citation: CORP § 400

text:
(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.

title: 1. CORPORATIONS

chapter: 4. Shares and Share Certificates

path: 1. CORPORATIONS > 1. GENERAL CORPORATION LAW > 4. Shares and Share Certificates


kind: section

code: CORP

citation: CORP § 401

text:
(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.

history: (History: Amended by Stats. 1993, Ch. 128, Sec. 4. Effective January 1, 1994.)

division: 1. GENERAL CORPORATION LAW

title: 1. CORPORATIONS


citation: CORP § 402

text:
(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.

history: (History: Amended by Stats. 2022, Ch. 617, Sec. 11. (SB 1202) Effective January 1, 2023.)

title: 1. CORPORATIONS


citation: CORP § 402.5

text:
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 6623 percent) of such class or series.

(c) Notwithstanding subdivision (a) of Section 500, provide that a distribution may be made without regard to the preferential dividends arrears amount, or any preferential rights amount, or both, as described in paragraphs (1) and (2) of subdivision (a) of Section 500.

history: (History: Amended by Stats. 2014, Ch. 71, Sec. 22. (SB 1304) Effective January 1, 2015.)

title: 1. CORPORATIONS


citation: CORP § 403

text:
(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.

history: (History: Amended by Stats. 1996, Ch. 477, Sec. 1. Effective January 1, 1997.)

title: 1. CORPORATIONS


citation: CORP § 404

text: 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.

history: (History: Added by Stats. 1975, Ch. 682.)

title: 1. CORPORATIONS


citation: CORP § 405

text:
(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.

title: 1. CORPORATIONS


citation: CORP § 406

text: 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.

title: 1. CORPORATIONS


citation: CORP § 407

text: 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.

history: (History: Amended by Stats. 2002, Ch. 480, Sec. 2. Effective January 1, 2003.)

title: 1. CORPORATIONS


citation: CORP § 408

text:
(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.

history: (History: Amended by Stats. 1982, Ch. 266, Sec. 1.)

title: 1. CORPORATIONS


citation: CORP § 409

text:
(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.

history: (History: Amended by Stats. 1986, Ch. 766, Sec. 13.)

title: 1. CORPORATIONS


citation: CORP § 410

text:
(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.

title: 1. CORPORATIONS


citation: CORP § 411

text: 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.

history: (History: Amended by Stats. 1986, Ch. 766, Sec. 14.)

title: 1. CORPORATIONS


citation: CORP § 412

text: 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.

history: (History: Amended by Stats. 1986, Ch. 766, Sec. 15.)

title: 1. CORPORATIONS


citation: CORP § 413

text: 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.

history: (History: Amended by Stats. 1979, Ch. 730.)

title: 1. CORPORATIONS


citation: CORP § 414

text:
(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.

title: 1. CORPORATIONS


citation: CORP § 415

text: 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.

title: 1. CORPORATIONS


citation: CORP § 416

text:
(a) Every holder of shares in a corporation shall be entitled to have a certificate signed in the name of the corporation by the chairperson or vice chairperson 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.

history: (History: Amended by Stats. 2015, Ch. 98, Sec. 7. (SB 351) Effective January 1, 2016.)

title: 1. CORPORATIONS


citation: CORP § 417

text:
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).

history: (History: Amended by Stats. 1986, Ch. 766, Sec. 17.)

title: 1. CORPORATIONS


citation: CORP § 418

text:
(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 ____ [a 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).

history: (History: Amended by Stats. 1986, Ch. 766, Sec. 18.)

title: 1. CORPORATIONS


citation: CORP § 419

text:
(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 certificate 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.

title: 1. CORPORATIONS


citation: CORP § 420

text:
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.

history: (History: Amended by Stats. 2002, Ch. 784, Sec. 89. Effective January 1, 2003.)

title: 1. CORPORATIONS


citation: CORP § 421

text: 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.

title: 1. CORPORATIONS


citation: CORP § 422

text:
(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.

history: (History: Amended by Stats. 1986, Ch. 766, Sec. 19.)

title: 1. CORPORATIONS


citation: CORP § 423

text:
(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 expressly 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 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 before 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 office of the corporation is located, and published once in some newspaper of general circulation in the county in which the principal 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.

history: (History: Amended by Stats. 2022, Ch. 617, Sec. 12. (SB 1202) Effective January 1, 2023.)

title: 1. CORPORATIONS


citation: CORP § 500

text:
(a) Neither a corporation nor any of its subsidiaries shall make any distribution to the corporation’s shareholders (Section 166) unless the board of directors has determined in good faith either of the following:

(1) The amount of retained earnings of the corporation immediately prior to the distribution equals or exceeds the sum of (A) the amount of the proposed distribution plus (B) the preferential dividends arrears amount.

(2) Immediately after the distribution, the value of the corporation’s assets would equal or exceed the sum of its total liabilities plus the preferential rights amount.

(b) For the purpose of applying paragraph (1) of subdivision (a) to a distribution by a corporation, “preferential dividends arrears amount” means the amount, if any, of cumulative dividends in arrears on all shares having a preference with respect to payment of dividends over the class or series to which the applicable distribution is being made, provided that if the articles of incorporation provide that a distribution can be made without regard to preferential dividends arrears amount, then the preferential dividends arrears amount shall be zero. For the purpose of applying paragraph (2) of subdivision (a) to a distribution by a corporation, “preferential rights amount” means the amount that would be needed if the corporation were to be dissolved at the time of the distribution to satisfy the preferential rights, including accrued but unpaid dividends, of other shareholders upon dissolution that are superior to the rights of the shareholders receiving the distribution, provided that if the articles of incorporation provide that a distribution can be made without regard to any preferential rights, then the preferential rights amount shall be zero. In the case of a distribution of cash or property in payment by the corporation in connection with the purchase of its shares, (1) 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 and (2) 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.

(c) The board of directors may base a determination that a distribution is not prohibited under subdivision (a) or under Section 501 on any of the following:

(1) Financial statements prepared on the basis of accounting practices and principles that are reasonable under the circumstances.

(2) A fair valuation.

(3) Any other method that is reasonable under the circumstances.

(d) The effect of a distribution under paragraph (1) or (2) of subdivision (a) is measured as of the date the distribution is authorized if the payment occurs within 120 days after the date of authorization.

(e) (1) If terms of indebtedness provide that payment of principal and interest is to be made only if, and to the extent that, payment of a distribution to shareholders could then be made under this section, indebtedness of a corporation, including indebtedness issued as a distribution, is not a liability for purposes of determinations made under paragraph (2) of subdivision (a).

(2) If indebtedness is issued as a distribution, each payment of principal or interest on the indebtedness shall be treated as a distribution, the effect of which is measured on the date the payment of the indebtedness is actually made.

(f) 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 Financial Protection and Innovation and the Securities and Exchange Commission.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 45. (SB 1498) Effective January 1, 2023.)

title: 1. CORPORATIONS

path: 1. CORPORATIONS > 1. GENERAL CORPORATION LAW > 5. Dividends and Reacquisitions of Shares


citation: CORP § 501

text: Neither a corporation nor any of its subsidiaries shall make 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.

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

title: 1. CORPORATIONS

chapter: 5. Dividends and Reacquisitions of Shares


citation: CORP § 503

text:
(a) The provisions of Sections 500 and 501 shall not apply to a purchase or redemption of shares of a deceased shareholder from the proceeds of insurance on the life of that shareholder in excess of the total amount of all premiums paid by the corporation for that insurance, in order to carry out the provisions of an agreement between the corporation and that shareholder to purchase or redeem those shares upon the death of the shareholder.

(b) The provisions of Sections 500 and 501 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 subdivision, “disability insurance” means an agreement of indemnification against the insured’s loss of the ability to work due to accident or illness.

history: (History: Repealed and added by Stats. 2011, Ch. 203, Sec. 5. (AB 571) Effective January 1, 2012.)

title: 1. CORPORATIONS


citation: CORP § 504

text:
(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.

history: (History: Amended by Stats. 2000, Ch. 112, Sec. 1. Effective January 1, 2001.)

title: 1. CORPORATIONS


citation: CORP § 505

text: 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.

history: (History: Added by Stats. 1975, Ch. 682.)

title: 1. CORPORATIONS


citation: CORP § 506

text:
(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 determining the value of any noncash property received in a distribution described in the preceding sentence, 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 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, 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 500 against any or all shareholders liable by one or more holders of shares having preferential rights with respect to cumulative dividends in arrears, in the case of a violation of paragraph (1) of subdivision (a) of Section 500, or upon dissolution, in the case of a violation of paragraph (2) of subdivision (a) of Section 500, in each case who have not consented to the applicable distribution, without regard to the provisions in Section 800, and in each case to the extent the applicable shares with preferential rights were outstanding at the time of the distribution; provided that holders of shares of preferential rights shall not have the right to bring suit in the name of the corporation under this subdivision unless the preferential dividends arrears amount, in the case of a violation of paragraph (1) of subdivision (a) of Section 500, or the preferential rights amount, in the case of a violation of paragraph (2) of subdivision (a) of Section 500, was greater than zero. A cause of action with respect to an obligation to return a distribution pursuant to this section shall be extinguished unless the action is brought within four years after the date the distribution is made.

(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.

history: (History: Amended by Stats. 2011, Ch. 203, Sec. 8. (AB 571) Effective January 1, 2012.)

title: 1. CORPORATIONS


citation: CORP § 508

text: This chapter does not apply in connection with any proceeding for winding up and dissolution under Chapter 18 or 19.

title: 1. CORPORATIONS


citation: CORP § 509

text:
(a) A corporation may redeem any or all shares which are redeemable at its option by (1) giving notice of redemption as provided in subdivisions (b) and (c) or as otherwise provided in its articles of incorporation, 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 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 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 before 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 before 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.

history: (History: Amended by Stats. 2022, Ch. 617, Sec. 13. (SB 1202) Effective January 1, 2023.)

title: 1. CORPORATIONS


citation: CORP § 510

text:
(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.

history: (History: Amended by Stats. 1995, Ch. 154, Sec. 5. Effective January 1, 1996.)

title: 1. CORPORATIONS


citation: CORP § 511

text: 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.

history: (History: Added by Stats. 1978, Ch. 370.)

title: 1. CORPORATIONS


citation: CORP § 600

text:
(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 office of the corporation. Subject to any limitations in the articles or bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to 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), electronic video screen communication, conference telephone, or other means of remote communication, participate in a meeting of shareholders, be deemed present in person or by proxy, and vote at a meeting of shareholders, subject to 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, electronic video screen communication, conference telephone, or other means of remote communication if the corporation implements reasonable measures: (1) to provide shareholders and proxyholders 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, (2) if any shareholder or proxyholder votes or takes other action at the meeting by means of electronic transmission to the corporation, electronic video screen communication, conference telephone, or other means of remote communication, to maintain a record of that vote or action in its books and records, and (3) to verify that each person who has voted remotely is a shareholder or proxyholder. A corporation shall not conduct a meeting of shareholders solely by electronic transmission by and to the corporation, electronic video screen communication, conference telephone, or other means of remote communication unless one or more of the following conditions apply: (A) all of the shareholders consent; (B) the board determines it is necessary or appropriate because of an emergency, as defined in paragraph (5) of subdivision (i) of Section 207; or (C) notwithstanding the absence of consent from all shareholders pursuant to (A) or subdivision (b) of Section 20, the meeting includes a live audiovisual feed for the duration of the meeting. A corporation holding a meeting pursuant to (C) may offer, in addition to remote audiovisual feed, an audio-only means by which a shareholder or proxyholder may participate provided that the choice between participating via audiovisual or via audio-only means is made by the shareholder or proxyholder and the corporation does not impose any barriers to either mode of participation. A de minimis disruption of an audio or audiovisual feed does not require a corporation to end a shareholder meeting under, or render the corporation out of compliance with, this subdivision.

history: (History: Amended by Stats. 2024, Ch. 157, Sec. 1. (AB 2908) Effective January 1, 2025.)

title: 1. CORPORATIONS

chapter: 6. Shareholders’ Meetings and Consents

path: 1. CORPORATIONS > 1. GENERAL CORPORATION LAW > 6. Shareholders’ Meetings and Consents


citation: CORP § 601

text:
(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), electronic video screen communication, conference telephone, or other means of remote 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) (1) 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 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. 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. Notwithstanding the foregoing, the notice of a shareholder’s meeting or any report may be sent by electronic communication or other means of remote communication if the board determines it is necessary or appropriate because of an emergency, as defined in paragraph (5) of subdivision (i) of Section 207. An affidavit of mailing or electronic transmission by the corporation, or electronic communication or other means of remote communication as permitted because of an emergency, 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.

(2) 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 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.

(3) (A) 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:

(i) The corporation is unable to deliver two consecutive notices to the shareholder by that means.

(ii) 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.

(B) This paragraph shall not apply if notices are provided by electronic communication or other means of remote communication as permitted because of an emergency.

(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, conference telephone, or other means of remote 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.

history: (History: Amended by Stats. 2022, Ch. 617, Sec. 15. (SB 1202) Effective January 1, 2023.)

title: 1. CORPORATIONS


citation: CORP § 602

text:
(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).

history: (History: Amended by Stats. 2000, Ch. 485, Sec. 8. Effective January 1, 2001.)

title: 1. CORPORATIONS


citation: CORP § 603

text:
(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 (except for a reorganization as to which shareholders have the right, pursuant to Chapter 13 (commencing with Section 1300) to demand payment of cash for their shares), 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.

history: (History: Amended by Stats. 2013, Ch. 109, Sec. 1. (AB 457) Effective January 1, 2014.)

title: 1. CORPORATIONS


citation: CORP § 604

text:
(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.

history: (History: Amended by Stats. 1980, Ch. 501.)

title: 1. CORPORATIONS


citation: CORP § 605

text:
(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.

history: (History: Amended by Stats. 1994, Ch. 1010, Sec. 65. Effective January 1, 1995.)

title: 1. CORPORATIONS


citation: CORP § 700

text:
(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.

title: 1. CORPORATIONS

chapter: 7. Voting of Shares

path: 1. CORPORATIONS > 1. GENERAL CORPORATION LAW > 7. Voting of Shares


citation: CORP § 701

text:
(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.

history: (History: Amended by Stats. 1977, Ch. 235.)

title: 1. CORPORATIONS


citation: CORP § 702

text:
(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.

history: (History: Amended by Stats. 1985, Ch. 403, Sec. 13.)

title: 1. CORPORATIONS


citation: CORP § 703

text:
(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 chairperson of the board, president or any vice president of the other corporation, or by any other person authorized to do so by the chairperson 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.

history: (History: Amended by Stats. 2015, Ch. 98, Sec. 8. (SB 351) Effective January 1, 2016.)

title: 1. CORPORATIONS


citation: CORP § 704

text: (a) If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, spouses 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.(b) 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.

history: (History: Amended by Stats. 2016, Ch. 50, Sec. 21. (SB 1005) Effective January 1, 2017.)

title: 1. CORPORATIONS