300-318
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
(2) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the board or
committee, and the board or committee authorizes, approves or
ratifies the contract or transaction in good faith by a vote
sufficient without counting the vote of the interested director or
directors and the contract or transaction is just and reasonable as
to the corporation at the time it is authorized, approved or
ratified, or
(3) As to contracts or transactions not approved as provided in
paragraph (1) or (2) of this subdivision, the person asserting the
validity of the contract or transaction sustains the burden of
proving that the contract or transaction was just and reasonable as
to the corporation at the time it was authorized, approved or
ratified.
A mere common directorship does not constitute a material
financial interest within the meaning of this subdivision. A director
is not interested within the meaning of this subdivision in a
resolution fixing the compensation of another director as a director,
officer or employee of the corporation, notwithstanding the fact
that the first director is also receiving compensation from the
corporation.
(b) No contract or other transaction between a corporation and any
corporation or association of which one or more of its directors are
directors is either void or voidable because such director or
directors are present at the meeting of the board or a committee
thereof which authorizes, approves or ratifies the contract or
transaction, if
(1) The material facts as to the transaction and as to such
director's other directorship are fully disclosed or known to the
board or committee, and the board or committee authorizes, approves
or ratifies the contract or transaction in good faith by a vote
sufficient without counting the vote of the common director or
directors or the contract or transaction is approved by the
shareholders (Section 153) in good faith, or
(2) As to contracts or transactions not approved as provided in
paragraph (1) of this subdivision, the contract or transaction is
just and reasonable as to the corporation at the time it is
authorized, approved or ratified.
This subdivision does not apply to contracts or transactions
covered by subdivision (a).
(c) Interested or common directors may be counted in determining
the presence of a quorum at a meeting of the board or a committee
thereof which authorizes, approves or ratifies a contract or
transaction.
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.
(2) With respect to paragraph (2) of subdivision (a), against
shareholders who received the distribution of assets.
(3) With respect to paragraph (3) of subdivision (a), against the
person who received the loan or guaranty. Any director sued under
this section may file a cross-complaint against the person or persons
who are liable to the director as a result of the subrogation
provided for in this subdivision or may proceed against them in an
independent action.
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.