the disappearing
partnerships and disappearing other business entities and the
surviving partnership or surviving other business entity.
(2) If a vote of the partners was required under Section 16911, a
statement that the principal terms of the agreement of merger were
approved by a vote of the partners, which equaled or exceeded the
vote required.
(3) If the surviving entity is a domestic partnership and not an
other business entity, any change to the information set forth in any
filed statement of partnership authority of the surviving
partnership resulting from the merger, including any change in the
name of the surviving partnership resulting from the merger. The
filing of a certificate of merger setting forth any changes to any
filed statement of partnership authority of the surviving partnership
shall have the effect of the filing of a certificate of amendment of
the statement of partnership authority by the surviving partnership,
and the surviving partnership need not file a certificate of
amendment under Section 16015 to reflect those changes.
(4) The future effective date or time (which shall be a date or
time certain not more than 90 days subsequent to the date of filing)
of the merger, if the merger is not to be effective upon the filing
of the certificate of merger with the office of the Secretary of
State.
(5) If the surviving entity is an other business entity or a
foreign partnership, the full name, type of entity, legal
jurisdiction in which the entity was organized and by whose laws its
internal affairs are governed, and the address of the principal place
of business of the entity.
(6) Any other information required to be stated in the certificate
of merger by the laws under which each constituent other business
entity is organized.
(c) A statement of merger or a certificate of merger, as is
applicable under subdivision (a) or (b), shall have the effect of the
filing of a cancellation for each disappearing partnership of any
statement of partnership authority filed by it.
16915.5. (a) Upon merger pursuant to this article, a surviving

domestic or foreign partnership or other business entity shall be
foreign partnership or other business entity that is taxed under
16916. (a) Whenever a domestic or foreign partnership or other

business entity having any real property in this state merges with
another partnership or other business entity pursuant to the laws of
this state or of the state or place in which any constituent
partnership or constituent other business entity was organized, and
the laws of the state or place of organization (including this state)
of any disappearing partnership or disappearing other business
entity provide substantially that the making and filing of a
statement of merger, agreement of merger or certificate of merger
vests in the surviving partnership or surviving other business entity
all the real property of any disappearing partnership and
disappearing other business entity, the filing for record in the
office of the county record of any county in this state in which any
of the real property of the disappearing partnership or disappearing
other business entity is located of either (1) a certificate of
merger or agreement of merger certified by the Secretary of State, or
other certificate prescribed by the Secretary of State, or (2) a
copy of the statement of merger, agreement of merger or certificate
of merger, certified by the Secretary of State or an authorized
the merger is effected, shall evidence record ownership in the
surviving partnership or surviving other business entity of all
interest of that disappearing partnership or disappearing other
business entity in and to the real property located in that county.
(b) A filed and, if appropriate, recorded statement of merger,
executed and declared to be accurate pursuant to subdivision (c) of
Section 16105, stating the name of a partnership or other business
entity that is a party to the merger in whose name property was held
before the merger and the name of the surviving entity, but not
containing all of the other information required by Section 16915,
operates with respect to the partnerships or other business entities
named to the extent provided in subdivision (a).
(c) Recording of the certificate of merger in accordance with
subdivision (a) shall create, in favor of bona fide purchasers or
encumbrancers for value, a conclusive presumption that the merger was
validly completed.
16917. This article is not exclusive. Partnerships, other than

limited liability partnerships, may be converted or merged in any
other manner provided by law.
CORPORATIONS CODE
SECTION 16951-16962
16951. For purposes of this chapter, the only types of limited
liability partnerships that shall be recognized are a registered
limited liability partnership and a foreign limited liability
partnership, as defined in Section 16101. No registered limited
liability partnership or foreign limited liability partnership may
render professional limited liability partnership services in this
state except through licensed persons.
16952. The name of a registered limited liability partnership shall

contain the words "Registered Limited Liability Partnership" or
"Limited Liability Partnership" or one of the abbreviations "L.L.P.,"
"LLP," "R.L.L.P.," or "RLLP" as the last words or letters of its
name.
16953. (a) To become a registered limited liability partnership, a

partnership, other than a limited partnership, shall file with the
Secretary of State a registration, executed by one or more partners
authorized to execute a registration, stating all of the following:
(1) The name of the partnership.
(2) The address of its principal office.
(3) The name and address of the agent for service of process on
the limited liability partnership in California.
(4) A brief statement of the business in which the partnership
engages.
(5) Any other matters that the partnership determines to include.
(6) That the partnership is registering as a registered limited
liability partnership.
(b) The registration shall be accompanied by a fee as set forth in
subdivision (a) of Section 12189 of the Government Code.
(c) The Secretary of State shall register as a registered limited
liability partnership any partnership that submits a completed
registration with the required fee.
(d) The Secretary of State may cancel the filing of the
registration if a check or other remittance accepted in payment of
the filing fee is not paid upon presentation. Upon receiving written
for payment, the Secretary of State shall give a first written
notice of the applicability of this section 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, the
Secretary of State shall give a second written notice of cancellation
and the cancellation shall thereupon be effective. The second notice
shall be given 20 days or more after the first notice and 90 days or
less after the date of the original filing.
(e) A partnership becomes a registered limited liability
partnership at the time of the filing of the initial registration
with the Secretary of State or at any later date or time specified in
the registration and the payment of the fee required by subdivision
(b). A partnership continues as a registered limited liability
partnership until a notice that it is no longer a registered limited
liability partnership has been filed pursuant to subdivision (b) of
Section 16954 or, if applicable, until it has been dissolved and
finally wound up. The status of a partnership as a registered limited
liability partnership and the liability of a partner of the
registered limited liability partnership shall not be adversely
affected by errors or subsequent changes in the information stated in
a registration under subdivision (a) or an amended registration or
notice under Section 16954.
(f) The fact that a registration or amended registration pursuant
to this section is on file with the Secretary of State is notice that
the partnership is a registered limited liability partnership and of
those other facts contained therein that are required to be set
forth in the registration or amended registration.
(g) The Secretary of State shall provide a form for a registration
under subdivision (a), which shall include the form for confirming
compliance with the optional security requirement pursuant to
subdivision (c) of Section 16956. The Secretary of State shall
include with instructional materials provided in conjunction with the
form for a registration under subdivision (a) a notice that filing
the registration will obligate the limited liability partnership to
pay an annual tax for that taxable year to the Franchise Tax Board
pursuant to Section 17948 of the Revenue and Taxation Code. That
notice shall be updated annually to specify the dollar amount of the
tax.
(h) A limited liability partnership providing professional limited
liability partnership services in this state shall comply with all
statutory and administrative registration or filing requirements of
the state board, commission, or other agency that prescribes the
rules and regulations governing the particular profession in which
the partnership proposes to engage, pursuant to the applicable
provisions of the Business and Professions Code relating to that
profession. The state board, commission, or other agency shall not
disclose, unless compelled by a subpoena or other order of a court of
competent jurisdiction, any information it receives in the course of
evaluating the compliance of a limited liability partnership with
applicable statutory and administrative registration or filing
requirements, provided that nothing in this section shall be
construed to prevent a state board, commission, or other agency from
disclosing the manner in which the limited liability partnership has
complied with the requirements of Section 16956, or the compliance or
noncompliance by the limited liability partnership with any other
requirements of the state board, commission, or other agency.
16954. (a) The registration of a registered limited liability

partnership may be amended by an amended registration executed by one
or more partners authorized to execute an amended registration and
filed with the Secretary of State, as soon as reasonably practical
after any information set forth in the registration or previously
filed amended registration becomes inaccurate or to add information
to the registration or amended registration.
(b) If a registered limited liability partnership ceases to be a
registered limited liability partnership, it shall file with the
Secretary of State a notice, executed by one or more partners
authorized to execute the notice, that it is no longer a registered
limited liability partnership. The notice shall state that a final
annual tax return, as described by Section 17948.3 of the Revenue and
Taxation Code, has been or will be filed with the Franchise Tax
Board, as required under Part 10.2 (commencing with Section 18401) of
(c) An amendment pursuant to subdivision (a) and a notice pursuant
to subdivision (b) shall each be accompanied by a fee as set forth
in subdivision (c) of Section 12189 of the Government Code.
(d) The Secretary of State shall provide forms for an amended
registration under subdivision (a) and a notice under subdivision
(b).
(e) A notice of cessation, signed pursuant to subdivision (b),
shall be filed with the Secretary of State. The Secretary of State
shall notify the Franchise Tax Board of the cessation.
16955. (a) A domestic partnership, other than a limited

partnership, may convert to a registered limited liability by the
vote of the partners possessing a majority of the interests of its
partners in the current profits of the partnership or by a different
vote as may be required in its partnership agreement.
(b) When such a conversion takes effect, all of the following
apply:
(1) All property, real and personal, tangible and intangible, of
the converting partnership remains vested in the converted registered
limited liability partnership.
(2) All debts, obligations, liabilities, and penalties of the
converting partnership continue as debts, obligations, liabilities,
and penalties of the converted registered limited liability
partnership.
(3) Any action, suit, or proceeding, civil or criminal, then
pending by or against the converting partnership may be continued as
if the conversion had not occurred.
(4) To the extent provided in the agreement of conversion and in
this chapter, the partners of a partnership shall continue as
partners in the converted registered limited liability partnership.
(5) A partnership that has been converted to a registered limited
liability partnership pursuant to this chapter is the same person
that existed prior to the conversion.
16956. (a) At the time of registration pursuant to Section 16953,

in the case of a registered limited liability partnership, and
Section 16959, in the case of a foreign limited liability
partnership, and at all times during which those partnerships shall
transact intrastate business, every registered limited liability
partnership and foreign limited liability partnership, as the case
may be, shall be required to provide security for claims against it
as follows:
(1) For claims based upon acts, errors, or omissions arising out
of the practice of public accountancy, a registered limited liability
partnership or foreign limited liability partnership providing
accountancy services shall comply with one, or pursuant to
subdivision (b) some combination, of the following:
(A) Maintaining a policy or policies of insurance against
liability imposed on or against it by law for damages arising out of
claims; however, the total aggregate limit of liability under the
policy or policies of insurance for partnerships with five or fewer
licensed persons shall not be less than one million dollars
($1,000,000), and for partnerships with more than five licensees
rendering professional services on behalf of the partnership, an
additional one hundred thousand dollars ($100,000) of insurance shall
be obtained for each additional licensee; however, the maximum
amount of insurance is not required to exceed five million dollars
($5,000,000) in any one designated period, less amounts paid in
defending, settling, or discharging claims as set forth in this
subparagraph. The policy or policies may be issued on a claims-made
or occurrence basis, and shall cover: (i) in the case of a
claims-made policy, claims initially asserted in the designated
period, and (ii) in the case of an occurrence policy, occurrences
during the designated period. For purposes of this subparagraph,
"designated period" means a policy year or any other period
designated in the policy that is not greater than 12 months. The
impairment or exhaustion of the aggregate limit of liability by
amounts paid under the policy in connection with the settlement,
discharge, or defense of claims applicable to a designated period
shall not require the partnership to acquire additional insurance
coverage for that designated period. The policy or policies of
insurance may be in a form reasonably available in the commercial
insurance market and may be subject to those terms, conditions,
exclusions, and endorsements that are typically contained in those
policies. A policy or policies of insurance maintained pursuant to
this subparagraph may be subject to a deductible or self-insured
retention.
Upon the dissolution and winding up of the partnership, the
partnership shall, with respect to any insurance policy or policies
then maintained pursuant to this subparagraph, maintain or obtain an
extended reporting period endorsement or equivalent provision in the
maximum total aggregate limit of liability required to comply with
this subparagraph for a minimum of three years if reasonably
available from the insurer.
(B) Maintaining in trust or bank escrow, cash, bank certificates
of deposit, United States Treasury obligations, bank letters of
credit, or bonds of insurance or surety companies as security for
payment of liabilities imposed by law for damages arising out of all
claims; however, the maximum amount of security for partnerships with
five or fewer licensed persons shall not be less than one million
dollars ($1,000,000), and for partnerships with more than five
licensees rendering professional services on behalf of the
partnership, an additional one hundred thousand dollars ($100,000) of
security shall be obtained for each additional licensee; however,
the maximum amount of security is not required to exceed five million
dollars ($5,000,000). The partnership remains in compliance with
this section during a calendar year notwithstanding amounts paid
during that calendar year from the accounts, funds, Treasury
obligations, letters of credit, or bonds in defending, settling, or
discharging claims of the type described in this paragraph, provided
that the amount of those accounts, funds, Treasury obligations,
letters of credit, or bonds was at least the amount specified in the
preceding sentence as of the first business day of that calendar
year. Notwithstanding the pendency of other claims against the
partnership, a registered limited liability partnership or foreign
limited liability partnership shall be deemed to be in compliance
with this subparagraph as to a claim if within 30 days after the time
that a claim is initially asserted through service of a summons,
complaint, or comparable pleading in a judicial or administrative
proceeding, the partnership has provided the required amount of
security by designating and segregating funds in compliance with the
requirements of this subparagraph.
(C) Unless the partnership has satisfied subparagraph (D), each
partner of a registered limited liability partnership or foreign
limited liability partnership providing accountancy services, by
virtue of that person's status as a partner, thereby automatically
guarantees payment of the difference between the maximum amount of
security required for the partnership by this paragraph and the
security otherwise provided in accordance with subparagraphs (A) and
(B), provided that the aggregate amount paid by all partners under
these guarantees shall not exceed the difference. Neither withdrawal
by a partner nor the dissolution and winding up of the partnership
shall affect the rights or obligations of a partner arising prior to
withdrawal or dissolution and winding up, and the guarantee provided
for in this subparagraph shall apply only to conduct that occurred
prior to the withdrawal or dissolution and winding up. Nothing
contained in this subparagraph shall affect or impair the rights or
obligations of the partners among themselves, or the partnership,
including, but not limited to, rights of contribution, subrogation,
or indemnification.
(D) Confirming, pursuant to the procedure in subdivision (c),
that, as of the most recently completed fiscal year of the
partnership, it had a net worth equal to or exceeding ten million
dollars ($10,000,000).
of the practice of law, a registered limited liability partnership or
foreign limited liability partnership providing legal services shall
comply with one, or pursuant to subdivision (b) some combination, of
the following:
(A) Each registered limited liability partnership or foreign
limited liability partnership providing legal services shall maintain
a policy or policies of insurance against liability imposed on or
against it by law for damages arising out of claims; however, the
total aggregate limit of liability under the policy or policies of
insurance for partnerships with five or fewer licensed persons shall
not be less than one million dollars ($1,000,000), and for
partnerships with more than five licensees rendering professional
services on behalf of the partnership, an additional one hundred
thousand dollars ($100,000) of insurance shall be obtained for each
additional licensee; however, the maximum amount of insurance is not
required to exceed seven million five hundred thousand dollars
or occurrence basis, and shall cover (i) in the case of a claims-made
policy, claims initially asserted in the designated period, and (ii)
in the case of an occurrence policy, occurrences during the
designated period. For purposes of this subparagraph, "designated
period" means a policy year or any other period designated in the
policy that is not greater than 12 months. The impairment or
exhaustion of the aggregate limit of liability by amounts paid under
the policy in connection with the settlement, discharge, or defense
of claims applicable to a designated period shall not require the
partnership to acquire additional insurance coverage for that
designated period. The policy or policies of insurance may be in a
form reasonably available in the commercial insurance market and may
be subject to those terms, conditions, exclusions, and endorsements
that are typically contained in those policies. A policy or policies
of insurance maintained pursuant to this subparagraph may be subject
to a deductible or self-insured retention.
(B) Each registered limited liability partnership or foreign
in trust or bank escrow, cash, bank certificates of deposit, United
States Treasury obligations, bank letters of credit, or bonds of
insurance or surety companies as security for payment of liabilities
imposed by law for damages arising out of all claims; however, the
maximum amount of security for partnerships with five or fewer
additional one hundred thousand dollars ($100,000) of security shall
be obtained for each additional licensee; however, the maximum amount
of security is not required to exceed seven million five hundred
thousand dollars ($7,500,000). The partnership remains in compliance
with this section during a calendar year notwithstanding amounts paid
requirement of this subparagraph.
(C) Unless the partnership has satisfied the requirements of
subparagraph (D), each partner of a registered limited liability
partnership or foreign limited liability partnership providing legal
services, by virtue of that person's status as a partner, thereby
automatically guarantees payment of the difference between the
maximum amount of security required for the partnership by this
paragraph and the security otherwise provided in accordance with the
provisions of subparagraphs (A) and (B), provided that the aggregate
amount paid by all partners under these guarantees shall not exceed
the difference. Neither withdrawal by a partner nor the dissolution
and winding up of the partnership shall affect the rights or
obligations of a partner arising prior to withdrawal or dissolution
and winding up, and the guarantee provided for in this subparagraph
shall apply only to conduct that occurred prior to the withdrawal or
dissolution and winding up. Nothing contained in this subparagraph
shall affect or impair the rights or obligations of the partners
among themselves, or the partnership, including, but not limited to,
rights of contribution, subrogation, or indemnification.
partnership, it had a net worth equal to or exceeding fifteen million
dollars ($15,000,000).
of the practice of architecture, a registered limited liability
architectural services shall comply with one, or pursuant to
partnership shall not be less than one million dollars ($1,000,000),
and for partnerships with more than five licensees rendering
professional services on behalf of the partnership, an additional one
hundred thousand dollars ($100,000) of liability coverage shall be
obtained for each additional licensee; however, the total aggregate
limit of liability under the policy or policies of insurance is not
required to exceed five million dollars ($5,000,000). The policy or
policies may be issued on a claims-made or occurrence basis, and
shall cover: (i) in the case of a claims-made policy, claims
initially asserted in the designated period, and (ii) in the case of
an occurrence policy, occurrences during the designated period. For
purposes of this subparagraph, "designated period" means a policy
year or any other period designated in the policy that is not greater
than 12 months. The impairment or exhaustion of the aggregate limit
of liability by amounts paid under the policy in connection with the
settlement, discharge, or defense of claims applicable to a
designated period shall not require the partnership to acquire
additional insurance coverage for that designated period. The policy
or policies of insurance may be in a form reasonably available in the
commercial insurance market and may be subject to those terms,
conditions, exclusions, and endorsements that are typically contained
in those policies. A policy or policies of insurance maintained
pursuant to this subparagraph may be subject to a deductible or
self-insured retention.
five or fewer licensees rendering professional services on behalf of
the partnership shall not be less than one million dollars
of security is not required to exceed five million dollars
($5,000,000). The partnership remains in compliance with this section
during a calendar year notwithstanding amounts paid during that
calendar year from the accounts, funds, Treasury obligations, letters
of credit, or bonds in defending, settling, or discharging claims of
the type described in this paragraph, provided that the amount of
those accounts, funds, Treasury obligations, letters of credit, or
bonds was at least the amount specified in the preceding sentence as
of the first business day of that calendar year. Notwithstanding the
pendency of other claims against the partnership, a registered
limited liability partnership or foreign limited liability
partnership shall be deemed to be in compliance with this
subparagraph as to a claim if within 30 days after the time that a
claim is initially asserted through service of a summons, complaint,
or comparable pleading in a judicial or administrative proceeding,
the partnership has provided the required amount of security by
designating and segregating funds in compliance with the requirements
of this subparagraph.
limited liability partnership providing architectural services, by
or indemnification.
dollars ($10,000,000).
of the practice of engineering or the practice of land surveying, a
partnership providing engineering or land surveying services shall
the following:
partnership shall not be less than two million dollars ($2,000,000),
hundred thousand dollars ($100,000) of liability coverage shall be
obtained for each additional licensee; however, the total aggregate
limit of liability under the policy or policies of insurance is not
required to exceed five million dollars ($5,000,000). The policy or
policies may be issued on a claims-made or occurrence basis, and
shall cover: (i) in the case of a claims-made policy, claims
initially asserted in the designated period, and (ii) in the case of
an occurrence policy, occurrences during the designated period. For
purposes of this subparagraph, "designated period" means a policy
year or any other period designated in the policy that is not greater
than 12 months. The impairment or exhaustion of the aggregate limit
of liability by amounts paid under the policy in connection with the
settlement, discharge, or defense of claims applicable to a
designated period shall not require the partnership to acquire
additional insurance coverage for that designated period. The policy
or policies of insurance may be in a form reasonably available in the
commercial insurance market and may be subject to those terms,
conditions, exclusions, and endorsements that are typically contained
in those policies. A policy or policies of insurance maintained
pursuant to this subparagraph may be subject to a deductible or
self-insured retention.
five or fewer licensees rendering professional services on behalf of
the partnership shall not be less than two million dollars
of security is not required to exceed five million dollars
($5,000,000). The partnership remains in compliance with this section
during a calendar year, notwithstanding amounts paid during that
calendar year from the accounts, funds, Treasury obligations, letters
of credit, or bonds in defending, settling, or discharging claims of
the type described in this paragraph, provided that the amount of
those accounts, funds, Treasury obligations, letters of credit, or
bonds was at least the amount specified in the preceding sentence as
of the first business day of that calendar year. Notwithstanding the
pendency of other claims against the partnership, a registered
partnership shall be deemed to be in compliance with this
subparagraph as to a claim if, within 30 days after the time that a
claim is initially asserted through service of a summons, complaint,
or comparable pleading in a judicial or administrative proceeding,
the partnership has provided the required amount of security by
designating and segregating funds in compliance with the requirements
of this subparagraph.
limited liability partnership providing engineering services or land
surveying services, by virtue of that person's status as a partner,
thereby automatically guarantees payment of the difference between
the maximum amount of security required for the partnership by this
paragraph and the security otherwise provided in accordance with
subparagraphs (A) and (B), provided that the aggregate amount paid by
all partners under these guarantees shall not exceed the difference.
Neither withdrawal by a partner nor the dissolution and winding up
of the partnership shall affect the rights or obligations of a
partner arising prior to withdrawal or dissolution and winding up,
and the guarantee provided for in this subparagraph shall apply only
to conduct that occurred prior to the withdrawal or dissolution and
winding up. Nothing contained in this subparagraph shall affect or
impair the rights or obligations of the partners among themselves, or
the partnership, including, but not limited to, rights of
contribution, subrogation, or indemnification.
dollars ($10,000,000).
(b) For purposes of satisfying the security requirements of this
section, a registered limited liability partnership or foreign
limited liability partnership may aggregate the security provided by
it pursuant to subparagraphs (A), (B), (C), and (D) of paragraph (1)
of subdivision (a), subparagraphs (A), (B), (C), and (D) of paragraph
(2) of subdivision (a), subparagraphs (A), (B), (C), and (D) of
paragraph (3) of subdivision (a), or subparagraphs (A), (B), (C), and
(D) of paragraph (4) of subdivision (a), as the case may be. Any
partnership intending to comply with the alternative security
provisions set forth in subparagraph (D) of paragraph (1) of
subdivision (a), subparagraph (D) of paragraph (2) of subdivision
(a), subparagraph (D) of paragraph (3) of subdivision (a), or
subparagraph (D) of paragraph (4) of subdivision (a), shall furnish
the following information to the Secretary of State's office, in the
manner prescribed in, and accompanied by all information required by,
the applicable section:
TRANSMITTAL FORM FOR EVIDENCING

COMPLIANCE
WITH SECTION 16956(a)(1)(D), SECTION
16956(a)(2)(D),
SECTION 16956(a)(3)(D), OR SECTION
16956(a)(4)(D) OF THE CALIFORNIA
CORPORATIONS CODE
The undersigned hereby confirms the
following:
_____________________________________
1. Name of registered or foreign limited
______________________
liability partnership
_________________________________
2. Jurisdiction where partnership is
__________
organized
3. ____________________________
Address of principal office
The registered or foreign limited liability
partnership
chooses
to satisfy the requirements of Section
16956 by
confirming,
pursuant to Section 16956(a)(1)(D),
16956(a)(2)(D),
16956(a)(3)(D), or 16956 (a)(4)(D) and
pursuant to Section 16956(c),
that, as of the most recently completed
fiscal year, the partnership

had
a net worth equal to or exceeding ten
4. million
dollars
($10,000,000), in the case of a partnership
providing
accountancy services, fifteen million
dollars
($15,000,000)
in the case of a partnership providing
legal services,
or
ten million dollars ($10,000,000), in the
case of a
partnership
providing architectural services,
engineering services, or land surveying
services.
_________________________________________
5. Title of authorized person executing this
_____
form
____________________________________
6. Signature of authorized person
____________________
executing this form
(c) Pursuant to subparagraph (D) of paragraph (1) of subdivision

(a), subparagraph (D) of paragraph (2) of subdivision (a),
subparagraph (D) of paragraph (3) of subdivision (a), or subparagraph
(D) of paragraph (4) of subdivision (a), a registered limited
liability partnership or foreign limited liability partnership may
satisfy the requirements of this section by confirming that, as of
the last day of its most recently completed fiscal year, it had a net
worth equal to or exceeding the amount required. In order to comply
with this alternative method of meeting the requirements established
in this section, a registered limited liability partnership or
foreign limited liability partnership shall file an annual
confirmation with the Secretary of State's office, signed by an
authorized member of the registered limited liability partnership or
foreign limited liability partnership, accompanied by a transmittal
form as prescribed by subdivision (b). In order to be current in a
given year, the partnership form for confirming compliance with the
optional security requirement shall be on file within four months of
the completion of the fiscal year and, upon being filed, shall
constitute full compliance with the financial security requirements
for purposes of this section as of the beginning of the fiscal year.
A confirmation filed during any particular fiscal year shall continue
to be effective for the first four months of the next succeeding
fiscal year.
(d) Neither the existence of the requirements of subdivision (a)
nor the extent of the registered limited liability partnership's or
foreign limited liability partnership's compliance with the
alternative requirements in this section shall be admissible in court
or in any way be made known to a jury or other trier of fact in
determining an issue of liability for, or to the extent of, the
damages in question.
(e) Notwithstanding any other provision of this section, if a
partnership is otherwise in compliance with the terms of this
section at the time that a bankruptcy or other insolvency proceeding
is commenced with respect to the registered limited liability
partnership or foreign limited liability partnership, it shall be
deemed to be in compliance with this section during the pendency of
the proceeding. A registered limited liability partnership that has
been the subject of a proceeding and that conducts business after the
proceeding ends shall thereafter comply with paragraph (1), (2),
(3), or (4) of subdivision (a), in order to obtain the limitations on
liability afforded by subdivision (c) of Section 16306.
(f) This section shall remain in effect only until January 1,
that date.
16956. (a) At the time of registration pursuant to Section 16953,

in the case of a registered limited liability partnership, and
Section 16959, in the case of a foreign limited liability
partnership, and at all times during which those partnerships shall
transact intrastate business, every registered limited liability
partnership and foreign limited liability partnership, as the case
may be, shall be required to provide security for claims against it
as follows:
of the practice of public accountancy, a registered limited liability
accountancy services shall comply with one, or pursuant to
additional one hundred thousand dollars ($100,000) of insurance shall
be obtained for each additional licensee; however, the maximum
amount of insurance is not required to exceed five million dollars
retention.
five or fewer licensed persons shall not be less than one million
dollars ($1,000,000), and for partnerships with more than five
security shall be obtained for each additional licensee; however,
the maximum amount of security is not required to exceed five million
dollars ($5,000,000). The partnership remains in compliance with
this section during a calendar year notwithstanding amounts paid
requirements of this subparagraph.
limited liability partnership providing accountancy services, by
or indemnification.
dollars ($10,000,000).
of the practice of law, a registered limited liability partnership or
foreign limited liability partnership providing legal services shall
the following:
(A) Each registered limited liability partnership or foreign
a policy or policies of insurance against liability imposed on or
against it by law for damages arising out of claims; however, the
total aggregate limit of liability under the policy or policies of
insurance for partnerships with five or fewer licensed persons shall
not be less than one million dollars ($1,000,000), and for
partnerships with more than five licensees rendering professional
services on behalf of the partnership, an additional one hundred
thousand dollars ($100,000) of insurance shall be obtained for each
additional licensee; however, the maximum amount of insurance is not
required to exceed seven million five hundred thousand dollars
or occurrence basis, and shall cover (i) in the case of a claims-made
policy, claims initially asserted in the designated period, and (ii)
in the case of an occurrence policy, occurrences during the
designated period. For purposes of this subparagraph, "designated
period" means a policy year or any other period designated in the
policy that is not greater than 12 months. The impairment or
exhaustion of the aggregate limit of liability by amounts paid under
the policy in connection with the settlement, discharge, or defense
of claims applicable to a designated period shall not require the
partnership to acquire additional insurance coverage for that
designated period. The policy or policies of insurance may be in a
form reasonably available in the commercial insurance market and may
be subject to those terms, conditions, exclusions, and endorsements
that are typically contained in those policies. A policy or policies
of insurance maintained pursuant to this subparagraph may be subject
to a deductible or self-insured retention.
(B) Each registered limited liability partnership or foreign
in trust or bank escrow, cash, bank certificates of deposit, United
States Treasury obligations, bank letters of credit, or bonds of
insurance or surety companies as security for payment of liabilities
imposed by law for damages arising out of all claims; however, the
of security is not required to exceed seven million five hundred
thousand dollars ($7,500,000). The partnership remains in compliance
with this section during a calendar year notwithstanding amounts paid
requirement of this subparagraph.
(C) Unless the partnership has satisfied the requirements of
subparagraph (D), each partner of a registered limited liability
partnership or foreign limited liability partnership providing legal
services, by virtue of that person's status as a partner, thereby
automatically guarantees payment of the difference between the
maximum amount of security required for the partnership by this
paragraph and the security otherwise provided in accordance with the
provisions of subparagraphs (A) and (B), provided that the aggregate
amount paid by all partners under these guarantees shall not exceed
the difference. Neither withdrawal by a partner nor the dissolution
and winding up of the partnership shall affect the rights or
obligations of a partner arising prior to withdrawal or dissolution
and winding up, and the guarantee provided for in this subparagraph
shall apply only to conduct that occurred prior to the withdrawal or
dissolution and winding up. Nothing contained in this subparagraph
shall affect or impair the rights or obligations of the partners
among themselves, or the partnership, including, but not limited to,
rights of contribution, subrogation, or indemnification.
partnership, it had a net worth equal to or exceeding fifteen million
dollars ($15,000,000).
of the practice of architecture, a registered limited liability
architectural services shall comply with one, or pursuant to
claims in an amount for each claim of at least one hundred thousand
dollars ($100,000) multiplied by the number of licensed persons
rendering professional services on behalf of the partnership;
however, the total aggregate limit of liability under the policy or
policies of insurance for partnerships with five or fewer licensees
rendering professional services on behalf of the partnership shall
not be less than five hundred thousand dollars ($500,000), and for
all other partnerships is not required to exceed five million dollars
subparagraph. On and after January 1, 2008, the total aggregate limit
of liability under the policy or policies of insurance for
partnerships with five or fewer licensees rendering professional
services on behalf of the partnership shall not be less than one
million dollars ($1,000,000), and for partnerships with more than
five licensees rendering professional services on behalf of the
liability coverage shall be obtained for each additional licensee;
however, the total aggregate limit of liability under the policy or
policies of insurance is not required to exceed five million dollars
($5,000,000). The policy or policies may be issued on a claims-made
retention.
claims in an amount of at least one hundred thousand dollars
($100,000) multiplied by the number of licensed persons rendering
professional services on behalf of the partnership; however, the
partnership shall not be less than five hundred thousand dollars
($500,000), and for all other partnerships is not required to exceed
five million dollars ($5,000,000). On and after January 1, 2008, the
partnership shall not be less than one million dollars ($1,000,000),
hundred thousand dollars ($100,000) of security shall be obtained
for each additional licensee; however, the maximum amount of security
is not required to exceed five million dollars ($5,000,000). The
partnership remains in compliance with this section during a calendar
year notwithstanding amounts paid during that calendar year from the
accounts, funds, Treasury obligations, letters of credit, or bonds
in defending, settling, or discharging claims of the type described
in this paragraph, provided that the amount of those accounts, funds,
Treasury obligations, letters of credit, or bonds was at least the
amount specified in the preceding sentence as of the first business
day of that calendar year. Notwithstanding the pendency of other
claims against the partnership, a registered limited liability
partnership or foreign limited liability partnership shall be deemed
to be in compliance with this subparagraph as to a claim if within 30
days after the time that a claim is initially asserted through
service of a summons, complaint, or comparable pleading in a judicial
or administrative proceeding, the partnership has provided the
required amount of security by designating and segregating funds in
compliance with the requirements of this subparagraph.
limited liability partnership providing architectural services, by
or indemnification.
dollars ($10,000,000).
(b) For purposes of satisfying the security requirements of this
section, a registered limited liability partnership or foreign
limited liability partnership may aggregate the security provided by
it pursuant to subparagraphs (A), (B), (C), and (D) of paragraph (1)
of subdivision (a), subparagraphs (A), (B), (C), and (D) of paragraph
(2) of subdivision (a), or subparagraphs (A), (B), (C), and (D) of
paragraph (3) of subdivision (a), as the case may be. Any registered
partnership intending to comply with the alternative security
provisions set forth in subparagraph (D) of paragraph (1) of
subdivision (a), subparagraph (D) of paragraph (2) of subdivision
(a), or subparagraph (D) of paragraph (3) of subdivision (a) shall
furnish the following information to the Secretary of State's office,
in the manner prescribed in, and accompanied by all information
required by, the applicable section:
TRANSMITTAL FORM FOR EVIDENCING

COMPLIANCE
WITH SECTION 16956(a)(1)(D), SECTION
16956(a)(2)(D),
OR
SECTION 16956(a)(3)(D) OF THE
CALIFORNIA
CORPORATIONS CODE
The undersigned hereby confirms the
following:
_____________________________________
1. Name of registered or foreign limited
______________________
liability partnership
_________________________________
2. Jurisdiction where partnership is
__________
organized
3. ____________________________
Address of principal office
The registered or foreign limited liability
partnership
chooses
to satisfy the requirements of Section
16956 by
confirming,
pursuant to Section 16956(a)(1)(D),
16956(a)(2)(D),
or
16956(a)(3)(D) and pursuant to Section
16956(c), that, as
of
the most recently completed fiscal year,
the partnership
4. had
a net worth equal to or exceeding ten
million
dollars
($10,000,000), in the case of a partnership
providing
accountancy services, fifteen million
dollars
($15,000,000)
in the case of a partnership
providing legal services,
or
ten million dollars ($10,000,000), in the
case of a
partnership
providing architectural services.
_________________________________________
5. Title of authorized person executing this
_____
form
________________________________________
6. Signature of authorized person executing
__________
this form
(c) Pursuant to subparagraph (D) of paragraph (1) of subdivision

(a), subparagraph (D) of paragraph (2) of subdivision (a), or
subparagraph (D) of paragraph (3) of subdivision (a), a registered
partnership may satisfy the requirements of this section by
confirming that, as of the last day of its most recently completed
fiscal year, it had a net worth equal to or exceeding the amount
required. In order to comply with this alternative method of meeting
the requirements established in this section, a registered limited
liability partnership or foreign limited liability partnership shall
file an annual confirmation with the Secretary of State's office,
signed by an authorized member of the registered limited liability
partnership or foreign limited liability partnership, accompanied by
a transmittal form as prescribed by subdivision (b). In order to be
current in a given year, the partnership form for confirming
compliance with the optional security requirement shall be on file
within four months of the completion of the fiscal year and, upon
being filed, shall constitute full compliance with the financial
security requirements for purposes of this section as of the
beginning of the fiscal year. A confirmation filed during any
particular fiscal year shall continue to be effective for the first
four months of the next succeeding fiscal year.
(d) Neither the existence of the requirements of subdivision (a)
nor the extent of the registered limited liability partnership's or
foreign limited liability partnership's compliance with the
alternative requirements in this section shall be admissible in court
or in any way be made known to a jury or other trier of fact in
determining an issue of liability for, or to the extent of, the
damages in question.
(e) Notwithstanding any other provision of this section, if a
partnership is otherwise in compliance with the terms of this
section at the time that a bankruptcy or other insolvency proceeding
is commenced with respect to the registered limited liability
partnership or foreign limited liability partnership, it shall be
deemed to be in compliance with this section during the pendency of
the proceeding. A registered limited liability partnership that has
been the subject of a proceeding and that conducts business after the
proceeding ends shall thereafter comply with paragraph (1), (2), or
(3) of subdivision (a), in order to obtain the limitations on
liability afforded by subdivision (c) of Section 16306.
(f) This section shall become operative on January 1, 2016.
16957. (a) No distribution shall be made by a registered limited

liability partnership if, after giving effect to the distribution:
(1) The registered limited liability partnership would not be able
to pay its debts as they become due in the usual course of business.
(2) The registered limited liability partnership's total assets
would be less than the sum of its total liabilities plus the amount
that would be needed, if the registered limited liability partnership
were to be dissolved at the time of the distribution, to satisfy the
preferential rights of other partners upon dissolution that are
superior to the rights of the partners receiving the distribution.
(b) A cause of action with respect to an obligation to return a
distribution is extinguished unless the action is brought within four
years after the distribution is made.
(c) A distribution for purposes of this section means the transfer
of money or property by a registered limited liability partnership
to its partners without consideration.
16958. (a) (1) The laws of the jurisdiction under which a foreign
limited liability partnership is organized shall govern its
organization and internal affairs and the liability and authority of
its partners, subject to compliance with Section 16956, and (2) a
foreign limited liability partnership may not be denied registration
by reason of any difference between those laws and the laws of this
state.
(b) The name of a foreign limited liability partnership
transacting intrastate business in this state shall contain the words
"Registered Limited Liability Partnership" or "Limited Liability
Partnership" or one of the abbreviations "L.L.P.," "LLP," "R.L.L.P.,"
or "RLLP," or such other similar words or abbreviations as may be
required or authorized by the laws of the jurisdiction of formation
of the foreign limited liability partnership, as the last words or
letters of its name.
16959. (a) (1) Before transacting intrastate business in this
state, a foreign limited liability partnership shall comply with all
the state board, commission, or agency that prescribes the rules and
regulations governing a particular profession in which the
partnership proposes to be engaged, pursuant to the applicable
provisions of the Business and Professions Code relating to the
profession or applicable rules adopted by the governing board. A
foreign limited liability partnership that transacts intrastate
business in this state shall within 30 days after the effective date
of the act enacting this section or the date on which the foreign
limited liability partnership first transacts intrastate business in
this state, whichever is later, register with the Secretary of State
by submitting to the Secretary of State an application for
registration as a foreign limited liability partnership, signed by a
person with authority to do so under the laws of the jurisdiction of
formation of the foreign limited liability partnership, stating the
name of the partnership, the address of its principal office, the
name and address of its agent for service of process in this state, a
brief statement of the business in which the partnership engages,
and any other matters that the partnership determines to include.
(2) Annexed to the application for registration shall be a
certificate from an authorized public official of the foreign limited
liability partnership's jurisdiction of organization to the effect
that the foreign limited liability partnership is in good standing in
that jurisdiction, if the laws of that jurisdiction permit the
issuance of those certificates, or, in the alternative, a statement
by the foreign limited liability partnership that the laws of its
jurisdiction of organization do not permit the issuance of those
certificates.
subdivision (b) of Section 12189 of the Government Code.
(c) The Secretary of State shall register as a foreign limited
application for registration with the required fee.
less after the original filing.
(e) A partnership becomes registered as a foreign limited
liability partnership at the time of the filing of the initial
registration with the Secretary of State or at any later date or time
specified in the registration and the payment of the fee required by
subdivision (b). A partnership continues to be registered as a
foreign limited liability partnership until a notice that it is no
longer so registered as a limited liability partnership has been
filed pursuant to Section 16960 or, if applicable, once it has been
dissolved and finally wound up. The status of a partnership
registered as a foreign limited liability partnership and the
liability of a partner of that foreign limited liability partnership
shall not be adversely affected by errors or subsequent changes in
the information stated in an application for registration under
subdivision (a) or an amended registration or notice under Section
16960.
to Section 16960 is on file with the Secretary of State is notice
that the partnership is a foreign limited liability partnership and
of those other facts contained therein that are required to be set
include with instructional materials, provided in conjunction with
the form for registration under subdivision (a), a notice that filing
notice shall be updated annually to specify the dollar amount of this
tax.
(h) A foreign limited liability partnership transacting intrastate
business in this state shall not maintain any action, suit, or
proceeding in any court of this state until it has registered in this
state pursuant to this section.
(i) Any foreign limited liability partnership that transacts
intrastate business in this state without registration is subject to
a penalty of twenty dollars ($20) for each day that unauthorized
intrastate business is transacted, up to a maximum of ten thousand
dollars ($10,000).
(j) A partner of a foreign limited liability partnership is not
liable for the debts or obligations of the foreign limited liability
partnership solely by reason of its having transacted business in
this state without registration.
(k) A foreign limited liability partnership, transacting business
in this state without registration, appoints the Secretary of State
as its agent for service of process with respect to causes of action
arising out of the transaction of business in this state.
(l) "Transact intrastate business" as used in this section means
to repeatedly and successively provide professional limited liability
partnership services in this state, other than in interstate or
foreign commerce.
(m) Without excluding other activities that may not be considered
to be transacting intrastate business, a foreign limited liability
partnership shall not be considered to be transacting intrastate
business merely because its subsidiary or affiliate transacts
intrastate business, or merely because of its status as any one or
more of the following:
business.
(n) Without excluding other activities that may not be considered
business within the meaning of this subdivision solely by reason of
carrying on in this state any one or more of the following
activities:
(2) Holding meetings of its partners or carrying on any other
activities concerning its internal affairs.
and registration of the foreign limited liability partnership's
securities or maintaining trustees or depositories with respect to
those securities.
acceptance without this state before becoming binding contracts.
(7) Creating or acquiring evidences of debt or mortgages, liens,
or security interest in real or personal property.
(8) Securing or collecting debts or enforcing mortgages and
security interests in property securing the debts.
(9) Conducting an isolated transaction that is completed within
180 days and not in the course of a number of repeated transactions
of a like nature.
(o) A person shall not be deemed to be transacting intrastate
business in this state merely because of its status as a partner of a
registered limited liability partnership or a foreign limited
liability company whether or not registered to transact intrastate
(p) The Attorney General may bring an action to restrain a foreign
limited liability partnership from transacting intrastate business
in this state in violation of this chapter.
(q) Nothing in this section is intended to, or shall, augment,
diminish, or otherwise alter existing provisions of law, statutes, or
court rules relating to services by a California architect,
California public accountant, California engineer, California land
surveyor, or California attorney in another jurisdiction, or services
by an out-of-state architect, out-of-state public accountant,
out-of-state engineer, out-of-state land surveyor, or out-of-state
attorney in California.
(r) This section shall remain in effect only until January 1,
that date.
16959. (a) (1) Before transacting intrastate business in this

state, a foreign limited liability partnership shall comply with all
the state board, commission, or agency that prescribes the rules and
regulations governing a particular profession in which the
partnership proposes to be engaged, pursuant to the applicable
provisions of the Business and Professions Code relating to the
profession or applicable rules adopted by the governing board. A
foreign limited liability partnership that transacts intrastate
business in this state shall within 30 days after the effective date
of the act enacting this section or the date on which the foreign
limited liability partnership first transacts intrastate business in
this state, whichever is later, register with the Secretary of State
by submitting to the Secretary of State an application for
registration as a foreign limited liability partnership, signed by a
person with authority to do so under the laws of the jurisdiction of
formation of the foreign limited liability partnership, stating the
name of the partnership, the address of its principal office, the
name and address of its agent for service of process in this state, a
brief statement of the business in which the partnership engages,
and any other matters that the partnership determines to include.
(2) Annexed to the application for registration shall be a
liability partnership's jurisdiction of organization to the effect
that the foreign limited liability partnership is in good standing in
that jurisdiction, if the laws of that jurisdiction permit the
issuance of those certificates, or, in the alternative, a statement
by the foreign limited liability partnership that the laws of its
jurisdiction of organization do not permit the issuance of those
certificates.
subdivision (b) of Section 12189 of the Government Code.
(c) The Secretary of State shall register as a foreign limited
application for registration with the required fee.
less after the original filing.
(e) A partnership becomes registered as a foreign limited
liability partnership at the time of the filing of the initial
registration with the Secretary of State or at any later date or time
specified in the registration and the payment of the fee required by
subdivision (b). A partnership continues to be registered as a
foreign limited liability partnership until a notice that it is no
longer so registered as a limited liability partnership has been
filed pursuant to Section 16960 or, if applicable, once it has been
dissolved and finally wound up. The status of a partnership
registered as a foreign limited liability partnership and the
liability of a partner of that foreign limited liability partnership
shall not be adversely affected by errors or subsequent changes in
the information stated in an application for registration under
subdivision (a) or an amended registration or notice under Section
16960.
to Section 16960 is on file with the Secretary of State is notice
that the partnership is a foreign limited liability partnership and
of those other facts contained therein that are required to be set
include with instructional materials, provided in conjunction with
the form for registration under subdivision (a), a notice that filing
notice shall be updated annually to specify the dollar amount of this
tax.
(h) A foreign limited liability partnership transacting intrastate
business in this state shall not maintain any action, suit, or
proceeding in any court of this state until it has registered in this
state pursuant to this section.
(i) Any foreign limited liability partnership that transacts
dollars ($10,000).
(j) A partner of a foreign limited liability partnership is not
liable for the debts or obligations of the foreign limited liability
partnership solely by reason of its having transacted business in
this state without registration.
(k) A foreign limited liability partnership, transacting business
in this state without registration, appoints the Secretary of State
as its agent for service of process with respect to causes of action
(l) "Transact intrastate business" as used in this section means
to repeatedly and successively provide professional limited liability
partnership services in this state, other than in interstate or
foreign commerce.
(m) Without excluding other activities that may not be considered
business merely because its subsidiary or affiliate transacts
intrastate business, or merely because of its status as any one or
more of the following:
business.
(n) Without excluding other activities that may not be considered
business within the meaning of this subdivision solely by reason of
carrying on in this state any one or more of the following
activities:
(2) Holding meetings of its partners or carrying on any other
and registration of the foreign limited liability partnership's
securities or maintaining trustees or depositories with respect to
those securities.
(7) Creating or acquiring evidences of debt or mortgages, liens,
or security interest in real or personal property.
(8) Securing or collecting debts or enforcing mortgages and
(9) Conducting an isolated transaction that is completed within
of a like nature.
(o) A person shall not be deemed to be transacting intrastate
business in this state merely because of its status as a partner of a
registered limited liability partnership or a foreign limited
liability company whether or not registered to transact intrastate
(p) The Attorney General may bring an action to restrain a foreign
limited liability partnership from transacting intrastate business
in this state in violation of this chapter.
(q) Nothing in this section is intended to, or shall, augment,
diminish, or otherwise alter existing provisions of law, statutes, or
court rules relating to services by a California architect,
California public accountant, or California attorney in another
jurisdiction, or services by an out-of-state architect, out-of-state
public accountant, or out-of-state attorney in California.
(r) This section shall become operative on January 1, 2016.
16960. (a) The registration of a foreign limited partnership may be

amended by an amended registration executed by one or more partners
authorized to execute an amended registration and filed with the
Secretary of State, as soon as reasonably practical after any
information set forth in the registration or previously filed amended
registration becomes inaccurate, to add information to the
registration or amended registration or to withdraw its registration
as a foreign limited liability partnership.
(b) If a foreign limited partnership ceases to be a limited
liability partnership, it shall file with the Secretary of State a
notice, executed by one or more partners authorized to execute the
notice, that it is no longer a foreign limited liability partnership.
The notice shall state that a final annual tax return, as described
by Section 17948.3 of the Revenue and Taxation Code, has been or will
be filed with the Franchise Tax Board, as required under Part 10.2
(commencing with Section 18401) of the Revenue and Taxation Code.
(c) A foreign limited liability partnership that is, but is no
longer required to be, registered under Section 16959 may withdraw
its registration by filing a notice with the Secretary of State,
executed by one or more partners authorized to execute the notice.
(d) The Secretary of State shall provide forms for an amended
registration under subdivision (a) and notices under subdivisions (b)
and (c).
(e) The filing of amended registration forms pursuant to
subdivision (a) and a notice pursuant to subdivision (b) or (c) shall
each be accompanied by a fee as set forth in subdivision (d) of
Section 12189 of the Government Code.
(f) A notice of cessation, signed pursuant to subdivision (b),
shall be filed with the Secretary of State. The Secretary of State
shall notify the Franchise Tax Board of the cessation.
16961. The filing of a registration with the Secretary of State
under Section 16953 or 16959 shall make it unnecessary for all
purposes for the registered limited liability partnership or foreign
limited liability partnership to make any of the filings referred to
in Chapter 5 (commencing with Section 17900) of Part 3 of Division 7
of the Business and Professions Code.
16962. (a) Each registered limited liability partnership whose

principal office is not in this state and each foreign limited
liability partnership registered under Section 16959 shall designate
as its agent for service of process any natural person or a domestic
or foreign corporation entitled to be designated as agent for the
service of process pursuant to Section 1505.
(b) In addition to service that may be made as provided in Section
416.40 of the Code of Civil Procedure, delivery by hand of a copy of
any process against a registered limited liability partnership or
foreign limited liability partnership registered under Section 16959
(1) to any natural person designated by it as agent or (2), if a
corporate agent has been designated, to any person named in the
1505 at the office of that corporate agent shall constitute valid
service on the registered limited liability partnership or foreign
limited liability partnership.
(c) If an agent for the purpose of service of process has resigned
and has not been replaced or if the agent designated cannot with
reasonable diligence be found at the address designated for
personally delivering the process, or if no agent has been
designated, and it is shown by affidavit to the satisfaction of the
court that process against a registered limited liability partnership
or foreign limited liability partnership required to be registered
under Section 16959 cannot be served with reasonable diligence upon
the designated agent by hand in the manner provided in Section
415.10, subdivision (a) of Section 415.20, or subdivision (a) of
Section 415.30 of the Code of Civil Procedure or upon the registered
partnership in the manner provided in Section 416.40 of the Code of
Civil Procedure, the court may make an order that the service be made
upon the registered limited liability partnership or foreign limited
liability partnership by delivering by hand to the Secretary of
State, or to any person employed in the Secretary of State's office
in the capacity of assistant or deputy, one copy of the process for
each defendant to be served, together with a copy of the order
authorizing that service. If the court makes that order, the
Secretary of State who receives the process, or the person employed
in the Secretary of State's office in the capacity of assistant or
deputy who receives the process, is required to accept the process. A
fee as set forth in subdivision (b) of Section 12197 of the
Government Code shall be paid to the Secretary of State for the use
of the state upon receipt of the process. Service in this manner
shall be deemed complete on the 10th day after delivery of the
(d) Upon the receipt of the copy of process and the fee therefor,
the Secretary of State shall give notice of the service of process to
the registered limited liability partnership or foreign limited
liability partnership registered under Section 16959 at its principal
executive office, by forwarding to that office, by registered mail
with request for return receipt, the copy of the process or, if the
records of the Secretary of State do not disclose an address for that
principal executive office, by forwarding the copy in the same
manner to the last designated agent for service of process who has
not resigned. If the agent for service of process has resigned and
has not been replaced and the records of the Secretary of State do
not disclose an address for its principal executive office, no action
need be taken by the Secretary of State.
(e) The Secretary of State shall keep a record of all process
served upon the Secretary of State under this section and shall
action with reference thereto. The certificate of the Secretary of
State, under the Secretary of State's official seal, certifying to
the receipt of process, the giving of notice thereof to the
partnership, and the forwarding of the process pursuant to this
section shall be competent and prima facie evidence of the matters
stated therein.
(f) The court order pursuant to subdivision (c) that service of
process be made upon the registered limited liability partnership or
foreign limited liability partnership by delivery to the Secretary of
State may be a court order of a court of another state, or of any
federal court, if the suit, action, or proceeding has been filed in
that court.
CORPORATIONS CODE
SECTION 15900-15901.17
15900. This chapter may be cited as the Uniform Limited Partnership

Act of 2008.
15901.02. In this chapter, the following terms have the following

meanings:
(a) "Acknowledged" means that an instrument is either of the
following:
(1) Formally acknowledged as provided in Article 3 (commencing
the Civil Code.
(2) Executed to include substantially the following wording
preceding the signature: "It is hereby declared that I am the person
who executed this instrument, which execution is my act and deed. 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."
(b) "Certificate of limited partnership" means the certificate
required by Section 15902.01. The term includes the certificate as
amended or restated.
(c) "Contribution," except in the phrase "right of contribution,"
means any benefit provided by a person to a limited partnership in
order to become a partner or in the person's capacity as a partner.
(d) "Debtor in bankruptcy" means a person that is the subject of
(1) An order for relief under Title 11 of the United States Code
application.
(2) A comparable order under federal, state, or foreign law
(e) "Designated office" means either of the following:
(1) With respect to a limited partnership, the office that the
limited partnership is required to designate and maintain under
Section 15901.14.
(2) With respect to a foreign limited partnership, its principal
office.
(f) "Distribution" means a transfer of money or other property
from a limited partnership to a partner in the partner's capacity as
a partner or to a transferee on account of a transferable interest
owned by the transferee.
(g) "Domestic corporation" means a corporation formed under the
laws of this state.
(h) "Electronic transmission by the partnership" means a
communication that meets both of the following requirements:
(1) It is delivered by any of the following means:
(A) Facsimile transmission or electronic mail when directed to the
facsimile number or electronic mail address, respectively, for the
recipient on the record with the partnership.
(B) Posting on an electronic message board or other electronic
database, that the partnership has designated for the communication,
which shall be validly delivered upon the later of either the posting
or delivery of the separate notice thereof.
(C) Other means of electronic communication.
(2) It is to a recipient that has provided an unrevoked consent to
the use of the means of transmission used by the partnership in the
electronic transmission.
(i) "Electronic transmission to the partnership" means a
communication that meets both of the following requirements:
(1) It is delivered by any of the following means:
(A) Facsimile communication or other electronic mail when directed
to the facsimile number or electronic mail address, respectively,
that the partnership has provided from time to time to the partners
for sending communications to the partnership.
(B) Posting on an electronic message board or electronic database
that the partnership has designated for the communication. A
transmission shall have been validly delivered upon the posting.
(C) Other means of electronic communication.
(2) It is a communication as to which the partnership has placed
in effect reasonable measures to verify that the sender is the
partner purporting to send the transmission, either in person or by
proxy.
(j) "Foreign limited liability limited partnership" means a
foreign limited partnership whose general partners have limited
liability for the obligations of the foreign limited partnership.
(k) "Foreign limited partnership" means a partnership formed under
the laws of a jurisdiction other than this state and required by
those laws to have one or more general partners and one or more
limited partners. The term includes a foreign limited liability
limited partnership.
(l) "Foreign other business entity" means an other business entity
formed under the laws of any state other than this state or under
the laws of a foreign country.
(m) "General partner" means:
(1) With respect to a limited partnership, a person to whom either
of the following applies:
(A) The person becomes a general partner under Section 15904.01.
(B) The person was a general partner in a limited partnership when
the limited partnership became subject to this chapter under
subdivision (a) or (b) of Section 15912.06.
(2) With respect to a foreign limited partnership, a person that
has rights, powers, and obligations similar to those of a general
partner in a limited partnership.
(n) "Interests of all partners" means the aggregate interests of
all partners in the current profits derived from business operations
of the partnership.
(o) "Interests of limited partners" means the aggregate interests
of all limited partners in their respective capacities as limited
partners in the current profits derived from business operations of
the partnership.
(p) "Limited partner" means:
(1) With respect to a limited partnership, a person to whom either
of the following applies:
(A) The person becomes a limited partner under Section 15903.01 or
subdivision (h) of 15907.02.
(B) The person was a limited partner in a limited partnership when
the limited partnership became subject to this chapter under
subdivision (a) or (b) of Section 15912.06.
(2) With respect to a foreign limited partnership, a person that
has rights, powers, and obligations similar to those of a limited
partner in a limited partnership.
(q) "Limited partnership or domestic limited partnership," except
in the phrases "foreign limited partnership" and "foreign limited
liability limited partnership," means an entity, having one or more
general partners and one or more limited partners, which is formed
under this chapter by two or more persons or becomes subject to this
chapter under Article 11 (commencing with Section 15911.01) or
subdivisions (a) or (b) of Section 15912.06.
(r) "Mail" means first-class mail, postage prepaid, unless
registered mail is specified. Registered mail includes certified
mail.
(s) "Majority in interest of all partners" means more than 50
percent of the interests of all partners.
(t) "Majority in interest of the limited partners" means more than
50 percent of the interests of limited partners.
(u) "Other business entity" means a corporation, general
partnership, limited liability company, business trust, real estate
investment trust, or an unincorporated association other than a
nonprofit association, but excludes a limited partnership.
(v) "Parent" of a limited partnership means any of the following:
(1) A general partner of the limited partnership.
(2) A person possessing, directly or indirectly, the power to
direct or cause the direction of the management and policies of a
general partner of the limited partnership.
(3) A person owning, directly or indirectly, limited partnership
interests possessing more than 50 percent of the aggregate voting
power of the limited partnership.
(w) "Partner" means a limited partner or general partner.
(x) "Partnership agreement" means the partners' agreement, whether
oral, implied, in a record, or in any combination, concerning the
limited partnership. The term includes the agreement as amended.
(y) "Person" means an individual, partnership, limited
partnership, trust, estate, association, corporation, limited
liability company, or other entity, whether domestic or foreign.
(z) "Person dissociated as a general partner" means a person
dissociated as a general partner of a limited partnership.
(aa) "Principal office" means the office where the principal
executive office of a limited partnership or foreign limited
partnership is located, whether or not the office is located in this
state.
(ab) "Proxy" means a written authorization signed by a partner or
the partner's attorney in fact giving another person the power to
vote with respect to the interest of that partner. "Signed," for the
purpose of this subdivision, means the placing of the partner's name
on the proxy, whether by manual signature, typewriting, telegraphic
transmission, or otherwise, by the partner or the partner's attorney
in fact.
(ac) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.
(ad) "Required information" means the information that a limited
partnership is required to maintain under Section 15901.11.
(ae) "Return of capital" means any distribution to a partner to
the extent that the aggregate distributions to that partner do not
exceed that partner's contributions to the partnership.
(af) "Sign" means either of the following:
(1) To execute or adopt a tangible symbol with the present intent
to authenticate a record.
(2) To attach or logically associate an electronic symbol, sound,
or process to or with a record with the present intent to
authenticate the record.
(ag) "State" means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.
(ah) "Time a notice is given or sent," unless otherwise expressly
provided, means any of the following:
(1) The time a written notice to a partner or the limited
partnership is deposited in the United States mail.
(2) The time any other written notice is personally delivered to
the recipient, is delivered to a common carrier for transmission, or
is actually transmitted by the person giving the notice by electronic
means to the recipient.
(3) The time any oral notice is communicated, in person or by
telephone or wireless, to the recipient 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.
(ai) (1) "Transact intrastate business" means, for purposes of
registration, entering into repeated and successive transactions of
business in this state, other than interstate or foreign commerce.
(2) A foreign limited partnership shall not be considered to be
transacting intrastate business within the meaning of paragraph (1)
solely because of its status as one or more of the following:
(A) A shareholder of a foreign corporation transacting intrastate
business.
(B) A shareholder of a domestic corporation.
(C) A limited partner of a foreign limited partnership transacting
(D) A limited partner of a domestic limited partnership.
(E) A member or manager of a foreign limited liability company
(F) A member or manager of a domestic limited liability company.
(3) Without excluding other activities that may not constitute
transacting intrastate business, a foreign limited partnership shall
not be considered to be transacting intrastate business within the
meaning of paragraph (1) solely by reason of carrying on in this
state one or more of the following activities:
(A) Maintaining or defending any action or suit or any
thereof or the settlement of claims and disputes.
(B) Holding meetings of its partners or carrying on other
(C) Maintaining bank accounts.
(D) Maintaining offices or agencies for the transfer, exchange,
and registration of its securities or depositories with relation to
its securities.
(E) Effecting sales through independent contractors.
(F) Soliciting or procuring orders, whether by mail or through
employees or agents or otherwise, where the orders require acceptance
without this state before becoming binding contracts.
(G) Creating or acquiring evidences of debt or mortgages, liens,
or security interests on real or personal property.
(H) Securing or collecting debts or enforcing mortgages and
(I) 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.
(J) Transacting business in interstate commerce.
(4) A person shall not be deemed to be transacting intrastate
business in this state within the meaning of paragraph (1) solely
because of the person's status as a limited partner of a domestic
limited partnership or a foreign limited partnership registered to
transact intrastate business in this state.
This definition shall not apply in determining the contacts or
activities that may subject a foreign limited partnership to service
of process, taxation, jurisdiction, or other regulation under any
other law of this state.
(aj) "Transfer" includes an assignment, conveyance, deed, bill of
sale, lease, mortgage, creation of a security interest or
encumbrance, gift, and transfer by operation of law.
(ak) "Transferable interest" means a partner's right to receive
distributions.
(al) "Transferee" means a person to which all or part of a
transferable interest has been transferred, whether or not the
transferor is a partner.
15901.03. (a) A person knows a fact if the person has actual

knowledge of it.
(b) A person has notice of a fact if the person:
(1) knows of it;
(2) has received a notification of it;
(3) has reason to know it exists from all of the facts known to
the person at the time in question; or
(4) has notice of it under subdivision (c) or (d).
(c) A certificate of limited partnership on file in the office of
the Secretary of State is notice that the partnership is a limited
partnership and the persons designated in the certificate as general
partners are general partners. Except as otherwise provided in
subdivision (d), the certificate is not notice of any other fact.
(d) A person has notice of:
(1) another person's dissociation as a general partner, 90 days
after the effective date of an amendment to the certificate of
limited partnership which states that the other person has
dissociated or 90 days after the effective date of a certificate of
dissociation pertaining to the other person, whichever occurs first;
(2) a limited partnership's dissolution, 90 days after the
effective date of an amendment to the certificate of limited
partnership stating that the limited partnership is dissolved;
(3) a limited partnership's termination, 90 days after the
effective date of a certificate of cancellation;
(4) a limited partnership's conversion under Article 11
(commencing with Section 15911.01), 90 days after the effective date
of the certificate of conversion; or
(5) a merger under Article 11 (commencing with Section 15911.01),
90 days after the effective date of the certificate of merger.
(e) A person notifies or gives a notification to another person by
taking steps reasonably required to inform the other person in
ordinary course, whether or not the other person learns of it.
(f) A person receives a notification when the notification:
(1) comes to the person's attention; or
(2) is delivered at the person's place of business or at any other
place held out by the person as a place for receiving
communications.
(g) Except as otherwise provided in subdivision (h), a person
other than an individual knows, has notice, or receives a
notification of a fact for purposes of a particular transaction when
the individual conducting the transaction for the person knows, has
notice, or receives a notification of the fact, or in any event when
the fact would have been brought to the individual's attention if the
person had exercised reasonable diligence. A person other than an
individual exercises reasonable diligence if it maintains reasonable
routines for communicating significant information to the individual
conducting the transaction for the person and there is reasonable
compliance with the routines. Reasonable diligence does not require
an individual acting for the person to communicate information unless
the communication is part of the individual's regular duties or the
individual has reason to know of the transaction and that the
transaction would be materially affected by the information.
(h) A general partner's knowledge, notice, or receipt of a
notification of a fact relating to the limited partnership is
effective immediately as knowledge of, notice to, or receipt of a
notification by the limited partnership, except in the case of a
fraud on the limited partnership committed by or with the consent of
the general partner. A limited partner's knowledge, notice, or
receipt of a notification of a fact relating to the limited
partnership is not effective as knowledge of, notice to, or receipt
of a notification by the limited partnership.
15901.04. (a) A limited partnership is an entity distinct from its

partners.
(b) A limited partnership may be organized under this chapter for
any lawful purpose. A limited partnership may engage in any lawful
business activity, whether or not for profit, except the banking
business, the business of issuing policies of insurance and assuming
insurance risks, or the trust company business.
(c) A limited partnership has a perpetual duration.
15901.05. A limited partnership has the powers to do all things

necessary or convenient to carry on its activities, including the
power to sue, be sued, and defend in its own name and to maintain an
action against a partner for harm caused to the limited partnership
by a breach of the partnership agreement or violation of a duty to
the partnership.
15901.06. The law of this state governs relations among the

partners of a limited partnership and between the partners and the
limited partnership and the liability of partners as partners for an
obligation of the limited partnership.
15901.07. (a) Unless displaced by particular provisions of this

chapter, the principles of law and equity supplement this chapter.
(b) If an obligation to pay interest arises under this chapter and
the rate is not specified, the rate is that specified in Section
3289 of the Civil Code.
15901.08. (a) The name of a limited partnership may contain the

name of any partner.
(b) The name of a limited partnership must contain the phrase
"limited partnership" or the abbreviation "L.P." or "LP" at the end
of its name.
(c) The name of a foreign limited liability limited partnership
that is applying for a certificate of registration pursuant to
Section 15909.02 must contain the phrase "limited liability limited
partnership" or the abbreviation "LLLP" or "L.L.L.P." and must not
contain the abbreviation "L.P." or "LP."
(d) Unless authorized by subdivision (e), the name of a limited
partnership must be distinguishable in the records of the Secretary
of State from:
(1) the name of any limited partnership that has previously filed
a certificate pursuant to Section 15902.01 or any foreign limited
partnership registered pursuant to Section 15909.01; and
(2) each name reserved under Section 15901.09.
(e) A limited partnership may apply to the Secretary of State for
authorization to use a name that does not comply with subdivision
(d). The Secretary of State shall authorize use of the name applied
for if, as to each conflicting name:
(1) the present user, registrant, or owner of the conflicting name
consents in a signed record to the use and submits an undertaking in
a form satisfactory to the Secretary of State to change the
conflicting name to a name that complies with subdivision (d) and is
distinguishable in the records of the Secretary of State from the
name applied for;
(2) the applicant delivers to the Secretary of State a certified
copy of the final judgment of a court of competent jurisdiction
establishing the applicant's right to use in this state the name
applied for; or
(3) the applicant delivers to the Secretary of State proof
satisfactory to the Secretary of State that the present user,
registrant, or owner of the conflicting name:
(A) has merged into the applicant;
(B) has been converted into the applicant; or
(C) has transferred substantially all of its assets, including the
conflicting name, to the applicant.
(f) Subject to Section 15909.05, this section applies to any
foreign limited partnership transacting business in this state,
having a certificate of registration to transact business in this
state, or applying for a certificate of registration.
(g) The name of a limited partnership may not contain the words
"bank," "insurance," "trust," "trustee," "incorporated," "inc.,"
"corporation" or "corp."
15901.09. (a) The exclusive right to the use of a name that

complies with Section 15901.08 may be reserved by:
(1) a person intending to organize a limited partnership under
this chapter and to adopt the name;
(2) a limited partnership or a foreign limited partnership
authorized to transact business in this state intending to adopt the
name;
(3) a foreign limited partnership intending to obtain a
certificate of registration to transact business in this state and
adopt the name;
(4) a person intending to organize a foreign limited partnership
and intending to have it obtain a certificate of registration to
transact business in this state and adopt the name;
(5) a foreign limited partnership formed under the name; or
(6) a foreign limited partnership formed under a name that does
not comply with subdivision (b) or (c) of Section 15901.08, but the
name reserved under this paragraph may differ from the foreign
limited partnership's name only to the extent necessary to comply
with subdivision (b) or (c) of Section 15901.08.
(b) A person may apply to reserve a name under subdivision (a) by
delivering to the Secretary of State an application that states the
name to be reserved and the paragraph of subdivision (a) which
applies. If the Secretary of State finds that the name is available
for use by the applicant, the Secretary of State shall issue a
certificate of name reservation and thereby reserve the name for the
exclusive use of the applicant for 60 days.
(c) An applicant that has reserved a name pursuant to subdivision
(b) may reserve the same name for an additional 60-day period. The
Secretary of State shall not issue a certificate 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.
(d) A person that has reserved a name under this section may
transfer the reserved name to another person, effective upon delivery
to the Secretary of State of a notice of transfer that states the
reserved name, the name and address of the person to which the
reservation is to be transferred, and the paragraph of subdivision
(a) which applies to the other person.
15901.10. (a) Except as otherwise provided in subdivision (b), the

partnership agreement governs relations among the partners and
between the partners and the partnership. To the extent the
partnership agreement does not otherwise provide, this chapter
governs relations among the partners and between the partners and the
partnership.
(b) A partnership agreement may not do any of the following:
(1) Vary a limited partnership's power under Section 15901.05 to
sue, be sued, and defend in its own name.
(2) Vary the law applicable to a limited partnership under Section
15901.06.
(3) Vary the requirements of Section 15902.04.
(4) Vary the information required under Section 15901.11 or
unreasonably restrict the right to information under Section 15903.04
or 15904.07, but the partnership agreement may impose reasonable
restrictions on the availability and use of information obtained
under those sections and may define appropriate remedies, including
liquidated damages, for a breach of any reasonable restriction on
use.
(5) Eliminate the duty of loyalty under Section 15904.08, but the
partnership agreement may do either or both of the following:
(A) Identify specific types or categories of activities that do
not violate the duty of loyalty, if not manifestly unreasonable.
(B) Specify the number or percentage of partners which may
authorize or ratify, after full disclosure to all partners of all
material facts, a specific act or transaction that otherwise would
violate the duty of loyalty.
(6) Unreasonably reduce the duty of care under subdivision (c) of
Section 15904.08.
(7) Eliminate the obligation of good faith and fair dealing under
subdivision (b) of Section 15903.05 and subdivision (d) of Section
15904.08, but the partnership agreement may prescribe the standards
by which the performance of the obligation is to be measured, if the
standards are not manifestly unreasonable.
(8) Vary the power of a person to dissociate as a general partner
under subdivision (a) of Section 15906.04 except to require that the
notice under subdivision (a) of Section 15906.03 be in a record.
(9) Eliminate the power of a court to decree dissolution in the
circumstances specified in subdivision (a) of Section 15908.02.
(10) Vary the requirement to wind up the partnership's business as
specified in Section 15908.03.
(11) Unreasonably restrict the right to maintain an action under
Article 10 (commencing with Section 15910.01).
(12) Restrict the right of a partner to approve a conversion or
merger.
(13) Vary the provisions of Article 11.5 (commencing with Section
15911.20), except to the extent expressly permitted by such
provisions.
(14) Restrict rights under this chapter of a person other than a
partner or a transferee.
15901.11. A limited partnership shall maintain at its designated

office the following information:
(1) a current list showing the full name and last known street and
mailing address of each partner, separately identifying the general
partners, in alphabetical order, and the limited partners, in
alphabetical order;
(2) a copy of the initial certificate of limited partnership and
all amendments to and restatements of the certificate, together with
signed copies of any powers of attorney under which any certificate,
amendment, or restatement has been signed;
(3) a copy of any filed certificate of conversion or merger;
(4) a copy of the limited partnership's federal, state, and local
income tax returns and reports, if any, for the six most recent
years;
(5) a copy of any partnership agreement made in a record and any
amendment made in a record to any partnership agreement;
(6) a copy of any financial statement of the limited partnership
for the six most recent years;
(7) a copy of any record made by the limited partnership during
the past three years of any consent given by or vote taken of any
partner pursuant to this chapter or the partnership agreement; and
(8) unless contained in a partnership agreement made in a record,
a record stating:
(A) the amount of cash, and a description and statement of the
agreed value of the other benefits, contributed and agreed to be
contributed by each partner;
(B) (1) the times at which, or events on the happening of which,
any additional contributions agreed to be made by each partner are to
be made;
(C) for any person that is both a general partner and a limited
partner, a specification of what transferable interest the person
owns in each capacity; and
(D) any events upon the happening of which the limited partnership
is to be dissolved and its activities wound up.
15901.12. A partner may lend money to and transact other business

with the limited partnership and has the same rights and obligations
with respect to the loan or other transaction as a person that is not
a partner.
15901.13. A person may be both a general partner and a limited

partner. A person that is both a general and limited partner has the
rights, powers, duties, and obligations provided by this chapter and
the partnership agreement in each of those capacities. When the
person acts as a general partner, the person is subject to the
obligations, duties and restrictions under this chapter and the
partnership agreement for general partners. When the person acts as a
limited partner, the person is subject to the obligations, duties
and restrictions under this chapter and the partnership agreement for
limited partners.
15901.14. (a) A limited partnership shall designate and

continuously maintain in this state:
(1) an office, which need not be a place of its activity in this
state; and
(2) an agent for service of process.
(b) A foreign limited partnership shall designate and continuously
maintain in this state an agent for service of process.
(c) An agent for service of process of a limited partnership or
foreign limited partnership must be an individual who is a resident
of this state or a corporation that has complied with Section 1505 of
the Corporations Code and whose capacity to act as an agent has not
terminated.
15901.15. Action requiring the consent of partners under this
chapter may be taken without a meeting, and a partner may appoint a
proxy to consent or otherwise act for the partner by signing an
appointment record, either personally or by the partner's attorney in
fact.
15901.16. (a) In addition to Chapter 4 (commencing with Section

413.10) of Title 5 of Part 2 of the Code of Civil Procedure, process
may be served upon limited partnerships and foreign limited
partnerships as provided in this section.
(b) Personal service of a copy of any process against the limited
partnership or the foreign limited partnership will constitute valid
service on the limited partnership if delivered either (1) to any
individual designated by it as agent or, if a limited partnership, to
any general partner or (2) if the designated agent or, if a limited
partnership, general partner is a corporation, to any person named in
the latest certificate of the corporate agent filed pursuant to
Section 1505 of the Corporations Code at the office of the corporate
agent or to any officer of the general partner, shall constitute
valid service on the limited partnership or the foreign limited
partnership. No change in the address of the agent for service of
process where the agent is an individual or appointment of a new
agent for service of process shall be effective (1) for a limited
partnership until an amendment to the certificate of limited
partnership is filed or (2) for a foreign limited partnership until
an amendment to the application for registration is filed. In the
case of a foreign limited partnership that has appointed the
Secretary of State as agent for service of process by reason of
subdivision (b) of Section 15909.07, process shall be delivered by
hand to the Secretary of State, or to any person employed in the
capacity of assistant or deputy, which shall be one copy of the
process for each defendant to be served, together with a copy of the
court order authorizing the service and the fee therefor. The order
shall include and set forth an address to which the process shall be
sent by the Secretary of State.
(c) (1) If an agent for service of process has resigned and has
not been replaced or if the agent designated cannot with reasonable
court that process against a limited partnership or foreign limited
partnership cannot be served with reasonable diligence upon the
designated agent or, if a foreign limited partnership, upon any
general partner by hand in the manner provided in Section 415.10,
subdivision (a) of Section 415.20, or subdivision (a) of Section
415.30 of the Code of Civil Procedure, the court may make an order
that the service shall be made upon a domestic limited partnership
which has filed a certificate or upon a foreign limited partnership
which has a certificate of registration to transact business in this
state by delivering by hand to the Secretary of State, or to any
person employed in the Secretary of State's office in the capacity of
assistant or deputy, one copy of the process for each defendant to
be served, together with a copy of the order authorizing the service.
Service in this manner shall be deemed complete on the 10th day
after delivery of the process to the Secretary of State.
(2) Upon receipt of any such copy of process and the fee therefor,
the Secretary of State shall give notice of the service of the
process to the limited partnership or foreign limited partnership, at
its principal office, by forwarding to that office, by registered
mail with request for return receipt, the copy of the process.
served upon the Secretary of State under this chapter and shall
action with reference thereto. A certificate under the Secretary of
giving of notice thereof to the limited partnership or foreign
limited partnership, and the forwarding of the process pursuant to
this section, shall be competent and prima facie evidence of the
(d) (1) The certificate of a limited partnership and the
application for a certificate of registration of a foreign limited
partnership shall designate, as the agent for service of process, an
individual residing in this state or a corporation which has complied
with Section 1505 of the Corporations Code and whose capacity to act
as an agent has not terminated. If an individual is designated, the
statement shall set forth that person's complete business or
residence address in this state. If a corporate agent is designated,
no address for it shall be set forth.
(2) An agent designated for service of process may file with the
resignation as an agent. Thereupon the authority of the agent to act
in that capacity shall cease and the Secretary of State forthwith
shall give written notice of the filing of the certificate of
resignation by mail to the limited partnership or foreign limited
partnership addressed to its designated office.
(3) If an individual who has been designated agent for service of
process dies or resigns or no longer resides in the state or if the
corporate agent for that purpose, resigns, dissolves, withdraws from
its corporate rights, powers and privileges suspended or ceases to
exist, (A) the limited partnership shall promptly file an amendment
to the certificate designating a new agent or (B) the foreign limited
partnership shall promptly file an amendment to the application for
registration.
(e) In addition to any other discovery rights which may exist, in
any case pending in a California court having jurisdiction in which a
party seeks records from a partnership formed under this chapter,
whether or not the partnership is a party, the court shall have the
power to order the production in California of the books and records
of the partnership on the terms and conditions that the court deems
appropriate.
15901.17. (a) A partner may, in a written partnership agreement or

other writing, consent to be subject to the nonexclusive jurisdiction
of the courts of a specified jurisdiction, or the exclusive
jurisdiction of the courts of this state.
(b) If a partner desires to use the arbitration process, that
partner may in a written partnership agreement or other writing,
consent to be nonexclusively subject to arbitration in a specified
state, or to be exclusively subject to arbitration in this state.
(c) Along with this consent to the jurisdiction of courts or
arbitration, a partner may consent to be served with legal process in
the manner prescribed in the partnership agreement or other writing.
CORPORATIONS CODE
SECTION 15902.01-15902.09
15902.01. (a) In order for a limited partnership to be formed, a

certificate of limited partnership must be filed with and on a form
prescribed by the Secretary of State and, either before or after the
filing of a certificate of limited partnership, the partners shall
have entered into a partnership agreement. The certificate must
state:
(1) the name of the limited partnership, which must comply with
Section 15901.08;
(2) the address of the initial designated office; and
(3) the name and address of the initial agent for service of
process in accordance with paragraph (1) of subdivision (d) of
Section 15901.16.
(4) the name and the address of each general partner.
(b) A certificate of limited partnership may also contain any
other matters but may not vary or otherwise affect the provisions
specified in subdivision (b) of Section 15901.10 in a manner
inconsistent with that section.
(c) Subject to subdivision (c) of Section 15902.06 a limited
partnership is formed when the Secretary of State files the
certificate of limited partnership.
(d) Subject to subdivision (b), if any provision of a partnership
agreement is inconsistent with the filed certificate of limited
partnership or with a filed certificate of dissociation,
cancellation, or amendment or filed certificate of conversion or
merger:
(1) the partnership agreement prevails as to partners and
transferees; and
(2) the filed certificate of limited partnership, certificate of
dissociation, cancellation, or amendment or filed certificate of
conversion or merger prevails as to persons, other than partners and
transferees, that reasonably rely on the filed record to their
detriment.
(e) A limited partnership may record in the office of the county
recorder of any county in this state a certified copy of the
certificate of limited partnership, or any amendment thereto, which
has been filed by the Secretary of State. A foreign limited
partnership may record in the office of the county recorder of any
county in the state a certified copy of the application for
registration to transact business, together with the certificate of
registration, referred to in Section 15909.02, or any amendment
thereto, which has been filed by the Secretary of State. The
recording shall create a conclusive presumption in favor of any bona
fide purchaser or encumbrancer for value of the partnership real
property located in the county in which the certified copy has been
recorded, that the persons named as general partners therein are the
general partners of the partnership named and that they are all of
the general partners of the partnership.
(f) The Secretary of State may cancel the filing of certificates
of limited partnership if a check or other remittance accepted in
payment of the filing fee is not paid upon presentation. For partners
and transferees, the partnership agreement is paramount. Upon
receiving written notification that the item presented for payment
has not been honored for payment, the Secretary of State shall give a
first written notice of the applicability of this section 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, the Secretary of State shall give a second
written notice of cancellation and the cancellation shall thereupon
be effective. The second notice shall be given 20 days or more after
the first notice and 90 days or less after the original filing.
(g) The Secretary of State shall include with instructional
materials, provided in conjunction with the form for filing a
certificate of limited partnership under subdivision (a), a notice
that the filing of the certificate of limited partnership will
obligate the limited partnership to pay an annual tax for that
taxable year to the Franchise Tax Board pursuant to Section 17935 of
the Revenue and Taxation Code. That notice shall be updated annually
to specify the dollar amount of the annual tax.
15902.02. (a) In order to amend its certificate of limited

partnership, a limited partnership must deliver to and on a form
prescribed by the Secretary of State for filing an amendment stating:
(1) the name and the Secretary of State's file number of the
limited partnership; and
(2) the changes the amendment makes to the certificate as most
recently amended or restated.
(b) A limited partnership shall promptly deliver to the Secretary
of State for filing an amendment to a certificate of limited
partnership to reflect:
(1) the admission of a new general partner;
(2) the dissociation of a person as a general partner; or
(3) the appointment of a person to wind up the limited partnership'
s activities under subdivisions (c) or (d) of Section 15908.03.
(c) A general partner that knows that any information in a filed
certificate of limited partnership was false when the certificate was
filed or has become false due to changed circumstances shall
promptly:
(1) cause the certificate to be amended; or
(2) if appropriate, deliver to the Secretary of State for filing
an amendment or a certificate of correction pursuant to Section
15902.07.
(d) A certificate of limited partnership may be amended at any
time for any other proper purpose as determined by the limited
partnership.
(e) A restated certificate of limited partnership may be delivered
to and on a form prescribed by the Secretary of State for filing in
the same manner as an amendment.
(1) A restated certificate of limited partnership may be filed
that embodies all of the provisions that are in effect contained in
the different certificates that have been filed with the Secretary of
State.
(2) A restated certificate of limited partnership may include an
amendment of the certificate of limited partnership not previously
filed with the Secretary of State.
(3) The restated certificate of limited partnership shall
supersede the initial certificate of limited partnership and all
amendments thereto previously filed with the Secretary of State.
(4) Any amendment effected in connection with the restatement of
the certificate of limited partnership shall be subject to any other
provision of this chapter not inconsistent with this section that
would apply if a separate certificate of amendment were filed to
effect that amendment.
(f) Subject to subdivision (c) of Section 15902.06, an amendment
or restated certificate is effective when filed by the Secretary of
State.
15902.03. A dissolved limited partnership that has completed

winding up shall deliver to and on a form prescribed by the Secretary
of State for filing a certificate of cancellation that states:
(1) the name of the limited partnership and the Secretary of State'
s file number;
(2) the date of filing of its initial certificate of limited
partnership; and
(3) any other information as determined by the general partners
filing the certificate or by a person appointed pursuant to
subdivisions (c) or (d) of Section 15908.03.
15902.04. (a) Each record delivered to the Secretary of State for

filing pursuant to this chapter must be signed in the following
manner:
(1) An initial certificate of limited partnership must be signed
by all general partners listed in the certificate.
(2) An amendment designating as general partner a person admitted
under paragraph (2) of subdivision (c) of Section 15908.01 following
the dissociation of a limited partnership's last general partner must
be signed by that person.
(3) An amendment required by subdivision (c) of Section 15908.03
following the appointment of a person to wind up the dissolved
limited partnership's activities must be signed by that person.
(4) Any other amendment must be signed by:
(A) at least one general partner listed in the certificate of
limited partnership;
(B) each other person designated in the amendment as a new general
partner; and
(C) each person that the amendment indicates has dissociated as a
general partner, unless:
(i) the person is deceased or a guardian or general conservator
has been appointed for the person and the amendment so states; or
(ii) the person has previously delivered to the Secretary of State
for filing a certificate of dissociation.
(5) A restated certificate of limited partnership must be signed
by at least one general partner listed in the certificate, and, to
the extent the restated certificate effects a change under any other
paragraph of this subdivision, the restated certificate must be
signed in a manner that satisfies that paragraph.
(6) A certificate of cancellation must be signed by all general
partners listed in the certificate of limited partnership or, if the
certificate of limited partnership of a dissolved limited partnership
lists no general partners, by the person appointed pursuant to
subdivisions (c) or (d) of Section 15908.03 to wind up the dissolved
limited partnership's activities.
(7) Certificates of conversion must be signed as provided in
subdivision (b) of Section 15911.06.
(8) Certificates of merger must be signed as provided in
subdivision (a) of Section 15911.14.
(9) Any other record delivered on behalf of a limited partnership
to the Secretary of State for filing must be signed by at least one
general partner listed in the certificate of limited partnership.
(10) A certificate of dissociation by a person pursuant to
paragraph (4) of subdivision (a) of Section 15906.05 stating that the
person has dissociated as a general partner must be signed by that
person.
(11) A certificate of withdrawal by a person pursuant to Section
15903.06 must be signed by that person.
(12) A record delivered on behalf of a foreign limited partnership
to the Secretary of State for filing must be signed by at least one
general partner of the foreign limited partnership.
(13) Any other record delivered on behalf of any person to the
Secretary of State for filing must be signed by that person.
(b) Any person may sign by an attorney in fact any record to be
filed pursuant to this chapter.
(c) The Secretary of State shall not be required to verify that
the person withdrawing or dissociating was ever actually named in an
official filing as a general or limited partner.
15902.05. (a) If a person required by this chapter to sign a record

or deliver a record to the Secretary of State for filing does not do
so, any other person that is aggrieved may petition the superior
court to order:
(1) the person to sign the record;
(2) deliver the record to the Secretary of State for filing; or
(3) the Secretary of State to file the record unsigned.
(b) If the person aggrieved under subdivision (a) is not the
limited partnership or foreign limited partnership to which the
record pertains, the aggrieved person shall make the limited
partnership or foreign limited partnership a party to the action. A
person aggrieved under subdivision (a) may seek the remedies provided
in subdivision (a) in the same action in combination or in the
alternative. In any action under this subdivision, if the court finds
the failure of the person to comply with the requirement to sign a
record or deliver a record to the Secretary of State for filing to
have been without justification, the court may award an amount
sufficient to reimburse the persons aggrieved under subdivision (a)
bringing the action for the reasonable expenses incurred by such
persons, including attorneys' fees, in connection with the action or
proceeding.
(c) A record filed unsigned pursuant to this section is effective
without being signed.
(d) Any person, other than a general partner, delivering a record
to the Secretary of State for filing, shall state the statutory
authority for such action after the signature on the appropriate
record.
15902.06. (a) A record authorized or required to be delivered to

the Secretary of State for filing under this chapter must be
completed on a form prescribed by and in a medium permitted by the
Secretary of State, and be delivered to the Secretary of State.
Unless the Secretary of State determines that a record does not
comply with the filing requirements of this chapter, and if all
requisite fees have been paid, the Secretary of State shall file the
record.
(b) Except as otherwise provided in Sections 15901.16, 15902.01,
and 15902.07, a record delivered to the Secretary of State for filing
under this chapter may specify an effective time and a delayed
effective date. Except as otherwise provided in this chapter, a
record filed by the Secretary of State is effective:
(1) if the record does not specify a delayed effective date, on
the date the record is filed as evidenced by the Secretary of State's
endorsement of the date on the record;
(2) if the record specifies a delayed effective date on the
earlier of:
(A) the specified date; or
(B) the 90th day after the record is filed; or
(c) In case a delayed effective date is specified, the record may
be prevented from becoming effective by a certificate stating that by
appropriate action it has been revoked and is null and void,
executed in the same manner as the original record and delivered to
the Secretary of State for filing before the specified effective
date. In the case of certificate of merger, a certificate revoking
the earlier filing need only be executed on behalf of one of the
constituent parties to the merger. If no such revocation certificate
is filed, the record becomes effective on the date specified.
(d) If the Secretary of State determines that a record delivered
to the Secretary of State for filing does not conform to the law and
returns it to the person delivering it, the record may be resubmitted
accompanied by a written opinion of the member of the State Bar of
California delivering the record or representing the person
delivering it, to the effect that the specific provisions of the
record objected to by the Secretary of State do 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 15901.08, 15901.09,
15909.02, and 15909.05, upon that written opinion in determining
whether the record conforms to law. When filed by the Secretary of
State upon resubmission, such record is effective retroactively as of
the date that the original record was delivered to the Secretary of
State for filing.
15902.07. (a) A limited partnership or foreign limited partnership

may deliver to and on a form prescribed by the Secretary of State for
filing a certificate of correction to correct a record previously
delivered by the limited partnership or foreign limited partnership
to the Secretary of State and filed by the Secretary of State, if at
the time of filing the record contained false or erroneous
information or was defectively signed.
(b) A certificate of correction may not state a delayed effective
date and must:
(1) describe the record to be corrected, including its filing date
and file number;
(2) specify the incorrect information and the reason it is
incorrect or the manner in which the signing was defective; and
(3) correct the incorrect information or defective signature.
(c) When filed by the Secretary of State, a certificate of
correction is effective retroactively as of the effective date of the
record the certificate corrects, but the certificate is effective
when filed:
(1) for the purposes of subdivisions (c) and (d) of Section
15901.03; and
(2) as to persons relying on the uncorrected record and adversely
affected by the correction.
15902.08. (a) If a record delivered to the Secretary of State for

filing under this chapter and filed by the Secretary of State
contains false information, a person that suffers loss by reliance on
the information may recover damages for the loss from:
(1) a person that signed the record, or caused another to sign it
on the person's behalf, and knew the information to be false at the
time the record was signed; and
(2) a general partner that has notice that the information was
false when the record was filed or has become false because of
changed circumstances, if the general partner has notice for a
reasonably sufficient time before the information is relied upon to
enable the general partner to effect an amendment under Section
15902.02, file a petition pursuant to Section 15902.05, or deliver to
the Secretary of State for filing a certificate of correction
pursuant to Section 15902.07.
(b) Signing a record authorized or required to be filed under this
chapter constitutes an affirmation under the penalties of perjury
that the facts stated in the record are true.
15902.09. (a) A domestic limited partnership whose certificate of

limited partnership has been canceled pursuant to Section 15902.03
may be revived by filing with, and on a form prescribed by, the
Secretary of State a certificate of revival. The certificate of
revival shall be accompanied by written confirmation by the Franchise
Tax Board that all of the following have occurred:
(1) All of the following have been paid to the Franchise Tax
Board:
(A) The annual tax due under Section 17935 of the Revenue and
Taxation Code.
(B) All fees, penalties, and interest for each year for which the
domestic limited partnership failed to pay such annual tax, including
each year between the cancellation of its certificate of limited
partnership and its revival.
(2) All required tax returns have been filed, including returns
for each taxable year between the cancellation of its certificate of
limited partnership and its revival.
(b) The certificate of revival shall set forth all of the
following:
(1) The name of the limited partnership at the time its
certificate of limited partnership was canceled, and if the name is
not available at the time of revival, the name under which the
limited partnership is to be revived.
(2) The date of filing of the original certificate of limited
partnership.
(3) The address of the limited partnership's designated office.
(4) The name and address of the initial agent for service of
process in accordance with paragraph (1) of subdivision (d) of
Section 15901.16.
(5) A statement that the certificate of revival is filed by one or
more general partners of the limited partnership authorized to
execute and file the certificate of revival to revive the limited
partnership.
(6) The Secretary of State's file number for the original limited
partnership.
(7) The name and address of each general partner.
(8) Any other matters the general partner or partners executing
the certificate of revival determine to include therein.
(c) The certificate of revival should be deemed to be an amendment
to the certificate of limited partnership, and the limited
partnership shall not be required to take any further action to amend
its certificate of limited partnership pursuant to Section 15902.02
with respect to the matter set forth in the certificate of revival.
(d) Upon the filing of the certificate of revival, the limited
partnership shall be revived with the same force and effect as if the
certificate of limited partnership had not been canceled pursuant to
Section 15902.03. The revival shall validate all contracts, acts,
matters, and things made, done, and performed by the limited
partnership, its partners, employees, and agents following the time
its certificate of limited partnership was canceled pursuant to
Section 15902.03 with the same force and effect and all intents and
purposes as if the certificate of limited partnership had remained in
full force and effect. This provision shall apply provided that
third parties are relying on the acts of the partnership, its
partners, employees, and agents. All real and personal property, and
all rights and interests, that belong to a limited partnership at the
time its certificate of limited partnership was canceled pursuant to
Section 15902.03 or that were acquired by the limited partnership
following the cancellation of the certificate of limited partnership,
that were not disposed of prior to the time of its revival, shall be
vested in the limited partnership after its revival as fully as if
they were held by the limited partnership at, and during the time
after, as the case may be, the time the certificate of limited
partnership was canceled. After its revival, the limited partnership
and its partners shall have all of the same liability for contracts,
acts, matters, and things made, done, or performed in the limited
partnership's name and on behalf of its partners, employees, and
agents, as the limited partnership and its partners would have had if
the limited partnership's certificate of limited partnership had at
all times remained in full force and effect.
(e) The amendments made to this section by the act adding this
subdivision shall apply to written confirmations made by the
Franchise Tax Board on or after January 1, 2010.
CORPORATIONS CODE
SECTION 15903.01-15903.07
15903.01. A person becomes a limited partner:

(a) as provided in the partnership agreement;
(b) as the result of a conversion or merger under Article 11
(commencing with Section 15911.01); or
(c) with the consent of all the partners.
15903.02. A limited partner does not have the right or the power as
a limited partner to act for or bind the limited partnership.
15903.03. (a) A limited partner is not liable for any obligation of

a limited partnership unless named as a general partner in the
certificate or, in addition to exercising the rights and powers of a
limited partner, the limited partner participates in the control of
the business. If a limited partner participates in the control of the
business without being named as a general partner, that partner may
be held liable as a general partner only to persons who transact
business with the limited partnership with actual knowledge of that
partner's participation in control and with a reasonable belief,
based upon the limited partner's conduct, that the partner is a
general partner at the time of the transaction. Nothing in this
chapter shall be construed to affect the liability of a limited
partner to third parties for the limited partner's participation in
tortious conduct.
(b) A limited partner does not participate in the control of the
business within the meaning of subdivision (a) solely by doing,
attempting to do, or having the right or power to do, one or more of
the following:
(1) Being any of the following:
(A) An independent contractor for, an agent or employee of, or
transacting business with, the limited partnership or a general
partner of the limited partnership.
(B) An officer, director, or shareholder of a corporate general
partner of the limited partnership.
(C) A member, manager, or officer of a limited liability company
that is a general partner of the limited partnership.
(D) A limited partner of a partnership that is a general partner
of the limited partnership.
(E) A trustee, administrator, executor, custodian, or other
fiduciary or beneficiary of an estate or trust that is a general
partner.
(F) A trustee, officer, adviser, shareholder, or beneficiary of a
business trust that is a general partner.
(2) Consulting with and advising a general partner with respect to
the business of the limited partnership.
(3) Acting as surety for the limited partnership or for a general
partner, guaranteeing one or more specific debts of the limited
partnership, providing collateral for the limited partnership or
general partner, borrowing money from the limited partnership or a
general partner, or lending money to the limited partnership or a
general partner.
(4) Approving or disapproving an amendment to the partnership
agreement.
(5) Voting on, proposing, or calling a meeting of the partners.
(6) Winding up the partnership pursuant to Section 15908.03.
(7) Executing and filing a certificate pursuant to Section
15902.05, a certificate of withdrawal pursuant to paragraph (4) of
subdivision (a) of Section 15902.04, or a certificate of cancellation
of the certificate of limited partnership pursuant to paragraph (6)
of subdivision (a) of Section 15902.04.
(8) Serving on an audit committee or committee performing the
functions of an audit committee.
(9) Serving on a committee of the limited partnership or the
limited partners for the purpose of approving actions of the general
partner.
(10) Calling, requesting, attending, or participating at any
meeting of the partners or the limited partners.
(11) Taking any action required or permitted by law to bring,
pursue, settle, or terminate a derivative action on behalf of the
(12) Serving on the board of directors or a committee of,
consulting with or advising, being or acting as an officer, director,
stockholder, partner, member, manager, agent, or employee of, or
being or acting as a fiduciary for, any person in which the limited
partnership has an interest.
(13) Exercising any right or power permitted to limited partners
under this chapter and not specifically enumerated in this
subdivision.
(c) The enumeration in subdivision (b) does not mean that any
other conduct or the possession or exercise of any other power by a
limited partner constitutes participation by the limited partner in
the control of the business of the limited partnership.
15903.04. (a) On 10 days' demand, made in a record received by the

limited partnership, a limited partner may inspect and copy any
information required to be maintained pursuant to Section 15901.11
during regular business hours in the limited partnership's designated
office. The limited partner need not have any particular purpose for
seeking the information.
(b) Subject to subdivision (g), during regular business hours and
at a reasonable location specified by the limited partnership, a
limited partner may obtain from the limited partnership, which may be
transmitted via electronic transmission, and inspect and copy true
and full information regarding the state of the activities and
financial condition of the limited partnership and other information
regarding the activities of the limited partnership as is just and
reasonable if:
(1) the limited partner seeks the information for a purpose
reasonably related to the partner's interest as a limited partner;
(2) the limited partner makes a demand in a record received by the
limited partnership, describing with reasonable particularity the
information sought and the purpose for seeking the information; and
(3) the information sought is directly connected to the limited
partner's purpose.
(c) Within 10 days after receiving a demand pursuant to
subdivision (b), the limited partnership in a record shall inform the
limited partner that made the demand:
(1) what information the limited partnership will provide in
response to the demand;
(2) when and where the limited partnership will provide the
information; and
(3) if the limited partnership declines to provide any demanded
information, the limited partnership's reasons for declining.
(d) Subject to subdivision (f), a person dissociated as a limited
partner may inspect and copy required information during regular
business hours in the limited partnership's designated office if:
(1) the information pertains to the period during which the person
was a limited partner;
(2) the person seeks the information in good faith; and
(3) the person meets the requirements of subdivision (b).
(e) The limited partnership shall respond to a demand made
pursuant to subdivision (d) in the same manner as provided in
subdivision (c).
(f) If a limited partner dies, Section 15907.04 applies.
(g) The limited partnership shall have the right to keep
confidential from limited partners for such period of time as the
limited partnership deems reasonable, any information which the
limited partnership reasonably believes to be in the nature of trade
secrets or other information the disclosure of which the limited
partnership in good faith believes is not in the best interest of the
limited partnership or could damage the limited partnership or its
business or which the limited partnership is required by law or by
agreement with a third party to keep confidential.
(h) The limited partnership may impose reasonable restrictions on
the use of information obtained under this section. In a dispute
concerning the reasonableness of a restriction under this
subdivision, the limited partnership has the burden of proving
reasonableness.
(i) A limited partnership may charge a person that makes a demand
under this section reasonable costs of copying, limited to the costs
of labor and material.
(j) Whenever this chapter or a partnership agreement provides for
a limited partner to give or withhold consent to a matter, before the
consent is given or withheld, the limited partnership shall, without
demand, provide the limited partner with all information material to
the limited partner's decision that the limited partnership knows.
(k) A limited partner or person dissociated as a limited partner
may exercise the rights under this section through an attorney or
other agent. Any restriction imposed under subdivision (g),
subdivision (h) or by the partnership agreement applies both to the
attorney or other agent and to the limited partner or person
dissociated as a limited partner.
(l) The rights stated in this section do not extend to a person as
transferee, but may be exercised by the legal representative of an
individual under legal disability who is a limited partner or person
dissociated as a limited partner.
15903.05. (a) A limited partner does not have any fiduciary duty to
the limited partnership or to any other partner solely by reason of
being a limited partner.
(b) A limited partner shall discharge the duties to the
partnership and the other partners under this chapter or under the
partnership agreement and exercise any rights consistently with the
obligation of good faith and fair dealing.
(c) A limited partner does not violate a duty or obligation under
this chapter or under the partnership agreement merely because the
limited partner's conduct furthers the limited partner's own
interest.
15903.06. (a) Except as otherwise provided in subdivision (b), a

person that makes an investment in a business enterprise and
erroneously but in good faith believes that the person has become a
limited partner in the enterprise is not liable for the enterprise's
obligations by reason of making the investment, receiving
distributions from the enterprise, or exercising any rights of or
appropriate to a limited partner, if, on ascertaining the mistake,
the person:
(1) causes an appropriate certificate of limited partnership,
amendment, or certificate of correction to be signed and delivered to
the Secretary of State for filing; or
(2) withdraws from future participation as an owner in the
enterprise by signing and delivering to and on a form prescribed by
the Secretary of State for filing a certificate of withdrawal under
this section.
(b) A person that makes an investment described in subdivision (a)
is liable to the same extent as a general partner to any third party
that enters into a transaction with the enterprise, believing in
good faith that the person is a general partner, before the Secretary
of State files a certificate of withdrawal, certificate of limited
partnership, amendment, or certificate of correction to show that the
person is not a general partner.
(c) If a person makes a diligent effort in good faith to comply
with paragraph (1) of subdivision (a) and is unable to cause the
appropriate certificate of limited partnership, amendment, or
certificate of correction to be signed and delivered to the Secretary
of State for filing, the person has the right to withdraw from the
enterprise pursuant to paragraph (2) of subdivision (a) even if the
withdrawal would otherwise breach an agreement with others that are
or have agreed to become co-owners of the enterprise.
15903.07. (a) The partnership agreement may provide for the

creation of classes of limited partners. The partnership agreement
shall define the rights, powers, and duties of those classes,
including rights, powers, and duties senior to other classes of
limited partners.
(b) The partnership agreement may provide to all or certain
specified classes of limited partners the right to vote separately or
with all or any class or the general partners on any matter.
CORPORATIONS CODE
SECTION 15904.01-15904.09
15904.01. A person becomes a general partner:

(a) as provided in the partnership agreement:
(b) under paragraph (2) of subdivision (c) of Section 15908.01
following the dissociation of a limited partnership's last general
partner;
(c) as the result of a conversion or merger under Article 11
(commencing with Section 15911.01); or
(d) with the consent of all the partners.
15904.02. (a) Each general partner is an agent of the limited

partnership for the purposes of its activities. An act of a general
partner, including the signing of a record in the partnership's name,
for apparently carrying on in the ordinary course the limited
partnership's activities or activities of the kind carried on by the
limited partnership binds the limited partnership, unless the general
partner did not have authority to act for the limited partnership in
the particular matter and the person with which the general partner
was dealing knew, had received a notification, or had notice under
subdivision (d) of Section 15901.03 that the general partner lacked
authority.
(b) An act of a general partner which is not apparently for
carrying on in the ordinary course the limited partnership's
activities or activities of the kind carried on by the limited
partnership binds the limited partnership only if the act was
actually authorized by all the other partners.
15904.03. (a) A limited partnership is liable for loss or injury

caused to a person, or for a penalty incurred, as a result of a
wrongful act or omission, or other actionable conduct, of a general
partner acting in the ordinary course of activities of the limited
partnership or with authority of the limited partnership.
(b) If, in the course of the limited partnership's activities or
while acting with authority of the limited partnership, a general
partner receives or causes the limited partnership to receive money
or property of a person not a partner, and the money or property is
misapplied by a general partner, the limited partnership is liable
for the loss.
15904.04. (a) Except as otherwise provided in subdivision (b), all

general partners are liable jointly and severally for all obligations
of the limited partnership unless otherwise agreed by the claimant
or provided by law.
(b) A person that becomes a general partner of an existing limited
partnership is not personally liable for an obligation of a limited
partnership incurred before the person became a general partner.
15904.05. (a) To the extent not inconsistent with Section 15904.04,

a general partner may be joined in an action against the limited
partnership or named in a separate action.
(b) A judgment against a limited partnership is not by itself a
judgment against a general partner. A judgment against a limited
partnership may not be satisfied from a general partner's assets
unless there is also a judgment against the general partner.
(c) A judgment creditor of a general partner may not levy
execution against the assets of the general partner to satisfy a
judgment based on a claim against the limited partnership, unless the
partner is personally liable for the claim under Section 15904.04
and:
(1) a judgment based on the same claim has been obtained against
the limited partnership and a writ of execution on the judgment has
been returned unsatisfied in whole or in part;
(2) the limited partnership is a debtor in bankruptcy;
(3) the general partner has agreed that the creditor need not
exhaust limited partnership assets;
(4) a court grants permission to the judgment creditor to levy
execution against the assets of a general partner based on a finding
that limited partnership assets subject to execution are clearly
insufficient to satisfy the judgment, that exhaustion of limited
partnership assets is excessively burdensome, or that the grant of
permission is an appropriate exercise of the court's equitable
powers; or
(5) liability is imposed on the general partner by law or contract
independent of the existence of the limited partnership.
15904.06. (a) Each general partner has equal rights in the

management and conduct of the limited partnership's activities.
Except as expressly provided in this chapter, any matter relating to
the activities of the limited partnership may be exclusively decided
by the general partner or, if there is more than one general partner,
by a majority of the general partners.
(b) The consent of each partner is necessary to:
(1) amend the partnership agreement; and
(2) sell, lease, exchange, or otherwise dispose of all, or
substantially all, of the limited partnership's property, with or
without the good will, other than in the usual and regular course of
the limited partnership's activities.
(c) A limited partnership shall reimburse a general partner for
payments made and indemnify a general partner for liabilities
incurred by the general partner in the ordinary course of the
activities of the partnership or for the preservation of its
activities or property.
(d) A limited partnership shall reimburse a general partner for an
advance to the limited partnership beyond the amount of capital the
general partner agreed to contribute.
(e) A payment or advance made by a general partner which gives
rise to an obligation of the limited partnership under subdivision
(c) or (d) constitutes a loan to the limited partnership which
accrues interest from the date of the payment or advance.
(f) A general partner is not entitled to remuneration for services
performed for the partnership.
15904.07. (a) A general partner, without having any particular

purpose for seeking the information, may inspect and copy during
regular business hours:
(1) in the limited partnership's designated office, required
information; and
(2) at a reasonable location specified by the limited partnership,
any other records maintained by the limited partnership regarding
the limited partnership's activities and financial condition.
(b) Each general partner and the limited partnership shall furnish
to a general partner which may be transmitted via electronic
transmission:
(1) without demand, any information concerning the limited
partnership's activities and activities reasonably required for the
proper exercise of the general partner's rights and duties under the
partnership agreement or this chapter; and
(2) on demand, any other information concerning the limited
partnership's activities, except to the extent the demand or the
information demanded is unreasonable or otherwise improper under the
circumstances.
(c) Subject to subdivision (e), on 10 days' demand made in a
record received by the limited partnership, a person dissociated as a
general partner may have access to the information and records
described in subdivision (a) at the location specified in subdivision
(a) if:
(1) the information or record pertains to the period during which
the person was a general partner;
(2) the person seeks the information or record in good faith; and
(3) the person satisfies the requirements imposed on a limited
partner by subdivision (b) of Section 15903.04.
(d) The limited partnership shall respond to a demand made
pursuant to subdivision (c) in the same manner as provided in
subdivision (c) of Section 15903.04.
(e) If a general partner dies, Section 15907.04 applies.
(f) The limited partnership may impose reasonable restrictions on
the use of information under this section. In any dispute concerning
the reasonableness of a restriction under this subdivision, the
limited partnership has the burden of proving reasonableness.
(g) A limited partnership may charge a person dissociated as a
general partner that makes a demand under this section reasonable
costs of copying, limited to the costs of labor and material.
(h) A general partner or person dissociated as a general partner
may exercise the rights under this section through an attorney or
other agent. Any restriction imposed under subdivision (f) or by the
partnership agreement applies both to the attorney or other agent and
to the general partner or person dissociated as a general partner.
(i) The rights under this section do not extend to a person as
transferee, but the rights under subdivision (c) of a person
dissociated as a general partner may be exercised by the legal
representative of an individual who dissociated as a general partner
under paragraph (2) or (3) of subdivision (g) of Section 15906.03.
15904.08. (a) The fiduciary duties that a general partner owes to

the limited partnership and the other partners are the duties of
loyalty and care under subdivisions (b) and (c).
(b) A general partner's duty of loyalty to the limited partnership
and the other partners is limited to the following:
(1) to account to the limited partnership and hold as trustee for
it any property, profit, or benefit derived by the general partner in
the conduct and winding up of the limited partnership's activities
or derived from a use by the general partner of limited partnership
property, including the appropriation of a limited partnership
opportunity;
(2) to refrain from dealing with the limited partnership in the
conduct or winding up of the limited partnership's activities as or
on behalf of a party having an interest adverse to the limited
partnership; and
(3) to refrain from competing with the limited partnership in the
conduct or winding up of the limited partnership's activities.
(c) A general partner's duty of care to the limited partnership
and the other partners in the conduct and winding up of the limited
partnership's activities is limited to refraining from engaging in
grossly negligent or reckless conduct, intentional misconduct, or a
knowing violation of law.
(d) A general partner shall discharge the duties to the
partnership and the other partners under this chapter or under the
partnership agreement and exercise any rights consistently with the
obligation of good faith and fair dealing.
(e) A general partner does not violate a duty or obligation under
this chapter or under the partnership agreement merely because the
general partner's conduct furthers the general partner's own
interest.
15904.09. (a) A partnership agreement may provide for the creation

of classes of general partners. The partnership agreement shall
define the rights, powers, and duties of those classes including
rights, powers, and duties senior to other classes of general
partners.
(b) The partnership agreement may provide to all or certain
specified classes of general partners the right to vote separately or
with all or any class of the general partners on any matters.
CORPORATIONS CODE
SECTION 15905.01-15905.09
15905.01. A contribution of a partner may consist of tangible or

intangible property or other benefit to the limited partnership,
including money, services performed, promissory notes, other
agreements to contribute cash or property, and contracts for services
to be performed.
15905.02. (a) A partner's obligation to contribute money or other

property or other benefit to, or to perform services for, a limited
partnership is not excused by the partner's death, disability, or
other inability to perform personally.
(b) If a partner does not make a promised nonmonetary
contribution, the partner is obligated at the option of the limited
partnership to contribute money equal to the value of that portion,
as stated in the required information, of the stated contribution
which has not been made.
(c) The obligation of a partner to make a contribution or return
money or other property paid or distributed in violation of this
chapter may be compromised only by consent of all partners. A
creditor of a limited partnership which extends credit or otherwise
acts in reliance on an obligation described in subdivision (a),
without notice of any compromise under this subdivision, may enforce
the original obligation.
(d) A partnership agreement may provide that the interest of a
partner who fails to make any contribution or other payment that the
partner is required to make will be subject to specific remedies for,
or specific consequences of, the failure. A provision shall be
enforceable in accordance with its terms unless the partner seeking
to invalidate the provision establishes that the provision was
unreasonable under the circumstances existing at the time the
agreement was made. The specific remedies or consequences may include
loss of voting, approval, or other rights, loss of the partner's
ability to actively participate in the management and operations of
the partnership, liquidated damages, or a reduction of the defaulting
partner's economic rights. The reduction of the defaulting partner's
economic rights may include one or more of the following provisions:
(1) Diluting, reducing or eliminating the defaulting partner's
proportionate interest in the partnership.
(2) Subordinating the defaulting partner's interest in the
partnership to that of nondefaulting partners.
(3) Permitting a forced sale of the partnership interest.
(4) Permitting the lending or contribution by other partners of
the amount necessary to meet the defaulting partner's commitment.
(5) Adjusting the interest rates or other rates of return,
preferred, priority, or otherwise, with respect to contributions by
or capital accounts of the other partners.
(6) Fixing the value of the defaulting partner's interest in the
partnership by appraisal, formula and redemption, or sale of the
defaulting partner's interest in the partnership at a percentage of
that value.
(7) Nothing in this section shall be construed to affect the
rights of third-party creditors of the partnership to seek equitable
remedies nor any rights existing under the Uniform Fraudulent
Transfer Act (Chapter 1 (commencing with Section 3439) of Title 2 of
Part 2 of Division 4 of the Civil Code).
15905.03. A distribution by a limited partnership must be shared

among the partners on the basis of the value, as stated in the
required records when the limited partnership decides to make the
distribution, of the contributions the limited partnership has
received from each partner.
15905.035. The profits and losses of a limited partnership shall be

allocated among the partners in the manner provided in the
partnership agreement. If the partnership agreement does not
otherwise provide, profits and losses shall be allocated in the same
manner as the partners share distributions.
15905.04. A partner does not have a right to any distribution

before the dissolution and winding up of the limited partnership
unless the limited partnership decides to make an interim
distribution.
15905.05. A person does not have a right to receive a distribution

on account of dissociation.
15905.06. A partner does not have a right to demand or receive any

distribution from a limited partnership in any form other than cash.
Subject to subdivision (b) of Section 15908.09, a limited partnership
may distribute an asset in kind to the extent each partner receives
a percentage of the asset equal to the partner's share of
distributions.
15905.07. When a partner or transferee becomes entitled to receive
a distribution, the partner or transferee has the status of, and is
entitled to all remedies available to, a creditor of the limited
partnership with respect to the distribution. However, the limited
partnership's obligation to make a distribution is subject to offset
for any amount owed to the limited partnership by the partner or
dissociated partner on whose account the distribution is made.
15905.08. (a) A limited partnership may not make a distribution in

violation of the partnership agreement.
(b) A limited partnership may not make a distribution if after the
distribution:
(1) the limited partnership would not be able to pay its debts as
they become due in the ordinary course of the limited partnership's
activities; or
(2) the limited partnership's total assets would be less than the
sum of its total liabilities plus the amount that would be needed, if
the limited partnership were to be dissolved, wound up, and
terminated at the time of the distribution, to satisfy the
preferential rights upon dissolution, winding up, and termination of
partners whose preferential rights are superior to those of persons
receiving the distribution.
(c) A limited partnership may base a determination that a
distribution is not prohibited under subdivision (b) on financial
statements prepared on the basis of accounting practices and
principles that are reasonable in the circumstances or on a fair
valuation or other method that is reasonable in the circumstances.
(d) Except as otherwise provided in subdivision (g), the effect of
a distribution under subdivision (b) is measured:
(1) in the case of distribution by purchase, redemption, or other
acquisition of a transferable interest in the limited partnership, as
of the date money or other property is transferred or debt incurred
by the limited partnership; and
(2) in all other cases, as of the date:
(A) the distribution is authorized, if the payment occurs within
120 days after that date; or
(B) the payment is made, if payment occurs more than l20 days
after the distribution is authorized.
(e) A limited partnership's indebtedness to a partner incurred by
reason of a distribution made in accordance with this section is at
parity with the limited partnership's indebtedness to its general
unsecured creditors.
(f) A limited partnership's indebtedness, including indebtedness
issued in connection with or as part of a distribution, is not
considered a liability for purposes of subdivision (b) if the terms
of the indebtedness provide that payment of principal and interest
are made only to the extent that a distribution could then be made to
partners under this section.
(g) If indebtedness is issued as a distribution, each payment of
principal or interest on the indebtedness is treated as a
distribution, the effect of which is measured on the date the payment
is made.
15905.09. (a) A general partner that consents to a distribution
made in violation of Section 15905.08 is personally liable to the
limited partnership for the amount of the distribution which exceeds
the amount that could have been distributed without the violation if
it is established that in consenting to the distribution the general
partner failed to comply with Section 15904.08.
(b) A partner or transferee that received a distribution knowing
that the distribution to that partner or transferee was made in
violation of Section 15905.08 is personally liable to the limited
partnership but only to the extent that the distribution received by
the partner or transferee exceeded the amount that could have been
properly paid under Section 15905.08.
(c) A general partner against which an action is commenced under
subdivision (a) may:
(1) implead in the action any other person that is liable under
subdivision (a) and compel contribution from the person; and
(2) implead in the action any person that received a distribution
in violation of subdivision (b) and compel contribution from the
person in the amount the person received in violation of subdivision
(b).
(d) An action under this section is barred if it is not commenced
within four years after the distribution.
CORPORATIONS CODE
SECTION 15906.01-15906.07
15906.01. (a) A person does not have a right to dissociate as a

limited partner before the termination of the limited partnership.
(b) A person is dissociated from a limited partnership as a
limited partner upon the occurrence of any of the following events:
(1) the limited partnership's having notice of the person's
express will to withdraw as a limited partner or on a later date
specified by the person;
(2) an event agreed to in the partnership agreement as causing the
person's dissociation as a limited partner;
(3) the person's expulsion as a limited partner pursuant to the
partnership agreement;
(4) the person's expulsion as a limited partner by the unanimous
consent of the other partners if:
(A) it is unlawful to carry on the limited partnership's
activities with the person as a limited partner;
(B) there has been a transfer of all of the person's transferable
interest in the limited partnership, other than a transfer for
security purposes, or a court order charging the person's interest,
which has not been foreclosed;
(C) the person is a corporation and, within 90 days after the
limited partnership notifies the person that it will be expelled as a
limited partner because it has filed a certificate of dissolution or
the equivalent, its charter has been revoked, or its right to
conduct business has been suspended by the jurisdiction of its
incorporation, there is no revocation of the certificate of
conduct business; or
(D) the person is a limited liability company or partnership that
has been dissolved and whose business is being wound up;
(5) on application by the limited partnership, the person's
expulsion as a limited partner by judicial order because:
(A) the person engaged in wrongful conduct that adversely and
materially affected the limited partnership's activities;
(B) the person willfully or persistently committed a material
breach of the partnership agreement or of the obligation of good
faith and fair dealing under subdivision (b) of Section 15903.05; or
(C) the person engaged in conduct relating to the limited
partnership's activities which makes it not reasonably practicable to
carry on the activities with the person as limited partner;
(6) in the case of a person who is an individual, the person's
death;
(7) in the case of a person that is a trust or is acting as a
limited partner by virtue of being a trustee of a trust, distribution
of the trust's entire transferable interest in the limited
successor trustee;
(8) in the case of a person that is an estate or is acting as a
limited partner by virtue of being a personal representative of an
estate, distribution of the estate's entire transferable interest in
the limited partnership, but not merely by reason of the substitution
of a successor personal representative;
(9) termination of a limited partner that is not an individual,
partnership, limited liability company, corporation, trust, or
estate;
(10) the limited partnership's participation in a conversion or
merger under Article 11 (commencing with Section 15911.01), if the
limited partnership:
(A) is not the converted or surviving entity; or
(B) is the converted or surviving entity but, as a result of the
conversion or merger, the person ceases to be a limited partner.
15906.02. (a) Upon a person's dissociation as a limited partner:

(1) subject to Section 15907.04, the person does not have further
rights as a limited partner;
(2) the person's obligation of good faith and fair dealing as a
limited partner under subdivision (b) of Section 15903.05 continues
only as to matters arising and events occurring before the
dissociation; and
(3) subject to Section 15907.04 and Article 11 (commencing with
Section 15911.01), any transferable interest owned by the person in
the person's capacity as a limited partner immediately before
dissociation is owned by the person as a mere transferee.
(b) A person's dissociation as a limited partner does not of
itself discharge the person from any obligation to the limited
partnership or the other partners which the person incurred while a
limited partner.
15906.03. A person is dissociated from a limited partnership as a

general partner upon the occurrence of any of the following events:
(a) the limited partnership's having notice of the person's
express will to withdraw as a general partner or on a later date
specified by the person;
(b) an event agreed to in the partnership agreement as causing the
persons dissociation as a general partner;
(c) the person's expulsion as a general partner pursuant to the
partnership agreement;
(d) the person's expulsion as a general partner by the unanimous
consent of the other partners if:
(1) it is unlawful to carry on the limited partnership's
activities with the person as a general partner;
(2) there has been a transfer of all or substantially all of the
person's transferable interest in the limited partnership, other than
a transfer for security purposes, or a court order charging the
person's interest, which has not been foreclosed;
(3) the person is a corporation and, within 90 days after the
limited partnership notifies the person that it will be expelled as a
general partner because it has filed a certificate of dissolution or
the equivalent, its charter has been revoked, or its right to
conduct business has been suspended by the jurisdiction of its
incorporation, there is no revocation of the certificate of
conduct business; or
(4) the person is a limited liability company or partnership that
has been dissolved and whose business is being wound up;
(e) on application by the limited partnership, the person's
expulsion as a general partner by judicial order because:
(1) the person engaged in wrongful conduct that adversely and
materially affected the limited partnership activities;
(2) the person willfully or persistently committed a material
breach of the partnership agreement or of a duty owed to the
partnership or the other partners under Section 15904.08; or
(3) the person engaged in conduct relating to the limited
partnership's activities which makes it not reasonably practicable to
carry on the activities of the limited partnership with the person
as a general partner;
(f) the person's:
(1) becoming a debtor in bankruptcy;
(2) execution of an assignment for the benefit of creditors;
(3) seeking, consenting to, or acquiescing in the appointment of a
trustee, receiver, or liquidator of the person or of all or
substantially all of the person's property; or
(4) failure, within 90 days after the appointment, to have vacated
or stayed the appointment of a trustee, receiver, or liquidator of
the general partner or of all or substantially all of the person's
property obtained without the person's consent or acquiescence, or
failing within 90 days after the expiration of a stay to have the
appointment vacated;
(g) in the case of a person who is an individual:
(1) the person's death;
(2) the appointment of a guardian or general conservator for the
person; or
(3) a judicial determination that the person has otherwise become
incapable of performing the person's duties as a general partner
under the partnership agreement;
(h) in the case of a person that is a trust or is acting as a
general partner by virtue of being a trustee of a trust, distribution
of the trust's entire transferable interest in the limited
successor trustee;
(i) in the case of a person that is an estate or is acting as a
general partner by virtue of being a personal representative of an
estate, distribution of the estate's entire transferable interest in
the limited partnership, but not merely by reason of the substitution
of a successor personal representative;
(j) termination of a general partner that is not an individual,
partnership, limited liability company, corporation, trust, or
estate; or
(k) the limited partnership's participation in a conversion or
merger under Article 11 (commencing with Section 15911.01), if the
limited partnership:
(1) is not the converted or surviving entity; or
(2) is the converted or surviving entity but, as a result of the
conversion or merger, the person ceases to be a general partner.
15906.04. (a) A person has the power to dissociate as a general

partner at any time, rightfully or wrongfully, by express will
pursuant to subdivision (a) of Section 15906.03.
(b) A person's dissociation as a general partner is wrongful only
if:
(1) it is in breach of an express provision of the partnership
agreement; or
(2) it occurs before the termination of the limited partnership,
and:
(A) the person withdraws as a general partner by express will;
(B) the person is expelled as a general partner by judicial
determination under subdivision (e) of Section 15906.03;
(C) the person is dissociated as a general partner by becoming a
debtor in bankruptcy; or
(D) in the case of a person that is not an individual, trust other
than a business trust, or estate, the person is expelled or
otherwise dissociated as a general partner because it willfully
dissolved or terminated.
(c) A person that wrongfully dissociates as a general partner is
liable to the limited partnership and, subject to Section 15910.01,
to the other partners for damages caused by the dissociation. The
liability is in addition to any other obligation of the general
partner to the limited partnership or to the other partners.
15906.05. (a) Upon a person's dissociation as a general partner:

(1) the person's right to participate as a general partner in the
management and conduct of the partnership's activities terminates;
(2) the person's duty of loyalty as a general partner under
paragraph (3) of subdivision (b) of Section 15904.08 terminates;
(3) the person's duty of loyalty as a general partner under
paragraphs (1) and (2) of subdivision (b) of Section 15904.08 and
duty of care under subdivision (c) of Section 15904.08 continue only
with regard to matters arising and events occurring before the person'
s dissociation as a general partner;
(4) the person may sign and deliver to the Secretary of State for
filing , on a form prescribed by the Secretary of State, a
certificate of dissociation pertaining to the person and, at the
request of the limited partnership, shall sign an amendment to the
certificate of limited partnership which states that the person has
dissociated; and
(5) subject to Section 15907.04 and Article 11 (commencing with
Section 15911.01), any transferable interest owned by the person
immediately before dissociation in the person's capacity as a general
partner is owned by the person as a mere transferee.
(b) A person's dissociation as a general partner does not of
itself discharge the person from any obligation to the limited
partnership or the other partners which the person incurred while a
general partner.
15906.06. (a) After a person is dissociated as a general partner

and before the limited partnership is dissolved, converted under
Article 11 (commencing with Section 15911.01), or merged out of
existence under that article, the limited partnership is bound by an
act of the person only if:
(1) the act would have bound the limited partnership under Section
15904.02 before the dissociation; and
(2) at the time the other party enters into the transaction:
(A) less than two years have passed since the dissociation; and
(B) the other party does not have notice of the dissociation and
reasonably believes that the person is a general partner.
(b) If a limited partnership is bound under subdivision (a), the
person dissociated as a general partner which caused the limited
partnership to be bound is liable:
(1) to the limited partnership for any damage caused to the
limited partnership arising from the obligation incurred under
subdivision (a); and
(2) if a general partner or another person dissociated as a
general partner is liable for the obligation, to the general partner
or other person for any damage caused to the general partner or other
person arising from the liability.
15906.07. (a) A person's dissociation as a general partner does not

of itself discharge the person's liability as a general partner for
an obligation of the limited partnership incurred before
dissociation. Except as otherwise provided in subdivisions (b) and
(c), the person is not liable for a limited partnership's obligation
incurred after dissociation.
(b) A person whose dissociation as a general partner resulted in a
dissolution and winding up of the limited partnership's activities
is liable to the same extent as a general partner under Section
15904.04 on an obligation incurred by the limited partnership under
Section 15908.04.
(c) A person that has dissociated as a general partner but whose
dissociation did not result in a dissolution and winding up of the
limited partnership's activities is liable on a transaction entered
into by the limited partnership after the dissociation only if:
(1) a general partner would be liable on the transaction; and
reasonably believes that the person is a general partner.
(d) By agreement with a creditor of a limited partnership and the
limited partnership, a person dissociated as a general partner may be
released from liability to the creditor for an obligation of the
(e) A person dissociated as a general partner is released from
liability for an obligation of the limited partnership if the limited
partnership's creditor, with notice of the person's dissociation as
a general partner but without the person's consent, agrees to a
material alteration in the nature or time of payment of the
obligation.
CORPORATIONS CODE
SECTION 15907.01-15907.04
15907.01. The only interest of a partner which is transferable is

the partner's transferable interest. A transferable interest is
personal property.
15907.02. (a) A transfer, in whole or in part, of a partner's

transferable interest:
(1) is permissible;
(2) does not by itself cause the partner's dissociation or a
dissolution and winding up of the limited partnership's activities;
and
(3) does not, as against the other partners or the limited
partnership, entitle the transferee to participate in the management
or conduct of the limited partnership's activities, to require access
to information concerning the limited partnership's transactions
except as otherwise provided in subdivision (c), or to inspect or
copy the required information or the limited partnership's other
records or to exercise any other rights or powers of a partner.
(b) A transferee has a right to receive, in accordance with the
transfer, distributions to which the transferor would otherwise be
entitled.
(c) A transferee is entitled to an account of the limited
partnership's transactions only upon the dissolution and winding up
of the limited partnership.
(d) Upon transfer, the transferor retains the rights of a partner
other than the interest in distributions transferred and retains all
duties and obligations of a partner.
(e) A limited partnership need not give effect to a transferee's
rights under this section until the limited partnership has notice of
the transfer.
(f) A transfer of a partner's transferable interest in the limited
partnership in violation of a restriction on transfer contained in
the partnership agreement is ineffective as to a person having notice
of the restriction at the time of transfer.
(g) A transferee that becomes a partner with respect to a
transferable interest is liable for the transferor's obligations
under Sections 15905.02 and 15905.09. However, the transferee is not
obligated for liabilities unknown to the transferee at the time the
transferee became a partner.
(h) A transferee of a partnership interest, including a transferee
of a general partner, may become a limited partner if and to the
extent that (1) the partnership agreement provides or (2) all general
partners and a majority in interest of the limited partners consent.
15907.03. (a) On application to a court of competent jurisdiction
by any judgment creditor of a partner or transferee, the court may
charge the transferable interest of the judgment debtor with payment
of the unsatisfied amount of the judgment with interest. To the
extent so charged, the judgment creditor has only the rights of a
transferee. The court may appoint a receiver of the share of the
distributions due or to become due to the judgment debtor in respect
of the limited partnership and make all other orders, directions,
accounts, and inquiries the judgment debtor might have made or which
the circumstances of the case may require to give effect to the
charging order.
transferable interest. The court may order a foreclosure upon the
interest subject to the charging order at any time. The purchaser at
the foreclosure sale has the rights of a transferee.
(c) At any time before foreclosure, an interest charged may be
redeemed:
(1) by the judgment debtor;
(2) with property other than limited partnership property, by one
or more of the other partners; or
(3) with limited partnership property, by the limited partnership
with the consent of all partners whose interests are not so charged.
(d) This chapter does not deprive any partner or transferee of the
benefit of any exemption laws applicable to the partner's or
transferee's transferable interest.
creditor of a partner or transferee may satisfy a judgment out of
the judgment debtor's transferable interest.
(f) No creditor of a partner shall have any right to obtain
possession or otherwise exercise legal or equitable remedies with
respect to the property of the limited partnership.
15907.04. If a partner dies, the deceased partner's personal

representative or other legal representative may exercise the rights
of a transferee as provided in Section 15907.02 and, for the purposes
of settling the estate, may exercise the rights of a current limited
partner under Section 15903.04.
CORPORATIONS CODE
SECTION 15908.01-15908.09
15908.01. Except as otherwise provided in Section 15908.02, a

limited partnership is dissolved, and its activities must be wound
up, only upon the occurrence of any of the following:
(a) the happening of an event specified in the partnership
agreement;
(b) the consent of all general partners and of limited partners
owning a majority of the rights to receive distributions as limited
partners at the time the consent is to be effective;
(c) after the dissociation of a person as a general partner:
(1) if the limited partnership has at least one remaining general
partner, and a consent to dissolve the limited partnership is given
within 90 days after the dissociation by partners owning a majority
of the rights to receive distributions as partners at the time the
consent is to be effective; or
(2) if the limited partnership does not have a remaining general
partner, the passage of 90 days after the dissociation, unless before
the end of the period:
(A) consent to continue the activities of the limited partnership
and admit at least one general partner is given by limited partners
owning a majority of the rights to receive distributions as limited
partners at the time the consent is to be effective; and
(B) at least one person is admitted as a general partner in
accordance with the consent; or
(d) the passage of 90 days after the dissociation of the limited
partnership's last limited partner, unless before the end of the
period the limited partnership admits at least one limited partner.
15908.02. (a) On application by a partner, a court of competent

jurisdiction may order dissolution of a limited partnership if it is
not reasonably practicable to carry on the activities of the limited
partnership in conformity with the partnership agreement.
(b) In any suit for judicial dissolution, the other partners may
avoid the dissolution of the limited partnership by purchasing for
cash the partnership interests owned by the partners so initiating
the proceeding (the "moving parties") at their fair market value. In
fixing the value, the amount of any damages resulting if the
initiation of the dissolution is a breach by any moving party or
parties of an agreement with the purchasing party or parties,
including, without limitation, the partnership agreement, may be
deducted from the amount payable to the moving party or parties.
(c) If the purchasing parties (1) elect to purchase the
partnership interests owned by the moving parties, (2) are unable to
agree with the moving parties upon the fair market value of the
partnership interests, and (3) give bond with sufficient security to
pay the estimated reasonable expenses, including attorneys' fees, of
the moving parties if the expenses are recoverable under paragraph
(3), the court, upon application of the purchasing parties, either in
the pending action or in a proceeding initiated in the superior
court of the proper county by the purchasing parties, shall stay the
winding up and dissolution proceeding and shall proceed to ascertain
and fix the fair market value of the partnership interests owned by
the moving parties.
(d) The court shall appoint three disinterested appraisers to
appraise the fair market value of the partnership interests owned by
the moving parties, and shall make an order referring the matter to
the appraisers so appointed for the purpose of ascertaining that
value. The order shall prescribe the time and manner of producing
evidence, if evidence is required. The award of the appraisers or a
majority of them, when confirmed by the court, shall be final and
conclusive upon all parties. The court shall enter a decree that
shall provide in the alternative for winding up and dissolution of
the limited partnership unless payment is made for the partnership
interests within the time specified by the decree. If the purchasing
parties do not make payment for the partnership interests within the
time specified, judgment shall be entered against them and the surety
or sureties on the bond for the amount of the expenses, including
attorneys' fees, of the moving parties. Any member aggrieved by the
action of the court may appeal therefrom.
(e) If the purchasing parties desire to prevent the winding up and
dissolution of the limited partnership, they shall pay to the moving
parties the value of their partnership interests ascertained and
decreed within the time specified pursuant to this section, or, in
the case of an appeal, as fixed on appeal. On receiving that payment
or the tender thereof, the moving parties shall transfer their
partnership interests to the purchasing parties.
(f) For the purposes of this section, the valuation date shall be
the date upon which the action for judicial dissolution was
commenced. However, the court may, upon the hearing of a motion by
any party, and for good cause shown, designate some other date as the
valuation date.
15908.03. (a) A limited partnership continues after dissolution

only for the purpose of winding up its activities.
(b) In winding up its activities, the limited partnership:
(1) may amend its certificate of limited partnership to state that
the limited partnership is dissolved, preserve the limited
partnership business or property as a going concern for a reasonable
time, prosecute and defend actions and proceedings, whether civil,
criminal, or administrative, transfer the limited partnership's
property, settle disputes by mediation or arbitration, file a
certificate of cancellation as provided in Section 15902.03, and
perform other necessary acts; and
(2) shall discharge the limited partnership's liabilities, settle
and close the limited partnership's activities, and marshal and
distribute the assets of the partnership.
(c) If a dissolved limited partnership does not have a general
partner, a person to wind up the dissolved limited partnership's
activities may be appointed by the consent of limited partners owning
a majority of the rights to receive distributions as limited
partners at the time the consent is to be effective. A person
appointed under this subdivision:
(1) has the powers of a general partner under Section 15908.04;
and
(2) shall promptly amend the certificate of limited partnership to
state:
(A) that the limited partnership does not have a general partner;
(B) the name of the person that has been appointed to wind up the
limited partnership; and
(C) the address of the person.
(d) On the application of any partner, the appropriate court may
order judicial supervision of the winding up, including the
appointment of a person to wind up the dissolved limited partnership'
s activities, if:
(1) a limited partnership does not have a general partner and
within a reasonable time following the dissolution no person has been
appointed pursuant to subdivision (c); or
(2) the applicant establishes other good cause.
(e) Unless otherwise provided in the partnership agreement, the
limited partners winding up the affairs of the partnership pursuant
to this section shall be entitled to reasonable compensation.
15908.04. (a) A limited partnership is bound by a general partner's
act after dissolution which:
(1) is appropriate for winding up the limited partnership's
activities; or
(2) would have bound the limited partnership under Section
15904.02 before dissolution, if, at the time the other party enters
into the transaction, the other party does not have notice of the
dissolution.
(b) A person dissociated as a general partner binds a limited
partnership through an act occurring after dissolution if:
reasonably believes that the person is a general partner; and
(2) the act:
(A) is appropriate for winding up the limited partnership's
activities; or
(B) would have bound the limited partnership under Section
15904.02 before dissolution and at the time the other party enters
into the transaction the other party does not have notice of the
dissolution.
15908.05. (a) If a general partner having knowledge of the

dissolution causes a limited partnership to incur an obligation under
subdivision (a) of Section 15908.04 by an act that is not
appropriate for winding up the partnership's activities, the general
partner is liable:
limited partnership arising from the obligation; and
(2) if another general partner or a person dissociated as a
general partner is liable for the obligation, to that other general
partner or person for any damage caused to that other general partner
or person arising from the liability.
(b) If a person dissociated as a general partner causes a limited
partnership to incur an obligation under subdivision (b) of Section
15908.04, the person is liable:
limited partnership arising from the obligation; and
(2) if a general partner or another person dissociated as a
general partner is liable for the obligation, to the general partner
or other person for any damage caused to the general partner or other
person arising from the liability.
15908.06. (a) A dissolved limited partnership may dispose of the

known claims against it by following the procedure described in
subdivision (b).
(b) A dissolved limited partnership may notify its known claimants
of the dissolution in a record. The notice must:
(1) specify the information required to be included in a claim;
(2) provide a mailing address to which the claim is to be sent;
(3) state the deadline for receipt of the claim, which may not be
less than 120 days after the date the notice is received by the
claimant; and
(4) state that the claim will be barred if not received by the
deadline.
(c) A claim against a dissolved limited partnership is barred if
the requirements of subdivision (b) are met and:
(1) the claim is not received by the specified deadline; or
(2) in the case of a claim that is timely received but rejected in
writing by the dissolved limited partnership, the claimant does not
commence an action to enforce the claim against the limited
partnership within 90 days after the receipt of a written notice of
the rejection.
(d) This section does not apply to a claim based on an event
occurring after the effective date of dissolution or a liability that
is contingent on that date.
15908.07. (a) A dissolved limited partnership may publish notice of

its dissolution and request persons having claims against the
limited partnership to present them in accordance with the notice.
(b) The notice must:
(1) be published at least once in a newspaper of general
circulation in the county in which the dissolved limited partnership'
s principal office is located or, if it has none in this state, in
the county in which the limited partnership's designated office is or
was last located;
(2) describe the information required to be contained in a claim
and provide a mailing address to which the claim is to be sent; and
(3) state that a claim against the limited partnership is barred
unless an action to enforce the claim is commenced within four years
after publication of the notice.
(c) If a dissolved limited partnership publishes a notice in
accordance with subdivision (b), the claim of each of the following
claimants is barred unless the claimant commences an action to
enforce the claim against the dissolved limited partnership within
four years after the publication date of the notice:
(1) a claimant that did not receive notice in a record under
Section 15908.06;
(2) a claimant whose claim was timely sent to the dissolved
limited partnership but not acted on; and
(3) a claimant whose claim is contingent or based on an event
occurring after the effective date of dissolution.
(d) A claim not barred under this section may be enforced:
(1) against the dissolved limited partnership, to the extent of
its undistributed assets;
(2) if the assets have been distributed in liquidation, against a
partner or transferee to the extent of that person's proportionate
share of the claim or the limited partnership's assets distributed to
the partner or transferee in liquidation, whichever is less, but a
person's total liability for all claims under this paragraph does not
exceed the total amount of assets distributed to the person as part
of the winding up of the dissolved limited partnership; or
(3) against any person liable on the claim under Section 15904.04.
(e) Publication of a notice of dissolution of a limited
partnership pursuant to this section shall not bar the collection of
any tax, interest, penalty or addition to tax under Part 10
(commencing with Section 17001) of, Part 10.20 (commencing with
Section 18401) of, and Part 11 (commencing with Section 23001) of,
15908.08. If a claim against a dissolved limited partnership is
barred under Section 15908.06 or 15908.07, any corresponding claim
under Section 15904.04 is also barred.
15908.09. (a) In winding up a limited partnership's activities, the

assets of the limited partnership, including the contributions
required by this section, must be applied to satisfy the limited
partnership's obligations to creditors, including, to the extent
permitted by law, partners that are creditors.
(b) Any surplus remaining after the limited partnership complies
with subdivision (a) must be returned to the partners as they share
in distributions.
(c) If a limited partnership's assets are insufficient to satisfy
all of its obligations under subdivision (a) the following rules
apply:
(1) Each person that was a general partner when the obligation was
incurred and that has not been released from the obligation under
Section 15906.07 shall contribute to the limited partnership for the
purpose of enabling the limited partnership to satisfy the
obligation. The contribution due from each of those persons is in
proportion to the right to receive distributions in the capacity of
general partner in effect for each of those persons when the
obligation was incurred.
(2) If a person does not contribute the full amount required under
paragraph (1) with respect to an unsatisfied obligation of the
limited partnership, the other persons required to contribute by
paragraph (1) on account of the obligation shall contribute the
additional amount necessary to discharge the obligation. The
additional contribution due from each of those other persons is in
proportion to the right to receive distributions in the capacity of
general partner in effect for each of those other persons when the
obligation was incurred.
(3) If a person does not make the additional contribution required
by paragraph (2), further additional contributions are determined
and due in the same manner as provided in that paragraph.
(d) A person that makes an additional contribution under paragraph
(2) or (3) of subdivision (c) may recover from any person whose
failure to contribute under paragraph (1) or (2) of subdivision (c)
necessitated the additional contribution. A person may not recover
under this subdivision more than the amount additionally contributed.
A person's liability under this subdivision may not exceed the
amount the person failed to contribute.
(e) The estate of a deceased individual is liable for the person's
obligations under this section.
(f) An assignee for the benefit of creditors of a limited
partnership or a partner, or a person appointed by a court to
represent creditors of a limited partnership or a partner, may
enforce a person's obligation to contribute under subdivision (c).
CORPORATIONS CODE
SECTION 15909.01-15909.08
15909.01. (a) The laws of the state or other jurisdiction under
which a foreign limited partnership is organized govern relations
among the partners of the foreign limited partnership and between the
partners and the foreign limited partnership and the liability of
partners as partners for an obligation of the foreign limited
partnership, except as to foreign limited liability limited
partnerships, which shall be treated as if they were foreign limited
partnerships.
(b) A foreign limited partnership may not be denied a certificate
of registration by reason of any difference between the laws of the
jurisdiction under which the foreign limited partnership is organized
and the laws of this state.
(c) A certificate of registration does not authorize a foreign
limited partnership to engage in any business or exercise any power
that a limited partnership may not engage in or exercise in this
state.
15909.02. (a) A foreign limited partnership may apply for a

certificate of registration to transact business in this state by
delivering an application signed and acknowledged by a general
partner of the foreign limited partnership to, and on a form
prescribed by, the Secretary of State for filing. The application
must state:
(1) the name of the foreign limited partnership and, if the name
does not comply with Section 15901.08, an alternate name adopted
pursuant to subdivision (a) of Section 15909.05.
(2) the name of the state or other jurisdiction under whose law
the foreign limited partnership is organized and the date of its
formation;
(3) the address of the foreign limited partnership's designated
office and, if the laws of the jurisdiction under which the foreign
limited partnership is organized require the foreign limited
partnership to maintain an office in that jurisdiction, the address
of the required office;
(4) the name and address of the foreign limited partnership's
initial agent for service of process in this state in accordance with
paragraph (1) of subdivision (d) of Section 15901.16;
(5) the name and address of each of the foreign limited
partnership's general partners; and
(6) whether the foreign limited partnership is a foreign limited
liability limited partnership.
(b) A foreign limited partnership shall deliver with the completed
application a certificate of existence or a record of similar import
signed by the Secretary of State or other official having custody of
the foreign limited partnership's publicly filed records in the
state or other jurisdiction under whose law the foreign limited
partnership is organized.
15909.03. (a) Activities of a foreign limited partnership that do

not constitute transacting business in this state for registration
purposes within the meaning of this article include the activities
set forth in subdivision (ai) of Section 15901.02.
(b) For purposes of this article, the ownership in this state of
income-producing real property or tangible personal property, other
than property excluded under subdivision (a), constitutes transacting
(c) This section does not apply in determining the contacts or
activities that may subject a foreign limited partnership to service
of process, taxation jurisdiction, or regulation under any other law
of this state.
15909.04. Unless the Secretary of State determines that an

application for a certificate of registration does not comply with
the filing requirements of this chapter, the Secretary of State, upon
payment of all requisite fees, shall file the application and shall
issue to the foreign limited partnership a certificate of
registration stating the date of filing of the application and that
the foreign limited partnership is qualified to transact intrastate
business, subject, however, to any licensing requirements otherwise
imposed by the laws of this state.
15909.05. (a) A foreign limited partnership whose name does not

comply with Section 15901.08 may not obtain a certificate of
registration until it adopts, for the purpose of transacting business
in this state, an alternate name that complies with Section
15901.08.
(b) If a foreign limited partnership authorized to transact
business in this state changes its name to one that does not comply
with Section 15901.08, it may not thereafter transact business in
this state until it complies with subdivision (a) and obtains an
amended certificate of registration.
(c) The Secretary of State may cancel the application and
certificate of registration of a foreign limited partnership if a
check or other remittance accepted in payment of the filing fee 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 a first written notice of the
applicability of this section 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, the Secretary of
State shall give a second written notice of cancellation and the
cancellation shall thereupon be effective. The second notice shall be
given 20 days or more after the first notice and 90 days or less
after the original filing.
15909.06. If any statement in the application for registration of a

foreign limited partnership was false when made or any statements
made have become erroneous, the foreign limited partnership shall
promptly deliver to, and on a form prescribed by, the Secretary of
State an amendment to the application for registration signed and
acknowledged by the general partner amending the statement.
15909.07. (a) In order to cancel its certificate of registration to

transact business in this state, a foreign limited partnership must
deliver to and on a form prescribed by the Secretary of State for
filing a certificate of cancellation signed and acknowledged by a
general partner of the foreign limited partnership. The registration
is canceled when the certificate becomes effective under Section
15902.06.
(b) A foreign limited partnership transacting business in this
state may not maintain an action or proceeding in this state unless
it has a certificate of registration to transact business in this
state.
(c) Any foreign limited partnership that transacts intrastate
business in this state without registration is subject to a penalty
of twenty dollars ($20) for each day that the unauthorized intrastate
business is transacted, up to a maximum of ten thousand dollars
($10,000). An action to recover this penalty may be brought, and any
recovery shall be paid, as provided in Section 2258.
(d) The failure of a foreign limited partnership to have a
certificate of registration to transact business in this state does
not impair the validity of a contract or act of the foreign limited
partnership or prevent the foreign limited partnership from defending
an action or proceeding in this state.
(e) A partner of a foreign limited partnership is not liable for
the obligations of the foreign limited partnership solely by reason
of the foreign limited partnership's having transacted business in
this state without a certificate of registration.
(f) If a foreign limited partnership transacts business in this
state without a certificate of registration or cancels its
certificate of registration, it appoints the Secretary of State as
its agent for service of process for rights of action arising out of
the transaction of business in this state.
15909.08. The Attorney General may maintain an action to restrain a

foreign limited partnership from transacting business in this state
in violation of this article.
CORPORATIONS CODE
SECTION 15910.01-15910.06
15910.01. (a) Subject to subdivision (b), a partner may maintain a

direct action against the limited partnership or another partner for
legal or equitable relief, with or without an accounting as to the
partnership's activities, to enforce the rights and otherwise protect
the interests of the partner, including rights and interests under
the partnership agreement or this chapter or arising independently of
the partnership relationship.
(b) A partner bringing a direct action under this section is
required to plead and prove an actual or threatened injury that is
not solely the result of an injury suffered or threatened to be
suffered by the limited partnership.
(c) The accrual of, and any time limitation on, a right of action
for a remedy under this section is governed by other law. A right to
an accounting upon a dissolution and winding up does not revive a
claim barred by law.
15910.02. A partner may bring a derivative action to enforce a
right of a limited partnership if:
(1) the partner first makes a demand on the general partners,
requesting that they cause the limited partnership to bring an action
to enforce the right, and the general partners do not bring the
action within a reasonable time; or
(2) a demand would be futile.
15910.03. (a) A derivative action may be maintained only by a

person that is a partner at the time the action is commenced and:
(1) that was a partner when the conduct giving rise to action
occurred; or
(2) whose status as a partner devolved upon the person by
operation of law or pursuant to the terms of the partnership
agreement from a person that was a partner at the time of that
conduct.
(b) Notwithstanding the foregoing, any partner who does not meet
the foregoing requirements may nevertheless be allowed in the
discretion of the court to maintain the action on a preliminary
showing to and determination by the court, by motion and after a
hearing, at which the court shall consider such evidence, by
affidavit or testimony, as it deems material that (1) there is a
strong prima facie case in favor of the claim asserted on behalf of
the partnership, (2) no other similar action has been or is likely to
be instituted, (3) the plaintiff acquired the shares before there
was disclosure to the public and to the plaintiff of the wrongdoing
of which plaintiff complains, (4) unless the action can be maintained
the defendant may retain a gain derived from the defendant's willful
breach of a fiduciary duty, and (5) the requested relief will not
result in unjust enrichment of the partnership or any partner.
15910.04. In a derivative action, the complaint must state with

particularity:
(1) the date and content of plaintiff's demand and the general
partners' response to the demand; or
(2) why demand is excused as futile.
15910.05. (a) Except as otherwise provided in subdivision (b):

(1) any proceeds or other benefits of a derivative action, whether
by judgment, compromise, or settlement, belong to the limited
partnership and not to the derivative plaintiff;
(2) if the derivative plaintiff receives any of those proceeds,
the derivative plaintiff shall immediately remit them to the limited
partnership.
(b) If a derivative action is successful in whole or in part, the
court may award the plaintiff reasonable expenses, including
reasonable attorney's fees, from the recovery of the limited
partnership.
15910.06. (a) In any derivative action, at any time within 30 days
after service of summons upon the limited partnership or the general
partner, the limited partnership or general partner may move the
party will benefit the limited partnership or its partners.
(2) That the moving party, if other than the partnership, did not
participate in the transaction complained of in any capacity. The
court on application of the limited partnership or the general
partner may, for good cause shown, extend the 30-day period for an
additional period or periods not exceeding 60 days.
(b) At the hearing upon any motion pursuant to subdivision (a) the
court shall consider such evidence, written or oral, by witnesses or
affidavit, as may be material (1) to the ground or grounds upon
reasonable expenses, including attorneys' fees, of the limited
partnership and the general partner which will be incurred in defense
of the action. If the court determines, after hearing the evidence
adduced by the parties, that the moving party has established a
probability in support of any of the grounds upon which the motion is
based, the court shall fix the amount of the bond, not to exceed
for reasonable expenses, including attorneys fees, which may be
incurred by the moving party and the limited partnership in
connection with the action, including expenses for which the limited
partnership may become liable pursuant to subdivision (c) of Section
15904.06. A ruling by the court on the motion shall not be a
determination of any issue in the action or of the merits thereof. If
the court, upon motion, makes a determination that a bond shall be
furnished by the plaintiff as to any one or more defendants, the
action shall be dismissed as to the defendant or defendants, unless
the bond required by the court has been furnished within such
reasonable time as may be fixed by the court.
(c) If the plaintiff shall, either before or after a motion is
made pursuant to subdivision (a), or any order or determination
pursuant to the motion, furnish a bond in the aggregate amount of
fifty thousand dollars ($50,000) to secure the reasonable expenses of
the parties entitled to make the motion, the plaintiff has complied
with the requirements of this section and with any order for a bond
theretofore made, any such motion then pending shall be dismissed and
no further additional bond shall be required.
(d) If a motion is filed pursuant to subdivision (a), no pleadings
need to be filed by the limited partnership or any other defendant
and the prosecution of the action shall be stayed until 10 days after
the motion has been disposed of.
CORPORATIONS CODE
SECTION 15911.01-15911.19
15911.01. For purposes of this article, the following definitions
apply:
(a) "Converted entity" means the other business entity or foreign
other business entity or foreign limited partnership that results
from a conversion of a domestic limited partnership under this
chapter.
(b) "Converted limited partnership" means a domestic limited
partnership that results from a conversion of an other business
entity or a foreign other business entity or a foreign limited
partnership pursuant to Section 15911.08.
(c) "Converting limited partnership" means a domestic limited
partnership that converts to an other business entity or a foreign
other business entity or a foreign limited partnership pursuant to
this chapter.
foreign other business entity or a foreign limited partnership that
converts to a domestic limited partnership pursuant to the terms of
Section 15911.08.
(e) "Constituent corporation" means a corporation that is merged
with or into one or more limited partnerships or other business
entities, and that includes a surviving corporation.
(f) "Constituent limited partnership" means a limited partnership
that is merged with or into one or more other limited partnerships or
other business entities, and that includes a surviving limited
partnership.
(g) "Constituent other business entity" means an other business
entity that is merged with or into one or more limited partnerships,
and that includes a surviving other business entity.
(h) "Disappearing limited partnership" means a constituent limited
partnership that is not the surviving limited partnership.
(i) "Disappearing other business entity" means a constituent other
(j) "Foreign other business entity" means an other business entity
formed under the laws of any state other than this state or under
the laws of a foreign country.
(k) "Other business entity" means a corporation, general
partnership, limited liability company, business trust, real estate
investment trust, or unincorporated association, other than a
nonprofit association, but excludes a limited partnership.
(l) "Surviving limited partnership" means a limited partnership
into which one or more other limited partnerships or other business
entities are merged.
(m) "Surviving other business entity" means another business
entity into which one or more limited partnerships are merged.
15911.02. (a) A limited partnership may be converted into another

business entity or a foreign other business entity or a foreign
limited partnership pursuant to this article if both of the following
apply:
(1) Pursuant to a conversion into a domestic or foreign
partnership or limited liability company or into a foreign limited
partnership, each of the partners of the converting limited
partnership receives a percentage interest in the profits and capital
of the converted entity equal to that partner's percentage interest
in profits and capital of the converting limited partnership as of
the effective time of the conversion.
(2) Pursuant to a conversion into an other business entity or
foreign other business entity not specified in paragraph (1), both of
the following occur:
(A) Each limited partnership interest of the same class is treated
equally with respect to any distribution of cash, property, rights,
interests, or securities of the converted entity, unless all limited
partners of the class consent.
(B) The nonredeemable limited partnership interests of the
converting limited partnership are converted only into nonredeemable
interests or securities of the converted entity, unless all holders
of the unredeemable interests consent.
(b) The conversion of a limited partnership to an other business
entity or a foreign other business entity or a foreign limited
partnership may be effected only if both of the following conditions
are satisfied:
(2) The limited partnership complies with all other requirements
of any other law that applies to conversion to the converted entity.
15911.03. (a) A limited partnership that desires to convert to an

other business entity or a foreign other business entity or a foreign
limited partnership shall approve a plan of conversion. The plan of
conversion shall state all of the following:
the converting limited partnership and the name of the converted
entity after conversion.
(3) The manner of converting the limited and general partnership
interests of each of the partners into shares of, securities of, or
interests in, the converted entity.
entity, including the partnership agreement, limited liability
company articles of organization and operating agreement, or articles
or certificate of incorporation if the converted entity is a
corporation, to which the holders of interests in the converted
entity are to be bound.
the parties.
(b) The plan of conversion shall be approved by all general
partners of the converting limited partnership and by a majority in
interest of each class of limited partners of the converting limited
partnership, unless a greater or lesser approval is required by the
partnership agreement of the converting limited partnership. However,
if the limited partners of the limited partnership would become
personally liable for any obligations of the converted entity as a
result of the conversion, the plan of conversion shall be approved by
all of the limited partners of the converting limited partnership,
unless the plan of conversion provides that all limited partners will
have dissenters' rights as provided in Article 11.5 (commencing with
Section 15911.20).
(c) Upon the effectiveness of the conversion, all partners of the
converting limited partnership, except those that exercise dissenters'
rights as provided in Article 11.5 (commencing with Section
15911.20), shall be deemed parties to any governing documents for the
converted entity adopted as part of the plan of conversion,
irrespective of whether or not the partner has executed the plan of
conversion or the governing documents for the converted entity. Any
adoption of governing documents made pursuant thereto shall be
effective at the effective time or date of the conversion.
(d) Notwithstanding its prior approval, a plan of conversion may
approved by all general partners of the converting limited
partnership and, if the amendment changes any of the principal terms
of the plan of conversion, the amendment is approved by the limited
partners of the converting limited partnership in the same manner and
to the same extent as required for the approval of the original plan
of conversion.
(e) The general partners of a converting limited partnership may,
by unanimous approval at any time before the conversion is effective,
in their discretion, abandon a conversion, without further approval
by the limited partners, subject to the contractual rights of third
parties other than limited partners.
(f) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the converted
entity is a domestic partnership or foreign other business entity, at
the principal executive office of, or registrar or transfer agent
of, the converted entity, if the converted entity is a domestic
corporation, or at the office at which records are to be kept under
Section 17057 if the converted entity is a domestic limited liability
company. Upon the request of a partner of a converting limited
partnership, the authorized person on behalf of the converted entity
shall promptly deliver to the partner or the holder of shares,
interests, or other securities, at the expense of the converted
entity, a copy of the plan of conversion. A waiver by a partner of
the rights provided in this subdivision shall be unenforceable.
15911.04. (a) A conversion into an other business entity or a

foreign other business entity or a foreign limited partnership shall
become effective upon the earliest date that all of the following
occur:
(1) The plan of conversion is approved by the partners of the
converting limited partnership, as provided in Section 15911.03.
(2) All documents required by law to create the converted entity
are filed, which documents shall also contain a statement of
conversion if required under Section 15911.06.
(3) The effective date, if set forth in the plan of conversion,
occurs.
(b) A copy of the statement of partnership authority or articles
of organization complying with Section 15911.06, if applicable, duly
certified by the Secretary of State, is conclusive evidence of the
conversion of the limited partnership.
15911.05. (a) The conversion of a limited partnership into a

foreign limited partnership or foreign other business entity shall be
required to comply with Section 15911.02.
(b) If the limited partnership is converting into a foreign
limited partnership or foreign other business entity, those
conversion proceedings shall be in accordance with the laws of the
state or place of organization of the foreign limited partnership or
foreign other business entity and the conversion shall become
effective in accordance with that law.
(c) (1) To enforce an obligation of a limited partnership that has
converted to a foreign limited partnership or foreign other business
entity, the Secretary of State shall only be the agent for service
of process in an action or proceeding against that converted foreign
entity if the agent designated for the service of process for that
entity is a natural person and cannot be found with due diligence or
if the agent is a corporation and no person to whom delivery may be
made may be located with due diligence, or if no agent has been
designated and if no one of the officers, partners, managers,
members, or agents of that entity may be located after diligent
search and it is so shown by affidavit to the satisfaction of the
court. The court then may make an order that service be made by
personal delivery to the Secretary of State or to an assistant or
deputy Secretary of State of two copies of the process together with
two copies of the order, and the order shall set forth an address to
which the process shall be sent by the Secretary of State. Service in
this manner is deemed complete on the 10th day after delivery of the
provide notice to that entity of the service of the process by
providing of notice thereof to that entity, and the forwarding of the
process shall be competent and prima facie evidence of the matters
stated therein.
15911.06. (a) Upon conversion of a limited partnership, one of the

following applies:
(1) If the limited partnership is converting into a domestic
limited liability company, a statement of conversion shall be
completed on the articles of organization for the converted entity
and shall be filed with the Secretary of State.
statement of partnership authority for the converted entity. If no
statement of partnership authority is filed, a certificate of
conversion shall be filed separately with the Secretary of State.
corporation, a statement of conversion shall be completed on the
articles of incorporation for the converted entity and shall be filed
with the Secretary of State.
(4) If the limited partnership is converting to a foreign limited
partnership or foreign other business entity, a certificate of
conversion shall be filed with the Secretary of State.
(b) Any certificate or statement of conversion shall be executed
and acknowledged by all general partners, unless a lesser number is
provided in the certificate of limited partnership, and shall set
forth all of the following:
converting limited partnership.
were approved by a vote of the partners, that equaled or exceeded
the vote required under Section 15911.03, specifying each class
entitled to vote and the percentage vote required of each class.
(4) The mailing address of the converted entity's agent for
service of process and the chief executive office of the converted
entity.
conversion or a statement of partnership authority, articles of
organization, or articles of incorporation containing a statement of
the filing of a certificate of cancellation by the converting limited
partnership, and no converting limited partnership that has made the
filing is required to file a certificate of cancellation under
Section 15902.03 as a result of that conversion.
15911.07. (a) Whenever a limited partnership or other business

entity having any real property in this state converts into a limited
partnership or an other business entity pursuant to the laws of this
state or of the state or place in which the limited partnership or
other business entity was organized, and the laws of the state or
place of organization, including this state, of the converting
limited partnership or other converting entity provide substantially
that the conversion vests in the converted limited partnership or
other converted entity all the real property of the converting
limited partnership or other converting entity, 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 converting limited partnership
or other converting entity is located of either of the following
shall evidence record ownership in the converted limited partnership
or other converted entity of all interest of the converting limited
partnership or other converting entity in and to the real property
located in that county:
(1) A certificate of conversion or statement of partnership
authority, a certificate of limited partnership, articles of
incorporation, or articles of organization complying with Section
15911.06, in the form prescribed and certified by the Secretary of
State.
(2) A copy of a certificate of conversion or a statement of
of organization, articles of incorporation, or other certificate or
document evidencing the creation of a foreign other business entity
or foreign limited partnership by conversion, containing a statement
of conversion, certified by the Secretary of State or an authorized
the conversion is effected.
conversion or a statement of partnership authority, certificate of
creation of a foreign other business entity or foreign limited
partnership by conversion, containing a statement of conversion,
filed pursuant to subdivision (a) of Section 15911.06, stating the
name of the converting limited partnership or other converting entity
in whose name property was held before the conversion and the name
of the converted entity or converted limited partnership, but not
containing all of the other information required by Section 15911.06,
operates with respect to the entities named to the extent provided
in subdivision (a).
(c) Recording of a certificate of conversion, or a statement of
of organization, articles of incorporation, or other certificate
evidencing the creation of another business entity or a limited
partnership by conversion, containing a statement of conversion, in
accordance with subdivision (a), shall create, in favor of bona fide
purchasers or encumbrances for value, a conclusive presumption that
the conversion was validly completed.
15911.08. (a) An other business entity or a foreign other business

entity or a foreign limited partnership may be converted to a
domestic limited partnership pursuant to this article only if the
converting entity is authorized by the laws under which it is
organized to effect the conversion.
a foreign limited partnership that desires to convert into a
domestic limited partnership shall approve a plan of conversion or
another instrument as is required to be approved to effect the
conversion pursuant to the laws under which that entity is organized.
business entity or a foreign limited partnership into a domestic
limited partnership shall be approved by the number or percentage of
the partners, members, shareholders, or holders of interest of the
converting entity as is required by the laws under which that entity
is organized, or a greater or lesser percentage, subject to
applicable laws, as set forth in the converting entity's partnership
agreement, articles of organization, operating agreement, articles or
certificate of incorporation, or other governing document.
business entity or a foreign limited partnership into a domestic
limited partnership shall be effective under this article at the time
the conversion is effective under the laws under which the
converting entity is organized, as long as a certificate of limited
partnership containing a statement of conversion has been filed with
the Secretary of State. If the converting entity's governing law is
silent as to the effectiveness of the conversion, the conversion
shall be effective upon the completion of all acts required under
this title to form a limited partnership.
conversion or a certificate of limited partnership containing a
statement of conversion pursuant to subdivision (a) shall have the
effect of the filing of a certificate of cancellation by the
converting foreign limited partnership or foreign limited liability
company and no converting foreign limited partnership or foreign
limited liability company that has made the filing is required to
file a certificate of cancellation under Section 15902.03 or 17455 as
a result of that conversion. If a converting other business entity
is a foreign corporation qualified to transact business in this
state, the foreign corporation shall, by virtue of the filing,
15911.09. (a) An entity that converts into another entity pursuant
to this article is, for all purposes, other than for the purposes of
Part 10 (commencing with Section 17001) of, Part 10.20 (commencing
with Section 18401) of, and Part 11 (commencing with Section 23001)
of, Division 2 of the Revenue and Taxation Code, the same entity that
existed before the conversion and the conversion shall not be deemed
a transfer of property.
of the converting entity or converting limited partnership are
vested in the converted entity or converted limited partnership.
entity or converting limited partnership continue as debts,
liabilities, and obligations of the converted entity or converted
converting entity or converting limited partnership shall be
preserved unimpaired and remain enforceable against the converted
entity or converted limited partnership to the same extent as against
the converting entity or converting limited partnership as if the
entity or converting limited partnership may be continued against the
converted entity or converted limited partnership as if the
(c) A partner of a converting limited partnership is liable for
the following:
(1) All obligations of the converting limited partnership for
which the partner was personally liable before the conversion.
out of property of the entity if that partner is a limited partner or
a shareholder in a corporation, or unless expressly provided
otherwise in the articles of organization or other governing
documents, a member of a limited liability company, or a holder of
equity securities in another converted entity if the holders of
equity securities in that entity are not personally liable for the
obligations of that entity under the law under which the entity is
organized or its governing documents.
(d) A partner of a converted limited partnership remains liable
for any and all obligations of the converting entity for which the
partner was personally liable before the conversion, but only to the
extent that the partner was liable for the obligations of the
converting entity prior to the conversion.
(e) If the other party to a transaction with the limited
partnership reasonably believes when entering the transaction that
the limited partner is a general partner, the limited partner is
liable for an obligation incurred by the limited partnership within
90 days after the conversion takes effect. The limited partner's
liability for all other obligations of the limited partnership
incurred after the conversion takes effect is that of a limited
partner.
15911.10. Mergers of limited partnerships shall be governed by

Sections 15911.11 to 15911.19, inclusive.
15911.11. The following entities may be merged pursuant to this
article:
(a) Two or more limited partnerships into one limited partnership.
(b) One or more limited partnerships and one or more other
business entities into one of those other business entities.
(c) One or more limited partnerships and one or more other
business entities into one limited partnership. Notwithstanding this
section, the merger of any number of limited partnerships with any
number of other business entities may be effected only if the other
business entities that are organized in California are authorized by
the laws under which they are organized to effect the merger, and (1)
if a limited partnership is the surviving limited partnership, the
foreign other business entities are not prohibited by the laws under
which they are organized from effecting that merger, and (2) if a
foreign limited partnership or foreign other business entity is the
survivor of the merger, the laws of the jurisdiction under which the
survivor is organized authorize that merger. Notwithstanding the
first sentence of this paragraph, if one or more domestic
corporations is also a party to the merger described in that
sentence, the merger may be effected only if, with respect to any
foreign other business entity that is a corporation, the foreign
corporation is authorized by the laws under which it is organized to
effect that merger.
15911.12. (a) Each limited partnership and other business entity

that desires to merge shall approve an agreement of merger. The
agreement of merger shall be approved by all general partners of each
constituent limited partnership and the principal terms of the
merger shall be approved by a majority in interest of each class of
limited partners of each constituent limited partnership, unless a
greater approval is required by the partnership agreement of the
constituent limited partnership. Notwithstanding the previous
sentence, if the limited partners of any constituent limited
partnership become personally liable for any obligations of a
constituent limited partnership or constituent other business entity
as a result of the merger, the principal terms of the agreement of
merger shall be approved by all of the limited partners of the
constituent limited partnership, unless the agreement of merger
provides that all limited partners will have the dissenters' rights
provided in Article 11.5 (commencing with Section 15911.20). The
agreement of merger shall be approved on behalf of each constituent
other business entity by those persons required to approve the merger
by the laws under which it is organized. Other persons, including a
parent of a constituent limited partnership, may be parties to the
agreement of merger. The agreement of merger shall state:
(2) The name and place of organization of the surviving limited
partnership or surviving other business entity, and of each
disappearing limited partnership and disappearing other business
entity, and the agreement of merger may change the name of the
surviving limited partnership, which new name may be the same as or
similar to the name of a disappearing domestic or foreign limited
partnership, subject to Section 15901.08.
the constituent limited partnerships into interests, shares, or other
securities of the surviving limited partnership or surviving other
business entity, and if partnership interests of any of the
constituent limited partnerships are not to be converted solely into
interests, shares, or other securities of the surviving limited
partnership or surviving other business entity, the cash, property,
rights, interests, or securities that the holders of the partnership
interests are to receive in exchange for the partnership interests,
which cash, property, rights, interests, or securities may be in
addition to or in lieu of interests, shares, or other securities of
the surviving limited partnership or surviving other business entity,
or that the partnership interests are canceled without
consideration.
under which any constituent other business entity is organized,
including, if a domestic corporation is a party to the merger,
partnership interests.
(b) Each limited partnership interest of the same class of any
constituent limited partnership, other than a limited partnership
interest in another constituent limited partnership that is being
canceled and that is held by a constituent limited partnership or its
parent or a limited partnership of which the constituent limited
partnership is a parent, shall, unless all limited partners of the
class consent, be treated equally with respect to any distribution of
cash, property, rights, interests, or securities. Notwithstanding
this subdivision, except in a merger of a limited partnership with a
limited partnership in which it controls at least 90 percent of the
limited partnership interests entitled to vote with respect to the
merger, the unredeemable limited partnership interests of a
constituent limited partnership may be converted only into
unredeemable interests or securities of the surviving limited
partnership or other business entity or a parent if a constituent
limited partnership or a constituent other business entity or its
parent owns, directly or indirectly, prior to the merger, limited
partnership interests of another constituent limited partnership or
interests or securities of a constituent other business entity
representing more than 50 percent of the interests or securities
entitled to vote with respect to the merger of the other constituent
limited partnership or constituent other business entity or more than
50 percent of the voting power, as defined in Section 194.5, of a
constituent other business entity that is a domestic corporation,
unless all of the limited partners of the class consent. This
subdivision shall apply only to constituent limited partnerships with
more than 35 limited partners.
be amended prior to the filing of the certificate of merger or the
agreement of merger, as provided in Section 15911.14, if the
amendment is approved by the general partners of each constituent
limited partnership in the same manner as required for approval of
the original agreement of merger and, if the amendment changes any of
the principal terms of the agreement of merger, the amendment is
approved by the limited partners of each constituent limited
partnership in the same manner and to the same extent as required for
the approval of the original agreement of merger, and by each of the
constituent other business entities.
(d) The general partners of a constituent limited partnership may,
in their discretion, abandon a merger, subject to the contractual
rights, if any, of third parties, including other constituent limited
partnerships and constituent other business entities, without
further approval by the limited partnership interests, at any time
before the merger is effective.
(a) may (1) effect any amendment to the partnership agreement of any
constituent limited partnership or (2) effect the adoption of a new
partnership agreement for a constituent limited partnership if it is
the surviving limited partnership in the merger. Any amendment to a
partnership agreement or adoption of a new partnership agreement made
pursuant to the foregoing sentence shall be effective at the
effective time or date of the merger. Notwithstanding the above
provisions of this subdivision, if a greater number of limited
partners is required to approve an amendment to the partnership
agreement of a constituent limited partnership than is required to
approve the agreement of merger pursuant to subdivision (a), and the
number of limited partners that approve the agreement of merger is
less than the number of limited partners required to approve an
amendment to the partnership agreement of the constituent limited
partnership, any amendment to the partnership agreement or adoption
of a new partnership agreement of that constituent limited
partnership made pursuant to the first sentence of this subdivision
shall be effective only if the agreement of merger provides that all
of the limited partners shall have the dissenters' rights provided in
Article 11.5 (commencing with Section 15911.20).
(f) The surviving limited partnership or surviving other business
entity shall keep the agreement of merger at its designated office or
at the business address specified in paragraph (5) of subdivision
(a) of Section 15911.14, as applicable, and, upon the request of a
limited partner of a constituent limited partnership or a holder of
shares, interests, or other securities of a constituent other
business entity, the general partners of the surviving limited
partnership or the authorized person of the surviving other business
entity shall promptly deliver to the limited partner or the holder of
shares, interests, or other securities, at the expense of the
surviving limited partnership or surviving other business entity, a
copy of the agreement of merger. A waiver by a partner or holder of
shares, interests, or other securities of the rights provided in this
subdivision shall be unenforceable.
15911.13. Subdivision (b) of Section 15911.12 shall not apply to

any transaction if the commissioner has approved the terms and
conditions of the transaction and the fairness of such terms and
conditions pursuant to Section 25142.
15911.14. (a) If the surviving entity is a limited partnership or

an other business entity, other than a corporation in a merger in
which a domestic corporation is a constituent party, after approval
of a merger by the constituent limited partnerships and any
constituent other business entities, the constituent limited
partnerships and constituent other business entities shall file a
certificate of merger in the office of, and on a form prescribed by,
the Secretary of State. The certificate of merger shall be executed
and acknowledged by each domestic constituent limited partnership by
all general partners, unless a lesser number is provided in the
certificate of limited partnership of the domestic constituent
limited partnership, and by each foreign constituent limited
partnership by one or more general partners, and by each constituent
other business entity by those persons required to execute the
certificate of merger by the laws under which the constituent other
business entity is organized. The certificate of merger shall set
forth all of the following:
of each of the constituent limited partnerships and constituent other
business entities, separately identifying the disappearing limited
partnerships and disappearing other business entities and the
surviving limited partnership or surviving other business entity.
(2) If a vote of the limited partners was required under Section
15911.12, a statement setting forth the total number of outstanding
interests of each class entitled to vote on the merger and that the
principal terms of the agreement of merger were approved by a vote of
the number of interests of each class which equaled or exceeded the
vote required, specifying each class entitled to vote and the
(3) If the surviving entity is a limited partnership and not an
other business entity, any change required to the information set
forth in the certificate of limited partnership of the surviving
limited partnership resulting from the merger, including any change
in the name of the surviving limited partnership resulting from the
merger. The filing of a certificate of merger setting forth any such
changes to the certificate of limited partnership of the surviving
limited partnership shall have the effect of the filing of a
certificate of amendment by the surviving limited partnership, and
the surviving limited partnership need not file a certificate of
amendment under Section 15902.02 to reflect those changes.
(4) The future effective date or time, which shall be a date or
time certain not more than 90 days subsequent to the date of filing,
State.
foreign limited partnership, the full name of the entity, type of
entity, legal jurisdiction in which the entity was organized and by
whose laws its internal affairs are governed, and the address of the
principal place of business of the entity.
entity is organized, including, if a domestic corporation is a party
to the merger, paragraph (2) of subdivision (g) of Section 1113. If
the surviving entity is a foreign limited partnership in a merger in
which a domestic corporation is a disappearing other business entity,
a copy of the agreement of merger and attachments as required under
paragraph (1) of subdivision (g) of Section 1113 shall be filed at
the same time as the filing of the certificate of merger.
(b) If the surviving entity is a domestic corporation or a foreign
corporation in a merger in which a domestic corporation is a
constituent party, after approval of the merger by the constituent
limited partnerships and constituent other business entities, the
surviving corporation shall file in the office of the Secretary of
State a copy of the agreement of merger and attachments required
domestic constituent limited partnership by all general partners,
unless a lesser number is provided in the certificate of limited
partnership of the domestic constituent limited partnership.
(c) A certificate of merger or the agreement of merger, as is
applicable under subdivision (a) or (b), shall have the effect of the
filing of a certificate of cancellation for each disappearing
limited partnership, and no disappearing limited partnership need
file a certificate of cancellation under Section 15902.03 as a result
of the merger.
(d) If the organization disappearing into the other business
entity is a foreign corporation qualified to transact intrastate
business in this state, a certificate of satisfaction of the
Franchise Tax Board as required by Section 23334 of the Revenue and
Taxation Code shall be filed with the certificate of merger or
agreement of merger, as is applicable under subdivision (a) or (b).
By the filing of the certificate of merger or agreement of merger, as
is applicable, the foreign corporation shall automatically surrender
its right to transact intrastate business.
15911.15. (a) Unless a future effective date or time is provided in

a certificate of merger or the agreement of merger, if an agreement
of merger is required to be filed under Section 15911.14, in which
event the merger shall be effective at that future effective date or
time, a merger shall be effective upon the filing of the certificate
of merger or the agreement of merger, as is applicable, in the office
of the Secretary of State.
(b) (1) For all purposes, a copy of the certificate of merger duly
certified by the Secretary of State is conclusive evidence of the
merger of (A) the constituent limited partnerships, either by
themselves or together with constituent other business entities, into
the surviving other business entity, or (B) the constituent limited
partnerships or the constituent other business entities, or both,
into the surviving limited partnership.
(2) In a merger in which the surviving entity is a corporation in
a merger in which a domestic corporation and a domestic limited
partnership are parties to the merger, a copy of an agreement of
merger certified on or after the effective date by an official having
custody thereof has the same force in evidence as the original and,
except as against the state, is conclusive evidence of the
performance of all conditions precedent to the merger, the existence
on the effective date of the surviving corporation, and the
performance of the conditions necessary to the adoption of any
amendment to the articles of incorporation of the surviving
corporation, if applicable, contained in the agreement of merger.
15911.16. (a) Upon a merger of limited partnerships or limited

partnerships and other business entities pursuant to this chapter,
the separate existence of the disappearing limited partnerships and
disappearing other business entities ceases and the surviving limited
partnership or surviving other business entity shall succeed,
without other transfer, act or deed, to all the rights and property,
whether real, personal, or mixed, of each of the disappearing limited
partnerships and disappearing other business entities, and shall be
subject to all the debts and liabilities of each in the same manner
as if the surviving limited partnership or surviving other business
entity had itself incurred them.
(b) All rights of creditors and all liens upon the property of
each of the constituent limited partnerships and constituent other
business entities shall be preserved unimpaired and may be enforced
against the surviving limited partnership or the surviving other
business entity to the same extent as if the debt, liability, or duty
which gave rise to that lien had been incurred or contracted by the
surviving limited partnership or the surviving other business entity,
provided that such liens upon the property of a disappearing limited
partnership or disappearing other business entity shall be limited
to the property affected thereby immediately prior to the time the
merger is effective.
disappearing limited partnership or disappearing other business
entity may be prosecuted to judgment, which shall bind the surviving
limited partnership or surviving other business entity, or the
surviving limited partnership or surviving other business entity may
be proceeded against or be substituted in the place of the
disappearing limited partnership or disappearing other business
entity.
(d) Nothing in this article is intended to affect the liability a
general partner of a disappearing limited partnership may have in
connection with the debts and liabilities of the disappearing limited
partnership existing prior to the time the merger is effective.
15911.17. (a) The merger of any number of domestic limited

partnerships with any number of foreign limited partnerships or
foreign other business entities shall be required to comply with
Section 15911.10.
(b) If the surviving entity is a domestic limited partnership or a
domestic other business entity, the merger proceedings with respect
to that limited partnership or other business entity and any domestic
disappearing limited partnership shall conform to the provisions of
this chapter governing the merger of domestic limited partnerships,
but if the surviving entity is a foreign limited partnership or a
foreign other business entity, then, subject to the requirements of
subdivision (d) and Article 11.5 (commencing with Section 15911.20)
and, with respect to any domestic constituent corporation, Section
1113 and Chapters 12 (commencing with Section 1200) and 13
(commencing with Section 1300) of Division 1 of Title 1, the merger
of organization of the surviving limited partnership or surviving
other business entity.
(c) If the surviving entity is a domestic limited partnership or
domestic other business entity, other than a domestic corporation,
the certificate of merger shall be filed as provided in subdivision
(a) of Section 15911.14, and thereupon, subject to subdivision (a) of
Section 15911.15, the merger shall be effective as to each domestic
constituent limited partnership and domestic constituent other
business entity. If the surviving entity is a domestic corporation,
the agreement of merger with attachments shall be filed as provided
in subdivision (b) of Section 15911.14, and thereupon, subject to
subdivision (a) of Section 15911.15, the merger shall be effective as
to each domestic constituent limited partnership and domestic
constituent other business entity unless another effective date is
provided in Chapter 11 (commencing with Section 1100) of Division 1
of Title 1, with respect to any constituent corporation or
constituent limited partnership.
(d) If the surviving entity is a foreign limited partnership or
foreign other business entity, the merger shall become effective in
limited partnership or surviving other business entity is organized,
but shall be effective as to any domestic disappearing limited
partnership as of the time of effectiveness in the foreign
jurisdiction upon the filing in this state of a certificate of merger
or agreement of merger as provided in Section 15911.14.
(e) If a merger described in subdivision (c) or (d) also includes
a foreign disappearing limited partnership previously registered for
the transaction of intrastate business in this state pursuant to
Section 15909.02, the filing of the certificate of merger or
agreement of merger, as is applicable under Section 15911.14,
automatically has the effect of a cancellation of registration for
that foreign limited partnership pursuant to Section 15909.06 without
the necessity of the filing of a certificate of cancellation.
(f) The provisions of subdivision (b) of Section 15911.12 and
Article 11.5 (commencing with Section 15911.20) apply to the rights
of the limited partners of any of the constituent limited
partnerships that are domestic limited partnerships and of any
domestic limited partnership that is a parent of any foreign
constituent limited partnership.
15911.18. Whenever a domestic or foreign limited partnership or

other business entity having any real property in this state merges
with another limited partnership or other business entity pursuant to
the laws of this state or of the state or place in which any
constituent limited partnership or constituent other business entity
was organized, and the laws of the state or place of organization,
including this state, of any disappearing limited partnership or
disappearing other business entity provide substantially that the
making and filing of the agreement of merger or certificate of merger
vests in the surviving limited partnership or surviving other
business entity all the real property of any disappearing limited
partnership and disappearing other business entity, 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 disappearing limited
partnership or disappearing other business entity is located of
either of the following shall evidence record ownership in the
surviving limited partnership or surviving other business entity of
all interest of such disappearing limited partnership or disappearing
other business entity in and to the real property located in that
county:
(a) A certificate of merger certified by the Secretary of State,
or other certificate prescribed by the Secretary of State.
(b) A copy of the agreement of merger or certificate of merger,
certified by the Secretary of State or an authorized public official
of the state or place pursuant to the laws of which the merger is
effected.
15911.19. Recording of the certificate of merger in accordance with

Section 15911.18 shall create, in favor of bona fide purchasers or
encumbrancers for value, a conclusive presumption that the merger was
validly completed.
CORPORATIONS CODE
SECTION 15911.20-15911.33
15911.20. (a) For purposes of this article, "reorganization" refers

to any of the following:
(1) A conversion pursuant to Article 11 (commencing with Section
15911.01).
(2) A merger pursuant to Article 11 (commencing with Section
15911.10).
(3) The acquisition by one limited partnership in exchange, in
whole or in part, for its partnership interests (or the partnership
interests or equity securities of a partnership or other business
entity that is in control of the acquiring limited partnership) of
partnership interests or equity securities of another limited
partnership or other business entity if, immediately after the
acquisition, the acquiring limited partnership has control of the
other limited partnership or other business entity.
(4) The acquisition by one limited partnership in exchange in
whole or in part for its partnership interests (or the partnership
interests or equity securities of a partnership or other business
entity which is in control of the acquiring limited partnership) or
for its debts securities (or debt securities of a limited partnership
or other business entity which is in control of the acquiring
limited partnership) which are not adequately secured and which have
a maturity date in excess of five years after the consummation of the
acquisition, or both, of all or substantially all of the assets of
another limited partnership or other business entity.
(b) For purposes of this article, "control" means the possession,
direct or indirect, of the power to direct or cause the direction of
the management and policies of a limited partnership or other
business entity.
15911.21. (a) If the approval of outstanding limited partnership

interests is required for a limited partnership to participate in a
reorganization, pursuant to the limited partnership agreement of the
partnership, or otherwise, then each limited partner of the limited
partnership holding those interests may, by complying with this
article, require the limited partnership to purchase for cash, at its
fair market value, the interest owned by the limited partner in the
limited partnership, if the interest is a dissenting interest as
defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the
proposed reorganization, excluding any appreciation or depreciation
in consequence of the proposed reorganization.
(b) As used in this article, "dissenting interest" means the
interest of a limited partner that satisfies all of the following
conditions:
(1) Either:
(A) Was not, immediately prior to the reorganization, either (i)
listed on any national securities exchange certified by the
Commissioner of Corporations under subdivision (o) of Section 25100,
or (ii) listed on the list of OTC margin stocks issued by the Board
of Governors of the Federal Reserve System, provided that in either
such instance the limited partnership whose outstanding interests are
so listed provides, in its notice to limited partners requesting
their approval of the proposed reorganization, a summary of the
provisions of this section and Sections 15911.22, 15911.23, 15911.24,
and 15911.25.
(B) If the interest is of a class of interests listed as described
in clause (i) or (ii) of subparagraph (A), demands for payment are
filed with respect to 5 percent or more of the outstanding interests
of that class.
(2) Was outstanding on the date for the determination of limited
partners entitled to vote on the reorganization.
(3) (A) Was not voted in favor of the reorganization, or (B) if
the interest is described in clause (i) or (ii) of subparagraph (A)
of paragraph (1), was voted against the reorganization; provided,
however, that clause (A) rather than clause (B) of this paragraph
applies in any event where the approval for the proposed
reorganization is sought by written consent rather than at a meeting.
(4) The limited partner has demanded that it be purchased by the
limited partnership at its fair market value in accordance with
Section 15911.22.
(5) The limited partner has submitted it for endorsement, if
applicable, in accordance with Section 15911.23.
(c) As used in this article, "dissenting limited partner" means
the recordholder of a dissenting interest, and includes an assignee
of record of such an interest.
15911.22. (a) If limited partners have a right under Section

15911.21, subject to compliance with paragraphs (4) and (5) of
subdivision (b) thereof, to require the limited partnership to
purchase their limited partnership interests for cash, such limited
partnership shall mail to each such limited partner a notice of the
approval of the reorganization by the requisite vote or consent of
the limited partners, within 10 days after the date of such approval,
accompanied by a copy of this section and Sections 15911.21,
15911.23, 15911.24, and 15911.25, a statement of the price determined
by the limited partnership to represent the fair market value of its
outstanding interests, and a brief description of the procedure to
be followed if the limited partner desires to exercise the limited
partner's rights under such sections. The statement of price
constitutes an offer by the limited partnership to purchase at the
price stated any dissenting interests as defined in subdivision (b)
of Section 15911.21, unless they lose their status as dissenting
interests under Section 15911.30.
(b) Any limited partner who has a right to require the limited
partnership to purchase the limited partner's interest for cash under
Section 15911.21, subject to compliance with paragraphs (4) and (5)
of subdivision (b) thereof, and who desires the limited partnership
to purchase such interest, shall make written demand upon the limited
partnership for the purchase of such interest and the payment to the
limited partner in cash of its fair market value. The demand is not
effective for any purpose unless it is received by the limited
partnership or any transfer agent thereof (1) in the case of
interests described in clause (i) or (ii) of subparagraph (A) of
paragraph (1) of subdivision (b) of Section 15911.21, not later than
the date of the limited partners' meeting to vote upon the
reorganization, or (2) in any other case, within 30 days after the
date on which notice of the approval of the reorganization by the
requisite vote or consent of the limited partners is mailed by the
limited partnership to the limited partners.
(c) The demand shall state the number or amount of the limited
partner's interest in the limited partnership and shall contain a
statement of what such limited partner claims to be the fair market
value of that interest on the day before the announcement of the
proposed reorganization. The statement of fair market value
constitutes an offer by the limited partner to sell the interest at
such price.
15911.23. Within 30 days after the date on which notice of the

approval of the outstanding interests of the limited partnership is
mailed to the limited partner pursuant to subdivision (a) of Section
15911.22, the limited partner shall submit to the limited partnership
at its principal office or at the office of any transfer agent
thereof, (a) if the interest is evidenced by a certificate, the
limited partner's certificate representing the interest which the
limited partner demands that the limited partnership purchase, to be
stamped or endorsed with a statement that the interest is a
dissenting interest or to be exchanged for certificates of
appropriate denominations so stamped or endorsed, or (b) if the
interest is not evidenced by a certificate, written notice of the
number or amount of interest which the limited partner demands that
the limited partnership purchase. Upon subsequent transfers of the
dissenting interest on the books of the limited partnership, the new
certificates or other written statement issued therefor shall bear a
like statement, together with the name of the original holder of the
dissenting interest.
15911.24. (a) If the limited partnership and the dissenting limited

partner agree that such limited partner's interest is a dissenting
interest and agree upon the price to be paid for the dissenting
interest, the dissenting limited partner is entitled to the agreed
price with interest thereon at the legal rate on judgments from the
date of consummation of the reorganization. All agreements fixing the
fair market value of any dissenting limited partner's interest as
between the limited partnership and such limited partner shall be in
writing and filed in the records of the limited partnership.
(b) Subject to the provisions of Section 15911.27, payment of the
fair market value for a dissenting interest shall be made within 30
days after the amount thereof has been agreed to or within 30 days
after any statutory or contractual conditions to the reorganization
are satisfied, whichever is later, and in the case of dissenting
interests evidenced by certificates of interest, subject to surrender
of such certificates of interest, unless provided otherwise by
agreement.
15911.25. (a) If the limited partnership denies that a limited

partnership interest is a dissenting interest, or the limited
partnership and a dissenting limited partner fail to agree upon the
fair market value of a dissenting interest, then such limited partner
or any interested limited partnership, within six months after the
requisite vote or consent of the limited partners was mailed to the
limited partner, but not thereafter, may file a complaint in the
superior court of the proper county praying the court to determine
whether the interest is a dissenting interest, or the fair market
value of the dissenting interest, or both, or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting limited partners may join as plaintiffs
or be joined as defendants in any such action and two or more such
actions may be consolidated.
issues. If the status of the limited partnership interest as a
dissenting interest is in issue, the court shall first determine that
issue. If the fair market value of the dissenting interest is in
issue, the court shall determine, or shall appoint one or more
impartial appraisers to determine, the fair market value of the
15911.26. (a) If the court appoints an appraiser or appraisers,

they shall proceed forthwith to determine the fair market value per
interest of the outstanding limited partnership interests of the
limited partnership, by class if necessary. Within the time fixed by
the court, the appraisers, or a majority of them, shall make and file
a report in the office of the clerk of the court. Thereupon, on the
motion of any party, the report shall be submitted to the court and
considered on any additional evidence as the court considers
relevant. If the court finds the report reasonable, the court may
confirm it.
(b) If a majority of the appraisers appointed fails to make and
file a report within 30 days from the date of their appointment, or
within any further time as may be allowed by the court, or the report
is not confirmed by the court, the court shall determine the fair
market value per interest of the outstanding limited partnership
interests of the limited partnership, by class if necessary.
(c) Subject to Section 15911.27, judgment shall be rendered
against the limited partnership for payment of an amount equal to the
fair market value, as determined by the court, of each dissenting
interest which any dissenting limited partner who is a party, or has
intervened, is entitled to require the limited partnership to
purchase, with interest thereon at the legal rate on judgments from
the date of consummation of the reorganization.
(d) Any judgment shall be payable forthwith, provided, however,
that with respect to limited partnership interests evidenced by
transferable certificates of interest, only upon the endorsement and
delivery to the limited partnership of those certificates
representing the interests described in the judgment. Any party may
appeal from the judgment.
(e) The costs of the action, including reasonable compensation for
the appraisers, to be fixed by the court, shall be assessed or
exceeds the price offered by the limited partnership, the limited
partnership shall pay the costs (including, in the discretion of the
court, if the value awarded by the court for the dissenting interest
is more than 125 percent of the price offered by the limited
partnership under subdivision (a) of Section 15911.22, attorney's
fees and fees of expert witnesses).
15911.27. To the extent that the payment to dissenting limited

partners of the fair market value of their dissenting interests would
require the dissenting limited partners to return such payment or a
portion thereof by reason of Section 15905.09 or the Uniform
Fraudulent Transfer Act (Chapter 1 (commencing with Section 3439) of
Title 2 of Part 2 of Division 4 of the Civil Code), then that payment
or portion thereof shall not be made and the dissenting limited
partners shall become creditors of the limited partnership for the
amount not paid, together with interest thereon at the legal rate on
judgments until the date of payment, but subordinate to all other
creditors in any proceeding relating to the winding up and
dissolution of the limited partnership, such debt to be payable when
permissible.
15911.28. Any cash distributions made by a limited partnership to a

dissenting limited partner after the date of consummation of the
reorganization, but prior to any payment by the limited partnership
for such dissenting limited partner's interest, shall be credited
against the total amount to be paid by the limited partnership for
such dissenting interest.
15911.29. Except as expressly limited by this article, dissenting

limited partners shall continue to have all the rights and privileges
incident to their interests immediately prior to the reorganization,
including limited liability, until payment by the limited
partnership for their dissenting interests. A dissenting limited
partner may not withdraw a demand for payment unless the limited
partnership consents thereto.
15911.30. A dissenting interest loses its status as a dissenting

interest and the holder thereof ceases to be a dissenting limited
partner and ceases to be entitled to require the limited partnership
to purchase the interest upon the happening of any of the following:
(a) The limited partnership abandons the reorganization. Upon
abandonment of the reorganization, the limited partnership shall pay,
on demand, to any dissenting limited partner who has initiated
proceeding in good faith under this article, all reasonable expenses
incurred in such proceedings and reasonable attorneys' fees.
(b) The interest is transferred prior to its submission for
endorsement in accordance with Section 15911.23.
(c) The dissenting limited partner and the limited partnership do
not agree upon the status of the interest as a dissenting interest or
upon the purchase price of the dissenting interest, and neither
files a complaint nor intervenes in a pending action, as provided in
Section 15911.25, within six months after the date upon which notice
of the approval of the reorganization by the requisite vote or
consent of limited partners was mailed to the limited partner.
(d) The dissenting limited partner, with the consent of the
limited partnership, withdraws such limited partner's demand for
purchase of the dissenting interest.
15911.31. If litigation is instituted to test the sufficient or

regularity of the vote or consent of the limited partners in
authorizing a reorganization, any proceedings under Sections 15911.25
and 15911.26 shall be suspended until final determination of that
litigation.
15911.32. (a) This article applies to the following:
(1) A domestic limited partnership formed on or after January 1,
1991.
(2) A foreign limited partnership if (A) the foreign limited
partnership was formed on or after January 1, 1991, or filed an
application to qualify to do business on or after January 1, 1991,
and (B) limited partners holding more than 50 percent of the voting
power held by all limited partners of the foreign limited partnership
reside in this state.
(3) A limited partnership if the partnership agreement so provides
or if all general partners and a majority in interest of the limited
partners determine that this article shall apply.
(b) This article does not apply to limited partnership interests
governed by limited partnership agreements whose terms and provisions
specifically set forth the amount to be paid in respect of such
interests in the event of a reorganization of the limited
partnership, or to limited partnerships with 35 or fewer limited
partners, unless the partnership agreement provides that this article
shall apply or unless all general partners and a majority in
interest of the limited partners agree that this article shall apply.
15911.33. (a) No limited partner of a limited partnership who has a

right under this article to demand payment of cash for the interest
owned by such limited partner in a limited partnership shall have any
right at law or in equity to attack the validity of the
reorganization, or to have the reorganization set aside or rescinded,
except in an action to test whether the vote or consent of limited
partners required to authorize or approve the reorganization has been
obtained in accordance with the procedures established therefor by
the partnership agreement of the limited partnership.
(b) If one of the parties to a reorganization is directly or
indirectly controlled by, or under common control with, another party
to the reorganization, subdivision (a) shall not apply to any
limited partner of such controlled party who has not demanded payment
of cash for such limited partner's interest pursuant to this
article; but if such limited partner institutes any action to attack
the validity of the reorganization or to have the reorganization set
aside or rescinded, the limited partner shall not thereafter have any
right to demand payment of cash for such limited partner's interest
pursuant to this article.
(c) If one of the parties to a reorganization is directly or
to the reorganization, then, in any action to attack the validity of
the reorganization or to have the reorganization set aside or
rescinded, (1) a party to a reorganization which controls another
party to a reorganization shall have the burden of proving that the
transaction is just and reasonable as to the limited partners of the
controlled party, and (2) a person who controls two or more parties
to a reorganization shall have the burden of proving that the
transaction is just and reasonable as to the limited partners of any
party so controlled.
(d) Subdivisions (b) and (c) shall not apply if a majority in
interest of the limited partners other than limited partners who are
directly or indirectly controlled by, or under common control with,
another party to the reorganization approve or consent to the
reorganization.
(e) This section shall not prevent a partner of a limited
partnership that is a party to a reorganization from bringing an
action against a general partner of the limited partnership, the
limited partnership, or any person controlling a general partner at
law or in equity as to any matters (including, without limitation, an
action for breach of fiduciary obligation or fraud) other than to
attack the validity of the reorganization or to have the
reorganization set aside or rescinded.
CORPORATIONS CODE
SECTION 15912.01-15912.07
15912.01. In applying and construing this chapter, consideration

must be given to the need to promote uniformity of the law with
respect to its subject matter among states that enact it.
15912.02. If any provision of this chapter or its application to

any person or circumstance is held invalid, the invalidity does not
affect other provisions or applications of this chapter which can be
this end, the provisions of this chapter are severable.
15912.03. This chapter modifies, limits, or supersedes the federal

Electronic Signatures in Global and National Commerce Act, 15 U.S.C.
Section 7001 et seq., but this chapter does not modify, limit, or
supersede Section 101(c) of that act or authorize electronic delivery
of any of the notices described in Section 103(b) of that act.
15912.04. This chapter shall become operative on January 1, 2008.
15912.06. (a) Before January 1, 2010, this chapter governs only:

(1) a limited partnership formed on or after January 1, 2008; and
(2) except as otherwise provided in subdivisions (c) and (d), a
limited partnership formed before January 1, 2008, which elects, in
the manner provided in its partnership agreement or by law for
amending the partnership agreement, to be subject to this chapter.
(b) Except as otherwise provided in subdivision (c), on and after
January 1, 2010, this chapter governs all limited partnerships.
(c) With respect to a limited partnership formed before January 1,
2008, the following rules apply except as the partners otherwise
elect in the manner provided in the partnership agreement or by law
for amending the partnership agreement:
(1) Section 15901.04(c) does not apply and the limited partnership
has whatever duration it had under the law applicable immediately
before January 1, 2008.
(2) Sections 15906.01 and 15906.02 do not apply and a limited
partner has the same right and power to dissociate from the limited
partnership, with the same consequences, as existed immediately
before January 1, 2008.
(3) Subdivision (d) of Section 15906.03 does not apply.
(4) Subdivision (e) of Section 15906.03 does not apply and a court
has the same power to expel a general partner as the court had
immediately before January 1, 2008.
(5) Subdivision (c) of Section 15908.01 does not apply and the
connection between a person's dissociation as a general partner and
the dissolution of the limited partnership is the same as existed
immediately before January 1, 2008.
(d) With respect to a limited partnership that elects pursuant to
paragraph (2) of subdivision (a) to be subject to this chapter, after
the election takes effect, the provisions of this chapter relating
to the liability of the limited partnership's general partners to
third parties apply:
(1) before January 1, 2010, to:
(A) a third party that had not done business with the limited
partnership in the year before the election took effect; and
(B) a third party that had done business with the limited
partnership in the year before the election took effect only if the
third party knows or has received a notification of the election; and
(2) on and after January 1, 2010, to all third parties, but those
provisions remain inapplicable to any obligation incurred while those
provisions were inapplicable under subparagraph (B) of paragraph
(1).
15912.07. This chapter does not affect an action commenced,

proceeding brought, or right accrued before this chapter becomes
operative.
CORPORATIONS CODE
SECTION 17000-17005
17000. This title shall be known and may be cited as the

Beverly-Killea Limited Liability Company Act.
17001. Unless the context otherwise indicates, the following

definitions govern the construction of this title:
(a) "Acknowledged" means that an instrument is either of the
following:
(1) Formally acknowledged as provided in Article 3 (commencing
the Civil Code.
(2) Executed to include substantially the following wording
preceding the signature: It is hereby declared that I am the person
who executed this instrument, which execution is my act and deed.
(b) "Articles of organization" means articles of organization
filed under Section 17050, including all amendments thereto or
restatements thereof, or, in the case of a foreign limited liability
company, all documents that serve a like function under the laws of
the jurisdiction in which the foreign limited liability company is
organized.
(c) "Bankrupt" or "bankruptcy" means, with respect to any person,
being the subject of an order for relief under Title 11 of the United
States Code, or any successor statute or other statute in any
foreign jurisdiction having like import or effect.
(d) "Capital account" means, unless otherwise provided in the
operating agreement, the amount of the capital interest of a member
in the limited liability company consisting of that member's original
contribution, as (1) increased by any additional contributions and
by that member's share of the limited liability company's profits,
and (2) decreased by any distribution to that member and by that
member's share of the limited liability company's losses.
(e) "Constituent limited liability company" means a limited
liability company that is merged with or into one or more other
limited liability companies or other business entities and includes a
surviving limited liability company.
(f) "Constituent other business entity" means any other business
entity that is merged with or into one or more limited liability
companies and includes a surviving other business entity.
(g) "Contribution" means any money, property, or services
rendered, or a promissory note or other binding obligation to
contribute money or property, or to render services as permitted in
this title, which a member contributes to a limited liability company
as capital in that member's capacity as a member pursuant to an
agreement between the members, including an agreement as to value.
(h) "Disappearing limited liability company" means a constituent
limited liability company that is not the surviving limited liability
company.
(i) "Disappearing other business entity" means a constituent other
(j) "Distribution" means the transfer of money or property by a
limited liability company to its members without consideration.
(k) "Domestic" means organized under the laws of this state when
used in relation to any limited liability company, other business
entity or person (other than a natural person).
(l) "Domestic corporation" means a corporation as defined in
Section 162.
(m) "Domestic limited partnership" means a partnership formed by
two or more persons under the laws of this state and having one or
more general partners and one or more limited partners.
(n) "Economic interest" means a person's right to share in the
income, gains, losses, deductions, credit, or similar items of, and
to receive distributions from, the limited liability company, but
does not include any other rights of a member, including, without
limitation, the right to vote or to participate in management, or,
except as provided in Section 17106, any right to information
concerning the business and affairs of the limited liability company.
(o) (1) "Electronic transmission by the limited liability company"
means a communication (a) delivered by (1) facsimile
telecommunication or electronic mail when directed to the facsimile
number or electronic mail address, respectively, for that recipient
on record with the limited liability company, (2) posting on an
electronic message board or network that the limited liability
company has designated for those communications, together with a
separate notice to the recipient of the posting, which transmission
shall be validly delivered upon the later of the posting or delivery
of the separate notice thereof, or (3) other means of electronic
communication, (b) to a recipient who has provided an unrevoked
consent to the use of those means of transmission, and (c) that
creates a record that is capable of retention, retrieval, and review,
and that may thereafter be rendered into clearly legible tangible
form. However, an electronic transmission by a limited liability
company to an individual member is not authorized unless, in addition
to satisfying the requirements of this section, the transmission
satisfies the requirements applicable to consumer consent to
electronic records as set forth in the Electronic Signatures in
Global and National Commerce Act (15 U.S.C. Sec. 7001(c)(1)).
(2) "Electronic transmission to the limited liability company"
means a communication (a) delivered by (1) facsimile
telecommunication or electronic mail when directed to the facsimile
number or electronic mail address, respectively, which the limited
liability company has provided from time to time to members or
managers for sending communications to the limited liability company,
(2) posting on an electronic message board or network that the
limited liability company has designated for those communications,
and which transmission shall be validly delivered upon the posting,
or (3) other means of electronic communication, (b) as to which the
limited liability company has placed in effect reasonable measures to
verify that the sender is the member or manager (in person or by
proxy) purporting to send the transmission, and (c) that creates a
record that is capable of retention, retrieval, and review, and that
may thereafter be rendered into clearly legible tangible form.
(p) "Foreign corporation" means a corporation formed under the
laws of any state other than this state or under the laws of the
United States or of a foreign country.
(q) "Foreign limited liability company" means either (1) an entity
formed under the limited liability company laws of any state other
than this state, or (2) an entity organized under the laws of any
foreign country that is (A) an unincorporated association, (B)
organized under a statute pursuant to which an association may be
formed that affords each of its members limited liability with
respect to the liabilities of the entity, and (C) not an entity that
is required to be registered or qualified pursuant to the provisions
of Title 1 (commencing with Section 100) or Title 2 (commencing with
Section 15001); but the term "foreign limited liability company" does
not include a foreign association, as defined in Section 170.
(r) "Foreign limited partnership" means a partnership formed under
the laws of any state other than this state or under the laws of a
foreign country, including a limited liability limited partnership,
and having as partners one or more general partners and one or more
limited partners or their equivalents under any name.
(s) "Foreign other business entity" means any other business
entity formed under the laws of any state other than this state or
under the laws of the United States or of a foreign country.
(t) "Limited liability company" or "domestic limited liability
company" means an entity having one or more members that is organized
under this title and is subject to the provisions of Section 17101.
(u) "Mail" unless otherwise provided in the operating agreement,
means first-class mail, postage prepaid, unless registered mail is
specified. Registered mail includes certified mail.
(v) "Majority in interest of the members," unless otherwise
provided in the operating agreement, means more than 50 percent of
the interests of members in current profits of the limited liability
company.
(w) "Manager" means a person elected by the members of a limited
liability company to manage the limited liability company if the
articles of organization contain the statement referred to in
subdivision (b) of Section 17151 or, if the articles of organization
do not contain that statement, "manager" means each of the members of
the limited liability company.
(x) "Member" means a person who:
(1) Has been admitted to a limited liability company as a member
in accordance with the articles of organization or operating
agreement, or an assignee of an interest in a limited liability
company who has become a member pursuant to Section 17303.
(2) Has not resigned, withdrawn, or been expelled as a member or,
if other than an individual, been dissolved.
(y) "Member of record" means a member named as a member on the
list maintained in accordance with paragraph (1) of subdivision (a)
of Section 17058.
(z) "Membership interest" means a member's rights in the limited
liability company, collectively, including the member's economic
interest, any right to vote or participate in management, and any
right to information concerning the business and affairs of the
limited liability company provided by this title.
(aa) "Officer" means any person elected or appointed pursuant to
Section 17154.
(ab) "Operating agreement" means any agreement, written or oral,
between all of the members as to the affairs of a limited liability
company and the conduct of its business in any manner not
inconsistent with law or the articles of organization, including all
amendments thereto, or, in the case of a foreign limited liability
company, all documents that serve a like function under the laws of
the jurisdiction in which the foreign limited liability company is
organized. The term "operating agreement" may include, without more,
an agreement between all the members to organize a limited liability
company pursuant to the provisions of this title.
(ac) "Other business entity" means a corporation, limited
partnership, general partnership, business trust, real estate
investment trust, or an unincorporated association (other than a
nonprofit association), but excluding a domestic limited liability
company and a foreign limited liability company.
(ad) "Parent," when used in relation to a specified limited
liability company, means a person who owns, directly or indirectly,
membership interests possessing more than 50 percent of the voting
power of the specified limited liability company. When used in
relation to a specified corporation or limited partnership, the term
"parent" shall have the meanings set forth in Section 175 and
subdivision (w) of Section 15611 or subdivision (v) of Section
15901.02 respectively.
(ae) "Person" means an individual, partnership, limited
partnership, trust, estate, association, corporation, limited
liability company, or other entity, whether domestic or foreign.
(af) ÝRESERVED]
(ag) ÝRESERVED]
(ah) ÝRESERVED]
(ai) "Proxy," unless otherwise provided in the operating
agreement, means a written authorization signed or an electronic
transmission authorized by a member or the member's attorney-in-fact
giving another person the power to exercise the voting rights of that
member. "Signed," for the purpose of this section, means the placing
of the member's name on the proxy (whether by manual signature,
typewriting, telegraphic or electronic transmission, or otherwise) by
the member or member'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 member, or by the member's
attorney-in-fact.
(aj) "Return of capital," unless otherwise provided in the
operating agreement, means any distribution to a member to the extent
that the member's capital account, immediately after the
distribution, is less than the amount of that member's contributions
to the limited liability company as reduced by prior distributions
that were a return of capital.
(ak) "State" means a state, territory, or possession of the United
States, the District of Columbia, or the Commonwealth of Puerto
Rico.
(al) "Subsidiary of a specified limited liability company" means a
limited liability company or other business entity in which shares,
interests, or other securities possessing more than 50 percent of the
voting power are owned by the specified limited liability company.
(am) "Surviving limited liability company" means a limited
liability company into which one or more other limited liability
companies or other business entities are merged.
(an) "Surviving other business entity" means an other business
entity into which one or more limited liability companies are merged.
(ao) "Time a notice is given or sent," unless otherwise expressly
provided, means the time a written notice is deposited in the United
States mail; is personally delivered to the recipient, is delivered
to a common carrier for transmission, or is actually transmitted by
the person giving the notice by electronic transmission, to the
recipient; or the time any oral notice is communicated, in person or
by telephone, to the recipient or to a person at the office of the
(ap) "Transact intrastate business" means to enter into repeated
and successive transactions of business in this state, other than in
interstate or foreign commerce.
(1) Without excluding other activities which may not be considered
company 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:
(A) A shareholder of a domestic corporation.
(B) A shareholder of a foreign corporation transacting intrastate
business.
(C) A limited partner of a foreign limited partnership transacting
(D) A limited partner of a domestic limited partnership.
(E) A member or manager of a foreign limited liability company
(F) A member or manager of a domestic limited liability company.
(2) Without excluding other activities which may not be considered
company shall not be considered to be transacting intrastate business
within the meaning of this subdivision solely by reason of carrying
on in this state any one or more of the following activities:
(A) Maintaining or defending any action or suit or any
thereof, or the settlement of claims or disputes.
(B) Holding meetings of its managers or members or carrying on any
other activities concerning its internal affairs.
(C) Maintaining bank accounts.
(D) Maintaining offices or agencies for the transfer, exchange,
and registration of the foreign limited liability company's
securities or maintaining trustees or depositaries with respect to
those securities.
(E) Effecting sales through independent contractors.
(F) Soliciting or procuring orders, whether by mail or through
(G) Creating or acquiring evidences of debt or mortgages, liens,
or security interests in real or personal property.
(H) Securing or collecting debts or enforcing mortgages and
(I) Conducting an isolated transaction that is completed within
of a like nature.
(3) A person shall not be deemed to be transacting intrastate
business in this state merely because of its status as a member or
manager of a domestic limited liability company or a foreign limited
liability company registered to transact intrastate business in this
state.
(aq) "Vote" includes authorization by written consent.
(ar) "Voting power" means the power to vote on any matter 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.
(as) "Withdrawal" includes the resignation or retirement of a
member as a member.
(at) "Written" or "in writing" includes facsimile, telegraphic,
and other electronic communication as authorized by this code.
17002. (a) Subject to any limitations contained in the articles of

organization and to compliance with any other applicable laws, a
limited liability company may engage in any lawful business activity,
whether or not for profit, except the banking business, the business
of issuing policies of insurance and assuming insurance risks, or
the trust company business.
(b) Notwithstanding subdivision (a) and as specifically provided
in this subdivision, a limited liability company may operate as a
health care service plan licensed pursuant to Chapter 2.2 (commencing
with Section 1340) of Division 2 of the Health and Safety Code if
the limited liability company is a subsidiary of a health care
service plan licensed pursuant to those provisions and the limited
liability company is established to serve an existing line of
business of the parent health care service plan. Notwithstanding any
other provision of law, the tort or contract liability of a limited
liability company created to operate as a health care service plan
under this subdivision and its members is not limited or restricted
in any manner because of the limited liability company status of the
health care service plan.
(c) Notwithstanding Section 17375, a limited liability company may
render services that may be lawfully rendered only pursuant to a
license, certificate, or registration authorized by the Business and
Professions Code if the applicable provisions of the Business and
Professions Code authorize a limited liability company to hold that
license, certificate, or registration.
17003. Subject to any limitations contained in the articles of

organization and to compliance with this title and any other
applicable laws, a limited liability company organized under this
title shall have all of the powers of a natural person in carrying
out its business activities, including, without limitation, the power
to:
(a) Transact its business, carry on its operations, qualify to do
business, and have and exercise the powers granted by this title in
any state, territory, district, possession, or dependency of the
United States, and in any foreign country.
(b) Sue, be sued, complain and defend any action, arbitration, or
proceeding, whether judicial, administrative, or otherwise, in its
own name.
(c) Adopt, use, and at will alter a company seal; but failure to
(d) Make contracts and guarantees, incur liabilities, act as
surety, and borrow money.
(e) Sell, lease, exchange, transfer, convey, mortgage, pledge, and
otherwise dispose of all or any part of its property and assets.
(f) Purchase, take, receive, lease, or otherwise acquire, own,
hold, improve, use, or otherwise deal in and with any interest in
real or personal property, wherever located.
(g) Lend money to and otherwise assist its members and employees.
(h) Issue notes, bonds, and other obligations and secure any of
them by mortgage or deed of trust or security interest of any or all
of its assets.
(i) Purchase, take, receive, subscribe for, or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, loan, pledge, or
otherwise dispose of and otherwise use and deal in and with stock or
other interests in and obligations of any person, or direct or
indirect obligations of the United States or of any government,
state, territory, governmental district, or municipality, or of any
instrumentality of any of them.
(j) Invest its surplus funds, lend money from time to time in any
manner which may be appropriate to enable it to carry on the
operations or fulfill the purposes set forth in its articles of
organization, and take and hold real property and personal property
as security for the payment of funds so loaned or invested.
(k) Be a promoter, stockholder, partner, member, manager,
associate, or agent of any person.
(l) Indemnify or hold harmless any person.
(m) Purchase and maintain insurance.
(n) 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 bonds,
debentures, and other securities.
(o) Pay pensions and establish and carry out pension,
profit-sharing, bonus, share purchase, option, savings, thrift, and
other retirement, incentive, and benefit plans, trusts, and
provisions for all or any of the current or former members, managers,
officers, or employees of the limited liability company or any of
its subsidiary or affiliated entities, and to indemnify and purchase
and maintain insurance on behalf of any fiduciary of such plans,
trusts, or provisions.
(p) Make donations, regardless of specific benefit to the limited
liability company, to the public welfare or for community, civic,
religious, charitable, scientific, literary, educational, or similar
purposes.
(q) Make payments or donations or do any other act, not
inconsistent with this title or any other applicable law, that
furthers the business and affairs of the limited liability company.
(r) Pay compensation, and pay additional compensation, to any or
all managers, officers, members, and employees on account of services
previously rendered to the limited liability company, whether or not
an agreement to pay such compensation was made before such services
were rendered.
(s) Insure for its benefit the life of any of its members,
managers, officers, or employees, insure the life of any member for
the purpose of acquiring at his or her death the interest owned by
such member, and continue such insurance after the relationship
terminates.
(t) Do every other act not inconsistent with law that is
appropriate to promote and attain the purposes set forth in its
articles of organization.
17004. (a) A member may lend money to and transact other business
with the limited liability company and, subject to other applicable
law, has the same rights and obligations with respect thereto as a
person who is not a member.
(b) Except as otherwise authorized in, or pursuant to, the
operating agreement or other agreement among all the members, no
member is entitled to remuneration for acting in the limited
liability company business, subject to the entitlement of managers or
members winding up the affairs of the limited liability company to
reasonable compensation pursuant to subdivision (c) of Section 17352.
17005. (a) Except as provided in subdivisions (b) and (c),

relations among members and between the members and the limited
liability company are governed by the articles of organization and
operating agreement. To the extent the articles of organization or
operating agreement do not otherwise provide, this title governs
relations among the members and between the members and the limited
liability company.
(b) The effect of the provisions of this title may be varied as
among the members or as between the members and the limited liability
company by the articles of organization or operating agreement,
provided, however, that the provisions of Sections 17059, 17103,
17104, 17152, 17154, and 17155 may only be varied by the articles of
organization or a written operating agreement. Notwithstanding the
first sentence of this subdivision, neither the articles of
organization nor the operating agreement may:
(1) Vary the definitions in Section 17001, except as specifically
provided therein.
(2) Eliminate the right of a member pursuant to subdivision (c) of
Section 17100 to assert that a provision in the operating agreement
governing the termination of that member's interest and the return of
that member's contribution was unreasonable under the circumstances
existing at the time the agreement was made.
(3) Vary the voting requirements or voting rights set forth in
subdivisions (b) and (c) of Section 17103.
(4) Vary a member's rights under Sections 17106 and 17453.
(c) The provisions of Chapter 2 (commencing with Section 17050),
Chapter 8 (commencing with Section 17350), Chapter 10 (commencing
with Section 17450), Chapter 11 (commencing with Section 17500),
Chapter 12 (commencing with Section 17550), and Chapter 13
(commencing with Section 17600) may be varied by the articles of
organization or by a written operating agreement only to the extent
expressly provided in those chapters.
(d) The fiduciary duties of a manager to the limited liability
company and to the members of the limited liability company may only
be modified in a written operating agreement with the informed
consent of the members.
(e) The presence in certain provisions of this title of the words
"unless otherwise provided in the articles of organization or
operating agreement" or words of similar import does not imply that
the effect of other provisions may not be varied as among the members
by the articles of organization or operating agreement.
(f) If any provision of the articles of organization conflicts
with one or more provisions of a written operating agreement, the
articles of organization shall control.
CORPORATIONS CODE
SECTION 17050-17062
17050. (a) In order to form a limited liability company, one or

more persons shall execute and file articles of organization with,
and on a form prescribed by, the Secretary of State and, either
before or after the filing of articles of organization, the members
shall have entered into an operating agreement. The person or persons
who execute and file the articles of organization may, but need not,
be members of the limited liability company.
(b) A limited liability company shall have one or more members.
(c) The existence of a limited liability company begins upon the
filing of the articles of organization. For all purposes, a copy of
the articles of organization duly certified by the Secretary of State
is conclusive evidence of the formation of a limited liability
company and prima facie evidence of its existence.
(d) The Secretary of State shall include with instructional
materials provided in conjunction with the form for filing articles
of organization under subdivision (a) a notice that filing the
registration will obligate the limited liability company to pay an
annual tax for that taxable year to the Franchise Tax Board pursuant
to Section 17941 of the Revenue and Taxation Code. That notice shall
be updated annually to specify the dollar amount of the tax.
17051. (a) The articles of organization shall set forth:

(1) The name of the limited liability company.
(2) The following statement:
The purpose of the limited liability company is to engage in any
lawful act or activity for which a limited liability company may be
organized under the Beverly-Killea Limited Liability Company Act.
(3) ÝRESERVED]
(4) The name and address of the initial agent for service of
process on the limited liability company who meets the qualifications
specified in paragraph (1) of subdivision (b) of Section 17061,
unless a corporate agent is designated, in which case only the name
of the agent shall be set forth.
(5) If the limited liability company is to be managed by one or
more managers and not by all its members, the statement referred to
in subdivision (b) of Section 17151. If the limited liability company
is to be managed by only one manager, the articles of organization
shall contain a statement to that effect.
(b) It is not necessary to set out in the articles of organization
any of the powers of a limited liability company enumerated in this
title.
(c) The articles of organization may contain any other provision
not inconsistent with law, including, but not limited to:
(1) A provision limiting or restricting the business in which the
limited liability company may engage or the powers that the limited
liability company may exercise or both.
(2) Provisions governing the admission of members to the limited
liability company.
(3) The time at which the limited liability company is to
dissolve.
(4) Any events that will cause a dissolution of the limited
liability company.
(5) A statement of whether there are limitations on the authority
of managers or members to bind the limited liability company, and, if
so, what the limitations are.
(6) The names of the managers of the limited liability company.
(d) No limitation upon the business, purposes, or powers of the
limited liability company contained in or implied by the articles of
organization or the operating agreement may be asserted by any
person, except in one of the following types of proceedings:
(1) In a proceeding by a member or the state to enjoin the doing
of unauthorized business by the limited liability company or its
managers or officers, if third parties have not acquired rights
thereby.
(2) In a proceeding to dissolve the limited liability company.
(3) In a derivative proceeding by the limited liability company or
by a member suing on the company's behalf against the officers or
managers of the limited liability company for violation of their
authority. However, the limitation may not be asserted if the person
asserting the limitation had actual knowledge of the limitation at
the time of the act or event complained of.
(e) The Secretary of State may cancel the filing of articles of
organization if a check or other remittance accepted in payment of
and the cancellation shall be effective at that time. The second
notice shall be given 20 days or more after the first notice and 90
days or less after the original filing.
17052. The name of each limited liability company as set forth in
its articles of organization:
(a) Shall contain either the words "limited liability company" or
the abbreviation "LLC" or "L.L.C." as the last words in the name of
the limited liability company. The words "limited" and "company" may
be abbreviated to "Ltd." and "Co.," respectively.
(b) May contain the name of one or more members.
(c) Shall not be a name that the Secretary of State determines is
likely to mislead the public and shall not be the same as, or
resemble so closely as to tend to deceive, (1) the name of any
limited liability company that has filed articles of organization
pursuant to Section 17050, (2) the name of any foreign limited
liability company registered to do business in this state pursuant to
Section 17451, or (3) any name that is under reservation for another
domestic limited liability company or foreign limited liability
company pursuant to Section 17053. However, a limited liability
company may adopt a name that is substantially the same as that of an
existing domestic limited liability company or foreign limited
liability company that is registered pursuant to Section 17451 upon
proof of consent by that domestic limited liability company or
foreign limited liability company and a finding by the Secretary of
State that, under the circumstances, the public is not likely to be
misled.
(d) Shall not contain the words "bank," "trust," "trustee,"
"incorporated," "inc.," "corporation," or "corp.," and shall not
contain the words "insurer" or "insurance company" or any other words
suggesting that it is in the business of issuing policies of
insurance and assuming insurance risks.
(e) The use by a limited liability company or a foreign limited
liability company of a name in violation of this section may be
enjoined, notwithstanding the filing of its articles of organization
or its registration with the Secretary of State.
(f) A limited liability company may record in the office of the
county recorder of any county in this state, and county recorders, on
request, shall record a certified copy of the limited liability
company articles of organization and any exhibits or attachments, or
any amendment or correction thereto, that has been filed in the
office of the Secretary of State. A foreign limited liability company
may record in the office of the county recorder of any county in the
state a certified copy of the limited liability company application
for registration, certificate of registration, or any amendment
thereto, that has been filed in the office of the Secretary of State.
The recording shall create a conclusive presumption in favor of any
bona fide purchaser or encumbrancer for value of the limited
liability company real property located in the county in which the
certified copy has been recorded, of the statements contained
therein.
17053. Any applicant may, upon payment of the fee prescribed in

subdivision (a) of Section 17701, obtain from the Secretary of State
a certificate of reservation of any name not prohibited by Section
17052, and upon the issuance of the certificate the name stated
therein may be reserved for a period of 60 days. The Secretary of
State shall not 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 for names so
similar as to fall within the prohibitions of subdivision (c) of
Section 17052.
17054. (a) Subject to subdivision (b) of Section 17103, the

articles of organization may be amended at any time and in any manner
as the members may determine, as long as the articles of
organization as amended contain only those provisions as it would be
lawful to insert in original articles of organization filed at the
time of the filing of the amendment. The articles of organization may
be amended regardless of whether any provision contained in the
amendment was permissible at the time of the original organization of
(b) The articles of organization shall be amended by filing a
certificate of amendment thereto duly executed by at least one
manager, unless a greater number is provided in the articles of
organization. The certificate of amendment shall be filed with, and
on a form prescribed by, the Secretary of State, and shall set forth
all of the following:
limited liability company.
(2) The text of the amendment to the articles of organization.
(c) A certificate of amendment to the articles of organization
shall be filed to effect any of the following:
(1) A change in the name of the limited liability company.
(2) Any change in the statement referred to in subdivision (b) of
Section 17151.
(3) Any change in the time as stated in the articles of
organization for the dissolution of the limited liability company.
(4) Any change in the events that will cause a dissolution of the
(d) The managers shall cause to be filed a certificate of
amendment to the articles of organization within 30 days of the
discovery by any of the managers of any false or erroneous material
statement contained in the articles of organization or any amendment
thereto.
(e) Any manager who executes a certificate of amendment shall be
liable for any statement materially inconsistent with the operating
agreement or any material misstatement of fact contained in the
certificate of amendment if the manager knew or should have known
that the statement was false when made or that the statement became
false and an amendment required by subdivision (d) was not filed, and
the person suffering the loss relied on the statement or
misstatement.
(f) Articles of organization may be restated at any time. Restated
articles of organization shall be filed with, and on a form
prescribed by, the Secretary of State, shall be specifically
designated as restated in the heading, shall set forth the limited
liability company's name and the Secretary of State's file number,
may set forth the name and address of the agent for service of
process required to be maintained by Section 17057, unless a
corporate agent is designated, in which case only the name of the
agent shall be set forth, shall set forth all the other matters
required by Section 17051 to be set forth in the articles of
organization, and may set forth any other matters that may be set
forth as authorized by Section 17051. If restated articles of
organization include the agent for service of process, any previously
filed statements pursuant to Section 17060 are superseded as to the
agent for service of process until another statement pursuant to
Section 17060 is filed subsequent to the filing of the restated
articles of organization. If the name of the limited liability
company is to be changed by the filing of the restated articles of
organization, the old name shall also be set forth in the heading in
a manner to indicate the intent to change the name.
17055. (a) If any document filed with the Secretary of State under
this title contains any typographical error, error of transcription,
or other technical error, or has been defectively executed, the
document may be corrected by the filing of a certificate of
correction.
(b) A certificate of correction shall be filed with, and on a form
prescribed by, the Secretary of State, and shall set forth:
(2) The title of the document being corrected.
(3) The name of each party to the document being corrected.
(4) The date that the document being corrected was filed.
(5) The provision in the document as previously filed and as
corrected and, if execution of the document was defective, the manner
in which it was defective.
(c) A certificate of correction shall not make any other change or
amendment that would not have complied in all respects with the
requirements of this title at the time the document being corrected
was filed.
(d) A certificate of correction shall be executed in the same
manner in which the document being corrected was required to be
executed.
(e) A certificate of correction may not:
(1) Change the effective date of the document being corrected.
(2) Affect any right or liability accrued or incurred before its
filing, except that any right or liability accrued or incurred by
reason of the error or defect being corrected shall be extinguished
by the filing if the person having the right or to whom the liability
is owed has not detrimentally relied on the original document.
17056. (a) Unless otherwise specified in any other section of this

title, any document required by this title to be executed and filed
with the Secretary of State shall be executed:
(1) By the person or persons organizing the limited liability
company when the limited liability company has not yet been formed.
(2) By any manager.
(3) If the limited liability company is in the hands of a
receiver, trustee, or other court-appointed fiduciary, by that
fiduciary.
(4) In the case of a foreign limited liability company, in the
manner required by the laws of the state of its organization.
(b) Any person may execute any document referred to in subdivision
(a) by an attorney in fact. Powers of attorney relating to the
signing of those documents by an attorney in fact need not be sworn
to, verified, or acknowledged, and need not be filed with the
Secretary of State.
(c) Any instrument filed with respect to a limited liability
company, other than the original articles of organization, may
provide that it is to become effective not more than 90 days after
its filing date. In case a delayed effective date is specified, the
instrument may be prevented from becoming effective by a certificate
stating that by appropriate action it has been revoked and is null
and void. This certificate shall be executed in the same manner as
the original instrument and shall be filed before the specified
effective date. In the case of a merger agreement or certificate of
merger, a certificate revoking the earlier filing need only be
executed on behalf of one of the constituent parties to the merger.
If no revocation certificate is filed, the instrument becomes
effective on the date specified.
(d) If the Secretary of State determines that an instrument
submitted for filing or otherwise submitted does not conform to the
law and returns it to the person submitting it, the instrument may be
resubmitted accompanied by a written opinion of a member of the
State Bar of California submitting the instrument or representing the
person submitting it, to the effect that the specific provisions of
disputed point of law, other than the application of Sections 17052,
17053, 17451, and 17452, 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.
17057. Each limited liability company shall continuously maintain

in this state each of the following:
(a) An office at which shall be maintained the records required by
Section 17058.
(b) An agent in this state for service of process on the limited
liability company.
17058. (a) Each limited liability company shall maintain in writing

or in any other form capable of being converted into clearly legible
tangible form at the office referred to in subdivision (a) of
Section 17057 all of the following:
(1) A current list of the full name and last known business or
residence address of each member and of each holder of an economic
interest in the limited liability company set forth in alphabetical
order, together with the contribution and the share in profits and
losses of each member and holder of an economic interest.
(2) If the articles of organization contain the statement
described in subdivision (b) of Section 17151, a current list of the
full name and business or residence address of each manager.
(3) A copy of the articles of organization and all amendments
thereto, together with any powers of attorney pursuant to which the
articles of organization or any amendments thereto were executed.
(4) Copies of the limited liability company's federal, state, and
local income tax or information returns and reports, if any, for the
six most recent taxable years.
(5) A copy of the limited liability company's operating agreement,
if in writing, and any amendments thereto, together with any powers
of attorney pursuant to which any written operating agreement or any
amendments thereto were executed.
(6) Copies of the financial statements of the limited liability
company, if any, for the six most recent fiscal years.
(7) The books and records of the limited liability company as they
relate to the internal affairs of the limited liability company for
at least the current and past four fiscal years.
(b) Upon request of an assessor, a domestic or foreign limited
liability company owning, claiming, possessing, or controlling
property in this state subject to local assessment shall make
available at the limited liability company's principal office in
California or at the office required to be kept pursuant to
subdivision (a) of Section 17057 or at a place mutually acceptable to
the assessor and the limited liability company, a true copy of
business records relevant to the amount, cost, and value of all
property that it owns, claims, possesses, or controls within the
county.
17059. The power to adopt, alter, amend, or repeal the operating

agreement of a limited liability company shall be vested in the
members. The articles of organization or a written operating
agreement may prescribe the manner in which the operating agreement
may be altered, amended, or repealed.
17060. (a) Every limited liability company and every foreign

limited liability company registered to transact intrastate business
in this state shall file within 90 days after the filing of its
original articles of organization and biennially thereafter during
the applicable filing period, on a form prescribed by the Secretary
of State, a statement containing:
(1) The name of the limited liability company and the Secretary of
State's file number and, in the case of a foreign limited liability
company, the state under the laws of which it is organized.
(2) The name and address of the agent for service of process
required to be maintained pursuant to subdivision (b) of Section
17057. If a corporate agent is designated, only the name of the agent
shall be set forth.
(3) The street address of its principal executive office and, in
the case of a domestic limited liability company, of the office
required to be maintained pursuant to Section 17057.
(4) The name and complete business or residence addresses of any
manager or managers and the chief executive officer, if any,
appointed or elected in accordance with the articles of organization
or operating agreement or, if no manager has been so elected or
appointed, the name and business or residence address of each member.
(5) The general type of business that constitutes the principal
business activity of the limited liability company (for example,
department store).
(b) If there has been no change in the information in the last
filed statement of the limited liability company on file in the
Secretary of State's office, the limited liability company may, in
lieu of filing the statement required by subdivision (a), advise the
Secretary of State, on a form prescribed by the Secretary of State,
that no changes in the required information have occurred during the
applicable filing period.
for a limited liability company shall be the calendar month during
which its original articles of organization were filed or, in the
case of a foreign limited liability company, the month during which
its application for registration was filed, and the immediately
preceding five calendar months. The Secretary of State shall mail a
form for compliance with this section to each limited liability
company approximately three months prior to the close of the
applicable filing period. The form shall state the due date thereof
and shall be mailed to the last address of the limited liability
company according to the records of the Secretary of State. The
failure of the limited liability company to receive the form shall
not exempt the limited liability company from complying with this
section.
(d) Whenever any of the information required by subdivision (a)
changes, other than the name and address of the agent for service of
process, the limited liability company may file a current statement
containing all the information required by subdivision (a). When
changing its agent for service of process or when the address of the
agent changes, the limited liability company shall file a current
statement containing all the information required by subdivision (a).
Whenever any statement is filed pursuant to this section changing
the name and address of the agent for service of process, that
statement supersedes any previously filed statement pursuant to this
section, the statement in the original articles of organization, and
the statement in any restated articles of organization that have been
filed, or in the case of a foreign limited liability company, in the
application for registration. Whenever restated articles of
organization are filed, the statement therein, if any, of the name
and address of the agent for service of process supersedes any
previously filed statement pursuant to this section.
dealing with the limited liability company on notice of, or under any
duty to inquire about, the existence or content of a statement filed
pursuant to this section.
17061. (a) In addition to Chapter 4 (commencing with Section

413.10) of Title 5 of Part 2 of the Code of Civil Procedure, process
may be served upon limited liability companies and foreign limited
liability companies as provided in this section.
(b) Personal service of a copy of any process against the limited
liability company or the foreign limited liability company by
delivery (1) to any individual designated by it as agent, or (2) if
the designated agent is a corporation, to any person named in the
1505 at the office of the corporate agent, shall constitute valid
service on the limited liability company or the foreign limited
liability company. No change in the address of the agent for service
of process or appointment of a new agent for service of process shall
be effective until an amendment to the statement described in
Section 17060 is filed. In the case of a foreign limited liability
company that has appointed the Secretary of State as agent for
service of process by reason of subdivision (d) of Section 17456,
process shall be delivered by hand to the Secretary of State, or to
any person employed in the capacity of assistant or deputy, and shall
include one copy of the process for each defendant to be served,
together with a copy of the court order authorizing the service and
the fee therefor. The order shall set forth the address to which the
process shall be sent by the Secretary of State.
(c) (1) If an agent for service of process has resigned and has
not been replaced or if the designated agent cannot with reasonable
court that process against a limited liability company or foreign
limited liability company cannot be served with reasonable diligence
upon the designated agent by hand in the manner provided in Section
415.10, subdivision (a) of Section 415.20, or subdivision (a) of
Section 415.30 of the Code of Civil Procedure, the court may make an
order that the service shall be made upon a domestic limited
liability company or upon a registered foreign limited liability
company by delivering by hand to the Secretary of State, or to any
person employed in the Secretary of State's office in the capacity of
assistant or deputy, one copy of the process for each defendant to
be served, together with a copy of the order authorizing the service.
Service in this manner shall be deemed complete on the 10th day
after delivery of the process to the Secretary of State.
(2) Upon receipt of the copy of process and the fee therefor, the
Secretary of State shall give notice of the service of the process to
the limited liability company or foreign limited liability company,
at its principal executive office, by forwarding to that office, by
registered mail with request for return receipt, the copy of the
process.
served upon the Secretary of State under this title and shall record
therein the time of service and the action taken by the Secretary of
State. A certificate under the Secretary of State's official seal,
certifying to the receipt of process, the giving of notice to the
limited liability company or foreign limited liability company, and
the forwarding of the process pursuant to this section, shall be
competent and prima facie evidence of the service of process.
(d) (1) The articles of organization of a limited liability
company and the application for registration of a foreign limited
liability company shall designate, as the agent for service of
process, an individual residing in this state or a corporation that
has complied with Section 1505 and whose capacity to act as an agent
has not terminated. If an individual is designated, the statement
shall set forth that person's complete business or residence address
in this state.
(2) An agent designated for service of process may file with the
resignation as an agent. Upon filing of the statement of resignation,
the authority of the agent to act in that capacity shall cease and
the Secretary of State shall give written notice of the filing of the
statement of resignation by mail to the limited liability company or
foreign limited liability company addressed to its principal
executive office.
(3) If an individual who has been designated agent for service of
process dies or resigns or no longer resides in the state, or if the
corporate agent for that purpose resigns, dissolves, withdraws from
its corporate rights, powers, and privileges suspended, or ceases to
exist, the limited liability company or foreign limited liability
company shall promptly file an initial or amended statement described
in Section 17060 designating a new agent.
(e) In addition to any other discovery rights that may exist, in
any case pending in a California court in which a party seeks records
from a limited liability company formed under this title, whether or
not the limited liability company is a party, the court may order
the production in California of the books and records of the limited
liability company on those terms and conditions that the court deems
appropriate.
(f) A member may, in a written operating agreement or other
writing, consent to be subject to the nonexclusive jurisdiction of
the courts of a specified jurisdiction, or the exclusive jurisdiction
of the courts of this state.
(g) If a member desires to use the arbitration process, that
member may, in a written operating agreement or other writing,
consent to be nonexclusively subject to arbitration in a specified
state, or to be exclusively subject to arbitration in this state.
(h) Along with the consent to the jurisdiction of courts or to be
subject to arbitration as provided in subdivisions (f) and (g), a
member may consent to be served with legal process in the manner
prescribed in a written operating agreement or other writing.
17062. An instrument shall be deemed filed, and the date of filing

endorsed thereon, upon receipt by the Secretary of State of any
instrument accompanied by the fee prescribed in Chapter 15
(commencing with Section 17700). The date of filing shall be the date
the instrument is received by the Secretary of State unless the
instrument is withheld from filing for a period of time not to exceed
90 days pursuant to a request by the party submitting it for filing
or unless, in the judgment of the Secretary of State, the filing is
intended to be coordinated with the filing of some other document
that 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 that
document is received in the Secretary of State's office at least one
business day prior to the requested date of filing. Upon receipt and
after filing of any document under this title, the Secretary of State
may microfilm or reproduce by other techniques any filings or
documents and destroy the original filing or document. The microfilm
or other reproduction of any document under the provision of this
section shall be admissible in any court of law.
CORPORATIONS CODE
SECTION 17100-17107
17100. (a) After formation of a limited liability company, a person

may become a member:
(1) In the case of a person acquiring a membership interest
directly from the limited liability company, at the time provided in
and upon compliance with the articles of organization or the
operating agreement or, if the articles of organization or operating
agreement do not so provide, only upon the vote of a majority in
interest of the members, excluding the vote of the person acquiring
the membership interest, and only when the person becomes a party to
the operating agreement.
(2) In the case of an assignee of a membership interest, upon
compliance with subdivision (a) of Section 17303 and at the time
provided in and upon compliance with the articles of organization or
the operating agreement or, if the articles of organization or
operating agreement do not so provide, when the assignee becomes a
party to the operating agreement.
(b) In each case under subdivision (a), the person acquiring the
membership interest shall be added as a member to the list required
by paragraph (1) of subdivision (a) of Section 17058.
(c) The operating agreement may provide for the termination in
whole or in part of the membership interest or economic interest of a
member in the limited liability company. If a member's economic
interest in the limited liability company is terminated pursuant to
the operating agreement, the member may demand and shall be entitled
to receive a return of that member's contribution. Any provision in
an operating agreement governing the termination of a member's
interest and the return of a member's contribution shall be
enforceable in accordance with its terms unless the member seeking to
invalidate the provision establishes that the provision was
agreement was made. Upon any termination of a membership interest,
the list required by paragraph (1) of subdivision (a) of Section
17058 shall be amended accordingly.
(d) Sections 406 and 407 of the Labor Code shall not apply to
membership interests issued by any foreign or domestic limited
liability company to the following persons:
(1) Any employee of the limited liability company or of any parent
or subsidiary thereof, pursuant to a membership interest purchase
plan or agreement or membership interest option plan or agreement.
(2) In any transaction in connection with securing employment, to
a person, who is or is about to become an officer of the limited
liability company or a manager (as appointed or elected by the
members) of the limited liability company, or of any parent or
subsidiary thereof.
17101. (a) Except as otherwise provided in Section 17254 or in

subdivision (e), no member of a limited liability company shall be
personally liable under any judgment of a court, or in any other
manner, for any debt, obligation, or liability of the limited
liability company, whether that liability or obligation arises in
contract, tort, or otherwise, solely by reason of being a member of
(b) A member of a limited liability company shall be subject to
liability under the common law governing alter ego liability, and
shall also be personally liable under a judgment of a court or for
any debt, obligation, or liability of the limited liability company,
whether that liability or obligation arises in contract, tort, or
otherwise, under the same or similar circumstances and to the same
extent as a shareholder of a corporation may be personally liable for
any debt, obligation, or liability of the corporation; except that
the failure to hold meetings of members or managers or the failure to
observe formalities pertaining to the calling or conduct of meetings
shall not be considered a factor tending to establish that a member
or the members have alter ego or personal liability for any debt,
obligation, or liability of the limited liability company where the
articles of organization or operating agreement do not expressly
require the holding of meetings of members or managers.
(c) Nothing in this section shall be construed to affect the
liability of a member of a limited liability company (1) to third
parties for the member's participation in tortious conduct, or (2)
pursuant to the terms of a written guarantee or other contractual
obligation entered into by the member, other than an operating
agreement.
(d) A limited liability company or foreign limited liability
company shall carry insurance or provide an undertaking to the same
extent and in the same amount as is required by any law, rule, or
regulation of this state that would be applicable to the limited
liability company or foreign limited liability company were it a
corporation organized and existing or duly qualified for the
transaction of intrastate business under the General Corporation Law.
(e) Notwithstanding subdivision (a), a member of a limited
liability company may agree to be obligated personally for any or all
of the debts, obligations, and liabilities of the limited liability
company as long as the agreement to be so obligated is set forth in
the articles of organization or in a written operating agreement that
specifically references this subdivision.
17102. The articles of organization or the operating agreement may

provide for the creation of classes of members having those relative
rights, powers, and duties as the articles of organization or
operating agreement may provide, including rights, powers, and duties
senior to other classes of members.
17103. (a) The articles of organization or a written operating

agreement may provide to all or certain identified members or a
specified class or group of members the right to vote separately or
with all or any class or group of members on any matter. Voting by
members may be on a per capita, number, financial interest, class,
group, or any other basis. If no voting provision is contained in the
articles of organization or written operating agreement:
(1) The members of a limited liability company shall vote in
proportion to their interests in current profits of the limited
liability company or, in the case of a member who has assigned his or
her or its entire economic interest in the limited liability company
to a person who has not been admitted as a member, in proportion to
the interest in current profits that the assigning member would have,
had the assignment not been made.
(2) Any amendment of the articles of organization or operating
agreement shall require the unanimous vote of all members.
(3) In all other matters in which a vote is required, a vote of a
majority in interest of the members shall be sufficient.
(b) Notwithstanding any provision to the contrary in the articles
of organization or operating agreement, in no event shall the
articles of organization be amended by a vote of less than a majority
in interest of the members.
(c) Notwithstanding any provision to the contrary in the articles
of organization or operating agreement, members shall have the right
to vote on a dissolution of the limited liability company as provided
in subdivision (b) of Section 17350 and on a merger of the limited
liability company as provided in Section 17551.
17104. (a) Meetings of members may be held at any place, by

electronic video screen communication or by electronic transmission
by and to the limited liability company pursuant to paragraphs (1)
and (2) of subdivision (o) of Section 17001, either within or without
this state, selected by the person or persons calling the meeting or
as may be stated in or fixed in accordance with the articles of
organization or a written operating agreement. If no other place is
stated or so fixed, all meetings shall be held at the principal
executive office of the limited liability company. Unless prohibited
by the articles of organization of the limited liability company, if
authorized by the operating agreement, members not physically present
in person or by proxy at a meeting of members may, by electronic
transmission by and to the limited liability company pursuant to
paragraphs (1) and (2) of subdivision (o) of Section 17001 or by
members, be deemed present in person or by proxy, and vote at a
meeting of members whether that meeting is to be held at a designated
place or in whole or in part by means of electronic transmission by
and to the limited liability company or by electronic video screen
communication, in accordance with subdivision (l).
(b) A meeting of the members may be called by any manager or by
any member or members representing more than 10 percent of the
interests of members for the purpose of addressing any matters on
which the members may vote.
(c) (1) Whenever members are required or permitted to take any
not less than 10 days nor more than 60 days before the date of the
meeting to each member entitled to vote at the meeting. The notice
shall state the place, date, and hour of the meeting, the means of
electronic transmission by and to the limited liability company or
electronic video screen communication, if any, and the general nature
of the business to be transacted. No other business may be
transacted at this meeting.
(2) Any report or any notice of a members' meeting shall be given
personally, by electronic transmission by the limited liability
company, or by mail or other means of written communication,
addressed to the member at the address of the member appearing on the
books of the limited liability company or given by the member to the
limited liability company for the purpose of notice, or, if no
address appears or is given, at the place where the principal
executive office of the limited liability company is located or by
publication at least once in a newspaper of general circulation in
the county in which the principal executive office is located. The
notice or report shall be deemed to have been given at the time when
delivered personally, delivered by electronic transmission by the
limited liability company, deposited in the mail, or sent by other
means of written communication. An affidavit of mailing or delivered
by electronic transmission by the limited liability company of any
notice or report in accordance with this article, executed by a
manager, shall be prima facie evidence of the giving of the notice or
report.
(3) If any notice or report addressed to the member at the address
of the member appearing on the books of the limited liability
company is returned to the limited liability company by the United
States Postal Service marked to indicate that the United States
Postal Service is unable to deliver the notice or report to the
member at the address, all future notices or reports shall be deemed
to have been duly given without further mailing if they are available
for the member at the principal executive office of the limited
liability company for a period of one year from the date of the
giving of the notice or report to all other members.
(4) Notice given by electronic transmission by the limited
liability company under this subdivision shall be valid only if it
complies with paragraph (1) of subdivision (o) of Section 17001.
Notwithstanding this condition, notice shall not be given by
electronic transmission by the limited liability company under this
subdivision after either of the following:
(A) The limited liability company is unable to deliver two
consecutive notices to the member by that means.
(B) The inability to so deliver the notices to the member becomes
or any other person responsible for the giving of the notice.
(5) Upon written request to a manager by any person entitled to
call a meeting of members, the manager shall immediately cause notice
held at a time requested by the person calling the meeting, not less
than 10 days nor more than 60 days after the receipt of the request.
If the notice is not given within 20 days after receipt of the
request, the person entitled to call the meeting may give the notice
or, upon the application of that person, the superior court of the
county in which the principal executive office of the limited
liability company is located, or if the principal executive office is
not in this state, the county in which the limited liability company'
s address in this state is located, shall summarily order the giving
of the notice, after notice to the limited liability company
affording it an opportunity to be heard. The procedure provided in
subdivision (c) of Section 305 shall apply to the application. The
court may issue any order as may be appropriate, including, without
limitation, an order designating the time and place of the meeting,
the record date for determination of members entitled to vote, and
the form of notice.
unless the articles of organization or a written operating agreement
otherwise require and, except as provided in this subdivision,
notice need not be given of the adjourned meeting if the time and
place thereof or the means of electronic transmission by and to the
limited liability company or electronic video screen communication,
if any, are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the limited liability company may
transact any business that may have been transacted at the original
meeting. If the adjournment is for more than 45 days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each member of
record entitled to vote at the meeting.
(e) The actions taken at any meeting of members, however called
and noticed, and wherever held, have the same validity as if taken at
a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after
the meeting, each of the members entitled to vote, not present in
person or by proxy, provides a waiver of notice or consents to the
holding of the meeting or approves the minutes of the meeting in
writing. All waivers, consents, and approvals shall be filed with the
limited liability company records or made a part of the minutes of
the meeting after conversion to the form in which those records or
minutes are kept. Attendance of a person at a meeting shall
constitute a waiver of notice of the meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.
Attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by this title to be included in
the notice but not so included, if the objection is expressly made at
the meeting. Neither the business to be transacted nor the purpose
of any meeting of members need be specified in any written waiver of
notice, unless otherwise provided in the articles of organization or
operating agreement, except as provided in subdivision (g).
(f) Members may participate in a meeting of the limited liability
company through the use of conference telephones or electronic video
screen communication, as long as all members participating in the
meeting can hear one another, or by electronic transmission by and to
the limited liability company pursuant to paragraphs (1) and (2) of
subdivision (o) of Section 17001. Participation in a meeting pursuant
to this provision constitutes presence in person at that meeting.
(g) Any action approved at a meeting, other than by unanimous
approval of those entitled to vote, shall be valid only if the
general nature of the proposal so approved was stated in the notice
of meeting or in any written waiver of notice.
(h) (1) A majority in interest of the members represented in
person or by proxy shall constitute a quorum at a meeting of members.
(2) The members present at a duly called or held meeting at which
a quorum is present may continue to transact business until
adjournment, notwithstanding the loss of a quorum, if any action
taken after loss of a quorum, other than adjournment, is approved by
the requisite percentage of interests of members specified in this
title or in the articles of organization or a written operating
agreement.
(3) In the absence of a quorum, any meeting of members may be
adjourned from time to time by the vote of a majority of the
interests represented either in person or by proxy, but no other
business may be transacted, except as provided in paragraph (2).
(i) (1) Any action that may be taken at any meeting of the members
may be taken without a meeting if a consent in writing, setting
forth the action so taken, is signed and delivered to the limited
liability company within 60 days of the record date for that action
by members having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at
which all members entitled to vote thereon were present and voted.
(2) Unless the consents of all members entitled to vote have been
solicited in writing, (A) notice of any member approval of an
amendment to the articles of organization or operating agreement, a
dissolution of the limited liability company as provided in Section
17350, or a merger of the limited liability company as provided in
Section 17551, without a meeting by less than unanimous written
consent shall be given at least 10 days before the consummation of
the action authorized by the approval, and (B) prompt notice shall be
given of the taking of any other action approved by members without
a meeting by less than unanimous written consent, to those members
entitled to vote who have not consented in writing.
(3) Any member giving a written consent, or the member's
proxyholder, may revoke the consent personally or by proxy by a
writing received by the limited liability company prior to the time
that written consents of members having the minimum number of votes
that would be required to authorize the proposed action have been
filed with the limited liability company, but may not do so
thereafter. This revocation is effective upon its receipt at the
office of the limited liability company required to be maintained
(j) The use of proxies in connection with this section will be
governed in the same manner as in the case of corporations formed
under the General Corporation Law.
(k) In order that the limited liability company may determine the
members of record entitled to notices of any meeting or to vote, or
entitled to receive any distribution or to exercise any rights in
respect of any other lawful action, a manager, or members
representing more than 10 percent of the interests of members, may
fix, in advance, a record date, that is not more than 60 days nor
less than 10 days prior to the date of the meeting and not more than
60 days prior to any other action. If no record date is fixed the
following shall apply:
(1) The record date for determining members entitled to notice of
or to vote at a meeting of members shall be at the close of business
on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business day
next preceding the day on which the meeting is held.
(2) The record date for determining members entitled to give
consent to limited liability company action in writing without a
meeting shall be the day on which the first written consent is given.
(3) The record date for determining members for any other purpose
shall be at the close of business on the day on which the managers
adopt the resolution relating thereto, or the 60th day prior to the
date of the other action, whichever is later.
(4) The determination of members of record entitled to notice of
or to vote at a meeting of members shall apply to any adjournment of
the meeting unless a manager or the members who called the meeting
fix a new record date for the adjourned meeting, but the manager or
the members who called the meeting shall fix a new record date if the
meeting is adjourned for more than 45 days from the date set for the
original meeting.
(l) A meeting of the members may be conducted, in whole or in
part, by electronic transmission by and to the limited liability
company or by electronic video screen communication if both of the
following requirements are met:
(1) The limited liability company implements reasonable measures
to provide members, in person or by proxy, a reasonable opportunity
to participate in the meeting and to vote on matters submitted to the
the meeting substantially concurrently with those proceedings.
(2) When any member votes or takes other action at the meeting by
means of electronic transmission to the limited liability company or
electronic video screen communication, a record of that vote or
action is maintained by the limited liability company.
17105. (a) The operating agreement may provide that the interest of
a member or assignee in a limited liability company may be evidenced
by a certificate of interest issued by the limited liability
company, and may make other provisions not inconsistent with this
title with respect to the transfer of interests represented by those
certificates or with respect to the form of those certificates.
(b) The operating agreement may provide that the certificate may
be signed by a manager or officer of the limited liability company,
whose signature may be a facsimile. In case any manager or officer of
the limited liability company who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be a
manager or officer before the certificate is issued, it may be issued
by the limited liability company with the same effect as if the
person were a manager or officer at the date of issue. If a
certificate is worn out or lost, it may be renewed on production of
the worn out or lost certificate or on satisfactory proof of its loss
together with such indemnity as may be required by the manager or
managers or a resolution of members.
17106. (a) Upon the request of a member or a holder of an economic

interest, for purposes reasonably related to the interest of that
person as a member or a holder of an economic interest, a manager
shall promptly deliver, in writing, to the member or holder of an
economic interest, at the expense of the limited liability company, a
copy of the information required to be maintained by paragraphs (1),
(2), and (4) of subdivision (a) of Section 17058, and any written
operating agreement of the limited liability company.
(b) Each member, manager, and holder of an economic interest has
the right upon reasonable request, for purposes reasonably related to
the interest of that person as a member, manager, or holder of an
economic interest, to each of the following:
(1) To inspect and copy during normal business hours any of the
records required to be maintained by Section 17058.
(2) To obtain in writing from the limited liability company
promptly after becoming available, a copy of the limited liability
company's federal, state, and local income tax or information returns
for each year.
(c) In the case of any limited liability company with more than 35
members:
(1) A manager shall cause an annual report to be sent to each of
the members not later than 120 days after the close of the fiscal
year. That report, which may be sent by electronic transmission by
the limited liability company (paragraph (1) of subdivision (o) of
Section 17001), shall contain a balance sheet as of the end of the
fiscal year and an income statement and a statement of cashflows for
the fiscal year.
(2) Members representing at least 5 percent of the voting
interests of members, or three or more members, may make a written
request to a manager for an income statement of the limited liability
company for the initial three-month, six-month, or nine-month period
of the current fiscal year ended more than 30 days prior to the date
of the request, and a balance sheet of the limited liability company
as of the end of that period. The statement shall be delivered or
mailed to the members within 30 days thereafter.
(3) The financial statements referred to in this section shall be
accompanied by the report thereon, if any, of the independent
accountants engaged by the limited liability company or, if there is
no report, the certificate of a manager of the limited liability
company that the financial statements were prepared without audit
from the books and records of the limited liability company.
(d) A manager shall promptly furnish to a member a copy of any
amendment to the articles of organization or operating agreement
executed by a manager pursuant to a power of attorney from the
member. The articles of organization or operating agreement may be
sent by electronic transmission by the limited liability company.
(e) The limited liability company shall send or cause information
to be sent in writing to each member or holder of an economic
interest within 90 days after the end of each taxable year the
information necessary to complete federal and state income tax or
information returns, and, in the case of a limited liability company
with 35 or fewer members, a copy of the limited liability company's
federal, state, and local income tax or information returns for the
year.
(f) In addition to any other remedies, a court of competent
jurisdiction may enforce the duty of making and mailing or delivering
the information and financial statements required by this section
and, for good cause shown, may extend the time therefor.
(g) In any action under this section, if the court finds the
failure of the limited liability company to comply with the
requirements of this section is without justification, the court may
award an amount sufficient to reimburse the person bringing the
action for the reasonable expenses incurred by that person, including
attorneys' fees, in connection with the action or proceeding.
(h) Any waiver of the rights provided in this section shall be
unenforceable.
(i) Any request, inspection, or copying by a member or holder of
an economic interest may be made by that person or by that person's
agent or attorney.
17107. (a) Upon complaint that a limited liability company is

failing to comply with the provisions of Section 17106, or to afford
to the members rights given to them in the articles of organization
or operating agreement, the Attorney General may, in the name of the
people of the State of California, send to the office required to be
maintained pursuant to Section 17057, notice of the complaint.
(b) If the answer of the limited liability company is not received
within 30 days of the date the notice was transmitted, or if the
answer is not satisfactory, and if the enforcement of the rights of
the aggrieved persons by private civil action, by class action, or
otherwise, would be so burdensome or expensive as to be
impracticable, the Attorney General may institute, maintain, or
intervene in any court of competent jurisdiction or before any
administrative agency for relief by way of injunction, the
dissolution of entities, the appointment of receivers, or any other
temporary, preliminary, provisional, or final remedies as may be
appropriate to protect the rights of members or to restore the
position of the members for the failure to comply with the
requirements of Section 17106 or the articles of organization or the
operating agreement. In any action, suit, or proceeding, there may be
joined as parties all persons and entities responsible for or
affected by the activity.
CORPORATIONS CODE
SECTION 17150-17158
17150. Unless the articles of organization include the statement
referred to in subdivision (b) of Section 17151 vesting management of
the limited liability company in a manager or managers, the business
and affairs of a limited liability company shall be managed by the
members subject to any provisions of the articles of organization or
operating agreement restricting or enlarging the management rights
and duties of any member or class of members. If management is vested
in the members, each of the members shall have the same rights and
be subject to all duties and obligations of managers as set forth in
this title.
17151. (a) The articles of organization may provide that the

business and affairs of the limited liability company shall be
managed by or under the authority of one or more managers who may,
but need not, be members.
(b) If the limited liability company is to be managed by one or
more managers and not by all its members, the articles of
organization shall contain a statement to that effect. Neither the
names of the managers nor the number of managers need be specified in
the articles of organization, but if management is vested in only
one manager, the articles of organization shall so state.
(c) The articles of organization or operating agreement may
prescribe the number and qualifications of managers who may, but need
not, be natural persons.
17152. If management of the limited liability company is vested in

one or more managers pursuant to a statement in the articles of
organization:
(a) Election of managers to fill initial positions or vacancies
shall be by the affirmative vote of a majority in interest of the
members.
(b) Any or all managers may be removed, with or without cause, by
the vote of a majority in interest of the members at a meeting called
expressly for that purpose. Any removal shall be without prejudice
to the rights, if any, of the manager under any contract of
employment.
(c) Any manager may resign as a manager at any time upon written
notice to the limited liability company, without prejudice to the
rights, if any, of the limited liability company under any contract
to which the manager is a party.
(d) Unless they have earlier resigned or been removed, managers
shall hold office until the expiration of the term for which they
were elected or, if no term was provided, until their successors have
been elected and qualified.
17153. The fiduciary duties a manager owes to the limited liability

company and to its members are those of a partner to a partnership
and to the partners of the partnership.
17154. (a) A written operating agreement may provide for the

appointment of officers, including, without limitation, a chairperson
or a president, or both, a secretary, a chief financial officer, and
any other officers with such titles, powers, and duties as shall be
specified in the articles of organization or operating agreement, or
determined by the managers or members. An officer may, but need not,
be a member or manager of the limited liability company, and any
number of offices may be held by the same person.
(b) Officers, if any, shall be appointed in accordance with the
written operating agreement or, if no such provision is made in the
operating agreement, any officers shall be appointed by the managers
and shall serve at the pleasure of the managers, 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 limited
liability company without prejudice to the rights, if any, of the
limited liability company under any contract to which the officer is
a party.
(c) Subject to the provisions of subdivision (d) of Section 17051,
any note, mortgage, evidence of indebtedness, contract, certificate,
statement, conveyance, or other instrument in writing, and any
any limited liability company and any other person, when signed by
the chairperson of the board, the president or any vice president and
any secretary, any assistant secretary, the chief financial officer,
or any assistant treasurer of the limited liability company, is not
invalidated as to the limited liability company 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.
17155. (a) Except for a breach of the duty set forth in Section
17153, the articles of organization or written operating agreement of
a limited liability company may provide for indemnification of any
person, including, without limitation, any manager, member, officer,
employee, or agent of the limited liability company, against
judgments, settlements, penalties, fines, or expenses of any kind
incurred as a result of acting in that capacity.
(b) A limited liability company shall have power to purchase and
maintain insurance on behalf of any manager, member, officer,
employee, or agent of the limited liability company against any
liability asserted against or incurred by the person in that capacity
or arising out of the person's status as a manager, member, officer,
employee, or agent of the limited liability company.
17156. Except as otherwise provided in the articles of organization

or the operating agreement, if the members have appointed more than
one manager, decisions of the managers shall be made by majority vote
of the managers if at a meeting, or by unanimous written consent.
17157. (a) Unless the statement referred to in subdivision (b) of

Section 17151 is included in the articles of organization, every
member is an agent of the limited liability company for the purpose
of its business or affairs, and the act of any member, including, but
not limited to, the execution in the name of the limited liability
company of any instrument, for the apparent purpose of carrying on in
the usual way the business or affairs of the limited liability
company of which that person is a member, binds the limited liability
company, unless the member so acting has, in fact, no authority to
act for the limited liability company in the particular matter, and
the person with whom the member is dealing has actual knowledge of
the fact that the member has no such authority.
(b) If the articles of organization contain the statement referred
to in subdivision (b) of Section 17151 that management of the
limited liability company is vested in a manager or managers, then:
(1) No member, acting solely in the capacity of a member, is an
agent of the limited liability company nor can any member bind, nor
execute any instrument on behalf of, the limited liability company.
(2) Every manager is an agent of the limited liability company for
the purpose of its business or affairs, and the act of any manager,
including, but not limited to, the execution in the name of the
limited liability company of any instrument, for apparently carrying
on in the usual way the business or affairs of the limited liability
company of which the person is the manager, binds the limited
liability company, unless the manager so acting has, in fact, no
authority to act for the limited liability company in the particular
matter, and the person with whom the manager is dealing has actual
knowledge of the fact that the manager has no such authority.
(c) No act of a manager or member in contravention of a
restriction on authority shall bind the limited liability company to
persons having actual knowledge of the restriction.
(d) Notwithstanding the provisions of subdivision (c) of this
section, and subject to the provisions of subdivision (d) of Section
17051, any note, mortgage, evidence of indebtedness, contract,
certificate, statement, conveyance, or other instrument in writing,
and any assignment or endorsement thereof, executed or entered into
between any limited liability company and any other person, when
signed by at least two managers (or by one manager in the case of a
limited liability company whose articles of organization state that
it is managed by only one manager), is not invalidated as to the
limited liability company by any lack of authority of the signing
managers or manager in the absence of actual knowledge on the part of
the other person that the signing managers or manager had no
authority to execute the same.
17158. (a) No person who is a manager or officer or both a manager

and officer of a limited liability company shall be personally liable
under any judgment of a court, or in any other manner, for any debt,
obligation, or liability of the limited liability company, whether
that liability or obligation arises in contract, tort, or otherwise,
solely by reason of being a manager or officer or both a manager and
officer of the limited liability company.
(b) Notwithstanding subdivision (a), a manager of a limited
liability company may agree to be obligated personally for any or all
of the debts, obligations, and liabilities of the limited liability
company as follows:
(1) If the agreement to be so liable is set forth in the articles
of organization or in a written operating agreement that specifically
references this subdivision.
(2) Pursuant to the terms of a written guarantee or other
contractual obligation entered into by the manager, other than an
operating agreement.
CORPORATIONS CODE
SECTION 17200-17202
17200. (a) The articles of organization or the operating agreement

may provide for capital contributions of members. The contribution of
a person may be in money, property, or services, or other obligation
to contribute money or property or to render services.
(b) Unless the articles of organization or operating agreement
provide otherwise, no member shall be required to make any additional
contribution to the limited liability company.
17201. (a) (1) Subject to the terms of the articles of organization

or the operating agreement, a member is not excused from an
obligation to the limited liability company to perform any promise to
contribute cash or property or to perform services because of death,
disability, dissolution, or any other reason.
(2) If a member does not make the required contribution of
property or services, that member is obligated, at the option of the
limited liability company, to contribute cash equal to that portion
of the fair market value (or agreed value if stated in writing and
signed by the limited liability company and the member) of the
contribution that has not been made. The foregoing option shall be in
addition to, and not in lieu of, any other rights, including the
right to specific performance, that the limited liability company may
have against the member under the articles of organization,
operating agreement, or applicable law.
(3) An operating agreement may provide that the interest of a
member who fails to make any contribution or other payment that the
member is required to make will be subject to specific remedies for,
or specific consequences of, the failure. A provision shall be
enforceable in accordance with its terms unless the member seeking to
invalidate the provision establishes that the provision was
agreement was made. The specific remedies or consequences may include
loss of voting, approval, or other rights, loss of the member's
ability to actively participate in the management and operations of
the limited liability company, liquidated damages, or a reduction of
the defaulting member's economic rights. The reduction of the
defaulting member's economic rights may include one or more of the
(A) Diluting, reducing, or eliminating the defaulting member's
proportionate interest in the limited liability company.
(B) Subordinating the defaulting member's interest in the limited
liability company to that of nondefaulting members.
(C) Permitting a forced sale of the membership interest.
(D) Permitting the lending or contribution by other members of the
amount necessary to meet the defaulting member's commitment.
(E) Adjusting the interest rates or other rates of return,
preferred, priority, or otherwise, with respect to contributions by
or capital accounts of the other members.
(F) Fixing the value of the defaulting member's interest in the
limited liability company by appraisal, formula and redemption, or
sale of the defaulting member's interest in the limited liability
company at a percentage of that value.
(b) (1) Unless otherwise provided in the articles of organization
or the operating agreement, the obligation of a member to make a
contribution or return money or property paid or distributed in
violation of this section may be compromised only by the unanimous
vote of the members.
(2) Notwithstanding the compromise of an obligation referred to in
paragraph (1), a person whose claim against a limited liability
company arises before the receipt of notice of the compromise may
enforce the original obligation of a member to make a contribution to
the limited liability company or to return a distribution if the
person had knowledge of the original obligation prior to the time the
claim arose and if the compromise occurred after the time the claim
arose. Any other person with a claim against a limited liability
company may enforce only the existing obligation of a member to make
a contribution to the limited liability company or to return to the
limited liability company money or other property paid or
distributed.
(c) A person with a claim against a limited liability company may
not enforce a conditional obligation of a member unless the
conditions have been satisfied or waived. Conditional obligations
include, without limitation, a capital contribution payable upon a
discretionary call of the limited liability company prior to the time
the call occurs.
(d) Nothing in this section shall be construed to affect the
rights of third-party creditors of the limited liability company to
seek equitable remedies nor any rights existing under the Uniform
Title 2 of Part 2 of Division 4 of the Civil Code).
17202. The profits and losses of a limited liability company shall

be allocated among the members, and among classes of members, in the
manner provided in the operating agreement. If the operating
agreement does not otherwise provide, profits and losses shall be
allocated in proportion to the contributions of each member.
CORPORATIONS CODE
SECTION 17250-17255
17250. Distributions of the money or property of a limited

liability company shall be made to the members and to any classes of
members in the manner provided in the operating agreement. If the
operating agreement does not otherwise provide, distributions that
are a return of capital shall be made in proportion to the
contributions made by each member and distributions that are not a
return of capital shall be made in proportion to the allocation of
profits.
Subject to Sections 17254 and 17353, at the time a member becomes
entitled to receive a distribution, the member has the status of, and
is entitled to all remedies available to, a creditor of the limited
liability company with respect to the distribution. An operating
agreement may provide for the establishment of a record date with
respect to the sharing of profits and distributions from a limited
liability company.
17251. Except as provided in this chapter, a member is entitled to

receive distributions from a limited liability company before the
withdrawal of that member from the company and before the dissolution
and winding up of the company, subject to the limitations contained
in Section 17254, to the extent and at the times or upon the
happening of the events specified in the operating agreement.
17252. (a) The articles of organization or a written operating

agreement may provide that a member may withdraw, resign, or retire
from a limited liability company at the time or upon the happening of
events specified in the operating agreement or that the member shall
not have the right to withdraw, resign, or retire as a member of a
limited liability company. Notwithstanding any restriction upon the
right of a member to withdraw, resign, or retire, a member may
withdraw from a limited liability company at any time by giving
written notice to the other members. However, unless the articles of
organization or written operating agreement provide otherwise, the
withdrawn member shall not be entitled to payment for the member's
interest in the limited liability company, and, beginning on the date
of the withdrawal, the withdrawn member shall have only the right of
a holder of an economic interest with respect to that withdrawn
member's interest in the limited liability company, and then only
with respect to distributions, if any, to which a holder of an
economic interest is entitled under the operating agreement of the
limited liability company, and the withdrawn member shall no longer
be a member of the limited liability company. If the withdrawal,
resignation, or retirement is in violation of the operating
agreement, the limited liability company shall have the right to
offset any damages for the breach of the operating agreement from the
amounts, if any, otherwise distributable to the withdrawn member
with respect to the withdrawn member's economic interest in the
(b) Upon the withdrawal of a member, the list required to be kept
pursuant to paragraph (1) of subdivision (a) of Section 17058 shall
be amended accordingly.
17253. (a) A member, regardless of the nature of the member's

contribution, has no right to demand and receive any distribution
from a limited liability company in any form other than money.
(b) No member may be compelled to accept from a limited liability
company a distribution of any asset in kind in lieu of a
proportionate distribution of money being made to other members.
(c) Except upon a dissolution and winding up of a limited
liability company, no member may be compelled to accept a
distribution of any asset in kind.
17254. (a) No distribution shall be made if, after giving effect to

the distribution, either of the following occurs:
(1) The limited liability company would not be able to pay its
debts as they become due in the usual course of business.
(2) The limited liability company's total assets would be less
than the sum of its total liabilities plus, unless the operating
agreement provides otherwise, the amount that would be needed, if the
limited liability company were to be dissolved at the time of the
distribution, to satisfy the preferential rights of other members
upon dissolution that are superior to the rights of the member
receiving the distribution.
(b) The limited liability company may base a determination that a
distribution is not prohibited under subdivision (a) on any of the
following:
(1) Financial statements prepared on the basis of accounting
practices and principles that are reasonable in the circumstances.
(2) A fair valuation.
(3) Any other method that is reasonable in the circumstances.
(c) Except as provided in subdivision (e), the effect of a
distribution under subdivision (a) is measured as of (1) the date the
distribution is authorized if the payment occurs within 120 days
after the date of authorization, or (2) the date payment is made if
it occurs more than 120 days after the date of authorization.
(d) (1) If terms of the indebtedness provide that payment of
principal and interest is to be made only if, and to the extent that,
payment of a distribution to members could then be made under this
section, indebtedness of a limited liability company, including
indebtedness issued as a distribution, is not a liability for
purposes of determinations made under subdivision (b).
(2) If the indebtedness is issued as a distribution, each payment
of principal or interest on the indebtedness is treated as a
distribution, the effect of which is measured on the date the payment
is actually made.
(e) A member or assignee of a member is obligated to return a
distribution from a limited liability company to the extent that (1)
the member or assignee had actual knowledge of facts indicating the
impropriety of the distribution, and (2) immediately after giving
effect to the distribution, and notwithstanding the compromise of an
obligation referred to in subdivision (b) of Section 17201, all
liabilities of the limited liability company, other than liabilities
to members or assignees on account of their interest in the limited
liability company and liabilities as to which recourse of creditors
is limited to specified property of the limited liability company,
exceed the fair market value of the limited liability company's
assets, provided that the fair market value of any property that is
subject to a liability as to which recourse of creditors is so
limited shall be included in the limited liability company assets
only to the extent that the fair market value of the property exceeds
this liability.
(f) A cause of action with respect to an obligation to return a
distribution pursuant to subdivision (e) is extinguished unless the
action is brought within four years after the distribution is made.
17255. (a) A member or manager who votes for a distribution in

violation of the operating agreement or Section 17254 or 17353 is
personally liable to the limited liability company for the amount of
the distribution that exceeds what could have been distributed
without violating Section 17254 or 17353 or the operating agreement
if it is established that the member or manager did not act in
compliance with Section 17254 or 17353.
(b) Each member or manager held liable under subdivision (a) for
an unlawful distribution is entitled to compel contribution:
(1) From each other member or manager who could be held liable
under subdivision (a) for the unlawful distribution.
(2) From each member for the amount the member received with
knowledge of facts indicating that the distribution was made in
violation of Section 17254 or 17353 or the operating agreement.
(c) A proceeding under this section is barred unless it is
commenced within four years after the date on which the effect of the
distribution is measured under Section 17254 or 17353.
CORPORATIONS CODE
SECTION 17300-17304
17300. A membership interest and an economic interest in a limited

liability company constitute personal property of the member or
assignee. A member or assignee has no interest in specific limited
liability company property.
17301. (a) Except as provided in the articles of organization or

the operating agreement:
(1) A membership interest or an economic interest is assignable in
whole or in part, provided, however, that no membership interest may
be assigned without the consent of a majority in interest of the
members not transferring their interests, as required pursuant to
Section 17303.
(2) An assignment of an economic interest does not of itself
dissolve the limited liability company or, other than as set forth in
the articles of organization or operating agreement, entitle the
assignee to vote or participate in the management and affairs of the
limited liability company or to become or exercise any rights of a
member.
(3) An assignment of an economic interest merely entitles the
assignee to receive, to the extent assigned, the distributions and
the allocations of income, gains, losses, deductions, credit, or
similar items to which the assignor would be entitled.
(4) Upon the assignment of all or part of an economic interest,
the assignor shall provide the manager or member of the limited
liability company responsible for maintaining its books and records
with the name and address of the assignee, together with details of
the interest assigned. Upon receipt of that notice, the limited
liability company shall amend the list required by paragraph (1) of
subdivision (a) of Section 17058 accordingly. Until the assignee of
that interest becomes a member, the assignor continues to be a member
and to have the power to exercise any rights and powers of a member,
including the right to vote which, in the case of a member who has
assigned his or her or its entire economic interest in the limited
liability company, shall include the right to vote in proportion to
the interest in current profits that the assigning member would have,
had the assignment not been made.
(b) Except to the extent assumed by agreement, until an assignee
of an economic interest in a limited liability company becomes a
member, the assignee shall have no liability to the limited liability
company under Chapter 5 (commencing with Section 17200) and Chapter
6 (commencing with Section 17250) solely as a result of the
assignment. The assignor of a membership interest is not released
from liability as a member solely as a result of the assignment.
(c) The pledge of, or granting of, a security interest, lien, or
other encumbrance in or against any or all of the membership interest
of a member shall not cause the member to cease to be a member or to
grant to anyone else the power to exercise any rights or powers of a
member.
17302. (a) On application by a judgment creditor of a member or of

a member's assignee, a court having jurisdiction may charge the
assignable membership interest of the judgment debtor to satisfy the
judgment. The court may appoint a receiver of the share of the
distributions due or to become due to the judgment debtor in respect
to the limited liability company and may make all other orders,
directions, accounts, and inquiries that the judgment debtor might
have made or that the circumstances of the case may require.
assignable membership interest. The court may order a foreclosure on
the membership interest subject to the charging order at any time.
The purchaser at the foreclosure sale has the rights of an assignee.
(c) At any time before foreclosure, a membership interest charged
may be redeemed in any of the following manners:
(1) By the judgment debtor.
(2) With property other than property of the limited liability
company by one or more of the other members.
(3) With property of the limited liability company by one or more
of the other members with the consent of all of the members whose
membership interests are not so charged.
(d) This section does not deprive any member or assignee of a
membership interest of the benefit of any exemption laws applicable
to the membership interest in the limited liability company.
creditor of a member or of a member's assignee may satisfy a
judgment out of the judgment debtor's membership interest in the
17303. (a) Except as otherwise provided in the articles of

organization or the operating agreement, an assignee of an interest
in a limited liability company may become a member only if a majority
in interest of the other members vote in favor of the assignee's
admission to the limited liability company as a member.
(b) An assignee who has become a member has, to the extent
assigned, the rights and powers, and is subject to the restrictions
and liabilities, of a member under the articles of organization, any
operating agreement, and this title. An assignee who becomes a member
also is liable for the obligations of the assignor to make
contributions as provided in Chapter 5 (commencing with Section
17200), and to return any unlawful distributions made to the assignee
under Chapter 6 (commencing with Section 17250) or Chapter 8
(commencing with Section 17350). However, the assignee is not
obligated for liabilities unknown to the assignee at the time the
assignee became a member and that could not be ascertained from the
articles of organization or operating agreement.
(c) Whether or not an assignee of a membership interest becomes a
member, the assignor is not released from the assignor's liability to
the limited liability company under Chapter 5 (commencing with
Section 17200) and Chapter 6 (commencing with Section 17250).
17304. (a) If a member who is an individual dies or is adjudged by

a court of competent jurisdiction to be incompetent to manage the
member's person or property, the member's executor, administrator,
guardian, conservator, or other legal representative may exercise all
of the member's rights for the purpose of settling the member's
estate or administering the member's property, including any power
the member had under the articles of organization or an operating
agreement to give an assignee the right to become a member.
(b) If a member is a corporation, trust, or other entity and is
dissolved or terminated, the powers of that member may be exercised
by its legal representative or successor.
CORPORATIONS CODE
SECTION 17350-17357
17350. A limited liability company shall be dissolved and its

affairs shall be wound up upon the happening of the first to occur of
the following:
(a) At the time specified in the articles of organization, if any,
or upon the happening of the events, if any, specified in the
articles of organization or a written operating agreement.
(b) By the vote of a majority in interest of the members, or a
greater percentage of the voting interests of members as may be
specified in the articles of organization or a written operating
agreement.
(c) Entry of a decree of judicial dissolution pursuant to Section
17351.
17350.5. (a) Notwithstanding any other provision of this division,

if a domestic limited liability company has not conducted any
business, only a majority of the members, or, if there are no
members, the majority of the managers, if any, or if no members or
managers, the person or a majority of the persons signing the
articles of organization, may execute and acknowledge a certificate
of cancellation of articles of organization, on a form prescribed by
the Secretary of State, stating all of the following:
(1) The name of the domestic limited liability company and the
Secretary of State's file number.
(2) That the certificate of cancellation is being filed within 12
months from the date the articles of organization were filed.
(3) That the limited liability company does not have any debts or
other liabilities, except as provided in paragraph (4).
23332 of the Revenue and Taxation Code, or a final annual tax return,
as described by Section 17947 of the Revenue and Taxation Code, has
been or will be filed with the Franchise Tax Board, as required under
Part 10.2 (commencing with Section 18401) of Division 2 of the
Revenue and Taxation Code.
(5) That the known assets of the limited liability company
remaining after payment of, or adequately providing for, known debts
and liabilities have been distributed to the persons entitled thereto
or that the limited liability company acquired no known assets, as
the case may be.
(6) That the limited liability company has not conducted any
business from the time of the filing of the articles of organization.
(7) That a majority of the managers or members voted, or, if no
managers or members, the person or a majority of the persons signing
the articles of organization, voted to dissolve the limited liability
company.
(8) If the limited liability company has received payments for
interests from investors, that those payments have been returned to
those investors.
(b) A certificate of cancellation executed and acknowledged
pursuant to subdivision (a) shall be filed with the Secretary of
State within 12 months from the date that the articles of
organization were filed. The Secretary of State shall notify the
Franchise Tax Board of the cancellation.
(c) Upon filing a certificate of cancellation pursuant to
subdivision (a), a limited liability company shall be cancelled and
its powers, rights, and privileges shall cease.
(d) A domestic limited liability company that filed articles of
organization on or after January 1, 2004, and that meets all of the
conditions described in subdivision (a) may file a certificate of
cancellation under this section.
17351. (a) Pursuant to an action filed by any manager or by any

member or members, a court of competent jurisdiction may decree the
dissolution of a limited liability company whenever any of the
following occurs:
(1) It is not reasonably practicable to carry on the business in
conformity with the articles of organization or operating agreement.
(2) Dissolution is reasonably necessary for the protection of the
rights or interests of the complaining members.
(3) The business of the limited liability company has been
abandoned.
(4) The management of the limited liability company is deadlocked
or subject to internal dissention.
(5) Those in control of the company have been guilty of, or have
knowingly countenanced persistent and pervasive fraud, mismanagement,
or abuse of authority.
(b) (1) In any suit for judicial dissolution, the other members
may avoid the dissolution of the limited liability company by
purchasing for cash the membership interests owned by the members so
initiating the proceeding (the "moving parties") at their fair market
value. In fixing the value, the amount of any damages resulting if
the initiation of the dissolution is a breach by any moving party or
parties of an agreement with the purchasing party or parties,
including, without limitation, the operating agreement, may be
deducted from the amount payable to the moving party or parties;
provided, that no member who sues for dissolution on the grounds set
forth in paragraph (3), (4), or (5) of subdivision (a) shall be
liable for damages for breach of contract in bringing that action.
(2) If the purchasing parties (A) elect to purchase the membership
interests owned by the moving parties, (B) are unable to agree with
the moving parties upon the fair market value of the membership
interests, and (C) give bond with sufficient security to pay the
estimated reasonable expenses, including attorneys' fees, of the
moving parties if the expenses are recoverable under paragraph (3),
the court, upon application of the purchasing parties, either in the
pending action or in a proceeding initiated in the superior court of
the proper county by the purchasing parties, shall stay the winding
up and dissolution proceeding and shall proceed to ascertain and fix
the fair market value of the membership interests owned by the moving
parties.
(3) The court shall appoint three disinterested appraisers to
appraise the fair market value of the membership interests owned by
the moving parties, and shall make an order referring the matter to
the appraisers so appointed for the purpose of ascertaining that
value. The order shall prescribe the time and manner of producing
evidence, if evidence is required. The award of the appraisers or a
majority of them, when confirmed by the court, shall be final and
conclusive upon all parties. The court shall enter a decree that
shall provide in the alternative for winding up and dissolution of
the limited liability company unless payment is made for the
membership interests within the time specified by the decree. If the
purchasing parties do not make payment for the membership interests
within the time specified, judgment shall be entered against them and
the surety or sureties on the bond for the amount of the expenses,
including attorneys' fees, of the moving parties. Any member
aggrieved by the action of the court may appeal therefrom.
(4) If the purchasing parties desire to prevent the winding up and
dissolution of the limited liability company, they shall pay to the
moving parties the value of their membership interests ascertained
and decreed within the time specified pursuant to this section, or,
in the case of an appeal, as fixed on appeal. On receiving that
payment or the tender thereof, the moving parties shall transfer
their membership interests to the purchasing parties.
(5) For the purposes of this section, the valuation date shall be
the date upon which the action for judicial dissolution was
commenced. However, the court may, upon the hearing of a motion by
any party, and for good cause shown, designate some other date as the
valuation date.
17352. In the event of a dissolution of a limited liability

company:
(a) The managers who have not wrongfully dissolved the limited
liability company or, if none, the members may wind up the limited
liability company's affairs, unless the dissolution occurs pursuant
to subdivision (c) of Section 17350, in which event the winding up
shall be conducted in accordance with the decree of dissolution. The
persons winding up the affairs of the limited liability company shall
give written notice of the commencement of winding up by mail to all
known creditors and claimants whose addresses appear on the records
of the limited liability company.
(b) Upon the petition of any manager or of any member or members,
or three or more creditors, a court of competent jurisdiction may
enter a decree ordering the winding up of the limited liability
company if that appears necessary for the protection of any parties
in interest. The decree shall designate the managers or members who
are to wind up the limited liability company's affairs.
(c) Except as otherwise provided in the articles of organization
or a written operating agreement, the managers or members winding up
the affairs of the limited liability company pursuant to this section
shall be entitled to reasonable compensation.
17353. (a) Except as otherwise provided in the articles of

organization or the written operating agreement, after determining
that all the known debts and liabilities of a limited liability
company in the process of winding up, including, without limitation,
debts and liabilities to members who are creditors of the limited
liability company, have been paid or adequately provided for, the
remaining assets shall be distributed among the members according to
their respective rights and preferences as follows:
(1) To members in satisfaction of liabilities for distributions
pursuant to Section 17201, 17202, or 17255.
(2) To members of the limited liability company for the return of
their contributions.
(3) To members in the proportions in which those members share in
distributions.
(c) The payment of a debt or liability, whether the whereabouts of
the creditor is known or unknown, has been adequately provided for
means:
(1) Payment thereof has been assumed or guaranteed in good faith
States government or any agency thereof, and the provision, including
the financial responsibility of the person, was determined in good
faith and with reasonable care by the members or managers of the
limited liability company to be adequate at the time of any
distribution of the assets pursuant to this section.
(2) The amount of the debt or liability has been deposited as
This subdivision shall not prescribe the exclusive means of making
17354. (a) A limited liability company that is dissolved

nevertheless continues to exist for the purpose of winding up its
affairs, prosecuting and defending actions by or against it in order
to collect and discharge obligations, disposing of and conveying its
property, and collecting and dividing its assets. A limited liability
company shall not continue business except so far as necessary for
the winding up thereof.
(b) No action or proceeding to which a limited liability company
is a party abates by the dissolution of the limited liability company
or by reason of proceedings for the winding up and dissolution
thereof.
up continue in the dissolved limited liability company for the
benefit of the persons entitled thereto upon dissolution and on
17355. (a) (1) Causes of action against a dissolved limited
liability company, whether arising before or after the dissolution of
the limited liability company, may be enforced against any of the
following:
(A) Against the dissolved limited liability company, to the extent
of its undistributed assets, including, without limitation, any
insurance assets held by the limited liability company that may be
available to satisfy claims.
(B) If any of the assets of the dissolved limited liability
company have been distributed to members, against members of the
dissolved limited liability company to the extent of the limited
liability company assets distributed to them upon dissolution of the
Any member compelled to return distributed assets in an amount
that exceeds the sum of the member's pro rata share of the claim and
the amount for which the member could otherwise be held liable under
Section 17254 or 17255 may seek contribution for the excess from any
other member or manager, up to the sum of that other person's pro
rata share of the claim and that other person's liabilities under
Section 17254 or 17255.
against a member of a dissolved limited liability company arising
under this section are extinguished unless the claimant commences a
proceeding to enforce the cause of action against that member of a
dissolved limited liability company prior to the earlier of the
following:
cause of action.
determining liability, members of the dissolved limited liability
company may be sued in the name of the limited liability company upon
any cause of action against the limited liability company. This
section does not affect the rights of the limited liability company
or its creditors under Sections 17254 and 17255, or the rights, if
any, of creditors under the Uniform Fraudulent Transfer Act, that may
arise against the member of a limited liability company.
(b) Summons or other process against a limited liability company
may be served by delivering a copy thereof to a manager, member,
officer, or person having charge of its assets or, if no such person
can be found, to any agent upon whom process might be served at the
time of dissolution. If none of those persons can be found with due
diligence and it is so shown by affidavit to the satisfaction of the
court, then the court may make an order that summons or other process
be served upon the dissolved limited liability company by personally
delivering a copy thereof, together with a copy of the order, to the
Secretary of State or an assistant or deputy Secretary of State.
Service in this manner is deemed complete on the 10th day after
delivery of the process to the Secretary of State. Upon receipt of
process and the fee therefor, the Secretary of State shall give
notice to the limited liability company as provided in Section 1702.
(c) Every limited liability company shall survive and continue to
exist indefinitely for the purpose of being sued in any quiet title
action. Any judgment rendered in any such action shall bind each and
all of its members or other persons having any equity or other
interest in the limited liability company, to the extent of their
interest therein, and the action shall have the same force and effect
as an action brought under the provisions of Sections 410.50 and
410.60 of the Code of Civil Procedure. Service of summons or other
process in any action may be made as provided in Chapter 4
(d) For purposes of Article 4 (commencing with Section 19071) of
Chapter 4 of Part 10.2 of Division 2 of the Revenue and Taxation
Code, the liability described in this section shall be considered a
liability at law within respect to a dissolved limited liability
company.
17356. (a) (1) The managers shall cause to be filed in the office
of, and on a form prescribed by, the Secretary of State, a
certificate of dissolution upon the dissolution of the limited
liability company pursuant to Chapter 8 (commencing with Section
17350), unless the event causing the dissolution is that specified in
subdivision (c) of Section 17350, in which case the managers or
members conducting the winding up of the limited liability company's
affairs pursuant to Section 17352 shall have the obligation to file
(2) The certificate of dissolution shall set forth all of the
following:
(A) The name of the limited liability company and the Secretary of
State's file number.
(B) Any other information the managers or members filing the
certificate of dissolution determine to include.
(3) If a dissolution pursuant to subdivision (b) of Section 17350
is made by the vote of all of the members and a statement to that
effect is added to the certificate of cancellation of articles of
organization pursuant to subdivision (b), the separate filing of a
certificate of dissolution pursuant to this subdivision is not
required.
(b) (1) The managers or members who filed the certificate of
dissolution shall cause to be filed in the office of, and on a form
prescribed by, the Secretary of State, a certificate of cancellation
of articles of organization upon the completion of the winding up of
the affairs of the limited liability company pursuant to Chapter 8
(commencing with Section 17350), unless the event causing the
dissolution is that specified in subdivision (c) of Section 17350, in
which case the managers or members conducting the winding up of the
limited liability company's affairs pursuant to Section 17352 shall
have the obligation to file the certificate of cancellation of
articles of organization.
(2) The certificate of cancellation of articles of organization
shall set forth all of the following:
(A) The name of the limited liability company and the Secretary of
(B) That a final franchise tax return, as described by Section
23332 of the Revenue and Taxation Code, or a final annual tax return,
as described by Section 17947 of the Revenue and Taxation Code, has
been or will be filed with the Franchise Tax board, as required under
Part 10.2 (commencing with Section 18401) of Division 2 of the
Revenue and Taxation Code.
(C) Any other information the managers or members filing the
certificate of cancellation of articles of organization determine to
include.
(3) The Secretary of State shall notify the Franchise Tax Board of
the filing.
17357. (a) Notwithstanding the filing of a certificate of

dissolution, a majority in interest of the members may cause to be
filed, in the office of, and on a form prescribed by, the Secretary
of State, a certificate of continuation, in any of the following
circumstances:
(1) The business of the limited liability company is to be
continued pursuant to a unanimous vote of the remaining members.
(2) The dissolution of the limited liability company was by vote
of the members pursuant to subdivision (b) of Section 17350 and each
member who consented to the dissolution has agreed in writing to
revoke his or her vote in favor of or consent to the dissolution.
(3) The limited liability company was not, in fact, dissolved.
(b) The certificate of continuation shall set forth all of the
following:
(1) The name of the limited liability company and the Secretary of
(2) The grounds provided by subdivision (a) that are the basis for
filing the certificate of continuation.
(c) Upon the filing of a certificate of continuation, the
certificate of dissolution shall be of no effect from the time of the
filing of the certificate of dissolution.
CORPORATIONS CODE
SECTION 17375
17375. Nothing in this title shall be construed to permit a

domestic or foreign limited liability company to render professional
services, as defined in subdivision (a) of Section 13401 and in
Section 13401.3, in this state.
CORPORATIONS CODE
SECTION 17450-17457
17450. Subject to the provisions of Section 17453:

(a) The laws of the state or foreign country under which a foreign
limited liability company is organized shall govern its organization
and internal affairs and the liability and authority of its managers
and members.
(b) A foreign limited liability company may not be denied
registration by reason of any difference between those laws and the
laws of this state.
17451. (a) Before transacting intrastate business in this state, a

foreign limited liability company shall register with the Secretary
of State. In order to register, a foreign limited liability company
shall submit to the Secretary of State an application for
registration as a foreign limited liability company, signed by a
person with authority to do so under the laws of the state of its
organization, on a form prescribed by the Secretary of State and
setting forth:
(1) The name of the foreign limited liability company and, if
different, the name under which it proposes to transact business in
this state.
(2) The state and date of its organization and a statement that
the foreign limited liability company is authorized to exercise its
powers and privileges in that state.
(3) The name and address of an agent for service of process on the
foreign limited liability company meeting the qualifications
specified in paragraph (1) of subdivision (d) of Section 17061,
unless a corporate agent is designated, in which case only the name
of the agent shall be set forth.
(4) A statement that the Secretary of State is appointed the agent
of the foreign limited liability company for service of process if
the agent has resigned and has not been replaced or if the agent
cannot be found or served with the exercise of reasonable diligence.
(5) The address of the principal executive office of the foreign
limited liability company and of its principal office in this state,
if any.
(b) Annexed to the application for registration shall be a
liability company's jurisdiction of organization to the effect that
the foreign limited liability company is in good standing in that
jurisdiction, if the laws of that jurisdiction permit the issuance of
those certificates; or, in the alternative, a statement by the
foreign limited liability company that the laws of its jurisdiction
of organization do not permit the issuance of those certificates.
(c) The Secretary of State may cancel the application and
certificate of registration of a foreign limited liability company if
a check or other remittance accepted in payment of the filing fee 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 a first written notice of the
applicability of this section 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, the Secretary of
State shall give a second written notice of cancellation and the
cancellation shall thereupon be effective. The second notice shall be
given 20 days or more after the first notice and 90 days or less
after the original filing.
(d) The Secretary of State shall include with instructional
materials, provided in conjunction with registration under
subdivision (a), a notice that filing the registration will obligate
the limited liability company to pay an annual tax to the Franchise
Tax Board pursuant to Section 17941 of the Revenue and Taxation Code.
That notice shall be updated annually to specify the dollar amount
of the tax.
17452. (a) If the Secretary of State finds that an application for

registration conforms to law and all requisite fees have been paid,
the Secretary of State shall issue a certificate of registration to
transact intrastate business in this state, subject, however, to any
licensing requirements imposed by the laws of this state. However, no
certificate of registration shall be issued for a foreign limited
liability company to transact intrastate business in this state under
a name that falls within the prohibitions of subdivision (c) of
Section 17052.
(b) If the name of a foreign limited liability company does not
satisfy the requirements of Section 17052, to obtain or maintain a
certificate of registration, a foreign limited liability company may
either:
(1) Add the words "limited liability company" or the abbreviation
"LLC" to its name for use in this state.
(2) Use an assumed name that is available, and that satisfies the
requirements of Section 17052, provided the foreign limited liability
company agrees that it will use the assumed name in all its dealings
with the Secretary of State and in the conduct of its affairs in
this state. The assumed name may be the name of the foreign limited
liability company with the addition of some distinguishing word or
words acceptable to the Secretary of State or a name available for
the name of a domestic limited liability company pursuant to Section
17052. Any foreign limited liability company that has made such an
agreement with the Secretary of State shall not do business in this
state except under the name agreed upon, as long as the agreement
remains in effect.
17453. If the members of a foreign limited liability company

residing in this state represent 25 percent or more of the voting
interests of members of that limited liability company, those members
shall be entitled to all information and inspection rights provided
in Section 17106.
17454. If any statement in the application for registration of a

foreign limited liability company was false when made or any
statements made have become erroneous, the foreign limited liability
company shall promptly file in the office of the Secretary of State
an amendment to the application for registration, signed by a person
with authority to do so under the laws of the state of its
organization, amending the statement.
17455. A foreign limited liability company may cancel its

registration by filing with the Secretary of State a certificate of
cancellation signed by a person with authority to do so under the
laws of the state of its organization. A cancellation does not
terminate the authority of the Secretary of State to accept service
of process on the foreign limited liability company with respect to
causes of action arising out of the transaction of business in this
state.
17456. (a) A foreign limited liability company transacting

intrastate business in this state shall not maintain any action,
suit, or proceeding in any court of this state until it has
registered in this state.
(b) Any foreign limited liability company that transacts
dollars ($10,000). An action to recover this penalty may be brought,
and any recovery shall be paid, as provided in Section 2258.
(c) A member of a foreign limited liability company is not liable
for the debts and obligations of the foreign limited liability
company solely by reason of its having transacted business in this
state without registration.
(d) A foreign limited liability company, transacting business in
this state without registration, appoints the Secretary of State as
its agent for service of process with respect to causes of action
17457. The Attorney General may bring an action to restrain a

foreign limited liability company from transacting intrastate
business in this state in violation of this chapter.
CORPORATIONS CODE
SECTION 17500-17501
17500. Any member of a foreign or domestic limited liability

company may bring a class action on behalf of all or a class of
members to enforce any claim common to those members and any such
action shall be governed by the law governing class actions
generally, provided that in order to maintain the class action there
shall be no requirement that the class be so numerous that joinder of
all members of the class is impracticable.
17501. (a) No action shall be instituted or maintained in right of

any domestic or foreign limited liability company by any member of
the limited liability company unless both of the following conditions
exist:
member of record, or beneficiary, at the time of the transaction or
any part thereof of which plaintiff complains, or that plaintiff's
interest thereafter devolved upon plaintiff by operation of law from
a member who was a member at the time of the transaction or any part
thereof complained of. Any member who does not meet these
requirements may nevertheless be allowed in the discretion of the
court to maintain the action on a preliminary showing to and
determination by the court, by motion and after a hearing at which
the court shall consider any evidence, by affidavit or testimony, as
it deems material, of all of the following:
(A) There is a strong prima facie case in favor of the claim
asserted on behalf of the limited liability company.
(B) No other similar action has been or is likely to be
instituted.
(C) The plaintiff acquired the interest before there was
disclosure to the public or to the plaintiff of the wrongdoing of
which plaintiff complains.
(D) Unless the action can be maintained, the defendant may retain
a gain derived from defendant's willful breach of a fiduciary duty.
(E) The requested relief will not result in unjust enrichment of
the limited liability company or any member of the limited liability
company.
plaintiff's efforts to secure from the managers the action plaintiff
desires or the reasons for not making that effort, and alleges
further that plaintiff has either informed the limited liability
company or the managers in writing of the ultimate facts of each
cause of action against each defendant or delivered to the limited
liability company or the managers a true copy of the complaint that
plaintiff proposes to file.
(b) In any action referred to in subdivision (a), at any time
within 30 days after service of summons upon the limited liability
company or upon any defendant who is a manager of the limited
liability company or held that position at the time of the acts
complained of, the limited liability company or the defendant may
move the court for an order, upon notice and hearing, requiring the
plaintiff to furnish security as hereinafter provided. The motion
shall be based upon one or both of the following grounds:
party will benefit the limited liability company or its members.
(2) That the moving party, if other than the limited liability
company, did not participate in the transaction complained of in any
capacity. The court, on application of the limited liability company
or any defendant, may, for good cause shown, extend the 30-day period
for an additional period not exceeding 60 days.
(c) At the hearing upon any motion pursuant to subdivision (b),
the court shall consider evidence, written or oral, by witnesses or
affidavit, as may be material (1) to the ground upon which the motion
is based, or (2) to a determination of the probable reasonable
expenses, including attorneys' fees, of the limited liability company
and the moving party that will be incurred in the defense of the
action.
If the court determines, after hearing the evidence adduced by the
parties, that the moving party has established a probability in
support of any of the grounds upon which the motion is based, the
court shall fix the nature and amount of security, not to exceed
for reasonable expenses, including attorneys' fees, that may be
incurred by the moving party and the limited liability company in
connection with the action. A ruling by the court on the motion shall
thereof. The amount of the security may thereafter be increased or
decreased in the discretion of the court upon a showing that the
security provided has or may become inadequate or is excessive, but
the court may not in any event increase the total amount of the
security beyond fifty thousand dollars ($50,000) in the aggregate for
all defendants. If the court, upon a motion, makes a determination
that security shall be furnished by the plaintiff as to any one or
more defendants, the action shall be dismissed as to that defendant
or defendants, unless the security required by the court has been
furnished within any reasonable time as may be fixed by the court.
The limited liability company and the moving party shall have
recourse to the security in the amount that the court determines upon
the termination of the action.
(d) If the plaintiff, either before or after a motion is made
pursuant to subdivision (b), or any order or determination pursuant
to that motion, posts good and sufficient bond or bonds in the
aggregate amount of fifty thousand dollars ($50,000) to secure the
reasonable expenses of the parties entitled to make the motion, the
plaintiff shall be deemed to have complied with the requirements of
this section and with any order for security made pursuant to this
section. Any motion then pending shall be dismissed and no further or
additional bond or other security shall be required.
(e) If a motion is filed pursuant to subdivision (b), no pleadings
need be filed by the limited liability company or any other
defendant and the prosecution of the action shall be stayed until 10
days after the motion has been disposed of.
CORPORATIONS CODE
SECTION 17540.1-17540.9
17540.1. For purposes of this chapter, the following definitions

shall apply:
(a) "Converted entity" means the other business entity or foreign
other business entity or foreign limited liability company that
results from a conversion of a domestic limited liability company
under this chapter.
(b) "Converted limited liability company" means a domestic limited
liability company that results from a conversion of an other
business entity or a foreign other business entity or a foreign
limited liability company pursuant to Section 17540.8.
(c) "Converting limited liability company" means a domestic
limited liability company that converts to an other business entity
or a foreign other business entity or a foreign limited liability
company pursuant to this chapter.
foreign other business entity or a foreign limited liability company
that converts to a domestic limited liability company pursuant to the
terms of Section 17540.8.
17540.2. (a) A limited liability company may be converted into an

other business entity or a foreign other business entity or a foreign
limited liability company pursuant to this chapter if, (1) pursuant
to a conversion into a domestic or foreign general partnership or
limited partnership or into a foreign limited liability company, each
of the members of the converting limited liability company would
receive a percentage interest in profits and capital of the converted
entity equal to that member's percentage interest in profits and
capital of the converting limited liability company as of the
effective time of the conversion, and (2) pursuant to a conversion
into an other business entity or foreign other business entity not
specified in clause (1) above, both of the following occur: (A) each
of the membership interests of the same class is treated equally with
respect to any distribution of cash, property, rights, interests, or
securities of the converted entity, unless all members of the class
consent, and (B) the nonredeemable membership interests of the
converting limited liability company are converted only into
nonredeemable interests or securities of the converted entity, unless
all holders of the nonredeemable interests consent.
(b) Notwithstanding this section, the conversion of a limited
liability company to an other business entity or a foreign other
business entity or a foreign limited liability company may be
effected only if both of the following conditions are complied with:
(2) The limited liability company complies with any and all other
requirements of any other law that applies to conversion to the
converted entity.
17540.3. (a) A limited liability company that desires to convert to

an other business entity or a foreign other business entity or a
foreign limited liability company shall approve a plan of conversion.
The plan of conversion shall state all of the following:
the converting limited liability company and the name of the
converted entity after conversion.
(3) The manner of converting the membership interests of each of
the members into securities of, shares of, or interests in, the
converted entity.
entity, including the articles or certificate of incorporation if the
converted entity is a domestic or foreign corporation, the
partnership agreement, or the limited liability company articles of
organization and operating agreement, to which the holders of
interests in the converted entity are to be bound.
the parties.
(b) The plan of conversion shall be approved by a vote of a
majority in interest of the members of the converting limited
liability company, or a greater percentage of the voting interests of
members as may be specified in the articles of organization or
written operating agreement of the converting limited liability
company. However, if the members of the limited liability company
would become personally liable for any obligations of the converted
entity as a result of the conversion, the plan of conversion shall be
approved by all of the members of the converting limited liability
company, unless the plan of conversion provides that all members will
have dissenters' rights as provided in Chapter 13 (commencing with
Section 17600).
(c) If the limited liability company is converting into a limited
partnership, then in addition to the approval of the members set
forth in subdivision (b), the plan of conversion shall be approved by
those members who will become general partners of the converted
limited partnership pursuant to the plan of conversion.
(d) Upon the effectiveness of the conversion, all members of the
converting limited liability company, except those that exercise
dissenters' rights as provided in Chapter 13 (commencing with Section
17600), shall be deemed parties to any governing documents for the
converted entity adopted as part of the plan of conversion,
irrespective of whether or not a member has executed the plan of
conversion or the governing documents for the converted entity. Any
adoption of governing documents made pursuant thereto shall be
effective at the effective time or date of the conversion.
(e) Notwithstanding its prior approval, a plan of conversion may
approved by the members of the converting limited liability company
in the same manner as was required for approval of the original plan
of conversion.
(f) A plan of conversion may be abandoned by the members of a
converting limited liability company in the manner as required for
approval of the plan of conversion, subject to the contractual rights
of third parties, at any time before the conversion is effective.
(g) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the converted
entity is a domestic partnership or foreign other business entity, at
the principal executive office of or registrar or transfer agent of
the converted entity if the converted entity is a domestic
corporation, or at the office at which records are to be kept under
Section 15614 or 15901.14 if the converted entity is a domestic
limited partnership. Upon the request of a member of a converting
limited liability company, the authorized person on behalf of the
converted entity shall promptly deliver to the member or the holder
of interests, shares, or other securities, at the expense of the
converted entity, a copy of the plan of conversion. A waiver by a
member of the rights provided in this subdivision shall be
unenforceable.
17540.4. (a) A conversion into an other business entity or a

shall become effective upon the earliest date that all of the
following occur:
(1) The approval of the plan of conversion by the members of the
converting limited liability company as provided in Section 17540.3.
(2) The filing of all documents required by law to effect the
conversion and create the converted entity, which documents shall
also contain a statement of conversion, if required under Section
17540.6.
(3) The occurrence of the effective date, if set forth in the plan
of conversion.
(b) A copy of the statement of partnership authority or
certificate of limited partnership complying with Section 17540.6, if
applicable, duly certified by the Secretary of State, is conclusive
evidence of the conversion of the limited liability company.
17540.5. (a) The conversion of a limited liability company into a

shall be required in order to comply with Section 17540.2.
(b) If the limited liability company is converting into a foreign
other business entity or a foreign limited liability company, those
conversion proceedings shall be in accordance with the laws of the
state or place of organization of the foreign other business entity
or foreign limited liability company and the conversion shall become
effective in accordance with that law.
(c) (1) To enforce an obligation of a limited liability company
that has converted to a foreign limited liability company or foreign
other business entity, the Secretary of State shall only be the agent
for service of process in an action or proceeding against that
converted foreign entity, if the agent designated for the service of
process for the entity is a natural person and cannot be located with
due diligence or if the agent is a corporation and no person, to
whom delivery may be made, may be located with due diligence, or if
no agent has been designated and if no one of the officers, partners,
managers, members, or agents of that entity may be located after
diligent search, and it is so shown by affidavit to the satisfaction
of the court. The court then may make an order that service be made
by personal delivery to the Secretary of State or to an assistant or
deputy Secretary of State of two copies of the process together with
two copies of the order, and the order shall set forth an address to
which the process shall be sent by the Secretary of State. Service in
this manner is deemed complete on the 10th day after delivery of the
give notice to such entity of the service of the process by
giving of notice thereof to that entity, and the forwarding of the
stated therein.
17540.6. (a) Upon conversion of a limited liability company:

(1) If the limited liability company is converting into a domestic
limited partnership, a statement of conversion shall be completed on
the certificate of limited partnership for the converted entity.
(2) If the limited liability company is converting into a domestic
statement of partnership authority for the converted entity, or if no
statement of partnership authority is filed then a certificate of
conversion shall be filed separately.
(3) If the limited liability company is converting to a domestic
corporation, a statement of conversion shall be completed on the
articles of incorporation for the converted entity.
(4) If the limited liability company is converting into a foreign
limited liability company or foreign other business entity, a
certificate of conversion shall be filed with the Secretary of State.
(b) Any certificate or statement of conversion shall be executed
and acknowledged by all of the managers, unless a lesser number is
provided in the articles of organization or the operating agreement
of the converting limited liability company, and shall set forth all
of the following:
converting limited liability company.
were approved by a vote of the members, which equaled or exceeded
the vote required under Section 17540.3, specifying each class
entitled to vote and the percentage vote required of each class.
conversion or an organizational document containing a statement of
the filing of a certificate of cancellation by the converting limited
liability company and no converting limited liability company that
has made the filing is required to file a certificate of dissolution
or a certificate of cancellation under Section 17356 as a result of
that conversion.
17540.7. (a) Whenever a limited liability company or other business

entity having any real property in this state converts into a
limited liability company or an other business entity pursuant to the
laws of this state or of the state or place in which the limited
liability company or other business entity was organized, and the
laws of the state or place of organization, including this state, of
the converting limited liability company or other converting entity
provide substantially that the conversion vests in the converted
limited liability company or other converted entity all the real
property of the converting limited liability company or other
converting entity, the filing for record in the office of the county
property of the converting limited liability company or other
converting entity is located of either (1) a certificate of
conversion, statement of partnership authority, certificate of
limited partnership, or articles of organization complying with
Section 17540.6, in the form prescribed and certified by the
Secretary of State, or (2) a copy of a certificate of conversion, or
a statement of partnership authority, certificate of limited
partnership, articles of organization, articles or certificate of
incorporation, or other certificate or document evidencing the
creation of a foreign other business entity or foreign limited
liability company by conversion, containing a statement of
conversion, certified by the Secretary of State or an authorized
the conversion is effected, shall evidence record ownership in the
converted limited liability company or other converted entity of all
interest of the converting limited liability company or other
converting entity in and to the real property located in that county.
conversion, or a statement of partnership authority, certificate of
formation of a foreign other business entity or a foreign limited
liability company filed pursuant to Section 17540.6 containing a
statement of conversion, stating the name of the converting limited
liability company or other converting entity in whose name property
was held before the conversion and the name of the converted entity
or converted limited liability company, but not containing all of the
other information required by Section 17540.6, operates with respect
to the converted entities named to the extent provided in
subdivision (a).
(c) Recording of a certificate of conversion or a statement of
of organization, or articles or certificate of incorporation, or
other certificate evidencing the creation of an other business entity
or a limited liability company by conversion, containing a statement
of conversion, in accordance with subdivision (a), shall create, in
favor of bona fide purchasers or encumbrances for value, a conclusive
presumption that the conversion was validly completed.
17540.8. (a) An other business entity or a foreign other business

entity or a foreign limited liability company may be converted to a
domestic limited liability company pursuant to this chapter only if
the converting entity is authorized by the laws under which it is
organized to effect the conversion.
a foreign limited liability company that desires to convert into a
domestic limited liability company shall approve a plan of conversion
or an other instrument as is required to be approved to effect the
conversion pursuant to the laws under which that entity is organized.
business entity or a foreign limited liability company into a
domestic limited liability company shall be approved by that number
or percentage of the partners, members, shareholders, or holders of
interest of the converting entity as is required by the laws under
which that entity is organized, or a greater or lesser percentage,
subject to applicable laws, as set forth in the converting entity's
partnership agreement, articles of organization, operating agreement,
articles or certificate of incorporation, or other governing
document.
business entity or a foreign limited liability company into a
domestic limited liability company shall be effective under this
chapter at the time the conversion is effective under the laws under
which the converting entity is organized as long as the articles of
organization containing a statement of conversion have been filed
with the Secretary of State. If the converting entity's governing law
is silent as to the effectiveness of the conversion, the conversion
shall be effective upon the completion of all acts required under
this title to form a limited liability company.
conversion or articles of organization containing a statement of
conversion pursuant to subdivision (a) shall have the effect of the
filing of a certificate of cancellation by the converting foreign
limited liability company or foreign limited partnership, and no
converting foreign limited liability company or foreign limited
partnership that has made the filing is required to file a
certificate of cancellation under Section 15696, 15909.07, or 17455
as a result of that conversion. If a converting other business entity
is a foreign corporation qualified to transact business in this
state, the foreign corporation shall, by virtue of the filing,
17540.9. (a) An entity that converts into another entity pursuant

to this chapter is for all purposes the same entity that existed
before the conversion.
of the converting entity or converting limited liability company are
vested in the converted entity or converted limited liability
company.
entity or converting limited liability company continue as debts,
liabilities, and obligations of the converted entity or converted
converting entity or converting limited liability company shall be
preserved unimpaired and remain enforceable against the converted
entity or converted limited liability company to the same extent as
against the converting entity or converting limited liability company
as if the conversion had not occurred.
entity or converting limited liability company may be continued
against the converted entity or converted limited liability company
as if the conversion had not occurred.
(c) A member of a converting limited liability company is liable
for:
(1) All obligations of the converting limited liability company
for which the member was personally liable before the conversion.
out of property of the entity if that member is a limited partner, a
shareholder in a corporation, or unless expressly provided otherwise
in the articles of organization or other governing documents, a
member of a converted limited liability company or a holder of equity
securities in an other converted entity if the holders of equity
securities in such entity are not personally liable for the
obligations of such entity under the law under which that entity is
organized or its governing documents.
(d) A member of a converted limited liability company remains
liable for any and all obligations of the converting entity for which
the member was personally liable before the conversion, but only to
the extent that the member was personally liable for the obligations
of the converting entity prior to the conversion.
(e) If the other party to a transaction with the limited liability
company reasonably believes when entering the transaction that the
limited liability company member is a general partner, the limited
liability company member is liable for an obligation incurred by the
limited liability company within 90 days after the conversion takes
effect. The limited liability company member's liability for all
other obligations of the limited liability company incurred after the
conversion takes effect is that of a limited liability company
member.
CORPORATIONS CODE
SECTION 17550-17556

chapter:
(1) Two or more limited liability companies into one limited
liability company.
(2) One or more limited liability companies and one or more other
business entities into one of those other business entities.
(3) One or more limited liability companies and one or more other
business entities into one limited liability company.
(b) Notwithstanding this section, the merger of any number of
limited liability companies with any number of other business
entities may be effected only if the other business entities that are
organized in California are authorized by the laws under which they
are organized to effect the merger, and:
(1) If a limited liability company is the surviving limited
liability company, the foreign other business entities are not
prohibited by the laws under which they are organized from effecting
that merger.
(2) If a foreign limited liability company or foreign other
business entity is the survivor of the merger, the laws of the
jurisdiction under which the survivor is organized authorize that
merger. Notwithstanding the foregoing sentence, if one or more
domestic corporations is also a party to the merger, the merger may
be effected only if, with respect to any foreign other business
entity that is a corporation, the foreign corporation is authorized
by the laws under which it is organized to effect that merger.
17551. (a) Each limited liability company and other business entity
that desires to merge shall approve an agreement of merger. The
agreement of merger shall be approved by the vote of a majority in
interest of the members of each constituent limited liability
company, or such greater percentage of the voting interests of
members as may be specified in the articles of organization or
written operating agreement of that constituent limited liability
company. Notwithstanding the previous sentence, if the members of any
constituent limited liability company become personally liable for
any obligations of a constituent limited liability company or
constituent other business entity as a result of the merger, the
principal terms of the agreement of merger shall be approved by all
of the members of the constituent limited liability company, unless
the agreement of merger provides that all members will have the
dissenters' rights provided in Chapter 13 (commencing with Section
17600). The agreement of merger shall be approved on behalf of each
constituent other business entity by those persons required to
approve the merger by the laws under which it is organized. Other
persons, including a parent of a constituent limited liability
company, may be parties to the agreement of merger. The agreement of
merger shall state:
(2) The name and place of organization of the surviving limited
liability company or surviving other business entity, and of each
disappearing limited liability company and disappearing other
business entity. The agreement of merger may change the name of the
surviving limited liability company, which new name may be the same
as or similar to the name of a disappearing domestic or foreign
limited liability company, subject to Section 17052.
(3) The manner of converting the interests of each of the
constituent limited liability companies into interests, shares, or
other securities of the surviving limited liability company or
surviving other business entity. If interests of any of the
constituent limited liability companies are not to be converted
solely into interests, shares, or other securities of the surviving
limited liability company or surviving other business entity, the
agreement of merger shall state the cash, property, rights,
interests, or securities that the holders of the interests are to
receive in exchange for the interests, that cash, property, rights,
interests, or securities may be in addition to or in lieu of
interests, shares, or other securities of the surviving limited
liability company or surviving other business entity, or that the
interests are canceled without consideration.
(4) The amendments to the articles of organization of the
surviving limited liability company, if applicable, to be effected by
the merger, if any.
(5) Any other details or provisions as are required by the laws
under which any constituent other business entity is organized,
including, if a domestic corporation is a party to the merger,
interests.
(b) Each interest of the same class of any constituent limited
liability company, other than an interest in another constituent
limited liability company, that is being canceled and that is held by
a constituent limited liability company or its parent or a limited
liability company of which the constituent limited liability company
is a parent, unless all members of the class consent, shall be
treated equally with respect to any distribution of cash, property,
rights, interests, or securities. Notwithstanding this subdivision,
except in a merger of a limited liability company with a limited
liability company in which it controls at least 90 percent of the
membership interests entitled to vote with respect to the merger, the
nonredeemable interests of a constituent limited liability company
may be converted only into nonredeemable interests or securities of
the surviving limited liability company or other business entity or a
parent if a constituent limited liability company or a constituent
other business entity or its parent owns, directly or indirectly,
prior to the merger, interests of another constituent limited
liability company or interests or securities of a constituent other
business entity representing more than 50 percent of the interests or
securities entitled to vote with respect to the merger of the other
constituent limited liability company or constituent other business
entity, or more than 50 percent of the voting power, as defined in
Section 194.5, of a constituent other business entity that is a
domestic corporation unless all of the members of the class consent.
The provisions of this subdivision do not apply to any transaction
if the commissioner has approved the terms and conditions of the
transaction and the fairness of those terms and conditions pursuant
to Section 25142.
be amended prior to the filing of the certificate of merger or the
agreement of merger as provided in Section 17552 if the amendment is
approved by the members of each constituent limited liability company
in the same manner as required for approval of the original
agreement of merger and, if the amendment changes any of the
principal terms of the agreement of merger, the amendment is approved
by each of the constituent other business entities in the same
manner as required for approval of the original agreement of merger.
(d) A merger may be abandoned by the members of a constituent
limited liability company in the same manner as required for approval
of the agreement of merger, subject to the contractual rights, if
any, of third parties, including other constituent limited liability
companies and constituent other business entities, at any time before
the merger is effective.
(a) may effect any amendment to the operating agreement of any
constituent limited liability company or effect the adoption of a new
operating agreement for a constituent limited liability company if
it is the surviving limited liability company in the merger. Any
amendment to an operating agreement or adoption of a new operating
agreement made pursuant to the foregoing sentence shall be effective
at the effective time or date of the merger. Notwithstanding the
above provisions of this subdivision, if a greater number of members
is required to approve an amendment to the operating agreement of the
constituent limited liability company than is required to approve
the agreement of merger pursuant to subdivision (a), and the number
of members that approve the agreement of merger is less than the
number of members required to approve an amendment to the operating
agreement of the constituent limited liability company, any amendment
to the operating agreement or adoption of a new operating agreement
of the surviving limited liability company made pursuant to the first
sentence of this subdivision shall be effective only if the
agreement of merger is approved by the number of members required to
approve an amendment to the operating agreement of the constituent
(f) The surviving limited liability company or surviving other
business entity shall keep the agreement of merger at the office
referred to in subdivision (a) of Section 17057 or at the business
address specified in paragraph (5) of subdivision (a) of Section
17552, as applicable. Upon the request of a member of a constituent
limited liability company or a holder of shares, interests, or other
securities of a constituent other business entity, a manager or, if
no managers have been elected, any member of the surviving limited
liability company or a person with authority to do so on behalf of
the surviving other business entity shall promptly deliver to the
member or the holder of shares, interests, or other securities, at
the expense of the surviving limited liability company or surviving
other business entity, a copy of the agreement of merger. A waiver by
a member or holder of shares, interests, or other securities of the
rights provided in this subdivision shall be unenforceable.
17552. (a) If the surviving entity is a limited liability company

or an other business entity (other than a corporation in a merger in
which a domestic corporation is a constituent party), after approval
of a merger by the constituent limited liability companies and any
constituent other business entities, the constituent limited
liability companies or constituent other business entities shall file
a certificate of merger in the office of, and on a form prescribed
by, the Secretary of State. The certificate of merger shall be
company, unless a lesser number is specified in the articles of
organization or the operating agreement of the constituent limited
liability company, and by each constituent foreign limited liability
company and each constituent other business entity by those persons
required to execute the certificate or agreement of merger by the
laws under which the constituent foreign limited liability company or
other business entity is organized. The certificate of merger shall
set forth all of the following:
of each of the constituent limited liability companies and
constituent other business entities, separately identifying the
disappearing limited liability companies and disappearing other
business entities and the surviving limited liability company or
surviving other business entity.
(2) If a vote of the members was required under Section 17551, a
statement setting forth the total number of outstanding interests of
each class entitled to vote on the merger and that the principal
terms of the agreement of merger were approved by a vote of the
number of interests of each class that equaled or exceeded the vote
vote required of each class.
(3) If the surviving entity is a limited liability company and not
an other business entity, any change required to the information set
forth in the articles of organization of the surviving limited
liability company resulting from the merger, including any change in
the name of the surviving limited liability company resulting from
the merger. The filing of a certificate of merger setting forth any
changes to the articles of organization of the surviving limited
liability company shall have the effect of the filing of an amendment
to the articles of organization by the surviving limited liability
company, and the surviving limited liability company need not file a
certificate of amendment under Section 17054 to reflect those
changes.
(4) The future effective date or time (which shall be a date or
time certain not more than 90 days subsequent to the date of filing)
State.
foreign limited liability company, the full name, type of entity,
legal jurisdiction in which the entity was organized and by whose
laws its internal affairs are governed, and the address of the
principal place of business of the entity.
entity is organized, including, if a domestic corporation is a party
to the merger, paragraph (2) of subdivision (g) of Section 1113.
If the surviving entity is a foreign limited liability company in
a merger in which a domestic corporation is a disappearing other
business entity, a copy of the agreement of merger and attachments as
required under paragraph (1) of subdivision (g) of Section 1113
shall be filed at the same time as the filing of the certificate of
merger.
(b) If the surviving entity is a domestic corporation or a foreign
corporation in a merger in which a domestic corporation is a
constituent party, after approval of the merger by the constituent
limited liability companies and constituent other business entities,
the surviving corporation shall file in the office of the Secretary
of State a copy of the agreement of merger and attachments required
domestic constituent limited liability company by all of the managers
of the limited liability company unless a lesser number is specified
in the articles of organization or the operating agreement of the
domestic constituent limited liability company.
(c) A certificate of merger, or the agreement of merger, as is
applicable under subdivisions (a) or (b), shall have the effect of
the filing of a certificate of cancellation of articles of
organization for each disappearing limited liability company and no
disappearing limited liability company need file a certificate of
cancellation of articles of organization under Section 17356 as a
result of the merger.
(d) If a disappearing other business entity is a foreign
corporation qualified to transact intrastate business in this state,
the filing of the certificate of merger or the agreement of merger
shall automatically surrender its right to transact intrastate
business.
17553. (a) Unless a future effective date or time is provided in

the certificate of merger or in any agreement of merger required to
be filed under Section 17552, in which event the merger shall be
effective at that future effective date or time (which shall be a
date or time certain not more than 90 days subsequent to the date of
filing), a merger shall be effective upon the filing of the
certificate of merger, or the agreement of merger, as is applicable
under subdivision (a) or (b), in the office of the Secretary of
State.
(b) (1) For all purposes, a copy of the certificate of merger duly
certified by the Secretary of State is conclusive evidence of the
merger of (A) the constituent limited liability companies (either by
themselves or together with constituent other business entities) into
the surviving other business entity, or (B) the constituent limited
liability companies or the constituent other business entities, or
both, into the surviving limited liability company.
(2) In a merger in which the surviving entity is a corporation in
a merger in which a domestic corporation and a domestic limited
liability company are parties to the merger, a copy of an agreement
of merger certified on or after the effective date by an official
having custody thereof has the same force in evidence as the original
and, except as against the state, is conclusive evidence of the
performance of all conditions precedent to the merger, the existence
on the effective date of the surviving corporation, and the
performance of the conditions necessary to the adoption of any
amendment to the articles of incorporation of the surviving
corporation, if applicable, contained in the agreement of merger.
17554. (a) Upon a merger of limited liability companies or limited

liability companies and other business entities pursuant to this
chapter, the separate existence of the disappearing limited liability
companies and disappearing other business entities ceases and the
surviving limited liability company or surviving other business
entity shall succeed, without other transfer, act, or deed, to all
the rights and property, whether real, personal, or mixed, of each of
the disappearing limited liability companies and disappearing other
business entities and shall be subject to all the debts and
liabilities of each in the same manner as if the surviving limited
liability company or surviving other business entity had itself
incurred them.
(b) All rights of creditors and all liens upon the property of
each of the constituent limited liability companies and constituent
other business entities shall be preserved unimpaired and may be
enforced against the surviving limited liability company or the
surviving other business entity to the same extent as if the debt,
liability, or duty that gave rise to that lien had been incurred or
contracted by it, provided that such liens upon the property of a
disappearing limited liability company or disappearing other business
entity shall be limited to the property affected thereby immediately
disappearing limited liability company or disappearing other business
entity may be prosecuted to judgment, that shall bind the surviving
limited liability company or surviving other business entity, or the
entity may be proceeded against or be substituted in the disappearing
limited liability company's or disappearing other business entity's
place.
(d) If a partnership is a party to a merger nothing in this
chapter is intended to affect the liability a general partner of a
disappearing partnership may have in connection with the debts and
liabilities of the disappearing partnership existing prior to the
time the merger is effective.

domestic or foreign limited liability company or other business
entity shall be deemed to have assumed the liability of each
disappearing domestic or foreign limited liability company or other
business entity that is taxed under Part 10 (commencing with Section
17001) of, or under Part 11 (commencing with Section 23001) of,
Division 2 of the Revenue and Taxation Code for the following:
17555. (a) The merger of any number of domestic limited liability

companies with any number of foreign limited liability companies or
foreign other business entities shall be required to comply with
Section 17550.
company or a domestic other business entity, the merger proceedings
with respect to that limited liability company or other business
entity and any domestic disappearing limited liability company shall
conform to the provisions of this chapter governing the merger of
domestic limited liability companies, but if the surviving entity is
a foreign limited liability company or a foreign other business
entity, then, subject to the requirements of subdivision (d) and
Chapter 13 (commencing with Section 17600), with respect to any
domestic constituent corporation, Section 1113 and Chapters 12
of Division 1 of Title 1, and with respect to any domestic
constituent limited partnership, Article 7.6 (commencing with Section
15679.1) of Chapter 3 and Article 11.5 (commencing with Section
15911.20) of Chapter 5.5 of Title 2, the merger proceedings may be in
accordance with the laws of the state or place of organization of
the surviving limited liability company or surviving other business
entity.
(c) If the surviving entity is a domestic limited liability
company or domestic other business entity, other than a domestic
corporation, a certificate of merger shall be filed as provided in
subdivision (a) of Section 17552 and thereupon, subject to
subdivision (a) of Section 17553, the merger shall be effective as to
each domestic constituent limited liability company and domestic
constituent other business entity. If the surviving entity is a
domestic corporation, the agreement of merger with attachments shall
be filed as provided in subdivision (b) of Section 17552, and
thereupon, subject to subdivision (a) of Section 17553, the merger
shall be effective as to each domestic constituent limited liability
company and domestic constituent other business entity unless another
effective date is provided for in Chapter 11 (commencing with
Section 1100) of Division 1 of Title 1, with respect to any
constituent corporation or any constituent other business entity.
(d) If the surviving entity is a foreign limited liability company
or foreign other business entity, the merger shall become effective
in accordance with the laws of the jurisdiction in which the
entity is organized; but the merger shall be effective as to any
domestic disappearing limited liability company as of the time of
effectiveness in the foreign jurisdiction upon the filing in this
state of a certificate of merger or agreement of merger as provided
in Section 17552.
(e) If a merger described in subdivision (c) or (d) also includes
a foreign disappearing limited liability company previously
registered for the transaction of intrastate business in this state
pursuant to Section 17451, the filing of the certificate of merger or
agreement of merger, as applicable, automatically has the effect of
a cancellation of registration for that foreign limited liability
company pursuant to Section 17456 without the necessity of the filing
(f) The provisions of subdivision (b) of Section 17551 and Chapter
13 (commencing with Section 17600) apply to the rights of the
members of any of the constituent limited liability companies that
are domestic limited liability companies and of any domestic limited
liability company that is a parent of any foreign constituent limited
liability company.
(g) If the surviving entity is a foreign limited liability company
or foreign other business entity, the surviving entity shall file
the following with the Secretary of State:
(1) An agreement that it may be served in this state in a
proceeding for the enforcement of an obligation of any constituent
entity and in a proceeding to enforce the rights of any holder of a
dissenting interest or dissenting shares in a constituent domestic
limited liability company or domestic other business entity.
(2) An irrevocable appointment of the Secretary of State as its
agent for service of process, and an address to which process may be
forwarded.
(3) An agreement that it will promptly pay the holder of any
dissenting interest or dissenting share in a constituent domestic
limited liability company or domestic other business entity the
amount to which that person is entitled under California law.
17556. Whenever a domestic or foreign limited liability company or
other business entity having any real property in this state merges
with another limited liability company or other business entity
pursuant to the laws of this state or of the state or place in which
any constituent limited liability company or constituent other
business entity was organized, and the laws of the state or place of
organization (including this state) of any disappearing limited
liability company or disappearing other business entity provide
substantially that the making and filing of the agreement of merger
or certificate of merger vests in the surviving limited liability
company or surviving other business entity all the real property of
any disappearing limited liability company and disappearing other
business entity, the filing for record in the office of the county
property of the disappearing limited liability company or
disappearing other business entity is located of either of the
documents specified in subdivision (a) or (b) shall evidence record
ownership in the surviving limited liability company or surviving
other business entity of all interest of the disappearing limited
liability company or disappearing other business entity in and to the
(a) A certificate of merger certified by the Secretary of State,
or any other certificate as may be prescribed by the Secretary of
State.
(b) A copy of the agreement of merger or certificate of merger,
certified by the Secretary of State or an authorized public official
of the state or place pursuant to the laws of which the merger is
effected.
CORPORATIONS CODE
SECTION 17600-17613
17600. (a) For purposes of this chapter, "reorganization" refers to

(1) A conversion pursuant to Chapter 11.5 (commencing with Section
17540.1).
(2) A merger pursuant to Chapter 12 (commencing with Section
17550).
(3) The acquisition by one limited liability company in exchange,
in whole or in part, for its membership interests (or the membership
interests or equity securities of a limited liability company or
other business entity that is in control of the acquiring limited
liability company), of membership interests or equity securities of
another limited liability company or other business entity if,
immediately after the acquisition, the acquiring limited liability
company has control of the other limited liability company or other
business entity.
(4) The acquisition by one limited liability company in exchange
in whole or in part for its membership interests (or the membership
interests or equity securities of a limited liability company or
other business entity that is in control of the acquiring limited
liability company) or for its debt securities (or debt securities of
a limited liability company or other business entity that is in
control of the acquiring limited liability company) that are not
adequately secured and that have a maturity date in excess of five
years after the consummation of the acquisition, or both, of all or
substantially all of the assets of another limited liability company
or other business entity.
(b) For purposes of this chapter, "control" means the possession,
direct or indirect, of the power to direct or cause the direction of
the management and policies of a limited liability company or other
business entity.
17601. (a) If the approval of outstanding membership interests is

required for a limited liability company to participate in a
reorganization, pursuant to the operating agreement of the limited
liability company, or otherwise, then each member of the limited
liability company holding those membership interests may, by
complying with this chapter, require the limited liability company to
purchase for cash, at its fair market value, the interest owned by
the member in the limited liability company, if the interest is a
dissenting interest as defined in subdivision (b). The fair market
value shall be determined as of the day before the first announcement
of the terms of the proposed reorganization, excluding any
appreciation or depreciation in consequence of the proposed
reorganization unless exclusion would be inequitable.
(b) As used in this chapter, "dissenting interest" means a
membership interest that satisfies all of the following conditions:
(1) The membership interest was outstanding on the date for the
determination of members entitled to vote on the reorganization.
(2) (A) The membership interest was not voted in favor of the
reorganization, or (B) the membership interest was voted against the
reorganization; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any event where the
approval for the proposed reorganization is sought by written consent
rather than at a meeting.
(3) That the member has demanded that the limited liability
company purchase at its fair market value in accordance with Section
17602.
(4) That the member submits for endorsement, if applicable, in
(c) As used in this chapter, "dissenting member" means the
recordholder of a dissenting interest, and includes an assignee of
record of that interest.
17602. (a) If members have a right under Section 17601, subject to

compliance with paragraphs (4) and (5) of subdivision (b) thereof, to
require the limited liability company to purchase their membership
interests for cash, that limited liability company shall mail to each
member a notice of the approval of the reorganization by the
requisite vote or consent of the members. This notice shall be mailed
within 10 days after the date of the approval, accompanied by a copy
of this section and Sections 17601, 17603, 17604, and 17605, a
statement of the price determined by the limited liability company to
represent the fair market value of its outstanding interests, a
statement of the method of valuation employed, the latest available
balance sheet of the limited liability company, the latest available
income statement of the limited liability company, and a brief
description of the procedure to be followed if the member desires to
exercise the member's rights under those sections. The statement of
price constitutes an offer by the limited liability company to
purchase at the price stated any dissenting interests as defined in
subdivision (b) of Section 17601, unless they lose their status as
dissenting interests under Section 17610.
(b) Any member who has a right to require the limited liability
company to purchase the member's interest for cash under Section
17601, subject to compliance with paragraphs (4) and (5) of
subdivision (b) thereof, and who desires the limited liability
company to purchase that interest, shall make written demand upon the
limited liability company for the purchase of the interest and the
payment to the member in cash of its fair market value. The demand is
not effective for any purpose unless it is received by the limited
liability company or any transfer agent thereof within 30 days after
the date on which notice of the approval of the reorganization by the
requisite vote or consent of the members is mailed by the limited
liability company to the members.
(c) The demand shall state the number or amount of the dissenting
member's interest in the limited liability company and shall contain
a statement of what that member claims to be the fair market value of
that interest on the day before the announcement of the proposed
reorganization. The statement of fair market value constitutes an
offer by the dissenting member to sell the interest at that price.
17603. Within 30 days after the date on which notice of the

approval of the outstanding interests of the limited liability
company is mailed to the dissenting member pursuant to subdivision
(a) of Section 17602, the member shall submit to the limited
liability company at its principal office or at the office of any
transfer agent thereof, the following:
(a) If the interest is evidenced by a certificate, the dissenting
member's certificate representing the interest that the member
demands that the limited liability company purchase, to be stamped or
endorsed with a statement that the interest is a dissenting
interest, or to be exchanged for certificates of appropriate
denominations so stamped or endorsed.
(b) If the interest is not evidenced by a certificate, written
notice of the number or amount of interest that the dissenting member
demands that the limited liability company purchase. Upon subsequent
transfers of the dissenting interest on the books of the limited
liability company, the new certificates or other written statement
issued therefor shall bear a like statement, together with the name
of the original holder of the dissenting interest.
17604. (a) If the limited liability company and the dissenting

member agree that the member's interest is a dissenting interest and
agree upon the price to be paid for the dissenting interest, the
dissenting member is entitled to the agreed price with interest
thereon at the legal rate on judgments from the date of consummation
of the reorganization. All agreements fixing the fair market value of
any dissenting member's interest as between the limited liability
company and the member shall be in writing and filed in the records
of the limited liability company.
(b) Subject to the provisions of Section 17607, payment of the
fair market value for a dissenting interest shall be made within 30
days after the amount thereof has been agreed upon or within 30 days
after any statutory or contractual conditions to the reorganization
are satisfied, whichever is later. In the case of dissenting
interests evidenced by certificates of interest, payment shall be
subject to surrender of the certificates of interest, unless provided
otherwise by agreement.
17605. (a) If the limited liability company denies that a

membership interest is a dissenting interest, or the limited
liability company and a dissenting member fail to agree upon the fair
market value of a dissenting interest, then the member or any
interested limited liability company, within six months after the
requisite vote or consent of the members was mailed to the member,
but not thereafter, may file a complaint in the superior court of the
proper county to determine whether the interest is a dissenting
interest, or the fair market value of the dissenting interest, or
both, or to intervene in any action pending on such a complaint.
(b) Two or more dissenting members may join as plaintiffs or be
joined as defendants in any action and two or more actions may be
consolidated.
issues. If the status of the membership interest as a dissenting
interest is an issue, the court shall first determine that issue. If
the fair market value of the dissenting interest is an issue, the
court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the dissenting
interest.
17606. (a) If the court appoints an appraiser or appraisers, they

shall determine the fair market value per interest of the outstanding
membership interests of the limited liability company, by class if
necessary. Within the time fixed by the court, the appraisers, or a
majority of them, shall make and file a report in the office of the
clerk of the court. On the motion of any party, the report shall be
submitted to the court and considered along with any additional
evidence as the court considers relevant. If the court finds the
report reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and
file a report within 30 days from the date of their appointment, or
within such further time as may be allowed by the court, or the
report is not confirmed by the court, the court shall determine the
fair market value per interest of the outstanding membership
interests of the limited liability company, by class if necessary.
(c) Subject to Section 17607, judgment shall be rendered against
the limited liability company for payment of an amount equal to the
fair market value, as determined by the court, of each dissenting
interest that any dissenting member who is a party, or has
intervened, is entitled to require the limited liability company to
purchase, with interest thereon at the legal rate on judgments from
the date of consummation of the reorganization.
(d) Any judgment shall be payable forthwith, provided, however,
that with respect to membership interests evidenced by transferable
certificates of interest, only upon the endorsement and delivery to
the limited liability company of those certificates representing the
interest described in the judgment. Any party may appeal from the
judgment.
(e) The costs of the action, including reasonable compensation for
the appraisers, to be fixed by the court, shall be assessed or
exceeds the price offered by the limited liability company, the
limited liability company shall pay the costs, including, in the
discretion of the court, if the value awarded by the court for the
dissenting interest is more than 125 percent of the price offered by
the limited liability company under subdivision (a) of Section 17602,
attorneys' fees and fees of expert witnesses.
17607. To the extent that the payment to dissenting members of the

fair market value of their dissenting interests would require the
dissenting members to return that payment or a portion thereof by
reason of subdivision (f) of Section 17254 or the Uniform Fraudulent
Transfer Act (Chapter 1 (commencing with Section 3439) of Title 2 of
Part 2 of Division 4 of the Civil Code), then that payment or portion
thereof shall not be made and the dissenting members shall become
creditors of the limited liability company for the amount not paid,
together with interest thereon at the legal rate on judgments until
the date of payment. The dissenting members shall be subordinate to
all other creditors in any proceeding relating to the winding up and
dissolution of the limited liability company.
17608. Any cash distributions made by a limited liability company

to a dissenting member after the date of consummation of the
reorganization, but prior to any payment by the limited liability
company for the dissenting member's interest, shall be credited
against the total amount to be paid by the limited liability company
for that dissenting interest.
17609. Except as expressly limited by this chapter, dissenting

members shall continue to have all the rights and privileges incident
to their interests immediately prior to the reorganization,
including limited liability, until payment by the limited liability
company for their dissenting interests. A dissenting member may not
withdraw a demand for payment unless the limited liability company
consents thereto.
17610. A dissenting interest loses its status as a dissenting

interest and the holder thereof ceases to be a dissenting member and
ceases to be entitled to require the limited liability company to
purchase the interest upon the occurrence of any of the following:
(a) The limited liability company abandons the reorganization.
Upon abandonment of the reorganization, the limited liability company
shall pay, on demand, to any dissenting member who has initiated
proceedings in good faith under this chapter, all reasonable expenses
incurred in those proceedings and reasonable attorneys' fees.
(b) The interest is transferred prior to its submission for
endorsement in accordance with Section 17603.
(c) The dissenting member and the limited liability company do not
agree upon the status of the interest as a dissenting interest or
upon the purchase price of the dissenting interest, and neither files
a complaint nor intervenes in a pending action, as provided in
Section 17605, within six months after the date upon which notice of
the approval of the reorganization by the requisite vote or consent
of members was mailed to the member.
(d) The dissenting member, with the consent of the limited
liability company, withdraws that member's demand for purchase of the
17611. If litigation is instituted to test the sufficiency or

regularity of the vote of the members in authorizing a
reorganization, any proceedings under Sections 17605 and 17606 shall
be suspended until final determination of that litigation.
17612. (a) Subject to subdivisions (b) and (c), this chapter

applies to the following:
(1) A domestic limited liability company.
(2) A foreign limited liability company if members holding more
than 50 percent of the voting interests of the foreign limited
liability company reside in this state.
(b) This chapter does not apply to membership interests governed
by operating agreements whose terms and provisions specifically set
forth the amount to be paid in respect of those interests in the
event of a reorganization of the limited liability company.
(c) This chapter shall not apply to any limited liability company
with 35 or fewer members if all the members have waived the
application of this chapter in writing, whether in an operating
agreement or otherwise, provided that if, at the time of the
reorganization, the limited liability company had more than 35
members, any waiver shall be ineffective as to that reorganization.
17613. (a) No member of a limited liability company who has a right

under this chapter to demand payment of cash for the interest owned
by that member in a limited liability company shall have any right at
law or in equity to attack the validity of the reorganization, or to
have the reorganization set aside or rescinded, except (1) in an
action to test whether the vote or consent of members required to
authorize or approve the reorganization has been obtained in
accordance with the procedures established therefor by the operating
agreement of the limited liability company, or if there is no written
operating agreement, this chapter, or (2) when the limited liability
company action is fraudulent with respect to the complaining member
or the limited liability company.
(b) If one of the parties to a reorganization is directly or
to the reorganization, subdivision (a) shall not apply to any member
of the controlled party who has not demanded payment of cash for the
member's interest pursuant to this chapter; but if the member
institutes any action to attack the validity of the reorganization or
to have the reorganization set aside or rescinded, the member shall
not thereafter have any right to demand payment of cash for that
member's interest pursuant to this chapter.
(c) If one of the parties to a reorganization is directly or
to the reorganization, then, in any action to attack the validity of
the reorganization or to have the reorganization set aside or
rescinded, (1) a party to a reorganization that controls another
party to a reorganization shall have the burden of proving that the
transaction is just and reasonable as to the members of the
controlled party, and (2) a person who controls two or more parties
to a reorganization shall have the burden of proving that the
transaction is just and reasonable as to the members of any party so
controlled.
(d) Subdivisions (b) and (c) shall not apply if a majority in
interest of the members other than members who are directly or
to the reorganization approve or consent to the reorganization.
(e) This section shall not prevent a member of a limited liability
company that is a party to a reorganization from bringing an action
against the limited liability company or any manager, officer,
employee, or agent of the limited liability company, at law or in
equity, as to any matters, including, without limitation, an action
for breach of fiduciary obligation or fraud, other than to attack the
validity of the reorganization or to have the reorganization set
aside or rescinded.
CORPORATIONS CODE
SECTION 17650-17656
17650. (a) If a manager or member required by this title to execute

or file any document fails, after demand, to do so within a
reasonable time or refuses to do so, any other manager or member, or
any person appointed by a court of competent jurisdiction, may
prepare, execute, and file that document with the Secretary of State.
(b) If there is any dispute concerning the filing of a document,
or the failure to file a document, any manager or member may petition
the superior court to direct the execution of the document.
(c) If the court finds that it is proper for the document to be
executed and that any person so designated has failed or refused to
execute the document, or if the court determines that any document
should be filed, it shall order a party to file the document, on a
form prescribed by the Secretary of State if appropriate, as ordered
by the court.
(d) In any action under this section, if the court finds the
failure of the manager or member to comply with the requirement to
file any document to have been without justification, the court may
award an amount sufficient to reimburse the managers or members
bringing the action for the reasonable expenses incurred by them,
including attorneys' fees, in connection with the action or
proceeding.
(e) Any member who is not a manager, or any person filing any
document under this section, shall state the statutory authority
after the signature on the appropriate document.
17651. (a) Every limited liability company that neglects, fails, or

refuses to keep or cause to be kept or maintained the documents,
books, and records required by Section 17058 to be kept or maintained
shall be subject to a penalty of twenty-five dollars ($25) for each
day that the failure or refusal continues, beginning 30 days after
receipt of written request by any member that the duty be performed,
up to a maximum of one thousand five hundred dollars ($1,500). The
penalty shall be paid to the member or members jointly making the
request for performance of the duty and damaged by the neglect,
failure, or refusal, if suit therefor is commenced within 90 days
after the written request is made; but the maximum daily penalty
because of failure to comply with any number of separate requests
made on any one day or for the same act shall be two hundred fifty
dollars ($250).
(b) Upon the failure of a limited liability company, or a foreign
limited liability company registered to transact intrastate business
in this state, to file the statement required by Section 17060, the
Secretary of State shall mail a notice of that delinquency to the
limited liability company or foreign limited liability company. The
notice shall also contain information concerning the application of
this section, advise the limited liability company or foreign limited
liability company of the penalty imposed by this subdivision for
failure to timely file the required statement after notice of
delinquency has been mailed by the Secretary of State, and shall
advise the limited liability company or foreign limited liability
company of its right to request relief from the Secretary of State
because of reasonable cause or unusual circumstances that justify the
failure to file. If, within 60 days after the mailing of the notice
of delinquency, a statement pursuant to Section 17060 has not been
filed by the limited liability company or foreign limited liability
company, the limited liability company or foreign limited liability
company shall be subject to a penalty of two hundred fifty dollars
($250).
17652. Any penalty prescribed by Section 17651 shall be in addition

to any remedy by injunction or action for damages or by writ of
mandate for the nonperformance of acts and duties enjoined by law
upon the limited liability company or its managers.
The court in which an action for any penalty is brought may
reduce, remit or suspend the penalty on any terms and conditions as
it may deem reasonable when it is made to appear that the neglect,
failure or refusal was inadvertent or excusable.
17653. (a) Upon the failure of a limited liability company to file

the statement required by Section 17060, the Secretary of State shall
mail a notice of the delinquency to the limited liability company.
The notice shall also contain information concerning the application
of this section, advise the limited liability company of the penalty
imposed by Section 19141 of the Revenue and Taxation Code for failure
to timely file the required statement after notice of delinquency
has been mailed by the Secretary of State, and shall advise the
limited liability company of its right to request relief from the
Secretary of State because of reasonable cause or unusual
circumstances that justify such failure to file. If, within 60 days
after the mailing of the notice of delinquency, a statement pursuant
to Section 17060 has not been filed by the limited liability company,
the Secretary of State shall certify the name of such limited
liability company to the Franchise Tax Board.
Tax Board shall assess against the limited liability company the
penalty provided in Section 19141 of the Revenue and Taxation Code.
(c) The penalty provided by Section 19141 shall not apply to a
limited liability company that on or prior to the date of
certification pursuant to subdivision (a) has dissolved or has been
merged into another limited liability company or other business
entity.
of State need not mail a notice of delinquency to a limited liability
company the powers, rights and privileges of which have been
suspended by the Franchise Tax Board pursuant to Section 23301,
23301.5 or 23775 of the Revenue and Taxation Code on or prior to, and
remain suspended on, the last day of the filing period pursuant to
Section 17060. The Secretary of State need not mail a form pursuant
to Section 17060 to a limited liability company the powers, rights
and privileges of which have been so suspended by the Franchise Tax
Board on or prior to, and remain suspended on, the day the Secretary
of State prepares the forms for mailing.
Secretary of State finds (1) the required statement was filed or the
required fee was paid before the expiration of the 60-day period
after mailing of the notice of delinquency, or (2) the failure to
provide notice of delinquency was due to an error of the Secretary of
State, the Secretary of State shall promptly decertify the name of
the limited liability company to the Franchise Tax Board. The
Franchise Tax Board shall then promptly abate any penalty assessed
against the limited liability company pursuant to Section 19141 of
limited liability company to file the statement required by Section
17060 is excusable because of reasonable cause or unusual
circumstances that justify such failure, the Secretary of State may
waive the penalty imposed by this section and by Section 19141 of the
Revenue and Taxation Code, in which case the Secretary of State
shall not certify the name of the limited liability company to the
Franchise Tax Board, or if already certified, the Secretary of State
shall promptly decertify the name of the limited liability company.
17654. (a) A limited liability company that (1) fails to file a

statement pursuant to Section 17060 for an applicable filing period,
(2) has not filed a statement pursuant to Section 17060 during the
preceding 24 months, and (3) was certified for penalty pursuant to
Section 17653 for the same filing period, shall be subject to
suspension pursuant to this section rather than to penalty pursuant
to Section 17653.
shall mail a notice to the limited liability company informing the
limited liability company that its powers, rights, and privileges
will be suspended after 60 days if it fails to file a statement
(c) After the expiration of the 60-day period without any
statement filed pursuant to Section 17060, the Secretary of State
notice of the suspension to the limited liability company and
thereupon, except for the purpose of amending the articles of
organization to set forth a new name, the powers, rights, and
privileges of the limited liability company are suspended.
(d) A statement pursuant to Section 17060 may be filed
notwithstanding suspension of the powers, rights, and privileges
pursuant to this section or Section 23301 or 23301.5 of the Revenue
and Taxation Code. Upon the filing of a statement pursuant to Section
17060 by a limited liability company that has suffered suspension
pursuant to this section, the Secretary of State shall certify that
fact to the Franchise Tax Board and the limited liability company may
thereupon be relieved from suspension unless the limited liability
company is held in suspension by the Franchise Tax Board by reason of
Section 23301 or 23301.5 of the Revenue and Taxation Code.
17655. (a) Sections 17653 and 17654 apply to foreign limited

liability companies with respect to the statements required to be
filed by Section 17060. For this purpose, the suspension of the
powers, rights, and privileges of a domestic limited liability
company shall mean the forfeiture of the exercise of the powers,
rights, and privileges of a foreign limited liability company in this
state.
(b) The forfeiture of the exercise of the powers, rights, and
privileges of a foreign limited liability company in this state as
used in subdivision (a) does not prohibit the transaction of business
in this state by a foreign limited liability company if the business
transacted subsequent to the forfeiture would not, considered as an
entirety, require the foreign limited liability company to obtain a
certificate of registration pursuant to subdivision (ao) of Section
17001 and Section 17452.
17656. (a) A limited liability company is liable for a civil

penalty in an amount not exceeding one million dollars ($1,000,000)
if the limited liability company does both of the following:
(1) Has actual knowledge that a member, officer, manager, or agent
of the limited liability company does any of the following:
(A) Makes, publishes, or posts, or has made, published, or posted,
either generally or privately to the shareholders or other persons,
(i) An oral, written, or electronically transmitted report,
exhibit, notice, or statement of its affairs or pecuniary condition
that contains a material statement or omission that is false and
intended to give membership shares in the limited liability company a
materially greater or a materially less apparent market value than
they really possess.
(ii) An oral, written, or electronically transmitted report,
prospectus, account, or statement of operations, values, business,
profits, or expenditures that includes a material false statement or
omission intended to give membership shares in the limited liability
company a materially greater or a materially less apparent market
(B) Refuses or has refused to make any book entry or post any
notice required by law in the manner required by law.
(C) Misstates or conceals or has misstated or concealed from a
regulatory body a material fact in order to deceive a regulatory body
to avoid a statutory or regulatory duty, or to avoid a statutory or
regulatory limit or prohibition.
(2) Within 30 days after actual knowledge is acquired of the
actions described in paragraph (1), the limited liability company
knowingly fails to do both of the following:
(A) Notify the Attorney General or appropriate government agency
in writing, unless the limited liability company has actual knowledge
that the Attorney General or appropriate government agency has been
notified.
(B) Notify its members and investors in writing, unless the
limited liability company has actual knowledge that the members and
investors have been notified.
(b) The requirement for notification under this section is not
applicable if the action taken or about to be taken by the limited
liability company, or by a member, officer, manager, or agent of the
limited liability company under paragraph (1) of subdivision (a), is
abated within the time prescribed for reporting, unless the
appropriate government agency requires disclosure by regulation.
(c) If the action reported to the Attorney General pursuant to
this section implicates the government authority of an agency other
than the Attorney General, the Attorney General shall promptly
forward the written notice to that agency.
(d) If the Attorney General was not notified pursuant to
subparagraph (A) of paragraph (2) of subdivision (a), but the limited
liability company reasonably and in good faith believed that it had
complied with the notification requirements of this section by
notifying a government agency listed in paragraph (5) of subdivision
(e), no penalties shall apply.
(e) For purposes of this section:
(1) "Manager" means a person defined by subdivision (w) of Section
17001 having both of the following:
(A) Management authority over the limited liability company.
(B) Significant responsibility for an aspect of the limited
liability company that includes actual authority for the financial
operations or financial transactions of the limited liability
company.
(2) "Agent" means a person or entity authorized by the limited
liability company to make representations to the public about the
limited liability company's financial condition and who is acting
within the scope of the agency when the representations are made.
(3) "Member" means a person as defined by subdivision (x) of
Section 17001 that is a member of the limited liability company at
the time the disclosure is required pursuant to subparagraph (B) of
paragraph (2) of subdivision (a).
(4) "Notify its members" means to give sufficient description of
an action taken or about to be taken that would constitute acts or
omissions as described in paragraph (1) of subdivision (a). A notice
or report filed by a limited liability company with the United States
Securities and Exchange Commission that relates to the facts and
circumstances giving rise to an obligation under paragraph (1) of
subdivision (a) shall satisfy all notice requirements arising under
paragraph (2) of subdivision (a) but shall not be the exclusive means
of satisfying the notice requirements, provided that the Attorney
General or appropriate agency is informed in writing that the filing
has been made together with a copy of the filing or an electronic
link where it is available online without charge.
(5) "Appropriate government agency" means an agency on the
following list that has regulatory authority with respect to the
financial operations of a limited liability company:
(A) Department of Corporations.
(B) Department of Insurance.
(C) Department of Financial Institutions.
(D) Department of Managed Health Care.
(E) United States Securities and Exchange Commission.
(6) "Actual knowledge of the limited liability company" means the
knowledge a member, officer, or manager of a limited liability
company actually possesses or does not consciously avoid possessing,
based on an evaluation of information provided pursuant to the
limited liability company's disclosure controls and procedures.
(7) "Refuse to make a book entry" means the intentional decision
not to record an accounting transaction when all of the following
conditions are satisfied:
(A) The independent auditors required recordation of an accounting
transaction during the course of an audit.
(B) The audit committee of the limited liability company has not
approved the independent auditor's recommendation.
(C) The decision is made for the primary purpose of rendering the
financial statements materially false or misleading.
(8) "Refuse to post any notice required by law" means an
intentional decision not to post a notice required by law when all of
the following conditions exist:
(A) The decision not to post the notice has not been approved by
the limited liability company's audit committee.
(B) The decision is intended to give the membership shares in the
limited liability company a materially greater or a materially less
apparent market value than they really possess.
(9) "Misstate or conceal material facts from a regulatory body"
means an intentional decision not to disclose material facts when all
of the following conditions exist:
(A) The decision not to disclose material facts has not been
approved by the limited liability company's audit committee.
(B) The decision is intended to give the membership shares in the
limited liability company a greater or a less apparent market value
than they really possess.
(10) "Material false statement or omission" means an untrue
statement of material fact or an omission to state a material fact
necessary in order to make the statements made under the
circumstances under which they were made not misleading.
(11) "Officer" means a person appointed pursuant to Section 17154,
except an officer of a specified subsidiary limited liability
company who is not also an officer of the parent limited liability
company.
(f) This section only applies to limited liability companies that
are issuers, as defined in Section 2 of the Sarbanes-Oxley Act of
2002 (15 U.S.C. Sec. 7201 and following).
(g) An action to enforce this section may only be brought by the
Attorney General or a district attorney or city attorney in the name
of the people of the State of California.
CORPORATIONS CODE
SECTION 18000-18035
18000. Unless the provision or context otherwise requires, the

definitions in this chapter govern the construction of this title.
18003. "Board" means the board of directors or other governing body

of an unincorporated association.
18005. "Director" means a natural person serving as a member of the

board or other governing body of the unincorporated association.
18008. "Governing document" means a constitution, articles of

association, bylaws, or other writing that governs the purpose or
operation of an unincorporated association or the rights or
obligations of its members.
18010. "Governing principles" means the principles stated in an

unincorporated association's governing documents. If an association
has no governing documents or the governing documents do not include
a provision governing an issue, the association's governing
principles regarding that issue may be inferred from its established
practices. For the purpose of this section, "established practices"
means the practices used by an unincorporated association without
material change or exception during the most recent five years of its
existence, or if it has existed for less than five years, during its
entire existence.
18015. (a) If the governing principles of an unincorporated

association define the membership of the association, "member" has
the meaning provided by the governing principles.
(b) If the governing principles of an unincorporated association
do not define the membership of the association, "member" means a
person who, pursuant to the governing principles of the
unincorporated association, has a right to participate in the
selection of persons authorized to manage the affairs of the
unincorporated association or in the development of policy of the
unincorporated association, but does not include a person who
participates solely as director, officer, or agent of the
association.
18020. (a) "Nonprofit association" means an unincorporated

association with a primary common purpose other than to operate a
business for profit.
(b) A nonprofit association may carry on a business for profit and
apply any profit that results from the business activity to any
activity in which it may lawfully engage.
18025. "Officer" means a natural person serving as an
unincorporated association's chair, president, secretary, chief
financial officer, or other position of authority that is established
pursuant to the association's governing principles.
18030. "Person" includes a natural person, corporation,

partnership, or other unincorporated organization, government, or
governmental subdivision or agency, or any other entity.
18035. (a) "Unincorporated association" means an unincorporated

group of two or more persons joined by mutual consent for a common
lawful purpose, whether organized for profit or not.
(b) Joint tenancy, tenancy in common, community property, or other
form or property tenure does not by itself establish an
unincorporated association, even if coowners share ownership of the
property for a common purpose.
(c) Marriage or creation of a registered domestic partnership does
not by itself establish an unincorporated association.
CORPORATIONS CODE
SECTION 18055-18070
18055. This title does not apply to any of the following persons:
(a) A corporation.
(b) A government or governmental subdivision or agency.
(c) A partnership or joint venture.
(d) A limited liability company.
(e) A labor organization, labor federation, labor council, or
labor committee, that is governed by a constitution or bylaws. As
used in this subdivision, "labor organization" means any organization
of any kind, or any agency or employee representation committee or
plan, where employees participate and which exists for the purpose,
in whole or in part, of dealing with employers concerning grievances,
labor disputes, wages, rates of pay, hours of employment, or
conditions of work.
18060. If a statute specific to a particular type of unincorporated

association is inconsistent with a general provision of this title,
the specific statute prevails to the extent of the inconsistency.
18065. Except to the extent this title provides a specific rule,

the general law of agency, including Article 2 (commencing with
Section 2019) of Chapter 2 of Title 6 of, and Title 9 (commencing
with Section 2295) of, Part 4 of Division 3 of the Civil Code,
applies to an unincorporated association.
18070. A provision of this title, insofar as it is substantially

the same as a previously existing provision relating to the same
subject matter, shall be considered as a restatement and continuation
thereof and not as a new enactment, and a reference in a statute to
the provision shall be deemed to include a reference to the
previously existing provision unless a contrary intent appears.
CORPORATIONS CODE
SECTION 18100-18135
18100. The interest of a member in an unincorporated association is

personal property.
18105. An unincorporated association may, in its name, acquire,

hold, manage, encumber, or transfer an interest in real or personal
property.
18110. Property acquired by or for an unincorporated association is

property of the unincorporated association and not of the members
individually.
18115. The acquisition, transfer, or encumbrance of an interest in

real property by an unincorporated association shall be executed by
its president and secretary or other comparable officers, or by a
person specifically designated by a resolution adopted by the
association, or by a committee or other body or person authorized to
act by the governing principles of the association.
18120. (a) An unincorporated association may record in a county in

which it has an interest in real property a verified and acknowledged
statement of authority stating the name of the association, and the
names, title, or capacity of its officers and other persons who are
authorized on its behalf to acquire, transfer, or encumber real
property. For the purposes of this section, "statement of authority"
includes a certified copy of a statement recorded in another county.
(b) An unincorporated association may revoke a statement of
authority by recording either of the following documents in the
county in which the statement of authority is recorded:
(1) A new statement of authority that satisfies the requirements
of subdivision (a). The new statement supersedes the revoked
statement.
(2) A verified and acknowledged document that expressly revokes
the statement of authority.
(c) It shall be conclusively presumed in favor of a bona fide
transferor, or purchaser, or encumbrancer for value of real property
of the association located in the county in which a statement of
authority has been recorded pursuant to subdivision (a), that a
person designated in the statement is authorized to acquire,
transfer, or encumber real property on behalf of the association.
(d) The presumption provided in subdivision (c) does not apply if,
before the acquisition, transfer, or encumbrance, either of the
following occurs:
(1) The statement of authority is revoked by the unincorporated
association.
(2) A person claiming to be a member, director, or officer of the
unincorporated association records, in the county in which the
property is located, a verified and acknowledged document stating
that the statement of authority is erroneous or unauthorized.
18125. No limitation on the power of an unincorporated association

to acquire, hold, manage, pledge, encumber, or transfer an interest
in real or personal property, or the manner of exercise of those
powers, shall be asserted as between the unincorporated association
or a member of the unincorporated association and a third person,
except in the following proceedings:
(a) A proceeding to enjoin an unauthorized act, or the
continuation of an unauthorized act, where a third person has not yet
acquired rights that would be adversely affected by the injunction,
or where, at the time of the unauthorized act, the third person had
actual knowledge that the act was unauthorized.
(b) A proceeding to dissolve the unincorporated association.
(c) A proceeding against a director, officer, or agent of the
unincorporated association for violation of that person's authority.
18130. After all of the known debts and liabilities of an

unincorporated association in the process of winding up its affairs
have been paid or adequately provided for, the assets of the
association shall be distributed in the following manner:
(a) Assets held upon a valid condition requiring return, transfer,
or conveyance of the assets, which condition has occurred or will
occur, shall be returned, transferred, or conveyed in accordance with
the condition.
(b) After complying with subdivision (a), any remaining assets
that are held in trust shall be distributed in accordance with the
trust.
(c) After complying with subdivisions (a) and (b), any remaining
assets shall be distributed in accordance with the governing
principles of the association. If the governing principles do not
provide the manner of distribution of the assets, the assets shall be
distributed pro rata to the current members of the association.
18135. (a) Notwithstanding Section 18260, a cause of action against

an unincorporated association may be enforced against a person who
received assets distributed under Section 18130. Liability under this
section shall be limited to the value of the assets distributed to
the person or the person's pro rata share of the claim against the
unincorporated association, whichever is less.
(b) An action under this section shall be commenced before the
earlier of the following dates:
(1) Expiration of the statute of limitations applicable to the
cause of action.
(2) Four years after dissolution of the unincorporated
association. This paragraph does not apply in a quiet title action.
CORPORATIONS CODE
SECTION 18200-18220
18200. (a) An unincorporated association may file with the

Secretary of State, on a form prescribed by the Secretary of State, a
statement containing either of the following:
(1) A statement designating the location and complete address of
the unincorporated association's principal office in this state. Only
one place may be designated.
(2) A statement (A) designating the location and complete address
of the unincorporated association's principal office in this state in
accordance with paragraph (1) or, if the unincorporated association
does not have an office in this state, designating the complete
address of the unincorporated association to which the Secretary of
State shall send any notices required to be sent to the association
under Sections 18210 and 18215, and (B) designating as agent of the
association for service of process any natural person residing in
this state or any corporation that has complied with Section 1505 and
whose capacity to act as an agent has not terminated.
(b) If a natural person is designated as agent for service of
process, the statement shall include the person's complete business
or residence address. If a corporate agent is designated, no address
for it shall be included.
(c) Filing is deemed complete on acceptance by the Secretary of
State of the statement, a copy of the statement, and the filing fee.
The Secretary of State shall return the copy of the statement to the
unincorporated association, with notations that indicate the file
number and filing date of the original.
(d) At any time, an unincorporated association that has filed a
statement under this section may file a new statement superseding the
last previously filed statement. If the new statement does not
designate an agent for service of process, the filing of the new
statement shall be deemed to revoke the designation of an agent
previously designated. A statement filed under this section expires
five years from December 31 following the date it was filed in the
office of the Secretary of State, unless previously superseded by the
filing of a new statement.
(e) Delivery by hand of a copy of any process against the
unincorporated association (1) to any natural person designated by it
as agent, or (2) if the association has designated a corporate
agent, to any person named in the last certificate of the corporate
agent filed pursuant to Section 1505 at the office of the corporate
agent shall constitute valid service on the association.
(f) For filing a statement as provided in this section, the
Secretary of State shall charge and collect the fee provided in
paragraph (1) of subdivision (b) of Section 12191 of the Government
Code for filing a designation of agent.
(g) Notwithstanding Section 18055, a statement filed by a
partnership under former Section 24003 is subject to this chapter
until the statement is revoked or expires.
18205. (a) The Secretary of State shall mark each statement filed
under Section 18200 with a consecutive file number and the date of
filing. In lieu of retaining the original statement, the Secretary of
State may retain a copy in accordance with Section 14756 of the
Government Code.
(b) The Secretary of State shall index each statement filed under
Section 18200 according to the name of the unincorporated association
as set out in the statement and shall enter in the index the file
number and the address of the association as set out in the statement
and, if an agent for service of process is designated in the
statement, the name of the agent and, if a natural person is
designated as the agent, the address of that person.
(c) Upon request of any person, the Secretary of State shall issue
a certificate showing whether, according to the Secretary of State's
records, there is on file on the date of the certificate, any
presently effective statement filed under Section 18200 for an
unincorporated association using a specific name designated by the
person making the request. If a statement is on file, the certificate
shall include the information required by subdivision (b) to be
included in the index. The fee for the certificate is the fee
provided in Section 12183 of the Government Code.
(d) When a statement has expired under subdivision (d) of Section
18200, the Secretary of State shall enter that fact in the index
together with the date of the expiration.
(e) Four years after a statement has expired, the Secretary of
State may destroy or otherwise dispose of the statement and delete
information concerning that statement from the index.
18210. (a) An agent designated by an unincorporated association for

the service of process may file with the Secretary of State a signed
and acknowledged written statement of resignation as agent of the
unincorporated association. The resignation is effective when filed.
The Secretary of State shall mail written notice of the filing to the
unincorporated association at its address set out in the statement
filed by the association.
(b) An unincorporated association may at any time file with the
Secretary of State a revocation of a designation of an agent for
service of process. The revocation is effective when filed.
(c) Notwithstanding subdivisions (a) and (b), service made on an
agent designated by an unincorporated association for service of
process in the manner provided in subdivision (e) of Section 18200 is
effective if made within 30 days after the statement of resignation
or the revocation is filed with the Secretary of State.
18215. Between the first day of October and the first day of
December immediately preceding the expiration date of a statement
filed under Section 18200, the Secretary of State shall send by
first-class mail a notice, indicating the date on which the statement
will expire and the file number assigned to the statement, to the
unincorporated association at its address as set out in the
statement. Neither the failure of the Secretary of State to mail the
notice as provided in this section nor the failure of the notice to
reach the unincorporated association shall continue the statement in
effect after the date of its expiration. Neither the state nor any
officer or employee of the state is liable for damages for failure to
mail the notice as required by this section.
18220. If designation of an agent for the purpose of service of

process has not been made as provided in Section 18200, or if the
agent designated cannot with reasonable diligence be found at the
address specified in the index referred to in Section 18205 for
delivery by hand of the process, and it is shown by affidavit to the
satisfaction of a court or judge that process against an
unincorporated association cannot be served with reasonable diligence
upon the designated agent by hand or the unincorporated association
in the manner provided for in Section 415.10 or 415.30 of the Code of
Civil Procedure or subdivision (a) of Section 415.20 of the Code of
Civil Procedure, the court or judge may make an order that service be
made upon the unincorporated association by delivery of a copy of
the process to one or more of the association's members designated in
the order and by mailing a copy of the process to the association at
its last known address. Service in this manner constitutes personal
service upon the unincorporated association.
CORPORATIONS CODE
SECTION 18200-18220
18200. (a) An unincorporated association may file with the

Secretary of State, on a form prescribed by the Secretary of State, a
statement containing either of the following:
(1) A statement designating the location and complete address of
the unincorporated association's principal office in this state. Only
one place may be designated.
(2) A statement (A) designating the location and complete address
of the unincorporated association's principal office in this state in
accordance with paragraph (1) or, if the unincorporated association
does not have an office in this state, designating the complete
address of the unincorporated association to which the Secretary of
State shall send any notices required to be sent to the association
under Sections 18210 and 18215, and (B) designating as agent of the
association for service of process any natural person residing in
this state or any corporation that has complied with Section 1505 and
whose capacity to act as an agent has not terminated.
(b) If a natural person is designated as agent for service of
process, the statement shall include the person's complete business
or residence address. If a corporate agent is designated, no address
for it shall be included.
(c) Filing is deemed complete on acceptance by the Secretary of
State of the statement, a copy of the statement, and the filing fee.
The Secretary of State shall return the copy of the statement to the
unincorporated association, with notations that indicate the file
number and filing date of the original.
(d) At any time, an unincorporated association that has filed a
statement under this section may file a new statement superseding the
last previously filed statement. If the new statement does not
designate an agent for service of process, the filing of the new
statement shall be deemed to revoke the designation of an agent
previously designated. A statement filed under this section expires
five years from December 31 following the date it was filed in the
office of the Secretary of State, unless previously superseded by the
filing of a new statement.
(e) Delivery by hand of a copy of any process against the
unincorporated association (1) to any natural person designated by it
as agent, or (2) if the association has designated a corporate
agent, to any person named in the last certificate of the corporate
agent filed pursuant to Section 1505 at the office of the corporate
agent shall constitute valid service on the association.
(f) For filing a statement as provided in this section, the
Secretary of State shall charge and collect the fee provided in
paragraph (1) of subdivision (b) of Section 12191 of the Government
Code for filing a designation of agent.
(g) Notwithstanding Section 18055, a statement filed by a
partnership under former Section 24003 is subject to this chapter
until the statement is revoked or expires.
18205. (a) The Secretary of State shall mark each statement filed
under Section 18200 with a consecutive file number and the date of
filing. In lieu of retaining the original statement, the Secretary of
State may retain a copy in accordance with Section 14756 of the
Government Code.
(b) The Secretary of State shall index each statement filed under
Section 18200 according to the name of the unincorporated association
as set out in the statement and shall enter in the index the file
number and the address of the association as set out in the statement
and, if an agent for service of process is designated in the
statement, the name of the agent and, if a natural person is
designated as the agent, the address of that person.
(c) Upon request of any person, the Secretary of State shall issue
a certificate showing whether, according to the Secretary of State's
records, there is on file on the date of the certificate, any
presently effective statement filed under Section 18200 for an
unincorporated association using a specific name designated by the
person making the request. If a statement is on file, the certificate
shall include the information required by subdivision (b) to be
included in the index. The fee for the certificate is the fee
provided in Section 12183 of the Government Code.
(d) When a statement has expired under subdivision (d) of Section
18200, the Secretary of State shall enter that fact in the index
together with the date of the expiration.
(e) Four years after a statement has expired, the Secretary of
State may destroy or otherwise dispose of the statement and delete
information concerning that statement from the index.
18210. (a) An agent designated by an unincorporated association for

the service of process may file with the Secretary of State a signed
and acknowledged written statement of resignation as agent of the
unincorporated association. The resignation is effective when filed.
The Secretary of State shall mail written notice of the filing to the
unincorporated association at its address set out in the statement
filed by the association.
(b) An unincorporated association may at any time file with the
Secretary of State a revocation of a designation of an agent for
service of process. The revocation is effective when filed.
(c) Notwithstanding subdivisions (a) and (b), service made on an
agent designated by an unincorporated association for service of
process in the manner provided in subdivision (e) of Section 18200 is
effective if made within 30 days after the statement of resignation
or the revocation is filed with the Secretary of State.
18215. Between the first day of October and the first day of
December immediately preceding the expiration date of a statement
filed under Section 18200, the Secretary of State shall send by
first-class mail a notice, indicating the date on which the statement
will expire and the file number assigned to the statement, to the
unincorporated association at its address as set out in the
statement. Neither the failure of the Secretary of State to mail the
notice as provided in this section nor the failure of the notice to
reach the unincorporated association shall continue the statement in
effect after the date of its expiration. Neither the state nor any
officer or employee of the state is liable for damages for failure to
mail the notice as required by this section.
18220. If designation of an agent for the purpose of service of

process has not been made as provided in Section 18200, or if the
agent designated cannot with reasonable diligence be found at the
address specified in the index referred to in Section 18205 for
delivery by hand of the process, and it is shown by affidavit to the
satisfaction of a court or judge that process against an
unincorporated association cannot be served with reasonable diligence
upon the designated agent by hand or the unincorporated association
in the manner provided for in Section 415.10 or 415.30 of the Code of
Civil Procedure or subdivision (a) of Section 415.20 of the Code of
Civil Procedure, the court or judge may make an order that service be
made upon the unincorporated association by delivery of a copy of
the process to one or more of the association's members designated in
the order and by mailing a copy of the process to the association at
its last known address. Service in this manner constitutes personal
service upon the unincorporated association.
CORPORATIONS CODE
SECTION 18250-18270
18250. Except as otherwise provided by law, an unincorporated

association is liable for its act or omission and for the act or
omission of its director, officer, agent, or employee, acting within
the scope of the office, agency, or employment, to the same extent as
if the association were a natural person.
18260. A money judgment against an unincorporated association,

whether organized for profit or not, may be enforced only against the
property of the association.
18270. (a) A judgment creditor of a member, director, officer, or

agent of an unincorporated association may not levy execution against
the assets of the member, director, officer, or agent to satisfy a
judgment based on a claim against the unincorporated association
unless a judgment based on the same claim has been obtained against
the unincorporated association and any of the following conditions is
satisfied:
(1) A writ of execution on the judgment against the unincorporated
association has been returned unsatisfied in whole or in part.
(2) The unincorporated association is a debtor in bankruptcy.
(3) The member, director, officer, or agent has agreed that the
creditor need not exhaust the assets of the unincorporated
association.
(4) A court grants permission to the judgment creditor to levy
execution against the assets of a member, director, officer, or agent
based on a finding that the assets of the unincorporated association
subject to execution are clearly insufficient to satisfy the
judgment, that exhaustion of the assets of the unincorporated
association is excessively burdensome, or that the grant of
permission is an appropriate exercise of the court's equitable
powers.
(b) Nothing in this section affects the right of a judgment
creditor to levy execution against the assets of a member, director,
officer, or agent of an unincorporated association if the claim
against the member, director, officer, or agent is not based on a
claim against the unincorporated association.
CORPORATIONS CODE
SECTION 18300
18300. It is the intent of the Legislature to enact legislation

relating to the governance of unincorporated associations.
CORPORATIONS CODE
SECTION 18310-18320
18310. (a) Unless otherwise provided by an unincorporated

association's governing principles, membership in the unincorporated
association is terminated by any of the following events:
(1) Resignation of the member.
(2) Expiration of the fixed term of the membership, unless the
membership is renewed before its expiration.
(3) Expulsion of the member.
(4) Death of the member.
(5) Termination of the legal existence of a member that is not a
natural person.
(b) Termination of membership does not relieve a person from an
obligation incurred as a member before termination.
(c) Termination of membership does not affect the right of an
unincorporated association to enforce an obligation against a person
incurred as a member before termination, or to obtain damages for its
breach.
18320. (a) This section only applies if membership in an

unincorporated association includes a property right or if expulsion
or suspension of a member would affect an important, substantial
economic interest. This section does not apply to an unincorporated
association that has a religious purpose.
(b) Expulsion or suspension of a member shall be done in good
faith and in a fair and reasonable manner. A procedure that satisfies
the requirements of subdivision (c) is fair and reasonable, but a
court may also determine that another procedure is fair and
reasonable taking into account the full circumstances of the
expulsion or suspension.
(c) A procedure for expulsion or suspension of a member that
satisfies the following requirements is fair and reasonable:
(1) The procedure is included in the unincorporated association's
governing documents.
(2) The member to be expelled or suspended is given notice,
including a statement of the reasons for the expulsion or suspension.
The notice shall be delivered at least 15 days before the effective
date of the expulsion or suspension.
(3) The member to be expelled or suspended is given an opportunity
to be heard by the person or body deciding the matter, orally or in
writing, not less than five days before the effective date of the
expulsion or suspension.
(d) A notice pursuant to this section may be delivered by any
method reasonably calculated to provide actual notice. A notice
delivered by mail shall be sent by first-class, certified, or
registered mail to the last address of the member shown on the
unincorporated association's records.
(e) A member may commence a proceeding to challenge the expulsion
or suspension of the member, including a claim alleging defective
notice, within one year after the effective date of the expulsion or
suspension. The court may order any relief, including reinstatement,
it determines is equitable under the circumstances. A vote of the
members or of the board may not be set aside solely because a person
was wrongfully excluded from voting by virtue of the challenged
expulsion or suspension, unless the court determines that the
wrongful expulsion or suspension was in bad faith and for the
purpose, and with the effect, of wrongfully excluding the member from
the vote or from the meeting at which the vote took place, so as to
affect the outcome of the vote.
(f) This section governs only the procedure for expulsion or
suspension and not the substantive grounds for expulsion or
suspension. An expulsion or suspension based on substantive grounds
that violate contractual or other rights of the member or are
otherwise unlawful is not made valid by compliance with this section.
CORPORATIONS CODE
SECTION 18330
18330. Except as otherwise provided by statute or by an

unincorporated association's governing principles, the following
rules govern a member vote conducted pursuant to this chapter:
(a) A vote may be conducted either at a member meeting at which a
quorum is present or by a written ballot in which the number of votes
cast equals or exceeds the number required for a quorum. Approval of
a matter voted on requires an affirmative majority of the votes
cast.
(b) Written notice of the vote shall be delivered to all members
entitled to vote on the date of delivery. The notice shall be
delivered or mailed or sent electronically to the member addresses
shown in the association's records a reasonable time before the vote
is to be conducted. The notice shall not be delivered electronically,
unless the recipient has consented to electronic delivery of the
notice. The notice shall state the matter to be decided and describe
how and when the vote is to be conducted.
(c) If the vote is to be conducted by written ballot, the notice
of the vote shall serve as the ballot. It shall set forth the
proposed action, provide an opportunity to specify approval or
disapproval of any proposal, and provide a reasonable time within
which to return the ballot to the unincorporated association.
(d) One-third the voting power of the association constitutes a
quorum.
(e) The voting power of the association is the total number of
votes that can be cast by members on a particular issue at the time
the member vote is held.
CORPORATIONS CODE
SECTION 18340
18340. If an unincorporated association's governing principles do

not provide a procedure to amend the association's governing
documents, the governing documents may be amended by a vote of the
members.
CORPORATIONS CODE
SECTION 18350-18400
18350. The following definitions govern the construction of this

article:
(a) "Constituent entity" means an entity that is merged with one
or more other entities and includes the surviving entity.
(b) "Disappearing entity" means a constituent entity that is not
the surviving entity.
(c) "Surviving entity" means an entity into which one or more
other entities are merged.
18360. An unincorporated association may merge with a domestic or

foreign corporation, domestic or foreign limited partnership,
domestic or foreign general partnership, or domestic or foreign
limited liability company. Notwithstanding this section, a merger may
be effected only if each constituent entity is authorized to effect
the merger by the laws under which it was organized.
18370. A merger involving an unincorporated association is subject

to the following requirements:
(a) Each party to the merger shall approve an agreement of merger.
The agreement shall include the following provisions:
(1) The terms of the merger.
(2) Any amendments the merger would make to the articles, bylaws,
or other governing documents of the surviving entity.
(3) The name, place of organization, and type of entity of each
constituent entity.
(4) The name of the constituent entity that will be the surviving
entity.
(5) If the name of the surviving entity will be changed in the
merger, the new name of the surviving entity.
(6) The disposition of the memberships or ownership interests of
each constituent entity.
(7) Other details or provisions, if any, including any details or
provisions required by the law under which a constituent entity is
organized.
(b) The principal terms of the merger agreement shall be approved
by the board, the members, and any person whose approval is required
by the association's governing documents. Unless otherwise provided
in the governing documents, the members shall approve the agreement
in the manner provided for amendment of the association's governing
documents. The members may approve the agreement before or after the
board approves the agreement.
(c) A merger agreement that would cause the members of an
unincorporated association to become individually liable for an
obligation of a constituent or surviving entity shall be approved by
all of the members of the unincorporated association. Approval by all
members is not required under this subdivision if the agreement of
merger provides for purchase by the surviving entity of the
membership interest of a member who votes against approval of the
merger agreement.
(d) A merger agreement may be amended by the board, unless the
amendment would change a principal term of the agreement, in which
case it shall be approved as provided in subdivision (b).
(e) Subject to the contractual rights of third parties, the board
may abandon a merger without the approval of the members.
18380. (a) A merger pursuant to this article has the following

effect:
(1) The separate existence of the disappearing entity ceases.
(2) The surviving entity succeeds, without other transfer, to the
rights and property of the disappearing entity.
(3) The surviving entity is subject to all the debts and
liabilities of the disappearing entity. A trust or other obligation
governing property of the disappearing entity applies as if it were
incurred by the surviving entity.
(b) All rights of creditors and all liens on or arising from the
property of each of the constituent entities are preserved
unimpaired, provided that a lien on property of a disappearing entity
is limited to the property subject to the lien immediately before
the merger is effective.
(c) An action or proceeding pending by or against a disappearing
entity or other party to the merger may be prosecuted to judgment,
which shall bind the surviving entity, or the surviving entity may be
proceeded against or substituted in its place.
(d) A merger does not affect an existing liability of a member,
director, officer, or agent of a constituent unincorporated
association for an obligation of the unincorporated association.
18390. If, as a consequence of merger, a surviving entity succeeds

to ownership of real property located in this state, the surviving
entity's record ownership of that property may be evidenced by
recording in the county in which the property is located a copy of
the agreement of merger that is signed by the president and secretary
or other comparable officers of the constituent entities and is
verified and acknowledged as provided in Sections 149 and 193.
18400. A bequest, devise, gift, grant, or promise contained in a

will or other instrument of donation, subscription, or conveyance
that is made to a disappearing entity and that takes effect or
remains payable after the merger inures to the benefit of the
surviving entity. A trust obligation that would govern property if
transferred to the disappearing entity applies to property that is
instead transferred to the surviving entity under this section.
CORPORATIONS CODE
SECTION 18410-18420
18410. An unincorporated association may be dissolved by any of the

following methods:
(a) If the association's governing documents provide a method for
dissolution, by that method.
(b) If the association's governing documents do not provide a
method for dissolution, by the affirmative vote of a majority of the
voting power of the association.
(c) If the association's operations have been discontinued for at
least three years, by the board or, if the association has no
incumbent board, by the members of its last preceding incumbent
board.
(d) If the association's operations have been discontinued, by
court order.
18420. Promptly after commencement of dissolution of an

unincorporated association, the board or, if none, the members shall
promptly wind up the affairs of the association, pay or provide for
its known debts or liabilities, collect any amounts due to it, take
any other action as is necessary or appropriate for winding up,
settling, and liquidating its affairs, and dispose of its assets as
CORPORATIONS CODE
SECTION 18605-18640
18605. A member, director, or agent of a nonprofit association is

not liable for a debt, obligation, or liability of the association
solely by reason of being a member, director, officer, or agent.
18610. A member of a nonprofit association is not liable for a

contractual obligation of the association unless one of the following
conditions is satisfied:
(a) The member expressly assumes personal responsibility for the
obligation in a signed writing that specifically identifies the
obligation assumed.
(b) The member expressly authorizes or ratifies the specific
contract, as evidenced by a writing. This subdivision does not apply
if the member authorizes or ratifies a contract solely in the member'
s capacity as a director, officer, or agent of the association.
(c) With notice of the contract, the member receives a benefit
under the contract. Liability under this subdivision is limited to
the value of the benefit received.
(d) The member executes the contract without disclosing that the
member is acting on behalf of the association.
(e) The member executes the contract without authority to execute
the contract.
18615. A director, officer, or agent of a nonprofit association is
not liable for a contractual obligation of the association unless one
of the following conditions is satisfied:
(a) The director, officer, or agent expressly assumes
responsibility for the obligation in a signed writing that
specifically identifies the obligation assumed.
(b) The director, officer, or agent executes the contract without
disclosing that the director, officer, or agent is acting on behalf
of the association.
(c) The director, officer, or agent executes the contract without
authority to execute the contract.
18620. (a) A member, director, officer, or agent of a nonprofit

association shall be liable for injury, damage, or harm caused by an
act or omission of the association or an act or omission of a
director, officer, or agent of the association, if any of the
following conditions is satisfied:
(1) The member, director, officer, or agent expressly assumes
liability for injury, damage, or harm caused by particular conduct
and that conduct causes the injury, damage, or harm.
(2) The member, director, officer, or agent engages in tortious
conduct that causes the injury, damage, or harm.
(3) The member, director, officer, or agent is otherwise liable
under any other statute.
(b) This section provides a nonexclusive list of existing grounds
for liability, and does not foreclose any common law grounds for
liability.
18630. Notwithstanding any other provision of this chapter, a

member or person in control of a nonprofit association may be subject
to liability for a debt, obligation, or liability of the association
under common law principles governing alter ego liability of
shareholders of a corporation, taking into account the differences
between a nonprofit association and a corporation.
18640. Nothing in this chapter limits application of the Uniform

Title 2 of Part 2 of Division 4 of the Civil Code).
CORPORATIONS CODE
SECTION 21200
21200. Any unincorporated association that is an organized medical

society limiting its membership to licensed physicians and surgeons
and that has as members at least 25 percent of the eligible
physicians and surgeons residing in the area in which it functions
(which must be at least one county) may, without incorporation,
purchase, receive, own, hold, lease, mortgage, pledge, or encumber by
deed of trust or otherwise, manage and sell all the real estate and
other property as may be convenient for the purposes and objects of
the association. However, if the association has less than 100
members, it shall have as members at least a majority of the eligible
persons or licensees in the geographic area served by the particular
association. The members of that unincorporated association are not
individually or personally liable for debts or liabilities contracted
or incurred by the association in the acquisition of lands or leases
or the purchase, leasing, construction, repairing or furnishing of
buildings or other structures to be used for the purposes of the
association or for debts or liabilities contracted or incurred by the
association in the carrying out or performance of any of its
purposes; provided, that the purposes are within the purposes stated
in Section 18020.
CORPORATIONS CODE
SECTION 21300-21310
21300. As used in this chapter, the following terms have the

meanings set forth in this section, unless the context otherwise
requires:
(a) "Association" includes any lodge, order, beneficial
association, fraternal or beneficial society or association,
historical, military, or veterans organization, labor union,
foundation, or federation, or any other society, organization, or
association, or degree, branch, subordinate lodge, or auxiliary
thereof.
(b) "Insignia" includes badge, motto, button, decoration, charm,
emblem, or rosette.
21301. Any association, the principles and activities of which are

not repugnant to the Constitution or laws of the United States or of
this State, may register in the office of the Secretary of State a
facsimile or description of its name or insignia and may by
reregistration alter or cancel it.
21302. An association shall not be permitted to register any name

or insignia similar to or so nearly resembling another name or
insignia already registered as may be likely to deceive.
21303. Application for such registration, alteration, or

cancellation shall be made by the chief officer or officers of the
association, upon blanks to be provided by the Secretary of State.
Such registration shall be for the use and benefit and on behalf of
the association, the individual members, and those hereafter to
become members thereof.
21304. The Secretary of State shall charge and collect a fee as set
forth in paragraph (2) of subdivision (b) of Section 12191 of the
Government Code for each registration made under this chapter.
21305. Upon the registration, the Secretary of State shall issue

his certificate setting forth the fact of the registration.
21306. The Secretary of State shall keep a properly indexed record

of the registrations provided for by this chapter, which record shall
also show any altered or canceled registration.
21307. Any person who willfully wears, exhibits, or uses for any
purpose a name or insignia registered under this chapter, unless he
is entitled to use, wear, or exhibit the name or insignia under the
constitution, bylaws, or rules of the association which registered
it, is guilty of a misdemeanor punishable by fine of not to exceed
two hundred dollars ($200) or by imprisonment in the county jail for
a period not to exceed 60 days.
21308. Any court of competent jurisdiction may restrain by

injunction:
1. The wearing or use of the insignia of any association, unless
the person wearing or using the insignia is entitled to wear or use
the insignia under the constitution, by-laws or rules of the
association.
2. The use of the name of any association in a commercial venture,
trade or business or in the solicitation of subscriptions for or
advertising in any newspaper or other publication or in the
solicitation of donations by any person representing directly or
indirectly that such commercial venture, trade or business, newspaper
or other publication or donation or solicitation for donation, is
sponsored, endorsed or being offered by any association, unless the
person so using the name is entitled to use the name under the
constitution, by-laws or rules of the association or by the written
consent of such association to such use.
21309. In any action under Section 21308 it is not necessary to

allege or prove actual damages or the threat thereof, or actual
injury or the threat thereof to the plaintiff, but in addition to
injunctive relief any plaintiff in any such action is entitled to
recover the amount of the actual damages, if any, sustained by such
plaintiff.
21310. The use of the name or insignia of any association by any
person not entitled to use the same under the constitution, by-laws,
rules or regulations of the association or by the written consent of
such association, is presumptive evidence of the unlawful use of or
traffic in such name or insignia.
CORPORATIONS CODE
SECTION 21400-21401
21400. Whenever any fraternal society or lodge, other than a

society subject to supervision by the Insurance Commissioner, pays
benefits contingent on the death of a member, beneficiaries other
than the following relatives by blood, marriage, or adoption shall be
paid only the excess of the amount of the benefits over the expense
of burial of the member: Spouse, relative by blood to the fourth
degree, father-in-law, mother-in-law, son-in-law, daughter-in-law,
stepfather, stepmother, stepchildren, children by legal adoption, and
parents by legal adoption.
21401. Any fraternal society or lodge which makes any payment in

violation of this chapter is liable for the expense of burial of the
member to the extent of the amount paid in violation thereof.
CORPORATIONS CODE
SECTION 22000-22003

any prospectus, circular, or other advertisement, or announcement of
any joint stock association, existing or intended to be formed, with
intent to permit the document to be published, and thereby to lead
officer, agent, member, or promoter of such association, is guilty of
a misdemeanor.
22001. Every director, officer, or agent of any joint stock

association is guilty of a felony who knowingly concurs in making,
publishing, or posting either generally or privately to the
stockholders or other persons, any written report, exhibit, or
statement of its affairs or pecuniary condition, or book or notice
containing any material statement which is false, or any untrue or
wilfully or fraudulently exaggerated report, prospectus, account,
statement of operations, values, business, profits, expenditures, or
prospects, or any other paper or document intended to produce or
give, or having a tendency to produce or give, the shares of stock in
such association a greater value or a less apparent or market value
than they really possess.
22002. (a) Every director, officer, or agent of any joint stock

association, who knowingly receives or possesses himself of any
property of the association, otherwise than in payment of a just
demand, and, with intent to defraud, omits to make, or to cause or
direct to be made, a full and true entry thereof in the books or
accounts of the association, is guilty of a public offense.
(b) Every director, officer, agent, or member of any joint stock
association who, with intent to defraud, destroys, alters, mutilates,
or falsifies any of the books, papers, writings, or securities
belonging to the association, or makes or concurs in making any false
entries, or omits or concurs in omitting to make any material entry
in any book of accounts or other record or document kept by the
association, is guilty of a public offense.
(c) Each public offense specified in this section is punishable by
($1,000), or by both such fine and imprisonment.
22003. For the purposes of this part every director of a joint

stock association is deemed to possess such knowledge of the affairs
of his association as to enable him to determine whether any act,
proceeding, or omission of its directors is a violation of this part.
CORPORATIONS CODE
SECTION 23000-23006
23000. "Real estate investment trust" as used in this part means

any unincorporated association or trust formed to engage in business
and managed by, or under the direction of, one or more trustees for
the benefit of the holders or owners (hereinafter in this part
"shareowners") of transferable shares of beneficial interest in the
trust estate (hereinafter in this part "shares") and which meets one
of the following two tests:
(a) It received, prior to the effective date of this part, an
order, permit or qualification from the Commissioner of Corporations
pursuant to the provisions of the Corporate Securities Law of 1968 or
any predecessor statute finding that it was a real estate investment
trust, notwithstanding the subsequent amendment, suspension or
revocation of any such finding, order, permit or qualification, and
it has for one or more of its three fiscal years immediately prior to
the effective date of this part complied with, or in good faith
filed a federal income tax return on the basis that it has complied
with the requirements for real estate investment trusts set forth in
Section 856 of the Federal Internal Revenue Code; or
(b) It is formed for the purpose of engaging in business as a real
estate investment trust under Part II of Subchapter M of Chapter 1
of Subtitle A of the Federal Internal Revenue Code of 1954, as
amended from time to time; the sale of its shares has been qualified
at any time by the Commissioner of Corporations pursuant to the
Corporate Securities Law of 1968; and in good faith it has commenced
business as a real estate investment trust.
An unincorporated association or trust which otherwise meets the
requirements of this section shall not be affected in its status as a
real estate investment trust whether or not it is in fact taxable
for any year or years under Part II of Subchapter M of Chapter 1 of
Subtitle A of the Federal Internal Revenue Code of 1954, as amended
from time to time.
23001. No shareowner of a real estate investment trust shall be

personally liable as such for any liabilities, debts or obligations
of, or claims against, the real estate investment trust, whether
arising before or after such shareowner became the owner or holder of
the shares thereof.
23002. Section 23001 shall apply to any real estate investment

trust organized under the laws of this state with respect to
liabilities, debts, obligations and claims wherever arising, and to
any real estate investment trust organized under the laws of a
foreign jurisdiction with respect to liabilities, debts, obligations
and claims arising in this state.
23003. A real estate investment trust shall not issue any security
redeemable at the option of the holder of the security.
23004. Section 23001 shall apply with respect to all liabilities,

debts, obligations of, and claims against, a real estate investment
trust arising after the effective date of this part, and prior law
shall continue to govern with respect to liabilities, debts,
obligations and claims existing on the effective date of this part.
No implication shall be created by the adoption of this part that the
holders or owners of shares of beneficial interest in business
trusts which do not meet the definition of real estate investment
trust in Section 23000 are, or are not, as such, personally liable
for the liabilities, debts or obligations of, or claims against, any
such trust.
23005. The provisions of Sections 1400 and 1402 governing

bankruptcy reorganizations for corporations also apply to real estate
investment trusts. For that purpose where the term "corporation" is
used in such sections it shall also include the term "real estate
investment trust," the terms "director" or "board of directors" shall
include "trustee" or "board of trustees," the term "articles" shall
include "declaration of trust" and the term "capital stock" shall
include "shares of beneficial interest."
article:
(1) Any two or more real estate investment trusts into one real
estate investment trust, provided that the merger is specifically
permitted by the declarations of trust, and that procedure is
detailed in those declarations.
(2) One or more real estate investment trusts with one or more
limited partnerships into one limited partnership, provided that the
merger is specifically permitted by the declarations of trust, and
that procedure is detailed in those declarations.
(3) One or more real estate investment trusts with one or more
limited partnerships into one real estate investment trust, provided
that the merger is specifically permitted by the declarations of
trust, and that procedure is detailed in those declarations.
(b) Any merger under this section shall only be effective upon the
approval of the holders of a majority of the shares of beneficial
interest of the real estate investment trust.
CORPORATIONS CODE
SECTION 24001.5
24001.5. (a) The Legislature finds and declares that the services
of directors or officers of nonprofit medical associations, as
defined in Section 21200, who serve without compensation are critical
to the efficient conduct and management of the public service and
charitable affairs of the people of California. The willingness of
volunteers to offer their services has been deterred by a perception
that their personal assets are at risk for these activities. The
unavailability and unaffordability of appropriate liability insurance
makes it difficult for these associations to protect the personal
assets of their volunteer decisionmakers with adequate insurance. It
is the public policy of this state to provide incentive and
protection to the individuals who perform these important functions.
(b) Except as provided in this section, no cause of action for
monetary damages shall arise against any person serving without
compensation as a director or officer of a nonprofit medical
association, as defined in Section 21200, on account of any negligent
act or omission occurring (1) within the scope of that person's
duties as a director acting as a board member, or within the scope of
that person's duties as an officer acting in an official capacity;
(2) in good faith; (3) in a manner that the person believes to be in
the best interest of the association; and (4) is in the exercise of
his or her policymaking judgment.
(c) This section shall not limit the liability of a director or
officer for any of the following:
(1) Self-dealing transactions, as described in Sections 5233 and
9243.
(2) Conflicts of interest, as described in Section 7233.
(3) Actions described in Sections 5237, 7236, and 9245.
(4) In the case of a charitable trust, an action or proceeding
against a trustee brought by a beneficiary of that trust.
(5) Any action or proceeding brought by the Attorney General.
(6) Intentional, wanton, or reckless acts, gross negligence, or an
action based on fraud, oppression, or malice.
(7) Any action brought under Chapter 2 (commencing with Section
16700) of Part 2 of Division 7 of the Business and Professions Code.
(d) This section only applies to nonprofit organizations organized
to provide charitable, educational, scientific, social, or other
forms of public service that are exempt from federal income taxation
under Section 501(c)(3) or 501(c)(6) of the Internal Revenue Code.
(e) This section applies only if the nonprofit association
maintains a liability insurance policy with an amount of coverage of
at least the following amounts:
(1) If the association's annual budget is less than fifty thousand
dollars ($50,000), the minimum required amount is five hundred
(2) If the association's annual budget equals or exceeds fifty
thousand dollars ($50,000), the minimum required amount is one
million dollars ($1,000,000).
This section applies only if the liability insurance policy is
applicable to the claim.
(f) For the purposes of this section, the payment of actual
expenses incurred in attending meetings or otherwise in the execution
of the duties of a director or officer shall not constitute
compensation.
(g) Nothing in this section shall be construed to limit the
liability of a nonprofit association for any negligent act or
omission of a director, officer, employee, agent, or servant
occurring within the scope of his or her duties.
(h) This section does not apply to any association that unlawfully
restricts membership, services, or benefits conferred on the basis
of political affiliation, age, or any characteristic listed or
defined in subdivision (b) or (e) of Section 51 of the Civil Code.
(i) This section does not apply to any volunteer director or
officer who receives compensation from the association in any other
capacity, including, but not limited to, as an employee.
CORPORATIONS CODE
SECTION 25000-25023
25000. This division may be known as the "Corporate Securities Law

of 1968."
References herein to "this law" refer to the applicable provisions
of this division.

this part apply throughout this division.
25002. "Advertisement" means any written or printed communication

or any communication by means of recorded telephone messages or
spoken on radio, television, or similar communications media,
published in connection with the offer or sale of a security.
25003. (a) "Agent" means any individual, other than a broker-dealer

or a partner of a licensed broker-dealer, who represents a
broker-dealer or who for compensation represents an issuer in
effecting or attempting to effect purchases or sales of securities in
this state.
(b) "Agent" does not include an individual who only represents an
issuer in effecting transactions in securities exempted by
subdivision (a), (b), (e), (f), (g), (j), (k) or (l) of Section 25100
or in effecting transactions exempted by Section 25102, and does not
include an individual who has no place of business in this state if
he or she effects transactions in this state exclusively with
broker-dealers.
(c) "Agent" does not include an associated person of a broker or
dealer effecting transactions described in Section 15(h)(3) of the
Securities Exchange Act of 1934, subject to the provisions of Section
15(h)(2) of that act.
(d) An officer or director of a broker-dealer or issuer, or an
individual occupying a similar status or performing similar
functions, is an agent only if he otherwise comes within this
definition and receives compensation specifically related to
purchases or sales of securities.
25003.5. "Business days" are all days other than every Saturday,
every Sunday, and such other days as are specified or provided for as
holidays in the Government Code of the State of California.
25004. (a) "Broker-dealer" means any person engaged in the business

of effecting transactions in securities in this state for the
account of others or for his own account. "Broker-dealer" also
includes a person engaged in the regular business of issuing or
guaranteeing options with regard to securities not of his own issue.
"Broker-dealer" does not include any of the following:
(1) Any other issuer.
(2) An agent, when an employee of a broker-dealer or issuer.
(3) A bank, trust company, or savings and loan association.
(4) Any person insofar as he buys or sells securities for his own
account, either individually or in some fiduciary capacity, but not
as part of a regular business.
(5) A person who has no place of business in this state if he
effects transactions in this state exclusively with (A) the issuers
of the securities involved in the transactions or (B) other
broker-dealers.
(6) A broker licensed by the Real Estate Commissioner of this
state when engaged in transactions in securities exempted by
subdivision (f) or (p) of Section 25100 or in securities the issuance
of which is subject to authorization by the Real Estate Commissioner
of this state or in transactions exempted by subdivision (e) of
Section 25102.
(7) An exchange certified by the Commissioner of Corporations
pursuant to this section when it is issuing or guaranteeing options.
The commissioner may by order certify an exchange under this section
upon such conditions as he by rule or order deems appropriate, and
upon notice and opportunity to be heard he may suspend or revoke such
certification, if he finds such certification, suspension, or
revocation to be in the public interest and necessary and appropriate
for the protection of investors.
(b) For purposes of this section, an agent is an employee of a
broker-dealer under paragraph (2) of subdivision (a) when the agent
is employed by or associated with the broker-dealer under all of the
following conditions:
(1) The agent is subject to the supervision and control of the
broker-dealer.
(2) The agent performs under the name, authority, and marketing
policies of the broker-dealer.
(3) The agent discloses to investors the identity of the
broker-dealer.
(4) The agent is reported pursuant to subdivision (c) of Section
25210 and the rules adopted thereunder.
25005. "Commissioner" means the Commissioner of Corporations.
25005.1. "Entity conversion transaction" means a conversion

pursuant to Section 1151, 1157, 15677.2, 15677.8, 15911.02, 15911.08,
16902, 16908, 17540.2, 17540.8, or a conversion that occurs entirely
out of state, unless the interests in the entity resulting from the
conversion to be held by the equity holders of the entity being
converted as a result of the conversion are not securities. For
purposes of Sections 25103 and 25120 an entity conversion transaction
is not a change in the rights, preferences, privileges, or
restrictions of or on outstanding securities or an exchange of
securities by the issuer with its existing security holders
exclusively.
25006. "Fraud," "deceit," and "defraud" are not limited to common

law fraud or deceit.
25007. "Guaranteed" means guaranteed as to payment of principal,

interest, dividends, or call premium.
25008. (a) An offer or sale of a security is made in this state

when an offer to sell is made in this state, or an offer to buy is
accepted in this state, or (if both the seller and the purchaser are
domiciled in this state) the security is delivered to the purchaser
in this state. An offer to buy or a purchase of a security is made in
this state when an offer to buy is made in this state, or an offer
to sell is accepted in this state, or (if both the seller and the
purchaser are domiciled in this state) the security is delivered to
the purchaser in this state.
(b) An offer to sell or to buy is made in this state when the
offer either originates from this state or is directed by the offeror
to this state and received at the place to which it is directed. An
offer to buy or to sell is accepted in this state when acceptance is
communicated to the offeror in this state; and acceptance is
communicated to the offeror in this state when the offeree directs it
to the offeror in this state reasonably believing the offeror to be
in this state and it is received at the place to which it is
directed. A security is delivered to the purchaser in this state when
the certificate or other evidence of the security is directed to the
purchaser in this state and received at the place to which it is
directed.
(c) An offer to sell or to buy is not made in this state merely
because (1) the publisher circulates or there is circulated on his
behalf in this state any bona fide newspaper or other publication of
general, regular and paid circulation which has had more than
two-thirds of its circulation outside this state during the past 12
months, or (2) a radio or television program originating outside this
state is received in this state.
25009. (a) "Investment adviser" means any person who, for

compensation, engages in the business of advising others, either
directly or through publications or writings, as to the value of
securities or as to the advisability of investing in, purchasing or
selling securities, or who, for compensation and as a part of a
regular business, publishes analyses or reports concerning
securities. "Investment adviser" does not include (1) a bank, trust
company or savings and loan association; (2) an attorney at law,
accountant, engineer or teacher whose performance of these services
is solely incidental to the practice of his or her profession; (3) an
associated person of an investment adviser; (4) a broker-dealer or
agent of a broker-dealer whose performance of these services is
solely incidental to the conduct of the business of a broker-dealer
and who receives no special compensation for them; or (5) a publisher
of any bona fide newspaper, news magazine or business or financial
publication of general, regular and paid circulation and the agents
and servants thereof, but this paragraph (5) does not exclude any
such person who engages in any other activity which would constitute
that person an investment adviser within the meaning of this section.
(b) "Investment adviser" also includes any person who uses the
title "financial planner" and who, for compensation, engages in the
business, whether principally or as part of another business, of
advising others, either directly or through publications or writings,
as to the value of securities or as to the advisability of investing
in, purchasing or selling securities, or who, for compensation and
as part of a regular business, publishes analyses or reports
concerning securities. This subdivision does not apply to: (1) a
bank, trust company, or savings and loan association; (2) an attorney
at law, accountant, engineer, or teacher whose performance of these
services is solely incidental to the practice of his or her
profession, so long as these individuals do not use the title
"financial planner;" (3) an associated person of an investment
adviser where the investment adviser is licensed or exempt from
licensure under this law; (4) an agent of a broker-dealer where the
broker-dealer is licensed or exempt from licensure under this law, so
long as (A) the performance of these services by the agent is solely
incidental to the conduct of the business of the broker-dealer, and
(B) the agent receives no special compensation for the performance of
these services; or (5) a publisher set forth in paragraph (5) of
subdivision (a), so long as the publisher or the agents and servants
of the publisher are not engaged in any other activity which would
constitute that person an investment adviser within the meaning of
this section.
25009.1. "Investment adviser" does not include persons excepted

from the definition of "investment adviser" by Section 202(a)(11) of
the Investment Advisers Act of 1940 (15 U.S.C. 80a-1 et seq., as
amended), except that with regard to those persons the commissioner
may investigate and bring enforcement actions with respect to fraud
and deceit, including and without limitation fraud and deceit under
Section 25235, and any rules of the commissioner adopted thereunder.
25009.5. (a) "Investment adviser representative" or "associated

person of an investment adviser" means any partner, officer, director
of (or a person occupying a similar status or performing similar
functions) or other individual, except clerical or ministerial
personnel, who is employed by or associated with, or subject to the
supervision and control of, an investment adviser that has obtained a
certificate or that is required to obtain a certificate under this
law, and who does any of the following:
(1) Makes any recommendations or otherwise renders advice
regarding securities.
(2) Manages accounts or portfolios of clients.
(3) Determines which recommendation or advice regarding securities
should be given.
(4) Solicits, offers, or negotiates for the sale or sells
investment advisory services.
(5) Supervises employees who perform any of the foregoing.
(b) "Investment adviser representative" means, with respect to an
investment adviser subject to Section 25230.1, a person defined as an
investment adviser representative by Rule 203A-3 of the Securities
and Exchange Commission (17 C.F.R. 275.203A-3) and who has a place of
25010. "Issuer" means any person who issues or proposes to issue

any security, except that:
(a) With respect to certificates of deposit, voting trust
certificates or collateral-trust certificates, or with respect to
certificates of interest or shares in an unincorporated investment
trust not having a board of directors or persons performing similar
functions or of the fixed, restricted management or unit type,
"issuer" means the person or persons performing the acts and assuming
the duties of depositor or manager pursuant to the provisions of the
trust or other agreement or instrument under which the security is
issued. However, with respect to equipment-trust certificates or like
securities, "issuer" means the person by whom the equipment or
property is or is to be used.
(b) With respect to certificates of interest or participation in
oil, gas or mining titles or leases or in payments out of production
under those titles or leases, "issuer" means the person or persons in
active control of the exploration or development of the property who
sell those interests or participations or payments or any person or
persons who subdivide and sell those interests or participations or
payments. The determination of the person or persons in active
control of the exploration or development of the property shall be
made on the basis of the actual relationship of the parties and not
on the basis of the legal designation of a person's interest.
(c) With respect to a fractional or pooled interest in a viatical
or life settlement contract, "issuer" means the person who creates,
for the purposes of sale, the fractional or pooled interest. In the
case of a viatical or life settlement contract that is not
fractionalized or pooled, "issuer" means the person effecting the
transactions with the investors in those contracts.
(d) In the case of an unincorporated association which provides by
its articles for limited liability of any or all of its members, or
in the case of a trust, committee, or other legal entity, the
trustees or members thereof shall not be individually liable as
issuers of any security issued by the association, trust, committee,
or other legal entity.
25011. "Nonissuer transaction" means any transaction not directly

or indirectly for the benefit of the issuer. A transaction is
indirectly for the benefit of the issuer if any portion of the
purchase price of any securities involved in the transaction will be
received indirectly by the issuer. An offering which involves both an
issuer transaction and a nonissuer transaction shall be treated for
the purposes of Chapters 2 (commencing with Section 25110) and 4
(commencing with Section 25130) of Part 2 of this division as an
issuer transaction, but for the purposes of Chapter 1 (commencing
with Section 25100) of Part 2 of this division they shall be treated
as separate transactions.
25012. "Owners' association" means a nonprofit corporation or

association created to own or lease the commonly owned lots, parcels
or areas referred to in clause (a) of Section 25015, or to provide
management, maintenance, preservation or control of either such lots,
parcels or areas or of the separately owned lots, parcels or areas,
or both, or any portion of or interest in them, or interest subject
to subdivision (g) of Section 11004.5 of the Business and Professions
Code, if the shares or certificates of membership therein are
transferable only by transfer of the interests in the lots, parcels
or areas. Such shares of stock or memberships shall be considered
interests in a real estate development or in subdivided lands or a
subdivision.
25013. "Person" means an individual, a corporation, a partnership,

a limited liability company, a joint venture, an association, a joint
stock company, a trust, an unincorporated organization, a
government, or a political subdivision of a government.
25014. "Publish" means publicly to issue or circulate by newspaper,

mail, radio or television, or otherwise to disseminate to the
public.
25014.5. "Rollup participant" means a finite-life limited

partnership.
(a) Except as provided in subdivision (b) of Section 25014.6, a
limited partnership has "finite-life" if both of the following apply:
(1) It operates as a conduit vehicle for investors to participate
in the ownership of assets for a limited period of time.
(2) It has a policy or purpose of distributing to investors
substantially all proceeds from the sale, financing, or refinancing
of assets, whether for the term of the partnership or after an
initial period of time following commencement of operations, rather
than reinvesting those proceeds in the business.
(b) Rollup participant does not include any partnership registered
under the Investment Company Act of 1940 or any business development
company as defined in Section 80a-2(48) of Title 15 of the United
States Code.
25014.6. "Rollup transaction" means any transaction or series of

transactions that directly or indirectly through acquisition or
otherwise involves the combination or reorganization of one or more
rollup participants and is one of the following:
(a) The offer or sale of securities by a successor entity, whether
newly formed or previously existing, to one or more investors of the
rollup participants to be combined or reorganized.
(b) The acquisition of the successor entity's securities by the
rollup participants being combined or reorganized; provided however,
that a rollup transaction shall not include any transaction that:
(1) The Securities and Exchange Commission exempts from the
definition of a rollup transaction pursuant to subparagraph (c) (ii)
of Item 901 of Regulation S-K adopted by the Securities and Exchange
Commission.
(2) Is determined to be exempt from this definition by the
Commissioner of Corporations upon his or her determination that this
action is in the public interest and consistent with the protection
of investors.
(3) Involves one or more limited partnerships all of the
securities of which are, prior to the transaction, securities for
which transactions are reported under a transaction reporting plan
declared effective before January 1, 1991, by the Securities and
Exchange Commission under Section 11A of the Securities Exchange Act
of 1934.
(4) Involves only those issuers not required to register or report
under Section 12 of the Securities Exchange Act of 1934 where the
resulting issuer is also not required to register or report under
Section 12.
(5) Involves the reorganization to corporate, trust, or
association form or restructuring of a single limited partnership if,
as a consequence of the proposed transaction there will be no
significant, adverse change in any of the following: voting rights,
the term of existence of the entity, management compensation, or
investment objectives.
association form or restructuring of a single limited partnership if
each investor is provided an option to retain a security under
substantially the same terms and conditions as the original issue.
association form or restructuring of a single limited partnership if
transactions in the security issued as a result of the reorganization
or restructuring are not reported under a transaction reporting plan
declared effective before January 1, 1991, by the Securities and
Exchange Commission under Section 11A of the Securities Exchange Act
of 1934.
25014.7. (a) "Eligible rollup transaction" means a rollup

transaction in which the new securities issued are listed or approved
for listing on a national securities exchange which has been
certified by the commissioner under subdivision (o) of Section 25100,
if the exchange requires as a condition to listing or designation
that the rollup transaction be conducted in accordance with
procedures to protect the rights of limited partners.
(b) The rights of limited partners will be presumed to be
protected if the rollup transaction provides for the right of
dissenting limited partners:
(1) To receive compensation for their limited partnership units
based on an appraisal of the limited partnership assets performed by
an independent appraiser unaffiliated with the sponsor or general
partner of the limited partnership and which value the assets as if
sold in an orderly manner in a reasonable period of time, plus or
minus other balance sheet items, and less the cost of sale or
refinancing. Compensation to dissenting limited partners of rollup
transactions may be cash, secured debt instruments, unsecured debt
instruments, or freely tradeable securities; provided, however, that:
(A) Rollups which utilize debt instruments as compensation provide
for a trustee and an indenture to protect the rights of the debt
holders and provide a rate of interest based upon, but not less than,
the then applicable federal rate as determined in accordance with
Section 1274 of the Internal Revenue Code of 1986.
(B) Rollups which utilize unsecured debt instruments as
compensation, in addition to the requirements of subparagraph (A),
limit total leverage to 70 percent of the appraised value of the
assets.
(C) All debt securities have a term no greater than seven years
and provide for prepayment with 80 percent of the net proceeds of any
sale or refinancing of the assets previously owned by the entity or
any part thereof.
(D) Freely tradeable securities utilized as compensation to
dissenting limited partners must be issued by an issuer whose
securities are listed on a national securities exchange that has been
certified for at least one year prior to the transaction, and the
number of securities to be received in return for limited partnership
interests must be determined by an appraisal of limited partnership
assets, conducted in a manner consistent with this paragraph, in
relation to the average last sale price of the freely tradeable
securities in the 20-day period following the transaction. If the
issuer of the freely tradeable securities is affiliated with the
sponsor or general partner, newly issued securities to be utilized as
compensation to dissenting limited partners shall not represent more
than 20 percent of the issued and outstanding shares of that class
of securities after giving effect to the issuance. For the purposes
of the preceding sentence, a sponsor or general partner is
"affiliated" with the issuer of the freely tradeable securities if
the sponsor or general partner receives any material compensation
from the issuer or its affiliates in conjunction with the rollup
transaction or the purchase of the general partner's interest;
provided, however, that nothing herein shall restrict the ability of
a sponsor or general partner to receive any payment for its equity
interests and compensation as otherwise provided by this section.
(2) To receive or retain a security with substantially the same
terms and conditions as the security originally held, provided that
the receipt or retention of that security is not a step in a series
of subsequent transactions that directly or indirectly through
acquisition or otherwise involves future combinations or
reorganizations of one or more rollup participants. Securities
received or retained will be considered to have the same terms and
conditions as the security originally held if:
(A) There is no material adverse change to dissenting limited
partners' rights, including, but not limited to, rights with respect
to voting, the business plan, or the investment, distribution,
management compensation and liquidation policies of the limited
partnership or resulting entity.
(B) The dissenting limited partners receive the same preferences,
privileges, and priorities as they had pursuant to the security
originally held.
The rights set forth in paragraphs (1) and (2) are the only rights
of dissenting limited partners to which the presumption under this
subdivision applies. A general partner or sponsor shall file an
application for qualification pursuant to Section 25110 or Section
25120 with respect to any other rights proposed to be offered to
dissenting limited partners.
At the time a registration statement is filed with the Securities
and Exchange Commission with respect to an eligible rollup
transaction, a general partner or sponsor shall notify, to the
maximum extent permitted by the federal securities laws, each limited
partner who has an address in this state by certified mail of the
following: That a registration statement has been filed with the
Securities and Exchange Commission with respect to a rollup
transaction; that the general partner or sponsor claims an exemption
from the review process under the law by virtue of Section 25014.7,
which defines "eligible rollup transaction"; that the general partner
or sponsor has the burden of proof under the law that the
transaction meets the definition of eligible rollup transaction; and
that the commissioner does not recommend or endorse the transaction.
(c) The rights of limited partners shall be presumed not to be
protected if the general partner:
(1) Converts an equity interest in the limited partnerships
subject to a rollup for which consideration was not paid and which
was not otherwise provided for in the limited partnership agreement
and disclosed to limited partners, into a voting interest in the new
entity, provided, however, an interest originally obtained in order
to comply with the provisions of Internal Revenue Service Revenue
Proclamation 89-12 may be converted.
(2) Fails to follow the valuation provisions in the limited
partnership agreements of the subject limited partners when valuing
their limited partnership interests.
(3) Utilizes a future value of their equity interest rather than
the current value of their equity interest, as determined by an
appraisal conducted in a manner consistent with paragraph (1) of
subdivision (b), when determining their interest in the new entity.
(d) The rights of limited partners shall be presumed not to be
protected as to voting rights, if:
(1) The voting rights in the entity resulting from a rollup do not
generally follow the original voting rights of the limited
partnerships participating in the rollup transaction.
(2) A majority of the interest in an entity resulting from a
rollup transaction may not, without concurrence by the sponsor,
general partners, board of directors or trustee, depending on the
form of entity, vote to:
(A) Amend the limited partnership agreement, articles of
incorporation or bylaws, or indenture.
(B) Dissolve the entity.
(C) Remove management and elect new management.
(D) Approve or disapprove the sale of substantially all of the
assets of the entity.
(3) The general partner or sponsor proposing a rollup is not
required to provide each person whose equity interest is subject to
the rollup transaction with a document which instructs the person on
the proper procedure for voting against or dissenting from the rollup
transaction.
(4) The general partner or sponsor does not utilize an independent
third party to receive and tabulate all votes and dissents, and
require that the third party make the tabulation available to the
general partner and any limited partner upon request at any time
during and after voting occurs.
(e) The rights of limited partners shall be presumed not to be
protected as to transaction costs if:
(1) Limited partners bear an unfair portion of the transaction
costs of a proposed rollup transaction that is rejected. For purposes
of this provision, transaction costs are defined as the costs of
printing and mailing the proxy, prospectus, or other documents; legal
fees not related to the solicitation of votes or tenders; financial
advisory fees; investment banking fees; appraisal fees; accounting
fees; independent committee expenses; travel expenses; and all other
fees related to the preparatory work of the transaction, but not
including costs that would have otherwise been incurred by the
subject limited partnerships in the ordinary course of business, or
solicitation expenses.
(2) Transaction costs of a rejected rollup transaction are not
apportioned between general and limited partners of the subject
limited partnerships according to the final vote on the proposed
transaction as follows:
(A) The general partner or sponsor bears all rollup transaction
costs in proportion to the number of votes to reject the rollup
transaction.
(B) Limited partners bear transaction costs in proportion to the
number of votes to approve the rollup transaction.
(3) The dissenting limited partnership is required to pay any of
the costs of the rollup transaction and the general partner or
sponsor is not required to pay the rollup transaction costs on behalf
of the dissenting limited partnerships in a rollup in which one or
more limited partnerships determines not to approve the transaction,
but where the rollup transaction is consummated with respect to one
or more approving limited partnerships.
(f) The rights of limited partners shall be presumed not to be
protected as to fees of general partners and sponsors, if:
(1) General partners and sponsors are not prevented from receiving
both unearned management fees discounted to a present value, if
those fees were not previously provided for in the limited
partnership agreement and disclosed to limited partners, and new
asset-based fees.
(2) Property management fees and other management fees are not
appropriate, not reasonable and greater than what would be paid to
third parties for performing similar services.
(3) Changes in fees which are substantial and adverse to limited
partners are not approved by an independent committee according to
the facts and circumstances of each transaction.
(g) A general partner or sponsor proposing a rollup transaction
shall pay all solicitation expenses related to the transaction,
including all preparatory work related thereto, in the event the
rollup transaction is not approved. For purposes of this section,
"solicitation expenses" include direct marketing expenses such as
telephone calls, broker-dealer factsheets, legal and other fees
related to the solicitation, as well as direct solicitation
compensation to brokers and dealers.
(h) A broker or dealer may not receive compensation for soliciting
votes or tenders from limited partners in connection with a rollup
transaction unless that compensation:
(1) Is payable and equal in amount regardless of whether the
limited partner votes affirmatively or negatively in the proposed
rollup.
(2) In the aggregate, does not exceed 2 percent of the exchange
value of the newly created securities.
(3) Is paid regardless of whether the limited partners reject the
proposed rollup transaction.
(i) As used in this section, the following terms have the
following meanings:
(1) "Limited partnership" includes any entity determined to be a
"partnership" pursuant to Section 14(h)(4)(B) of the Securities
Exchange Act of 1934 or such other entity having a substantially
economically equivalent form of ownership instrument.
(2) "Dissenting limited partner" means a holder or a beneficial
interest in a limited partnership that is the subject of a rollup
transaction who casts a vote against the rollup transaction, except
that for purposes of an exchange or tender offer dissenting limited
partner means any person who files a dissent from the terms of the
transaction with the party responsible for tabulating the votes or
tenders, to be received in connection with the transaction during the
period in which the offer is outstanding.
(3) "Management fee" means a fee paid to the sponsor, general
partner, their affiliates, or other persons for management and
administration of the limited partnership.
25015. "Real estate development" means a development (a) which

consists or will consist of separately owned lots, parcels or areas
with either or both of the following features: (1) one or more
additional continguous or noncontiguous lots, parcels, or areas owned
in common by the owners of the separately owned lots, parcels, or
areas, or (2) mutual, common, or reciprocal interests in or
restrictions upon all or portions of such separately owned lots,
parcels, or areas; and (b) in which the several owners of the
separately owned lots, parcels, or areas have rights, directly or
indirectly, to the beneficial use and enjoyment of the lots, parcels,
or areas owned in common, or any one or more of them or portions
thereof or interests therein, or of the interests or restrictions
referred to in clause (a) above, or both. The estate in a separately
or commonly owned lot, parcel, or area may be an estate of
inheritance or perpetual estate, an estate for life, or an estate for
years. The common ownership of the lots, parcels, or areas or the
enjoyment of the interests or restrictions referred to in clause (a)
above or both may be through ownership of shares of stock or
memberships in an owners' association or otherwise.
25016. "Rule" means any published regulation or standard of general

application issued by the commissioner. "Order" means a consent,
authorization, approval, permit, or requirement applicable to a
specific case issued by the commissioner.
25017. (a) "Sale" or "sell" includes every contract of sale of,

contract to sell, or disposition of, a security or interest in a
security for value. "Sale" or "sell" includes any exchange of
securities and any change in the rights, preferences, privileges, or
restrictions of or on outstanding securities.
(b) "Offer" or "offer to sell" includes every attempt or offer to
dispose of, or solicitation of an offer to buy, a security or
interest in a security for value.
(c) Any security given or delivered with, or as a bonus on account
of, any purchase of securities or any other thing constitutes a part
of the subject of the purchase and is considered to have been
offered and sold for value.
(d) A purported gift of assessable stock involves an offer and
sale.
(e) Every sale or offer of a warrant or right to purchase or
subscribe to another security of the same or another issuer, as well
as every sale or offer of a security which gives the holder a present
or future right or privilege to convert the security into another
security of the same or another issuer, includes an offer and sale of
the other security only at the time of the offer or sale of the
warrant or right or convertible security; but neither the exercise of
the right to purchase or subscribe or to convert nor the issuance of
securities pursuant thereto is an offer or sale.
(f) The terms defined in this section do not include: (1) any bona
fide secured transaction in or loan of outstanding securities; (2)
any stock dividend payable with respect to common stock of a
corporation solely (except for any cash or scrip paid for fractional
shares) in shares of such common stock, if the corporation has no
other class of voting stock outstanding; provided, that shares issued
in any such dividend shall be subject to any conditions previously
imposed by the commissioner applicable to the shares with respect to
which they are issued; or (3) any act incident to a transaction or
reorganization approved by a state or federal court in which
securities are issued and exchanged for one or more outstanding
securities, claims, or property interests, or partly in that exchange
and partly for cash, and nothing in this division shall be construed
to prohibit a court from applying the protections described in
Section 25014.7 or 25140 and the regulations adopted thereunder when
approving any transaction involving a rollup participant.
25018. "Securities Act of 1933," "Securities Exchange Act of 1934,"

"Public Utility Holding Company Act of 1935," "Investment Advisers
Act of 1940," and "Investment Company Act of 1940" mean the federal
statutes of those names as amended before or after the effective date
of this law.
25019. "Security" means any note; stock; treasury stock; membership
in an incorporated or unincorporated association; bond; debenture;
evidence of indebtedness; certificate of interest or participation in
any profit-sharing agreement; collateral trust certificate;
preorganization certificate or subscription; transferable share;
investment contract; viatical settlement contract or a fractionalized
or pooled interest therein; life settlement contract or a
fractionalized or pooled interest therein; voting trust certificate;
certificate of deposit for a security; interest in a limited
liability company and any class or series of those interests
(including any fractional or other interest in that interest), except
a membership interest in a limited liability company in which the
person claiming this exception can prove that all of the members are
actively engaged in the management of the limited liability company;
provided that evidence that members vote or have the right to vote,
or the right to information concerning the business and affairs of
the limited liability company, or the right to participate in
management, shall not establish, without more, that all members are
actively engaged in the management of the limited liability company;
certificate of interest or participation in an oil, gas or mining
title or lease or in payments out of production under that title or
lease; put, call, straddle, option, or privilege on any security,
certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof); or any put,
call, straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency; any beneficial
interest or other security issued in connection with a funded
employees' pension, profit sharing, stock bonus, or similar benefit
plan; or, in general, any interest or instrument commonly known as a
"security"; or any certificate of interest or participation in,
temporary or interim certificate for, receipt for, guarantee of, or
warrant or right to subscribe to or purchase, any of the foregoing.
All of the foregoing are securities whether or not evidenced by a
written document. "Security" does not include: (1) any beneficial
interest in any voluntary inter vivos trust which is not created for
the purpose of carrying on any business or solely for the purpose of
voting, or (2) any beneficial interest in any testamentary trust, or
(3) any insurance or endowment policy or annuity contract under which
an insurance company admitted in this state promises to pay a sum of
money (whether or not based upon the investment performance of a
segregated fund) either in a lump sum or periodically for life or
some other specified period, or (4) any franchise subject to
registration under the Franchise Investment Law (Division 5
(commencing with Section 31000)), or exempted from registration by
Section 31100 or 31101.
25020. "State" means any state, territory, or possession of the

United States, the District of Columbia and Puerto Rico.
25021. "Subdivided lands" and "subdivision" have the meanings

prescribed in Sections 11000, 11004.5, and 11218 of the Business and
Professions Code.
25022. "Underwriter" means a person who has agreed with an issuer
or other person on whose behalf a distribution is to be made (a) to
purchase securities for distribution or (b) to distribute securities
for or on behalf of such issuer or other person or (c) to manage or
supervise a distribution of securities for or on behalf of such
issuer or other person.
25023. (a) Except as provided in subdivision (b), "viatical

settlement contract" means an agreement as defined in paragraph (1)
of subdivision (a) of Section 10113.1 of the Insurance Code and "life
settlement contract" means an agreement, other than a viatical
settlement contract, for the purchase, sale, assignment, transfer,
devise, or bequest of any portion of the death benefit or ownership
of a life insurance policy or certificate for consideration that is
less than the expected death benefit of the life insurance policy or
certificate.
(b) "Viatical settlement contract" and "life settlement contract"
do not include any of the following:
(1) The assignment, transfer, sale, devise, or bequest of a death
benefit, life insurance policy, or certificate of insurance by the
insured or the original owner to any person if the assignment,
transfer, sale, devise, or bequest (A) is not accompanied by the
publication of any advertisement and (B) is not effected by or
through a broker-dealer (Section 25004).
(2) The assignment of a life insurance policy to a bank, savings
bank, savings association, credit union, or other lender (either
licensed or not required to be licensed) as collateral for a loan, or
to a stop-loss insurer or reinsurer.
(3) The exercise of accelerated benefits pursuant to the terms of
a life insurance policy issued in accordance with the insurance laws
of this state.
(4) The assignment, transfer, sale, devise or bequest of any
undivided death benefit, life insurance policy, or certificate of
insurance by an entity licensed pursuant to Section 10113.2 of the
Insurance Code, or a viatical or life settlement provider licensed
from another state, to one individual or entity, provided that the
individual or entity represents that the individual or entity is
purchasing for its own account (or trust account, if the entity is a
trustee) and not with a view to or for sale in connection with a
distribution of the individual death benefit, life insurance policy,
or certificate of insurance.
CORPORATIONS CODE
SECTION 25100-25105
25100. The following securities are exempted from Sections 25110,

25120, and 25130:
(a) Any security (including a revenue obligation) issued or
guaranteed by the United States, any state, any city, county, city
and county, public district, public authority, public corporation,
public entity, or political subdivision of a state or any agency or
corporate or other instrumentality of any one or more of the
foregoing; or any certificate of deposit for any of the foregoing.
(b) Any security issued or guaranteed by Canada, any Canadian
province, any political subdivision or municipality of that province,
or by any other foreign government with which the United States
currently maintains diplomatic relations, if the security is
recognized as a valid obligation by the issuer or guarantor; or any
certificate of deposit for any of the foregoing.
(c) Any security issued or guaranteed by and representing an
interest in or a direct obligation of a national bank or a bank or
trust company incorporated under the laws of this state, and any
security issued by a bank to one or more other banks and representing
an interest in an asset of the issuing bank.
(d) Any security issued or guaranteed by a federal savings
association or federal savings bank or federal land bank or joint
land bank or national farm loan association or by any savings
association, as defined in subdivision (a) of Section 5102 of the
Financial Code, which is subject to the supervision and regulation of
the Commissioner of Financial Institutions of this state.
(e) Any security (other than an interest in all or portions of a
parcel or parcels of real property which are subdivided land or a
subdivision or in a real estate development), the issuance of which
is subject to authorization by the Insurance Commissioner, the Public
Utilities Commission, or the Real Estate Commissioner of this state.
(f) Any security consisting of any interest in all or portions of
a parcel or parcels of real property which are subdivided lands or a
subdivision or in a real estate development; provided that the
exemption in this subdivision shall not be applicable to: (1) any
investment contract sold or offered for sale with, or as part of,
that interest, or (2) any person engaged in the business of selling,
distributing, or supplying water for irrigation purposes or domestic
use that is not a public utility except that the exemption is
applicable to any security of a mutual water company (other than an
investment contract as described in paragraph (1)) offered or sold in
connection with subdivided lands pursuant to Chapter 2 (commencing
with Section 14310) of Part 7 of Division 3 of Title 1.
(g) Any mutual capital certificates or savings accounts, as
defined in the Savings Association Law, issued by a savings
association, as defined by subdivision (a) of Section 5102 of the
Financial Code, and holding a license or certificate of authority
then in force from the Commissioner of Financial Institutions of this
state.
(h) Any security issued or guaranteed by any federal credit union,
or by any credit union organized and supervised, or regulated, under
the Credit Union Law.
(i) Any security issued or guaranteed by any railroad, other
common carrier, public utility, or public utility holding company
which is (1) subject to the jurisdiction of the Interstate Commerce
Commission or its successor or (2) a holding company registered with
the Securities and Exchange Commission under the Public Utility
Holding Company Act of 1935 or a subsidiary of that company within
the meaning of that act or (3) regulated in respect of the issuance
or guarantee of the security by a governmental authority of the
United States, of any state, of Canada or of any Canadian province;
and the security is subject to registration with or authorization of
issuance by that authority.
(j) Any security (except evidences of indebtedness, whether
interest bearing or not) of an issuer (1) organized exclusively for
educational, benevolent, fraternal, religious, charitable, social, or
reformatory purposes and not for pecuniary profit, if no part of the
net earnings of the issuer inures to the benefit of any private
shareholder or individual, or (2) organized as a chamber of commerce
or trade or professional association. The fact that amounts received
from memberships or dues or both will or may be used to construct or
otherwise acquire facilities for use by members of the nonprofit
organization does not disqualify the organization for this exemption.
This exemption does not apply to the securities of any nonprofit
organization if any promoter thereof expects or intends to make a
profit directly or indirectly from any business or activity
associated with the organization or operation of that nonprofit
organization or from remuneration received from that nonprofit
organization.
(k) Any agreement, commonly known as a "life income contract," of
an issuer (1) organized exclusively for educational, benevolent,
fraternal, religious, charitable, social, or reformatory purposes and
not for pecuniary profit and (2) which the commissioner designates
by rule or order, with a donor in consideration of a donation of
property to that issuer and providing for the payment to the donor or
persons designated by him or her of income or specified periodic
payments from the donated property or other property for the life of
the donor or those other persons.
(l) Any note, draft, bill of exchange, or banker's acceptance
which is freely transferable and of prime quality, arises out of a
current transaction or the proceeds of which have been or are to be
used for current transactions, and which evidences an obligation to
pay cash within nine months of the date of issuance, exclusive of
days of grace, or any renewal of that paper which is likewise
limited, or any guarantee of that paper or of that renewal, provided
that the paper is not offered to the public in amounts of less than
twenty-five thousand dollars ($25,000) in the aggregate to any one
purchaser. In addition, the commissioner may, by rule or order,
exempt any issuer of any notes, drafts, bills of exchange or banker's
acceptances from qualification of those securities when the
commissioner finds that the qualification is not necessary or
appropriate in the public interest or for the protection of
investors.
(m) Any security issued by any corporation organized and existing
under the provisions of Chapter 1 (commencing with Section 54001) of
Division 20 of the Food and Agricultural Code.
(n) Any beneficial interest in an employees' pension,
profit-sharing, stock bonus or similar benefit plan which meets the
requirements for qualification under Section 401 of the federal
Internal Revenue Code or any statute amendatory thereof or
supplementary thereto. A determination letter from the Internal
Revenue Service stating that an employees' pension, profit-sharing,
stock bonus or similar benefit plan meets those requirements shall be
conclusive evidence that the plan is an employees' pension,
profit-sharing, stock bonus or similar benefit plan within the
meaning of the first sentence of this subdivision until the date the
determination letter is revoked in writing by the Internal Revenue
Service, regardless of whether or not the revocation is retroactive.
(o) Any security listed or approved for listing upon notice of
issuance on a national securities exchange, if the exchange has been
certified by rule or order of the commissioner and any warrant or
right to purchase or subscribe to the security. The exemption
afforded by this subdivision does not apply to securities listed or
approved for listing upon notice of issuance on a national securities
exchange, in a rollup transaction unless the rollup transaction is
an eligible rollup transaction as defined in Section 25014.7.
That certification of any exchange shall be made by the
commissioner upon the written request of the exchange if the
commissioner finds that the exchange, in acting on applications for
listing of common stock, substantially applies the minimum standards
set forth in either subparagraph (A) or (B) of paragraph (1), and, in
considering suspension or removal from listing, substantially
applies each of the criteria set forth in paragraph (2).
(1) Listing standards:
(A) (i) Shareholders' equity of at least four million dollars
($4,000,000).
(ii) Pretax income of at least seven hundred fifty thousand
dollars ($750,000) in the issuer's last fiscal year or in two of its
last three fiscal years.
(iii) Minimum public distribution of 500,000 shares (exclusive of
the holdings of officers, directors, controlling shareholders, and
other concentrated or family holdings), together with a minimum of
800 public holders or minimum public distribution of 1,000,000 shares
together with a minimum of 400 public holders. The exchange may also
consider the listing of a company's securities if the company has a
minimum of 500,000 shares publicly held, a minimum of 400
shareholders and daily trading volume in the issue has been
approximately 2,000 shares or more for the six months preceding the
date of application. In evaluating the suitability of an issue for
listing under this trading provision, the exchange shall review the
nature and frequency of that activity and any other factors as it may
determine to be relevant in ascertaining whether the issue is
suitable for trading. A security that trades infrequently shall not
be considered for listing under this paragraph even though average
daily volume amounts to 2,000 shares per day or more.
Companies whose securities are concentrated in a limited
geographical area, or whose securities are largely held in block by
institutional investors, normally may not be considered eligible for
listing unless the public distribution appreciably exceeds 500,000
shares.
(iv) Minimum price of three dollars ($3) per share for a
reasonable period of time prior to the filing of a listing
application; provided, however, in certain instances an exchange may
favorably consider listing an issue selling for less than three
dollars ($3) per share after considering all pertinent factors,
including market conditions in general, whether historically the
issue has sold above three dollars ($3) per share, the applicant's
capitalization, and the number of outstanding and publicly held
shares of the issue.
(v) An aggregate market value for publicly held shares of at least
three million dollars ($3,000,000).
(B) (i) Shareholders' equity of at least four million dollars
($4,000,000).
(ii) Minimum public distribution set forth in clause (iii) of
subparagraph (A) of paragraph (1).
(iii) Operating history of at least three years.
(iv) An aggregate market value for publicly held shares of at
least fifteen million dollars ($15,000,000).
(2) Criteria for consideration of suspension or removal from
listing:
(i) If a company that (A) has shareholders' equity of less than
one million dollars ($1,000,000) has sustained net losses in each of
its two most recent fiscal years, or (B) has net tangible assets of
less than three million dollars ($3,000,000) and has sustained net
losses in three of its four most recent fiscal years.
(ii) If the number of shares publicly held (excluding the holdings
of officers, directors, controlling shareholders and other
concentrated or family holdings) is less than 150,000.
(iii) If the total number of shareholders is less than 400 or if
the number of shareholders of lots of 100 shares or more is less than
300.
(iv) If the aggregate market value of shares publicly held is less
than seven hundred fifty thousand dollars ($750,000).
(v) If shares of common stock sell at a price of less than three
dollars ($3) per share for a substantial period of time and the
issuer shall fail to effectuate a reverse stock split of the shares
within a reasonable period of time after being requested by the
exchange to take that action.
A national securities exchange, certified by rule or order of the
commissioner under this subdivision, shall file annual reports when
requested to do so by the commissioner. The annual reports shall
contain, by issuer: the variances granted to an exchange's listing
standards, including variances from corporate governance and voting
rights' standards, for any security of that issuer; the reasons for
the variances; a discussion of the review procedure instituted by the
exchange to determine the effect of the variances on investors and
whether the variances should be continued; and any other information
that the commissioner deems relevant. The purpose of these reports is
to assist the commissioner in determining whether the quantitative
and qualitative requirements of this subdivision are substantially
being met by the exchange in general or with regard to any particular
security.
The commissioner after appropriate notice and opportunity for
hearing in accordance with the provisions of the Administrative
Procedure Act, Chapter 5 (commencing with Section 11500) of Part 1 of
Division 3 of Title 2 of the Government Code, may, in his or her
discretion, by rule or order, decertify any exchange previously
certified that ceases substantially to apply the minimum standards or
criteria as set forth in paragraphs (1) and (2).
A rule or order of certification shall conclusively establish that
any security listed or approved for listing upon notice of issuance
on any exchange named in a rule or order of certification, and any
warrant or right to purchase or subscribe to that security, is exempt
under this subdivision until the adoption by the commissioner of any
rule or order decertifying the exchange.
(p) A promissory note secured by a lien on real property, which is
neither one of a series of notes of equal priority secured by
interests in the same real property nor a note in which beneficial
interests are sold to more than one person or entity.
(q) Any unincorporated interindemnity or reciprocal or
interinsurance contract, that qualifies under the provisions of
Section 1280.7 of the Insurance Code, between members of a
cooperative corporation, organized and operating under Part 2
(commencing with Section 12200) of Division 3 of Title 1, and whose
members consist only of physicians and surgeons licensed in
California, which contracts indemnify solely in respect to medical
malpractice claims against the members, and which do not collect in
advance of loss any moneys other than contributions by each member to
a collective reserve trust fund or for necessary expenses of
administration.
(1) Whenever it appears to the commissioner that any person has
engaged or is about to engage in any act or practice constituting a
violation of any provision of Section 1280.7 of the Insurance Code,
the commissioner may, in the commissioner's discretion, bring an
action in the name of the people of the State of California in the
superior court to enjoin the acts or practices or to enforce
compliance with Section 1280.7 of the Insurance Code. Upon a proper
showing a permanent or preliminary injunction, a restraining order,
or a writ of mandate shall be granted and a receiver or conservator
may be appointed for the defendant or the defendant's assets.
(2) The commissioner may, in the commissioner's discretion, (A)
make public or private investigations within or outside of this state
as the commissioner deems necessary to determine whether any person
has violated or is about to violate any provision of Section 1280.7
of the Insurance Code or to aid in the enforcement of Section 1280.7,
and (B) publish information concerning the violation of Section
1280.7.
(3) For the purpose of any investigation or proceeding under this
section, the commissioner or any officer designated by the
commissioner may administer oaths and affirmations, subpoena
witnesses, compel their attendance, take evidence, and require the
production of any books, papers, correspondence, memoranda,
agreements, or other documents or records which the commissioner
deems relevant or material to the inquiry.
(4) In case of contumacy by, or refusal to obey a subpoena issued
to, any person, the superior court, upon application by the
commissioner, may issue to the person an order requiring the person
to appear before the commissioner, or the officer designated by the
commissioner, to produce documentary evidence, if so ordered, or to
give evidence touching the matter under investigation or in question.
Failure to obey the order of the court may be punished by the court
as a contempt.
(5) No person is excused from attending or testifying or from
producing any document or record before the commissioner or in
obedience to the subpoena of the commissioner or any officer
designated by the commissioner, or in any proceeding instituted by
the commissioner, on the ground that the testimony or evidence
(documentary or otherwise), required of the person may tend to
incriminate the person or subject the person to a penalty or
forfeiture, but no individual may be prosecuted or subjected to any
penalty or forfeiture for or on account of any transaction, matter,
or thing concerning which the person is compelled, after validly
claiming the privilege against self-incrimination, to testify or
produce evidence (documentary or otherwise), except that the
individual testifying is not exempt from prosecution and punishment
for perjury or contempt committed in testifying.
(6) The cost of any review, examination, audit, or investigation
made by the commissioner under Section 1280.7 of the Insurance Code
shall be paid to the commissioner by the person subject to the
review, examination, audit, or investigation, and the commissioner
may maintain an action for the recovery of these costs in any court
of competent jurisdiction. In determining the cost, the commissioner
may use the actual amount of the salary or other compensation paid to
the persons making the review, examination, audit, or investigation
plus the actual amount of expenses including overhead reasonably
incurred in the performance of the work.
The recoverable cost of each review, examination, audit, or
investigation made by the commissioner under Section 1280.7 of the
Insurance Code shall not exceed twenty-five thousand dollars
($25,000), except that costs exceeding twenty-five thousand dollars
($25,000) shall be recoverable if the costs are necessary to prevent
a violation of any provision of Section 1280.7 of the Insurance Code.
(r) Any shares or memberships issued by any corporation organized
and existing pursuant to the provisions of Part 2 (commencing with
Section 12200) of Division 3 of Title 1, provided the aggregate
investment of any shareholder or member in shares or memberships sold
pursuant to this subdivision does not exceed three hundred dollars
($300). This exemption does not apply to the shares or memberships of
that corporation if any promoter thereof expects or intends to make
a profit directly or indirectly from any business or activity
associated with the corporation or the operation of the corporation
or from remuneration, other than reasonable salary, received from the
corporation. This exemption does not apply to nonvoting shares or
memberships of that corporation issued to any person who does not
possess, and who will not acquire in connection with the issuance of
nonvoting shares or memberships, voting power (Section 12253) in the
corporation. This exemption also does not apply to shares or
memberships issued by a nonprofit cooperative corporation organized
to facilitate the creation of an unincorporated interindemnity
arrangement that provides indemnification for medical malpractice to
its physician and surgeon members as set forth in subdivision (q).
(s) Any security consisting of or representing an interest in a
pool of mortgage loans that meets each of the following requirements:
(1) The pool consists of whole mortgage loans or participation
interests in those loans, which loans were originated or acquired in
the ordinary course of business by a national bank or federal savings
association or federal savings bank having its principal office in
this state, by a bank incorporated under the laws of this state or by
a savings association as defined in subdivision (a) of Section 5102
of the Financial Code and which is subject to the supervision and
regulation of the Commissioner of Financial Institutions, and each of
which at the time of transfer to the pool is an authorized
investment for the originating or acquiring institution.
(2) The pool of mortgage loans is held in trust by a trustee which
is a financial institution specified in paragraph (1) as trustee or
otherwise.
(3) The loans are serviced by a financial institution specified in
paragraph (1).
(4) The security is not offered in amounts of less than
twenty-five thousand dollars ($25,000) in the aggregate to any one
purchaser.
(5) The security is offered pursuant to a registration under the
Securities Act of 1933, or pursuant to an exemption under Regulation
A under that act, or in the opinion of counsel for the issuer, is
offered pursuant to an exemption under Section 4(2) of that act.
(t) (1) Any security issued or guaranteed by and representing an
interest in or a direct obligation of an industrial loan company
incorporated under the laws of the state and authorized by the
Commissioner of Financial Institutions to engage in industrial loan
business.
(2) Any investment certificate in or issued by any industrial loan
company that is organized under the laws of a state of the United
States other than this state, that is insured by the Federal Deposit
Insurance Corporation, and that maintains a branch office in this
state.
25100.1. The following securities are not subject to Sections

25110, 25120, and 25130:
(a) A security defined as a "covered security" pursuant to Section
18(b)(1) of the Securities Act of 1933 (15 U.S.C. Sec. 77r).
(b) A security issued by an investment company that is registered
or that has filed a registration statement under the Investment
Company Act of 1940 (15 U.S.C. Sec. 80a-1) and that is defined as a
"covered security" pursuant to Section 18(b)(2) of the Securities Act
of 1933, and all the following requirements are met:
(1) Prior to any offer or sale in this state, there is filed with
or paid to the commissioner each of the following:
(A) A notice consisting of all documents that are part of a
federal registration statement filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 or, in lieu
thereof, a form prescribed by the commissioner, and that a consent to
service of process is either on file with the commissioner or is
attached to the notice.
(B) As necessary to compute fees, a report of the value of
securities covered under this subdivision that are offered or sold in
this state.
(C) The notice filing fee provided for in subdivision (a) of
Section 25608.1.
(2) If any offer or sale is to be made pursuant to Section 18(b)
(2) of the Securities Act of 1933 and this subdivision more than 12
months after the date the notice was filed under this subdivision,
the issuer shall file another notice and pay the fee specified in
subparagraph (C) of paragraph (1).
25101. The following securities are exempt from the provisions of

Section 25130:
(a) Any security issued by a person that is the issuer of any
security listed on a national securities exchange, if the exchange is
certified by rule or order of the commissioner.
(b) The exemption provided by subdivision (a) does not apply to
securities offered pursuant to a registration under the Securities
Act of 1933 or pursuant to the exemption afforded by Regulation A
under that act if the aggregate offering price of the securities
offered pursuant to that exemption exceeds fifty thousand dollars
($50,000).
25101.1. The following securities are not subject to Sections

25110, 25120, and 25130:
(a) A security that is offered or sold in a transaction that is
exempt from registration under Section 4(1) or 4(3) of the Securities
Act of 1933 (15 U.S.C. 77r) pursuant to Section 18(b)(4)(A) of that
act, if the issuer, other than a foreign (other country) issuer
described in subdivision (b), of the security files the required
reports with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, (15
U.S.C. 78a et seq.).
(b) A security of a foreign (other country) issuer that avails
itself of the exemption from registration under Section 12(g)(3) of
the Securities Exchange Act of 1934 is subject to the qualification
requirements of Sections 25110, 25120, and 25130, unless the issuer
is a reporting company under the Securities Exchange Act of 1934 and
files the required reports under Section 13 or 15(d) of that act.
25102. The following transactions are exempted from the provisions
of Section 25110:
(a) Any offer (but not a sale) not involving any public offering
and the execution and delivery of any agreement for the sale of
securities pursuant to the offer if (1) the agreement contains
substantially the following provision: "The sale of the securities
that are the subject of this agreement has not been qualified with
the Commissioner of Corporations of the State of California and the
issuance of the securities or the payment or receipt of any part of
the consideration therefor prior to the qualification is unlawful,
unless the sale of securities is exempt from the qualification by
Section 25100, 25102, or 25105 of the California Corporations Code.
The rights of all parties to this agreement are expressly conditioned
upon the qualification being obtained, unless the sale is so exempt"
; and (2) no part of the purchase price is paid or received and none
of the securities are issued until the sale of the securities is
qualified under this law unless the sale of securities is exempt from
the qualification by this section, Section 25100, or 25105.
(b) Any offer (but not a sale) of a security for which a
registration statement has been filed under the Securities Act of
1933 but has not yet become effective, or for which an offering
statement under Regulation A has been filed but has not yet been
qualified, if no stop order or refusal order is in effect and no
public proceeding or examination looking towards an order is pending
under Section 8 of the act and no order under Section 25140 or
subdivision (a) of Section 25143 is in effect under this law.
(c) Any offer (but not a sale) and the execution and delivery of
any agreement for the sale of securities pursuant to the offer as may
be permitted by the commissioner upon application. Any negotiating
permit under this subdivision shall be conditioned to the effect that
none of the securities may be issued and none of the consideration
therefor may be received or accepted until the sale of the securities
is qualified under this law.
(d) Any transaction or agreement between the issuer and an
underwriter or among underwriters if the sale of the securities is
qualified, or exempt from qualification, at the time of distribution
thereof in this state, if any.
(e) Any offer or sale of any evidence of indebtedness, whether
secured or unsecured, and any guarantee thereof, in a transaction not
involving any public offering.
(f) Any offer or sale of any security in a transaction (other than
an offer or sale to a pension or profit-sharing trust of the issuer)
that meets each of the following criteria:
(1) Sales of the security are not made to more than 35 persons,
including persons not in this state.
(2) All purchasers either have a preexisting personal or business
relationship with the offeror or any of its partners, officers,
directors or controlling persons, or managers (as appointed or
elected by the members) if the offeror is a limited liability
company, or by reason of their business or financial experience or
the business or financial experience of their professional advisers
who are unaffiliated with and who are not compensated by the issuer
or any affiliate or selling agent of the issuer, directly or
indirectly, could be reasonably assumed to have the capacity to
protect their own interests in connection with the transaction.
(3) Each purchaser represents that the purchaser is purchasing for
the purchaser's own account (or a trust account if the purchaser is
a trustee) and not with a view to or for sale in connection with any
distribution of the security.
(4) The offer and sale of the security is not accomplished by the
publication of any advertisement. The number of purchasers referred
to above is exclusive of any described in subdivision (i), any
officer, director, or affiliate of the issuer, or manager (as
appointed or elected by the members) if the issuer is a limited
liability company, and any other purchaser who the commissioner
designates by rule. For purposes of this section, a husband and wife
(together with any custodian or trustee acting for the account of
their minor children) are counted as one person and a partnership,
corporation, or other organization that was not specifically formed
for the purpose of purchasing the security offered in reliance upon
this exemption, is counted as one person. The commissioner may by
rule require the issuer to file a notice of transactions under this
subdivision.
The failure to file the notice or the failure to file the notice
within the time specified by the rule of the commissioner shall not
affect the availability of this exemption. An issuer who fails to
file the notice as provided by rule of the commissioner shall, within
15 business days after discovery of the failure to file the notice
or after demand by the commissioner, whichever occurs first, file the
notice and pay to the commissioner a fee equal to the fee payable
had the transaction been qualified under Section 25110.
(g) Any offer or sale of conditional sale agreements, equipment
trust certificates, or certificates of interest or participation
therein or partial assignments thereof, covering the purchase of
railroad rolling stock or equipment or the purchase of motor
vehicles, aircraft, or parts thereof, in a transaction not involving
any public offering.
(h) Any offer or sale of voting common stock by a corporation
incorporated in any state if, immediately after the proposed sale and
issuance, there will be only one class of stock of the corporation
outstanding that is owned beneficially by no more than 35 persons,
provided all of the following requirements have been met:
(1) The offer and sale of the stock is not accompanied by the
publication of any advertisement, and no selling expenses have been
given, paid, or incurred in connection therewith.
(2) The consideration to be received by the issuer for the stock
to be issued consists of any of the following:
(A) Only assets (which may include cash) of an existing business
enterprise transferred to the issuer upon its initial organization,
of which all of the persons who are to receive the stock to be issued
pursuant to this exemption were owners during, and the enterprise
was operated for, a period of not less than one year immediately
preceding the proposed issuance, and the ownership of the enterprise
immediately prior to the proposed issuance was in the same
proportions as the shares of stock are to be issued.
(B) Only cash or cancellation of indebtedness for money borrowed,
or both, upon the initial organization of the issuer, provided all of
the stock is issued for the same price per share.
(C) Only cash, provided the sale is approved in writing by each of
the existing shareholders and the purchaser or purchasers are
existing shareholders.
(D) In a case where after the proposed issuance there will be only
one owner of the stock of the issuer, only any legal consideration.
(3) No promotional consideration has been given, paid, or incurred
in connection with the issuance. Promotional consideration means any
consideration paid directly or indirectly to a person who, acting
alone or in conjunction with one or more other persons, takes the
initiative in founding and organizing the business or enterprise of
an issuer for services rendered in connection with the founding or
organizing.
(4) A notice in a form prescribed by rule of the commissioner,
signed by an active member of the State Bar of California, is filed
with or mailed for filing to the commissioner not later than 10
business days after receipt of consideration for the securities by
the issuer. That notice shall contain an opinion of the member of the
State Bar of California that the exemption provided by this
subdivision is available for the offer and sale of the securities.
The failure to file the notice as required by this subdivision and
the rules of the commissioner shall not affect the availability of
this exemption. An issuer who fails to file the notice within the
time specified by this subdivision shall, within 15 business days
after discovery of the failure to file the notice or after demand by
the commissioner, whichever occurs first, file the notice and pay to
the commissioner a fee equal to the fee payable had the transaction
been qualified under Section 25110. The notice, except when filed on
behalf of a California corporation, shall be accompanied by an
irrevocable consent, in the form that the commissioner by rule
prescribes, appointing the commissioner or his or her successor in
office to be the issuer's attorney to receive service of any lawful
process in any noncriminal suit, action, or proceeding against it or
its successor that arises under this law or any rule or order
hereunder after the consent has been filed, with the same force and
validity as if served personally on the issuer. An issuer on whose
behalf a consent has been filed in connection with a previous
qualification or exemption from qualification under this law (or
application for a permit under any prior law if the application or
notice under this law states that the consent is still effective)
need not file another. Service may be made by leaving a copy of the
process in the office of the commissioner, but it is not effective
unless (A) the plaintiff, who may be the commissioner in a suit,
action, or proceeding instituted by him or her, forthwith sends
notice of the service and a copy of the process by registered or
certified mail to the defendant or respondent at its last address on
file with the commissioner, and (B) the plaintiff's affidavit of
compliance with this section is filed in the case on or before the
return day of the process, if any, or within the further time as the
court allows.
the purchaser's own account, or a trust account if the purchaser is
a trustee, and not with a view to or for sale in connection with any
distribution of the stock.
For the purposes of this subdivision, all securities held by a
husband and wife, whether or not jointly, shall be considered to be
owned by one person, and all securities held by a corporation that
has issued stock pursuant to this exemption shall be considered to be
held by the shareholders to whom it has issued the stock.
All stock issued by a corporation pursuant to this subdivision as
it existed prior to the effective date of the amendments to this
section made during the 1996 portion of the 1995-96 Regular Session
that required the issuer to have stamped or printed prominently on
the face of the stock certificate a legend in a form prescribed by
rule of the commissioner restricting transfer of the stock in a
manner provided for by that rule shall not be subject to the transfer
restriction legend requirement and, by operation of law, the
corporation is authorized to remove that transfer restriction legend
from the certificates of those shares of stock issued by the
corporation pursuant to this subdivision as it existed prior to the
effective date of the amendments to this section made during the 1996
portion of the 1995-96 Regular Session.
(i) Any offer or sale (1) to a bank, savings and loan association,
trust company, insurance company, investment company registered
under the Investment Company Act of 1940, pension or profit-sharing
trust (other than a pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or individual retirement
account), or other institutional investor or governmental agency or
instrumentality that the commissioner may designate by rule, whether
the purchaser is acting for itself or as trustee, or (2) to any
corporation with outstanding securities registered under Section 12
of the Securities Exchange Act of 1934 or any wholly owned subsidiary
of the corporation that after the offer and sale will own directly
or indirectly 100 percent of the outstanding capital stock of the
issuer, provided the purchaser represents that it is purchasing for
its own account (or for the trust account) for investment and not
with a view to or for sale in connection with any distribution of the
security.
(j) Any offer or sale of any certificate of interest or
participation in an oil or gas title or lease (including subsurface
gas storage and payments out of production) if either of the
following apply:
(1) All of the purchasers meet one of the following requirements:
(A) Are and have been during the preceding two years engaged
primarily in the business of drilling for, producing, or refining oil
or gas (or whose corporate predecessor, in the case of a
corporation, has been so engaged).
(B) Are persons described in paragraph (1) of subdivision (i).
(C) Have been found by the commissioner upon written application
to be substantially engaged in the business of drilling for,
producing, or refining oil or gas so as not to require the protection
provided by this law (which finding shall be effective until
rescinded).
(2) The security is concurrently hypothecated to a bank in the
ordinary course of business to secure a loan made by the bank,
provided that each purchaser represents that it is purchasing for its
own account for investment and not with a view to or for sale in
connection with any distribution of the security.
(k) Any offer or sale of any security under, or pursuant to, a
plan of reorganization under Chapter 11 of the federal bankruptcy law
that has been confirmed or is subject to confirmation by the decree
or order of a court of competent jurisdiction.
(l) Any offer or sale of an option, warrant, put, call, or
straddle, and any guarantee of any of these securities, by a person
who is not the issuer of the security subject to the right, if the
transaction, had it involved an offer or sale of the security subject
to the right by the person, would not have violated Section 25110 or
25130.
(m) Any offer or sale of a stock to a pension, profit-sharing,
stock bonus, or employee stock ownership plan, provided that (1) the
plan meets the requirements for qualification under Section 401 of
the Internal Revenue Code, and (2) the employees are not required or
permitted individually to make any contributions to the plan. The
exemption provided by this subdivision shall not be affected by
whether the stock is contributed to the plan, purchased from the
issuer with contributions by the issuer or an affiliate of the
issuer, or purchased from the issuer with funds borrowed from the
issuer, an affiliate of the issuer, or any other lender.
(n) Any offer or sale of any security in a transaction, other than
an offer or sale of a security in a rollup transaction, that meets
all of the following criteria:
(1) The issuer is (A) a California corporation or foreign
corporation that, at the time of the filing of the notice required
under this subdivision, is subject to Section 2115, or (B) any other
form of business entity, including without limitation a partnership
or trust organized under the laws of this state. The exemption
provided by this subdivision is not available to a "blind pool"
issuer, as that term is defined by the commissioner, or to an
investment company subject to the Investment Company Act of 1940.
(2) Sales of securities are made only to qualified purchasers or
other persons the issuer reasonably believes, after reasonable
inquiry, to be qualified purchasers. A corporation, partnership, or
other organization specifically formed for the purpose of acquiring
the securities offered by the issuer in reliance upon this exemption
may be a qualified purchaser if each of the equity owners of the
corporation, partnership, or other organization is a qualified
purchaser. Qualified purchasers include the following:
(A) A person designated in Section 260.102.13 of Title 10 of the
California Code of Regulations.
(B) A person designated in subdivision (i) or any rule of the
commissioner adopted thereunder.
(C) A pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or an individual retirement
account, if the investment decisions made on behalf of the trust,
plan, or account are made solely by persons who are qualified
purchasers.
(D) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, each with total assets in excess of five million
dollars ($5,000,000) according to its most recent audited financial
statements.
(E) With respect to the offer and sale of one class of voting
common stock of an issuer or of preferred stock of an issuer
entitling the holder thereof to at least the same voting rights as
the issuer's one class of voting common stock, provided that the
issuer has only one-class voting common stock outstanding upon
consummation of the offer and sale, a natural person who, either
individually or jointly with the person's spouse, (i) has a minimum
net worth of two hundred fifty thousand dollars ($250,000) and had,
during the immediately preceding tax year, gross income in excess of
one hundred thousand dollars ($100,000) and reasonably expects gross
income in excess of one hundred thousand dollars ($100,000) during
the current tax year or (ii) has a minimum net worth of five hundred
thousand dollars ($500,000). "Net worth" shall be determined
exclusive of home, home furnishings, and automobiles. Other assets
included in the computation of net worth may be valued at fair market
value.
Each natural person specified above, by reason of his or her
business or financial experience, or the business or financial
experience of his or her professional adviser, who is unaffiliated
with and who is not compensated, directly or indirectly, by the
issuer or any affiliate or selling agent of the issuer, can be
reasonably assumed to have the capacity to protect his or her
interests in connection with the transaction. The amount of the
investment of each natural person shall not exceed 10 percent of the
net worth, as determined by this subparagraph, of that natural
person.
(F) Any other purchaser designated as qualified by rule of the
commissioner.
the purchaser's own account (or trust account, if the purchaser is a
(4) Each natural person purchaser, including a corporation,
partnership, or other organization specifically formed by natural
persons for the purpose of acquiring the securities offered by the
issuer, receives, at least five business days before securities are
sold to, or a commitment to purchase is accepted from, the purchaser,
a written offering disclosure statement that shall meet the
disclosure requirements of Regulation D (17 C.F.R. 230.501 et seq.),
and any other information as may be prescribed by rule of the
commissioner, provided that the issuer shall not be obligated
pursuant to this paragraph to provide this disclosure statement to a
natural person qualified under Section 260.102.13 of Title 10 of the
California Code of Regulations. The offer or sale of securities
pursuant to a disclosure statement required by this paragraph that is
in violation of Section 25401, or that fails to meet the disclosure
requirements of Regulation D (17 C.F.R. 230.501 et seq.), shall not
render unavailable to the issuer the claim of an exemption from
Section 25110 afforded by this subdivision. This paragraph does not
impose, directly or indirectly, any additional disclosure obligation
with respect to any other exemption from qualification available
under any other provision of this section.
(5) (A) A general announcement of proposed offering may be
published by written document only, provided that the general
announcement of proposed offering sets forth the following required
information:
(i) The name of the issuer of the securities.
(ii) The full title of the security to be issued.
(iii) The anticipated suitability standards for prospective
purchasers.
(iv) A statement that (I) no money or other consideration is being
solicited or will be accepted, (II) an indication of interest made
by a prospective purchaser involves no obligation or commitment of
any kind, and, if the issuer is required by paragraph (4) to deliver
a disclosure statement to prospective purchasers, (III) no sales will
be made or commitment to purchase accepted until five business days
after delivery of a disclosure statement and subscription information
to the prospective purchaser in accordance with the requirements of
this subdivision.
(v) Any other information required by rule of the commissioner.
(vi) The following legend: "For more complete information about
(Name of Issuer) and (Full Title of Security), send for additional
information from (Name and Address) by sending this coupon or calling
(Telephone Number)."
(B) The general announcement of proposed offering referred to in
subparagraph (A) may also set forth the following information:
(i) A brief description of the business of the issuer.
(ii) The geographic location of the issuer and its business.
(iii) The price of the security to be issued, or, if the price is
not known, the method of its determination or the probable price
range as specified by the issuer, and the aggregate offering price.
(C) The general announcement of proposed offering shall contain
only the information that is set forth in this paragraph.
(D) Dissemination of the general announcement of proposed offering
to persons who are not qualified purchasers, without more, shall not
disqualify the issuer from claiming the exemption under this
subdivision.
(6) No telephone solicitation shall be permitted until the issuer
has determined that the prospective purchaser to be solicited is a
qualified purchaser.
(7) The issuer files a notice of transaction under this
subdivision both (A) concurrent with the publication of a general
announcement of proposed offering or at the time of the initial offer
of the securities, whichever occurs first, accompanied by a filing
fee, and (B) within 10 business days following the close or
abandonment of the offering, but in no case more than 210 days from
the date of filing the first notice. The first notice of transaction
under subparagraph (A) shall contain an undertaking, in a form
acceptable to the commissioner, to deliver any disclosure statement
required by paragraph (4) to be delivered to prospective purchasers,
and any supplement thereto, to the commissioner within 10 days of the
commissioner's request for the information. The exemption from
qualification afforded by this subdivision is unavailable if an
issuer fails to file the first notice required under subparagraph (A)
or to pay the filing fee. The commissioner has the authority to
assess an administrative penalty of up to one thousand dollars
($1,000) against an issuer that fails to deliver the disclosure
statement required to be delivered to the commissioner upon the
commissioner's request within the time period set forth above.
Neither the filing of the disclosure statement nor the failure by the
commissioner to comment thereon precludes the commissioner from
taking any action deemed necessary or appropriate under this division
with respect to the offer and sale of the securities.
(o) An offer or sale of any security issued by a corporation or
limited liability company pursuant to a purchase plan or agreement,
or issued pursuant to an option plan or agreement, where the security
at the time of issuance or grant is exempt from registration under
the Securities Act of 1933, as amended, pursuant to Rule 701 adopted
pursuant to that act (17 C.F.R. 230.701), the provisions of which are
hereby incorporated by reference into this section, provided that
(1) the terms of any purchase plan or agreement shall comply with
Sections 260.140.42, 260.140.45, and 260.140.46 of Title 10 of the
California Code of Regulations, (2) the terms of any option plan or
agreement shall comply with Sections 260.140.41, 260.140.45, and
260.140.46 of Title 10 of the California Code of Regulations, and (3)
the issuer files a notice of transaction in accordance with rules
adopted by the commissioner no later than 30 days after the initial
issuance of any security under that plan, accompanied by a filing fee
as prescribed by subdivision (y) of Section 25608. The failure to
file the notice of transaction within the time specified in this
subdivision shall not affect the availability of this exemption. An
issuer that fails to file the notice shall, within 15 business days
after discovery of the failure to file the notice or after demand by
the commissioner, whichever occurs first, file the notice and pay the
commissioner a fee equal to the maximum aggregate fee payable had
the transaction been qualified under Section 25110.
Offers and sales exempt pursuant to this subdivision shall be
deemed to be part of a single, discrete offering and are not subject
to integration with any other offering or sale, whether qualified
under Chapter 2 (commencing with Section 25110), or otherwise exempt,
or not subject to qualification.
(p) An offer or sale of nonredeemable securities to accredited
investors (Section 28031) by a person licensed under the Capital
Access Company Law (Division 3 (commencing with Section 28000) of
Title 4), provided that all purchasers either (1) have a preexisting
personal or business relationship with the offeror or any of its
partners, officers, directors, controlling persons, or managers (as
appointed or elected by the members), or (2) by reason of their
business or financial experience or the business or financial
experience of their professional advisers who are unaffiliated with
and who are not compensated by the issuer or any affiliate or selling
agent of the issuer, directly or indirectly, could be reasonably
assumed to have the capacity to protect their own interests in
connection with the transaction. All nonredeemable securities shall
be evidenced by certificates that shall have stamped or printed
prominently on their face a legend in a form to be prescribed by rule
or order of the commissioner restricting transfer of the securities
in the manner as the rule or order provides. The exemption under this
subdivision shall not be available for any offering that is exempt
or asserted to be exempt pursuant to Section 3(a)(11) of the
Securities Act of 1933 (15 U.S.C. Sec. 77c(a)(11)) or Rule 147 (17
C.F.R. Sec. 230.147) thereunder or otherwise is conducted by means of
any form of general solicitation or general advertising.
(q) Any offer or sale of any viatical or life settlement contract
or fractionalized or pooled interest therein in a transaction that
meets
all of
the following criteria:
(1) Sales of securities described in this subdivision are made
only to qualified purchasers or other persons the issuer reasonably
believes, after reasonable inquiry, to be qualified purchasers. A
corporation, partnership, or other organization specifically formed
for the purpose of acquiring the securities offered by the issuer in
reliance upon this exemption may be a qualified purchaser only if
each of the equity owners of the corporation, partnership, or other
organization is a qualified purchaser. Qualified purchasers include
the following:
(A) A person designated in Section 260.102.13 of Title 10 of the
California Code of Regulations.
(B) A person designated in subdivision (i) or any rule of the
commissioner adopted thereunder.
(C) A pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or an individual retirement
account, if the investment decisions made on behalf of the trust,
plan, or account are made solely by persons who are qualified
purchasers.
(D) An organization described in Section 501(c)(3) of the Internal
Revenue Code, corporation, Massachusetts or similar business trust,
or partnership, each with total assets in excess of five million
dollars ($5,000,000) according to its most recent audited financial
statements.
(E) A natural person who, either individually or jointly with the
person's spouse, (i) has a minimum net worth of one hundred fifty
thousand dollars ($150,000) and had, during the immediately preceding
tax year, gross income in excess of one hundred thousand dollars
($100,000) and reasonably expects gross income in excess of one
hundred thousand dollars ($100,000) during the current tax year or
(ii) has a minimum net worth of two hundred fifty thousand dollars
($250,000). "Net worth" shall be determined exclusive of home, home
furnishings, and automobiles. Other assets included in the
computation of net worth may be valued at fair market value.
Each natural person specified above, by reason of his or her
business or financial experience, or the business or financial
experience of his or her professional adviser, who is unaffiliated
with and who is not compensated, directly or indirectly, by the
issuer or any affiliate or selling agent of the issuer, can be
reasonably assumed to have the capacity to protect his or her
interests in connection with the transaction.
The amount of the investment of each natural person shall not
exceed 10 percent of the net worth, as determined by this
subdivision, of that natural person.
(F) Any other purchaser designated as qualified by rule of the
commissioner.
the purchaser's own account (or trust account, if the purchaser is a
(3) Each natural person purchaser, including a corporation,
partnership, or other organization specifically formed by natural
persons for the purpose of acquiring the securities offered by the
issuer, receives, at least five business days before securities
described in this subdivision are sold to, or a commitment to
purchase is accepted from, the purchaser, the following information
in writing:
(A) The name, principal business and mailing address, and
telephone number of the issuer.
(B) The suitability standards for prospective purchasers as set
forth in paragraph (1) of this subdivision.
(C) A description of the issuer's type of business organization
and the state in which the issuer is organized or incorporated.
(D) A brief description of the business of the issuer.
(E) If the issuer retains ownership or becomes the beneficiary of
the insurance policy, an audit report of an independent certified
public accountant together with a balance sheet and related
statements of income, retained earnings, and cashflows that reflect
the issuer's financial position, the results of the issuer's
operations, and the issuer's cashflows as of a date within 15 months
before the date of the initial issuance of the securities described
in this subdivision. The financial statements listed in this
subparagraph shall be prepared in conformity with generally accepted
accounting principles. If the date of the audit report is more than
120 days before the date of the initial issuance of the securities
described in this subdivision, the issuer shall provide unaudited
interim financial statements.
(F) The names of all directors, officers, partners, members, or
trustees of the issuer.
(G) A description of any order, judgment, or decree that is final
as to the issuing entity of any state, federal, or foreign country
governmental agency or administrator, or of any state, federal or
foreign country court of competent jurisdiction (i) revoking,
suspending, denying, or censuring for cause any license, permit, or
other authority of the issuer or of any director, officer, partner,
member, trustee, or person owning or controlling, directly or
indirectly, 10 percent or more of the outstanding interest or equity
securities of the issuer, to engage in the securities, commodities,
franchise, insurance, real estate, or lending business or in the
offer or sale of securities, commodities, franchises, insurance, real
estate, or loans, (ii) permanently restraining, enjoining, barring,
suspending, or censuring any such person from engaging in or
continuing any conduct, practice, or employment in connection with
the offer or sale of securities, commodities, franchises, insurance,
real estate, or loans, (iii) convicting any such person of, or
pleading nolo contendere by any such person to, any felony or
misdemeanor involving a security, commodity, franchise, insurance,
real estate, or loan, or any aspect of the securities, commodities,
franchise, insurance, real estate, or lending business, or involving
dishonesty, fraud, deceit, embezzlement, fraudulent conversion, or
misappropriation of property, or (iv) holding any such person liable
in a civil action involving breach of a fiduciary duty, fraud,
deceit, embezzlement, fraudulent conversion, or misappropriation of
property. This subparagraph does not apply to any order, judgment, or
decree that has been vacated, overturned, or is more than 10 years
old.
(H) Notice of the purchaser's right to rescind or cancel the
investment and receive a refund pursuant to Section 25508.5.
(I) The name, address, and telephone number of the issuing
insurance company, and the name, address, and telephone number of the
state or foreign country regulator of the insurance company.
(J) The total face value of the insurance policy and the
percentage of the insurance policy the purchaser will own.
(K) The insurance policy number, issue date, and type.
(L) If a group insurance policy, the name, address, and telephone
number of the group, and, if applicable, the material terms and
conditions of converting the policy to an individual policy,
including the amount of increased premiums.
(M) If a term insurance policy, the term and the name, address,
and telephone number of the person who will be responsible for
renewing the policy if necessary.
(N) That the insurance policy is beyond the state statute for
contestability and the reason therefor.
(O) The insurance policy premiums and terms of premium payments.
(P) The amount of the purchaser's moneys that will be set aside to
pay premiums.
(Q) The name, address, and telephone number of the person who will
be the insurance policy owner and the person who will be responsible
for paying premiums.
(R) The date on which the purchaser will be required to pay
premiums and the amount of the premium, if known.
(S) A statement to the effect that any projected rate of return to
the purchaser from the purchase of a viatical or life settlement
contract or a fractionalized or pooled interest therein is based on
an estimated life expectancy for the person insured under the life
insurance policy; that the return on the purchase may vary
substantially from the expected rate of return based upon the actual
life expectancy of the insured that may be less than, equal to, or
may greatly exceed the estimated life expectancy; and that the rate
of return would be higher if the actual life expectancy were less
than, and lower if the actual life expectancy were greater than the
estimated life expectancy of the insured at the time the viatical or
life settlement contract was closed.
(T) A statement that the purchaser should consult with his or her
tax adviser regarding the tax consequences of the purchase of the
viatical or life settlement contract or fractionalized or pooled
interest therein and, if the purchaser is using retirement funds or
accounts for that purchase, whether or not any adverse tax
consequences might result from the use of those funds for the
purchase of that investment.
(U) Any other information as may be prescribed by rule of the
commissioner.
25102.1. The following transactions are not subject to Sections
25110, 25120, and 25130:
(a) Any offer or sale of a security to a "qualified purchaser" as
that term is defined by rule of the Securities and Exchange
Commission pursuant to Section 18(b)(3) of the Securities Act of 1933
(15 U.S.C. 77r), if all of the following requirements are met:
(1) A notice is filed with the commissioner prior to an offer in
this state, along with any documents filed with the Securities and
Exchange Commission in annual or periodic reports that the
commissioner by rule or order deems appropriate.
(2) A consent to service of process under Section 25165 is filed
with the notice required by paragraph (1).
(3) Payment of a notice filing fee provided for in subdivision (b)
of Section 25608.1.
(b) Any offer and sale of a security with respect to a transaction
that is exempt from registration under Section 4(4) of the
Securities Act of 1933 pursuant to Section 18 (b) (4) (B) of that
act.
(c) Any offer or sale of a security with respect to a transaction
that is exempt from registration under the Securities Act of 1933
pursuant to Section 18(b)(4)(C) of that act.
(d) Any offer or sale of a security with respect to a transaction
that is exempt from registration under the Securities Act of 1933
pursuant to Section 18(b)(4)(D) of that act, if all of the following
requirements are met:
(1) A notice in the form of a copy of the completed Form D (17
C.F.R. 239.500) filed with the Securities and Exchange Commission is
filed with the commissioner within 15 days of the first sale in this
state, along with documents filed with the Securities and Exchange
Commission in annual or periodic reports that the commissioner by
rule or order deems appropriate. The commissioner may allow for a
notice in the form of the electronic transmission of the information
in Form D.
(2) A consent to service of process under Section 25165 is filed
with the notice as required by paragraph (1).
(3) Payment of the notice filing fee provided for in subdivision
(c) of Section 25608.1 is made.
(e) Notwithstanding the language of subdivisions (a), (b), (c),
and (d) of this section, an issuer may file an application for
qualification pursuant to Section 25111, 25112, 25113, 25121, 25131,
or 25142.
25102.5. There shall be exempted from Section 25110 a transaction

that is the sale of a series of notes secured directly by an interest
in the same real property, or the sale of undivided interests in a
note secured directly by real property equivalent to a series
transaction, that complies with all of the provisions of Article 6
of the Business and Professions Code. For purposes of this section, a
real estate broker licensed by the Real Estate Commissioner of this
state who engages in the offer and sale of notes secured directly by
real property of various makers, which are a series of notes or notes
in which undivided interests are offered and sold, shall be deemed
to be the issuer of these notes and undivided interests if the notes
of the various makers are offered and sold pursuant to a plan or
arrangement that is common to the various makers with respect to
documentation and loan standards and that include provisions for
servicing these notes on behalf of purchasers.
of Section 25110 and Section 25120:
(a) Any negotiations or agreements prior to general solicitation
of approval by the holders of equity securities, and subject to that
approval, of (1) a change in the rights, preferences, privileges, or
restrictions of or on outstanding securities, (2) a merger,
consolidation, or sale of assets in consideration of the issuance of
securities, or (3) an entity conversion transaction.
(b) Any change in the rights, preferences, privileges, or
restrictions of or on outstanding securities or any entity conversion
transaction, unless the holders of at least 25 percent of the
outstanding shares or units of any class of securities that will be
directly or indirectly affected substantially and adversely by that
change or transaction have addresses in this state according to the
records of the issuer.
(c) Any exchange incident to a merger, consolidation, or sale of
assets in consideration of the issuance of securities of another
issuer, unless at least 25 percent of the outstanding securities of
any class, any holders of which are to receive securities in the
exchange, are held by persons who have addresses in this state
according to the records of the issuer of which they are holders.
This exemption is not available for a rollup transaction as defined
by Section 25014.6. The exemption is also not available for a
transaction excluded from the definition of rollup transaction by
virtue of paragraph (5) or (6) of subdivision (b) of Section 25014.6
if the transaction is one of a series of transactions that directly
or indirectly through acquisition or otherwise involves the
combination or reorganization of one or more rollup participants.
(d) For the purposes of subdivision (b) and subdivision (c) of
this section, (1) any securities held to the knowledge of the issuer
in the names of broker-dealers or nominees of broker-dealers and (2)
any securities controlled by any one person who controls directly or
indirectly 50 percent or more of the outstanding securities of that
class shall not be considered outstanding. The determination of
whether 25 percent of the outstanding securities are held by persons
having addresses in this state, for the purposes of subdivision (b)
and subdivision (c) of this section, shall be made as of the record
date for the determination of the security holders entitled to vote
on or consent to the action, if approval of those holders is
required, or, if not, as of the date of directors' approval of that
action.
(e) Any change (other than a stock split or reverse stock split)
in the rights, preferences, privileges, or restrictions of or on
outstanding equity securities, except the following if they
materially and adversely affect any class of equity securities: (1)
to add, change, or delete assessment provisions; (2) to change the
rights to dividends thereon; (3) to change the redemption provisions;
(4) to make them redeemable; (5) to change the amount payable on
liquidation; (6) to change, add, or delete conversion rights; (7) to
change, add, or delete voting rights; (8) to change, add, or delete
preemptive rights; (9) to change, add, or delete sinking fund
provisions; (10) to rearrange the relative priorities of outstanding
equity securities; (11) to impose, change, or delete restrictions
upon the transfer of equity securities in the organizational
documents for the entity; (12) to change the right of holders of
equity securities with respect to the calling of special meetings of
holders of equity securities; and (13) to change, add, or delete any
rights, preferences, privileges, or restrictions of, or on, the
outstanding shares or memberships of a mutual water company or other
corporation or entity organized primarily to provide services or
facilities to its shareholders or members. Changes in the rights,
preferences, privileges, or restrictions of or on outstanding equity
securities do not materially and adversely affect any class of
holders of equity securities within the meaning of this subdivision
if they arise from (i) the addition to articles of incorporation of
the provisions described or referred to in subdivision (a) of Section
158 upon the conversion of an existing corporation to a close
corporation pursuant to subdivision (b) of Section 158, (ii) the
deletion from the articles of incorporation of the provisions
described or referred to in subdivision (a) of Section 158 upon the
voluntary termination of close corporation status pursuant to
subdivisions (c) and (e) of Section 158, (iii) the involuntary
cessation of close corporation status pursuant to subdivision (e) of
Section 158, or (iv) the termination of a shareholders' agreement
(f) Any stock split or reverse stock split, except the following:
(1) any stock split or reverse stock split if the corporation has
more than one class of shares outstanding and the split would have a
material effect on the proportionate interests of the respective
classes as to voting, dividends, or distributions; (2) any stock
split of a stock that is traded in the market and its market price as
of the date of directors' approval of the stock split adjusted to
give effect to the split was less than two dollars ($2) per share;
and (3) any reverse stock split if the corporation has the option of
paying cash for any fractional shares created by the reverse split
and as a result of that action the proportionate interests of the
shareholders would be substantially altered. Any shares issued upon a
stock split or reverse stock split exempted by this subdivision
shall be subject to any conditions previously imposed by the
commissioner applicable to the shares with respect to which they are
issued.
(g) Any change in the rights of outstanding debt securities,
except the following if they substantially and adversely affect any
class of securities: (1) to change the rights to interest thereon;
(2) to change their redemption provisions; (3) to make them
redeemable; (4) to extend the maturity thereof or to change the
amount payable thereon at maturity; (5) to change their voting
rights; (6) to change their conversion rights; (7) to change sinking
fund provisions; and (8) to make them subordinate to other
indebtedness.
(h) Any exchange incident to a merger, consolidation, or sale of
assets, other than a rollup transaction (as defined in Section
25014.6), in consideration of the issuance of equity securities of
another entity or any entity conversion transaction that meets the
following conditions:
(1) The exchange incident to a merger, consolidation, or sale of
assets or the entity conversion transaction, had the exchange
transaction involved the issuance of a security in a transaction
subject to the provisions of Section 25110, would have been exempt
from qualification by subdivision (f) of Section 25102, without
giving effect to paragraph (3) thereof, and either of the following
is applicable:
(A) (i) Not less than 75 percent of the outstanding equity
securities of each constituent or converting entity entitled to vote
on the proposed transaction voted in favor of the transaction, (ii)
not more than 10 percent of the outstanding equity securities of each
constituent or converting entity entitled to vote on the proposed
transaction voted against the transaction, and (iii) each constituent
or converting entity whose security holders are entitled to vote on
the proposed transaction is subject to a state statute that has
provisions for dissenters' rights for holders of equity securities
entitled to vote on the proposed transaction that do not vote in
favor of or voted against the transaction.
(B) (i) The transaction is solely for the purposes of changing the
issuer's state of incorporation or organization, or form of
organization, (ii) all the securities of the same class or series,
unless all the security holders of the class or series consent, are
treated equally, and (iii) the holders of nonredeemable voting equity
securities receive nonredeemable voting equity securities.
(2) The commissioner may, by rule, require the acquiring or
surviving entity to file a notice of transaction under this section.
However, the failure to file the notice or the failure to file the
notice within the time specified by the rule of the commissioner
shall not affect the availability of this exemption. An acquiring or
surviving entity that fails to file the notice as provided by rule of
the commissioner shall, within 15 business days after demand by the
commissioner, file the notice and pay to the commissioner a fee equal
to the fee payable had the transaction been qualified under Section
25110 or 25120.
(i) Any exchange of securities in connection with any merger or
consolidation or sale of corporate assets in consideration wholly or
in part of the issuance of securities or any entity conversion
transaction under, or pursuant to, a plan of reorganization that
pursuant to the provisions of the United States Bankruptcy Code
(Title 11 of the United States Code) has been confirmed or is subject
to confirmation by the decree or order of a court of competent
jurisdiction.

of Section 25130:
(a) Any offer or sale of a security by the bona fide owner thereof
for his or her own account if the sale (1) is not accompanied by the
publication of any advertisement and (2) is not effected by or
through a broker-dealer in a public offering.
(b) Any offer or sale effected by or through a licensed
broker-dealer pursuant to an unsolicited order or offer to buy. For
the purpose of this subdivision, an inquiry regarding a written bid
for a security or a written solicitation of an offer to sell a
security made by another broker-dealer within the previous 60 days
shall not be considered the solicitation of an order or offer to buy.
(c) Any offer or sale to a bank, savings and loan association,
trust company, insurance company, investment company registered under
the Investment Company Act of 1940, pension or profit-sharing trust
(other than a pension or profit-sharing trust of the issuer, a
self-employed individual retirement plan, or individual retirement
account), or such other institutional investor or governmental agency
or instrumentality as the commissioner may designate by rule,
whether the purchaser is acting for itself or as trustee; provided
the purchaser represents that it is purchasing for its own account
(or for the trust account) for investment and not with a view to or
for sale in connection with any distribution of the security.
(d) Any transaction or agreement between a person on whose behalf
an offering is made and an underwriter or among underwriters, if the
sale of the securities is exempt from qualification at the time of or
qualified prior to distribution in this state, if any.
(e) Any offer or sale of any security by or for the account of a
bona fide secured party selling the security in the ordinary course
of business to liquidate a bona fide debt.
(f) Any transaction by an executor, administrator, sheriff,
marshal, receiver, trustee in bankruptcy, guardian, or conservator.
(g) Any offer (but not a sale) of a security for which a
registration statement has been filed under the Securities Act of
1933 but has not yet become effective, or for which an offering
statement under Regulation A has been filed but has not yet been
qualified, if no stop order or refusal order is in effect and no
public proceeding or examination looking toward such an order is
pending under Section 8 of that act and no order under Section 25140
or subdivision (a) of Section 25143 is in effect under this division.
(h) Any offer or sale of a security if a qualification under
Chapter 2 (commencing with Section 25110) of this part for any
securities of the same class has become effective within 18 months,
or longer period as the commissioner may order provided that each
consecutive order shall be for no more than six months, prior to the
offer or sale or if a qualification under Chapter 3 (commencing with
Section 25120) or Chapter 4 (commencing with Section 25130) of this
part for any securities of the same class has become effective within
12 months prior to that offer or sale, provided no order under
Section 25140 or subdivision (a) of Section 25143 is in effect under
this division with respect to the qualification, and, provided
further, that this exemption does not apply to securities offered
pursuant to a registration under the Securities Act of 1933 or
pursuant to an exemption under Regulation A under that act if the
aggregate offering price of the securities offered under such
exemption exceeds fifty thousand dollars ($50,000). The commissioner
may, by rule or order, withhold this exemption with respect to
securities qualified only pursuant to a limited offering
qualification.
25105. There shall be exempted from the provisions of Section

25110, 25120 or 25130 any other transaction which the commissioner by
rule exempts as not being comprehended within the purposes of this
law and the qualification of which he finds is not necessary or
investors.
CORPORATIONS CODE
SECTION 25110-25118
25110. It is unlawful for any person to offer or sell in this state

any security in an issuer transaction (other than in a transaction
subject to Section 25120), whether or not by or through underwriters,
unless such sale has been qualified under Section 25111, 25112 or
25113 (and no order under Section 25140 or subdivision (a) of Section
25143 is in effect with respect to such qualification) or unless
such security or transaction is exempted or not subject to
qualification under Chapter 1 (commencing with Section 25100) of this
part. The offer or sale of such a security in a manner that varies
or differs from, exceeds the scope of, or fails to conform with
either a material term or material condition of qualification of the
offering as set forth in the permit or qualification order, or a
material representation as to the manner of offering which is set
forth in the application for qualification, shall be an unqualified
offer or sale.
25111. (a) Any security for which a registration statement has been
filed under the Securities Act of 1933 in connection with the same
offering may be qualified by coordination under this section either
in an issuer or nonissuer transaction. The term "registration
statement" as used in this section includes an offering statement as
defined by Rule 252(a) under Regulation A (17 C.F.R. 230.252(a))
under the Securities Act of 1933, as amended. The term "effective,"
as used in this section in connection with an offering statement,
means an offering statement that has been qualified under Regulation
A of the Securities Act of 1933.
(b) Except as provided in subdivision (d), an application for
qualification under this section shall contain the following
information and be accompanied by the following documents, in
addition to the information specified in Section 25160 and the
consent to service of process required by Section 25165: (1) a copy
of the registration statement under the Securities Act of 1933,
together with all exhibits (other than exhibits incorporated by
reference and those specified by rule of the commissioner, unless
requested by the commissioner); (2) an undertaking to forward to the
commissioner all future amendments to the registration statement
under the Securities Act of 1933, other than an amendment that merely
delays the effective date of the registration statement, promptly
and in any event not later than the first business day after the day
they are forwarded to or filed with the Securities and Exchange
Commission, whichever first occurs; and (3) other information
required to evidence compliance with any rules of the commissioner.
The application must be filed with the commissioner not later than
the fifth business day following filing of the registration statement
with the Securities and Exchange Commission, unless that time is
extended by rule or order of the commissioner.
(c) Except as provided in subdivision (d), qualification of the
sale of securities under this section automatically becomes effective
(and the securities may be offered and sold in accordance with the
terms of the application as amended) at the moment the federal
registration statement becomes effective if all the following
conditions are satisfied: (1) no stop order or order under
subdivision (a) of Section 25143 is in effect under this law; (2) the
application has been on file with the commissioner for at least 10
days; and (3) a statement of the maximum and minimum proposed
offering prices and the maximum underwriting discounts and
commissions has been on file for two business days or such shorter
period as the commissioner permits by rule or order and the offering
is made within those limitations. The applicant shall promptly notify
the commissioner by telephone or telegram of the date and time when
the federal registration statement became effective and the content
of the price amendment, if any, and shall promptly file a
posteffective amendment to the application containing the information
and documents in the price amendment. "Price amendment" means the
final federal amendment that includes a statement of the offering
price, underwriting and selling discounts or commissions, amount of
proceeds, interest, dividend or conversion rates, call prices and
other matters related to the offering price. Upon failure to receive
the required notification and posteffective amendment with respect to
the price amendment, the commissioner may enter a stop order,
without notice or hearing, retroactively denying effectiveness to the
application for qualification or suspending its effectiveness until
compliance with this subdivision, if he or she promptly notifies the
applicant by telephone or telegram (and promptly confirms by letter
or telegram when he or she notifies by telephone) of the issuance of
the order. If the applicant proves compliance with the requirements
of this subdivision as to notice and posteffective amendment, the
stop order is void as of the time of its entry. The commissioner may
by rule or order waive either or both of the conditions specified in
clauses (2) and (3) of this subdivision. If the federal registration
statement becomes effective before all the conditions in this
subdivision are satisfied and they are not waived, the application
for qualification automatically becomes effective as soon as all the
conditions are satisfied. If the applicant advises the commissioner
of the date when the federal registration statement is expected to
become effective, the commissioner shall promptly advise the
applicant by telephone or telegram, at the applicant's expense,
whether all the conditions are satisfied and whether he or she then
contemplates the institution of a proceeding under Section 25140 or
25143; but this advice by the commissioner does not preclude the
institution of such a proceeding at any time.
(d) (1) An open-end investment company or a unit investment trust
that has previously qualified the sale of its securities pursuant to
this section shall, in lieu of filing the application specified in
subdivision (b), file pursuant to this subdivision if it has made no
material change in its offering and if it is in compliance with all
terms of its prior qualification. An application filed pursuant to
this subdivision shall contain the following information and be
accompanied by the following documents, in addition to the
information specified in Section 25160 and the consent to service of
process required by Section 25165: (A) a statement that the applicant
has made no material change in its offering and that it is in
compliance with the terms of its qualification; and (B) a copy of its
current registration statement under the Securities Act of 1933.
If no stop order or orders under subdivision (a) of Section 25143
are in effect under this law, qualification of the sale of securities
under this subdivision automatically becomes effective (and the
securities may be offered and sold in accordance with the terms of
the application) upon the day following the expiration of its prior
qualification pursuant to this section or, if that qualification has
expired, upon the first business day following the filing of the
application pursuant to this subdivision. Nothing contained in this
subdivision shall restrict the authority of the commissioner pursuant
to Section 25140 or 25143.
(2) A unit investment trust that has not previously applied to
qualify the sale of its securities pursuant to this section but that
is substantially the same as one or more unit investment trusts
previously qualified under this section by the same sponsor, shall
file pursuant to this subdivision if it can make the statements
specified below. An application filed pursuant to this subdivision
shall contain the following information and be accompanied by the
following documents, in addition to the information specified in
Section 25160 and the consent to service of process required by
Section 25165: (A) a statement that the applicant, in its
organization, its plan of business, its securities and its offering,
is substantially the same as a unit investment trust previously
qualified under this section by the same sponsor; (B) a statement
that those previously qualified unit investment trusts are in
compliance with the terms of their qualifications and (C) a copy of
its current registration statement under the Securities Act of 1933.
If no stop order or orders under subdivision (a) of Section 25143 are
in effect under this law, qualification of the sale of securities
under this subdivision automatically becomes effective (and the
security may be offered and sold in accordance with the terms of the
application) at the moment the federal registration becomes effective
or, if the registration is effective when the application is filed,
upon the first business day following the filing of the application
pursuant to this subdivision.
25112. (a) Any security issued by a person which is the issuer of

any security registered under Section 12 of the Securities Exchange
Act of 1934 or issued, by an investment company registered under the
Investment Company Act of 1940, and which is not eligible for
qualification under Section 25111, may be qualified by notification
under this section.
(b) An application for qualification under this section shall
contain such information and be accompanied by such documents as
shall be required by rule of the commissioner, in addition to the
process required by Section 25165. For this purpose, the commissioner
may classify issuers and types of securities.
(c) If no stop order or order under subdivision (a) of Section
25143 is in effect under this law, qualification of the sale of the
securities under this section automatically becomes effective (and
the securities may be offered and sold in accordance with the terms
of the application as amended) at 12 o'clock noon California time of
the 10th business day after the filing of the application or the last
amendment thereto or at such earlier time as the commissioner
determines.
25113. (a) All securities, whether or not eligible for

qualification by coordination under Section 25111 or qualification by
notification under Section 25112, may be qualified by permit under
this section.
(b) (1) An application for a permit under this section shall
contain any information and be accompanied by any documents as shall
be required by rule of the commissioner, in addition to the
process required by Section 25165. For this purpose, the commissioner
may classify issuers and types of securities.
(2) An applicant may file a small company application for permit
under this section if it meets all of the following conditions:
(A) The applicant is: (i) a California corporation or a foreign
corporation, which at the time of filing an application under this
subdivision is subject to Section 2115, and neither corporation is a
"blind pool" company, as that term is defined by the commissioner;
(ii) not engaged in oil and gas exploration or production, or mining
or other extractive industries; (iii) not an investment company
subject to the Investment Company Act of 1940; and (iv) not subject
to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934.
(B) The total offering of voting common stock and preferred stock
by the applicant to be sold in a 12-month period, within or outside
this state, is limited to one million dollars ($1,000,000), less the
aggregate offering price for all securities sold (within the 12
months before the start, and during the offering, of the voting
common stock or preferred stock) under Rule 504 of the Securities and
Exchange Commission, in reliance on any exemption under subdivision
(b) of Section 3 of the Securities Act of 1933, or in violation of
subdivision (a) of Section 5 of that act, and immediately after the
proposed sale and issuance there will be only one class of voting
common stock.
(C) The minimum offering price of the voting common stock and
preferred stock (and the conversion price if the preferred stock is
convertible into the voting common stock) to be sold is two dollars
($2) per share and the applicant files an undertaking with the
commissioner that there will be no stock splits, stock dividends,
spinoffs, or mergers for a period of two years from the close of the
offering. The undertaking notwithstanding, the commissioner may
approve a spinoff or merger pursuant to an application for
qualification filed by an applicant.
(D) The net proceeds from the offering are to be expended in the
operations of the business.
(E) The offering is made pursuant to a Small Corporate Offering
Registration disclosure document based on the Form U-7 as adopted by
the North American Securities Administrators Association and any
additional requirements as the commissioner shall prescribe, that may
include, but not be limited to, investor suitability and due
diligence investigation requirements.
(F) The application and disclosure document is reviewed and signed
by a majority of the members of the board of directors of the
applicant.
(G) The application shall contain that information and be
accompanied by those documents required by rule of the commissioner,
in addition to the information specified in Section 25610 and the
consent to service of process required by Section 25165.
(c) Qualification of securities under this section becomes
effective upon the commissioner issuing a permit authorizing the
issuance of those securities.
25114. Every qualification under this chapter is effective for 12

months from its effective date, unless the commissioner by order or
rule specifies a different period, except during the time an order
under Section 25140 or subdivision (a) of Section 25143 is in effect.
25115. Every application for qualification of an issuer transaction

under this chapter shall be signed and verified by the issuer; every
application for qualification of a nonissuer transaction under
Section 25111 shall be signed and verified by the person on whose
behalf the offering is being made or by the issuer on behalf of such
person.
25116. (a) An evidence of indebtedness issued pursuant to a
qualification under this chapter or Chapter 3 (commencing with
Section 25120), and the purchasers or holders thereof, shall be
exempt from the usury provisions of the Constitution, subject to
compliance by the issuer and purchaser with the terms and
requirements that may be imposed by the commissioner as a condition
of the qualification. This section creates and authorizes a class of
transactions and persons pursuant to Section 1 of Article XV of the
Constitution.
(b) Any evidence of indebtedness issued in compliance with this
section shall be entitled to the benefits of the usury exemption
contained in this section regardless of whether subsequent to its
issuance the evidence of indebtedness is determined by a court of
competent jurisdiction to be a "security."
25117. (a) An evidence of indebtedness, and the purchasers or

holders thereof, shall be exempt from the usury provisions of Section
1 of Article XV of the California Constitution if (1) the evidence
of indebtedness is rated or provisionally rated by Standard & Poor's
Corporation as AAA, AA, A, BBB, or investment grade commercial paper,
or by Moody's Investors Service, Inc. as Aaa, Aa, A, Baa, or
investment grade commercial paper, including any such ratings with "+"
or "--" designation or other variations that occur within these
ratings, or has a rating or a provisional rating by another
nationally recognized rating agency or system, which rating and
agency or system have been certified by rule or order of the
commissioner, or (2) the issuer thereof either (A) has any security
listed or approved for listing upon notice of issuance on a national
securities exchange, if the exchange has been certified by the
commissioner, pursuant to subdivision (o) of Section 25100, or (B)
meets each of the following requirements:
(i) The issuer is a corporation which is subject to Section 13 of
the Securities Exchange Act of 1934.
(ii) The issuer had total shareholders' equity of at least one
million dollars ($1,000,000) at the end of its most recent fiscal
year, and had consolidated net income, after all charges, including
taxes and extraordinary losses, and excluding extraordinary gains, of
at least five hundred thousand dollars ($500,000) for three of its
last four fiscal years, including its most recent fiscal year. The
determination of total shareholders' equity and net income shall be
determined in conformity with generally accepted accounting
principles applicable to that fiscal year or years, on a consolidated
basis, or (3) the evidence of indebtedness is issued by any
corporation all of the outstanding shares of which are owned by an
issuer which meets the requirements of subparagraph (A) or (B) of
paragraph (2).
(b) This section creates and authorizes a class of transactions
and persons pursuant to Section 1 of Article XV of the California
Constitution.
(c) Any evidence of indebtedness issued in compliance with this
section shall be entitled to the benefits of the usury exemption
contained in this section regardless of whether subsequent to its
issuance the evidence of indebtedness is determined by a court of
competent jurisdiction to be a "security."
25118. (a) An evidence of indebtedness issued by an entity or

guaranteed by an entity that is an affiliate (as defined in Section
150) of the borrower that, on the day the evidence of indebtedness
issued or guaranty is first issued or entered into, has total assets
of at least two million dollars ($2,000,000) according to its then
most recent financial statements, and the purchasers or holders
thereof, shall be exempt from the usury provisions of the California
Constitution. The financial statements referred to in the preceding
sentence shall meet both of the following requirements:
(1) Be as of a date not more than 90 days prior to the date the
evidence of indebtedness or guaranty is first issued or entered into.
(2) Be prepared in accordance with either of the following:
(A) In accordance with generally accepted accounting principles
and, if the entity has consolidated subsidiaries, on a consolidated
basis.
(B) In accordance with the rules and requirements of the
Securities and Exchange Commission, whether or not required by law to
be prepared in accordance with those rules and requirements.
(b) Any one or more evidences of indebtedness, and the purchasers
or holders thereof, shall be exempt from the usury provisions of the
California Constitution if either of the following applies:
(1) The evidences of indebtedness aggregate at the time of
issuance at least three hundred thousand dollars ($300,000) in
original face amount, or, if the evidences of indebtedness are
purchased with original issue discount, they are purchased for an
aggregate purchase price at the time of issuance of at least three
hundred thousand dollars ($300,000).
(2) The evidences of indebtedness are issued pursuant to a bona
fide written commitment for the lending to the issuer of at least
three hundred thousand dollars ($300,000), or the provision of a line
of credit to the issuer in a principal amount of at least three
hundred thousand dollars ($300,000). The exemption provided by this
paragraph shall not be affected by a subsequent event of default or
other event not in the lender's control that has relieved or may
relieve the lender from its commitment.
(c) Any evidence of indebtedness described in subdivision (a) or
(b), and the purchasers or holders thereof, shall be entitled to the
benefits of the usury exemption contained in this section regardless
of whether, at any time after the evidence of indebtedness or
guaranty upon which the exemption is based is first issued or entered
into, the evidence of indebtedness or guaranty is determined by a
court of competent jurisdiction not to be a "security."
(d) This section creates and authorizes a class of transactions
and persons pursuant to Section 1 of Article XV of the California
Constitution.
(e) This section does not apply to:
(1) Any evidence of indebtedness issued or guaranteed (if the
guaranty is part of the consideration for the indebtedness) by an
individual, a revocable trust having one or more individuals as
trustors, or a partnership in which, at the time of issuance, one or
more individuals are general partners.
(2) Any transaction subject to the limitation on permissible rates
of interest set forth in paragraph (1) of the first sentence of
Section 1 of Article XV of the California Constitution.
(f) The exemptions created by this section shall only be available
in a transaction that meets either of the following criteria:
(1) The lender and either the issuer of the indebtedness or the
guarantor, as the case may be, or any of their respective officers,
directors, or controlling persons, or, if any party is a limited
liability company, the managers as appointed or elected by the
members, have a preexisting personal or business relationship.
(2) The lender and the issuer, or the lender and the guarantor, by
reason of their own business and financial experience or that of
their professional advisers, could reasonably be assumed to have the
capacity to protect their own interests in connection with the
transaction.
(g) For purposes of this section, "preexisting personal or
business relationship" and "capacity to protect their own interests
in connection with the transaction" as used in subdivision (f) shall
have the same meaning as, and be determined according to the same
standards as, specified in paragraph (2) of subdivision (f) of
Section 25102 and its implementing regulations provided that, solely
with respect to this section, a lender or purchaser who is
represented by counsel may designate that person as its professional
adviser whether or not that person is compensated by the issuer or
guarantor, as long as that person has a bona fide attorney-client
relationship with the lender or purchaser.
(h) This section shall not exempt any person from the application
of the California Finance Lenders Law (Division 9 (commencing with
Section 22000) of the Financial Code).
CORPORATIONS CODE
SECTION 25120-25122
25120. (a) Except as provided in subdivision (b), it is unlawful

for any person to offer or sell in this state any security in any of
the following manners:
(1) In an issuer transaction in connection with any change in the
rights, preferences, privileges, or restrictions of or on outstanding
securities.
(2) In any exchange of securities by the issuer with its existing
security holders exclusively.
(3) In any exchange in connection with any merger or consolidation
or purchase of assets in consideration wholly or in part of the
issuance of securities.
(4) In an entity conversion transaction.
(b) Subdivision (a) shall not apply to a security if the security
is qualified for sale under this chapter (and no order under Section
25140 or subdivision (a) of Section 25143 is in effect with respect
to the qualification) or if the security or transaction is exempted
or not subject to qualification under Chapter 1 (commencing with
Section 25100) of this part.
25121. The securities qualified for sale under this chapter shall
be qualified by permit under this section. The application for the
permit shall be signed and verified by the issuer and shall contain
such information and be accompanied by such documents as shall be
required by rule of the commissioner, in addition to the information
specified in Section 25160 and the consent to service of process
required by Section 25165. For this purpose, the commissioner may
classify issuers and types of securities and transactions.
25122. Qualification of securities under this chapter becomes
effective upon the commissioner issuing a permit authorizing the
issuance of such securities.
CORPORATIONS CODE
SECTION 25130-25134
25130. It is unlawful for any person to offer or sell any security

in this state in any nonissuer transaction unless it is qualified for
such sale under this chapter or under Section 25111 or 25113 of
Chapter 2 (commencing with Section 25110) of this part (and no order
under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification) or unless such security or
transaction is exempted or not subject to qualification under Chapter
1 (commencing with Section 25100) of this part.
25131. (a) The securities to be offered or sold in a nonissuer

transaction, which are not eligible for qualification under Section
25111, shall be qualified by notification under this section;
provided however that securities offered in a nonissuer transaction
pursuant to an exemption under Regulation A under the Securities Act
of 1933 shall be qualified under Section 25113.
(b) The application for qualification by notification under this
section shall be signed and verified by the person on whose behalf
the offering is being made or by the issuer or by any broker-dealer
and shall contain such information and be accompanied by such
documents as shall be required by rule of the commissioner, in
addition to the information specified in Section 25160 and the
consent to service of process required by Section 25165. For this
purpose, the commissioner may classify issuers and types of
securities.
(c) If no stop order or order under subdivision (a) of Section
25143 is in effect under this law, a qualification under this section
automatically becomes effective (and the securities may be offered
and sold in accordance with the terms of the application as amended)
at 12 o'clock noon California time on the 10th business day after the
filing of the application or the last amendment thereto or at such
earlier time as the commissioner determines.
(d) Information may not be required under this section unless it
is known to the person filing the application or to the persons on
whose behalf the distribution is to be made, or can be furnished by
them without unreasonable effort or expense.
25132. Every qualification under this chapter and every

qualification of a nonissuer transaction under Section 25111 is
effective for 12 months from its effective date, except during the
time a stop order under Section 25140 or an order under subdivision
(a) of Section 25143 is in effect. A qualification under this chapter
may be withdrawn only in the discretion of the commissioner. The
commissioner may by rule or order extend the effective period of any
qualification under this chapter.
25133. It is unlawful for any person without the written consent of

the commissioner to consummate the sale or transfer of any
securities heretofore or hereafter placed in escrow pursuant to a
condition ordered by the commissioner and that have not been released
from escrow, or that are subject to a currently effective legend
condition requiring such consent (except as permitted therein), or
concerning which the commissioner has issued a written notice to the
holders thereof pursuant to Section 25534 ordering the certificates
evidencing the securities to be stamped or printed with a legend as
provided in the section.
25134. Every applicant seeking qualification for the sale of

securities shall, upon request of the commissioner, furnish to the
commissioner an authorization for examination of the applicant's
financial records of the sale of such securities pursuant to Section
7473 of the Government Code.
CORPORATIONS CODE
SECTION 25140-25151
25140. (a) (1) The commissioner may issue a stop order denying
effectiveness to, or suspending or revoking the effectiveness of, any
qualification of an underwritten offering of securities under
Section 25111, 25112 or 25131 or may suspend or revoke any permit
issued under Section 25113 or 25122 if he or she finds (A) that the
order is in the public interest and (B) that the proposed plan of
business of the issuer or the proposed issuance or sale of securities
is not fair, just, or equitable, or that the issuer does not intend
to transact its business fairly and honestly, or that the securities
proposed to be issued or the method to be used in issuing them will
tend to work a fraud upon the purchaser thereof.
(2) In the case of an application for or qualification of
securities under Section 25111, 25112, or 25131 that is not an
underwritten offering of securities, the commissioner may issue a
stop order denying effectiveness to, or suspending or revoking the
effectiveness of the qualification unless he or she finds (A) that
the stop order is not in the public interest and (B) that the
proposed plan of business of the applicant or the proposed issuance
of securities is fair, just, and equitable, that the issuer intends
to transact its business fairly and honestly, and that the securities
that the issuer proposes to issue or the method to be used in
issuing them are not such as will work a fraud upon the purchaser
thereof.
(b) The commissioner may refuse to issue a permit under Section
25113 unless he or she finds that the proposed plan of business of
the applicant and the proposed issuance of securities are fair, just,
and equitable, that the applicant intends to transact its business
fairly and honestly, and that the securities which it proposes to
issue and the methods to be used by it in issuing them are not such
as, in his or her opinion, will work a fraud upon the purchaser
thereof.
(c) The commissioner may refuse to issue a permit under Section
25122 unless he or she finds that the proposed plan of
recapitalization or reorganization and the proposed issuance of
securities are fair, just, and equitable to all security holders
affected.
(d) Notwithstanding the provisions of subdivisions (a) and (b) of
this section, the commissioner shall not have authority to issue any
stop order or to refuse to issue or to suspend or revoke any permit
on the basis that the price at which the security is to be offered is
unfair, unjust or inequitable in any case where the security is
being publicly offered for cash pursuant to a registration statement
under the Securities Act of 1933 and the offering is the subject of a
firm commitment underwriting by an underwriter or syndicate of
underwriters all of whom are registered under the Securities Exchange
Act of 1934. For the purposes of this subdivision a firm commitment
underwriting means an underwriting pursuant to which the underwriter
or syndicate of underwriters is committed to take up and pay for the
securities subject only to the usual or customary conditions, but not
including any "market out" or similar condition operative after the
time of commencement of the offering. (A condition relating to the
suspension of all trading on a national securities exchange, a
banking holiday, war, civil insurrection, or the like is not a
"market out" or similar condition within the meaning of this
subdivision.) Nothing contained in this subdivision shall deny
authority to the commissioner to issue a stop order or to refuse to
issue or to suspend or revoke a permit because of unreasonable
discounts, commissions or other compensation to underwriters, sellers
or others, unreasonable promoters' profits or participations or
unreasonable amounts or kinds of options.
25141. The commissioner may impose as a condition of qualification

under Chapter 2 (commencing with Section 25110) or Chapter 3
(commencing with Section 25120) of this part conditions requiring the
deposit in escrow of securities, imposing a legend condition
restricting the transferability thereof, impounding the proceeds from
the sale thereof, limiting the expense in connection with the sale
thereof, requiring the waiver of assets, dividends or voting rights
by the holders of promotional securities, or any other condition if
the commissioner finds that without such condition the offering will
be unfair, unjust or inequitable. The commissioner may in his or her
discretion modify or remove any such conditions when in his or her
opinion they are no longer necessary or appropriate.
25142. When application is made for a permit to issue securities or

to deliver other consideration (whether or not the security or
transaction is exempt from qualification or not required to be
qualified) in exchange for one or more bona fide outstanding
securities, claims, or property interests, or partly in such exchange
and partly for cash, the commissioner is expressly authorized to
approve the terms and conditions of such issuance and exchange or
such delivery and exchange and the fairness of such terms and
conditions, and is expressly authorized to hold a hearing upon the
fairness of such terms and conditions, at which all persons to whom
it is proposed to issue securities or to deliver such other
consideration in such exchange have the right to appear. The
application for a permit to deliver consideration other than
securities shall be in such form, contain such information and be
accompanied by such documents as shall be required by rule of the
commissioner or, in the absence thereof, in substantially the form of
an application filed pursuant to Section 25121.
25143. (a) The commissioner may by order summarily postpone or

suspend the effectiveness of any qualification pending final
determination of any proceeding under this chapter. Upon the entry of
the order, the commissioner shall promptly notify each person
specified in subdivision (b) of this section that it has been entered
and of the reasons therefor and that upon the receipt of a written
request the matter will be set down for hearing to commence within 15
business days after such receipt unless the applicant consents to a
later date. If no hearing is requested and none is ordered by the
commissioner, the order will remain in effect until it is modified or
vacated by the commissioner. If a hearing is requested or ordered,
the commissioner, after notice and hearing in accordance with
subdivision (b) of this section, may modify or vacate the order or
extend it until final determination.
(b) No stop order may be entered under this chapter except under
subdivision (a) of this section without appropriate prior notice to
the applicant, the issuer, and the person on whose behalf the
securities are to be or have been offered and hearing in accordance
with the provisions of the Administrative Procedure Act, Chapter 5
(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of
the Government Code, in connection with which the commissioner shall
have all of the powers granted thereunder. In the case of
qualification by permit, such hearing shall be held upon such notice
within 20 business days after a written request therefor by the
applicant unless the permit is issued prior to the expiration of such
period or the applicant consents to a later date.
25144. The commissioner may vacate or modify a stop order if he

finds that the conditions which caused its entry have changed or that
it is otherwise in the public interest to do so.
25145. Every issuer qualifying securities for sale in this state

shall at all times keep and maintain a complete set of books,
records, and accounts of such sales and the disposition of the
proceeds thereof, and shall thereafter, at such times as are required
by the commissioner, make and file in the office of the commissioner
a report, setting forth the securities sold by it under such
qualification, the proceeds derived therefrom and the disposition
thereof.
25146. For a period of 18 months after the qualification is

effective, the commissioner may by rule or order require an issuer
who has filed an application to file reports not more often than
semiannually for the purpose of keeping reasonably current the
information contained in the application; provided, that the
commissioner may not require the filing of any such report after
completion of the offering if a nonissuer transaction in the security
would be entitled to exemption under Section 25101.
25147. The commissioner may by rule or order require as a condition

of qualification that any security qualified under Section 25113 be
sold only on a specified form of subscription or sale contract, and
that a signed or conformed copy of each contract be preserved for any
period up to three years specified in the rule or order.
25148. Except in cases where the delivery of a prospectus or proxy

statement is required under the Securities Act of 1933 or the
Securities Exchange Act of 1934, the commissioner may by rule or
order require as a condition of qualification under Section 25112,
25113, 25122 or 25131 that a prospectus or proxy statement containing
any designated part of the information required in the application
be given to each person to whom an offer is made before the sale of
the security to be issued under the permit or order.
25149. The commissioner may act as escrow holder for securities

required to be deposited in escrow by his order.
25150. The commissioner may accept and act upon the opinions,
appraisements and reports of any engineers, appraisers, or other
experts which may be presented by an applicant on any question of
fact concerning or affecting the securities proposed to be offered
and sold. In lieu of, or in addition to, such opinions,
appraisements, and reports, the commissioner may have any or all
matters concerning or affecting such securities investigated,
appraised, passed upon and certified to him by engineers, appraisers,
or other experts selected by him.
25151. (a) Upon the filing of a written request for the consent to
transfer securities referred to in Section 25133, accompanied by such
information and documents as the commissioner may by rule require,
the commissioner shall issue such consent if the commissioner finds
that the transfer requested will be fair, just, and equitable to the
proposed transferees, and otherwise the commissioner shall deny such
consent.
(b) The issuance of the commissioner's consent pursuant to this
section shall not be a qualification of the transaction pursuant to,
nor an exemption from the qualification requirements of, Section
25110, 25120, or 25130.
CORPORATIONS CODE
SECTION 25160-25166
25160. Every application for qualification shall state (1) the

maximum amount of securities proposed to be offered in this state;
and (2) any adverse order, judgment, or decree entered in connection
with the offering by the regulatory authority in any state or by any
court or by the Securities and Exchange Commission. Verification of
an application shall be in the manner provided in the Code of Civil
Procedure for the verification of pleadings. All information required
to be included in an application shall be true and complete as of
the time the qualification of the sale of securities becomes
effective; and an applicant shall promptly supply by amendment prior
to the effectiveness of such qualification any information based on
facts occurring after the original date of filing which is necessary
to supplement or correct the information contained in the original
application so as to make such information not materially misleading
as of the effective date of such qualification.
25161. Any document filed under this law or a predecessor statute

may be incorporated by reference in a subsequent application or
notice filing if it was filed within four years prior to the filing
of the application or notice filing, or is otherwise available in the
files of the commissioner, to the extent that the document is
currently accurate.
25162. An amendment to an application filed after the effective

date of the qualification of the sale of securities, if such
amendment is approved by the commissioner, shall become effective on
such date as the commissioner may determine, having due regard to the
public interest and the protection of investors.
25163. In any proceeding under this law, the burden of proving an

exemption or an exception from a definition is upon the person
claiming it.
25164. (a) Neither (1) the fact that an application for

qualification under this law has been filed nor (2) the fact that
such qualification has become effective constitutes a finding by the
commissioner that any document filed under this law is true,
complete, or not misleading. Neither any such fact nor the fact that
a notice is filed or an exemption is available for a security or a
transaction means that the commissioner has passed in any way upon
the merits or qualifications of, or recommended or given approval to,
any person, security or transaction (except as provided in Section
25142).
(b) It is unlawful to make or cause to be made to any prospective
purchaser any representation inconsistent with subdivision (a) of
this section.
(c) Every permit issued by the commissioner shall recite in bold
type that the issuance thereof is permissive only and does not
constitute a recommendation or endorsement of the securities
permitted to be issued.
25165. Every applicant for qualification of the sale of securities

under this law or every person filing an application or a notice
under Sections 25100.1, 25101.1, 25102.1, and 25230.1 or a request
for or notice of an exemption from qualification (other than a
California corporation or a person licensed as a broker-dealer in
this state) shall file with the commissioner, in such form as
prescribed by rule, an irrevocable consent appointing the
commissioner or his or her successor in office to be the applicant's
or person's attorney to receive service of any lawful process in any
noncriminal suit, action or proceeding against the applicant or
person or the successor, executor or administrator thereof, which
arises under this law or any rule or order hereunder after the
consent has been filed, with the same force and validity as if served
personally on the person filing the consent. A person who has filed
such a consent in connection with a previous qualification under this
law (or application for a permit under any prior law if the
application under this law states that such consent is still
effective), or in connection with a notice filing under Section
25100.1, 25101.1, 25102.1, and 25230.1, need not file another.
Service may be made by leaving a copy of the process in the office of
the commissioner but it is not effective unless (1) the plaintiff,
who may be the commissioner in a suit, action or proceeding
instituted by him or her, forthwith sends notice of the service and a
copy of the process by registered or certified mail to the defendant
or respondent at the last address on file with the commissioner, and
(2) the plaintiff's affidavit of compliance with this section is
filed in the case on or before the return day of the process, if any,
or within such further time as the court allows.
25166. It is unlawful for any person willfully to make any untrue

statement of a material fact in any application, notice, or report
filed with the commissioner under this part or pursuant to
subdivision (b) of Section 25507, or willfully to omit to state in
any such application, notice, or report any material fact which is
required to be stated therein.
CORPORATIONS CODE
SECTION 25200-25209
25200. A broker-dealer registered under the Securities Exchange Act

of 1934, who has not previously had any certificate denied or
revoked under this law or any predecessor statute, shall be exempted
from the provisions of Section 25210 if he has no place of business
in this state and he does not direct offers to sell or buy into this
state in any manner to persons other than broker-dealers, banks,
savings and loan associations, trust companies, insurance companies,
investment companies registered under the Investment Company Act of
1940, pension or profit-sharing trusts (other than self-employed
individual retirement plans), or other institutional investors or
governmental agencies or instrumentalities designated by rule of the
commissioner, or to more than 15 other customers (whether or not
self-employed individual retirement plans) having an existing account
with such broker-dealer prior to any offer made to them in this
state, during any period of 12 consecutive months, whether or not the
offeror or any of the offerees is then present in this state.
25202. (a) An investment adviser shall not be subject to Section

25230 if (1) the investment adviser does not have a place of business
in this state and (2) during the preceding 12-month period has had
fewer than six clients who are residents of this state.
(b) For the purpose of this section only, "client" has the same
meaning as the term "client" is defined by the Securities and
Exchange Commission under the rule adopted pursuant to Section 222(d)
of the Investment Advisers Act of 1940, as amended. Also, for the
purpose of this section only, "client" does not mean other investment
advisers, broker-dealers, banks, savings and loan associations,
trust companies, insurance companies, investment companies registered
under the Investment Company Act of 1940, pension and profit-sharing
trusts (other than self-employed individual retirement plans), or
other institutional investors or governmental agencies or
instrumentalities designated by rule or order of the commissioner.
25203. A person whose only clients are insurance companies shall be

exempted from the provisions of Section 25230.
25204. The commissioner may by such rules as he deems necessary or

investors, either unconditionally or upon specified terms and
conditions or for specified periods, exempt from the provisions of
Section 25210 or Section 25230 any class of persons specified in such
rules.
25206. A broker licensed by the Real Estate Commissioner is exempt

from the provisions of Section 25210 when engaged in transactions in
any interest in any general or limited partnership, joint venture,
unincorporated association, or similar organization (but not a
corporation) owned beneficially by no more than 100 persons and
formed for the sole purpose of, and engaged solely in, investment in
or gain from an interest in real property, including, but not limited
to, a sale, exchange, trade, or development. An interest held by a
husband and wife shall be considered held by one person for the
purposes of this section.
25207. A financial institution that undertakes activities with
respect to an investment company pursuant to the provisions of
Section 1338, 6524, 14652.5, or 18022.5 of the Financial Code shall
not be subject to Section 25210 or 25230 in connection with such
activities but shall be subject to Sections 25218, 25234, 25235, and
25237 and to subdivisions (a), (b), and (d) of Section 25216, and
such rules thereunder as the commissioner may specify by rule.
Nothing in this section shall affect the status of such a financial
institution as a broker-dealer or investment adviser, or the
employees of such persons, when engaged in the activities authorized
by the provisions of the Financial Code specified above.
25208. A person licensed as a capital access company under Division

3 (commencing with Section 28000) of Title 4 is exempt from the
provisions of Section 25210 when engaged in the transaction of
business pursuant to the requirements of the Capital Access Company
Law and the regulations promulgated thereunder.
25209. Section 25210 shall not apply to an agent of an issuer when

engaged in transactions exempted by subdivision (q) of Section 25102,
provided that the agent is a life agent licensed in California or in
the state of domicile of the purchaser.
CORPORATIONS CODE
SECTION 25210-25221
25210. (a) Unless exempted under the provisions of Chapter 1

(commencing with Section 25200) of this part, no broker-dealer shall
effect any transaction in, or induce or attempt to induce the
purchase or sale of, any security in this state unless the
broker-dealer has first applied for and secured from the commissioner
a certificate, then in effect, authorizing that person to act in
that capacity.
(b) No person shall, on behalf of a broker-dealer licensed
pursuant to Section 25211, or on behalf of an issuer, effect any
transaction in, or induce or attempt to induce the purchase or sale
of, any security in this state unless that broker-dealer and agent
have complied with any rules as the commissioner may adopt for the
qualification and employment of those agents.
(c) The commissioner shall, consistent with Section 25213, review
the disciplinary histories of agents upon the filing of notice of (1)
the employment or transfer of an agent for a broker-dealer, (2) an
amendment to the information filed by the agent at the time of
employment or transfer, and (3) the termination of employment of the
agent from the broker-dealer.
25211. (a) The application for a certificate as a broker-dealer
shall be accompanied by the consent to service of process specified
in Section 25240 and, unless filed pursuant to subdivision (b), shall
contain such information in such detail relating to the applicant
and any persons associated with him or her as the commissioner may by
rule require.
(b) A broker-dealer registered under the Securities Exchange Act
of 1934 who is a member of the New York Stock Exchange, the NYSE
Amex, the NYSE Arca, or the Financial Industry Regulatory Authority,
and who has not had any certificate as a broker-dealer, investment
adviser or agent denied or revoked under this law or any predecessor
statute, may be licensed by notification pursuant to this subdivision
by filing with the commissioner an application setting forth the
following information in such form and detail as the commissioner may
by rule require:
(1) Such information as is necessary to identify the broker-dealer
and its offices in this state, and the location of its records and
principal office.
(2) Such information as is necessary to establish that the
broker-dealer meets the requirements for licensure by notification
under this subdivision.
(3) The consent to service of process specified in Section 25240.
(4) Such information as the commissioner may require as to the
jurisdictions in which the broker-dealer is licensed or registered
and as to the nature of the business conducted by the broker-dealer.
(c) Unless a proceeding has been instituted under Section 25212,
a certificate under subdivision (b) shall become effective on the
third business day after the application is filed with the
commissioner or upon the day the certificate is issued, whichever
first occurs. However, the commissioner may by order delay
effectiveness for a period not exceeding 15 business days (or for an
additional period with the consent of the applicant) if the
commissioner believes that the delay is necessary in the public
interest to determine if a proceeding should be instituted under
Section 25212. The commissioner may by rule or order waive that
provision of subdivision (b) which precludes application thereunder
by a person who has had a certificate denied or revoked under this
law or any predecessor statute if the commissioner finds the waiver
to be in the public interest. The commissioner, after appropriate
notice and opportunity for hearing in accordance with the provisions
of the Administrative Procedure Act, Chapter 5 (commencing with
Section 11500) of Part 1 of Division 3 of Title 2 of the Government
Code, may by rule or order disqualify a self-regulatory organization
specified in subdivision (b) from the provisions thereof. The
commissioner may by rule establish standards or criteria pursuant to
which disqualification may be made and he or she may disqualify upon
a finding that the self-regulatory organization fails substantially
to comply with those standards or criteria. Disqualification by the
commissioner shall not affect a certificate which has become
effective pursuant to this subdivision prior to the effective date of
that rule or order of disqualification but each person licensed
pursuant to subdivision (b) upon the basis of membership in that
organization shall, within 90 days after the effective date of that
rule or order, or such additional time as the commissioner may allow,
file with the commissioner a complete and current application in the
form required pursuant to subdivision (a). If a broker-dealer
licensed pursuant to subdivision (b) ceases to meet the
qualifications for licensing pursuant to that subdivision, he or she
shall, within 10 days after that event, file with the commissioner a
complete and current application in the form required pursuant to
subdivision (a).
(d) An application for a certificate as a broker-dealer, with
respect to a broker-dealer to be formed or organized, may be made by
a licensed broker-dealer to which the broker-dealer to be formed or
organized is to be the successor. The application shall contain such
information in such detail relating to the applicant and to the
successor and any person associated with the applicant or the
successor as the commissioner may by rule require. The application
shall become effective and the successor may transact business as a
broker-dealer 30 days after the receipt of the application by the
commissioner or within such shorter period of time as the
commissioner may determine, unless an order has been entered under
Section 25212 denying a certificate to the successor or a proceeding
looking toward an order has been instituted under that section. The
certificate shall terminate on the 45th day after the effective date
thereof, unless prior thereto the successor shall, in accordance with
such rules as the commissioner may prescribe, adopt the application
as its own and file the consent to service of process specified in
Section 25240.
25211.5. A broker-dealer acting pursuant to a certificate which is

then in effect and which is issued pursuant to Section 25211, shall
be exempt from the usury provisions of the State Constitution. This
section creates and authorizes a class of persons pursuant to Section
1 of Article XV of the Constitution.
25212. The commissioner may, after appropriate notice and

opportunity for hearing, by order censure, deny a certificate to,
suspend for a period not exceeding 12 months or revoke the
certificate of, any broker-dealer if the commissioner finds that the
censure, denial, suspension, or revocation is in the public interest
and that the broker-dealer, whether prior or subsequent to becoming a
broker-dealer, or any partner, officer, director, or branch manager
of the broker-dealer, whether prior or subsequent to becoming
associated with the broker-dealer, or any person directly or
indirectly controlling the broker-dealer, whether prior or subsequent
to becoming such, or any agent employed by the broker-dealer while
so employed has done any of the following:
(a) Has willfully made or caused to be made in any application for
a certificate or in any report required to be filed with the
commissioner under this law, or in any proceeding before the
commissioner, any statement which was at the time and in the light of
the circumstances under which it was made false or misleading with
respect to any material fact, or has willfully omitted to state in
the application or report any material fact which is required to be
stated therein.
(b) Has been either (1) convicted of or has pled nolo contendere
to a felony or misdemeanor, or (2) held liable in a civil action by
final judgment of a court based upon conduct showing moral turpitude,
and the commissioner finds that the felony, misdemeanor, or civil
action (A) involved the purchase or sale of any security, (B) arose
out of the conduct of the business of a broker-dealer or investment
adviser, (C) involved theft, or (D) involved the violation of Section
1341, 1342, or 1343 of Title 18 of the United States Code.
(c) Is permanently or temporarily enjoined by order, judgment, or
decree of any court of competent jurisdiction from acting as an
investment adviser, underwriter, or broker-dealer, or as an
affiliated person or employee of any investment company, bank, or
insurance company, or from engaging in or continuing any conduct or
practice in connection with that activity or in connection with the
purchase or sale of any security.
(d) Is or has been subject to (1) any order of the Securities and
Exchange Commission or the securities administrator of any other
state denying registration to, or revoking or suspending the
registration of, the person as a broker, dealer, agent, or investment
adviser, (2) any order of any national securities association or
national securities exchange (registered under the Securities
Exchange Act of 1934) suspending or expelling that person from
membership in the association or exchange or from association with
any member thereof, or (3) any other order of the commission or any
administrator, association, or exchange referred to in this
subdivision which is or has been necessary for the protection of any
investor.
(e) Has willfully violated any provision of the Securities Act of
1933, the Securities Exchange Act of 1934, the Investment Advisers
Act of 1940, the Investment Company Act of 1940, the Commodity
Exchange Act, or Title 4 (commencing with Section 25000), including
the Franchise Investment Law, Division 5 (commencing with Section
31000), or the California Commodity Law of 1990, Division 4.5
(commencing with Section 29500), or of any rule or regulation under
any of those statutes, or any order of the commissioner which is or
has been necessary for the protection of any investor.
(f) Is or has been subject to (1) any order of the Commodity
Futures Trading Commission denying registration to, or revoking or
suspending the registration of, that person under the Commodity
Exchange Act, (2) any order of any board of trade or commodity
exchange, including, but not limited to, the New York Mercantile
Exchange, the Chicago Mercantile Exchange, the Chicago Board of
Trade, or the Chicago Board Options Exchange, suspending or expelling
that person from membership in the board of trade or commodity
exchange or from association with any member thereof, or (3) any
other order of the commission or any board or exchange referred to in
this subdivision which is or has been necessary for the protection
of any investor.
(g) Has willfully aided, abetted, counseled, commanded, induced,
or procured the violation by any other person of any of the statutes
or rules or regulations referred to in subdivision (e) above, or has
failed reasonably to supervise, with a view to preventing violations
of those statutes, rules and regulations, another person who commits
a violation, if the other person is subject to his or her
supervision; for the purposes of this subdivision, no person shall be
deemed to have failed reasonably to supervise any person if (1)
there have been established procedures, and a system for applying
those procedures, which would reasonably be expected to prevent and
detect, insofar as practicable, any violation by the other person,
and (2) that person has reasonably discharged the duties and
obligations incumbent upon him or her by reason of those procedures
and system without reasonable cause to believe that those procedures
and system were not being complied with.
(h) Is subject to any currently effective order of the
commissioner entered pursuant to Section 25213 revoking or suspending
the certificate of the person as an agent.
(i) Has violated any provision of this division or the rules
thereunder or, in the case of an applicant only, any similar
regulatory scheme of the State of California or a foreign
jurisdiction.
25212.1. The commissioner may immediately revoke by order the

certificate of any broker-dealer if the broker-dealer fails to comply
with any currently effective order of the commissioner which is
necessary for the protection of any investor, unless the
broker-dealer secures a court order restraining the enforcement of
the commissioner's revocation order within 10 days of the date the
order is issued.

opportunity for hearing, by order censure, or suspend for a period
not exceeding 12 months, or deny or bar from any position of
employment, management or control of any broker-dealer or investment
adviser, any officer, director, partner, agent, employee of, or
person performing similar functions for, a broker-dealer, or any
other person, if the commissioner finds that the censure, suspension,
denial, or bar is in the public interest and that the person has
committed any act or omission enumerated in subdivision (a), (e),
(f), or (g) of Section 25212 or has been convicted of, or pled nolo
contendere to, any offense or been held liable in any civil action
specified in subdivision (b) of Section 25212, or is enjoined from
any act, conduct or practice specified in subdivision (c) of Section
25212 or is subject to any order specified in subdivision (d) of
Section 25212.
25213.3. The commissioner shall, after appropriate notices and

opportunity for hearing, by order suspend, for a period not exceeding
12 months, or bar from any position of employment, management or
control of any broker-dealer, any officer, director, partner, agent,
employee of, or person performing similar functions for, a
broker-dealer, or any other person, if the person has been convicted
of, or has pleaded nolo contendere to, a felony or misdemeanor in
violation of Section 25541 that was committed on or after January 1,
1989.
25214. (a) It is unlawful for any person, as to whom an order

suspending or barring employment or control is in effect pursuant to
Section 25213 or 25213.3, willfully to become or to be employed by
any broker-dealer or investment adviser, contrary to the terms of
that order, without the consent of the commissioner; and it is
unlawful for any broker-dealer to permit a person as to whom an order
is in effect pursuant to Section 25213, 25213.3, or 25232.1 to
become or to remain a person employed by the broker-dealer, contrary
to the terms of that order, without the consent of the commissioner,
if the broker-dealer knew, or in the exercise of reasonable care
should have known, of the order.
(b) Any person as to whom an order suspending or barring
employment or control is issued pursuant to Section 25213 or 25213.3
may petition the commissioner for reinstatement or reduction of
penalty, or for modification of the order, as provided in and subject
to the provisions of Section 11522 of the Government Code. The
commissioner may, at any time and with the consent of that person
without hearing, modify such order.
25215. No order may be entered under Section 25212, 25213, 25213.3,

or 25252 except after notice to any person affected thereby (and, in
the case of an agent, to his or her employer or prospective employer
if known to the commissioner) of the intention of the commissioner
to enter that order and of the reasons therefor and that upon receipt
of a request the matter will be set down for hearing to commence
within 15 business days after that receipt unless the person affected
consents to a later date. If no hearing is requested within 30 days
after the mailing of the notice and none is ordered by the
commissioner, the order may be entered without hearing to remain in
effect until it is modified or vacated by the commissioner. In the
case of an original application for a certificate, that hearing shall
be set down to commence within 15 business days after receipt of a
written request by the applicant made 30 days or more after the
filing of the application, even though no notice by the commissioner
has been given, unless the applicant consents to a later date. If a
hearing is requested or ordered, it shall be held in accordance with
the provisions of the Administrative Procedure Act (Chapter 5
the Government Code), and the commissioner shall have all of the
powers granted thereunder.
25216. (a) No broker-dealer or agent shall effect any transaction

in, or induce or attempt to induce the purchase or sale of, any
security in this state by means of any manipulative, deceptive or
other fraudulent scheme, device, or contrivance. The commissioner
shall, for the purposes of this subdivision, by rule define such
schemes, devices or contrivances as are manipulative, deceptive, or
otherwise fraudulent.
(b) No broker-dealer or agent shall effect any transaction in, or
induce or attempt to induce the purchase or sale of, any security in
this state in connection with which such broker-dealer or agent
engages in any fraudulent, deceptive or manipulative act or practice
or makes any fictitious quotation. The commissioner shall, for the
purposes of this subdivision, by rule define and prescribe means
reasonably designed to prevent such acts and practices as are
fraudulent, deceptive, or manipulative and such quotations as are
fictitious.
(c) No broker-dealer or agent shall effect any transaction in, or
induce or attempt to induce the purchase or sale of, any security in
this state in contravention of such rules as the commissioner may
prescribe as necessary or appropriate in the public interest or for
the protection of investors to provide safeguards with respect to the
financial responsibility of broker-dealers. Subject to the
limitations of Section 15(h) of the Securities Exchange Act of 1934,
those rules may require a minimum capital for broker-dealers or
prescribe a ratio between net capital and aggregate indebtedness or
both and a fidelity bond.
(d) No broker-dealer or agent shall effect or attempt to effect in
this state, in contravention of such rules as the commissioner may
prescribe as necessary or appropriate in the public interest or for
the protection of investors, (1) any transaction in connection with
any security whereby any party to such transaction acquires any put,
call, straddle, or other option or privilege (A) of buying or selling
the security, (B) on any security, certificate of deposit, or group
or index of securities (including any interest therein or based on
the market value thereof), (C) entered into on a national securities
exchange relating to foreign currency, or (2) any transaction in
connection with any security with relation to which the broker-dealer
or agent has, directly or indirectly, any interest in any such put,
call, straddle, option, or privilege, or (3) any transaction in any
security for the account of any person who the broker-dealer or agent
has reason to believe has, and who actually has, directly or
indirectly, any interest in any such put, call, straddle, option, or
privilege with relation to such security.
(e) The commissioner may by rule require any issuer who employs
agents in connection with any security or transaction not exempted by
Chapter 1 (commencing with Section 25100) of Part 2 of this division
to post a surety bond in an amount not exceeding ten thousand
dollars ($10,000), conditioned that the issuer will comply with the
provisions of this law and the rules and orders issued thereunder.
The bond, unless previously canceled, shall cover for the entire
period that the qualification is in effect. If a deposit in lieu of a
bond is made pursuant to Article 7 (commencing with Section 995.710)
of Chapter 2 of Title 14 of Part 2 of the Code of Civil Procedure,
the deposit may include an appropriate deposit of securities. No suit
may be maintained to enforce any liability on the bond unless
brought within two years after the contract of sale or other act upon
which the suit is based.
25217. (a) No broker-dealer licensed under this chapter shall,

effect any transaction in, or induce or attempt to induce the
purchase or sale of, any security in this state unless such
broker-dealer and all agents employed by such broker-dealer meet such
specified and appropriate standards with respect to training,
experience, supervision, terms of employment, and other
qualifications as the commissioner finds necessary or desirable. The
commissioner may establish such standards by rules, which may: (1)
appropriately classify broker-dealers and agents (taking into account
relevant matters, including types of business done and nature of
securities sold); (2) specify that all or any portion of such
standards shall be applicable to any such class; (3) require persons
in any such class to pass examinations prescribed in accordance with
such rules; and (4) provide that persons in any such class, other
than a broker-dealer and partners, officers and supervisory employees
(which term may be defined by the commissioner's rules and as so
defined shall include branch managers of broker-dealers) of
broker-dealers, may be qualified solely on the basis of compliance
with such specified standards of training and such other
qualifications as the commissioner finds appropriate.
(b) In addition to the fees imposed by Section 25608, the
commissioner may prescribe by rule reasonable fees and charges to
defray the cost of any examination administered by the commissioner
or under the commissioner's direction. The commissioner may cooperate
with national securities associations and national securities
exchanges and with the Securities and Exchange Commission in
administering examinations and may require broker-dealers and agents
to pass examinations administered by or on behalf of any such
association or exchange or by the Securities and Exchange Commission
and to pay to such association or exchange or such commission
reasonable fees or charges to defray the costs incurred by such
association or exchange or commission in administering such
examinations.
(c) A broker-dealer licensed under this chapter making loans to
its customers which are subject to the provisions of Division 9
(commencing with Section 22000) of the Financial Code shall be
licensed as a personal property broker under that division.
25218. No broker-dealer licensed under this chapter shall effect

any transaction in, or induce or attempt to induce the purchase or
sale of, any security in this state in contravention of such rules as
the commissioner may prescribe designed to promote just and
equitable principles of trade, to provide safeguards against
unreasonable profits or unreasonable rates of commissions or other
charges, and in general to protect investors and the public interest,
and to remove impediments to and perfect the mechanism of a free and
open market.
25219. Notwithstanding any other provision of this division, if in

his or her opinion the public interest and the protection of
investors so require, the commissioner is authorized summarily to
suspend all over-the-counter trading in this state by broker-dealers
and agents in any security or summarily to suspend all trading on a
national securities exchange located in this state in any security
(provided, in the case of trading on that exchange, that the security
is not listed on any national securities exchange located outside
this state on which trading has not been suspended) for a period not
exceeding 90 days, and for successive periods of 90 days. No
broker-dealer or agent shall effect any transaction (other than an
unsolicited brokerage transaction effected on a national securities
exchange located outside this state) in, or induce or attempt to
induce the purchase or sale of, any security in this state in which
trading is in any manner suspended under this section, except in
performance of a contract previously entered into.
25220. At any time after the issuance of an order under Section

25219, any interested person (including, but not limited to, the
issuer of the security and any broker-dealer who has been making a
market in the security) may in writing request that the suspension of
trading be rescinded. Upon the receipt of such a written request,
the matter shall be set down for hearing to commence within 15
business days after such receipt unless the person making the request
consents to a later date. After such hearing, which shall be
conducted in accordance with the provisions of the Administrative
Division 3 of Title 2 of the Government Code, and in connection with
which the commissioner shall have all of the powers granted
thereunder, the commissioner may order such suspension to be
continued until modified or rescinded by further order of the
commissioner if he finds that trading in the security will be unfair,
unjust, or inequitable to investors or will tend to work a fraud
upon the purchasers or sellers of such security. Otherwise, he shall
rescind the suspension of trading and no further orders may be
entered under Section 25219 with respect to the same security in the
absence of changed circumstances justifying such order.
25221. (a) Notwithstanding any other provision of law, a

broker-dealer, or any affiliate thereof, licensed under this chapter,
or any officer or employee thereof, may submit to the Department of
Justice fingerprints of an applicant for employment for the purpose
of obtaining information as to the existence and nature of a record
of a conviction and of an arrest for which the Department of Justice
establishes that the applicant was released on bail or on his or her
own recognizance pending trial. Fingerprints taken pursuant to this
section include fingerprints taken by the use of fingerprint
live-scan technology, as described in Section 1596.871 of the Health
and Safety Code.
(b) The Department of Justice shall provide the following
information to the broker-dealer, affiliate, or officer or employee
thereof pursuant to subdivision (a):
(1) Every conviction rendered against the applicant.
(2) Every arrest for which the Department of Justice establishes
that the applicant was released on bail or on his or her own
recognizance pending trial.
CORPORATIONS CODE
SECTION 25230-25238
25230. (a) It is unlawful for any investment adviser to conduct

business as an investment adviser in this state unless the investment
adviser has first applied for and secured from the commissioner a
certificate, then in effect, authorizing the investment adviser to do
so or unless the investment adviser is exempted by the provisions of
Chapter 1 (commencing with Section 25200) of this part or unless the
investment adviser is subject to Section 25230.1.
(b) No person, on behalf of an investment adviser that has
obtained a certificate pursuant to Section 25231, may, in this state:
offer or negotiate for the sale of investment advisory services of
the investment adviser; determine which recommendations shall be made
to, make recommendations to, or manage the accounts of, clients of
the investment adviser; or determine the reports or analyses
concerning securities to be published by the investment adviser,
unless the investment adviser and that person have complied with
rules that the commissioner may adopt for the qualification and
employment of those persons.
(c) The commissioner may, consistent with Section 25232.1, review
the disciplinary history of an investment adviser representative upon
the filing of notice of any of the following:
(1) The employment, association, or transfer of the investment
adviser representative.
(2) An amendment to the information filed by the investment
adviser representative at the time of employment, association, or
transfer.
(3) The termination of employment or association of the investment
adviser representative.
25230.1. (a) A person that is registered under Section 203 of the

Investment Advisers Act of 1940 as an investment adviser is not
subject to the requirement of obtaining a certificate under Section
25230, but may not conduct business in this state unless the person
has fewer than six clients as specified in Section 25202 or unless
the person first complies with subdivision (b). An investment adviser
representative that has a place of business in this state may be
required to obtain a certificate pursuant to Section 25231.
(b) A person subject to subdivision (a) shall:
(1) File with the commissioner an annual notice, consisting of
those documents filed with the Securities and Exchange Commission
pursuant to the securities laws that the commissioner by rule or
order deems appropriate or, in lieu thereof, a form prescribed by the
commissioner, and a consent to service of process under Section
25240.
(2) Pay the notice filing fee provided for in subdivision (d) of
Section 25608.1.
(c) No investment adviser representative, on behalf of an
investment adviser subject to subdivision (a), may, in this state:
offer or negotiate for the sale of investment advisory services of
the investment adviser; determine which recommendations shall be made
to, make recommendations to, or manage the accounts of, clients of
the investment adviser; or determine the reports or analysis
concerning securities to be published by the investment adviser,
unless the investment adviser representative has complied with rules
that the commissioner may adopt for the qualification and employment
of investment adviser representatives.
(d) Subdivision (a) does not prohibit the commissioner from
investigating and bringing enforcement actions with respect to fraud
or deceit, including and without limitation, fraud or deceit under
Section 25235 and the rules of the commissioner adopted thereunder,
against an investment adviser or an investment adviser
representative.
25231. (a) Any investment adviser, or any person who contemplates

becoming an investment adviser, may apply for a certificate to act as
an investment adviser by filing with the commissioner an
application. The application shall be accompanied by the consent to
service of process specified in Section 25240 and shall contain
information, in such form and detail, as the commissioner may by rule
prescribe.
(b) Unless otherwise provided by rule or order of the
commissioner, all investment adviser and investment adviser
representative applications, amendments, reports, notices, related
filings, and fees required to be filed with the commissioner pursuant
to this title shall be filed electronically with and transmitted to
the Web-based Investment Adviser Registration Depository operated by
the Financial Industry Regulatory Authority.

opportunity for hearing, by order censure, deny a certificate to, or
suspend for a period not exceeding 12 months or revoke the
certificate of, an investment adviser, if the commissioner finds that
the censure, denial, suspension, or revocation is in the public
interest and that the investment adviser, whether prior or subsequent
to becoming such, or any partner, officer or director thereof or any
person performing similar functions or any person directly or
indirectly controlling the investment adviser, whether prior or
subsequent to becoming such, or any employee of the investment
adviser while so employed has done any of the following:
(a) Has willfully made or caused to be made in any application for
a certificate or any report filed with the commissioner under this
division, or in any proceeding before the commissioner, any statement
which was at the time and in the light of the circumstances under
which it was made false or misleading with respect to any material
fact, or has willfully omitted to state in the application or report
any material fact which is required to be stated therein.
(b) Has been either (1) convicted of or has pled nolo contendere
to any felony or misdemeanor, or (2) held liable in a civil action by
final judgment of a court based upon conduct showing moral
turpitude, and the commissioner finds that the felony, misdemeanor or
civil action (A) involved the purchase or sale of any security, (B)
arose out of the conduct of the business of a broker-dealer or
investment adviser, (C) involved theft, or (D) involved the violation
of Section 1341, 1342, or 1343 of Title 18 of the United States
Code.
(c) Is permanently or temporarily enjoined by order, judgment, or
decree of any court of competent jurisdiction from acting as an
investment adviser, underwriter or broker-dealer or as an affiliated
person or employee of any investment company, bank, or insurance
company, or from engaging in or continuing any conduct or practice in
connection with that activity, or in connection with the purchase or
sale of any security.
(d) Is or has been subject to (1) any order of the Securities and
Exchange Commission or the securities administrator of any other
state denying or revoking or suspending his or her registration as an
investment adviser, or investment adviser representative, or as a
broker or dealer or agent, (2) any order of any national securities
association or national securities exchange (registered under the
Securities Exchange Act of 1934) suspending or expelling him or her
from membership in that association or exchange or from association
with any member thereof, or (3) any other order of the commission or
any administrator, association, or exchange referred to in this
subdivision which is or has been necessary for the protection of any
investor.
(e) Has willfully violated any provision of the Securities Act of
1933, the Securities Exchange Act of 1934, the Investment Advisers
Act of 1940, the Investment Company Act of 1940, the Commodity
Exchange Act, or Title 4 (commencing with Section 25000), including
the Franchise Investment Law, Division 5 (commencing with Section
31000), or the California Commodity Law of 1990, Division 4.5
(commencing with Section 29500), or of any rule or regulation under
any of those statutes, or any order of the commissioner which is or
has been necessary for the protection of any investor.
(f) Is or has been subject to (1) any order of the Commodity
Futures Trading Commission denying registration to, or revoking or
suspending the registration of, that person under the Commodity
Exchange Act, (2) any order of any board of trade or commodity
exchange, including, but not limited to, the New York Mercantile
Exchange, the Chicago Mercantile Exchange, the Chicago Board of
Trade, or the Chicago Board Options Exchange, suspending or expelling
that person from membership in the board of trade or commodity
exchange or from association with any member thereof, or (3) any
other order of the commission or any board or exchange referred to in
this subdivision which is or has been necessary for the protection
of any investor.
(g) Has aided, abetted, counseled, commanded, induced, or procured
the violation by any other person of any statute or rule or
regulation referred to in subdivision (e).
(h) Has violated any provision of this division or the rules
thereunder or, in the case of an applicant only, any similar
regulatory scheme of the State of California or a foreign
jurisdiction.
25232.1. The commissioner may, after appropriate notice and

opportunity for hearing, by order censure, or suspend for a period
not exceeding 12 months, or bar from any position of employment,
management or control of any investment adviser, broker-dealer or
commodity adviser, any officer, director, partner, employee of, or
person performing similar functions for, an investment adviser, or
any other person, if he or she finds that the censure, suspension or
bar is in the public interest and that the person has committed any
act or omission enumerated in subdivision (a), (e), (f), or (g) of
Section 25232 or has been convicted of any offense or held liable in
any civil action specified in subdivision (b) of Section 25232 or is
enjoined from any act, conduct or practice specified in subdivision
(c) of Section 25232 or is subject to any order specified in
subdivision (d) of Section 25232.
25232.2. (a) It is unlawful for any person, as to whom an order

suspending or revoking the person's certificate as an investment
adviser is in effect pursuant to Section 25232 or as to whom an order
suspending or barring employment is in effect pursuant to Section
25232.1, willfully to become or to be employed by any investment
adviser, broker-dealer or commodity adviser, without the consent of
the commissioner, and it is unlawful for any investment adviser to
permit a person as to whom an order is in effect pursuant to Section
25212.1 or 25232.1 to become or to remain employed by the investment
adviser, without the consent of the commissioner, if such investment
adviser knew, or in the exercise of reasonable care should have
known, of such order.
(b) Any person as to whom an order suspending or barring
employment with or participation is issued pursuant to Section
25232.1 may petition the commissioner for reinstatement or reduction
of penalty as provided in and subject to the provisions of Section
11522 of the Government Code.
25232.3. The commissioner may immediately revoke the certificate of

any investment adviser if the investment adviser fails to comply
with any currently effective order of the commissioner which is
necessary for the protection of any investor, unless the investment
adviser secures a court order restraining the enforcement of the
commissioner's revocation order within 10 days of the date the order
is issued.
25233. No order may be entered under Section 25232, 25232.1, or

25252 except after notice to the person affected thereby of the
intention of the commissioner to enter that order and of the reasons
therefor and that upon receipt of a request the matter shall be set
down for hearing to commence within 15 business days after that
receipt unless the person affected consents to a later date. If no
hearing is requested within 30 days after the mailing of that notice
and none is ordered by the commissioner, the order may be entered
without hearing to remain in effect until it is modified or vacated
by the commissioner. In the case of an original application for a
certificate, such a hearing shall be set down to commence within 15
business days after receipt of a written request by the applicant
made 30 days or more after the filing of the application, even though
no such notice by the commissioner has been given, unless the
applicant consents to a later date. If a hearing is requested or
ordered, it shall be held in accordance with the provisions of the
Administrative Procedure Act (Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code),
and the commissioner shall have all of the powers granted thereunder.
25234. (a) No investment adviser licensed under this chapter shall

in this state enter into, extend or renew any investment advisory
contract, or in any way perform any investment advisory contract
entered into, extended or renewed on or after the effective date of
this law, if that contract:
(1) Provides for compensation to the investment adviser on the
basis of a share of capital gains upon or capital appreciation of the
funds or any portion of the funds of the client, except as may be
permitted by rule or order of the commissioner;
(2) Fails to provide, in substance, that no assignment of the
contract shall be made by the investment adviser without the consent
of the other party to the contract;
(3) Fails to provide, in substance, that the investment adviser,
if a partnership, will notify the other party to the contract of any
change in the membership of the partnership within a reasonable time
after the change.
(b) As used in this section, "investment advisory contract" means
any contract or agreement whereby a person agrees to act as
investment adviser or to manage any investment or trading account for
a person other than an investment company. Paragraph (1) of
subdivision (a) of this section does not prohibit an investment
advisory contract that provides for compensation based upon the total
value of a fund averaged over a definite period, or as of definite
dates, or taken as of a definite date.
25235. It is unlawful for any investment adviser, directly or

indirectly, in this state:
(a) To employ any device, scheme, or artifice to defraud any
client or prospective client.
(b) To engage in any transaction, practice, or course of business
which operates or would operate as a fraud or deceit upon any client
or prospective client.
(c) Acting as principal for his own account, knowingly to sell any
security to or purchase any security from a client for whom he is
acting as investment adviser, or, acting as broker for a person other
than such client, knowingly to effect any sale or purchase of any
security for the account of such client, without disclosing to such
client in writing before the completion of the transaction the
capacity in which he is acting and obtaining the written consent of
the client to such transaction.
(d) To engage in any act, practice, or course of business which is
fraudulent, deceptive, or manipulative. The commissioner shall, for
the purpose of this subdivision, by rule define and prescribe means
reasonably designed to prevent such acts, practices, and courses of
business as are fraudulent, deceptive, or manipulative.
(e) To represent that he is an investment counsel or to use the
name "investment counsel" as descriptive of his business unless his
principal business consists of acting as investment adviser and a
substantial part of his business consists of rendering investment
advisory services on the basis of the individual needs of his
clients.
25236. (a) No investment adviser licensed under this chapter shall

conduct any business as such investment adviser in this state unless
the investment adviser and all natural persons associated with such
investment adviser meet such specified and appropriate standards with
respect to training, experience and other qualifications as the
commissioner finds necessary or desirable. The commissioner may
establish such standards by rule, which may
(1) Appropriately classify investment advisers and persons
associated with investment advisers;
(2) Specify that all or any portion of such standards shall be
applicable to any such class; and
(3) Require persons in any such class to pass examinations
prescribed in accordance with such rules.
(b) In addition to the fees imposed by Section 25608, the
commissioner may prescribe by rule reasonable fees and charges to
defray the costs of carrying out this section, including, but not
limited to, fees for any examination administered by him or under his
direction.
25237. The commissioner shall prescribe rules with respect to

investment advisers licensed under this chapter who have custody of
their clients' securities or funds or who have any power of attorney
from their clients to execute transactions as he or she finds to be
necessary or appropriate in the public interest or for the protection
of investors. The rules may require a minimum capital for those
investment advisers or prescribe a minimum ratio between net capital
and aggregate indebtedness or both, and may require a fidelity bond.
25238. No investment adviser licensed under this chapter and no

natural person associated with the investment adviser shall engage in
investment advisory activities, or attempt to engage in investment
advisory activities, in this state in contradiction of such rules as
the commissioner may prescribe designed to promote fair, equitable
and ethical principles.
CORPORATIONS CODE
SECTION 25240-25256
25240. Every applicant for a certificate as a broker-dealer or an

investment adviser (other than a California corporation), and every
investment adviser subject to Section 25230.1, shall file with the
commissioner, in such form as the commissioner by rule prescribes, an
irrevocable consent appointing the commissioner or the commissioner'
s successor in office to be the person's attorney to receive service
of any lawful process in any noncriminal suit, action or proceeding
against the person or the person's successor, executor, or
administrator, which arises under this law or any rule or order
hereunder after the consent has been filed, with the same force and
validity as if served personally on the person filing the consent. A
person who has filed such a consent in connection with a previous
application under this law (or under any prior law if the application
states that such consent is still effective), or a person who has
filed such a consent in connection with a previous notice filed under
Section 25230.1, need not file another. Service may be made by
leaving a copy of the process in the office of the commissioner, but
it is not effective unless (1) the plaintiff, who may be the
commissioner in a suit, action or proceeding instituted by the
commissioner, forthwith sends notice of the service and a copy of the
process by registered or certified mail to the defendant or
respondent at the person's last address on file with the
commissioner, and (2) the plaintiff's affidavit of compliance with
this section is filed in the case on or before the return day of the
process, if any, or within such further time as the court allows.
25241. (a) Every broker-dealer and every investment adviser

licensed under Section 25230 shall make and keep accounts,
correspondence, memorandums, papers, books, and other records and
shall file financial and other reports as the commissioner by rule
requires, subject to the limitations of Section 15(h) of the
Securities Exchange Act of 1934 with respect to broker-dealers and
Section 222 of the Investment Advisers Act of 1940 with respect to
investment advisers.
(b) All records so required shall be preserved for the time
specified in the rule.
(c) All records referred to in this section are subject at any
time and from time to time to reasonable periodic, special, or other
examinations by the commissioner, within or without this state, as
the commissioner deems necessary or appropriate in the public
interest or for the protection of investors.
(d) For the purpose of avoiding unnecessary duplications of
examinations, the commissioner, insofar as he or she deems it
practicable in administering this section, may cooperate with the
securities administrators of other states, the Securities and
Exchange Commission and any national securities exchange or national
securities association.
(e) Unless otherwise provided by rule, every investment adviser
subject to Section 25230 and every broker-dealer, including an
applicant for a license under Section 25210 or 25230, shall furnish
an authorization for disclosure to the commissioner of financial
records of the licensee's broker-dealer or investment adviser
business pursuant to Section 7473 of the Government Code.
25242. (a) Surrender of a certificate as a broker-dealer or

investment adviser becomes effective 30 days after receipt of an
application to surrender that certificate or within a shorter period
of time as the commissioner may determine, unless a revocation or
suspension proceeding is pending when the application is filed or a
proceeding to revoke or suspend or to impose conditions upon the
withdrawal is instituted within 30 days after the application is
filed. If a proceeding is pending or instituted, withdrawal becomes
effective at a time and upon any conditions as the commissioner by
order determines.
(b) If the commissioner finds that any broker-dealer or investment
adviser is no longer in existence, or has ceased to do business as a
broker-dealer or investment adviser, or is subject to an
adjudication of mental incompetence or to the control of a committee
or conservator or guardian, or cannot be located after reasonable
search, the commissioner may by order summarily revoke the
certificate of that broker-dealer or investment adviser.
(c) The commissioner may summarily suspend or revoke the
certificate of a broker-dealer or investment adviser if he or she (1)
fails to pay any fee required by Section 25608 or imposed pursuant
to Section 25217, 25218 or 25236 within 10 days after notice by the
commissioner that the fee is due and unpaid, (2) fails to file any
report required under Section 25241 within 10 days after notice by
the commissioner that the report is due, (3) fails to maintain any
bond required by subdivision (e) of Section 25216 or by Section
25237, (4) fails to file an application pursuant to subdivision (a)
of Section 25211 when required by subdivision (c) of that section,
within the time specified therein or within 10 days after notice by
the commissioner that the application is required, whichever last
occurs, (5) fails to maintain any capital required by subdivision (c)
of Section 25216 or by Section 25237, or (6) fails to maintain
records as required by Section 25241.
25243. It is unlawful for any person holding a certificate as a

broker-dealer or investment adviser under this part to represent or
imply in any manner whatsoever that such person has been sponsored,
recommended, or approved or that the person's abilities or
qualifications have in any respect been passed upon by the
commissioner. Nothing in this section prohibits a statement (other
than in a paid advertisement) that a person holds a certificate under
this law, if such statement is true in fact and if the effect of
such licensing is not misrepresented.
25243.5. (a) A broker-dealer or investment adviser, or an agent or

representative thereof, shall not use a senior-specific
certification, credential, or professional designation in connection
with the offer, sale, or purchase of securities, or the provision of
advice as to the value of or the advisability of investing in,
purchasing, or selling securities, either directly or indirectly or
through publications or writings or by issuing or promulgating
analyses or reports relating to securities, that indicates or implies
that the broker-dealer, investment adviser, or an agent or
representative thereof, has special certification or training in
advising or servicing senior citizens or retirees, in such a way as
to mislead any person.
(b) The prohibited use of these certifications, credentials, or
professional designations includes, but is not limited to, the
following:
(1) The use of a certification, credential, or professional
designation by a person who has not actually earned or is otherwise
ineligible to use the certification, credential, or designation.
(2) The use of a nonexistent or self-conferred certification,
credential, or professional designation.
designation that indicates or implies a level of occupational
qualifications obtained through education, training, or experience
that the person using the certification, credential, or professional
designation does not have.
designation that was obtained from a designating, credentialing, or
certifying organization where any of the following apply:
(A) The organization is primarily engaged in the business of
instruction in sales marketing.
(B) The organization does not have reasonable standards or
procedures for assuring the competency of individuals to whom it
grants a certification, credential, or professional designation.
(C) The organization does not have reasonable standards or
procedures for monitoring and disciplining individuals with a
certification, credential, or professional designation for improper
or unethical conduct.
(D) The organization does not have reasonable continuing education
requirements for individuals with a certification, credential, or
professional designation in order to maintain the certificate,
credential, or professional designation.
(c) There is a rebuttable presumption that a designating,
credentialing, or certifying organization is not disqualified solely
for the purposes of paragraph (4) of subdivision (b) when the
organization has been accredited by the American National Standards
Institute, the National Commission for Certifying Agencies, or an
organization that is on the United States Department of Education's
list entitled "Accrediting Agencies Recognized for Title IV Purposes"
and the certification, credential, or professional designation
issued therefrom does not primarily apply to sales and/or marketing.
(d) In determining whether a combination of words, or an acronym
standing for a combination of words, constitutes a certification,
credential, or professional designation indicating or implying that a
person has special certification or training in advising or serving
senior citizens or retirees, factors to be considered shall include
(1) Use of one or more word such as "senior," "retirement,"
"elder," or like words combined with one or more words such as
"certified," "registered," "chartered," "adviser," "specialist,"
"consultant," "planner," or like words, in the name of the
certification, credential, or professional designation or credential.
(2) The manner in which those words are combined.
(e) This section shall not apply to the use of a job title by a
person within an organization that is licensed or registered by the
Department of Corporations or a federal financial services regulatory
agency, when that job title indicates seniority or standing within
the organization, or specifies a person's area of specialization
within the organization. For the purposes of this subdivision,
federal financial services regulatory agency includes, but is not
limited to, an agency that regulates brokers or dealers, investment
advisers, or investment companies as described under the Investment
Company Act of 1940 (15 U.S.C. Sec. 809-1 et seq.).
(f) (1) This section shall not apply to a broker or agent who is
licensed by the Department of Insurance and is in compliance with the
requirements of Section 787.1 of the Insurance Code.
(2) This subdivision shall be operative only if Assembly Bill 2150
of the 2007-08 Regular Session is chaptered and becomes effective
and that bill adds Section 787.1 to the Insurance Code.
(g) This section shall become operative on July 1, 2009.
25244. Any person whose certificate as a broker-dealer or

investment adviser has been suspended or revoked shall immediately
surrender such certificate to the commissioner.

statement of a material fact in any application, notice, or report
filed with the commissioner under this part, or willfully to omit to
state in any such application, notice, or report any material fact
which is required to be stated therein.
25246. It is unlawful for any agent or broker-dealer to require, as

a condition to the purchase or sale of securities for and in the
name of a married person, that the prior consent or authorization of
the spouse of that person be obtained.
25247. (a) Upon written or oral request, the commissioner shall

make available to any person the information specified in Section
6254.12 of the Government Code and made available through the Public
Disclosure Program of the Financial Industry Regulatory Authority
with respect to any broker-dealer or agent licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of a
broker-dealer. Any information disclosed pursuant to this subdivision
shall constitute a public record. Notwithstanding any other
provisions of law, the commissioner may disclose either orally or in
writing that information pursuant to this subdivision. There shall be
no liability on the part of and no cause of action of any nature
shall arise against the State of California, the Department of
Corporations, the Commissioner of Corporations, or any officer,
agent, or employee of the state or of the Department of Corporations
for the release of any false or unauthorized information, unless the
release of that information was done with knowledge and malice.
(b) Any broker-dealer or agent licensed or regulated under this
part shall upon request deliver a written notice to any client when a
new account is opened stating that information about the license
status or disciplinary record of a broker-dealer or an agent may be
obtained from the Department of Corporations, or from any other
source that provides substantially similar information.
(c) The notice provided under subdivision (b) shall contain the
office location or telephone number where the information may be
obtained.
(d) A broker-dealer or agent shall be exempt from providing the
notice required under subdivision (b) if a person who does not have a
financial relationship with the broker-dealer or agent, requests
only general operational information such as the nature of the
broker-dealer's or agent's business, office location, hours of
operation, basic services, and fees, but does not solicit advice
regarding investments or other services offered.
(e) Upon written or oral request, the commissioner shall make
available to any person the disciplinary records maintained on the
Investment Adviser Registration Depository and made available through
the Investment Advisor Public Disclosure Web site with respect to
any investment adviser, investment adviser representative, or
associated person of an investment adviser licensed or regulated
under this part. The commissioner shall also make available the
current license status and the year of issuance of the license of an
investment adviser. Any information disclosed pursuant to this
subdivision shall constitute a public record. Notwithstanding any
other provision of law, the commissioner may disclose that
information either orally or in writing pursuant to this subdivision.
There shall be no liability on the part of and no cause of action of
any nature shall arise against the State of California, the
Department of Corporations, the Commissioner of Corporations, or any
officer, agent, or employee of the state or of the Department of
Corporations for the release of any false or unauthorized
information, unless the release of that information was done with
knowledge and malice.
(f) Section 461 of the Business and Professions Code shall not be
applicable to the Department of Corporations when using a national,
uniform application adopted or approved for use by the Securities and
Exchange Commission, the North American Securities Administrators
Association, or the Financial Industry Regulatory Authority that is
required for participation in the Central Registration Depository or
the Investment Adviser Registration Depository.
(g) This section shall not require the disclosure of criminal
history record information maintained by the Federal Bureau of
Investigation pursuant to Section 534 of Title 28 of the United
States Code, and the rules thereunder, or information not otherwise
subject to disclosure under the Information Practices Act of 1977.
25248. (a) If the commissioner finds, as a result of any

examination or investigation or from any report made to the
commissioner, that any person subject to this part, other than an
investment adviser subject to Section 25230.1, is in an insolvent
condition, or is conducting a securities, broker-dealer, or
investment advisory business in such an unsafe, injurious, or
unauthorized manner as to render further operations hazardous to the
public or to customers, the commissioner may, by an order addressed
to and served by registered or certified mail or by personal service
on that person and on any other person having in his or her
possession or control any client funds, trust funds, or other
property deposited with that person, direct discontinuance of the
disbursement of client or trust funds by the parties or any of them,
the receipt of client or trust funds, or other business operations.
No person having in his or her possession any of these funds shall be
liable for failure to comply with the order unless he or she has
received written notice of the order. Subject to subdivision (b), the
order shall remain in effect until set aside by the commissioner, in
whole or in part, the person is the subject of an order for relief
in bankruptcy, or pursuant to Section 25253, the commissioner has
assumed possession of the broker-dealer or investment adviser.
(b) Within 15 days from the date of an order pursuant to
subdivision (a), the person may request a hearing under the
11500) of Part 1 of Division 3 of Title 2 of the Government Code).
Upon receipt of a request, the matter shall be set for hearing to
commence within 30 days after that receipt unless the person subject
to this division consents to a later date. If no hearing is requested
within 15 days after the mailing or service of the notice and none
is ordered by the commissioner, the failure to request a hearing
shall constitute a waiver of the right to a hearing. Neither the
request for a hearing nor the hearing itself shall stay the order
issued by the commissioner under subdivision (a).
25249. If, after examination or investigation, the commissioner has

reasonable grounds to believe that any broker-dealer or investment
adviser has violated any law or rule binding upon it, the
commissioner shall, by written order addressed to the broker-dealer
or investment adviser, direct the discontinuance of the violation.
The order shall be effective immediately, but shall not become final
except in accordance with the provisions of Section 25251.
25250. If, after examination or investigation, the commissioner has

reasonable grounds to believe that any broker-dealer or investment
adviser, other than an investment adviser subject to Section 25230.1,
is conducting business in an unsafe or injurious manner, the
commissioner shall, by written order addressed to the broker-dealer
or investment adviser, direct the discontinuance of the unsafe or
injurious practices. The order shall be effective immediately, but
shall not become final except in accordance with the provisions of
Section 25251.
25251. (a) No order issued pursuant to Section 25249 or 25250 may

become final except after notice to the affected broker-dealer or
investment adviser of the commissioner's intention to make the order
final and of the reasons for the finding. The commissioner shall also
notify the broker-dealer or investment adviser that upon receiving a
request the matter shall be set for hearing to commence within 15
business days after receipt of the request. The broker-dealer or
investment adviser may consent to have the hearing commence at a
later date. If no hearing is requested within 30 days after the
mailing or service of the required notice, and none is ordered by the
commissioner, the order may become final without a hearing and the
broker-dealer or investment adviser shall immediately discontinue the
practices named in the order. If a hearing is requested or ordered,
it shall be held in accordance with the provisions of the
11500) of Part 1 of Division 3 of Title 2 of the Government Code),
and the commissioner shall have all of the powers granted under that
act. If, upon the conclusion of the hearing, it appears to the
commissioner that the broker-dealer or investment adviser is
conducting business in an unsafe and injurious manner or is violating
any law of this state, or any rule binding upon it, the commissioner
shall make the order of discontinuance final and the broker-dealer
or investment adviser shall immediately discontinue the practices
named in the order.
(b) The broker-dealer or investment adviser may within 10 days
after an order is made final commence an action to restrain
enforcement of the order. If the enforcement of the order is not
enjoined within 10 days by the court in which the action is brought,
the broker-dealer or investment adviser shall comply with the order.

opportunity for hearing, by orders, levy administrative penalties as
follows:
(a) Any person subject to this division, other than a
broker-dealer or investment adviser, who willfully violates any
provision of this division, or who willfully violates any rule or
order adopted or issued pursuant to this division, is liable for
administrative penalties of not more than one thousand dollars
($1,000) for the first violation, and not more than two thousand five
hundred dollars ($2,500) for each subsequent violation.
(b) Any broker-dealer or investment adviser that willfully
violates any provision of this division to which it is subject, or
that willfully violates any rule or order adopted or issued pursuant
to this division and to which it is subject, is liable for
administrative penalties of not more than five thousand dollars
($5,000) for the first violation, not more than ten thousand dollars
($10,000) for the second violation, and not more than fifteen
thousand dollars ($15,000) for each subsequent violation.
(c) The administrative penalties shall be collected by the
commissioner and paid into the State Corporations Fund.
(d) The administrative penalties available to the commissioner
pursuant to this section are not exclusive, and may be sought and
employed in any combination with civil, criminal, and other
administrative remedies deemed advisable by the commissioner to
enforce the provisions of this division.
25253. (a) Whenever it appears to the commissioner that any of the

conditions specified in subdivision (b) has occurred with respect to
any broker-dealer or investment adviser subject to this division, the
commissioner shall dispatch a written notice demanding remedial
action and a summary of findings, as referred to in Section 25248, to
the principal officer of that broker-dealer or investment adviser or
to its manager of record.
(b) The conditions that require the commissioner to commence
remedial action against a broker-dealer or investment adviser
pursuant to subdivision (a) includes any of the following:
(1) The broker-dealer or investment adviser is in an insolvent
condition.
(2) It is conducting its securities, broker-dealer, or investment
advisory business in an unsafe or unauthorized manner.
(3) It has violated any rule or order adopted or issued pursuant
to this division that is or has been necessary for the protection of
any investor.
(4) It refuses to submit its books, papers, and affairs to the
inspection of any examiner or investigator.
(5) It neglects or refuses to observe any order of the
commissioner made pursuant to this division that is or has been
necessary for the protection of any investor, within the time
specified therein, unless the enforcement of the order is restrained
in a proceeding brought by the broker-dealer or investment adviser.
(6) It has violated any provision of this division or any similar
regulatory scheme of this state or a foreign jurisdiction relating to
the protection of any investor.
(7) Any officer, director, stockholder, or partner of the
broker-dealer or investment adviser, or attorney-in-fact of the
broker-dealer or investment adviser has embezzled, misappropriated,
or willfully diverted the assets or client or trust funds of the
broker-dealer or investment adviser.
(8) It has permitted its capital to be lower than the minimum
required by law, including any rule or order adopted or issued
pursuant to this division.
(9) It has failed to comply with the bonding requirements of
Chapter 2 (commencing with Section 25210) or Chapter 3 (commencing
with Section 25230) of this part.
(c) The broker-dealer or investment adviser shall be afforded a
reasonable opportunity to comply or otherwise effect those remedies
specified in the written notice or any other remedies that the
commissioner may deem acceptable. However, if the broker-dealer or
investment adviser fails to comply within five days of receipt of the
notice, or as soon as it appears to the commissioner that no
compliance is possible, or in the event prompt delivery of the
written notice is impossible, the commissioner may take possession of
the property and business of the broker-dealer or investment adviser
and retain possession until the broker-dealer or investment adviser,
subject to those conditions that the commissioner may prescribe,
resumes its business or its affairs are finally liquidated.
(d) Whenever the commissioner has taken possession of any
broker-dealer or investment adviser, the broker-dealer or investment
adviser, within 10 days after the taking, may apply to the superior
court to enjoin further proceedings in any California county or city
and county in which the California office or offices of the
broker-dealer or investment adviser is located. The court, after
ordering the commissioner to show cause why further proceedings
should not be enjoined and after a hearing and a determination of the
facts upon the merits, may dismiss the application or enjoin the
commissioner from further proceedings and direct the commissioner to
surrender the property and business to the broker-dealer or
investment adviser, or make any further order that may be just.
(e) If any facts occur that would entitle the commissioner under
subdivision (b) to take possession of the property, business, and
assets of a broker-dealer or investment adviser, the commissioner may
appoint a conservator of the broker-dealer or investment adviser and
require the conservator to post a bond. The conservator, under the
direction of the commissioner, shall take possession of the property,
business, and assets of the broker-dealer or investment adviser and
take any action that the conservator deems necessary to conserve the
assets of the broker-dealer or investment adviser pending further
disposition of its business. The conservator shall retain possession
until the property, business, and assets of the broker-dealer or
investment adviser are returned to the broker-dealer or investment
adviser or until further order of the commissioner.
(f) Subject to the other provisions of this section, a
conservator, while in possession of the property, business, and
assets of a broker-dealer or investment adviser, has the same powers
and rights and is subject to the same duties and obligations as the
commissioner while in possession of the property, business, and
assets of a broker-dealer or investment adviser. During that time,
the rights of a broker-dealer or investment adviser and of all
persons with respect thereto, subject to the other provisions of this
section, are the same as if the commissioner had taken possession of
the property, business, and assets. A conservator, while in
possession of the property, business, and assets of a broker-dealer
or investment adviser shall have all the rights, powers, and
privileges of the broker-dealer or investment adviser, its officers
and directors or partners. All expenses of the conservatorship shall
be paid out of the assets of the broker-dealer or investment adviser
and shall be a lien thereon which shall be prior to any other lien.
(g) An investment adviser subject to Section 25230.1 is not
subject to this section, unless that investment adviser or persons
acting on behalf of that investment adviser committed any of the acts
of fraud or deceit set forth in paragraph (7) of subdivision (b).
25254. (a) If the commissioner determines it is in the public

interest, the commissioner may include in any administrative action
brought under this part a claim for ancillary relief, including, but
not limited to, a claim for restitution or disgorgement or damages on
behalf of the persons injured by the act or practice constituting
the subject matter of the action, and the administrative law judge
shall have jurisdiction to award additional relief.
(b) In an administrative action brought under this part, the
commissioner is entitled to recover costs, which in the discretion of
the administrative law judge may include an amount representing
reasonable attorney's fees and investigative expenses for the
services rendered, for deposit into the State Corporations Fund for
the use of the Department of Corporations.
25255. The civil, criminal, and administrative remedies available

to the commissioner pursuant to this division are not exclusive, and
may be sought and employed in any combination deemed advisable by the
commissioner to enforce the provisions of this division.
25256. (a) For any broker-dealer or investment adviser, a

disciplinary action taken by the State of California, another state,
an agency of the federal government, or another country for an action
substantially related to the activity regulated under this division
may be grounds for disciplinary action by the commissioner. A
certified copy of the record of the disciplinary action taken against
the licensee by the State of California, other state, agency of the
federal government, or other country shall be conclusive evidence of
the events related therein.
(b) Nothing in this section precludes the commissioner from
applying a specific statutory provision in this division providing
for discipline against a broker-dealer or investment adviser, as a
result of disciplinary action taken against a broker-dealer or an
investment adviser, by the State of California, another state, an
agency of the federal government, or another country.
CORPORATIONS CODE
SECTION 25300-25302
25300. (a) No person shall publish any advertisement in this state

concerning any security sold or offered for sale in this state unless
a true copy of the advertisement has first been filed in the office
of the commissioner at least three business days prior to the
publication or such shorter period as the commissioner may by rule or
order allow.
(b) Subdivision (a) of this section does not apply to:
(1) Any advertisement for any security published by a licensed
broker-dealer if he or she is not effecting transactions in such
security as an underwriter or other participant in a distribution for
the issuer;
(2) Any advertisement for any security published by an issuer or
any underwriter or other participant in a distribution for the issuer
if the security or transaction is exempted by the provisions of
Chapter 1 (commencing with Section 25100) of Part 2 of this division;
(3) Any advertisement for any security in a nonissuer transaction
if the security is exempted by Section 25100 or an offer of the
security is exempted by subdivision (g) of Section 25104;
(4) Any advertisement permitted or required by Section 5(b)(2) or
Section 2(10)(b) of the Securities Act of 1933 with respect to a
security which has been registered under the Securities Act of 1933
and qualified for sale in this state;
(5) Any advertisement with respect to (A) a security that is
subject to Sections 25100.1 and 25101.1 and the advertisement is
permitted or required under the Securities Act of 1933, (B) a
transaction that is subject to Section 25102.1 and the advertisement
is permitted or required under the Securities Act of 1933, or (C) an
investment adviser that is subject to Section 25230.1 and the
advertisement is permitted or required under the Investment Adviser
Act of 1940; or
(6) Any other advertisement exempted by rule of the commissioner.
25301. All advertisements published by any broker-dealer that are

exempted from filing by paragraph (1) or paragraph (6) of subdivision
(b) of Section 25300 shall be approved prior to use by signature or
initial of an officer, partner, or responsible supervisory official
of the broker-dealer and the signed or initialed copy shall be
retained by the broker-dealer in an appropriate file for a period of
three years, subject to examination by the commissioner.
25302. (a) No person shall publish any advertisement concerning any
security in this state after the commissioner finds that the
advertisement contains any statement that is false or misleading or
omits to make any statement necessary in order to make the statements
made, in the light of the circumstances under which they were made,
not misleading and so notifies the person in writing. Such
notification may be given summarily without notice or hearing. At any
time after the issuance of a notification under this section, the
person desiring to use the advertisement may in writing request that
the order be rescinded. Upon the receipt of such a written request,
the matter shall be set down for hearing to commence within 15
business days after such receipt unless the person making the request
consents to a later date. After such hearing, which shall be
conducted in accordance with the provisions of the Administrative
Division 3 of Title 2 of the Government Code, the commissioner shall
determine whether to affirm and continue or to rescind such order,
and the commissioner shall have all the powers granted under such
act.
(b) This section does not apply to any advertisement for any
security which is subject to the supervision, regulation or
examination of any of the following:
(1) The Insurance Commissioner.
(2) The Commissioner of Financial Institutions.
(3) The Public Utilities Commission.
(4) The Office of Thrift Supervision.
(5) The Comptroller of the Currency of the United States.
(6) The Federal Deposit Insurance Corporation.
(7) The Board of Governors of the Federal Reserve System.
CORPORATIONS CODE
SECTION 25400-25404
25400. It is unlawful for any person, directly or indirectly, in

this state:
(a) For the purpose of creating a false or misleading appearance
of active trading in any security or a false or misleading appearance
with respect to the market for any security, (1) to effect any
transaction in a security which involves no change in the beneficial
ownership thereof, or (2) to enter an order or orders for the
purchase of any security with the knowledge that an order or orders
of substantially the same size, at substantially the same time and at
substantially the same price, for the sale of any such security, has
been or will be entered by or for the same or different parties, or
(3) to enter an order or orders for the sale of any security with the
knowledge that an order or orders of substantially the same size, at
substantially the same time and at substantially the same price, for
the purchase of any such security, has been or will be entered by or
for the same or different parties.
(b) To effect, alone or with one or more other persons, a series
of transactions in any security creating actual or apparent active
trading in such security or raising or depressing the price of such
security, for the purpose of inducing the purchase or sale of such
security by others.
(c) If such person is a broker-dealer or other person selling or
offering for sale or purchasing or offering to purchase the security,
to induce the purchase or sale of any security by the circulation or
dissemination of information to the effect that the price of any
such security will or is likely to rise or fall because of market
operations of any one or more persons conducted for the purpose of
raising or depressing the price of such security.
(d) If such person is a broker-dealer or other person selling or
offering for sale or purchasing or offering to purchase the security,
to make, for the purpose of inducing the purchase or sale of such
security by others, any statement which was, at the time and in the
light of the circumstances under which it was made, false or
misleading with respect to any material fact, or which omitted to
state any material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made,
not misleading, and which he knew or had reasonable ground to believe
was so false or misleading.
(e) For a consideration, received directly or indirectly from a
broker-dealer or other person selling or offering for sale or
purchasing or offering to purchase the security, to induce the
purchase or sale of any security by the circulation or dissemination
of information to the effect that the price of such security will or
is likely to rise or fall because of the market operations of any one
or more persons conducted for the purpose of raising or depressing
the price of such security.
25401. It is unlawful for any person to offer or sell a security in

this state or buy or offer to buy a security in this state by means
of any written or oral communication which includes an untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
25402. It is unlawful for an issuer or any person who is an

officer, director or controlling person of an issuer or any other
person whose relationship to the issuer gives him access, directly or
indirectly, to material information about the issuer not generally
available to the public, to purchase or sell any security of the
issuer in this state at a time when he knows material information
about the issuer gained from such relationship which would
significantly affect the market price of that security and which is
not generally available to the public, and which he knows is not
intended to be so available, unless he has reason to believe that the
person selling to or buying from him is also in possession of the
information.
25403. (a) Every person who with knowledge directly or indirectly

controls and induces any person to violate any provision of this
division or any rule or order thereunder shall be deemed to be in
violation of that provision, rule, or order to the same extent as the
controlled and induced person.
(b) Any person that knowingly provides substantial assistance to
another person in violation of any provision of this division or any
rule or order thereunder shall be deemed to be in violation of that
provision, rule, or order to the same extent as the person to whom
the assistance was provided.
(c) It shall be unlawful for any person directly or indirectly to
do any act or thing which would be unlawful for that person to do
under any provision of this division or any rule or order thereunder
through or by any other person.
(d) Nothing in this section shall be construed to limit the power
of the state to punish any person for any conduct which constitutes a
crime under any other statute.
25404. (a) It is unlawful for any person to knowingly alter,

destroy, mutilate, conceal, cover up, falsify, or make a false entry
in any record, document, or tangible object with the intent to
impede, obstruct, or influence the administration or enforcement of
this division.
(b) It is unlawful for any person to knowingly make an untrue
statement to the commissioner during the course of licensing,
investigation, or examination, with the intent to impede, obstruct,
or influence the administration or enforcement of any provision of
this division.
CORPORATIONS CODE
SECTION 25500-25510
25500. Any person who willfully participates in any act or

transaction in violation of Section 25400 shall be liable to any
other person who purchases or sells any security at a price which was
affected by such act or transaction for the damages sustained by the
latter as a result of such act or transaction. Such damages shall be
the difference between the price at which such other person
purchased or sold securities and the market value which such
securities would have had at the time of his purchase or sale in the
absence of such act or transaction, plus interest at the legal rate.
25501. Any person who violates Section 25401 shall be liable to the
person who purchases a security from him or sells a security to him,
who may sue either for rescission or for damages (if the plaintiff
or the defendant, as the case may be, no longer owns the security),
unless the defendant proves that the plaintiff knew the facts
concerning the untruth or omission or that the defendant exercised
reasonable care and did not know (or if he had exercised reasonable
care would not have known) of the untruth or omission. Upon
rescission, a purchaser may recover the consideration paid for the
security, plus interest at the legal rate, less the amount of any
income received on the security, upon tender of the security. Upon
rescission, a seller may recover the security, upon tender of the
consideration paid for the security plus interest at the legal rate,
less the amount of any income received by the defendant on the
security. Damages recoverable under this section by a purchaser shall
be an amount equal to the difference between (a) the price at which
the security was bought plus interest at the legal rate from the date
of purchase and (b) the value of the security at the time it was
disposed of by the plaintiff plus the amount of any income received
on the security by the plaintiff. Damages recoverable under this
section by a seller shall be an amount equal to the difference
between (1) the value of the security at the time of the filing of
the complaint plus the amount of any income received by the defendant
on the security and (2) the price at which the security was sold
plus interest at the legal rate from the date of sale. Any tender
specified in this section may be made at any time before entry of
judgment.
25501.5. (a) (1) A person who purchases a security from or sells a

security to a broker-dealer that is required to be licensed and has
not, at the time of the sale or purchase, applied for and secured
from the commissioner a certificate under Part 3 (commencing with
Section 25200), that is in effect at the time of the sale or purchase
authorizing that broker-dealer to act in that capacity, may bring an
action for rescission of the sale or purchase or, if the plaintiff
or the defendant no longer owns the security, for damages.
(2) Upon rescission and tender of the security, a purchaser may
recover the consideration paid for the security plus interest at the
legal rate, less the amount of any income received on the security.
(3) Upon rescission and tender of the consideration paid for the
security plus interest at the legal rate, a seller may recover the
security plus the amount of any income received by the defendant on
the security.
(4) Damages recoverable under this section by a purchaser shall be
an amount equal to the difference between the following:
(A) The price at which the security was bought plus interest at
the legal rate from the date of purchase.
(B) The value of the security at the time it was disposed of by
the plaintiff plus the amount of any income received on the security
by the plaintiff.
(5) Damages recoverable under this section by a seller shall be an
amount equal to the difference between the following:
(A) The value of the security at the time of the filing of the
complaint plus the amount of any income received by the defendant on
the security.
(B) The price at which the security was sold plus interest at the
legal rate from the date of sale.
(6) A tender of a security or of consideration paid for a security
plus interest pursuant to this section may be made at any time
before entry of judgment.
(b) The court, in its discretion, may award reasonable attorney's
fees and costs to a prevailing plaintiff under this section.
25502. Any person who violates Section 25402 shall be liable to the
person who purchases a security from him or sells a security to him,
for damages equal to the difference between the price at which such
security was purchased or sold and the market value which such
security would have had at the time of the purchase or sale if the
information known to the defendant had been publicly disseminated
prior to that time and a reasonable time had elapsed for the market
to absorb the information, plus interest at the legal rate, unless
the defendant proves that the plaintiff knew the information or that
the plaintiff would have purchased or sold at the same price even if
the information had been revealed to him.
25502.5. (a) Any person other than the issuer who violates Section
25402 shall be liable to the issuer of the security purchased or sold
in violation of Section 25402 for damages in an amount up to three
times the difference between the price at which the security was
purchased or sold and the market value which the security would have
had at the time of the purchase or sale if the information known to
the defendant had been publicly disseminated prior to that time and a
reasonable time had elapsed for the market to absorb the information
and shall be liable to the issuer of the security or to a person who
institutes an action under this section in the right of the issuer
of the security for reasonable costs and attorney's fees.
(b) The amounts recoverable under this section by the issuer shall
be reduced by any amount paid by the defendant in a proceeding
brought by the Securities and Exchange Commission with respect to the
same transaction or transactions under the federal Insider Trading
Sanctions Act of 1984 (15 U.S.C. Secs. 78a, 78c, 78o, 78t, 78u, and
78ff) or any other act regardless of whether the amount was paid
pursuant to a judgment or settlement or paid before or after the
filing of an action by the plaintiff against the defendant. If a
proceeding has been commenced by the Securities and Exchange
Commission but has not been finally resolved, the court shall delay
entering a judgment for the plaintiff under this section until that
proceeding is resolved.
(c) If any shareholder of an issuer alleges to the board that
there has been a violation of this section, the board shall be
required to consider the allegation in good faith, and if the
allegation involves misconduct by any director, that director shall
not be entitled to vote on any matter involving the allegation.
However, that director may be counted in determining the presence of
a quorum at a meeting of the board or a committee of the board.
(d) This section shall only apply to issuers who have total assets
in excess of one million dollars ($1,000,000) and have a class of
equity security held of record by 500 or more persons.
25503. Any person who violates Section 25110, 25130 or 25133, or a

condition of qualification under Chapter 2 (commencing with Section
25110) of this part, imposed pursuant to Section 25141, or an order
suspending trading issued pursuant to Section 25219, shall be liable
to any person acquiring from him the security sold in violation of
such section, who may sue to recover the consideration he paid for
such security with interest thereon at the legal rate, less the
amount of any income received therefrom, upon the tender of such
security, or for damages, if he no longer owns the security, or if
the consideration given for the security is not capable of being
returned. Damages, if the plaintiff no longer owns the security,
shall be equal to the difference between (a) his purchase price plus
interest at the legal rate from the date of purchase and (b) the
value of the security at the time it was disposed of by the plaintiff
plus the amount of any income received therefrom by the plaintiff.
Damages, if the consideration given for the security is not
capable of being returned, shall be equal to the value of that
consideration plus interest at the legal rate from the date of
purchase, provided the security is tendered; and if the plaintiff no
longer owns the security, damages in such case shall be equal to the
difference between (a) the value of the consideration given for the
security plus interest at the legal rate from the date of purchase
and (b) the value of the security at the time it was disposed of by
the plaintiff plus the amount of any income received therefrom by the
plaintiff. Any person who violates Section 25120 or a condition of
qualification under Chapter 3 (commencing with Section 25120) of this
part imposed pursuant to Section 25141, shall be liable to any
person acquiring from him the security sold in violation of such
section who may sue to recover the difference between (a) the value
of the consideration received by the seller and (b) the value of the
security at the time it was received by the buyer, with interest
thereon at the legal rate from the date of purchase. Any person on
whose behalf an offering is made and any underwriter of the offering,
whether on a best efforts or a firm commitment basis, shall be
jointly and severally liable under this section, but in no event
shall any underwriter (unless such underwriter shall have knowingly
received from the issuer for acting as an underwriter some benefit,
directly or indirectly, in which all other underwriters similarly
situated did not share in proportion to their respective interest in
the underwriting) be liable in any suit or suits authorized under
this section for damages in excess of the total price at which the
securities underwritten by him and distributed to the public were
offered to the public. Any tender specified in this section may be
made at any time before entry of judgment. No person shall be liable
under this section for violation of Section 25110, 25120 or 25130 if
the sale of the security is qualified prior to the payment or receipt
of any part of the consideration for the security sold, even though
an offer to sell or a contract of sale may have been made or entered
into without qualification.
25504. Every person who directly or indirectly controls a person

liable under Section 25501 or 25503, every partner in a firm so
liable, every principal executive officer or director of a
corporation so liable, every person occupying a similar status or
performing similar functions, every employee of a person so liable
who materially aids in the act or transaction constituting the
violation, and every broker-dealer or agent who materially aids in
the act or transaction constituting the violation, are also liable
jointly and severally with and to the same extent as such person,
unless the other person who is so liable had no knowledge of or
reasonable grounds to believe in the existence of the facts by reason
of which the liability is alleged to exist.
25504.1. Any person who materially assists in any violation of

Section 25110, 25120, 25130, 25133, or 25401, or a condition of
qualification under Chapter 2 (commencing with Section 25110) of Part
2 of this division imposed pursuant to Section 25141, or a condition
of qualification under Chapter 3 (commencing with Section 25120) of
Part 2 of this division imposed pursuant to Section 25141, or an
order suspending trading issued pursuant to Section 25219, with
intent to deceive or defraud, is jointly and severally liable with
any other person liable under this chapter for such violation.
25504.2. (a) Any accountant, engineer, appraiser, or other person

whose profession gives authority to a statement made by such person,
who pursuant to rule of the commissioner has given written consent to
be and has been named in any prospectus or offering circular
distributed in connection with the offer or sale of securities as
having prepared or certified in such capacity either any part of such
document or any written report or valuation which is distributed
with or referred to in any such document is jointly and severally
liable with any other person liable under Section 25501 if:
(1) The part of such document so prepared or certified or the
report or valuation so distributed or referred to includes an untrue
statement of a material fact or omits to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; and
(2) The person asserting such liability acquired a security
described in such document in reliance on such untrue statement or in
reliance on such part of the document or on such report or valuation
without notice of such omission.
(b) Notwithstanding the provisions of subdivision (a), no such
accountant, engineer, appraiser, or other person shall be liable as
provided therein if such person sustains the burden of proof that:
(1) Such person had, after reasonable investigation, reasonable
ground to believe and did believe, at the time such person consented
to such use of such person's name, that the statements so included in
such part of such document or in such report or valuation were true
and that there was no omission to state a material fact necessary in
order to make the statements made, in the light of the circumstances
under which they were made, not misleading; or
(2) Such part of such document did not fairly represent such
person's statement as an expert or was not a fair copy of or extract
from such person's report or valuation as an expert; or
(3) Prior to the acquisition of the security by the person
asserting the liability, such accountant, engineer, appraiser, or
other person advised the issuer and the commissioner in writing that
such person would not be responsible for such part of the document or
the report or valuation.
(c) A person who participates in the preparation of a document
described in subdivision (a) of this section shall be deemed to have
prepared or certified only those portions thereof which are expressly
stated with such person's written consent to have been made on such
person's authority.
25505. A corporation which is liable under this chapter shall have

a right of indemnification against any of its principal executive
officers, directors, and controlling persons whose willful violation
of any provision of this law gave rise to such liability. All persons
liable under this chapter shall have a right of contribution against
all other persons similarly liable, based upon each person's
proportionate share of the total liability, except that no person
whose willful violation of any provision of this law has given rise
to any liability shall have any right of contribution against any
other person guilty merely of a negligent violation, and except that
no principal executive officer, director, or controlling person whose
willful violation has given rise to any liability shall have any
right of contribution against the corporation to which he sustains
that relationship.
25506. (a) For proceedings commencing before January 1, 2005, no

action shall be maintained to enforce any liability created under
Section 25500, 25501, or 25502 (or Section 25504 or Section 25504.1
insofar as they related to those sections) unless brought before the
expiration of four years after the act or transaction constituting
the violation or the expiration of one year after the discovery by
the plaintiff of the facts constituting the violation, whichever
shall first expire.
(b) For proceedings commencing on or after January 1, 2005, no
action shall be maintained to enforce any liability created under
Section 25500, 25501, or 25502 (or Section 25504 or Section 25504.1
insofar as they related to those sections) unless brought before the
expiration of five years after the act or transaction constituting
the violation or the expiration of two years after the discovery by
the plaintiff of the facts constituting the violation, whichever
shall first expire.
25506.1. No action shall be maintained to enforce any liability

created under Section 25504.2 unless brought within one year after
the discovery of the facts constituting the violation, or after such
discovery should have been made by the exercise of reasonable
diligence. In no event shall any such action be brought more than
three years after the act or transaction constituting the violation.
25507. (a) No action shall be maintained to enforce any liability

created under Section 25503 (or Section 25504 or Section 25504.1
insofar as they relate to that section) unless brought before the
expiration of two years after the violation upon which it is based or
the expiration of one year after the discovery by the plaintiff of
the facts constituting such violation, whichever shall first expire.
(b) No buyer may commence an action under Section 25503 (or
Section 25504 or Section 25504.1 insofar as they relate to that
section) if, before suit is commenced, such buyer shall have received
a written offer approved as to form by the commissioner (1) stating
the respect in which liability under such section may have arisen,
(2) offering to repurchase the security for a cash price payable upon
delivery of the security or offering to pay the buyer an amount in
cash equal in either case to the amount recoverable by the buyer in
accordance with Section 25503, or, offering to rescind the
transaction by putting the parties back in the same position as
before the transaction, (3) providing that such offer may be accepted
by the buyer at any time within a specified period of not less than
30 days after the date of receipt thereof unless rejected earlier
during such period by the buyer, (4) setting forth the provisions of
this subdivision (b), and (5) containing such other information as
the commissioner may require by rule or order, and such buyer shall
have failed to accept such offer in writing within the specified
period after receipt thereof.
(c) The commissioner may by rule or order impose as a condition to
approval of an offer under subdivision (b) of this section, if the
commissioner finds such action is necessary and appropriate for the
protection of investors, conditions requiring:
(1) That equivalent and concurrent offers be made to all investors
as to whom liability may have arisen and still exists under Section
25503 (or Section 25504 or Section 25504.1 insofar as they relate to
that section) in connection with the distribution or transaction;
(2) That the offer be made subject to a condition voiding such
offer if the issuer, by reason of acceptances, is disabled from
commencing or continuing business;
(3) That the offer be made within a specified period after
approval thereof by the commissioner;
(4) If the consideration paid by the offeree was other than
monetary or if the offer is of rescission, and if the offer is
rejected by the offeree on the ground that it does not accord him the
damages payable under Section 25503 or that the rescission offered
does not place the parties back in the same position as before the
transaction, that an offer so rejected shall not bar the commencement
of an action by the offeree under Section 25503 (or Section 25504 or
Section 25504.1 insofar as they relate to that section); or
(5) That the offeror file a report or reports with the
commissioner containing such information as he may require concerning
the making of the offer, its acceptance or rejection, and compliance
with its terms and conditions or with conditions imposed under this
subdivision.
(d) Each person who files a repurchase offer with the commissioner
pursuant to subdivision (b) shall file with the commissioner, in
such form as the commissioner by rule prescribes, an irrevocable
consent appointing the commissioner or the commissioner's successor
in office to be such person's attorney to receive service of any
lawful process in any noncriminal suit, action or proceeding against
such person or such person's successor, executor or administrator,
which arises under this law or any rule or order hereunder after the
consent has been filed, with the same force and validity as if served
personally on the person filing the consent. A person who has filed
such a consent in connection with a qualification under this law (or
application for a permit under any prior law if the application under
this law states that such consent is still effective) need not file
another. Service may be made by leaving a copy of the process in the
office of the commissioner but it is not effective unless (1) the
plaintiff, who may be the commissioner in a suit, action or
proceeding instituted by him, forthwith sends notice of the service
and a copy of the process by registered or certified mail to the
defendant or respondent at such person's last address on file with
the commissioner, and (2) the plaintiff's affidavit of compliance
with this section is filed in the case on or before the return day of
the process, if any, or within such further time as the court
allows.
25508. No action shall be maintained to enforce any right of

indemnification or contribution created by Section 25505 unless
brought before the expiration of one year after final judgment based
upon the liability for which the right of indemnification or
contribution exists.
25508.5. In addition to any other rights provided for under this
division, including, but not limited to, Sections 25501 and 25506, or
otherwise, a person who purchases a viatical or life settlement
contract or a fractionalized or pooled interest therein may rescind
or cancel the purchase for any reason. The person may rescind or
cancel the purchase at any time before seven calendar days after the
date the person remits the required consideration to the issuer or
the issuer's agent by giving written notice of rescission or
cancellation to the issuer or the issuer's agent. No specific form is
required for the rescission or cancellation. The notice is effective
when personally delivered, deposited in the United States mail, or
deposited with a commercial courier or delivery service. The issuer
shall refund all the person's money within seven calendar days after
receiving the notice of rescission or cancellation.
25509. Every cause of action under this chapter survives the death
of any person who might have been a plaintiff or defendant.
25510. Except as explicitly provided in this chapter, no civil

liability in favor of any private party shall arise against any
person by implication from or as a result of the violation of any
provision of this law or any rule or order hereunder. Nothing in this
chapter shall limit any liability which may exist by virture of any
other statute or under common law if this law were not in effect.
CORPORATIONS CODE
SECTION 25530-25536
25530. (a) Whenever it appears to the commissioner that any person

has engaged or is about to engage in any act or practice constituting
a violation of any provision of this division or any rule or order
hereunder, the commissioner may in the commissioner's discretion
bring an action in the name of the people of the State of California
in the superior court to enjoin the acts or practices or to enforce
compliance with this law or any rule or order hereunder. Upon a
proper showing, a permanent or preliminary injunction, restraining
order, or writ of mandate shall be granted and a receiver, monitor,
conservator, or other designated fiduciary or officer of the court
may be appointed for the defendant or the defendant's assets, or any
other ancillary relief may be granted as appropriate.
A receiver, monitor, conservator, or other designated fiduciary or
officer of the court appointed by the superior court pursuant to
this section may, with the approval of the court, exercise any or all
of the powers of the defendant's officers, directors, partners,
trustees or persons who exercise similar powers and perform similar
duties, including the filing of a petition for bankruptcy. No action
at law or in equity may be maintained by any party against the
commissioner, or a receiver, monitor, conservator, or other
designated fiduciary or officer of the court, by reason of their
exercising these powers or performing these duties pursuant to the
order of, or with the approval of, the superior court.
(b) If the commissioner determines it is in the public interest,
the commissioner may include in any action authorized by subdivision
(a) a claim for ancillary relief, including but not limited to, a
claim for restitution or disgorgement or damages on behalf of the
persons injured by the act or practice constituting the subject
matter of the action, and the court shall have jurisdiction to award
additional relief.
(c) In any case in which a defendant is ordered by the court to
pay restitution to a victim, the court may in its order require the
payment as a money judgment, which shall be enforceable by a victim
as if the restitution order were a separate civil judgment, and
enforceable in the same manner as is provided for the enforcement of
any other money judgment. Any order issued under this subdivision
shall contain provisions that are designed to achieve a fair and
orderly satisfaction of the judgment.
25530.1. In any proceeding under Section 25530, the court may

prohibit, conditionally or unconditionally, and permanently or for
such period of time as it shall determine, any person who violated
Section 25401 from acting as an officer or director of any issuer
that has securities qualified pursuant to Section 25110, or that has
securities or a transaction exempt from qualification pursuant to
Section 25100, 25102, or 25103, if the person's conduct demonstrates
unfitness to serve as an officer or director of the issuer.
25531. (a) The commissioner in his discretion (1) may make such
public or private investigations within or outside of this state as
he deems necessary to determine whether any person has violated or is
about to violate any provision of this law or any rule or order
hereunder or to aid in the enforcement of this law or in the
prescribing of rules and forms hereunder, and (2) may publish
information concerning any violation of this law or any rule or order
hereunder.
(b) In making any investigation authorized by subdivision (a) of
this section, the commissioner may, for a reasonable time not
exceeding 30 days, take possession of the books, records, accounts
and other papers pertaining to the business of any broker-dealer or
investment adviser and place a keeper in exclusive charge of them in
the place where they are usually kept. During such possession no
person shall remove or attempt to remove any of the books, records,
accounts, or other papers except pursuant to a court order or with
the consent of the commissioner; but the directors, officers,
partners, and employees of the broker-dealer or investment adviser
may examine them, and employees shall be permitted to make entries
therein reflecting current transactions.
(c) For the purpose of any investigation or proceeding under this
law, the commissioner or any officer designated by him may administer
oaths and affirmations, subpoena witnesses, compel their attendance,
take evidence, and require the production of any books, papers,
correspondence, memoranda, agreements, or other documents or records
which the commissioner deems relevant or material to the inquiry.
(d) In case of contumacy by, or refusal to obey a subpoena issued
commissioner, may issue to the person an order requiring him to
appear before the commissioner, or the officer designated by him,
there to produce documentary evidence, if so ordered, or to give
evidence touching the matter under investigation or in question.
as a contempt.
(e) No person is excused from attending and testifying or from
producing any document or record before the commissioner, or in
designated by him, or in any proceeding instituted by the
commissioner, on the ground that the testimony or evidence
(documentary or otherwise) required of him may tend to incriminate
him or subject him to a penalty or forfeiture; but no individual may
be prosecuted or subjected to any penalty or forfeiture for or on
account of any transaction, matter, or thing concerning which he is
compelled, after validly claiming his privilege against
self-incrimination, to testify or produce evidence (documentary or
otherwise), except that the individual testifying is not exempt from
prosecution and punishment for perjury or contempt committed in
testifying.
25532. (a) If, in the opinion of the commissioner, (1) the sale of
a security is subject to qualification under this law and it is being
or has been offered or sold without first being qualified, the
commissioner may order the issuer or offeror of the security to
desist and refrain from the further offer or sale of the security
until qualification has been made under this law or (2) the sale of a
security is subject to the requirements of Section 25100.1, 25101.1,
or 25102.1 and the security is being or has been offered or sold
without first meeting the requirements of those sections, the
commissioner may order the issuer or offeror of that security to
desist and refrain from the further offer or sale of the security
until those requirements have been met.
(b) If, in the opinion of the commissioner, a person has been or
is acting as a broker-dealer or investment adviser, or has been or is
engaging in broker-dealer or investment adviser activities, in
violation of Section 25210, 25230, or 25230.1, the commissioner may
order that person to desist and refrain from the activity until the
person has been appropriately licensed or the required filing has
been made under this law.
(c) If, in the opinion of the commissioner, a person has violated
or is violating Section 25401, the commissioner may order that person
to desist and refrain from the violation.
(d) If, after an order has been served under subdivision (a), (b),
or (c), a request for hearing is filed in writing within 30 days of
the date of service of the order by the person to whom the order was
directed, a hearing shall be held in accordance with provisions of
the Administrative Procedure Act, Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code, and
the commissioner shall have all of the powers granted under that
chapter. Unless the hearing is commenced within 15 business days
after the request is filed (or the person affected consents to a
later date), the order is rescinded.
If that person fails to file a written request for a hearing
within 30 days from the date of service of the order, the order shall
be deemed a final order of the commissioner and is not subject to
review by any court or agency, notwithstanding Section 25609.
25533. The commissioner may refer any evidence available concerning

any violation of this law or of any rule or order hereunder to the
Attorney General or the district attorney of the county in which the
violation occurred, who may, with or without this type of a
reference, institute appropriate criminal proceedings under this law.
The commissioner and his or her counsel, deputies, or assistants
may, upon request of the Attorney General or the district attorney,
assist the prosecuting attorney in presenting the law or facts at the
trial.
25533.5. The commissioner shall send a copy of a desist and refrain

order issued under this law to the Attorney General and the district
attorney of the county in which the person who is the subject of the
order resides or maintains a principal place of business. There
shall be no liability on the part of, and no cause of action of any
nature shall arise against, the State of California, the department
and its employees, the commissioner, the members of the commissioner'
s staff, or the commissioner's authorized representatives for the
failure to provide to the Attorney General or the district attorney a
copy of the order as required by this section.
25534. Whenever any securities are issued which the commissioner

determines were offered or sold in violation of Section 25110, 25120,
or 25130, the commissioner may, by written order to the issuer and
notice to the holders of such securities, require certificates
evidencing such securities to have stamped or printed prominently on
their face a legend, in the form prescribed by rule of the
commissioner, restricting the transfer of such securities. Upon
receipt of the order, the issuer shall stamp or print such legend
prominently on the face of all outstanding certificates subject to
the order. If, after such order or notice has been given, a request
for a hearing is filed in writing by the person or persons to whom
such order or notice was addressed, a hearing shall be held in
accordance with the provisions of the Administrative Procedure Act,
Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of
Title 2 of the Government Code, and the commissioner shall have all
the powers granted thereunder; unless such hearing is commenced
within 15 business days after the request for hearing is received by
the commissioner (or the person or persons affected and the issuer
consent to a later date), such order and notice are rescinded.
25535. (a) Any person who violates any provision of this law, or
who violates any rule or order under this law, shall be liable for a
civil penalty not to exceed twenty-five thousand dollars ($25,000)
for each violation, which shall be assessed and recovered in a civil
action brought in the name of the people of the State of California
by the commissioner in any court of competent jurisdiction.
(b) As applied to the penalties for acts in violation of this
division, the remedies provided by this section and by other sections
of this division are not exclusive, and may be sought and employed
in any combination to enforce the provisions of this division.
(c) No action shall be maintained to enforce any liability created
under subdivision (a) unless brought before the expiration of four
years after the act or transaction constituting the violation.
25536. (a) The commissioner may take such actions as are authorized
by Section 6d of the federal Commodity Exchange Act (7 U.S.C. Sec. 1
et seq.) as amended before or after the effective date of this
section.
(b) Nothing in this section shall be construed as a limitation on
the powers of the commissioner under this division or any other law
administered by the commissioner.
CORPORATIONS CODE
SECTION 25540-25542
25540. (a) Except as provided for in subdivision (b), any person

who willfully violates any provision of this division, or who
willfully violates any rule or order under this division, shall upon
conviction be fined not more than one million dollars ($1,000,000),
or imprisoned in the state prison, or in a county jail for not more
than one year, or be punished by both that fine and imprisonment; but
no person may be imprisoned for the violation of any rule or order
if he or she proves that he or she had no knowledge of the rule or
order.
(b) Any person who willfully violates Section 25400, 25401, or
25402, or who willfully violates any rule or order under this
division adopted pursuant to those provisions, shall upon conviction
be fined not more than ten million dollars ($10,000,000), or
imprisoned in the state prison for two, three, or five years, or be
punished by both that fine and imprisonment.
(c) Any issuer, as defined in Section 2 of the Sarbanes-Oxley Act
of 2002 (Public Law 107-204), who willfully violates Section 25400,
25401, or 25402, or who willfully violates any rule or order under
this division adopted pursuant to those provisions, shall upon
conviction be fined not more than twenty-five million dollars
($25,000,000), or imprisoned in the state prison for two, three, or
five years, or be punished by both that fine and imprisonment.
25541. (a) Any person who willfully employs, directly or

indirectly, any device, scheme, or artifice to defraud in connection
with the offer, purchase, or sale of any security or willfully
engages, directly or indirectly, in any act, practice, or course of
business which operates or would operate as a fraud or deceit upon
any person in connection with the offer, purchase, or sale of any
security shall upon conviction be fined not more than ten million
dollars ($10,000,000), or imprisoned in the state prison for two,
three, or five years, or be punished by both that fine and
imprisonment.
(b) Any issuer, as defined in Section 2 of the Sarbanes-Oxley Act
of 2002 (Public Law 107-204), who willfully violates subdivision (a)
shall upon conviction be fined not more than twenty-five million
dollars ($25,000,000), or imprisoned in the state prison for two,
three, or five years, or be punished by both that fine and
imprisonment.
25542. Nothing in this law limits the power of the state to punish
any person for any conduct which constitutes a crime under any other
statute.
CORPORATIONS CODE
SECTION 25550
25550. When any person, including any nonresident of this state,

engages in conduct prohibited or made actionable by this law or any
rule or order hereunder, whether or not he has filed a consent to
service of process under subdivision (h) of Section 25102, Section
25165, or Section 25240, and personal jurisdiction over him cannot
otherwise be obtained in this state, that conduct shall be considered
equivalent to his appointment of the commissioner or his successor
in office to be his attorney to receive service of any lawful process
in any noncriminal suit, action, or proceeding against him or his
successor, executor, or administrator which grows out of that conduct
and which is brought under this law or any rule or order hereunder,
with the same force and validity as if served on him personally.
Service may be made by leaving a copy of the process in the office of
the commissioner, but it is not effective unless (a) the plaintiff,
who may be the commissioner in a suit, action, or proceeding
instituted by him, forthwith sends notice of the service and a copy
of the process by registered or certified mail to the defendant or
respondent at his last known address or takes other steps which are
reasonably calculated to give actual notice, and (b) the plaintiff's
affidavit of compliance with this section is filed in the case on or
before the return day of the process, if any, or within such further
time as the court allows.
CORPORATIONS CODE
SECTION 25600-25620
25600. There is in the state government, in the Business and

Transportation Agency a Department of Corporations, which shall
administer the provisions of this division. The chief officer of the
Department of Corporations is the Commissioner of Corporations. The
commissioner shall be appointed by the Governor and shall hold office
at the pleasure of the Governor. He or she shall receive an annual
salary as fixed in the Government Code. Within 15 days from the time
of his or her appointment the commissioner shall take and subscribe
to the constitutional oath of office and file it in the office of the
Secretary of State.
Whenever the term "Division of Corporations" is used in the law,
it means the Department of Corporations.
25601. The commissioner shall have his principal office in the City
of Sacramento, and may establish branch offices in the City and
County of San Francisco, in the City of Los Angeles and in the City
of San Diego. The commissioner shall from time to time obtain the
necessary furniture, stationery, fuel, light, and other proper
conveniences for the transaction of the business of the Department of
Corporations.
25602. In accordance with the laws governing the state civil

service, the commissioner shall employ and, with the approval of the
Department of Finance, fix the compensation of such personnel as the
commissioner needs to discharge properly the duties imposed upon the
commissioner by law, including legal counsel to act as the attorney
for the commissioner in actions or proceedings brought by or against
the commissioner under or pursuant to any provision of any law under
the commissioner's jurisdiction, or in which the commissioner joins
or intervenes as to a matter within the commissioner's jurisdiction,
as a friend of the court or otherwise, and stenographic reporters to
take and transcribe the testimony in any formal hearing or
investigation before the commissioner or before a person authorized
by the commissioner. The personnel of the Department of Corporations
shall perform such duties as the commissioner assigns to them. Such
employees as the commissioner designates by rule or order shall,
within 15 days after their appointments, take and subscribe to the
constitutional oath of office and file it in the office of the
Secretary of State.
25603. The commissioner shall adopt a seal bearing the inscription:

"Commissioner of Corporations, State of California." The seal shall
be affixed to or imprinted on all orders and certificates issued by
him and such other instruments as he directs. All courts shall take
judicial notice of this seal.
25604. The administration and enforcement of, and the education of

the public relative to, the laws and programs of the Department of
Corporations shall be supported from the State Corporations Fund.
Funds appropriated from the State Corporations Fund and made
available for expenditure for any law or program of the department
may come from fees collected from the following:
(a) Section 25608, except for fees collected pursuant to
subdivisions (o) to (r), inclusive, of Section 25608.
(b) Section 25608.1.
25605. (a) The commissioner may publish any information filed with
him or obtained by him, if, in the judgment of the commissioner, such
action is in the public interest. No provision of this law
authorizes the commissioner or any of his assistants, clerks, or
deputies to disclose any information withheld from public inspection
except among themselves or when necessary or appropriate in a
proceeding or investigation under this law or to other federal or
state regulatory agencies. No provision of this law either creates or
derogates from any privilege which exists at common law or otherwise
when documentary or other evidence is sought under a subpoena
directed to the commissioner or any of his assistants, clerks, or
deputies.
(b) It is unlawful for the commissioner or any of his assistants,
clerks, or deputies to use for personal benefit any information which
is filed with or obtained by the commissioner and which is not then
generally available to the public.
25606. (a) The Attorney General shall render to the commissioner

opinions upon all questions of law, relating to the construction or
interpretation of any law under the commissioner's jurisdiction or
arising in the administration thereof, that may be submitted to the
Attorney General by the commissioner, and upon the commissioner's
request shall act as the attorney for the commissioner in actions and
proceedings brought by or against the commissioner under or pursuant
to any provision of any law under the commissioner's jurisdiction.
(b) Sections 11041, 11042 and 11043 of the Government Code do not
apply to the Commissioner of Corporations.
25607. (a) Neither the commissioner nor any of the commissioner's

assistants, clerks, or deputies shall be interested as a director,
officer, shareholder, member (other than a member of an organization
formed for religious purposes), partner, agent, or employee of any
person who, during the period of the official's or employee's
association with the Department of Corporations, (1) was licensed or
applied for license as a broker-dealer or investment adviser under
this division, or (2) applied for or secured the qualification of the
sale of securities under this division.
(b) Nothing contained in subdivision (a) shall prohibit the
holding or purchasing of any securities by any assistant, clerk, or
deputy in accordance with rules as the commissioner shall adopt for
the purpose of protecting the public interest and avoiding conflicts
of interest.
(c) Nothing contained in subdivision (a) shall prohibit the
holding or purchasing of any securities by the commissioner if any of
the following criteria is met:
(1) The securities held or purchased by the commissioner are
exempt from the qualification requirements of Sections 25110, 25120,
and 25130 by virtue of Section 25100, provided that the holding or
purchasing of those securities is in accordance with rules adopted
for the purpose of protecting the public interest and avoiding
conflicts of interest.
(2) The securities held or purchased by the commissioner are not
subject to Sections 25110, 25120, and 25130 by virtue of Section
25100.1, provided that the holding or purchasing of those securities
is in accordance with rules adopted for the purpose of protecting the
public interest and avoiding conflicts of interest.
(3) The holding or purchasing of any securities by the
commissioner meets each of the following requirements:
(A) The securities are held or purchased through a management
account or trust administered by a bank or trust company authorized
to do business in this state, and the bank or trust company has sole
investment discretion regarding the holding, purchase, and sale of
securities.
(B) The commissioner did not, directly or indirectly, advise,
counsel, command, or suggest the holding, purchase, or sale of any
security or furnish any information relating to the security to the
bank or trust company.
(C) The account or trust does not at any time have more than 10
percent of its total assets invested in the securities of any one
issuer or hold more than 5 percent of the outstanding shares or units
of any class of securities of any one issuer.
(D) The commissioner shall report to the Attorney General not less
often than quarterly all holdings, purchases, and sales of
securities by him or her as authorized in paragraph (3), which
reports shall be retained by the Attorney General as public
documents.
25608. (a) The commissioner shall charge and collect the fees fixed
in this section and Section 25608.1. All fees charged and collected
under this section and Section 25608.1 shall be transmitted to the
Treasurer at least weekly, accompanied by a detailed statement
thereof and shall be credited to the State Corporations Fund.
(b) The fee for filing an application for a negotiating permit
under subdivision (c) of Section 25102 is fifty dollars ($50).
(c) The fee for filing a notice pursuant to paragraph (5) of
subdivision (h) of Section 25102 and the fee for filing a notice
pursuant to paragraph (4) of subdivision (f) of Section 25102, in
addition to the fee prescribed in those paragraphs, if applicable,
shall be determined based on the value of the securities proposed to
be sold in the transaction for which the notice is filed and in
accordance with subdivision (g), and shall be as follows:
Value of
Securities
Proposed to be Sold Filing Fee
$25,000 or less $ 25
$25,001 to $100,000 $ 35
$100,001 to $500,000 $ 50
$500,001 to $1,000,000 $150
Over $1,000,000 $300
(d) The fee for filing an application for designation of an issuer

pursuant to subdivision (k) of Section 25100 is fifty dollars ($50).
(e) The fee for filing an application for qualification of the
sale of securities by notification under Section 25112 or by permit
under paragraph (1) of subdivision (b) of Section 25113 (except
applications for qualification by permit of the sale of any guarantee
of any security, the fees for which applications are fixed in
subdivision (k)) is two hundred dollars ($200) plus one-fifth of 1
percent of the aggregate value of the securities sought to be sold in
this state up to a maximum aggregate fee of two thousand five
hundred dollars ($2,500).
The fee for filing a small company application for qualification
of the sale of securities by permit under paragraph (2) of
subdivision (b) of Section 25113 is two thousand five hundred dollars
($2,500). In the case where the costs of processing a small company
application exceed the filing fee, an additional fee shall be
charged, not to exceed one thousand dollars ($1,000), over and above
the filing fee based on the costs of the salary or other compensation
paid to persons processing the application plus overhead costs
reasonably incurred in the performance of the work. In determining
the costs, the commissioner may use the estimated average hourly cost
for all persons processing applications for the fiscal year.
(f) The fee for filing an application for qualification of the
sale of securities by coordination under Section 25111 or a notice of
intention to sell under subdivision (t) of Section 25100 is two
hundred dollars ($200) plus one-fifth of 1 percent of the aggregate
value of the securities sought to be sold in this state up to a
maximum aggregate fee of two thousand five hundred dollars ($2,500).
(g) For the purpose of determining the fees fixed in subdivisions
(e) and (f):
(1) The value of the securities shall be the price at which the
company proposes to sell the securities, or the value, as alleged in
the application, or the actual value, as determined by the
commissioner, of the consideration (if other than money) to be
received in exchange therefor, or of the securities when sold,
whichever is greater.
(2) Interim or voting trust certificates shall have a value equal
to the aggregate value of the securities to be represented by the
interim or voting trust certificates.
(3) The value of a warrant or right to purchase or subscribe to
another security of the same or another issuer shall be an amount
equal to the consideration to be paid for that warrant or right plus
an amount equal to the consideration to be paid upon purchase of the
additional securities, provided that if the latter amount is not
determinable at the time of qualification, that amount shall then be
the value of the additional securities as determined by the
commissioner.
(4) In the case of a share dividend where the shareholders are
given an option to accept either cash or additional shares of common
stock, the value of the securities to be sold shall be the maximum
amount of cash that would be payable in the event that all
shareholders elected to accept cash.
(h) The fee for filing an application for qualification of the
sale of securities by permit under Section 25121 is:
(1) Two hundred dollars ($200) in connection with any change
(including any stock split or reverse stock split or stock dividend,
except a stock dividend where the shareholders are given an option to
accept either cash or additional shares of common stock) in the
rights, preferences, privileges, or restrictions of or on outstanding
securities.
(2) Two hundred dollars ($200) plus one-fifth of 1 percent of the
value, as alleged in the application, or the actual value, as
determined by the commissioner, of the consideration to be received
in exchange therefor, up to a maximum aggregate fee of two thousand
five hundred dollars ($2,500), in any exchange of securities by the
issuer with its existing security holders exclusively, or in any
exchange in connection with any merger or consolidation or purchase
of corporate assets in consideration of the issuance of securities,
or any entity conversion transaction.
(i) The fee for filing an application for qualification of the
sale of securities by notification under Section 25131 shall be one
hundred dollars ($100).
(j) The fee for an application for the removal of any condition
under Section 25141 is fifty dollars ($50).
(k) The fee for filing any application for a permit to execute or
issue any guarantee of any security is fifty dollars ($50).
(l) The fee for acting as escrowholder for securities under
Section 25149 is fifty dollars ($50). In addition, a fee of two
dollars and fifty cents ($2.50) shall be paid for the deposit with
the commissioner of each new certificate or other document resulting
from a transfer in escrow.
(m) The fee for filing an application for an order (1) consenting
to the transfer in escrow of securities or (2) consenting to the
transfer of securities subject to any condition imposed by the
commissioner requiring the commissioner's consent to the transfer is
twenty dollars ($20) for each transfer.
(n) The filing fee for an amendment to an application filed after
the effective date of the qualification of the sale of securities is
fifty dollars ($50) plus any additional fee that would have been
required to be paid with the original application for qualification
of the sale of securities under this section if the matters set forth
in the amendment had been included in the original application.
(o) (1) The fee for filing an application for a broker-dealer
certificate under Section 25211 is three hundred dollars ($300).
(2) Each broker-dealer shall pay to the commissioner its pro rata
share of all costs and expenses, reasonably incurred in the
administration of the broker-dealer program under this division, as
estimated by the commissioner for the ensuing year and any deficit
actually incurred or anticipated in the administration of the program
in the year in which the assessment is made. The pro rata share
shall be the proportion that the broker-dealer and the number of its
agents in this state bears to the aggregate number of broker-dealers
and agents in this state as shown by records maintained by or on
behalf of the commissioner. The pro rata share may include the costs
of any examinations, audit, or investigation provided for in
subdivision (r).
(3) Every broker-dealer who has secured from the commissioner a
certificate shall, in order to keep the certificate in effect for an
additional period, pay a minimum assessment of seventy-five dollars
($75) on or before the 31st of December in each year.
(4) The commissioner may assess and levy against each
broker-dealer any additional amount above the minimum assessment
amount of seventy-five dollars ($75) that is reasonable and necessary
to support the broker-dealer program under this division. If an
additional amount is assessed, the commissioner shall notify each
broker-dealer by mail of any additional amount assessed and levied
against it on or before the 30th day of May in each year, and that
amount shall be paid within 20 days thereafter. If payment is not
made within 20 days, the commissioner shall assess and collect a
penalty in addition to the assessment of 1 percent of the assessment
for each month or part of a month that the payment is delayed or
withheld.
(5) If a broker-dealer fails to pay any assessment on or before
the 30th day of the month following the day upon which payment is
due, the commissioner may by order summarily suspend or revoke the
certificate issued to the broker-dealer. If, after that order is
made, a request for hearing is filed in writing and a hearing is not
held within 60 days thereafter, the order is deemed rescinded as of
its effective date. During any period when its certificate is revoked
or suspended, a broker-dealer shall not conduct business pursuant to
this division except as may be permitted by order of the
commissioner; provided, however, that the revocation, suspension, or
surrender of a certificate shall not affect the powers of the
commissioner as provided under this division.
(6) In determining the amount assessed, the commissioner shall
consider all appropriations from the State Corporations Fund for the
support of the broker-dealer program under this division and all
reimbursements applicable to the administration of the broker-dealer
program under this division.
(p) The commissioner shall charge a fee of twenty-five dollars
($25) for the filing of a notice or report required by rule adopted
pursuant to subdivision (b) of Section 25210 or subdivision (b) of
Section 25230.
(q) (1) Except as provided for in paragraph (2), the fee for
filing an application for an investment adviser under Section 25231
is one hundred twenty-five dollars ($125), and payment of this amount
shall keep the certificate, if granted, in effect during the
calendar year during which it is granted. Every investment adviser
who has secured from the commissioner a certificate shall, in order
to keep the certificate in effect for an additional period, pay a
renewal fee of one hundred twenty-five dollars ($125) on or before
the 31st day of December.
(2) Paragraph (1) shall not apply to a broker-dealer licensed
under Section 25210.
(r) (1) Except as provided for in paragraph (2), the fee for any
routine or nonroutine regulatory examination, audit, or investigation
is the amount of the salary or other compensation paid to the
persons making the examination, audit, or investigation plus the
amount of expenses including overhead reasonably incurred in the
performance of the work. In determining the costs associated with an
examination, audit, or investigation, the commissioner may use the
estimated average hourly cost for all persons performing
examinations, audits, or investigations for the fiscal year.
(2) An investment adviser licensed under Section 25230 pursuant to
the Investment Adviser Registration Depository shall not be subject
to paragraph (1) only in regard to the fee for a routine regulatory
examination of its investment advisory services for which it is
licensed under Section 25230.
(s) The fee for any hearing held by the commissioner pursuant to
Section 25142 shall be the sum determined by the commissioner to
cover the actual expense of noticing and holding the hearing.
(t) The commissioner may fix by rule a reasonable charge for any
publications issued under his or her authority. The charges shall not
apply to reports of the commissioner in the ordinary course of
distribution.
(u) The fee for filing an offer under subdivision (b) of Section
25507 shall be the amount of filing fee payable under subdivision
(e), (f), (h), or (i) of this section if an application had been
filed to qualify the transaction in which the securities upon which
the offer is to be made were sold in violation of the qualification
provisions of this law.
(v) The fee for filing an application for exemption pursuant to
subdivision (l) of Section 25100 is two hundred fifty dollars ($250).
(w) The commissioner may by rule require payment of a fee for
filing a notice or report required by a rule adopted pursuant to
Section 25105. The fee required in connection with a transaction as
defined by that rule shall not exceed the fees specified in
subdivision (c) based on the value of the securities sold, but the
commissioner may permit a single notice for more than one
transaction.
(x) The fee for filing the first notice of transaction under
subdivision (n) of Section 25102 is six hundred dollars ($600).
(y) The fee for filing a notice of transaction under subdivision
(o) of Section 25102 shall be the fee for filing an application for
qualification of the sale of securities by permit under paragraph (1)
of subdivision (b) of Section 25113 as set forth in subdivision (e)
of this section.
(z) The fee for filing a notice of transaction under subdivision
(h) of Section 25103 shall be six hundred dollars ($600).
25608.1. (a) The fee for an investment company filing a notice

pursuant to subdivision (b) of Section 25100.1 is two hundred dollars
($200) plus one-fifth of 1 percent of the aggregate value of the
securities sought to be sold in this state up to a maximum aggregate
fee of two thousand five hundred dollars ($2,500).
(b) The fee for an issuer filing a notice pursuant to subdivision
(a) of Section 25102.1 is six hundred dollars ($600).
(c) The fee for an issuer filing a notice pursuant to subdivision
(d) of Section 25102.1 is three hundred dollars ($300).
(d) The fee for an investment adviser filing a notice pursuant to
subdivision (b) of Section 25230.1 is one hundred twenty-five dollars
($125) and the fee for filing a notice or report required by rule
adopted pursuant to subdivision (c) of Section 25230.1 is twenty-five
dollars ($25).
25608.2. Commencing July 1, 2000, the fee provisions of subdivision

(c) of Section 25608, as they apply to the fee for filing a notice
pursuant to paragraph (4) of subdivision (f) of Section 25102, and
the fee provisions of subdivisions (a), (b), and (c) of Section
25608.1, shall be the maximum fees that may be levied on a notice
filing under subdivision (b) of Section 25100.1, subdivision (f) of
Section 25102, and subdivisions (a), (c), and (d) of Section 25102.1.
The commissioner, however, may set the notice filing fee under
subdivision (c) of Section 25608, as it relates to a notice filing
under subdivision (f) of Section 25102, and the notice filing fees
under subdivisions (a), (b), and (c) of Section 25608.1, at amounts
below the maximum fees set forth in those sections. The commissioner
shall set the notice filing fees under those sections for the
upcoming fiscal year on or about June 1 of each year. If the
commissioner fails to set the notice filing fees for the upcoming
fiscal year, then the filing fees shall be the maximum fees that may
be levied under those sections for the upcoming fiscal year.
25608.3. (a) Notwithstanding Sections 25608 and 25608.1, the

commissioner may set any fee under those sections at an amount below
the maximum fee set forth in those sections. The commissioner shall
set the fee for the upcoming fiscal year on or about June 1 of each
year, except that for the six-month period of January 1, 2002,
through June 30, 2002, and for the 2002-03 fiscal year, the
commissioner, on January 1, 2002, shall, in a reasonable and prudent
manner, reduce any fee under Sections 25608 and 25608.1 by an amount
below the maximum fee set forth in those sections. For the fiscal
year commencing on July 1, 2003, and thereafter, the commissioner
shall establish the level of fees adequate to cover anticipated
costs, including the maintenance of a prudent reserve, but not to
exceed the maximum fees that may be levied under Sections 25608 and
25608.1. If, for the fiscal year commencing on July 1, 2003, or
thereafter, the commissioner fails to set the fee for the upcoming
fiscal year on or before June 1, then the fee for the next fiscal
year shall be the fee that was in effect for the current fiscal year.
(b) In carrying out this section, the commissioner shall reduce or
suspend fees to achieve no more than a 25-percent fund balance in
the State Corporations Fund by June 30, 2007, and thereafter.
(c) The department shall report by February 1, 2002, to the Chair
of the Joint Legislative Budget Committee and the chairs of the
budget committees on the fees to be reduced and the projected revenue
and fund balance impact on the State Corporations Fund through the
2006-07 fiscal year. Each year from 2002 through 2007, the department
shall submit a status update report by November 1 on the fees
reduced, the revenue and fund balance impact in the prior fiscal
year, and the projected revenue and fund balance impact through the
2006-07 fiscal year.
25609. Every final order, decision, license, or other official act

of the commissioner is subject to judicial review in accordance with
law.
25610. The commissioner may from time to time make, amend and
rescind such rules, forms, and orders as are necessary to carry out
the provisions of this law, including rules and forms governing
applications and reports, and defining any terms, whether or not used
in this law, insofar as the definitions are not inconsistent with
the provisions of this law. For the purpose of rules and forms, the
commissioner may classify securities, persons, and matters within his
jurisdiction, and may prescribe different requirements for different
classes. The commissioner may in his discretion waive any
requirement of any rule or form in situations where in his opinion
such requirement is not necessary in the public interest or for the
protection of investors.
25611. The commissioner may prepare and make available to

interested persons lists of persons whose securities are qualified
for trading purposes in this state, are exempt from qualification, or
are not subject to qualification as the commissioner may determine
to be necessary or desirable, and the commissioner may make
reasonable charges for those lists to defray the expenses of
preparation and dissemination.
25612. No rule, form or order may be made, amended, or rescinded

unless the commissioner finds that the action is necessary or
appropriate in the public interest or for the protection of investors
and consistent with the purposes fairly intended by the policy and
provisions of this law.
25612.3. Unless otherwise provided by rule, the commissioner shall
require the use of the following forms:
(a) Form BD (Uniform Application for Broker-Dealer Registration)
for a broker-dealer application.
(b) Form ADV (Uniform Application for Investment Adviser
Registration) for an investment adviser application.
(c) Form BDW (Uniform Request for Broker-Dealer Withdrawal) for
withdrawing from licensure as a broker-dealer.
(d) Form ADV-W (Notice of Withdrawal from Registration as
Investment Adviser) for withdrawing from licensure as an investment
adviser.
(e) Form U-4 (Uniform Application for Securities Industry
Registration or Transfer) for the reporting of an agent of a
broker-dealer or an investment adviser representative or associated
person of an investment adviser.
(f) Form U-5 (Uniform Termination Notice for Securities Industry
Registration) for the reporting of the termination of an agent of a
broker-dealer or an investment adviser representative or associated
person of an investment adviser.
25612.5. (a) To encourage uniform interpretation and administration

of this law and the Franchise Investment Law (Division 5 (commencing
with Section 31000)) and effective securities and franchise
regulation and enforcement, the commissioner may cooperate with the
securities agencies or administrators of one or more states, Canadian
provinces or territories, or other countries, the Securities and
Exchange Commission, the Commodity Futures Trading Commission, the
Securities Investor Protection Corporation, any self-regulatory
organization, any national or international organization or
securities officials or agencies, and any governmental law
enforcement or regulatory agency.
(b) The cooperation authorized by subdivision (a) includes, but is
not limited to, the following actions:
(1) Prescribing rules and forms with a view to achieving maximum
uniformity in the form and content of registration statements,
applications, and reports wherever practicable.
(2) Participating in a nationwide central depository for
qualification or registration of securities under this law and for
documents or records required or allowed to be maintained under this
law.
(3) Participating in the Central Registration Depository, or any
successor or alternative nationwide or regional depository, for the
registering, certifying, or licensing of broker-dealers or agents, or
both.
(4) Participating in the Investment Adviser Registration
Depository, or any successor or alternative nationwide or regional
depository, for the registering, certifying, or licensing of
investment advisers or investment adviser representatives, or both.
(5) Cooperating in any regulatory activity necessary in the
administration of the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of
2001 (Public Law 107-56; USA Patriot Act), consistent with state
law.
(c) Notwithstanding any other provision of law, any application
for qualification, amendment to the application or related securities
qualification or registration document or notice under Sections
25100.1, 25101.1, 25102, 25102.1, 25110, 25120, 25130, and 25230.1 or
record otherwise required to be signed that is filed in this state
as an electronic record pursuant to a nationwide central depository
for qualification or registration of securities, or any electronic
record filed through the Central Registration Depository or the
Investment Adviser Registration Depository, shall be deemed to be a
valid original document upon reproduction to paper form by the
Department of Corporations.
(d) For purposes of this section, "electronic record" has the same
meaning as in subdivision (g) of Section 1633.2 of the Civil Code.
25613. The commissioner may by rule or order prescribe (1) the form
and content of financial statements required under this law, (2) the
circumstances under which consolidated financial statements shall be
filed, and (3) the circumstances under which financial statements
shall be audited by independent certified public accountants or
public accountants.
25614. All rules of the commissioner (other than those relating

solely to the internal administration of the Department of
Corporations) shall be made, amended or rescinded in accordance with
the provisions of the Administrative Procedure Act, Chapter 4
the Government Code. Rules may be adopted prior to the effective
date of this law to become effective upon its effective date.
25615. A document is filed when it is received by the commissioner;

but no qualification of the sale of securities shall become
effective until the appropriate fee has been paid.
25616. The commissioner shall keep an index of all qualifications

which are or have ever been effective, all denial, suspension, or
revocation orders which have been entered and all permits and
certificates which have been issued by him under this law.
25617. Upon request and at such reasonable charges as he prescribes

by rule, the commissioner shall furnish to any person photostatic or
other copies (certified under his seal of office if requested) of
any document which is retained as a matter of public record, except
that he shall not charge or collect any fee for photostatic or other
copies of any document furnished to public officers for use in their
official capacity. In any judicial proceeding or prosecution, any
copy so certified is prima facie evidence of the contents of the
document certified.
25618. The commissioner in his discretion may honor requests from
interested persons for interpretive opinions.
25619. (a) The commissioner may destroy any applications, notices,

orders, permits, and revoked or surrendered certificates, together
with the files and folders, as useless or obsolete, four years after
the date of filing or issuance, with the approval of the Department
of General Services; provided, that a permanent record shall be
maintained of any disciplinary action taken by the commissioner.
(b) When acting as escrow holder for securities, the commissioner
may destroy any certificates evidencing securities of any corporation
which has been dissolved or whose charter has been suspended for a
period of not less than two years for nonpayment of taxes or
penalties and may destroy any other records pertaining to the escrow
of the securities destroyed, and he or she shall have no further
liability or accountability therefor; provided, that the commissioner
shall maintain a permanent record containing such information as he
or she may by rule prescribe relating to the certificates and records
so destroyed.
(c) Copies on microfilm or in other form which may be retained by
the commissioner in his discretion of any records destroyed under
this section shall be accepted for all purposes as equivalent to the
original when certified by the commissioner.
25620. (a) Notwithstanding any other provision of law, the

commissioner may by rule or order prescribe circumstances under which
to accept electronic records or electronic signatures. However,
nothing in this section requires the commissioner to accept
electronic records or electronic signatures.
(b) For purposes of this section, the following terms have the
following meanings:
(1) "Electronic record" means a record created, generated, sent,
communicated, received, or stored by electronic means, and includes a
record transmitted by means of facsimile machine or other telephone
transceiving equipment.
(2) "Electronic signature" means an electronic sound, symbol, or
process attached to or logically associated with an electronic record
and executed or adopted by a person with the intent to sign the
electronic record.
(c) The Legislature hereby finds and declares that the Department
of Corporations has continuously implemented methods to file records
electronically, including broker-dealer and investment adviser
applications, and is encouraged to continue to expand its use of
electronic filings to the extent feasible, as budget, resources, and
equipment are made available to accomplish that goal.
CORPORATIONS CODE
SECTION 25700-25707
25700. No provision of this law imposing any liability applies to
any act done or omitted in good faith in conformity with any rule,
form, permit, order, or written interpretive opinion of the
commissioner, or any such opinion of the Attorney General,
notwithstanding that the rule, form, permit, order, or written
interpretive opinion may later be amended or rescinded or be
determined by judicial or other authority to be invalid for any
reason.
25701. Any condition, stipulation or provision purporting to bind

any person acquiring any security to waive compliance with any
provision of this law or any rule or order hereunder is void.
25702. Whenever a person is entitled under this law to a hearing in

accordance with the provisions of the Administrative Procedure Act,
Title 2 of the Government Code, a formal hearing before the
Department of Corporations may be substituted with the consent of
such person and of the commissioner for such hearing before an
independent hearing officer; and in that case after such hearing
before the Department of Corporations such person shall not be
entitled to any further administrative remedy.
25703. If any provision of this law or the application thereof to

any person or circumstance is held invalid, the invalidity shall not
affect other provisions or applications of this law which can be
this end the provisions of this law are declared to be severable.
25704. (a) Except as expressly provided in this section, prior law

exclusively governs all suits, actions, prosecutions or proceedings
which are pending or may be initiated on the basis of facts or
circumstances occurring before the effective date of this law.
(b) No civil suit or action may be maintained to enforce any
liability or to establish that any securities are void under prior
law unless brought within any period of limitation which applied when
the cause of action accrued and, in any event, within three years
after the effective date of this law.
(c) All effective permits, certificates, orders, consents, and
registrations under prior law, all administrative orders relating to
the same and all conditions imposed upon the same remain in effect so
long as they would have remained in effect if this law had not been
enacted. They are considered to have been filed, entered, or imposed
under this law, but are governed by prior law. Certificates dated as
of January 1, 1969, may be issued by the commissioner after the
effective date of this law pursuant to applications filed prior
thereto and shall be considered to have been issued under the prior
law. Applications for permits filed prior to January 1, 1969, may
subsequently be processed without amendment if they comply with prior
law, but thereafter shall be otherwise governed by this law.
(d) Judicial review of all administrative orders as to which
review proceedings have not been instituted by the effective date of
this law are governed by Section 25609, except that no review
proceeding may be instituted unless the petition is filed within any
period of limitation which applied to a review proceeding when the
order was entered.
25705. All references to "the Corporate Securities Law" in any code

or statute of the State of California shall hereafter be deemed to
be references to the Corporate Securities Law of 1968.
25706. (a) All effective permits, orders, and consents under the
Real Estate Syndicate Act, all administrative orders relating to the
Real Estate Syndicate Act, and all conditions imposed upon the Real
Estate Syndicate Act remain in effect so long as they would have
remained in effect if such act had not been repealed, but shall be
considered to have been filed, entered, or imposed under this law. An
application to amend, extend, modify, revoke, or set aside any such
permits, orders, or consents shall be filed under and be subject to
the provisions of this division.
(b) Any application pending under the Real Estate Syndicate Act,
upon the effective date of this section, shall be processed by the
Real Estate Commissioner pursuant to the provisions of the Real
Estate Syndicate Act in effect on December 31, 1977, until such
application is granted or denied by such commissioner.
(c) Except as expressly provided by this section, the Real Estate
Syndicate Act continues to govern all suits, actions, prosecutions,
or proceedings which are pending prior to, or which may be initiated
thereunder on the basis of facts or circumstances occurring prior to,
the effective date of this section.
(d) No civil suit or action may be maintained to enforce any
liability under the Real Estate Syndicate Act, unless brought within
any period of limitation which applied the time the cause of action
accrued.
(e) Judicial review of all administrative orders under the Real
Estate Syndicate Act as to which review proceedings have not been
commenced prior to the effective date of this section shall be
governed by Section 25609, except that no review proceeding may be
commenced unless the petition is filed within the applicable period
of limitation which applied to a review proceeding when the order was
issued and except that judicial review of administrative orders of
the Real Estate Commissioner made pursuant to subdivision (b) shall
be governed by the provisions of law applicable to such proceedings
on December 31, 1977.
25707. (a) All permits and orders issued under Article 6

of the Business and Professions Code, and all conditions imposed
pursuant to those provisions, shall remain in effect for the period
of time that they would have remained in effect if those provisions
had not been repealed by the act enacting this section. Following the
repeal of those provisions, the permits, orders, and conditions
shall be deemed to have been issued or imposed under this division.
An application to amend, extend, modify, revoke, or set aside a
permit or order shall be filed under this division and is subject to
this division.
(b) An application pending under Article 6 (commencing with
Section 10237) of Chapter 3 of Part 1 of Division 4 of the Business
and Professions Code, on the effective date of this section, shall be
processed by the Real Estate Commissioner subject to those
provisions as they were in effect on December 31, 1996, until each
application that was pending on the effective date of this section is
granted or denied by the Real Estate Commissioner.
(c) Except as expressly provided by this section, all actions,
prosecutions, or proceedings under Article 6 (commencing with Section
10237) of Chapter 3 of Part 1 of Division 4 of the Business and
Professions Code that are pending prior to the effective date of this
section, or that otherwise could be initiated based on facts or
circumstances occurring prior to the effective date of this section,
shall be governed by those provisions.
(d) No civil action may be brought to enforce any liability under
Article 6 (commencing with Section 10237) of Chapter 3 of Part 1 of
Division 4 of the Business and Professions Code, unless it is brought
within the period of limitations that applied to the action at the
time the action accrued.
(e) Judicial review of orders under Article 6 (commencing with
Section 10237) of Chapter 3 of Part 1 of Division 4 of the Business
and Professions Code that had not commenced prior to the effective
date of this section shall be governed by Section 25609, except that
no review proceeding shall be commenced unless the petition is filed
within the applicable period of limitations that applied to a review
proceeding when the order was issued. Judicial review of an order of
the Real Estate Commissioner made pursuant to subdivision (b) shall
be governed by the provisions of law applicable to those proceedings
on December 31, 1996.
CORPORATIONS CODE
SECTION 27000-27003
27000. Unless the provision or the context otherwise indicates, and

except as expressly otherwise provided in this chapter, words used
in this division have the meanings prescribed in Part 1 (commencing
with Section 25000) of the Corporate Securities Law.
27001. As used in this division "security" includes all of the

things enumerated in Section 25019 and also includes shares, stock,
and investment certificates as defined in the Savings Association
Law.
27002. (a) As used in this division, "individual" includes every

natural person, domestic or foreign private corporation, nonprofit
corporation, unincorporated association, company, partnership of
whatever kind, syndicate, joint stock company, trustee, protective
committee, depositors' league, and other similar organization however
described.
(b) As used in this division, "individual" does not include any of
the following persons:
(1) Any licensed practicing attorney rendering or performing
services in connection with the practice of law.
(2) Any person holding a broker-dealer's or investment adviser's
certificate then in effect issued by the commissioner, rendering or
performing services as such.
(3) Any holder of a permit then in effect, granted by the
commissioner under the Corporate Securities Law, permitting the issue
of certificates of deposit.
(4) Any securities depository as defined in Section 30004 of the
Financial Code, which is licensed under Section 30200 of the
Financial Code or exempted from licensing thereunder by Section 30005
or 30006 of the Financial Code.
(5) Any broker licensed by the Real Estate Commissioner of this
state rendering or performing services with respect to securities, if
the person would not be subject to the broker-dealer certification
requirements for effecting transactions in the securities.
(6) Any security owner or holder who, without compensation of any
kind, induces or attempts to induce, other security holders or owners
of the same issuer into entering into agreements with persons who
are excluded from "individual" by virtue of paragraphs (1) to (5),
inclusive.
27003. If any provision of this division, or the application

thereof to any person or circumstance, is held invalid, the remainder
of this division, or the application of such provision to other
persons or circumstances, shall not be affected thereby.
CORPORATIONS CODE
SECTION 27100-27101
27100. Any individual who, within this state, solicits, receives,

collects, or solicits any subscription or contract to pay, any
contributions, fees, funds, or compensation of any kind, from any
owner or holder of any security, for the purpose of protecting,
enforcing, or representing the rights of the security owners or
holders evidenced by the security, shall be subject to the provisions
of this division.
27101. It is unlawful for any individual, directly or indirectly,

in connection with the solicitation, receipt, or collection of, or
solicitation of any subscription or contract to pay any
contributions, fees, funds, or compensation of any kind, from any
owner or holder of any security, for the purpose of protecting,
enforcing, or representing the rights of the security owners or
holders evidenced by the security, to do any of the following:
(a) Employ any device, scheme, or artifice to defraud.
(b) By means of any written or oral communication, make any untrue
statement of a material fact, or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading.
(c) Engage in any transaction, act, practice, or course of
business which operates or would operate as a fraud or deceit upon
any person.
(d) Misappropriate or convert the funds, security, or property of
any other person.
CORPORATIONS CODE
SECTION 27200-27202
27200. Every individual who solicits, receives, collects, or

contracts for the payment of, any contributions, fees, funds, or
compensation of any kind, in violation of this division, is civilly
liable for the return of the full amount of that contribution, fee,
or fund, together with reasonable attorney's fees. This liability is
both joint and several.
27201. No action shall be maintained to enforce any liability

created under Section 27200 unless brought before the expiration of
two years after the violation upon which it is based or the
expiration of one year after the discovery by the plaintiff of the
facts constituting the violation, whichever shall first expire.
27202. Every individual who willfully violates Section 27101 is

guilty of a public offense punishable by a fine not exceeding two
hundred fifty thousand dollars ($250,000), or by imprisonment in the
state prison for two, three, or four years, or by both fine and
imprisonment.
CORPORATIONS CODE
SECTION 28000-28004

"Capital Access Company Law."
28001. This division shall be liberally construed to accomplish its

purposes.
28002. The provisions of the Corporate Securities Law of 1968
(Division 1 (commencing with Section 25000) of Title 4) shall apply
to licensees.
28003. The Legislature finds all of the following:

(a) It is necessary to increase job opportunities in the state.
(b) Promoting the establishment, growth, and expansion of small
business firms in this state is an efficient way to increase job
opportunities in the state.
(c) Small business firms are unable to grow and create job
opportunities unless they have access to risk capital.
(d) Congress has exempted from the provisions of the federal
Investment Company Act of 1940, certain companies that are not in the
business of issuing redeemable securities, the operations of which
are subject to state regulation governing entities that provide
financial or managerial assistance to enterprises doing business, or
proposing to do business, in that state.
(e) Therefore, in order for the state to obtain the full benefits
of that exemption, it is necessary that the state provide for the
licensure and regulation of capital access companies, to permit these
companies to operate pursuant to the exemption from regulation under
the federal Investment Company Act of 1940.
28004. (a) The purpose of this division is to provide for the

licensure and regulation of capital access companies that will
provide risk capital and management assistance, primarily to small
business firms in the state, to enable those companies to operate
pursuant to the exemption from regulation under the federal
Investment Company Act of 1940.
(b) The purpose of this division as set forth in subdivision (a)
constitutes the standard that the commissioner shall observe in
administering the provisions of this division.
CORPORATIONS CODE
SECTION 28030-28049
28030. Subject to additional definitions contained in this division

which are applicable to specific provisions of this division, and
unless the context otherwise requires, the definitions in this
article apply throughout this division.
28031. "Accredited investor" means a person who is defined in

Section 2(a)(15) of the Securities Act of 1933, or any other person
that the Securities and Exchange Commission may so designate by rule,
regulation, or order, who, by purchasing the securities of a
licensee, provides the investment funds with which the licensee will
provide financial assistance to small business firms.
28032. "Affiliate" means any person or persons controlling,
controlled by, or under common control with, other specified persons.
28033. "Commissioner" means the Commissioner of Corporations or his

or her designee with respect to a particular matter.
28034. "Company" means a corporation, limited partnership, limited

liability company, or other form of business entity, which is
organized under the laws of the State of California.
28035. "Control" means the possession, direct or indirect, of the

power to direct or cause the direction of the management and policies
of a specified person.
28036. "Controlling person," when used with respect to a specified

person, means any person who controls the specified person, directly
or indirectly, through one or more intermediaries.
28037. "Insolvent," when used with respect to any person, means a

person who has ceased to pay his or her debts in the ordinary course
of business, who cannot pay his or her debts as they become due, or
whose liabilities exceed his or her assets.
28038. "License" means a license issued under this division

authorizing a licensee to transact business as a capital access
company.
28039. "Licensee" means a company that is licensed under this

division.
28040. "Officer" means either of the following:

(a) When used with respect to a corporation, any person appointed
or designated as an officer of the corporation by or pursuant to
applicable law or the articles of incorporation or bylaws of the
corporation or any person who performs with respect to the
corporation functions usually performed by an officer of a
corporation.
(b) When used with respect to a specified person other than a
natural person or a corporation, any person who performs with respect
to the specified person functions usually performed by an officer of
a corporation with respect to the corporation.
28041. "Order" means any approval, consent, authorization,
exemption, denial, prohibition, or requirement applicable to a
specific case issued by the commissioner. "Order" includes any
condition of a license and any agreement made by any person with the
commissioner under this division.
28042. "Parent," when used with respect to a specified person other

than a natural person, means any person other than a natural person
that controls the specified person, directly or indirectly, through
one or more intermediaries.
28043. "Person" means any natural person, proprietorship, joint

venture, partnership, trust, business trust, syndicate, association,
joint stock company, corporation, limited liability company,
government, agency of any government, or any other organization.
However, "person," when used with respect to acquiring control of or
controlling a specified person, includes any combination of two or
more persons acting in concert.
28044. "Principal security holder," means any person who owns,

directly or indirectly, of record or beneficially, securities
representing 10 percent or more of the voting power of the issuer of
those securities.
28045. "To provide financing assistance to a person" means to

purchase securities issued by the person, either directly from the
person, or indirectly through a securities underwriter.
28046. "Security" has the meaning set forth in Section 25019.
28047. "Small business firm" means a person that proposes to

transact, or transacts, business on a regular and continuous basis in
California and, together with its affiliates, has a net worth of not
more than eighteen million dollars ($18,000,000) and average net
income after federal income taxes, excluding any carryover losses,
for the preceding two years no greater than six million dollars
($6,000,000).
28047.1. "Smaller business firm" means a person that proposes to

transact, or transacts, business on a regular and continuous basis in
California and, together with its affiliates, has a net worth of not
more than six million dollars ($6,000,000), and average net income
after federal income taxes, excluding any carryover losses, for the
preceding two years no greater than two million dollars ($2,000,000).
28048. "Subsidiary," when used with respect to a specified person
other than a natural person, means any person other than a natural
person controlled by the specified person, directly or indirectly,
through one or more intermediaries.
28049. "Voting power" has the meaning set forth in Section 194.5.
CORPORATIONS CODE
SECTION 28100-28111
28100. The commissioner shall administer and enforce the provisions

of this division in a manner that facilitates the legislative
purposes set forth in Section 28004, consistent with protection of
investors.
28101. Whenever the commissioner issues an order or license under

this division, the commissioner may impose any conditions that are in
his or her opinion necessary to carry out the provisions and
purposes of this division.
28102. Any application filed with the commissioner under this

division or under any regulation or order issued under this division
shall be in a form, shall contain information, shall be signed in a
manner, and shall be verified in a manner, that the commissioner may
by regulation or order require.
28103. In determining whether to approve any application filed

under this division or under any regulation or order issued under
this division, the commissioner may consider proposals made by the
applicant, including, but not limited to, proposals to appoint
officers, sell securities, obtain financing, or purchase securities
of small business firms, and, if in the opinion of the commissioner
it is probable that the applicant will be able to implement the
proposal, the commissioner may make findings on the basis of the
proposal. However, whenever the commissioner approves an application
on the basis, in whole or in part, of a proposal made by the
applicant, the commissioner shall impose upon the approval
appropriate conditions requiring that the applicant implement the
proposal within a period of time specified by the commissioner.
28104. (a) The commissioner may do both of the following:

(1) Make public or private investigations within or outside this
state that he or she deems necessary to determine whether to approve
any application filed under this division or under any regulation or
order issued under this division, to determine whether any person has
violated or may violate any provision of this division or of any
regulation or order issued under this division, to aid in the
enforcement of any provision of this division or of any regulation or
order issued under this division, or to aid in the issuing of
regulations or orders under this division.
(2) Publish information concerning any violation of any provision
of this division or of any regulation or order issued under this
division.
(b) For purposes of any investigation, examination, or other
proceeding under this division, the commissioner may administer oaths
and affirmations, subpoena witnesses, compel their attendance, take
evidence, and require the production of any books, papers,
that the commissioner deems relevant or material to the inquiry.
(c) In case of contumacy by, or refusal to obey a subpoena issued
commissioner, may issue to the person an order requiring him or her
to appear before the commissioner, and to produce documentary
evidence, if so ordered, or to give evidence relevant to the matter
under investigation or in question. Failure to obey the order of the
court may be punished by the court as a contempt.
28105. The commissioner may provide information relating to a

licensee or any parent or subsidiary of the licensee to, or receive
information relating to a licensee or any parent or subsidiary of the
licensee from, any governmental agency.
28106. If the commissioner permits any licensee, any affiliate of

the licensee, or any governmental agency to inspect or make copies of
any record relating to the licensee or to any director, officer,
employee, or affiliate of the licensee, or if the commissioner
provides the record, or a copy thereof, to any of those persons,
Sections 6254 and 6255 of the Government Code shall continue to apply
to the record to the extent that these sections applied to the
record prior to that action by the commissioner.
28107. The commissioner may refer any evidence available concerning

any violation of this division or of any regulation or order issued
under this division that constitutes a crime to the district attorney
of the county in which the violation occurred, who may, with or
without that reference, institute appropriate criminal proceedings.
28108. Before any applicant for a license is issued a license, the

applicant and each parent and subsidiary of the applicant shall file,
and each person that becomes a parent or subsidiary of a licensee
shall file, not less than 30 days after becoming a parent or
subsidiary of the licensee, with the commissioner, in the form the
commissioner may by regulation or order require, an irrevocable
consent appointing the commissioner to be the person's
attorney-in-fact to receive service of any lawful process in any
noncriminal judicial or administrative proceeding against the person,
or the person's successor, executor, or administrator, which arises
this division after the consent has been filed, with the same force
and validity as if served personally on the person. Service may be
made by leaving a copy of the process at any office of the
commissioner, but the service is not effective unless (a) the party
making the service, who may be the commissioner, forthwith sends
notice of the service and a copy of the process by registered or
certified mail to the person served at the person's last address on
file with the commissioner, and (b) an affidavit of compliance with
this section by the party making service is filed on or before the
return date, if any, or within that further time as the court, in the
case of a judicial proceeding, or the administrative agency, in the
case of an administrative proceeding, allows.
28109. Whenever any person, including any nonresident of this

state, engages in conduct prohibited or made actionable by this
division or by any regulation or order issued under this division,
whether or not the person has filed a consent to service of process
under Section 28108, and if personal jurisdiction over the person
cannot otherwise be obtained in this state, that conduct shall be
considered equivalent to the person's appointment of the commissioner
to be the person's attorney-in-fact to receive service of any lawful
process in any noncriminal judicial or administrative proceeding
against the person or the person's successor, executor, or
administrator, which grows out of that conduct and which is brought
this division, with the same force and validity as if served on the
person personally. Service may be made by leaving a copy of the
process in any office of the commissioner, but the service is not
effective unless (a) the party making the service, who may be the
commissioner, forthwith sends notice of the service and a copy of the
process by registered or certified mail to the person served at the
person's last known address or takes other steps which are reasonably
calculated to give actual notice, and (b) an affidavit of compliance
with this section by the party making service is filed in the case
on or before the return date, if any, or within that further time as
the court, in the case of a judicial proceeding, or the
administrative agency, in the case of an administrative proceeding,
allows.
28110. (a) Fees shall be paid to, and collected by, the
commissioner, as follows:
(1) The fee for filing with the commissioner an application for a
license shall be no greater than two thousand dollars ($2,000).
(2) The fee for filing with the commissioner an application for
approval to acquire control of a licensee shall be no greater than
one thousand dollars ($1,000).
(3) The fee for filing with the commissioner an application for
approval for a licensee to merge with another company, an application
for approval for a licensee to purchase all or substantially all of
the business of another person, or an application for approval for a
licensee to sell all or substantially all of its business or of the
business of any of its offices to another licensee, shall be no
greater than one thousand dollars ($1,000). However, whenever two or
more applications relating to the same merger, purchase, or sale are
filed with the commissioner, the fee for filing each application
shall be the quotient determined by dividing one thousand dollars
($1,000) by the number of the applications.
(4) Whenever the commissioner examines, audits, or investigates
any licensee or any affiliate of a licensee, that licensee shall pay,
within 10 days after receipt of a statement from the commissioner, a
fee that equals the amount of the salary or other compensation paid
to the persons making the examination, audit, or investigation plus
the amount of expenses, including overhead, reasonably incurred in
the performance of the work. The licensee shall be given a
preliminary estimate of the fee before the commissioner commences an
examination, audit, or investigation. In determining the costs
associated with an examination, audit, or investigation, the
commissioner may use the estimated average hourly cost for all
departmental persons performing examinations, audits, or
investigations for the fiscal year.
(b) (1) Each fee for filing an application with the commissioner
shall be paid at the time the application is filed with the
commissioner.
(2) No fee for filing an application with the commissioner shall
be refundable, regardless of whether the application is approved,
denied, withdrawn, or abandoned.
(c) All fees charged and collected under this section shall be
transmitted to the Treasurer at least weekly, accompanied by a
detailed statement therefor, and shall be credited to the State
Corporations Fund.
28111. (a) If a licensee becomes licensed as a small business

investment company and is subject to regulation by the Small Business
Administration under the federal Small Business Investment Act of
1958, the commissioner may by rule or order provide that a licensee
in compliance with those federal regulations shall be deemed to be in
compliance with the regulatory requirements under this division
except those provisions required to exempt licensees from regulation
under the federal Investment Company Act of 1940, and the provisions
of Chapter 8 (commencing with Section 28550), Chapter 9 (commencing
with Section 28600), Chapter 10 (commencing with Section 28650),
Chapter 11 (commencing with Section 28700), Chapter 12 (commencing
with Section 28800), Chapter 13 (commencing with Section 28900), and
Chapter 14 (commencing with Section 28950).
(b) A violation by a licensee of any regulation promulgated by the
Small Business Administration that the commissioner has by rule or
order deemed to be consistent with the regulatory requirements under
this division shall constitute a violation of this division. The
commissioner shall have all of the powers granted in this division to
enforce those federal regulations against a licensee.
CORPORATIONS CODE
SECTION 28150-28155
28150. (a) Except as provided in subdivision (b), no person

proposing to transact or transacting business in this state, other
than a licensee, shall use any name or title that indicates that it
is a capital access company or otherwise represent that it is a
capital access company or that it is a licensee.
(b) Any company that proposes to apply for a license or that has
applied for a license, may, before being issued a license, use a name
or title that indicates that it is a capital access company if it
meets all of the following requirements:
(1) The company appends to the name the designation "proposed,"
"in organization," or "in formation," or any similar designation that
the commissioner may approve. The designation shall be set forth at
least as conspicuously as the name or title.
(2) The company performs only those acts that may be necessary to
(A) apply for and obtain the license and (B) prepare to commence
transacting business as a licensee.
(3) The company does not represent that it is a licensee.
28151. No person other than a person who meets the definition of a

licensee may be issued a license under this division.
28152. If the commissioner finds all of the following with respect

to an application for a license, the commissioner shall approve the
application:
(a) That the applicant has a tangible net worth, exclusive of the
funds to invest under subdivision (b), in an amount that is not less
than two hundred fifty thousand dollars ($250,000) and that the
tangible net worth is adequate for the applicant to transact business
as a capital access company.
(b) That the applicant has funds to invest in an amount that is
not less than five million dollars ($5,000,000).
(c) That the applicant has, in addition to the requirements of
subdivisions (a) and (b), financial resources in an amount that is
adequate for the applicant to pay its expenses in transacting
business as a capital access company for a period of not less than
three years from the date of licensure.
(d) That the directors, officers, and controlling persons of the
applicant are each of good character and sound financial standing,
that the directors and officers of the applicant are each competent
to perform their functions with respect to the applicant, and that
the directors and officers of the applicant are collectively adequate
to manage the business of the applicant as a capital access company.
For purposes of this subdivision, the commissioner shall accord
weight to the prior or current successful operation of a commercial
or investment enterprise.
(e) That none of the following persons are subject to any act or
omission enumerated in subdivision (a), (e), (f), or (g) of Section
25212, or has been convicted of, or pled nolo contendere to, any
offense or been held liable in any civil action specified in
subdivision (b) of Section 25212, or is enjoined from any act,
conduct, or practice specified in subdivision (c) of Section 25212,
or is subject to any order specified in subdivision (d) of Section
25212:
(1) A person who is or will be a controlling person of the
applicant.
(2) A person who makes or will make recommendations with respect
to the investment of funds of the applicant.
(3) A person who is or will be a partner, principal executive
officer, manager, or director of the applicant.
(4) A person who occupies or will occupy a similar status or who
performs or will perform similar functions to those listed above in
paragraphs (1) to (3), inclusive.
(5) An employee who materially aids or assists or will materially
aid or assist in the applicant's investment-related functions.
(6) A broker-dealer or agent who materially aids or assists or
will materially aid or assist in the sale or distribution of any
securities of the applicant.
(f) That it is reasonable to believe that the applicant, if
licensed, will comply with the provisions of Section 6(a)(5) of the
Investment Company Act of 1940, the applicable provisions of the
Corporate Securities Law of 1968, this division, and of any
regulation adopted or order issued under this division.
If, after notice and a hearing, the commissioner finds otherwise,
the commissioner shall deny the application.
28153. (a) For purposes of Section 28152, the commissioner may

find:
(1) That a director, officer, or controlling person of an
applicant is not of good character if the director, officer, or
controlling person or any director or officer of the controlling
person has been convicted of, or has pleaded nolo contendere to, a
crime involving fraud or dishonesty.
(2) That it is not reasonable to believe that an applicant, if
licensed, will comply with all applicable provisions of this division
and of any regulation or order issued under this division if the
applicant has been convicted of, or has pleaded nolo contendere to, a
crime involving fraud or dishonesty.
(b) Subdivision (a) shall not be deemed to be the only grounds
upon which the commissioner may find, for purposes of Section 28152,
that a director, officer, or controlling person of an applicant is
not of good character or that it is not reasonable to believe that an
applicant, if licensed, will comply with all applicable provisions
of the Investment Company Act of 1940, the Corporate Securities Law
of 1968, this division, and of any regulation or order issued under
this division.
28154. Except pursuant to Section 28551, no license shall be

transferable or assignable.
28155. No licensee shall represent that it is sponsored,

recommended, or approved by, or that its abilities or qualifications
have in any respect been passed upon by, the commissioner. No
licensee shall advertise, print, display, publish, distribute, or
broadcast, or cause or permit to be advertised, printed, displayed,
published, distributed, or broadcast in any manner, any statement or
representation with regard to the business subject to the provisions
of this division that is false, misleading, or deceptive, or that
omits material information that is necessary to make the statements
not false, misleading, or deceptive, or in the case of a licensee,
that refers to the supervision of business by the state or any
department or official of the state. Nothing in this section shall be
deemed to prohibit a licensee from stating that it is licensed if
the effect of such license is not misrepresented.
CORPORATIONS CODE
SECTION 28200-28201
28200. The organizational documents of the licensee shall include

the following statement:
(a) The activities of the licensee are limited to the promotion of
economic, business, or industrial development in the State of
California through the provision of financial or managerial
assistance primarily to small business firms and to other activities
that are incidental or necessary to carry out that purpose.
(b) The licensee will not engage in the business of issuing
redeemable securities.
(c) The security holders of the licensee are limited, on a
class-by-class basis, to persons who reside in the State of
California, or who have a substantial business presence in the State
of California, and who hold not less than 80 percent of the licensee'
s securities.
(d) The securities of the licensee will be sold solely to
accredited investors (Section 28031) and the licensee will not
purchase any securities issued by an investment company as defined in
Section 3 of the Investment Company Act of 1940 or issued by any
company that would be an investment company except for the exclusions
from that definition under paragraph (1) or (7) of Section 3(a) of
that act, other than (1) any debt security that is rated investment
grade by not less than one nationally recognized statistical rating
organization or (2) any security issued by a registered open-end
investment company that is required by its investment policies to
invest not less than 65 percent of its total assets in securities
described in paragraph (1) or securities that are determined by that
registered open-end investment company to be comparable in quality to
securities described in paragraph (1).
(e) The licensee will engage in the transaction of business
pursuant to the exemption from registration under the Investment
Company Act of 1940 afforded to economic, business, and industrial
development companies as provided for by Section 6(a)(5) of the
Investment Company Act of 1940, as amended (15 U.S.C. Sec. 80a-6(a)),
and a license pursuant to the Capital Access Company Law (Division 3
(commencing with Section 28000)).
(f) The investment of funds by the licensee will be limited by and
subject to the provisions of Section 6(a)(5) of the Investment
Company Act of 1940, the Corporate Securities Law of 1968, and the
Capital Access Company Law.
28201. No licensee shall, except by prior written notice to the
commissioner, transact business under any name other than its
corporate name.
CORPORATIONS CODE
SECTION 28210-28212
28210. Each licensee shall have a board of directors, executive

committee, or other policy body, which shall consist of not less than
three members.
28211. The board of directors, executive committee, or other policy

body of each licensee shall hold a meeting not less frequently than
once each calendar year.
28212. The board of directors, executive committee, or other policy

body of each licensee shall approve the contract to be entered into
between the licensee and any person who will make recommendations
with respect to the investment of funds of the licensee.
CORPORATIONS CODE
SECTION 28320
28320. (a) No licensee shall relocate its head office without prior
written notice to the commissioner.
(b) No licensee shall establish, relocate, or close any office
(other than its head office) unless it files a notice with the
commissioner not less than two business days after taking the action.
CORPORATIONS CODE
SECTION 28400-28405
28400. No licensee shall engage in any business other than the

following:
(a) The business of providing financing assistance through the
purchase of securities of small business firms or smaller business
firms doing business or proposing to do business wholly or
substantially in this state.
(b) The business of providing managerial assistance (including
managerial and technical assistance) to small business firms or
smaller business firms doing business or proposing to do business
wholly or substantially in this state.
(c) At least 20 percent of all financing assistance provided by
the licensee shall be through purchase of securities of smaller
business firms doing business or proposing to do business wholly or
substantially in this state.
28404. No licensee shall provide financing assistance to any small

business firm for the purpose of evading the requirements of this
division.
28405. This section creates and authorizes an exempt class of

persons pursuant to Section 1 of Article XV of the California
Constitution. The restrictions upon rates of interest contained in
Section 1 of Article XV of the California Constitution shall not
apply to any evidence of indebtedness purchased by any licensee.
CORPORATIONS CODE
SECTION 28500-28505
28500. Each licensee shall make and keep books, accounts, and other
records in the form and in the manner that the commissioner may by
regulation or order require. All records so required shall be kept at
the place and shall be preserved for the time that the commissioner
may by regulation or order specify.
28501. Each licensee shall, not more than 90 days after the close
of each of its fiscal years or within a longer period that the
commissioner may by regulation or order specify, file with the
commissioner an audit report containing all of the following:
(a) Financial statements (including balance sheets, statements of
income or loss, statements of changes in capital accounts, and
statements of cashflows or, in the case of a licensee that is a
California nonprofit corporation, comparable financial statements)
for, or as of, the end of the fiscal year, prepared, with audit, by
an independent certified public accountant in accordance with
generally accepted accounting principles.
(b) A report, certificate, or opinion of the independent certified
public accountant or independent public accountant, stating that the
financial statements were prepared in accordance with generally
accepted accounting principles.
(c) Any other information that the commissioner may by regulation
or order require.
28502. Each licensee, director, officer, and employee of a

licensee, and each parent and subsidiary of a licensee shall file
with the commissioner all reports that the commissioner may by
regulation or order require within the timeframe specified. In
addition, each affiliate of a licensee (other than a parent or
subsidiary of the licensee) shall file with the commissioner all
reports regarding transactions between the affiliate and the licensee
that the commissioner may require within the timeframe specified.
Each report shall be in a form, shall contain information, shall be
signed in a manner, and shall be verified in a manner, that the
commissioner may by regulation or order require.
28503. (a) The commissioner shall examine each licensee not less
frequently than once each calendar year.
(b) (1) The commissioner may at any time examine any licensee or
any parent or subsidiary of a licensee.
(2) The commissioner may at any time examine any affiliate of a
licensee (other than a parent or subsidiary of the licensee), but
only with respect to matters relating to transactions between the
affiliate and the licensee.
(c) The directors, officers, and employees of any licensee or of
any affiliate of a licensee being examined by the commissioner and
any other person having custody of any of the books, accounts, or
records of the licensee or of the affiliate shall exhibit to the
commissioner, on request, any or all of the books, accounts, and
other records of the licensee or of the affiliate and shall otherwise
facilitate the examination so far as it may be in their power to do
so. However, in the case of an examination of an affiliate of a
licensee other than a parent or subsidiary of the licensee, only
books, accounts, and records of the affiliate that relate to
transactions between the affiliate and the licensee shall be subject
to this subdivision.
(d) The commissioner may, if in his or her opinion it is necessary
in the examination of any licensee or of any affiliate of a
licensee, retain any certified public accountant, attorney,
appraiser, or other person to assist him or her, and the licensee
shall pay, within 10 days after receipt of a statement from the
commissioner, the fees of the person retained.
28504. (a) A licensee may, after the approval of the board of

directors, executive committee, or other policy body of the licensee,
cause or permit any other person to make or keep any of its books,
accounts, or other records.
(b) If any person other than a licensee makes or keeps any of the
books, accounts, or other records of the licensee, the provisions of
this division and of any regulation or order issued under this
division shall apply to the person with respect to the performance of
those services and with respect to those books, accounts, and other
records to the same extent as if the person were the licensee.
(c) If any person other than an affiliate of a licensee makes or
keeps any of the books, accounts, or other records of the affiliate
or, in the case of an affiliate other than a parent or subsidiary of
the licensee, the books, accounts, and other records of the affiliate
that relate to transactions between the affiliate and the licensee,
the provisions of this division and of any regulation or order issued
under this division shall apply to the person with respect to those
books, accounts, and other records to the same extent as if the
person were the affiliate.
28505. Subject to the provisions of Rules 250.10 and 250.10.5 of

the Commissioner of Corporations (10 C.C.R. Secs. 250.10 and
250.10.5), the commissioner may make available to the public any
report filed with him or her under this division or under any
regulations or order issued under this division.
CORPORATIONS CODE
SECTION 28550-28552
28550. No person shall, except with the prior written approval of

the commissioner, acquire control of a licensee.
28551. The commissioner shall approve an application for approval

to acquire control of a licensee only if, after notice and a hearing,
the commissioner finds all of the following:
(a) That the applicant and the directors and officers of the
applicant are of good character and sound financial standing.
(b) That it is reasonable to believe that, if the applicant
acquires control of the licensee, the applicant will comply with all
applicable provisions of this division and of any regulation or order
issued under this division.
(c) That the applicant's plans, if any, to make any major change
in the business, corporate structure, or management of the licensee
are not detrimental to the safety and soundness of the licensee or
the accredited investors of the licensee, or to the public
convenience and advantage.
28552. (a) For purposes of Section 28551, the commissioner may

find:
(1) That an applicant or a director or officer of an applicant is
not of good character if the person has been convicted of, or has
pleaded nolo contendere to, a crime involving fraud or dishonesty.
(2) That an applicant's plan to make a major change in the
management of a licensee is detrimental to the safety and soundness
of the licensee or the accredited investors of the licensee and to
the public convenience and advantage if the plan provides for a
person who has been convicted of, or has pleaded nolo contendere to,
a crime involving fraud or dishonesty to become a director or officer
of the licensee.
(b) Subdivision (a) shall not be deemed to be the only grounds
upon which the commissioner may find, for purposes of Section 28551,
that an applicant or a director or officer of an applicant is not of
good character or that an applicant's plan to make a major change in
the management of a licensee is detrimental to the safety and
soundness of a licensee or to the accredited investors of the
licensee, or to the public convenience and advantage.
CORPORATIONS CODE
SECTION 28600-28604
28600. For purposes of this chapter:

(a) "Acquiring licensee" means either of the following:
(1) In the case of a merger, the licensee that is the surviving
company.
(2) In the case of a purchase or sale, the licensee that is the
purchaser.
(b) "Disappearing company" has the meaning set forth in Section
165.
(c) "Surviving company" has the meaning set forth in Section 190.
28601. No licensee shall merge with any other company unless either
(a) If the licensee is to be the surviving company, the merger is
first approved by the commissioner.
(b) If the licensee is to be a disappearing company, the surviving
company is a licensee and the merger is first approved by the
commissioner.
28602. No licensee shall purchase all or substantially all of the

business of any other person unless the purchase is first approved by
the commissioner.
28603. No licensee shall sell all or substantially all of its

business to any other person unless the other person is a licensee
and the sale is first approved by the commissioner.
28604. The commissioner shall approve an application for approval

of a merger, purchase, or sale, only if, after notice and a hearing,
the commissioner finds all of the following:
(a) That the merger, purchase, or sale will be safe and sound with
respect to the acquiring licensee.
(b) That it is reasonable to believe that, upon consummation of
the merger, purchase, or sale, the acquiring licensee will comply
with all applicable provisions of this division and of any regulation
or order issued under this division.
(c) That the merger, purchase, or sale will not be detrimental to
the licensee or the accredited investors of the licensee, or the
public convenience and advantage, or, if the merger, purchase, or
sale would be detrimental to any of the foregoing, then it is
necessary in the interests of the safety and soundness of any of the
parties to it.
CORPORATIONS CODE
SECTION 28650-28651
28650. Any licensee may offer to surrender its license by filing

with the commissioner the license and a report, which shall (a) be in
a form, (b) contain information, and (c) be signed and verified in a
manner, that the commissioner may by regulation or order require.
28651. (a) Except as otherwise provided in subdivision (b), a

voluntary surrender of a license shall be effective upon the issuance
of an order by the commissioner accepting the offer of surrender and
the report required under Section 28650.
(b) If a proceeding to revoke or suspend a license is pending at
the time when the license and the report required under Section 28650
are filed with the commissioner or if a proceeding to revoke or
suspend a license or to impose conditions upon the surrender of a
license is instituted before the license and the report called for in
Section 28650 are filed with the commissioner, the voluntary
surrender of the license shall become effective at the time and upon
the conditions that the commissioner may by order specify.
CORPORATIONS CODE
SECTION 28700-28716
28700. For purposes of this chapter, unless the context otherwise

requires:
(a) "Office with a licensee" means the position of director,
officer, or employee of the licensee or of any subsidiary of the
licensee.
(b) "Subject person," when used with respect to a licensee, means
(1) Any controlling person or affiliate of the licensee.
(2) Any director, officer, or employee of the licensee or of any
of the persons specified in paragraph (1).
(3) Any other person who participates in the conduct of the
business of the licensee.
28701. Whenever it appears to the commissioner that any person has

violated, or that there is reasonable cause to believe that any
person may violate, any provision of this division or of any
regulation or order issued under this division, the commissioner may
bring an action in the name of the people of this state in the
superior court to enjoin the violation or to enforce compliance with
this division or with any regulation or order issued under this
division. Upon a proper showing, a restraining order, preliminary or
permanent injunction, or writ of mandate shall be granted, and a
receiver or a conservator may be appointed for the defendant or the
defendant's assets. The court may not require the commissioner to
post a bond.
28702. (a) If the commissioner finds that any person has violated,
or that there is reasonable cause to believe that any person may
violate, Section 28150, the commissioner may order the person to
cease and desist from the violation unless and until the person is
issued a license.
(b) (1) Within 30 days after an order is issued pursuant to
subdivision (a), the person to whom the order is directed may file
with the commissioner an application for a hearing on the order. If
the commissioner fails to commence a hearing within 15 business days
after the application is filed with him or her (or within any longer
period to which the person consents), the order shall be deemed
rescinded. Upon the completion of the hearing, the commissioner shall
affirm, modify, or rescind the order.
(2) The right of any person to whom an order is issued under
subdivision (a) to petition for judicial review of the order shall
not be affected by the failure of the person to apply to the
commissioner for a hearing on the order pursuant to paragraph (1).
28703. The commissioner may issue a cease and desist order,

including an order to take appropriate corrective action, if, after
notice and a hearing, the commissioner finds either of the following:
(a) That any licensee or any subject person of a licensee has
violated, is violating, or that there is reasonable cause to believe
that any licensee or any subject person of a licensee may violate,
any provision of this division or of any regulation or order issued
under this division or any provision of any other applicable law.
(b) That any licensee or any subject person of a licensee has
engaged or participated in, is engaging or participating in, or that
there is reasonable cause to believe that any licensee or any subject
person of a licensee may engage or participate in, any unsafe or
unsound act with respect to the business of the licensee.
28704. (a) The commissioner may issue a cease and desist order,
including an order to take appropriate corrective action, if the
commissioner finds both of the following:
(1) That any of the factors set forth in Section 28703 is true
with respect to any licensee or any subject person of a licensee.
(2) That the action or violation is likely to cause the insolvency
of, or substantial dissipation of the assets or earnings of, the
licensee, or is likely to seriously weaken the condition of the
licensee or otherwise to seriously prejudice the interests of the
licensee or the accredited investors of the licensee, prior to the
completion of proceedings conducted pursuant to Section 28703.
subdivision (a), any licensee or subject person of a licensee to whom
the order is directed may file with the commissioner an application
for a hearing on the order. The filing of an application for a
hearing shall not stay the effectiveness of the order. If the
commissioner fails to commence a hearing within 15 business days
after the application is filed (or within any longer period to which
the licensee or subject person consents), the order shall be deemed
rescinded. Upon the completion of the hearing, the commissioner shall
affirm, modify, or rescind the order.
(2) The right of any licensee or subject person of a licensee to
whom an order is issued under subdivision (a) to petition for
judicial review of the order shall not be affected by the failure of
the licensee or subject person to apply to the commissioner for a
hearing on the order pursuant to paragraph (1).
28705. The commissioner may issue an order removing a subject

person from that person's office with the licensee, if any, and
prohibiting that person from further participating in any manner in
the conduct of the business of the licensee, if, after notice and a
hearing, the commissioner finds all of the following:
(a) (1) That the subject person of a licensee has violated a
provision of this division or of any regulation or order issued under
this division or any provision of any other applicable law;
(2) That the subject person of a licensee has engaged or
participated in any unsafe or unsound act with respect to the
business of the licensee; or
(3) That the subject person of a licensee has engaged or
participated in any act which constitutes a breach of his or her
fiduciary duty as a subject person.
(b) (1) That the act, violation, or breach of fiduciary duty has
caused or is likely to cause substantial financial loss or other
damage to the licensee or the accredited investors of the licensee;
or
(2) That the act, violation, or breach of fiduciary duty has
seriously prejudiced or is likely to seriously prejudice the
interests of the licensee or the accredited investors of the
licensee; or
(3) That the subject person has received financial gain by reason
of the act, violation, or breach of fiduciary duty.
(c) That the act, violation, or breach of fiduciary duty either
involves dishonesty on the part of the subject person or demonstrates
the subject person's gross negligence with respect to the business
of the licensee or a willful disregard for the safety and soundness
of the licensee.
28706. The commissioner may issue an order removing a subject

person from his or her office, if any, with the licensee and
prohibiting him or her from further participating in any manner in
the conduct of the business of the licensee, except with the prior
consent of the commissioner, if the commissioner finds, after notice
and a hearing, that the subject person of a licensee has, by engaging
or participating in any act with respect to any financial or other
business institution which resulted in substantial financial loss or
other damage, demonstrated either of the following:
(a) Dishonesty.
(b) Willful or continuing disregard for the safety and soundness
of the financial or other business institution.
28707. (a) The commissioner may issue an order suspending a subject

the conduct of the business of the licensee, except with the consent
of the commissioner, if the commissioner finds both of the following:
(1) That the factors set forth in subdivisions (a), (b), and (c)
of Section 28705 or the factors set forth in subdivision (a) of
Section 28706 are true with respect to the subject person of a
licensee.
(2) That it is necessary for the protection of the interests of
the licensee or the accredited investors of the licensee, or for the
protection of the public interest that the commissioner immediately
suspend the subject person from his or her office, if any, with the
licensee and prohibit him or her from further participating in any
manner in the conduct of the business of the licensee.
subdivision (a), any subject person of a licensee to whom the order
is directed may file with the commissioner an application for a
hearing on the order. The filing of an application for a hearing
shall not stay the effectiveness of the order. If the commissioner
fails to begin a hearing within 15 business days after the
application is filed (or within any longer period to which the
subject person consents), the order shall be deemed rescinded. Upon
the completion of the hearing, the commissioner shall affirm, modify,
or rescind the order.
(2) The right of any subject person of a licensee to whom an order
is issued under subdivision (a) to petition for judicial review of
the order shall not be affected by the failure of the subject person
to apply to the commissioner for a hearing on the order pursuant to
paragraph (1).
28708. (a) The commissioner may issue an order suspending a subject

the conduct of the business of the licensee, except with the consent
of the commissioner, if the commissioner finds both of the following:
(1) That the subject person of a licensee has been indicted by a
grand jury for, or held to answer by a magistrate for, a crime
involving dishonesty or breach of trust.
(2) That the continuation of that person as a subject person of
the licensee may threaten the interests of the licensee or the
accredited investors of the licensee, or may threaten to impair
public confidence in the licensee.
(b) The commissioner may issue an order suspending or removing the
subject person or former subject person from his or her office, if
any, with the licensee and prohibiting him or her from further
participating in any manner in the conduct of the business of the
licensee, except with the prior consent of the commissioner, if the
commissioner finds both of the following:
(1) That the subject person or former subject person of a licensee
to whom an order was issued pursuant to subdivision (a) or any other
subject person of a licensee has been finally convicted of a crime
which is punishable by imprisonment for a term exceeding one year and
which involves dishonesty or breach of trust.
(2) That the continuation or resumption by that person as a
subject person of the licensee may threaten the interests of the
licensee or the accredited investors of the licensee, or may threaten
to impair public confidence in the licensee.
(c) (1) Within 30 days after an order is issued pursuant to
subdivision (a) or (b), any subject person of a licensee to whom the
order is directed may file with the commissioner an application for a
hearing on the order. If the commissioner fails to commence a
hearing within 15 business days after the application is filed (or
within any longer period to which the subject person consents), the
order shall be deemed rescinded. Upon the completion of the hearing,
the commissioner shall affirm, modify, or rescind the order.
(2) The right of any subject person or former subject person of a
licensee to whom an order is issued under subdivision (a) or (b) to
petition for judicial review of the order shall not be affected by
the failure of the person to apply to the commissioner for a hearing
on the order pursuant to paragraph (1).
(d) The fact that any subject person of a licensee charged with a
crime involving dishonesty or breach of trust is not finally
convicted of the crime shall not preclude the commissioner from
issuing an order to the subject person pursuant to any other section
of this division.
28709. Any person to whom an order is issued under Section 28705,

28706, 28707, or 28708 may apply to the commissioner to modify or
rescind the order. The commissioner shall not grant the application
unless the commissioner finds that it is in the public interest to do
so and that it is reasonable to believe that the person will, if and
when he or she becomes a subject person of a licensee, comply with
all applicable provisions of this division and of any regulation or
order issued under this division.
28710. The commissioner may issue an order suspending or revoking

the license of a licensee, if, after notice and a hearing, the
commissioner finds any of the following:
(a) That the licensee or any controlling person or affiliate of
the licensee has violated any provision of this division or of any
regulation or order issued under this division or any provision of
any other applicable law.
(b) That the licensee is conducting its business in an unsafe and
unsound manner.
(c) That the licensee is in a condition that it is unsafe or
unsound for it to transact business.
(d) That the licensee has ceased to transact business as a capital
access company.
(e) That the licensee is insolvent.
(f) That the licensee has suspended payment of its obligations,
has made an assignment for the benefit of its creditors, or has
admitted in writing its inability to pay its debts as they become
due.
(g) That the licensee is the subject of an order for relief in
bankruptcy or has sought other similar relief under any other
bankruptcy, reorganization, insolvency, or moratorium law, or that
any person has applied for any of that relief under any of those laws
against any licensee and the licensee has by any affirmative act
approved of or consented to the action or the relief has been
granted.
(h) That any fact or condition exists which, if it had existed at
the time when any licensee applied for its license, would have been
grounds for denying the application.
28711. (a) If the commissioner finds that any of the factors set
forth in Section 28710 is true with respect to any licensee and that
it is necessary for the protection of the public interest that the
commissioner immediately suspend or revoke the license of the
licensee, the commissioner may issue an order suspending or revoking
the license of the licensee.
(b) Within 30 days after an order is issued pursuant to
subdivision (a), any licensee to whom the order is directed may file
with the commissioner a request for a hearing on the order. If the
commissioner fails to commence a hearing within 15 business days
after the request is filed (or within any longer period to which the
licensee consents), the order shall be deemed rescinded. Upon the
completion of the hearing, the commissioner shall affirm, modify, or
rescind the order.
28712. Any person whose license is suspended or revoked shall

immediately deliver the license to the commissioner.
28713. Any person to whom an order is issued under Section 28709 or

28710 may apply to the commissioner to modify or rescind the order.
The commissioner shall not grant the application unless the
commissioner finds that it is in the public interest to do so and
that it is reasonable to believe that the person will, if and when it
becomes a licensee, comply with all applicable provisions of this
division and of any regulation or order issued under this division.
28714. (a) If the commissioner finds that any of the factors set
forth in Section 28709 is true with respect to any licensee and that
it is necessary for the protection of the interests of the licensee
or the accredited investors of the licensee, or for the protection of
the public interest that the commissioner take immediate possession
of the property and business of the licensee, the commissioner may
forthwith take possession of the property and business of the
licensee and retain possession until the licensee resumes business or
is finally liquidated. The licensee may, with the consent of the
commissioner, resume business upon any conditions that the
commissioner may prescribe.
(b) Whenever the commissioner takes possession of the property and
business of a licensee pursuant to subdivision (a), the licensee may
apply within 10 days to the superior court in the county in which
the head office of the licensee is located to enjoin further
proceedings. The court, after citing the commissioner to show cause
why further proceedings should not be enjoined and after a hearing,
may dismiss the application or enjoin the commissioner from further
proceedings and order the commissioner to surrender the property and
business of the licensee to the licensee or make any further order
that may be just.
(c) An appeal may be taken from the judgment of the superior court
by the commissioner or by the licensee in the manner provided by law
for appeals from the judgment of a superior court. An appeal from
the judgment of the superior court shall operate as a stay of the
judgment. No bond need be given if the appeal is taken by the
commissioner, but if the appeal is taken by the licensee, a bond
shall be given as required by the Code of Civil Procedure.
(d) Whenever the commissioner takes possession of the property and
business of a licensee pursuant to subdivision (a), the commissioner
shall conserve or liquidate the property and business of the
licensee.
28715. Sections 11041, 11042, and 11043 of the Government Code do

not apply to the Commissioner of Corporations.

this division.
this division.
CORPORATIONS CODE
SECTION 28800-28802
28800. It shall be unlawful for any person willfully to make any

untrue statement of a material fact in any application, report, or
other document filed with the commissioner under this division or
under any regulation or order issued under this division, or
willfully to omit to state in any application, report or other
document filed with the commissioner under this division any material
fact which is required to be stated therein.
28801. It shall be unlawful for any person having custody of any of

the books, accounts, or other records of a licensee willfully to
refuse to allow the commissioner, upon request, to inspect or make
copies of any of those books, accounts, or other records.
28802. It shall be unlawful for any person, with intent to deceive
any director, officer, employee, auditor, or attorney of a licensee,
the commissioner or any governmental agency, to make any false entry
in any of the books, accounts or other records of the licensee, to
omit to make any entry in those books, accounts or other records
which the person is required to make, or to alter, conceal, or
destroy any of those books, accounts, or other records.
CORPORATIONS CODE
SECTION 28820-28821
28820. In this article, unless the context otherwise requires:

(a) (1) "Associate," when used with respect to a licensee, means
all of the following:
(A) Any principal shareholder, director, officer, manager, agent,
or adviser of the licensee.
(B) Any director, officer, partner, general manager, agent,
employer, or employee of any person referred to in subparagraph (A).
(C) Any person who controls, is controlled by, or is under common
control with, any person referred to in subparagraph (A), directly or
indirectly, through one or more intermediaries.
(D) Any close relative of any person referred to in subparagraph
(A).
(E) Any person of whom any person referred to in subparagraphs (A)
to (D), inclusive, is a director or officer.
(F) Any person in whom any person referred to in subparagraphs (A)
to (D), inclusive, or any combination of persons acting in concert
owns or controls, directly or indirectly, a 10-percent or greater
equity interest.
(2) For purposes of this subdivision, any person who is in any of
the relationships referred to in subparagraphs (A) to (F), inclusive,
of paragraph (1) within six months before or after a licensee
provides financing assistance shall be deemed to be in the
relationship as of the date when the licensee provides the financing
assistance.
(3) For purposes of this subdivision, if a licensee, in order to
protect its interests, designates any person to serve as a director
of, officer of, or in any capacity in the management of, a small
business firm to which the licensee provides financing assistance,
the person shall not, on that account, be deemed to have any
relationship with the small business firm. However, this paragraph
shall not apply in any case where the person has, directly or
indirectly, any other financial interest in the small business firm
or where the person, at any time before the licensee provides the
financing assistance, served as a director of, officer of, or in any
other capacity in the management of, the small business firm for a
period of 30 days or more.
(b) "Close relative" means ancestor, lineal descendant, brother or
sister and lineal descendants of either, spouse, father-in-law,
mother-in-law, son-in-law, brother-in-law, daughter-in-law, or
sister-in-law.
28821. (a) A licensee shall not provide financial or managerial
assistance to, or for the benefit of, any person to the detriment of
a small business firm or smaller business firm, the licensee, its
shareholders, or partners. Unless a licensee obtains a prior written
exemption from the commissioner for special instances in which
providing financial assistance may further the purposes of this
division despite presenting a conflict of interest, a licensee shall
not directly or indirectly do any of the following:
(1) Provide financial assistance to any of the licensee's
associates.
(2) Provide financial assistance to an associate of another
licensee, if one of the licensee's associates has received or will
receive any direct or indirect financial assistance or a commitment
from that licensee or a third licensee, including financial
assistance or commitments received under any understanding,
agreement, or cross dealing, reciprocal or circular arrangement.
(3) Borrow money from any of the following:
(A) A small business firm or smaller business firm to which the
licensee has provided financial assistance.
(B) An officer, director, or owner of at least a 10-percent equity
interest in the business.
(C) A close relative of a person described in subparagraph (B).
(4) Provide financial assistance to a small business firm or
smaller business firm to discharge an obligation to a licensee's
associate or to make other funds available to pay the obligation,
except if the obligation is to an associate lending institution and
is a line of credit or other obligation incurred in the normal course
of business.
(5) Provide financial assistance to a small business firm or
smaller business firm for the purpose of purchasing property from a
licensee's associate.
(b) Without the commissioner's prior written approval, a licensee'
s associates shall not, directly or indirectly, do either of the
following:
(1) Borrow money from any person described in paragraph (3) of
subdivision (a).
(2) Receive from a small business firm or smaller business firm
any compensation in connection with any financial assistance a
licensee provides or anything of value for procuring, attempting to
procure, or influencing a licensee's action with respect to that
financial assistance.
(c) (1) Without the commissioner's prior written approval, a
licensee shall not provide financial assistance to any business in
which the licensee's associate has either a voting equity interest,
or total equity interests, including potential interests, of at least
5 percent.
(2) If a licensee and its associate provide financial assistance
to the same small business firm or smaller business firm, whether at
the same time or different times, a licensee shall demonstrate to the
commissioner's satisfaction that the terms and conditions are, or
were, fair and equitable to the licensee, taking into account any
differences in the timing of each party's financial transactions.
(3) Financial assistance that meets either of the following
criteria is exempt from the prior approval requirement in paragraph
(1) and shall be presumed to be fair and equitable to the licensee
for the purposes of paragraph (2):
(A) The licensee's associate is a lending institution that is
providing financing under a credit facility in order to meet the
operational needs of a small business firm or smaller business firm,
and the terms of that financing are usual and customary.
(B) The licensee's associate invests in the small business firm or
smaller business firm on the same terms and conditions and at the
same time as the licensee.
(d) To protect a licensee's investment, a licensee may designate
an associate to serve as an officer, director, or other participant
in the management of a small business firm or smaller business firm.
The licensee shall identify this associate in the licensee's records
maintained and made available for the commissioner's review. Without
the commissioner's prior written approval, the associate shall not do
(1) Have any other direct or indirect financial interest in the
small business firm or smaller business firm that exceeds, or has the
potential to exceed, 5 percent of the firm's equity.
(2) Have served for more than 30 days as an officer, director, or
other participant in the management of the small business firm or
smaller business firm before the licensee provided the financial
assistance.
(3) Receive any income or anything of value from the small
business firm or smaller business firm unless it is for the licensee'
s benefit, with the exception of director's fees, expenses, and
distributions based upon the associate's ownership interest in the
small business firm or smaller business firm.
CORPORATIONS CODE
SECTION 28880-28881
28880. Any person who willfully violates any provision under this
chapter shall upon conviction be fined not more than two hundred
fifty thousand dollars ($250,000) or be imprisoned in the state
prison, or in a county jail for not more than one year, or be
punished by both that fine and imprisonment.
28881. Nothing in this division limits the power of the state to

punish any person for any act which constitutes a crime under any
statute.
CORPORATIONS CODE
SECTION 28900-28901
28900. If, after notice and a hearing, the commissioner finds that
any person has violated any provision of this division or of any
regulation or order issued under this division, the commissioner may
order the person to pay to the commissioner a civil penalty in that
amount as the commissioner may specify. However, the amount of the
civil penalty shall not exceed two thousand five hundred dollars
($2,500) for each violation, or in the case of a continuing
violation, two thousand five hundred dollars ($2,500) for each day
for which the violation continues.
28901. The provisions of Section 28900 are additional to, and not
alternative to, other provisions of this division which authorize the
commissioner to issue orders or to take other action on account of a
violation of any provision of this division or of any regulation or
order issued under this division. However, no person who has been
finally convicted under Chapter 12 (commencing with Section 28800) of
this division on account of a violation of any provision of Chapter
12 (commencing with Section 28800) shall be liable to pay a civil
penalty under Section 28900 on account of the violation.
CORPORATIONS CODE
SECTION 28950-28958
28950. No provision of this division imposing any liability applies

to any act done or omitted in good faith in conformity with any
rule, form, permit, order, or written interpretive opinion of the
commissioner, or any written interpretive opinion of the Attorney
General, notwithstanding that the rule, form, permit, order, or
written interpretive opinion may later be amended or rescinded or be
reason.
28951. (a) The commissioner may from time to time make, amend, and
rescind the rules, forms, and orders that are necessary to carry out
this law, and define any terms, whether or not used in this law,
insofar as the definitions are not inconsistent with this law. For
the purpose of rules, the commissioner may, among other things,
classify persons within the commissioner's jurisdiction and may
prescribe different requirements for different classes. The
commissioner may, in the commissioner's discretion, waive any
requirement of any rule or form in situations where in his or her
opinion the requirement is not necessary in the public interest.
(b) The commissioner may, by regulation or order, either
unconditionally or upon specified terms and conditions or for
specified periods, exempt from the provisions of this division any
person or transaction or class of persons or transactions, if the
commissioner finds that action to be in the public interest and that
the regulation of those persons or transactions is not necessary for
the purposes of this division.
28952. The commissioner may honor requests from interested persons

for interpretive opinions.
claiming it.

law.
28955. Nothing in this law, shall impair, derogate, or otherwise

affect the authority or powers of the commissioner under the
Corporate Securities Law of 1968 (Part 3 (commencing with Section
25000)) or the application of any provision thereof to any person or
transaction subject thereto.
28956. If any provision of this division , or the application

thereof to any person or circumstance, is held invalid, the
invalidity shall not affect other provisions or applications of this
law that can be given effect without the invalid provision or
application, and to this end the provisions of this division are
declared to be severable.
28957. Neither the commissioner nor any employee of the

commissioner shall use any information which is filed with or
obtained by the commissioner which is not public information for
personal gain or benefit, nor shall the commissioner nor any employee
of the commissioner engage in any securities transaction based on
that information, even though public, if there has not been a
sufficient period of time for the securities or commodity markets to
assimilate that information.
28958. (a) The program established by this division shall be

supported from funds appropriated by the Legislature from the State
Corporations Fund.
(b) The funds appropriated from the State Corporations Fund and
made available for expenditure under subdivision (a) of this section
shall come from fees collected under Section 28110, penalties
collected under Sections 28880 and 28900, and securities application
filing fees collected under subdivisions (e), (f), (h), and (i) of
Section 25608 and notice filing fees collected under subdivision (a)
of Section 25608.1.
CORPORATIONS CODE
SECTION 29000-29008
29000. Unless the provision or the context otherwise requires, the

definitions set forth in this chapter govern the construction of this
division.
29001. "Person" means an individual, partnership, corporation,

limited liability company, or association, either domestic or
foreign, whether acting in his or her own right or as the officer,
agent, servant, employee, correspondent, or representative of another
or as trustee.
29002. (a) "Trustee" means a person executing a trust, as defined

in this section.
(b) "Trust" means any voluntary trust expressly created by or
declared in an instrument in writing, other than a will or a judicial
writ, order, decree, or judgment, to carry on any business or to
secure the payment or repayment of money.
29003. "Contract" includes any agreement, trade, or transaction.
29004. "Securities" means all shares in any corporation or

association or of trustees, bonds, coupons, scrip, rights, choses in
action, and other evidences of debt or property and options for the
purchase or sale thereof or of any right entitling the holder thereof
to participate in profits or a division of assets.
29005. "Commodities" means anything movable that is bought and

sold.
29006. "Bucket shop" means any room, office, store, building, or

other place where any bucketing or bucket shopping contract is made
or offered to be made.
29007. "Keeper" means any person owning, keeping, managing,

operating, or promoting a bucket shop, or assisting to keep, manage,
operate, or promote a bucket shop.
29008. "Bucketing" or "bucket shopping" means any of the following:

(a) Making or offering to make any contract respecting the
purchase or sale of any securities or commodities, wherein both
parties intend, or the keeper intends, that the contract shall be, or
may be, terminated, closed, or settled according to or upon the
basis of the public market quotations of prices made on any board of
trade or exchange upon which the securities or commodities are dealt
in, without a bona fide purchase or sale of the securities or
commodities.
(b) Making or offering to make any contract respecting the
parties intend, or the keeper intends, that the contract shall be, or
may be, deemed terminated, closed, or settled when the public market
quotations of prices for the securities or commodities named in the
contract reach a certain figure without a bona fide purchase or sale
of the securities or commodities.
(c) Making or offering to make any contract respecting the
parties do not intend, or such keeper does not intend, the actual or
bona fide receipt or delivery of the securities or commodities, but
do intend, or the keeper does intend, a settlement of the contract
based upon the differences in the public market quotations of prices
at which the securities or commodities are or are asserted to be
bought and sold.
(d) The sale by a keeper of any security or commodity purchased by
him for the account of or upon the order of another when the
proceeds of the sale are not immediately credited by the keeper to
the account of the other person and when a report or statement in
writing of the sale is not rendered to the other person by the keeper
on the next business day following the sale.
CORPORATIONS CODE
SECTION 29100-29105
29100. Any person who makes or offers to make any contract

constituting bucketing under Section 29008, or who makes any sale
constituting bucketing under Section 29008, or who is the keeper of
any bucket shop, is guilty of a felony.
29101. Any person who communicates, receives, exhibits, or displays

in any manner any statement of quotations of prices of any
securities or commodities, with an intent to make, or to offer to
make, or to aid in making or offering to make, any contract
constituting bucketing under Section 29008 is guilty of a felony.
29102. The felonies specified in this chapter are punishable, for

each offense, if the offender is a corporation, by a fine of not less
than one thousand dollars ($1,000) nor more than ten thousand
dollars ($10,000) or, if the offender is not a corporation, by
imprisonment in a state prison or by a fine of not less than one
thousand dollars ($1,000) nor more than ten thousand dollars
($10,000), or by both such imprisonment and fine.
29103. The prosecution, conviction, and punishment of a corporation

under any provision of this chapter shall not be deemed to be a
prosecution, conviction, or punishment of any of its officers,
directors, or shareholders.
29104. All contracts for the purchase or sale of shares of the
capital stock of any corporation or association without any intention
on the part of one party to deliver and of the other party to
receive the shares, and contemplating merely the payment of
differences between the contract and market prices on divers days,
shall be void, and neither party to any such contract shall be
entitled to recover any damages for failure to perform the same, or
any money paid thereon, in any court of this state.

this division.
this division.
CORPORATIONS CODE
SECTION 29200-29201
29200. Every person doing business as a broker or making contracts

as a broker or agent for the purchase or sale of any securities or
commodities on any board of trade or exchange shall keep or cause to
be kept at his office or place of business correct and permanent
records or books of account showing each of such transactions as a
separate item. The failure so to keep or cause to be kept such
records or books of account is prima facie evidence that any such
contract was bucketing or bucketshopping.
Such records or books of account shall at all times be open to
inspection by the Commissioner of Corporations or by any deputy,
investigator, or auditor of the Department of Corporations to whom he
may delegate such authority in writing.
29201. Every person shall, upon written demand therefor, furnish to

any customer or principal for whom he has executed any order for the
actual purchase or sale of any securities or commodities on any
board of trade or exchange, either for immediate or future delivery,
a written statement showing the name of the person from whom the
property was bought or to whom it was sold, as the case may be, and
the time when, place where, and the price at which it was either
bought or sold. If any such person refuses or neglects to furnish
such a statement within forty-eight hours after such demand, the
refusal or neglect is prima facie evidence that the transaction was
bucketing or bucket shopping within the terms of this division.
CORPORATIONS CODE
SECTION 29500-29516

"California Commodity Law of 1990." References herein to "this law"
refer to the applicable provisions of this division unless the
context otherwise requires. The definitions in this chapter govern
the construction of this law.
29501. "Board of trade" means any person or group of persons

engaged in buying or selling any commodity or receiving the same for
sale on consignment, whether the person or group of persons is
characterized as a board of trade, exchange, or other form of
marketplace.
29502. "Business days" are all days other than every Saturday,
every Sunday and such other days as are specified or provided for as
holidays in the Government Code.
29504. "Commodity" means, except as otherwise specified by the

commissioner by rule or order, any agricultural, grain, or livestock
product or byproduct, any metal or mineral (including a precious
metal set forth in Section 29515), any gem or gemstone (whether
characterized as precious, semiprecious, or otherwise), any fuel
(whether liquid, gaseous, or otherwise), any foreign currency, and
all other goods, articles, products, or items of any kind. However,
the term "commodity" shall not include (a) a numismatic coin whose
fair market value is at least 15 percent higher than the value of the
metal it contains, or (b) any work of art offered or sold by art
dealers, at public auction, or through a private sale by the owner of
the work of art.
29505. (a) "Commodity contract" means any account, agreement, or

contract for the purchase or sale, primarily for speculation or
investment purposes and not for use or consumption by the offeree or
purchaser, of one or more commodities, whether for immediate or
subsequent delivery or whether delivery is intended by the parties,
and whether characterized as a cash contract, deferred shipment or
deferred delivery contract, forward contract, futures contract,
installment or margin contract, leverage contract, or otherwise. A
"commodity contract" includes a commodity option as defined in
Section 29510, unless otherwise specified. Any "commodity contract"
offered or sold shall, in the absence of evidence to the contrary, be
presumed to be offered or sold for speculation or investment
purposes.
(b) A "commodity contract" shall not include any contract or
agreement which requires, and under which the purchaser personally
receives, or at the request of the purchaser a family member or an
individual (which individual is other than the seller or any
affiliate of the seller, including any officer, director, or employee
of the seller or any affiliate of the seller) with whom the
purchaser has a preexisting close personal or preexisting business
relationship personally receives, within 28 calendar days from the
full payment in good funds of the purchase price, actual physical
delivery of the quantity of each commodity purchased under the
contract or agreement. In the case of a seller who requires a partial
payment of the total purchase price before obligating itself to
actually physically deliver the quantity of each commodity purchased
under the contract or agreement described in this subdivision, both
the amount remaining on the total purchase price shall be paid in
good funds and actual physical delivery of the quantity of each
commodity purchased under the contract or agreement shall be
personally received (by the purchaser or above-described individual)
within 28 calendar days from the date of the partial payment in good
funds. Otherwise, for the purposes of this exclusion from the
definition of a "commodity contract," a partial payment of, or an
installment payment on, the purchase price is not a full payment in
good funds of the purchase price.
29506. "Commodity Exchange Act" means the federal statute so named,

as amended before or after January 1, 1991.
29507. "Commodity Futures Trading Commission" means the independent

regulatory agency established by Congress to administer the
Commodity Exchange Act.
29508. "CFTC Rule" means any rule, regulation, or order of the

Commodity Futures Trading Commission in effect on January 1, 1991,
and all subsequent amendments, additions, or other revisions thereto,
unless the commissioner, within 10 days following the effective date
of any amendment, addition, or revision, disallows the application
thereof to this law or to any provision thereof by rule or order.
29509. "Commodity merchant" means any of the following, as defined

or described in the Commodity Exchange Act or by CFTC Rule:
(a) Futures commission merchant.
(b) Commodity pool operator.
(c) Commodity trading advisor.
(d) Introducing broker.
(e) Leverage transaction merchant.
(f) An associated person of any person specified in subdivisions
(a) to (d), inclusive.
(g) Floor broker.
(h) Any other person (other than a futures association) required
to register with the Commodity Futures Trading Commission.
29510. "Commodity option" means any account, agreement, or contract

giving a party thereto the right but not the obligation to purchase
or sell one or more commodities or one or more commodity contracts,
or both, whether characterized as an option, privilege, indemnity,
bid, offer, put, call, advance guaranty, decline guaranty, or
otherwise, but shall not include an option traded on a national
securities exchange registered with the United States Securities and
Exchange Commission.
29511. "Financial institution" means (a) a national bank or a bank

or trust company incorporated under the laws of this state, (b) a
federal savings and loan association or federal savings bank, or (c)
a federally insured bank chartered by a state of the United States
when the commodity depository activities of the bank are supervised
by the bank regulator of that state.
29512. "Good funds" means the verified receipt of immediately

available funds according to the applicable requirements of federal
Regulation CC.
29513. "Offer" includes every offer to sell, offer to purchase, or

offer to enter into a commodity contract or commodity option.

a limited liability company, an association, a joint stock company, a
trust, an unincorporated organization, a government, or a political
subdivision of a government.
29515. "Precious metal" means the following in either coin,

bullion, or other form:
(a) Silver.
(b) Gold.
(c) Platinum.
(d) Palladium.
(e) Copper.
(f) Other items that the commissioner may specify by rule or
order.
29515.5. "Purchase price" means all funds paid by or on behalf of a

purchaser to a seller of a commodity contract or a commodity option
(or to another person at the request or direction of a seller),
including, but not limited to, the sale price of a commodity, an
administrative charge or fee, assessment, deposit, dues, handling
charge or fee, holding charge or fee, membership charge or fee,
reservation charge or fee, or any charge, fee, or other payment made
or paid in connection with the sale of a commodity contract or a
commodity option.
29516. "Sale" or "sell" includes every sale, contract of sale,

contract to sell, or disposition, for value.
CORPORATIONS CODE
SECTION 29520
29520. Except as otherwise provided in Section 29530, 29531, or

29532, no person shall sell or purchase or offer to sell or purchase
any commodity under any commodity contract or under any commodity
option, or offer to enter into, or enter into, as seller or purchaser
any commodity contract or any commodity option.
CORPORATIONS CODE
SECTION 29530-29532
29530. (a) The prohibitions in Section 29520 shall not apply to any
transaction offered by and in which any of the following persons (or
any employee, officer, or director thereof acting solely in that
capacity) is the purchaser or seller:
(1) A person registered with the Commodity Futures Trading
Commission as a futures commission merchant or as a leverage
transaction merchant whose activities require registration.
(2) A person affiliated with, and whose obligations and
liabilities under the transaction are guaranteed by, a person
referred to in subdivision (a).
(3) A person who is a member of a contract market designated by
the Commodity Futures Trading Commission (or any clearinghouse
thereof) when the transaction at issue requires membership in and is
subject to the regulatory jurisdiction of that contract market.
(4) A financial institution.
(5) A broker-dealer licensed under Section 25211, or exempt from
licensure under Section 25200, when engaging in activities subject to
the exclusive regulatory jurisdiction of the Commodity Futures
Trading Commission.
(6) A person licensed pursuant to Chapter 14 (commencing with
Section 1800) of Division 1 of the Financial Code to receive money
for transmittal to foreign countries if (A) the license has not
expired or been surrendered, suspended, or revoked, (B) the licensed
person has a tangible net worth of at least 3 million dollars
($3,000,000) according to its audited financial statements prepared
by an independent certified public accountant for each of the
immediately preceding three fiscal years, and (C) pursuant to the
provisions of subdivision (b) of Section 29531, the licensed person
issues and a purchaser receives a certificate, document of title,
confirmation, or other instrument evidencing that the purchased
quantity of precious metals or foreign currencies has been delivered
to a depository which is a financial institution located in a state
of the United States.
(b) The exemption provided by subdivision (a) shall not apply to
any transaction or activity which is prohibited by the Commodity
Exchange Act or CFTC Rule.
29531. The prohibitions in Section 29520 shall not apply to the

following:
(a) An account, agreement, or transaction within the exclusive
regulatory jurisdiction of the Commodity Futures Trading Commission
as granted under Section 2 of Title 42 of the United States Code
(Section 2(a)(1)(A) of the Commodity Exchange Act).
(b) A commodity contract for the purchase of one or more precious
metals or foreign currencies which requires full payment in good
funds of the purchase price and under which the purchaser receives,
within 28 calendar days from the full payment in good funds of the
purchase price, substitute delivery of the quantity of the precious
metals or foreign currencies purchased, or a commodity contract for
the purchase of one or more precious metals or foreign currencies
which allows partial payment in good funds of the purchase price and
under which the purchaser receives within 28 calendar days from the
partial payment in good funds of the purchase price, substitute
delivery of the quantity of precious metals or foreign currencies
purchased by that payment; provided that, for purposes of this
subdivision, substitute delivery shall be deemed to have occurred if,
within the 28-day period, the quantity of precious metals or foreign
currencies purchased by the full or partial payment is actually
physically delivered (whether in specifically segregated or fungible
bulk form) into the possession of a depository (other than the
seller) which is either (1) a financial institution, (2) a
depository, the warehouse receipts of which are recognized for
delivery purposes for any commodity on a contract market designated
by the Commodity Futures Trading Commission, (3) a storage facility
licensed or regulated by the United States or any agency thereof, or
(4) a facility for the storage of precious metals or foreign
currencies located within a state of the United States and operated
by an armored contract carrier defined under subdivision (e), or (5)
a depository designated by the commissioner. The depository (or other
person which itself qualifies as a depository) enumerated in this
subdivision shall issue and the purchaser shall receive a
certificate, document of title, confirmation or other instrument
evidencing that the quantity of precious metals has been delivered to
the depository and is being and will continue to be held by the
depository on the purchaser's behalf, free and clear of all liens and
encumbrances, other than liens of the purchaser, tax liens, liens
agreed to by the purchaser, or liens of the depository for fees and
expenses, which have previously been disclosed to the purchaser.
(c) A commodity contract solely between persons engaged in
producing, processing, using commercially or handling as merchants,
each commodity subject thereto, or any byproduct thereof.
(d) A commodity contract under which the offeree or the purchaser
is a person referred to in Section 29530, an insurance company, or an
investment company as defined in Section 80a-3 of Title 15 of the
United States Code (Section 3 of Title I of the federal Investment
Company Act of 1940).
(e) For the purposes of this section, "armored contract carrier"
means a person who: (1) is operating as a carrier transporting coin,
currency, precious metals, securities, or negotiable items pursuant
to a currently effective permit as a highway contract carrier and a
city carrier issued by the Public Utilities Commission of this state
and is also operating a facility for the storage of precious metals
or foreign currencies pursuant to a commodity contract; (2) has
purchased and maintains sufficient amounts of insurance coverage for
all risks associated with the operation of a facility for the storage
of precious metals or foreign currencies from an insurance company
admitted in this state; (3) has continuously operated as a carrier
under its permit and has continuously operated a facility for the
storage of precious metals or foreign currencies for at least five
years; (4) has a tangible net worth of at least five million dollars
($5,000,000) for each of the immediately preceding five fiscal years
according to its financial statements prepared on an individual
company basis, or on a combining or consolidating basis with any
affiliates, which financial statements have been audited by an
independent certified public accountant; and (5) provides the
following disclosure to a purchaser in 10-point boldface type with
the certificate, document of title, confirmation, or other instrument
evidencing that the purchased quantity of precious metals or foreign
currencies has been delivered to or is on deposit with the storage
facility: "(Name of carrier) is not licensed, regulated, or
supervised as a depository or storage facility by the United States
Government or the State of California."
29532. The commissioner may by rule or order prescribe the terms

and conditions of all transactions and contracts covered by this law
and exempt any person or transaction from this law conditionally or
unconditionally.
CORPORATIONS CODE
SECTION 29535-29538
29535. (a) No person shall engage in a trade or business or

otherwise act as a commodity merchant unless the person (1) is
registered or temporarily licensed with the Commodity Futures Trading
Commission for each activity constituting that person as a commodity
merchant and the registration or temporary license shall not have
expired, been suspended, or revoked; or (2) is exempt from the
registration by virtue of the Commodity Exchange Act (7 U.S.C. Sec. 1
et seq.) or of a CFTC rule.
(b) No board of trade shall trade, or provide a place for the
trading of, any commodity contract required to be traded on or
subject to the rules of a contract market designated by the Commodity
Futures Trading Commission, unless the board of trade has been so
designated for the commodity contract and that designation shall not
have been vacated, suspended, or revoked.
29536. It is unlawful for any person, directly or indirectly, in
connection with the purchase or sale of, the offer to sell, the offer
to purchase, the offer to enter into, or the entry into, a
commodity, commodity contract, or commodity option to do any of the
following:
(a) To willfully employ any device, scheme, or artifice to
defraud.
(b) To willfully make any false report, enter any false record,
make any untrue statement of a material fact, or omit to state a
material fact necessary in order to make the statements made, in the
light of the circumstances under which they were made, not
misleading.
(c) To willfully engage in any transaction, act, practice, or
course of business which operates or would operate as a fraud or
deceit upon any persons.
(d) To willfully misappropriate or convert the funds, security, or
property of any other person.
29537. (a) Sections 29520, 29535, and 29536 apply to persons who
sell or offer to sell when either of the following occur:
(1) An offer to sell is made in this state.
(2) An offer to buy is made and accepted in this state.
(b) Sections 29520, 29535, and 29536 apply to persons who buy or
offer to buy when either of the following occur:
(1) An offer to buy is made in this state.
(2) An offer to sell is made and accepted in this state.
(c) For the purpose of this section, an offer to sell or to buy is
made in this state, whether or not either party is then present in
this state, when the offer:
(1) Originates from this state.
(2) Is directed by the offeror to this state and received at the
place to which it is directed (or at any post office in this state in
the case of a mailed offer).
(d) For the purpose of this section, an offer to buy or to sell is
accepted in this state when acceptance:
(1) Is communicated to the offeror in this state.
(2) Has not previously been communicated to the offeror, orally or
in writing, outside this state. Acceptance is communicated to the
offeror in this state, whether or not either party is then present in
this state, when the offeree directs it to the offeror in this
state, reasonably believing the offeror to be in this state and it is
received at the place to which it is directed (or at any post office
in this state in the case of a mailed acceptance).
(e) An offer to sell or to buy is not made in this state when
either of the following occur:
(1) The publisher circulates or there is circulated on his or her
behalf in this state any bona fide newspaper or other publication of
general, regular, and paid circulation which is not published in this
state, or which is published in this state but has had more than
two-thirds of its circulation outside this state during the past 12
months.
(2) A radio or television program originating outside this state
is received in this state.

this division.
this division.
CORPORATIONS CODE
SECTION 29540-29546

has engaged, or is about to engage, in any act or practice
constituting a violation of any provision of this law or any rule or
order under this law, the commissioner may in his or her discretion
bring an action in the name of the people of the State of California
in the superior court to enjoin the acts or practices or to enforce
compliance with this law or any rule or order under this law. Upon a
proper showing, a permanent or preliminary injunction, restraining
order, or writ of mandate shall be granted and a monitor, receiver,
conservator, or other designated fiduciary or officer of the court
may be appointed for the defendant or the defendant's assets, or
other ancillary relief may be granted as appropriate.
A receiver, monitor, conservator, or other designated fiduciary or
officer of the court appointed by the superior court pursuant to
this section may, with the approval of the court, exercise all of the
powers of the defendant's officers, directors, partners, trustees,
or persons who exercise similar powers and perform similar duties,
including the filing of a petition for bankruptcy. No action at law
or in equity may be maintained by any party against the commissioner,
or a receiver, monitor, conservator, or other designated fiduciary
or officer of the court by reason of their exercising these powers or
performing these duties pursuant to the order of, or with the
approval of, the superior court.
(a) a claim for ancillary relief, including, but not limited to, a
claim for restitution, disgorgement, or damages on behalf of the
person injured by the act or practice constituting the subject matter
of the action, and the court shall have jurisdiction to award
additional relief.
29541. (a) The commissioner in his or her discretion (1) may make
public or private investigations within or outside of this state that
the commissioner deems necessary to determine whether any person has
violated or is about to violate any provision of this law or any
rule or order hereunder, or to aid the enforcement of this law or in
the prescribing of rules and forms under this law, and (2) may
publish information concerning any violation of this law or a rule or
order hereunder.
(b) For the purpose of any investigation or proceeding under this
law, the commissioner or any officer designated by the commissioner
may administer oaths and affirmations, subpoena witnesses, compel
their attendance, take evidence, and require the production of any
books, papers, correspondence, memoranda, agreements, or other
documents or records which the commissioner deems relevant or
material to the inquiry.
commissioner, may issue to the person an order requiring him or her
to appear before the commissioner or the officer designated by the
commissioner, to produce documentary evidence, if so ordered, or to
give evidence touching the matter under investigation or in question.
as a contempt.
(d) No person is excused from attending and testifying or from
designated by the commissioner or in any proceeding instituted by the
(documentary or otherwise) required of him or her may tend to
incriminate him or her or subject him or her to a penalty or
forfeiture. However, no individual may be prosecuted or subjected to
any penalty or forfeiture for or on account of any transaction,
matter, or thing concerning which he or she is compelled, after
validly claiming his or her privilege against self-incrimination, to
testify or produce evidence (documentary or otherwise), except that
the individual testifying is not exempt from prosecution and
punishment for perjury or contempt committed in testifying.
29542. (a) If, in the opinion of the commissioner, any person is

engaging in any activity in violation of any provision of this law,
or rule or order under this law, the commissioner may order the
person to desist and refrain from the activity unless and until the
activity will not be in violation of any provision of this law or any
rule or order under this law.
(b) If after an order has been made under subdivision (a), a
request for hearing is filed in writing within one year of the date
of service of the order by the person to whom the order was directed,
a hearing shall be held in accordance with the Administrative
Procedure Act (Chapter 5, (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code), and the
commissioner shall have all of the powers granted under the
Administrative Procedure Act. Unless the hearing is commenced within
15 business days after the request is filed (or the person affected
consents to a later date), the order is rescinded.
within one year from the date of service of the order, the order
shall be deemed a final order of the commissioner and shall not be
subject to review by any court or agency, notwithstanding Section
29563.
29543. The commissioner may refer the evidence that is available

concerning any violation of this law, or of any rule or order under
this law, to the Attorney General or the district attorney of the
county in which the violation occurred, who may, with or without such
a reference, institute appropriate criminal proceedings under this
law. The commissioner and the commissioner's counsel, deputies, or
assistants may, upon request of the Attorney General or the district
attorney, assist the prosecutor in presenting the law or facts at the
trial.
29544. (a) Any person who willfully violates any provision of this
law, or who willfully violates any rule or order under this law,
shall be liable for a civil penalty not to exceed twenty-five
thousand dollars ($25,000) for each violation, which shall be
assessed and recovered in a civil action brought in the name of the
people of the State of California by the commissioner in any court of
competent jurisdiction.
The penalty collected shall be paid to the State Corporations Fund
to be used for the support of this division.
in any combination to enforce this division.
29545. (a) The commissioner may take actions that are authorized by
Section 9a of Title 7 of the United States Code (Section 6d of the
federal Commodity Exchange Act) as amended before or after the
effective date of this section.
(b) Nothing in this section shall be construed as a limitation on
the powers of the commissioner under this act or any other law
administered by the commissioner.
29546. The commissioner in his or her discretion may honor requests

from interested parties for interpretive opinions.
CORPORATIONS CODE
SECTION 29550-29555
29550. (a) Except as provided in subdivision (b), any person who

willfully violates any provision of this law, or who willfully
violates any rule or order under this law, shall upon conviction be
fined not more than two hundred fifty thousand dollars ($250,000) or
imprisoned in the state prison or in a county jail for not more than
one year, or be punished by both a fine and imprisonment; but no
person may be imprisoned for the violation of any rule or order if
that person proves that he or she had no knowledge of the rule or
order.
(b) Any person who willfully violates Section 29536 shall upon
conviction be fined not more than two hundred fifty thousand dollars
($250,000), or imprisoned in the state prison for two, three, or four
years, or be punished by both a fine and imprisonment.
(c) One-half of the fines collected under this section shall be
paid to the State Corporations Fund to be used for the support of
this division. The remainder of the fines collected under this
section shall be paid to the state or local agency which brought the
criminal prosecution.
statute.
29552. Any person who materially assists in any violation of this

law, or any rule or order of the commissioner under this law, is
jointly and severally liable with any other person liable under this
law for the violation.
29553. No action shall be maintained to enforce any liability under

Section 29552 unless brought before the expiration of four years
after the act or transaction constituting the violation or within one
year after the discovery by the plaintiff of the facts constituting
the violation, whichever occurs last.
29554. Every cause of action under this law survives the death of
any person who might have been a plaintiff or defendant.
29555. Except as explicitly provided in this law, no civil

person by implication from, or as a result of, the violation of any
provision of this law or any rule or order under this law. Nothing in
this law shall limit any liability which may exist by virtue of any
CORPORATIONS CODE
SECTION 29560-29567

form, permit, order, or written interpretive opinion of the
commissioner, or any written interpretive opinion of the Attorney
General, notwithstanding that the rule, form, permit, order, or
written interpretive opinion may later be amended or rescinded or be
reason.
29561. The commissioner may from time to time make, amend, and
rescind the rules, forms, and orders that are necessary to carry out
this law, and define any terms, whether or not used in this law,
insofar as the definitions are not inconsistent with this law. For
the purpose of rules, the commissioner may classify commodities,
commodity contracts, commodity options, and persons within the
commissioner's jurisdiction and may prescribe different requirements
for different classes. The commissioner may, in the commissioner's
discretion, waive any requirement of any rule or form in situations
where in his or her opinion the requirement is not necessary in the
public interest.

claiming it.
29563. Every final order, decision, certificate, registration, or

other official act of the commissioner is subject to judicial review
in accordance with law.
29564. Nothing in this law, shall impair, derogate, or otherwise

affect the authority or powers of the commissioner under the
Corporate Securities Law of 1968 (Part 3 (commencing with Section
25000)) or the application of any provision thereof to any person or
transaction subject thereto.

this end this law is declared to be severable.
29566. Neither the commissioner nor any employee of the

commissioner shall use any information which is filed with or
obtained by the commissioner which is not public information for
personal gain or benefit, nor shall the commissioner nor any employee
of the commissioner engage in any securities or commodity
transaction based on that information, even though public, if there
has not been a sufficient period of time for the securities or
commodity markets to assimilate that information.
29567. (a) The program established by this division shall be

supported from funds appropriated by the Legislature from the State
Corporations Fund.
(b) The funds appropriated from the State Corporations Fund and
made available for expenditure under subdivision (a) of this section
shall come from securities application filing fees collected under
subdivisions (e), (f), (h), and (i) of Section 25608 of the
Corporations Code.
CORPORATIONS CODE
SECTION 31000-31019
31000. This division may be known as the "Franchise Investment Law."

References in this division to "this law" refer to the applicable
provisions of this division.
31001. The Legislature hereby finds and declares that the

widespread sale of franchises is a relatively new form of business
which has created numerous problems both from an investment and a
business point of view in the State of California. Prior to the
enactment of this division, the sale of franchises was regulated only
to the limited extent to which the Corporate Securities Law of 1968
applied to those transactions. California franchisees have suffered
substantial losses where the franchisor or his or her representative
has not provided full and complete information regarding the
franchisor-franchisee relationship, the details of the contract
between franchisor and franchisee, and the prior business experience
of the franchisor.
It is the intent of this law to provide each prospective
franchisee with the information necessary to make an intelligent
decision regarding franchises being offered. Further, it is the
intent of this law to prohibit the sale of franchises where the sale
would lead to fraud or a likelihood that the franchisor's promises
would not be fulfilled, and to protect the franchisor and franchisee
by providing a better understanding of the relationship between the
franchisor and franchisee with regard to their business relationship.
31001.1. (a) To enhance the uniform and efficient administration,

and the effective enforcement, of this division, it is the intent of
the Legislature that the commissioner shall maintain a risk-based
process of reviewing franchise applications as described in this
section.
(b) Under the risk-based review process, the commissioner shall
focus on reviewing application information posing the most risk to
prospective franchisees in accordance with Section 31115, with
emphasis on risks associated with the franchisor's financial
condition, the franchisor's compliance record, and significant
deficiencies with the franchisor's application.
(c) When reviewing franchise filings under this section, the
commissioner shall concentrate on helping to prevent
misappropriation, mismanagement, and misrepresentation in connection
with the offer or sale of any franchise subject to this division.
(d) The commissioner shall consider guidelines, or other
information developed by the North American Securities Administrators
Association that are in effect, to assist in the implementation of
the risk-based review process. The risk-based review procedures
implemented by the commissioner shall be considered internal
management criteria and guidelines within the meaning of subdivisions
(d) and (e) of Section 11340.9 of the Government Code.
this part apply throughout this division.
31003. "Advertisement" means any written or printed communication

or any communication by means of recorded telephone messages or
spoken on radio, television, or similar communications media,
published in connection with an offer or sale of a franchise.
31003.5. "Business days" are all days other than every Saturday,
every Sunday, and such other days as are specified or provided for as
holidays in the Government Code.
31005. (a) "Franchise" means a contract or agreement, either

expressed or implied, whether oral or written, between two or more
persons by which:
(1) A franchisee is granted the right to engage in the business of
offering, selling or distributing goods or services under a
marketing plan or system prescribed in substantial part by a
franchisor; and
(2) The operation of the franchisee's business pursuant to such
plan or system is substantially associated with the franchisor's
trademark, service mark, trade name, logotype, advertising or other
commercial symbol designating the franchisor or its affiliate; and
(3) The franchisee is required to pay, directly or indirectly, a
franchise fee.
(b) For the purposes of this division, the term "franchise" also
means the following:
(1) Any contractual agreement between a petroleum corporation or
distributor and a gasoline dealer, or between a petroleum corporation
and distributor, under which the petroleum distributor or the
gasoline dealer is granted the right to use a trademark, trade name,
service mark, or other identifying symbol or name owned by the other
party to the agreement, or any agreement between a petroleum
corporation or distributor and a gasoline dealer, or between a
petroleum corporation and distributor, under which the petroleum
distributor or the gasoline dealer is granted the right to occupy
premises owned, leased, or controlled by the other party to the
agreement, for the purposes of engaging in the retail sale of
petroleum and other products of the other party to the agreement.
(2) Any contract between a refiner and a petroleum distributor,
between a refiner and a petroleum retailer, between a petroleum
distributor and another petroleum distributor, or between a petroleum
distributor and a petroleum retailer, under which a refiner or
petroleum distributor authorizes or permits a petroleum retailer or
petroleum distributor to use, in connection with the sale,
consignment, or distribution of gasoline, diesel, gasohol, or
aviation fuel, a trademark which is owned or controlled by such
refiner or by a refiner which supplies fuel to the petroleum
distributor which authorizes or permits such use. The term "franchise"
as defined in this paragraph includes the following:
(A) Any contract under which a petroleum retailer or petroleum
distributor is authorized or permitted to occupy leased marketing
premises, which premises are to be employed in connection with the
sale, consignment, or distribution of fuel under a trademark which is
owned or controlled by such refiner or by a refiner which supplies
fuel to the petroleum distributor which authorizes or permits such
occupancy.
(B) Any contract pertaining to the supply of fuel which is to be
sold, consigned, or distributed under a trademark owned or controlled
by a refiner, or under a contract which has existed continuously
since May 15, 1973, and pursuant to which, on May 15, 1973, fuel was
sold, consigned, or distributed under a trademark owned and
controlled on such date by a refiner.
(C) The unexpired portion of any franchise, as defined by the
preceding provisions of this subdivision, which is transferred or
assigned as authorized by the provisions of such franchise or by any
applicable provision of state law which permits such transfer or
assignment without regard to any provision of the franchise.
(c) For purposes of this division, the term "franchise" does not
include a nonprofit organization operated on a cooperative basis by
and for independent retailers which wholesales goods and services
primarily to its member retailers and to which all of the following
is applicable:
(1) Control and ownership of each member is substantially equal.
(2) Membership is limited to those who will avail themselves of
the services furnished by the organization.
(3) Transfer of ownership is prohibited or limited.
(4) Capital investment receives no return.
(5) Substantially equal benefits pass to the members on the basis
of patronage of the organization.
(6) Members are not personally liable for obligations of the
organization in the absence of a direct undertaking or authorization
by them.
(7) Services of the organization are furnished primarily for the
use of the members.
(8) Each member and prospective member is provided with an
offering circular which complies with the specifications of Section
31111.
(9) No part of the receipts, income, or profit of the organization
is paid to any profitmaking entity, except for arms-length payments
for necessary goods and services, and members are not required to
purchase goods or services from any designated profitmaking entity.
(d) The nonprofit organization is subject to an action for
rescission or damages under Section 3343.7 of the Civil Code if the
organization fraudulently induced the plaintiff to join the
organization.
31005.5. For the purposes of this division and in respect only to a

franchise as defined in subdivision (b) of Section 31005, the
following terms shall have the following meanings:
(a) "Franchisor" means a refiner or petroleum distributor who
authorizes or permits, under a franchise, a petroleum retailer or
petroleum distributor to use a trademark in connection with the sale,
consignment, or distribution of fuel.
(b) "Franchisee" means a petroleum retailer or petroleum
distributor who is authorized or permitted, under a franchise, to use
a trademark in connection with the sale, consignment, or
distribution of fuel.
(c) "Refiner" means any person engaged in the refining of crude
oil to produce fuel, and includes any affiliate of such person.
(d) "Petroleum distributor" means any person, including any
affiliate of such person, who either purchases fuel for sale,
consignment, or distribution to another, or receives fuel on
consignment for consignment or distribution to his or her own fuel
accounts or to accounts of his or her supplier, but shall not include
a person who is an employee of, or merely serves as a common carrier
providing transportation service for, such supplier.
(e) "Petroleum retailer" means any person who purchases fuel for
sale to the general public for ultimate consumption.
(f) "Marketing premises" means, in the case of any franchise,
premises which, under such franchise, are to be employed by the
franchisee in connection with the sale, consignment, or distribution
of fuel.
(g) "Leased marketing premises" means marketing premises owned,
leased, or in any way controlled by a franchisor and which the
franchisee is authorized or permitted, under the franchise, to employ
in connection with the sale, consignment, or distribution of fuel.
(h) "Contract" means any oral or written agreement. For supply
purposes, delivery levels during the same month of the previous year
shall be prima facie evidence of an agreement to deliver such levels.
(i) "Trademark" means any trademark, trade name, service mark, or
other identifying symbol or name.
(j) "Fuel" means gasoline, diesel, gasohol, or aviation fuel.
(k) "Affiliate" means any person who, other than by means of a
franchise, controls, is controlled by, or is under common control
with, any other person.
(l) "Petroleum corporation" means any corporation or person
owning, managing, or controlling the exploration, production,
processing, transportation, or sale of crude or refined petroleum or
any petroleum product.
31006. A "franchisee" is a person to whom a franchise is granted.
31007. A "franchisor" is a person who grants a franchise.
31008. "Area franchise" means any franchise between a franchisor

and a franchisee whereby the franchisee is granted the right to
operate more than one unit within a specified geographical area.
31008.5. "Subfranchise" means any contract or agreement between a

franchisor and a subfranchisor whereby the subfranchisor is granted
the right, for consideration given in whole or in part for that
right, to sell or negotiate the sale of franchises in the name or on
behalf of the franchisor. A contract or agreement which is a
franchise does not become a subfranchise merely because under its
terms a person is granted the right to receive compensation for
referrals to a franchisor or subfranchisor or to receive compensation
for acting as a sales representative on their behalf.
31009. A "subfranchisor" is a person to whom a subfranchise is

granted.
31010. Where used in this law, unless specifically stated

otherwise, "franchise" includes "area franchise" and "subfranchise."
31011. "Franchise fee" means any fee or charge that a franchisee or

subfranchisor is required to pay or agrees to pay for the right to
enter into a business under a franchise agreement, including, but not
limited to, any payment for goods and services.
However, the following shall not be considered the payment of a
franchise fee:
(a) The purchase or agreement to purchase goods at a bona fide
wholesale price if no obligation is imposed upon the purchaser to
purchase or pay for a quantity of the goods in excess of that which a
reasonable businessperson normally would purchase by way of a
starting inventory or supply or to maintain a going inventory or
supply.
(b) The payment of a reasonable service charge to the issuer of a
credit card by an establishment accepting or honoring that credit
card.
(c) Amounts paid to a trading stamp company under Chapter 3
(commencing with Section 17750) of Part 3 of Division 7 of the
Business and Professions Code by a person issuing trading stamps in
connection with the retail sale of merchandise or service.
31012. "Fraud" and "deceit" are not limited to common law fraud or
deceit.
31013. (a) An offer or sale of a franchise is made in this state

when an offer to sell is made in this state, or an offer to buy is
accepted in this state, or, if the franchisee is domiciled in this
state, the franchised business is or will be operated in this state.
(b) An offer to sell is made in this state when the offer either
originates from this state or is directed by the offeror to this
state and received at the place to which it is directed. An offer to
sell is accepted in this state when acceptance is communicated to the
offeror in this state; and acceptance is communicated to the offeror
in this state when the offeree directs it to the offeror in this
state reasonably believing the offeror to be in this state and it is
received at the place to which it is directed.
(c) An offer to sell is not made in this state merely because (1)
the publisher circulates or there is circulated on his behalf in this
state any bona fide newspaper or other publication of general,
regular, and paid circulation which has had more than two-thirds of
its circulation outside this state during the past 12 months, or (2)
a radio or television program originating outside this state is
received in this state.
31014. "Order" means a consent, authorization, approval,

prohibition or requirement applicable to a specific case issued by
the commissioner.

a limited liability company, a joint venture, an association, a joint
stock company, a trust or an unincorporated organization.
31016. "Publish" means publicly to issue or circulate by newspaper,

mail, radio or television, or otherwise to disseminate to the
public.
31017. "Rule" means any published regulation or standard of general

application issued by the commissioner.
31018. (a) "Sale" or "sell" includes every contract or agreement of

sale of, a contract to sell, or disposition of, a franchise or
interest in a franchise for value.
(b) "Offer" or "offer to sell" includes every attempt to dispose
of, or solicitation of an offer to buy, a franchise or interest in a
franchise for value.
(c) The terms defined in this section do not include the renewal
or extension of an existing franchise where there is no interruption
in the operation of the franchised business by the franchisee;
provided, that a material modification of an existing franchise,
whether upon renewal or otherwise, is a "sale" within the meaning of
this section.
31019. "State" means any state, territory, or possession of the

United States, the District of Columbia and Puerto Rico.
CORPORATIONS CODE
SECTION 31100-31109.1
31100. There shall be exempted from any or all of the provisions of

Chapter 2 (commencing with Section 31110) any other transaction
which the commissioner by rule exempts as not being comprehended
within the purposes of this law and the registration of which the
commissioner finds is not necessary or appropriate in the public
interest or for the protection of investors.
31101. There shall be exempted from the provisions of Chapter 2
(commencing with Section 31110) of this part the offer and sale of a
franchise if the franchisor complies with each of the following
minimum net worth, experience, disclosure, and notice filing
requirements:
(a) Net worth. The franchisor and, when necessary, a corporation
owning at least 80 percent of the franchisor (parent) meet one of the
following net worth requirements, according to financial statements
for the fiscal year just ended. The franchisor and the parent, when
necessary, may rely upon the immediately preceding fiscal year's
audited financial statement for 15 months from that fiscal year end
date.
(1) The franchisor has a net worth on a consolidated basis of not
less than five million dollars ($5,000,000), according to its audited
financial statement.
(2) The franchisor has a net worth of not less than one million
dollars ($1,000,000) and its parent has a net worth of five million
dollars ($5,000,000), according to the audited financial statements
of the franchisor and its parent, respectively.
(3) The franchisor has a net worth of one million dollars
($1,000,000), according to its unaudited financial statement, and the
parent has a net worth on a consolidated basis of not less than five
million dollars ($5,000,000), according to its audited financial
statement, and the parent absolutely and unconditionally guarantees
to assume the duties and obligations of the franchisor under the
franchise agreement should the franchisor become unable to perform
its duties and obligations.
(b) Experience. The franchisor or a corporation owning at least 80
percent of the franchisor (parent) complies with one or more of the
following conditions throughout the five-year period immediately
preceding the offer and sale of the franchise, or complies with one
of the following conditions during part of the period and one or more
of the following conditions during the balance of the period:
(1) The franchisor has had at least 25 franchisees conducting
business which is the subject of the franchise.
(2) The franchisor has conducted business which is the subject of
the franchise.
(3) The parent has had at least 25 franchisees conducting business
which is the subject of the franchise.
(4) The parent has conducted business which is the subject of the
franchise.
(c) Disclosure. (1) Except as provided in subparagraph (2), the
franchisor discloses in writing to each prospective franchisee, at
least 10 business days prior to the execution by the prospective
franchisee of any binding franchise or other agreement, or at least
10 business days prior to the receipt of any consideration, the
following information:
(A) The name of the franchisor, the name under which the
franchisor is doing or intends to do business, and the name of any
parent or affiliated company that will engage in business
transactions with franchisees.
(B) The franchisor's principal business address and the name and
address of its agent in the State of California authorized to receive
service of process.
(C) The business form of the franchisor, whether corporate,
partnership, or otherwise.
(D) The business experience of the franchisor, including the
length of time the franchisor (i) has conducted a business of the
type to be operated by the franchisees, (ii) has granted franchises
for such business, and (iii) has granted franchises in other lines of
business.
(E) A copy of the typical franchise contract or agreement proposed
for use or in use in this state.
(F) A statement of the franchise fee charged, the proposed
application of the proceeds of such fee by the franchisor, and the
formula by which the amount of the fee is determined if the fee is
not the same in all cases.
(G) A statement describing any payments or fees other than
franchise fees that the franchisee or subfranchisor is required to
pay to the franchisor, including royalties and payments or fees which
the franchisor collects in whole or in part on behalf of a third
party or parties.
(H) A statement of the conditions under which the franchise
agreement may be terminated or renewal refused, or repurchased at the
option of the franchisor.
(I) A statement as to whether, by the terms of the franchise
agreement or by other device or practice, the franchisee or
subfranchisor is required to purchase from the franchisor or his or
her designee services, supplies, products, fixtures, or other goods
relating to the establishment or operation of the franchise business,
together with a description thereof.
(J) A statement as to whether, by the terms of the franchise
agreement or other device or practice, the franchisee is limited in
the goods or services offered by him or her to his or her customers.
(K) A statement of the terms and conditions of any financing
arrangements when offered directly or indirectly by the franchisor or
his or her agent or affiliate.
(L) A statement of any past or present practice or of any intent
of the franchisor to sell, assign, or discount to a third party any
note, contract, or other obligation of the franchisee or
subfranchisor in whole or in part.
(M) If any statement of estimated or projected franchisee earnings
is used, a statement of such estimation or projection and the data
upon which it is based.
(N) A statement as to whether franchisees or subfranchisors
receive an exclusive area or territory.
(O) A copy of the financial statement or statements required by
subdivision (a).
(P) A copy of the unconditional guaranty, if applicable, required
by paragraph (3) of subdivision (a).
(2) In the case of a material modification of an existing
franchise, the franchisor discloses in writing to each franchisee
information concerning the specific sections of the franchise
agreement proposed to be modified and such additional information as
may be required by rule or order of the commissioner. Any agreement
by such franchisee to such material modifications shall not be
binding upon the franchisee if the franchisee, within 10 business
days after the receipt of such writing identifying the material
modification, notifies the franchisor in writing that the agreement
to such modification is rescinded. A writing identifying the material
modification is received when delivered to the franchisee. A written
notice by the franchisee rescinding an agreement to a material
modification is effective when delivered to the franchisor or when
deposited in the mail, postage prepaid, and addressed to the
franchisor in accordance with any notice provisions in the franchise
agreement, or when delivered or mailed to the person designated in
the franchise agreement for the receipt of notices on behalf of the
franchisor.
(d) Notice filing. The franchisor has filed with the commissioner
a notice of exemption and paid the fee required by subdivision (f) of
Section 31500 prior to an offer or sale of a franchise in this state
during any calendar year in which one or more franchises are sold,
excluding any material modification.
31102. The offer or sale of a franchise by a franchisee for his own

account or the offer or sale of the entire area franchise owned by a
subfranchisor for his own account, is exempted from the provisions
of Section 31110 if the sale is not effected by or through a
franchisor. A sale is not effected by or through a franchisor merely
because a franchisor has a right to approve or disapprove a different
franchisee.
31103. This division shall not be applicable to any transaction

relating to a bank credit card plan. "Bank credit card plan" means a
credit card plan in which the issuers of credit cards, as defined in
subdivision (a) of Section 1747.02 of the Civil Code are only: banks
regulated by or under the supervision of the Federal Reserve Board,
the Federal Deposit Insurance Corporation, the Comptroller of the
Currency of the United States, or the Commissioner of Financial
Institutions of this state under Division 1 (commencing with Section
99) of the Financial Code; or, persons controlling these banks,
provided that the assets of such a bank or banks represent a majority
of the assets on a consolidated basis of any holding company system
of which the card issuers may be a party; or, persons controlled by
these banks.

(commencing with Section 31110) of this part the offer and sale of a
franchise if the franchisor:
(a) Is a petroleum corporation or distributor who is a wholesale
distributor or marketer of petroleum products; doing business
continuously for the past five years and who does not require an
advance of funds in the nature of a fee or lease for such franchise
agreements; not engaged in the production or the refining of
petroleum; and
(b) Complies with the provisions of subdivisions (c) and (d) of
Section 31101.
(c) For the purposes of subdivision (a) of this section:
(1) A "wholesale distributor" or "marketer" means any entity
which, for wholesale, purchases or receives through transfer, or
otherwise obtains, by consignment or otherwise, refined petroleum
products and resells or otherwise transfers such products, without
substantially changing their form, to other purchasers.
(2) An "advance of funds" means (A) a fee or lease for a franchise
agreement, and (B) does not mean rent for the possession or use, or
both, of premises or property, the purchase of inventory for resale
or supplies, utility deposits, and other consideration or
expenditures for the formation or operation, or both, of a wholesale
distributor or marketer entity.
31105. Any offer, sale, or other transfer of a franchise, or any

interest in a franchise, to a resident of another state or any
territory or foreign country, shall be exempted from the provisions
of Chapter 2 (commencing with Section 31110) of this part, if all
locations from which sales, leases or other transactions between the
franchised business and its customers are made, or goods or services
are distributed, are physically located outside this state.

(commencing with Section 31110) of this part, any offer, sale, or
other transfer of a franchise or any interest in a franchise,
provided that the offer, sale or transfer meets the requirements in
subdivisions (a) and (b):
(a) Any of the following conditions apply:
(1) One or more of the owners of the prospective franchisee owning
at least a 50 percent interest in the prospective franchisee meet
(A) The owner or owners have had, within the seven years before
the date of the sale or other transaction, at least 24 months'
experience being responsible for the financial and operational
aspects of a business offering products or services substantially
similar to those offered by the franchised business.
(B) The owner or owners are not controlled by the franchisor.
(2) One or more of the owners of the prospective franchisee owning
at least a 50 percent interest in the prospective franchisee meet
(A) The owner or owners are, or have been within 60 days prior to
the sale or other transaction, an officer, director, managing agent,
or an owner of at least a 25 percent interest in the franchisor for
at least 24 months.
(B) The owner or owners are not controlled by the franchisor.
(3) The offer, sale, or other transfer is of an additional
franchise to an existing franchisee of the franchisor, or to an
entity, one or more of the officers, directors, managing agents or
owners of at least a 25 percent interest of which is an existing
franchisee of the franchisor; provided that, in either case, for 24
months or more the franchisee, or the qualifying person, has been
engaged in a business offering products or services substantially
similar to those to be offered by the franchise being sold, or
otherwise transferred.
(b) The franchisor files with the commissioner a notice of
exemption and pays the fee prescribed in subdivision (f) of Section
31500 no later than 15 calendar days after the sale of a franchise in
this state pursuant to this section.

(commencing with Section 31110) of this part, any offer (but not the
sale) by a franchisor of a franchise while an application for renewal
or amendment is pending if the prospective franchisee receives all
of the following:
(a) The offering circular and its exhibits as filed with the
commissioner with the application for renewal or amendment.
(b) A written statement from the franchisor that (1) the filing
has been made but is not effective, (2) the information in the
offering circular and exhibits has not been reviewed by the
commissioner, and (3) the franchisor will deliver to the prospective
franchisee an effective offering circular and exhibits at least 10
business days prior to execution by the prospective franchisee of a
binding agreement or payment of any consideration to the franchisor,
or any person affiliated with the franchisor, whichever occurs first,
showing all material changes from the offering circular and exhibits
received by the prospective franchisee under subdivision (a) of this
section.
(c) The offering circular and exhibits in accordance with
paragraph (3) of subdivision (b) of this section.

(commencing with Section 31110), any offer or sale of a franchise if
the franchise involves the adding of a new product or service line to
the existing business of a prospective franchisee, provided all of
the following requirements are met:
(a) For at least the last 24 months prior to the date of sale of
the franchise, the prospective franchisee, or if the prospective
franchisee is not a natural person, an existing officer, director, or
managing agent of the prospective franchisee who has held that
position with the prospective franchisee for at least the last 24
months, has been engaged in a business offering products or services
substantially similar or related to those to be offered by the
franchised business.
(b) The new product or service is substantially similar or related
to the product or service being offered by the prospective
franchisee's existing business.
(c) The franchised business is to be operated from the same
business location as the prospective franchisee's existing business.
(d) The parties anticipated, in good faith, at the time the
agreement establishing the franchise relationship was reached, that
sales resulting from the franchised business will not represent more
than 20 percent of the total sales in dollar volume of the franchisee
on an annual basis.
(e) The prospective franchisee is not controlled by the
franchisor.
(f) The franchisor files with the commissioner a notice of
31500 prior to an offer or sale of such a franchise in this state
during any calendar year in which one or more of those franchises are
sold.
31109. Any offer or sale of a franchise that meets all of the

following requirements shall be exempt from Chapter 2 (commencing
with Section 31110):
(a) Each and every purchaser of the franchise is one of the
following:
(1) Any partner, executive officer, or director of the franchisor,
or any executive officer of its corporate general partner if the
franchisor is a partnership, or any manager if the franchisor is a
(2) Any entity with total assets exceeding five million dollars
($5,000,000) according to its most recent financial statements and
not specifically formed for the purpose of acquiring the franchise
offered. For purposes of this section, "entity" shall mean an
organization described in Section 501(c)(3) of the Internal Revenue
Code, a corporation, Massachusetts or similar business trust, limited
liability company, or partnership. The financial statements referred
to in this paragraph shall meet both of the following requirements:
(A) Be as of date not more than 90 days prior to the earlier of
either the date on which the first prospective purchaser signs any
binding franchise or other agreement with the franchisor in
connection with the award of the franchise, or the date on which the
franchisor receives any consideration from the first prospective
purchaser in connection with the award of the franchise.
(B) Be prepared in accordance with either of the following:
(i) Generally accepted accounting principles and, if the entity
has consolidated subsidiaries, on a consolidated basis.
(ii) The rules and requirements of the Securities and Exchange
Commission, whether or not required by law to be prepared in
accordance with those rules and requirements.
(3) Any natural person whose net worth, or joint net worth with
that person's spouse, exceeds one million dollars ($1,000,000) at the
time of his or her purchase of the franchise, excluding the value of
that person's personal residence, any and all retirement or pension
plan accounts or benefits, home furnishings, and automobiles.
(4) Any natural person whose gross income exceeds three hundred
thousand dollars ($300,000) per year in each of the two most recent
years, or whose joint gross income with that person's spouse exceeds
five hundred thousand dollars ($500,000) per year in each of those
years, and who reasonably expects to reach the same income level in
the current year.
(5) Any entity, in which all of the equity owners are persons or
entities described in either paragraph (1), (2), (3), or (4).
(b) Each and every purchaser of the franchise has knowledge and
experience in financial and business matters, either alone or with
professional advisers of the purchaser who are unaffiliated with, and
not directly or indirectly compensated by, the franchisor or an
affiliate or selling agent of the franchisor, such that the
franchisor reasonably believes, based on reasonable inquiry before
the sale, that each and every purchaser has the capacity to evaluate
the merits and risks of, and protect their own interests in, the
franchise investment.
(c) Each and every purchaser of the franchise purchases the
franchise for the purchaser's own account, or a trust account if the
purchaser is a trustee, for the purpose of conducting the business as
a franchise and not with a view to, or for a sale in connection
with, any resale or distribution of the franchise or any interest in
the franchise.
(d) The immediate cash payment required from a purchaser of the
franchise who is a natural person, upon the purchase of the
franchise, shall not exceed 10 percent of that person's net worth or
joint net worth with that person's spouse, exclusive of that person's
personal residence, any and all retirement or pension accounts or
benefits, home furnishings and automobiles.
(e) The franchisor files with the commissioner a notice of
31500 prior to any offer or sale of a franchise in this state for
which the exemption is claimed during any calendar year in which one
or more franchises are sold, excluding any material modification.
(f) No franchisor or any of its officers, directors, employees, or
agents shall form, organize, engage, or assist any person to
purchase a franchise for resale or distribution to avoid the
registration requirements of Chapter 2 (commencing with Section
31110).
31109.1. (a) There shall be exempted from the provisions of Chapter

2 (commencing with Section 31110) the offer and sale of a franchise
registered under Section 31111, 31121, or 31123 on terms different
from the terms of the offer registered thereunder if all of the
following requirements are met:
(1) The initial offer is the offer registered under Section 31111,
31121, or 31123.
(2) The prospective franchisee receives all of the following in a
separate written appendix to the offering circular:
(A) A summary description of each material negotiated term that
was negotiated by the franchisor for a California franchise during
the 12-month period ending in the calendar month immediately
preceding the month in which the negotiated offer or sale is made
under this section.
(B) A statement indicating that copies of the negotiated terms are
available upon written request.
(C) The name, telephone number, and address of the representative
of the franchisor to whom requests for a copy of the negotiated terms
may be obtained.
(3) The franchisor certifies or declares in an appendix to its
application for renewal that it has complied with all of the
requirements of this section, in the event this exemption is claimed.
(4) The negotiated terms, on the whole, confer additional benefits
on the franchisee.
(b) The franchisor shall provide a copy of the negotiated terms
described in subdivision (a) to the prospective franchisee within
five business days following the request of the franchisee.
(c) The franchisor shall maintain copies of all material
negotiated terms for which this exemption is claimed for a period of
five years from the effective date of the first agreement containing
the relevant negotiated term. Upon the request of the commissioner,
the franchisor shall make the copies available to the commissioner
for review. For purposes of this section, the commissioner may
prescribe by rule or order the format and content of the summary
description of the negotiated terms required by subparagraph (A) of
paragraph (2) of subdivision (a).
(d) For purposes of this section, "material" means that a
reasonable franchisee would view the terms as important in
negotiating the franchise.
CORPORATIONS CODE
SECTION 31110-31125
31110. On and after April 15, 1971, it shall be unlawful for any
person to offer or sell any franchise in this state unless the offer
of the franchise has been registered under this part or exempted
under Chapter 1 (commencing with Section 31100) of this part.
31111. (a) The application for registration of an offer shall be

filed with the commissioner upon the Uniform Franchise Registration
Application, as identified, modified, and supplemented by rule of the
commissioner.
(b) An authorization for the commissioner to examine the
registrant's financial records of the sale of the franchise pursuant
to Section 7473 of the Government Code shall be filed with the
application.
31112. Any application or amendment under this law shall be signed

and verified by the franchisor or by the subfranchisor. Such
verification shall be in the same manner provided in the Code of
Civil Procedure for the verification of pleadings.
31113. If the commissioner finds that it is necessary and

appropriate for the protection of prospective franchisees or
subfranchisors because the applicant has failed to demonstrate that
adequate financial arrangements have been made to fulfill the
franchisor's obligations to provide real estate, improvements,
equipment, inventory, training, or other items included in the
offering, the commissioner may by rule or order require the escrow or
impound of franchisee fees and other funds paid by the franchisee or
subfranchisor until such obligations have been satisfied. At the
option of the franchisor, the franchisor may furnish a surety bond as
provided by rule of the commissioner.
31114. The application for registration shall be accompanied by a

proposed offering circular, which shall contain the material
information set forth in the application for registration, as
specified by rule of the commissioner, and such additional
disclosures as the commissioner may require. The offering circular
shall recite in bold type of not less than 10-point type that
registration does not constitute approval, recommendation, or
endorsement by the commissioner.
31115. The commissioner may summarily issue a stop order denying

the effectiveness of or suspending or revoking effectiveness of any
registration if the commissioner finds:
(a) That there has been a failure to comply with any of the
provisions of this law or the rules of the commissioner pertaining
thereto.
(b) That the offer or sale of the franchise would constitute
misrepresentation to, or deceit or fraud of the purchasers, or that,
in the case of a franchise other than a subfranchise, a major
inducement to prospective franchisees is fees or other compensation
from participation in the sale of additional franchises.
(c) That the applicant has failed to comply with any rule or order
of the commissioner issued pursuant to Section 31113.
(d) That any person identified in the application or any officer
or director of the franchisor, whether or not identified in the
application, meets one or more of the following conditions, and the
involvement of this person in the sale or management of the franchise
creates an unreasonable risk to prospective franchisees:
(1) Has been convicted of a felony, or pleaded nolo contendere to
a felony charge, or held liable in a civil action by final judgment
if the felony or civil action involved fraud, embezzlement,
fraudulent conversion, or misappropriation of property.
(2) Is subject to any currently effective order of the Securities
and Exchange Commission or the securities administrator of any state
denying registration to or revoking or suspending the registration of
the person as a securities broker or dealer or investment adviser or
is subject to any currently effective order of any national
securities association or national securities exchange (as defined in
the Securities and Exchange Act of 1934) suspending or expelling the
person from membership in the association or exchange.
(3) Is subject to any currently effective order or ruling of the
Federal Trade Commission.
(4) Is subject to any currently effective injunctive or
restrictive order relating to business activity as a result of an
action brought by any public agency or department, including, without
limitation, actions affecting a license as a real estate broker or
sales person.
31116. (a) Except as provided in subdivision (b), if no stop order

under Section 31115 is in effect under this law, registration of the
offer of franchises automatically becomes effective at 12 o'clock
noon, California time, of the 15th business day after the filing of
the application for registration or the last amendment thereto, or at
such earlier time as the commissioner determines.
(b) With respect to any application for registration or the last
amendment thereto filed between January 1, 1971, and March 15, 1971,
if no stop order under Section 31115 is in effect under this law,
registration becomes effective on April 15, 1971; with respect to any
application filed after March 15, 1971 and before May 10, 1971, if
no stop order under Section 31115 is in effect under this law,
registration becomes effective on June 1, 1971, or the 15th business
day after the filing, whichever is the later, or at such earlier time
as the commissioner determines.
31117. Upon the entry of a stop order under Section 31115 the
commissioner shall promptly notify the applicant that it has been
entered and of the reasons therefor and that upon receipt of written
request the matter will be set down for hearing to commence within 15
business days after such receipt unless the applicant consents to a
later date. If no hearing is requested within 30 days after receipt
of the notice and none is ordered by the commissioner, the order will
remain in effect until it is modified or vacated by the
commissioner. If a hearing is requested or ordered, the commissioner,
after notice and hearing in accordance with the provisions of
Title 2 of the Government Code, in connection with which the
commissioner shall have all of the powers granted thereunder, may
modify or vacate the order or extend it until its final
determination.
31118. The commissioner may vacate or modify a stop order if he

finds that the conditions which caused its entry have changed or that
it is otherwise in the public interest to do so.
31119. (a) It is unlawful to sell any franchise in this state that

is subject to registration under this law without first providing to
the prospective franchisee, at least 14 days prior to the execution
by the prospective franchisee of any binding franchise or other
agreement, or at least 14 days prior to the receipt of any
consideration, whichever occurs first, a copy of the offering
circular, together with a copy of all proposed agreements relating to
the sale of the franchise.
(b) Nothing in this division shall be construed to prevent a
franchisor from providing copies of the offering circular documents
to prospective franchisees through electronic means pursuant to any
requirements or conditions that may be imposed by rule or order of
the commissioner.
31120. A franchise offering shall be deemed duly registered for a

period of one year from the effective date of the registration,
unless the commissioner by order or rule specifies a different
period.
31121. The registration may be renewed for additional periods of

one year each, unless the commissioner by rule or order specifies a
different period, by submitting to the commissioner a registration
renewal statement no later than 15 business days prior to the
expiration of the registration unless such period is waived by order
of the commissioner. If no stop order or other order under Section
31115 is in effect under this law, registration of the offer of the
franchises automatically becomes renewed effective at 12 o'clock
noon, California time, of the date on which the prior registration is
due to expire, or at such earlier time as the commissioner
determines.
31122. The registration renewal statement shall be in the form and

content prescribed by the commissioner, and shall be accompanied by a
proposed offering prospectus. Each such registration renewal
statement shall be accompanied by the fee prescribed in Part 5
(commencing with Section 31500) of this division.
31123. A franchisor shall promptly notify the commissioner in

writing, by an application to amend the registration, of any material
change in the information contained in the application as originally
submitted, amended or renewed. The commissioner may by rule further
define what shall be considered a material change for such purposes,
and the circumstances under which a revised offering prospectus must
accompany such application.
31124. An amendment to an application filed after the effective

date of the registration of the sale of franchises, if such amendment
is approved by the commissioner, shall become effective on such date
as the commissioner may determine, having due regard for the public
interest and the protection of franchisees.
31125. (a) An application for registration of a material

modification of an existing franchise or of existing franchises shall
be in a form and contain information as the commissioner may by rule
prescribe, and shall be accompanied by a proposed disclosure form as
specified in subdivision (b). The application may be included with
an application pursuant to Section 31111 or 31121.
(b) Except as provided in subdivisions (c) and (d), it is unlawful
to solicit the agreement of a franchisee to a proposed material
modification of an existing franchise without first delivering to the
franchisee a written disclosure, in a form and containing
information as the commissioner may by rule or order require,
identifying the proposed modification, either five business days
prior to the execution of any binding agreement by the franchisee to
the modification or containing a statement that the franchisee may,
by written notice mailed or delivered to the franchisor or a
specified agent of the franchisor within not less than five business
days following the execution of the agreement, rescind the agreement
to the material modification.
(c) Any modification of a franchise agreement with an existing
franchisee of a franchisor shall be exempted from the provisions of
this chapter, if all of the following are met:
(1) The franchisee receives the complete written modification at
least five business days prior to the execution of a binding
agreement, or providing that the franchisee may, by written notice
mailed or delivered to the franchisor or a specified agent of the
franchisor within not less than five business days following the
execution of the agreement, rescind the agreement to the material
modification; provided (A) the agreement is not executed within 12
months after the date of the franchise agreement, and (B) the
modification does not waive any right of the franchisee under the
California Franchise Relations Act (Chapter 5.5 (commencing with
Section 20000) of Division 8 of the Business and Professions Code),
but the modification may include a general release of all known and
unknown claims by a party to the modification.
(2) The modification meets one of the following:
(A) The proposed modification is in connection with the resolution
of a bona fide dispute between the franchisor and the franchisee or
the resolution of a claimed or actual franchisee or franchisor
default, and the modification is not applied on a franchise
systemwide basis at or about the time the modification is executed. A
modification shall not be deemed to be made on a franchise
systemwide basis if it is offered on a voluntary basis to fewer than
25 percent of the franchisor's California franchises within any
12-month period.
(B) The proposed modification is offered on a voluntary basis to
fewer than 25 percent of the franchisor's California franchises
within any 12-month period, provided each franchisee is given a right
to rescind the modification agreement if the modification is not
made in compliance with paragraph (1) of subdivision (c).
(d) Any modification of a franchise agreement with an existing
franchise of a franchisee shall be exempted from this chapter if the
modification is offered on a voluntary basis and does not
substantially and adversely impact the franchisee's rights, benefits,
privileges, duties, obligations, or responsibilities under the
franchise agreement.
(e) For purposes of this section, "California franchise" means:
(1) an existing franchise of a franchisee with any location in this
state from which sales, leases, or other transactions between the
franchised business and its customers are made or goods or services
are distributed, or (2) an existing franchise of a franchisee that is
a resident of this state and that owns, controls, or has an equity
interest in the franchise.
(f) A franchisor shall not make modifications in consecutive years
for the purpose of evading the 25 percent requirements set forth
above.
CORPORATIONS CODE
SECTION 31150-31157
31150. Every franchisor or subfranchisor offering franchises for

sale in this state shall at all times keep and maintain a complete
set of books, records, and accounts of such sales.
31151. The commissioner may accept and act upon the opinions,
appraisements and reports of any engineers, appraisers, or other
experts which may be presented by an applicant or any interested
party, on any question of fact concerning or affecting the franchises
proposed to be offered and sold. In lieu of, or in addition to, such
opinions, appraisements, and reports, the commissioner may have any
or all matters concerning or affecting such franchises investigated,
appraised, passed upon and certified to him by engineers, appraisers
or other experts selected by him.
31152. Any document filed under this law or under the Corporate
Securities Law of 1968 or a predecessor statute thereto may be
incorporated by reference in a subsequent application filed under
this law if it was filed within four years prior to the filing of
such application, or is otherwise available in the files of the
commissioner, to the extent that the document is currently accurate.

claiming it.
31154. (a) Neither (1) the fact that an application for

registration under this law has been filed, nor (2) the fact that
such registration has become effective constitutes a finding by the
commissioner that any document filed under this law is true, complete
or not misleading. Neither any such fact nor the fact that an
exemption is available for a transaction means that the commissioner
has passed in any way upon the merits or qualifications of, or
recommended or given approval to, any person, franchise or
transaction.
(b) It is unlawful to make or cause to be made to any prospective
purchaser or offeree any representation inconsistent with subdivision
(a) of this section.
31155. Every applicant for registration of an offer to sell

franchises under this law, by other than a California corporation,
California limited partnership, or California limited liability
company, shall file with the commissioner, in such form as he or she
by rule prescribed, an irrevocable consent appointing the
commissioner or his or her successor in office to be his or her
attorney to receive service of any lawful process in any noncriminal
suit, action or proceeding against him or her or his or her
successor, executor or administrator, which arises under this law or
any rule or order hereunder after the consent has been filed, with
the same force and validity as if served personally on the person
filing the consent. A person who has filed such a consent in
connection with a previous registration under this law need not file
another. Service may be made by leaving a copy of the process in the
office of the commissioner but it is not effective unless (a) the
plaintiff, who may be the commissioner in a suit, action, or
proceeding instituted by him or her, forthwith sends notice of the
service and a copy of the process by registered or certified mail to
the defendant or respondent at his or her last address on file with
the commissioner, and (b) the plaintiff's affidavit of compliance
with this section is filed in the case on or before the return day of
the process, if any, or within such further time as the court
allows.
31156. No person shall publish in this state any advertisement

offering a franchise subject to the registration requirements of this
law unless a true copy of the advertisement has been filed in the
office of the commissioner at least three business days prior to the
first publication or such shorter period as the commissioner by rule
or order may allow, or unless such advertisement has been exempted by
rule of the commissioner.
31157. No person shall publish any advertisement concerning any

franchise in this state after the commissioner finds that the
advertisement contains any statement that is false or misleading or
omits to make any statement necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading and so notifies the person in writing. Such notification
may be given summarily without notice of hearing. At any time after
the issuance of a notification under this section, the person
desiring to use the advertisement may in writing request that the
order be rescinded. Upon the receipt of such a written request, the
matter shall be set down for hearing to commence within 15 business
days after such receipt unless the person making the request consents
to a later date. After such hearing, which shall be conducted in
accordance with the provisions of Chapter 5 (commencing with Section
11500) of Part 1 of Division 3 of Title 2 of the Government Code, the
commissioner shall determine whether to affirm and continue or to
rescind such order, and the commissioner shall have all the powers
granted under such act.
CORPORATIONS CODE
SECTION 31200-31204

statement of a material fact in any application, notice or report
filed with the commissioner under this law, or willfully to omit to
state in any such application, notice, or report any material fact
which is required to be stated therein, or fail to notify the
commissioner of any material change as required by Section 31123.
31201. It is unlawful for any person to offer or sell a franchise

in this state by means of any written or oral communication not
enumerated in Section 31200 which includes an untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements made, in the light of the circumstances under
which they were made, not misleading.

statement of a material fact in any statement required to be
disclosed in writing pursuant to Section 31101, or willfully to omit
to state in any such statement any material fact which is required to
be stated therein.
31203. It is unlawful for any person to violate any order of the

commissioner or condition to the effectiveness of the registration of
the offer or sale of franchises.

any provision of this division.
this division.
CORPORATIONS CODE
SECTION 31210-31211
31210. It is unlawful for any person to effect or attempt to effect

a sale of a franchise in this state, except in transactions exempted
under Chapter 1 (commencing with Section 31100) of Part 2 of this
division, unless such person is: (1) identified in an application or
amended application filed with the commissioner pursuant to Part 2
(commencing with Section 31100) of this division, (2) licensed by the
California Department of Real Estate as a real estate broker or real
estate salesman, or (3) licensed by the commissioner as a
broker-dealer or agent pursuant to the Corporate Securities Law of
1968.
31211. If in the opinion of the commissioner any person is acting

in violation of Section 31210, the commissioner may order such person
to desist and refrain from further activity. If, after such an order
has been made, a request for a hearing is filed in writing by the
person to whom such order was directed, a hearing shall be held in
the commissioner shall have all of the powers granted thereunder;
unless such hearing is commenced within 15 business days after the
request is made (or the person affected consents to a later date),
such order shall be deemed rescinded.
CORPORATIONS CODE
SECTION 31220
31220. It shall be a violation of this division for any franchisor,

directly or indirectly, through any officer, agent or employee, to
restrict or inhibit the right of franchisees to join a trade
association or to prohibit the right of free association among
franchisees for any lawful purposes. Notwithstanding Section 31410, a
violation of this section shall not constitute a crime.
CORPORATIONS CODE
SECTION 31300-31306
31300. Any person who offers or sells a franchise in violation of
Section 31101, 31110, 31119, 31200, or 31202, or in violation of any
provision of this division that provides an exemption from the
provisions of Chapter 2 (commencing with Section 31110) of Part 2 or
any portions of Part 2, shall be liable to the franchisee or
subfranchisor, who may sue for damages caused thereby, and if the
violation is willful, the franchisee may also sue for rescission,
unless, in the case of a violation of Section 31200 or 31202, the
defendant proves that the plaintiff knew the facts concerning the
untruth or omission, or that the defendant exercised reasonable care
and did not know, or, if he or she had exercised reasonable care,
would not have known, of the untruth or omission.
31301. Any person who violates Section 31201 shall be liable to any
person (not knowing or having cause to believe that such statement
was false or misleading) who, while relying upon such statement shall
have purchased a franchise, for damages, unless the defendant proves
that the plaintiff knew the facts concerning the untruth or omission
or that the defendant exercised reasonable care and did not know,
(or if he had exercised reasonable care would not have known) of the
untruth or omission.
31302. Every person who directly or indirectly controls a person

liable under Section 31300 or 31301, every partner in a firm so
liable, every principal executive officer or director of a
corporation so liable, every person occupying a similar status or
performing similar functions, every employee of a person so liable
who materially aids in the act or transaction constituting the
violation, are also liable jointly and severally with and to the same
extent as such person, unless the other person who is so liable had
no knowledge of or reasonable grounds to believe in the existence of
the facts by reason of which the liability is alleged to exist.
31302.5. (a) Any person who violates Section 31220 may be sued in
the superior court in the county in which the defendant resides or
where a franchise affected by the violation does business, for
temporary and permanent injunctive relief and for damages, if any,
and the costs of suit, including reasonable attorneys' fees. A
plaintiff shall not be required to allege or prove that actual
damages have been suffered in order to obtain injunctive relief.
(b) No action shall be maintained to enforce any liability created
under Section 31220 unless brought before the expiration of two
years after the violation upon which it is based or the expiration of
one year after the discovery by the plaintiff of the facts
constituting such violation, whichever occurs first.

four years after the act or transaction constituting the violation,
the expiration of one year after the discovery by the plaintiff of
the fact constituting the violation, or 90 days after delivery to the
franchisee of a written notice disclosing any violation of Section
31110 or 31200, which notice shall be approved as to form by the
commissioner, whichever shall first expire.

two years after the violation upon which it is based, expiration of
one year after the discovery by the plaintiff of the facts
constituting such violation, or 90 days after delivery to the
franchisee of a written notice disclosing any violation of Section
31201 or 31202 which notice shall be approved as to form by the
commissioner, whichever shall first expire.
31305. Every cause of action under this chapter survives the death
of any person who might have been a plaintiff or defendant.
31306. Except as explicitly provided in this chapter, no civil

person by implication from or as a result of the violation of any
provision of this law or any rule or order hereunder. Nothing in this
chapter shall limit any liability which may exist by virtue of any
CORPORATIONS CODE
SECTION 31400-31408

has engaged or is about to engage in any act or practice constituting
a violation of any provision of this law or any rule or order
hereunder, the commissioner may in the commissioner's discretion
bring an action, or the commissioner may request the Attorney General
to bring an action in the name of the people of the State of
California, in the superior court to enjoin the acts or practices or
to enforce compliance with this law or any rule or order hereunder.
Upon a proper showing a permanent or preliminary injunction,
restraining order or writ of mandate shall be granted and a receiver
or conservator may be appointed for the defendant or the defendant's
assets.
(a) a claim for ancillary relief, including, but not limited to, a
claim for restitution or disgorgement or damages on behalf of the
matter of the action, and the court shall have jurisdiction to award
that additional relief.
31400.1. In any proceeding under Section 31400, the court may
prohibit, conditionally or unconditionally, and permanently or for
such period of time as it shall determine, any person who violated
Section 31200, 31201, or 31202 from acting as an officer or director
of any franchisor if the person's conduct demonstrates unfitness to
serve as an officer or director of the franchisor.
31401. (a) The commissioner may in his discretion (1) make such
public or private investigations within or outside of this state as
he deems necessary to determine whether any person has violated or is
about to violate any provision of this law or any rule or order
hereunder or to aid in the enforcement of this law or in the
prescribing of rules and forms hereunder, and (2) publish information
concerning the violation of this law or any rule or order hereunder.
(b) For the purpose of any investigation or proceeding under this
law, the commissioner or any officer designated by him may administer
oaths and affirmations, subpoena witnesses, compel their attendance,
take evidence, and require the production of any books, papers,
which the commissioner deems relevant or material to the inquiry.
commissioner, may issue to the person an order requiring him to
appear before the commissioner, or the officer designated by him,
there to produce documentary evidence, if so ordered, or to give
evidence touching the matter under investigation or in question.
as a contempt.
(d) No person is excused from attending and testifying or from
designated by him, or in any proceeding instituted by the
(documentary or otherwise) required of him may tend to incriminate
him or subject him to a penalty or forfeiture; but no individual may
be prosecuted or subjected to any penalty or forfeiture for or on
account of any transaction, matter, or thing concerning which he is
compelled, after validly claiming his privilege against
self-incrimination, to testify or produce evidence (documentary or
otherwise), except that the individual testifying is not exempt from
prosecution and punishment for perjury or contempt committed in
testifying.
31402. If, in the opinion of the commissioner, the offer of any

franchise is subject to registration under this law and it is being,
or it has been, offered for sale without the offer first being
registered, the commissioner may order the franchisor or offeror of
that franchise to desist and refrain from the further offer or sale
of that franchise unless and until the offer has been duly registered
under this law. If, after that order has been made, a request for a
hearing is filed in writing within 60 days from the date of service
of the order by the person to whom the order was directed, a hearing
shall be held in accordance with Chapter 5 (commencing with Section
the commissioner shall have all of the powers granted under that
chapter. Unless that hearing is commenced within 15 business days
after the request is made (or the person affected consents to a later
date), the order shall be deemed rescinded.
be deemed a final order of the commissioner and shall not be subject
to review by any court or agency, notwithstanding Section 31501.
31403. If, in the opinion of the commissioner, the offer of any

franchise exempt from registration under this law is being or has
been offered for sale without complying with Section 31201, or any
other provision that provides an exemption from Chapter 2 (commencing
with Section 31110) of Part 2, the commissioner may order the
franchisor or offeror of the franchise to desist and refrain from the
further offer or sale of the franchise unless and until the offer is
made in compliance with this law. If, after that order has been
made, a request for a hearing is filed in writing within 60 days from
the date of service of the order by the person to whom the order was
directed, a hearing shall be held in accordance with Chapter 5
the Government Code and the commissioner shall have all of the
powers granted under that chapter. Unless that hearing is commenced
within 15 business days after the request is made, or the person
affected consents to a later date, the order shall be deemed
rescinded.
be deemed a final order of the commissioner and shall not be subject
to review by any court or agency, notwithstanding Section 31501.
31404. The commissioner may refer evidence that is available

concerning any violation of this law or of any rule or order
hereunder to the district attorney of the county in which the
violation occurred, who may, with or without such a reference,
institute appropriate criminal proceedings under this law. Upon
request of the district attorney, the commissioner and the counsel,
deputies, or assistants of the commissioner may assist the district
attorney in presenting the law or facts at the trial.
31405. (a) Any person who violates any provision of this law, or
who violates any rule or order made under this law, shall be liable
for a civil penalty not to exceed ten thousand dollars ($10,000) for
each violation, which shall be assessed and recovered in a civil
action brought in the name of the people of the State of California
by the commissioner in any court of competent jurisdiction.
in any combination to enforce the provisions of this division.
31406. (a) If, upon inspection or investigation, based upon a

complaint or otherwise, the commissioner has cause to believe that a
person is violating any provision of this division or any rule or
order promulgated pursuant to this division, the commissioner may
issue a citation to that person in writing describing with
particularity the basis of the citation. Each citation may contain an
order to desist and refrain and an assessment of an administrative
penalty not to exceed two thousand five hundred dollars ($2,500) per
violation and shall contain reference to this section, including the
provisions of subdivision (c). All penalties collected under this
section shall be deposited in the State Corporations Fund.
(b) The sanctions authorized under this section shall be separate
from, and in addition to, all other administrative, civil, or
criminal remedies.
(c) If within 60 days from the receipt of the citation, the person
cited fails to notify the commissioner that the person intends to
request a hearing as described in subdivision (d), the citation shall
be deemed final.
(d) Any hearing under this section shall be conducted in
accordance with Chapter 5 (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code.
(e) After the exhaustion of the review procedures provided for in
this section, the commissioner may apply to the appropriate superior
court for a judgment in the amount of the administrative penalty and
order compelling the cited person to comply with the order of the
commissioner. The application shall include a certified copy of the
final order of the commissioner and shall constitute a sufficient
showing to warrant the issuance of the judgment and order.
31407. (a) If, after examination or investigation, the commissioner

has reasonable grounds to believe that any person is conducting
business in violation of any provision of this division or related
rule or order binding upon it, the commissioner may, by written order
addressed to the person, direct the discontinuance of the violation.
The order shall be effective immediately, but shall not become final
except in accordance with subdivision (b).
(b) An order issued pursuant to this section shall not become
final except after notice to the affected person of the commissioner'
s intention to make the order final and of the reasons for the
finding. The commissioner shall also notify the person that upon
receiving a request the matter shall be set for hearing to commence
within 15 business days after receipt of the request. The person may
consent to have the hearing commence at a later date. If no hearing
is requested within 60 days after the mailing or service of the
required notice, and none is ordered by the commissioner, the order
may become final without a hearing and that person shall immediately
discontinue the practices named in the order. If a hearing is
requested or ordered it shall be held in accordance with Chapter 5
the Government Code, and the commissioner shall have all of the
powers granted under that chapter. If, upon the conclusion of the
hearing, it appears to the commissioner that the person is violating
any provision of this division or any related rule or order binding
upon it, the commissioner shall make the order of discontinuance
final and the person shall immediately discontinue the practices
named in the order.
31408. (a) If the commissioner determines it is in the public

interest, the commissioner may include in any administrative action
brought under this division, including a stop order, a claim for
ancillary relief, including, but not limited to, a claim for
rescission, restitution or disgorgement or damages on behalf of the
matter of the action, and the administrative law judge shall have
jurisdiction to award additional relief. The person affected may be
required to attend remedial education, as directed by the
commissioner.
(b) In an administrative action brought under this part the
commissioner is entitled to recover costs, which in the discretion of
the administrative law judge may include any amount representing
reasonable attorney's fees and investigative expenses for the
services rendered, for deposit into the State Corporations Fund for
the use of the Department of Corporations.
CORPORATIONS CODE
SECTION 31410-31412
31410. Any person who willfully violates any provision of this law,
or who willfully violates any rule or order under this law, shall
upon conviction be fined not more than one hundred thousand dollars
($100,000) or imprisoned in the state prison, or in a county jail for
not more than one year, or be punished by both that fine and
imprisonment; but no person may be imprisoned for the violation of
any rule or order if he or she proves that he or she had no knowledge
of the rule or order.
31411. Any person who willfully employs, directly or indirectly,

any device, scheme, or artifice to defraud in connection with the
offer or sale of any franchise or willfully engages, directly or
indirectly, in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon any person in
connection with the offer, purchase, or sale of any franchise shall
upon conviction be fined not more than one hundred thousand dollars
($100,000) or imprisoned in the state prison, or in a county jail for
not more than one year, or be punished by both that fine and
imprisonment.
statute.
CORPORATIONS CODE
SECTION 31420
31420. When any person, including any nonresident of this state,

engages in conduct prohibited or made actionable by this law or any
rule or order hereunder, whether or not he has filed a consent to
service of process under Section 31155, and personal jurisdiction
over him cannot otherwise be obtained in this state, that conduct
shall be considered equivalent to his appointment of the commissioner
or his successor in office to be his attorney to receive service of
any lawful process in any noncriminal suit, action, or proceeding
against him or his successor, executor, or administrator which grows
out of that conduct and which is brought under this law or any rule
or order hereunder, with the same force and validity as if served on
him personally. Service may be made by leaving a copy of the process
in the office of the commissioner, but it is not effective unless (a)
the plaintiff, who may be the commissioner in a suit, action, or
proceeding instituted by him, forthwith sends notice of the service
and a copy of the process by registered or certified mail to the
defendant or respondent at his last known address or takes other
steps which are reasonably calculated to give actual notice, and (b)
the plaintiff's affidavit of compliance with this section is filed in
the case on or before the return day of the process, if any, or
within such further time as the court allows.
CORPORATIONS CODE
SECTION 31500-31506
31500. (a) The commissioner shall charge and collect the fees fixed
by this section. All fees and charges collected under this section
shall be transmitted to the Treasurer at least weekly, accompanied by
a detailed statement thereof and shall be credited to the State
Corporations Fund.
(b) The fee for filing an application for registration of the
offer of franchises under Section 31111 is six hundred seventy-five
dollars ($675).
(c) The fee for filing an application for renewal of a
registration under Section 31121 is four hundred fifty dollars
($450).
(d) The fee for filing an amendment to the application filed under
Section 31111 or 31121 after the effective date of the registration
of the offer of franchises, is fifty dollars ($50).
(e) The fee for filing an application for material modification
under Section 31125 is fifty dollars ($50), whether or not it
accompanies an application under Section 31111 or 31121.
(f) The fee for filing the initial notice of exemption under
Section 31101 is four hundred fifty dollars ($450) and the fee for
filing each consecutive subsequent notice of exemption under these
provisions is one hundred fifty dollars ($150).
(g) The fee for filing an application for approval of a written
notice of violation under Section 31303 or 31304 is six hundred
seventy-five dollars ($675).

law.
31502. The commissioner may from time to time make, amend and
rescind such rules, forms, and orders as are necessary to carry out
the provisions of this law, including rules and forms governing
applications and reports, and defining any terms, whether or not used
in this law, insofar as the definitions are not inconsistent with
the provisions of this law.
31503. All rules of the commissioner, other than those relating

solely to the internal administration of the Department of
Corporations, shall be made, amended or rescinded in accordance with
the provisions of Chapter 4.5 (commencing with Section 11371) of Part
1 of Division 3 of Title 2 of the Government Code.
31504. (a) All applications, reports and other papers and documents
filed with the commissioner under this law shall be open to public
inspection, except that the commissioner may, in his discretion,
withhold from public inspection any information the disclosure of
which is, in the judgment of the commissioner, not necessary in the
public interest or for the protection of investors. The commissioner
may publish any information filed with him or obtained by him, if, in
the judgment of the commissioner, such action is in the public
interest. No provision of this law authorizes the commissioner or any
of his assistants, clerks, or deputies to disclose any information
withheld from public inspection except among themselves or when
necessary or appropriate in a proceeding or investigation under this
law or to other federal or state regulatory agencies. No provision of
this law either creates or derogates from any privilege which exists
at common law or otherwise when documentary or other evidence is
sought under a subpoena directed to the commissioner or any of his
assistants, clerks, or deputies.
(b) It is unlawful for the commissioner or any of his assistants,
clerks, or deputies to use for personal benefit any information which
is filed with or obtained by the commissioner and which is not then
generally available to the public.
31505. Upon request and at such reasonable charges as he prescribes

by rule, the commissioner shall furnish to any person photostatic or
other copies (certified under his seal of office if requested) of
any document which is retained as a matter of public record, except
that he shall not charge or collect any fee for photostatic or other
copies of any document furnished to public officers for use in their
official capacity. In any judicial proceeding or prosecution, any
copy so certified is prima facie evidence of the contents of the
document certified.
31506. (a) The commissioner may destroy any applications or orders,
together with the files and folders, as useless or obsolete, four
years after the date of filing or issuance, with the approval of the
Department of General Services; provided that a permanent record
shall be maintained of any disciplinary action taken by the
commissioner.
(b) Copies on microfilm or in other form which may be retained by
the commissioner in his discretion of any records destroyed under
this section shall be accepted for all purposes as equivalent to the
original when certified by the commissioner.
CORPORATIONS CODE
SECTION 31510-31516
31510. The commissioner in his discretion may honor requests from

interested persons for interpretive opinions.

form, order, or any written interpretive opinion of the commissioner,
or any opinion of the Attorney General, notwithstanding that the
rule, form, order, or written interpretive opinion may later be
amended or rescinded or be determined by judicial or other authority
to be invalid for any reason.
31512. Any condition, stipulation or provision purporting to bind

any person acquiring any franchise to waive compliance with any
provision of this law or any rule or order hereunder is void.
31513. Whenever a person is entitled under this law to a hearing in

11500) of Part 1 of Division 3 of Title 2 of the Government Code, a
formal hearing before the Department of Corporations may be
substituted with the consent of such person and of the commissioner
for such hearing before an independent hearing officer; and in that
case after such hearing before the Department of Corporations such
person shall not be entitled to any further administrative remedy.

this end the provisions of this law are declared to be severable.
31515. Prior law exclusively governs all suits, actions,
prosecutions or proceedings which are pending or may be initiated on
the basis of facts or circumstances occurring before the effective
date of this law.
31516. Nothing in this law is intended to preclude the

applicability of the Real Estate Law, Part 1 (commencing with Section
10000), Division 4 of the Business and Professions Code, to any sale
or lease of real property.
CORPORATIONS CODE
SECTION 35000-35007
35000. This title may be cited as the Subversive Organization

Registration Law.
35001. This title is enacted in the exercise of the police power of

this State for the protection of the public peace and safety by
requiring the registration of subversive organizations which are
conceived and exist for the purpose of undermining and eventually
destroying the democratic form of government in this State and in the
United States.
35002. As used in this title, "subversive organization" means every

corporation, association, society, camp, group, bund, political
party, assembly, and every body or organization composed of two or
more persons or members, which comes within either or both of the
following descriptions:
(a) Which directly or indirectly advocates, advises, teaches, or
practices, the duty, necessity, or propriety of controlling,
conducting, seizing, or overthrowing the Government of the United
States, of this State, or of any political subdivision thereof by
force or violence.
(b) Which is subject to foreign control as defined in Section
35003.
35003. An organization is "subject to foreign control" if it comes

within either of the following descriptions:
(a) It solicits or accepts financial contributions, loans, or
support of any kind directly or indirectly from, or is affiliated
directly or indirectly with, a foreign government or a political
subdivision thereof, an agent, agency, or instrumentality of a
foreign government or political subdivision thereof, a political
party in a foreign country, or an international political
organization.
(b) Its policies, or any of them, are determined by or at the
suggestion of, or in collaboration with, a foreign government or
political subdivision thereof, an agent, agency, or instrumentality
of a foreign government or a political subdivision thereof, a
political party in a foreign country, or an international political
organization.
35004. "Subversive organization" does not include any labor union

or religious, fraternal, or patriotic organization, society, or
association whose objectives and aims do not contemplate the
overthrow of the Government of the United States, of this State, or
of any political subdivision thereof by force or violence.
35005. This title imposes additional requirements upon

corporations, associations, or organizations which are subversive
organizations. Neither the fact that such a corporation, association,
or organization was organized pursuant to law nor that its affairs
and activities are in any respect regulated by law exempts it from
complying with this title.
35006. The Secretary of State may adopt and promulgate such rules
and regulations as may be necessary to carry out the provisions of
this title, and may alter, amend, or repeal such rules and
regulations.
35007. If any provision of this title, or the application thereof

to any person, corporation, association, organization, or
circumstances, is for any reason held invalid, ineffective, or
unconstitutional by a court of competent jurisdiction, the remainder
of this title, or the application of such provision to other persons,
corporations, associations, organizations, or circumstances, shall
not be affected thereby, and the Legislature hereby declares the
severability of the several sections and provisions of this title,
and that it would have enacted this title without the invalid
provisions or the invalid applications, as the case may be, had such
invalidity been apparent.
CORPORATIONS CODE
SECTION 35100-35105
35100. Every subversive organization in existence on September 13,

1941, shall within 30 days after that date, and every subversive
organization thereafter organized shall within 10 days after its
organization, file with the Secretary of State, on such forms and in
such detail as he may prescribe, the following information and
documents:
(a) A complete and detailed statement subscribed, under oath, by
all of its officers, showing all of the following:
(1) Its name and post-office address.
(2) The names and addresses of all its branches, chapters, and
affiliates.
(3) The names, nationalities, and residence addresses of its
officers and members, and the qualifications required for membership
in it.
(4) The nature and extent of its existing and proposed aims,
purposes, and activities.
(5) The times and places of its meetings.
(6) The description and location of the real property and the
kind, quantity, and quality of the personal property owned by it, its
assets and liabilities, the methods for the financing of its
activities, and the names and addresses of all persons,
organizations, and other sources who or which have contributed money,
property, literature, or other things of value to the organization
or any of its branches, chapters, or affiliates for any of its
purposes.
(7) Such other information as the Secretary of State may from time
to time require.
(b) A true copy, certified by all of its officers, of all of the
following:
(1) Its charter, articles of association, or constitution, and its
by-laws, rules, and regulations.
(2) Its oath, affirmation, or pledge of membership, if any.
(3) Each agreement, resolution, and other instrument or document
relating to its organization, powers, and purposes and the powers and
duties of its officers and members.
(4) Each book, pamphlet, leaflet, or other printed, written, or
illustrated matter directly or indirectly issued or distributed by it
or in its behalf, or to or by its members with its knowledge,
consent, or approval.
(5) Such other documents as the Secretary of State may from time
to time require.
(c) A description of the uniforms, badges, insignia, or other
means of identification prescribed by it, and worn or carried by its
officers or members, or any of such officers or members.
(d) In case it is subject to foreign control, a statement of the
manner in which it is so subject.
35101. Every subversive organization shall within 10 days after any

revision or amendment of, or other change with respect to, its
charter, articles of association, constitution, by-laws, rules,
regulations, oath, affirmation, or pledge of membership, or any part
thereof, file with the Secretary of State a true copy certified by
all of its officers of the revised, amended, or changed charter,
articles of association, constitution, by-laws, rules, regulations,
oath, affirmation, or pledge of membership, or part thereof.
35102. Every subversive organization shall within 10 days after a

change has been made in its officers, or in its aims, purposes,
activities, property holdings, or methods and sources of financing
its activities, file with the Secretary of State a statement
subscribed under oath by all of its officers showing the change.
35103. Every subversive organization shall at least once in each
period of six months file with the Secretary of State a statement
subscribed under oath by all of its officers showing the names and
residence addresses of all persons who have been admitted to
membership during that period or, if no members have been admitted
during that period, a statement to that effect similarly subscribed.
35104. Every subversive organization shall within 10 days after the

adoption thereof file with the Secretary of State, on such form and
in such detail as he may prescribe, each resolution adopted, or the
minutes of any meeting held by it, authorizing or providing for
concerted action by its officers, members, or a part of its
membership, to promote or prevent the passage of any act of
legislation by any local, state, or federal legislative body, or to
support or defeat any candidate for public office.
35105. All statements or documents filed with the Secretary of

State under this title are public records and shall be open to public
examination and inspection at all reasonable hours.
CORPORATIONS CODE
SECTION 35200
35200. Any subversive organization shall not send, deliver, mail,

or transmit, or suffer or permit to be sent, delivered, mailed, or
transmitted, to any person in this State who is not a member of the
organization any anonymous letter, document, leaflet, or other
written or printed matter. All letters, documents, leaflets, or other
written or printed matter issued by a subversive organization which
are intended to come to the attention of a person who is not a member
of the organization shall bear the name of the organization and the
names and residences of its officers.
CORPORATIONS CODE
SECTION 35300-35302
35300. Any subversive organization which violates any provision of

this title is guilty of a felony punishable by fine of not less than
one thousand dollars ($1,000) nor more than ten thousand dollars
($10,000). Any such violation constitutes a separate and distinct
offense for each day, or part thereof, during which it is continued.
35301. Any officer or member of the board of directors, board of

trustees, executive committee, or other similar governing body of a
subversive organization who violates any provision of this title, or
permits or acquiesces in the violation of any provision of this title
by the organization is guilty of a felony punishable by fine of not
less than five hundred dollars ($500) nor more than ten thousand
dollars ($10,000), or by imprisonment in a state prison, or by both.
35302. Any person who becomes or remains a member of any subversive

organization, or attends a meeting thereof, with knowledge that the
organization has failed to comply with any provision of this title,
is guilty of a misdemeanor punishable by fine of not less than twenty
dollars ($20) nor more than one thousand dollars ($1,000), or by
imprisonment in the county jail for not less than 10 days nor more
than one year, or by both.
CORPORATIONS CODE
SECTION 100000-100008
100000. The following acts and sections are repealed:
GENERAL LAWS
Year: Ch: Page Year: Ch: Page Year: Ch: Page
Secs. 1-32, 1858 :298:264 1865- 6:478:620
incl. and
175-184, incl. 1859 : 98: 93 1867- 8:208:201
of
1850 :128:347 1862 : 23: 17 1867- 8:255:268
1852 :100:172 1863 : 94:101 1867- 8:288:310
1853 : 65: 87 1863 :140:173 1867- 8:326:372
1853 :175:274 1863 :248:324 1867- 8:534:708
1854 : 22:148 1863 :303:402 1869-70: 35: 40
(Spec.)
1855 : 1: 1 1863-4:120:109 1869-70:116:107
1857 : 80: 75 1863-4:294:302 1869-70:165:229
1857 :110:121 1863-4:295:303 1869-70:553:822
1857 :189:208 1865-6: 54: 37 1869-70:578:881
1858 : 68: 57 1865-6:118:100 1871- 2: 44: 45
1858 : 99: 80 1865-6:270:304 1871- 2:225:300
1858 :181:133 1865-6:376:458 1871- 2:318:432
Corporations formed and existing before 12 o'clock, noon, of

January 1, 1873, which have not elected to continue their existence
under the provisions of the Civil Code repealed by this code or under
this code are not affected by the repeal of any act or section by
this section. The acts and sections repealed by this section continue
to apply to all such corporations, notwithstanding their repeal by
this section.
100001. The following acts and sections are repealed:
GENERAL LAWS
Year:Ch:Page Year:Ch:Page Year: Ch: Page
1871-2:566:826 1877-8:450:695 1915:190: 422
1873-4:216:320 1877-8:561:883 1931:862:1762
Secs. 1, 2, 3, 1895:183 :221 1931:866:1838
5, 14
of
1873-4:340: 499
1901: 93 :108 1931:871:1847
1875-6:456:653 1913:336 :680 1935:289:1006
CIVIL CODE
Sections Sections Sections
277 317 330.10
278 318 330.11
279 319 330.12
280 320 330.13
281 320a 330.15
285 320b 330.16
287 320c 330.17
288 320d 330.18
290 321 330.19
291 321a 330.20
292 321b 330.21
293 322 330.22
294 322a 330.23
295 323 332
296 324 333
297 325 334
297a 325a 334a
298 326 335
299 326a 336
300a 326b 337
300b 327 338
301 328 339
302 328a 340
303 328b 341
304 328c 342
305 328d 342a
306 328e 342b
307 328f 343
307a 329 343b
307b 330 344
308 330.1 345
309 330.2 346
310 330.3 346a
311 330.4 346b
312 330.5 346c
313 330.6 347
314 330.7 348
315 330.8 348a
316 330.9 348b
348c 402 601
352 402a 602
353 403 603
354 403a 604
355 403b 605
356 403c 605a
357 403d 605b
358 404 605c
359 404a 605d
361 404b 605dd
361a 404c 605e
361b 405 605g
362 405a 605h
362a 406 605i
362b 406a 605j
362c 406b 605k
362d 407 605l
363 408 605m
364 409 605n
365 411 606
366 412 607
367 413 607a
368 591 607b
369 592 607c
370 592a 653.1
370a 592b 653.2
371 592c 653.3
372 592d 653.5
373 592e 653.6
374 593 653.7
375 593a 653.8
399 594 653.9
399a 594.5 653.10
400 595 653.11
400a 596 653.12
401 597 653.13
401a 598 653.14
401c 599 653.15
600 653.16
PENAL CODE
557 559 563
558 560 564
POLITICAL CODE
3666c 3669cc 3669d
3669c
100002. The following acts and code sections are repealed:
GENERAL LAWS
Yea Ch: Page
r
186 129 123
9-
70
CIVIL CODE
2395 2420 2481
2396 2421 2482
2397 2422 2483
2398 2423 2484
2399 2424 2485
2400 2425 2486
2401 2426 2487
2402 2427 2488
2403 2428 2489
2404 2429 2490
2405 2430 2491
2406 2431 2492
2407 2432 2493
2408 2433 2494
2409 2434 2495
2410 2435 2496
2411 2436 2497
2412 2437 2498
2413 2438 2499
2414 2439 2500
2415 2472 2501
2416 2477 2502
2417 2478 2503
2418 2479 2504
2419 2480 2505
2506
PENAL CODE
Section
358
100003. The following acts and code sections are repealed:
GENERAL LAWS
Year: Ch: Page
1911 :572 :1093
1933 :409 :1037
1933 :869 :2249
1945 :144 : 630
CIVIL CODE
Sections Sections
2523 2525
2524
PENAL CODE
Sections Sections
559 564
563 568
100004. Chapter 183 of the Statutes of 1941 is repealed.

100005. The Corporate Securities Act (Chapter 532 of the Statutes
of 1917) is repealed.

CA Corporations Code

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CA Corporations Code

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CALIFORNIA CORPORATIONS CODE

1. This act shall be known as the Corporations Code.

2. The provisions of this code, insofar as they are substantially

4. No action or proceeding commenced before this code takes effect,

5. Unless the provision or the context otherwise requires, these

6. Title, division, part, chapter, article, and section headings

7. Whenever, by the provisions of this code, a power is granted to,

8. Writing includes any form of recorded message capable of

9. Whenever reference is made to any portion of this code or of any

10. "Section" means a section of this code unless some other

12. The masculine gender includes the feminine and neuter.

14. "County" includes "city and county."

15. "Shall" is mandatory and "may" is permissive.

16. "Oath" includes affirmation.

17.1. (a) In addition to the definition set forth in Section 17,

18. "Person" includes a corporation as well as a natural person.

19. If any provision of this code, or the application thereof to

20. "Electronic transmission by the corporation" means a

101. Unless the provision or the context otherwise requires, the

102. (a) Subject to Chapter 23 (commencing with Section 2300)

104. Unless otherwise expressly provided, whenever reference is

105. A corporation or association may be sued as provided in the

106. Any corporation heretofore or hereafter formed under this

107. No corporation, association or individual shall issue or put

108. The fees of the Secretary of State for filing instruments by

109. (a) Any agreement, certificate or other instrument relating to

109.5. (a) Provisions of the articles described in paragraph (3) of

110. (a) Upon receipt of any instrument by the Secretary of State

110.5. The Secretary of State may cancel the filing of articles of

111. All references in this division to the voting of shares

113. Any reference in this division to mailing means first-class

115. As used in this division, independent accountant means a

116. Nothing contained in this division modifies the provisions of

117. Any requirement in this division for a vote of each class of

118. Any reference in this division to the time a notice is given

149. "Acknowledged" means that an instrument is either:

150. A corporation is an "affiliate" of, or a corporation is

151. "Approved by (or approval of) the board" means approved or

152. "Approved by (or approval of) the outstanding shares" means

153. "Approved by (or approval of) the shareholders" means approved

154. "Articles" includes the articles of incorporation, amendments

155. "Board" means the board of directors of the corporation.

156. "Certificate of determination" means a certificate executed

156.1. "Certificated security" means a share (Section 184), as

156.5. "Certificate of Redomestication" is the document by which

157. "Chapter" refers to a chapter of this Division 1 of Title 1 of

158. (a) "Close corporation" means a corporation whose articles

160. (a) Except as provided in subdivision (b), "control" means the

161. "Constituent corporation" means a corporation which is merged

161.5. "Constituent limited partnership" means a limited

161.9. "Conversion" means a conversion pursuant to Chapter 11.5

162. "Corporation", unless otherwise expressly provided, refers

163. "Corporation subject to the Banking Law" (Division 1

163.1. For purposes of Section 503, "cumulative dividends in

164. "Directors" means natural persons designated in the articles

165. "Disappearing corporation" means a constituent corporation

165.5. "Disappearing limited partnership" means a constituent

166. "Distribution to its shareholders" means the transfer of cash

167. "Domestic corporation" means a corporation formed under the

167.5. "Domestic limited partnership" means any limited partnership

167.7. "Domestic other business entity" means an other business

167.8. "Disappearing other business entity" means a constituent

169. "Filed", unless otherwise expressly provided, means filed in

170. "Foreign association" means a business association organized