California Corporate Codes

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CALIFORNIA CORPORATE CODES

GENERAL PROVISIONS AND DEFINITIONS - 158. Close corp

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Close corp means less than 35 s/h and statement of “close corp”
-cl close corp is small number of shares, limited market for its shares and shrlder participation with managent.

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CALIFORNIA CORPORATE CODES

201. Names;

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Names; misleading or deceptive

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CALIFORNIA CORPORATE CODES

202. Articles of incorporation;

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Articles of incorporation; required provisions
Articles shall set forth the name of the corp, the purpose of the corp, the name and address of agent for service of process, and total number of shares and classes of shares
-cl business porpoise (any legal activity) not required

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CALIFORNIA CORPORATE CODES

204. Articles of incorporation; optional provisions

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Articles may set forth granting of preemptive rights to s/h, provisions limiting or restricting business, special qualification of persons who may be s/h, provisions limiting or eliminating personal liability of director in a derivative action for breach of duties to corp and provisions authorizing indemnification in excess of that permitted by Section
317 except if intentional and knowing misconduct, bad faith conduct, improper personal benefit, reckless disregard of duties, unexcused pattern of inattentiveness, or if expressly prohibited in Section 317.

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CALIFORNIA CORPORATE CODES

207. Powers

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A corp shall have all the powers of a natural person in carrying out its business activities and may make charitable gifts regardless of any specific corp benefit

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CALIFORNIA CORPORATE CODES

208. Limitations on business; enforcement (DOCTRINE OF ULTA VIRES)

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No limitation on the business of the corp contained in the articles shall be asserted except in a proceeding by a s/h or the state to enjoin unauthorized business where there are no 3PB, or dissolution proceeding, or derivative suit against directors for violation of authority

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CALIFORNIA CORPORATE CODES

212. Bylaws; contents

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The bylaws shall set forth the number of directors, so long as not less than 3, unless shares are not issued yet or only one s/h; the qualifications, duties and compensation of directors; the requirements of a quorum; and the appointment, duties, compensation and tenure of officers.

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CALIFORNIA CORPORATE CODES

300. Powers of board; close corp; s/h agreements; validity; liability; failure to observe formalities

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Unless s/h approve otherwise, the business of a publicly held corp shall be exercised under the ultimate direction and management of the board. In a closely held corp the s/h may validly agree to take managerial control of any business normally done by board but they will be assuming liability for any wrongdoing thereto, and the directors will be relieved of such liability. The failure of a close corp to observe corp formalities relating to meetings of directors or s/h pursuant to a s/h agreement shall not be a factor to establish that s/h have personal liability for corp obligations

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CALIFORNIA CORPORATE CODES

303. Directors; removal without cause

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Any director may be removed without cause if removal is approved by s/h unless those who did not consent to removal would be sufficient to elect

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CALIFORNIA CORPORATE CODES

304. Removal for cause; s/h suit

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Any director may be removed if court finds fraud or gross abuse of authority in a suit by at least 10 percent of shares

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CALIFORNIA CORPORATE CODES

308. Deadlocked board; deadlocked s/h; provisional directors; appointment; powers

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Any director or owner(s) of a third of all shares may start court action to appoint impartial non-related provisional director if board is deadlocked or owner(s) of half of all shares if s/h are deadlocked and if the deadlock is causing or may cause harm to the corp

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CALIFORNIA CORPORATE CODES

309. Performance of duties by director; liability (BUSINESS JUDGMENT RULE)

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No liability if director performs duties in good faith, in best interest of corp, with care, and reasonable inquiry and reasonably relies on info from competent officer, employee, counsel, accountant or committee of board or any professional the director reasonably believes to be competent in his profession

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CALIFORNIA CORPORATE CODES

310. Contracts in which director has material financial interest; validity (not about self-dealing or breach of duty, only has to do with validity of contract)

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No contract in which a director has a material financial interest is void or voidable if the material facts as to the director’s interest are fully disclosed and the contract is approved by the s/h (excluding interested directors) in good faith, or if the board (excluding interested directors) with full knowledge approves it in good faith and the contract is reasonable as to the corp

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CALIFORNIA CORPORATE CODES

313. Business agreements; signatures; validity

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Corp will be liable to 3rd party for any business agreement entered into and signed by chairman of board or any officer regardless of authority unless actual knowledge by 3rd party of lack of authority

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CALIFORNIA CORPORATE CODES

317. Indemnification of agent of corp

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Corp may indemnify any agent against actual and reasonable expenses of lawsuit if agent acted in good faith and reasonable belief of corp benefit except if found liable by court to corp in performance of duties to corp, or if settled without court approval. Conviction or nolo contendere alone do not create presumption of bad faith.
Corp must indemnify if agent is successful on the merits.

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CALIFORNIA CORPORATE CODES

406. Unless articles provide otherwise

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board may issue shares without first offering them to s/h

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CALIFORNIA CORPORATE CODES

418. Certificates; required contents; failure to state; close corps

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Share certificate must disclose: if it is a close corp, max number of s/h if close corp, restrictions, assessability, voting agreements, irrevocable proxy, redeemability, and convertibility. S/h will not be liable unless actual knowledge.

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CALIFORNIA CORPORATE CODES

421. Close corp; restrictions on rights to transfer

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S/h of close corp agrees to not transfer shares to a greater number in violation of 418

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CALIFORNIA CORPORATE CODES

500. Distributions; retained earnings or assets remaining after completion

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Distribution only if: retained earnings equal at least requested distribution; sum of assets equal at least 1.25 times its liabilities; or current assets equal at least its current liabilities

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CALIFORNIA CORPORATE CODES

501. Inability to meet

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liabilities as they mature; prohibition of distribution

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CALIFORNIA CORPORATE CODES

505. Additional restrictions on

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dividends allowed in articles and bylaws

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CALIFORNIA CORPORATE CODES

506. Receipt of prohibited dividend; liability of s/h; suit by creditors or other s/h

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S/h will be liable to corp for benefit of creditors or other s/h for receipt of prohibited dividends in amount received or fair market value of property received

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CALIFORNIA CORPORATE CODES

706. Agreement between s/h; voting trust agreements

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S/h may contract for voting a certain way specified in agreement and may transfer their voting rights to a trustee to vote according to the agreement but may not exceed 10 years

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CALIFORNIA CORPORATE CODES

800. Derivative actions; conditions

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In order to sue on behalf of corp the plaintiff must have been a s/h at time of transaction complained of or with court approval, must allege facts with particularity efforts of demand or reasons for not making them, and must allege notice of facts of each cause of action given to board. Court approval is based on the following: strong prima facie case, no other similar action instituted, plaintiff acquired shares before public disclosure of wrongdoing, defendant may otherwise wrongfully gain from willful breach of fiduciary duty, and corp will not be unjustly enriched

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CALIFORNIA CORPORATE CODES

1001. Disposition of substantially all assets; approval

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A corp may dispose of all or substantially all assets if approved by board and s/h (unless usual and regular coarse of business) and if acquiring party controls disposing corp then 90% s/h approval

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CALIFORNIA CORPORATE CODES

1300. Reorganization or short-form merger

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dissenting shares; corp purchase at fair market value defined as price before the announcement of the merger

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CALIFORNIA CORPORATE CODES

1600. Rights of inspection; list of s/h names

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S/h with at least 5% of shares or 1% with Schedule 14A have the absolute right to inspect and copy list of s/h names

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CALIFORNIA CORPORATE CODES

1601-1604. Accounting books and records and minutes of meetings

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inspection upon demand by s/h or voting trust certificate or director; purpose reasonably related to s/h interest; absolute nature of right cannot be limited by articles or bylaws; failure to comply will give rise to a cause of action to enforce such right with penalties

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CALIFORNIA CORPORATE CODES

1800. Involuntary dissolution; verified complaint; plaintiffs; grounds

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Verified complaint for involuntary dissolution may be filed by: half or more of directors, 1/3 or more of s/h in public corp, any s/h in close corp, or any s/h if corp term has expired, provided that the grounds for it is: abandonment of corp business, deadlock of directors, s/h deadlock, fraud, mismanagement, abuse of authority, reasonable necessity to protect rights or interest of s/h in close corp, or expiration of corp term

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CALIFORNIA CORPORATE CODES

1802. Court may appoint a

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provisional director in case of deadlock

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CALIFORNIA CORPORATE CODE

2000. Avoidance of dissolution by purchasing plaintiff’s shares

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The corp or majority s/h may buy the shares of those initiating dissolution for fair market value in order to avoid dissolution

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CALIFORNIA CORPORATE CODE

AUTHORITY OF COMMISSIONER

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25140. Commissioner may issue stop order against securities of an issuer whose business is unfair, unjust, inequitable, or fraudulent towards buyers of the security or if in public interest