text:
Notwithstanding subdivision (d) of Section 13401 and any other provision of law, the following licensed persons may be shareholders, officers, directors, or professional employees of the professional corporations designated in this section so long as the sum of all shares owned by those licensed persons does not exceed 49 percent of the total number of shares of the professional corporation so designated herein, and so long as the number of those licensed persons owning shares in the professional corporation so designated herein does not exceed the number of persons licensed by the governmental agency regulating the designated professional corporation. This section does not limit employment by a professional corporation designated in this section to only those licensed professionals listed under each subdivision. Any person duly licensed under Division 2 (commencing with Section 500) of the Business and Professions Code, the Chiropractic Act, or the Osteopathic Act may be employed to render professional services by a professional corporation designated in this section.

(a) Medical corporation.

(1) Licensed doctors of podiatric medicine.

(2) Licensed psychologists.

(3) Registered nurses.

(4) Licensed optometrists.

(5) Licensed marriage and family therapists.

(6) Licensed clinical social workers.

(7) Licensed physician assistants.

(8) Licensed chiropractors.

(9) Licensed acupuncturists.

(10) Naturopathic doctors.

(11) Licensed professional clinical counselors.

(12) Licensed physical therapists.

(13) Licensed pharmacists.

(14) Licensed midwives.

(15) Licensed occupational therapists.

(b) Podiatric medical corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Registered nurses.

(4) Licensed optometrists.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Naturopathic doctors.

(8) Licensed physical therapists.

(c) Psychological corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Registered nurses.

(4) Licensed optometrists.

(5) Licensed marriage and family therapists.

(6) Licensed clinical social workers.

(7) Licensed chiropractors.

(8) Licensed acupuncturists.

(9) Naturopathic doctors.

(10) Licensed professional clinical counselors.

(11) Licensed midwives.

(d) Speech-language pathology corporation.

(1) Licensed audiologists.

(e) Audiology corporation.

(1) Licensed speech-language pathologists.

(f) Nursing corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed psychologists.

(4) Licensed optometrists.

(5) Licensed marriage and family therapists.

(6) Licensed clinical social workers.

(7) Licensed physician assistants.

(8) Licensed chiropractors.

(9) Licensed acupuncturists.

(10) Naturopathic doctors.

(11) Licensed professional clinical counselors.

(12) Licensed midwives.

(g) Marriage and family therapist corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Licensed clinical social workers.

(4) Registered nurses.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Naturopathic doctors.

(8) Licensed professional clinical counselors.

(9) Licensed midwives.

(h) Licensed clinical social worker corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Licensed marriage and family therapists.

(4) Registered nurses.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Naturopathic doctors.

(8) Licensed professional clinical counselors.

(i) Physician assistants corporation.

(1) Licensed physicians and surgeons.

(2) Registered nurses.

(3) Licensed acupuncturists.

(4) Naturopathic doctors.

(5) Licensed midwives.

(j) Optometric corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed psychologists.

(4) Registered nurses.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Naturopathic doctors.

(k) Chiropractic corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed psychologists.

(4) Registered nurses.

(5) Licensed optometrists.

(6) Licensed marriage and family therapists.

(7) Licensed clinical social workers.

(8) Licensed acupuncturists.

(9) Naturopathic doctors.

(10) Licensed professional clinical counselors.

(11) Licensed midwives.

(l) Acupuncture corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed psychologists.

(4) Registered nurses.

(5) Licensed optometrists.

(6) Licensed marriage and family therapists.

(7) Licensed clinical social workers.

(8) Licensed physician assistants.

(9) Licensed chiropractors.

(10) Naturopathic doctors.

(11) Licensed professional clinical counselors.

(12) Licensed midwives.

(m) Naturopathic doctor corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Registered nurses.

(4) Licensed physician assistants.

(5) Licensed chiropractors.

(6) Licensed acupuncturists.

(7) Licensed physical therapists.

(8) Licensed doctors of podiatric medicine.

(9) Licensed marriage and family therapists.

(10) Licensed clinical social workers.

(11) Licensed optometrists.

(12) Licensed professional clinical counselors.

(13) Licensed midwives.

(n) Dental corporation.

(1) Licensed physicians and surgeons.

(2) Dental assistants.

(3) Registered dental assistants.

(4) Registered dental assistants in extended functions.

(5) Registered dental hygienists.

(6) Registered dental hygienists in extended functions.

(7) Registered dental hygienists in alternative practice.

(o) Professional clinical counselor corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Licensed clinical social workers.

(4) Licensed marriage and family therapists.

(5) Registered nurses.

(6) Licensed chiropractors.

(7) Licensed acupuncturists.

(8) Naturopathic doctors.

(9) Licensed midwives.

(p) Physical therapy corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed acupuncturists.

(4) Naturopathic doctors.

(5) Licensed occupational therapists.

(6) Licensed speech-language therapists.

(7) Licensed audiologists.

(8) Registered nurses.

(9) Licensed psychologists.

(10) Licensed physician assistants.

(11) Licensed midwives.

(q) Registered dental hygienist in alternative practice corporation.

(1) Registered dental assistants.

(2) Licensed dentists.

(3) Registered dental hygienists.

(4) Registered dental hygienists in extended functions.

(r) Licensed midwifery corporation.

(1) Licensed physicians and surgeons.

(2) Licensed psychologists.

(3) Registered nurses.

(4) Licensed marriage and family therapists.

(5) Licensed clinical social workers.

(6) Licensed physician assistants.

(7) Licensed chiropractors.

(8) Licensed acupuncturists.

(9) Licensed naturopathic doctors.

(10) Licensed professional clinical counselors.

(11) Licensed physical therapists.

(s) Occupational therapy corporation.

(1) Licensed physicians and surgeons.

(2) Licensed doctors of podiatric medicine.

(3) Licensed acupuncturists.

(4) Naturopathic doctors.

(5) Licensed physical therapists.

(6) Licensed speech-language therapists.

(7) Licensed audiologists.

(8) Registered nurses.

(9) Licensed psychologists.

(10) Licensed physician assistants.

(11) Licensed midwives.

(12) Licensed clinical social workers.

(13) Licensed marriage and family therapists.

(14) Licensed occupational therapy assistants.

history: (History: Amended by Stats. 2022, Ch. 290, Sec. 7. (AB 2671) Effective January 1, 2023.)

title: 1. CORPORATIONS


kind: section

code: CORP

citation: CORP § 13402

text:
(a) This part shall not apply to any corporation now in existence or hereafter organized which may lawfully render professional services other than pursuant to this part, nor shall anything herein contained alter or affect any right or privilege, whether under any existing or future provision of the Business and Professions Code or otherwise, in terms permitting or not prohibiting performance of professional services through the use of any form of corporation permitted by the General Corporation Law.

(b) The conduct of a business in this state by a corporation pursuant to a license or registration issued under any state law, except laws relating to taxation, shall not be considered to be the conduct of a business as a professional corporation if the business is conducted by, and the license or registration is issued to, a corporation which is not a professional corporation within the meaning of this part, whether or not a professional corporation could conduct the same business, or portions of the same business, as a professional corporation.

history: (History: Amended by Stats. 1988, Ch. 919, Sec. 13.)

division: 3. CORPORATIONS FOR SPECIFIC PURPOSES

part: 4. PROFESSIONAL CORPORATIONS

title: 1. CORPORATIONS

chapter: 7. Marketing Contracts

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 7. Marketing Contracts > 4. PROFESSIONAL CORPORATIONS


citation: CORP § 13403

text:
The provisions of the General Corporation Law shall apply to professional corporations, except where such provisions are in conflict with or inconsistent with the provisions of this part. A professional corporation which has only one shareholder need have only one director who shall be such shareholder and who shall also serve as the president and treasurer of the corporation. The other officers of the corporation in such situation need not be licensed persons. A professional corporation which has only two shareholders need have only two directors who shall be such shareholders. The two shareholders between them shall fill the offices of president, vice president, secretary and treasurer.

A professional medical corporation may establish in its articles or bylaws the manner in which its directors are selected and removed, their powers, duties, and compensation. Each term of office may not exceed three years. Notwithstanding the foregoing, the articles or bylaws of a professional medical corporation with more than 200 shareholders may provide that directors who are officers of the corporation or who are responsible for the management of all medical services at one or more medical centers may have terms of office, as directors, of up to six years; however, no more than 50 percent of the members of the board, plus one additional member of the board, may have six-year terms of office.

history: (History: Amended by Stats. 1980, Ch. 36.)

title: 1. CORPORATIONS


citation: CORP § 13404

text: A corporation may be formed under the General Corporation Law or pursuant to subdivision (b) of Section 13406 for the purposes of qualifying as a professional corporation in the manner provided in this part and rendering professional services. The articles of incorporation of a professional corporation shall contain a specific statement that the corporation is a professional corporation within the meaning of this part. Except as provided in subdivision (b) of Section 13401, no professional corporation shall render professional services in this state without a currently effective certificate of registration issued by the governmental agency regulating the profession in which such corporation is or proposes to be engaged, pursuant to the applicable provisions of the Business and Professions Code or the Chiropractic Act expressly authorizing such professional services to be rendered by a professional corporation.

history: (History: Amended by Stats. 1993, Ch. 955, Sec. 6. Effective January 1, 1994.)

title: 1. CORPORATIONS


text:
(a) A foreign professional corporation may qualify as a foreign corporation to transact intrastate business in this state in accordance with Chapter 21 (commencing with Section 2100) of Division 1. A foreign professional corporation shall be subject to the provisions of the General Corporation Law applicable to foreign corporations, except where those provisions are in conflict with or inconsistent with the provisions of this part. The statement and designation filed by the foreign professional corporation pursuant to Section 2105 shall contain a specific statement that the corporation is a foreign professional corporation within the meaning of this part.

(b) No foreign professional corporation shall render professional services in this state without a currently effective certificate of registration issued by the governmental agency regulating the profession in which that corporation proposes to be engaged, pursuant to the applicable provisions of the Business and Professions Code expressly authorizing those professional services to be rendered by a foreign professional corporation.

(c) If the California board, commission, or other agency that prescribes the rules or regulations governing a particular profession either now or hereafter requires that the shareholders of the professional corporation bear any degree of personal liability for the acts of the corporation, either by personal guarantee or in some other form that the governing agency prescribes, the shareholders of a foreign corporation that has been qualified to do business in this state in the same profession shall, as a condition of doing business in this state, be subject, with regard to the rendering of professional services by the professional corporation in California, or for California residents, to the same degree of personal liability, if any, as is prescribed by the governing agency for shareholders of a California professional corporation rendering services in the same profession.

(d) Each application by a foreign professional corporation to qualify to do business in this state shall contain the following statement:

“The shareholders of the undersigned foreign professional corporation shall be subject, with regard to the rendering of professional services by the professional corporation in California, or for California residents, to the same degree of personal liability, if any, in California as is from time to time prescribed by the agency governing the profession in this state for shareholders in a California professional corporation rendering services in the same profession. This application accordingly constitutes a submission to the jurisdiction of the courts of California to the same extent, but only to the same extent, as applies to the shareholders of a California professional corporation in the same profession. The foregoing submission to jurisdiction is a condition of qualification to do business in this state.”

history: (History: Added by Stats. 1993, Ch. 910, Sec. 3. Effective January 1, 1994.)

title: 1. CORPORATIONS


citation: CORP § 13405

text:
(a) Subject to the provisions of Section 13404, a professional corporation may lawfully render professional services in this state, but only through employees who are licensed persons. The corporation may employ persons not so licensed, but such persons shall not render any professional services rendered or to be rendered by that corporation in this state. A professional corporation may render professional services outside of this state, but only through employees who are licensed to render the same professional services in the jurisdiction or jurisdictions in which the person practices. Nothing in this section is intended to prohibit the rendition of occasional professional services in another jurisdiction as an incident to the licensee’s primary practice, so long as it is permitted by the governing agency that regulates the particular profession in the jurisdiction. Nothing in this section is intended to prohibit the rendition of occasional professional services in this state as an incident to a professional employee’s primary practice for a foreign professional corporation qualified to render professional services in this state, so long as it is permitted by the governing agency that regulates the particular profession in this state.

(b) Subject to Section 13404.5, a foreign professional corporation qualified to render professional services in this state may lawfully render professional services in this state, but only through employees who are licensed persons, and shall render professional services outside of this state only through persons who are licensed to render the same professional services in the jurisdiction or jurisdictions in which the person practices. The foreign professional corporation may employ persons in this state who are not licensed in this state, but those persons shall not render any professional services rendered or to be rendered by the corporation in this state.

(c) Nothing in this section or in this part is intended to, or shall, augment, diminish or otherwise alter existing provisions of law, statutes or court rules relating to services by a California attorney in another jurisdiction, or services by an out-of-state attorney in California. These existing provisions, including, but not limited to, admission pro hac vice and the taking of depositions in a jurisdiction other than the one in which the deposing attorney is admitted to practice, shall remain in full force and effect.

history: (History: Amended by Stats. 1993, Ch. 910, Sec. 4. Effective January 1, 1994.)

title: 1. CORPORATIONS


citation: CORP § 13406

text:
(a) Subject to the provisions of subdivision (b), shares of capital stock in a professional corporation may be issued only to a licensed person or to a person who is licensed to render the same professional services in the jurisdiction or jurisdictions in which the person practices, and any shares issued in violation of this restriction shall be void. Unless there is a public offering of securities by a professional corporation or by a foreign professional corporation in this state, its financial statements shall be treated by the Commissioner of Financial Protection and Innovation as confidential, except to the extent that such statements shall be subject to subpoena in connection with any judicial or administrative proceeding, and may be admissible in evidence therein. A shareholder of a professional corporation or of a foreign professional corporation qualified to render professional services in this state shall not enter into a voting trust, proxy, or any other arrangement vesting another person (other than another person who is a shareholder of the same corporation) with the authority to exercise the voting power of any or all of the shareholder’s shares, and any purported voting trust, proxy, or other arrangement shall be void.

(b) A professional law corporation may be incorporated as a nonprofit public benefit corporation under the Nonprofit Public Benefit Corporation Law under either of the following circumstances:

(1) The corporation is a qualified legal services project or a qualified support center within the meaning of subdivisions (a) and (b) of Section 6213 of the Business and Professions Code.

(2) The professional law corporation otherwise meets all of the requirements and complies with all of the provisions of the Nonprofit Public Benefit Corporation Law, as well as all of the following requirements:

(A) All of the members of the corporation, if it is a membership organization as described in the Nonprofit Corporation Law, are persons licensed to practice law in California.

(B) All of the members of the professional law corporation’s board of directors are persons licensed to practice law in California.

(C) Seventy percent of the clients to whom the corporation provides legal services are lower income persons as defined in Section 50079.5 of the Health and Safety Code, and to other persons who would not otherwise have access to legal services.

(D) The corporation shall not enter into contingency fee contracts with clients.

(c) A professional law corporation incorporated as a nonprofit public benefit corporation that is a recipient in good standing as defined in subdivision (c) of Section 6213 of the Business and Professions Code shall be deemed to have satisfied all of the filing requirements of a professional law corporation under Sections 6161.1, 6162, and 6163 of the Business and Professions Code.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 62. (SB 1498) Effective January 1, 2023.)

title: 1. CORPORATIONS


citation: CORP § 13407

text:
Shares in a professional corporation or a foreign professional corporation qualified to render professional services in this state may be transferred only to a licensed person, to a shareholder of the same corporation, to a person licensed to practice the same profession in the jurisdiction or jurisdictions in which the person practices, or to a professional corporation, and any transfer in violation of this restriction shall be void, except as provided herein.

A professional corporation may purchase its own shares without regard to any restrictions provided by law upon the repurchase of shares, if at least one share remains issued and outstanding.

If a professional corporation or a foreign professional corporation qualified to render professional services in this state shall fail to acquire all of the shares of a shareholder who is disqualified from rendering professional services in this state or of a deceased shareholder who was, on his or her date of death, licensed to render professional services in this state, or if such a disqualified shareholder or the representative of such a deceased shareholder shall fail to transfer said shares to the corporation, to another shareholder of the corporation, to a person licensed to practice the same profession in the jurisdiction or jurisdictions in which the person practices, or to a licensed person, within 90 days following the date of disqualification, or within six months following the date of death of the shareholder, as the case may be, then the certificate of registration of the corporation may be suspended or revoked by the governmental agency regulating the profession in which the corporation is engaged. In the event of such a suspension or revocation, the corporation shall cease to render professional services in this state.

Notwithstanding any provision in this part, upon the death or incapacity of a dentist, any individual named in subdivision (a) of Section 1625.3 of the Business and Professions Code may employ licensed dentists and dental assistants and charge for their professional services for a period not to exceed 12 months from the date of death or incapacity of the dentist. The employment of licensed dentists and dental assistants shall not be deemed the practice of dentistry within the meaning of Section 1625 of the Business and Professions Code, provided that all of the requirements of Section 1625.4 of the Business and Professions Code are met. If an individual listed in Section 1625.3 of the Business and Professions Code is employing licensed persons and dental assistants, then the shares of a deceased or incapacitated dentist shall be transferred as provided in this section no later than 12 months from the date of death or incapacity of the dentist.

history: (History: Amended by Stats. 2007, Ch. 433, Sec. 4. Effective January 1, 2008.)

title: 1. CORPORATIONS


citation: CORP § 13408

text: The following shall be grounds for the suspension or revocation of the certificate of registration of a professional corporation or a foreign professional corporation qualified to render professional services in this state: (a) if all shareholders who are licensed persons of such corporation shall at any one time become disqualified persons, or (b) if the sole shareholder shall become a disqualified person, or (c) if such corporation shall knowingly employ or retain in its employment a disqualified person, or (d) if such corporation shall violate any applicable rule or regulation adopted by the governmental agency regulating the profession in which such corporation is engaged, or (e) if such corporation shall violate any statute applicable to a professional corporation or to a foreign professional corporation, or (f) any ground for such suspension or revocation specified in the Business and Professions Code relating to the profession in which such corporation is engaged. In the event of such suspension or revocation of its certificate of registration such corporation shall cease forthwith to render professional services in this state.

history: (History: Amended by Stats. 1993, Ch. 910, Sec. 7. Effective January 1, 1994.)

title: 1. CORPORATIONS


text: A professional corporation shall not be formed so as to cause any violation of law, or any applicable rules and regulations, relating to fee splitting, kickbacks, or other similar practices by physicians and surgeons or psychologists, including, but not limited to, Section 650 or subdivision (e) of Section 2960 of the Business and Professions Code. A violation of any such provisions shall be grounds for the suspension or revocation of the certificate of registration of the professional corporation. The Commissioner of Financial Protection and Innovation or the Director of the Department of Managed Health Care may refer any suspected violation of those provisions to the governmental agency regulating the profession in which the corporation is, or proposes to be engaged.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 63. (SB 1498) Effective January 1, 2023.)

title: 1. CORPORATIONS


citation: CORP § 13409

text:
(a) Subject to Section 201, a professional corporation may adopt any name permitted by a law expressly applicable to the profession in which the corporation is engaged or by a rule or regulation of the governmental agency regulating that profession. The Secretary of State may require proof by affidavit or otherwise establishing that the name of the professional corporation complies with the requirements of this section and of the law governing the profession in which that professional corporation is engaged. The statements of fact in those affidavits may be accepted by the Secretary of State as sufficient proof of the facts.

(b) Subject to Section 201, a foreign professional corporation qualified to render professional services in this state may transact intrastate business in this state by any name permitted by a law expressly applicable to the profession in which the corporation is engaged, or by a rule or regulation of the governmental agency regulating the rendering of professional services in this state by the corporation. The Secretary of State may require proof by affidavit or otherwise establishing that the name of the foreign professional corporation qualified to render professional services in this state complies with the requirements of this section and of the law governing the profession in which the foreign professional corporation qualified to render professional services in this state proposes to engage in this state. The statements of fact in those affidavits may be accepted by the Secretary of State as sufficient proof of the facts.

history: (History: Amended by Stats. 2020, Ch. 361, Sec. 12. (SB 522) Effective January 1, 2021.)

title: 1. CORPORATIONS


citation: CORP § 13410

text:
(a) A professional corporation or a foreign professional corporation qualified to render professional services in this state shall be subject to the applicable rules and regulations adopted by, and all the disciplinary provisions of the Business and Professions Code expressly governing the practice of the profession in this state, and to the powers of, the governmental agency regulating the profession in which such corporation is engaged. Nothing in this part shall affect or impair the disciplinary powers of any such governmental agency over licensed persons or any law, rule or regulation pertaining to the standards for professional conduct of licensed persons or to the professional relationship between any licensed person furnishing professional services and the person receiving such services.

(b) With respect to any foreign professional corporation qualified to render professional services in this state, each such governmental agency shall adopt rules, regulations, and orders as appropriate to restrict or prohibit any disqualified person from doing any of the following:

(1) Being a shareholder, director, officer, or employee of the corporation.

(2) Rendering services in any profession in which he or she is a disqualified person.

(3) Participating in the management of the corporation.

(4) Sharing in the income of the corporation.

history: (History: Amended by Stats. 1993, Ch. 910, Sec. 10. Effective January 1, 1994.)

title: 1. CORPORATIONS


citation: CORP § 14000

text: This chapter shall be known and may be cited as the California Small Business Financial Development Corporation Law.

history: (History: Repealed and added by Stats. 2013, Ch. 537, Sec. 2. (AB 1247) Effective October 4, 2013.)

title: 1. CORPORATIONS

article: 1. Introduction

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. California Small Business Financial Development Corporations > 1. Introduction


citation: CORP § 14001

text:
(a) It is the intent of the Legislature in enacting this chapter to promote the economic development of small businesses through the California Small Business Finance Center by making available capital, general management assistance, and other resources, including financial services, personnel, and business education to small business entrepreneurs, including women, veteran, and minority-owned businesses, for the purpose of promoting the health, safety, and social welfare of the citizens of California, to eliminate unemployment of the economically disadvantaged of the state, and to stimulate economic development and entrepreneurship.

(b) It is the further intent of the Legislature to provide a flexible means to mobilize and commit all available and potential resources in the various regions of the state to fulfill these objectives, including federal, state, and local public resources, and private debt and equity investment.

(c) It is the further intent of the Legislature that corporations operating pursuant to this law shall, to the maximum extent feasible, coordinate with other job and business development efforts within their region directed toward implementing the purpose of this chapter.

(d) It is the further intent of the Legislature to provide expanded resources allowing participation by small and emerging contractors in state public works contracts. Increased access to surety bonding resources will assist in supporting participation by those firms in public works contracts, and by stimulating increased participation by small firms, the state will benefit from increased competition and lower bid costs.

history: (History: Amended by Stats. 2014, Ch. 71, Sec. 23. (SB 1304) Effective January 1, 2015.)

title: 1. CORPORATIONS

chapter: 1. California Small Business Financial Development Corporations

article: 1. Introduction


citation: CORP § 14002

text: If any provision of this chapter or the application thereof to any person or circumstances is held invalid, this invalidity shall not affect other provisions or applications of the chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.

title: 1. CORPORATIONS

article: 1. Introduction


citation: CORP § 14003

text:
Unless the context otherwise requires, the definitions in this section shall govern the construction of this chapter.

(a) “Bank” means the California Infrastructure and Economic Development Bank.

(b) “Bank board” means the board of directors of the California Infrastructure and Economic Development Bank.

(c) “Board of directors” means the board of directors of the corporation.

(d) “California Small Business Board” means the advisory board established pursuant to Section 14004.1 for the purpose of advising on issues and programs affecting small business.

(e) “California Small Business Finance Center” means the governmental unit within the bank, which is located within the Governor’s Office of Business and Economic Development, with the administrative responsibility for the programs and activities authorized pursuant to Section 8684.2 of the Government Code, the Small Business Financial Assistance Act of 2013 (Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7 of the Government Code), and this chapter.

(f) “Corporation” means any nonprofit California small business financial development corporation created pursuant to this chapter, or pursuant to Chapter 1 (commencing with Section 32000) of Division 15.5 of the Financial Code.

(g) “Directives and requirements” means a document adopted by the bank board setting forth policy direction as well as key rules governing a particular subject area.

(h) “Executive director” means the executive director of the California Infrastructure and Economic Development Bank.

(i) “Expansion fund” means the California Small Business Expansion Fund authorized pursuant to Section 63089.5 of the Government Code.

(j) “Financial company” means banking organizations, including national banks and trust companies, savings and loan associations, certified community development financial institutions, microbusiness lenders, state insurance companies, mutual insurance companies, and other public and private banking, lending, retirement, and insurance organizations.

(k) “Financial institution” means regulated banking organizations, including national banks and trust companies authorized to conduct business in the state and state-chartered commercial banks, trust companies, credit unions, and savings and loan associations.

(l) “Financial product” means the type of financial assistance described in Section 63088.5 of the Government Code or that the California Small Business Finance Center or a small business financial development corporation is otherwise authorized to provide.

(m) “Loan committee” means a committee appointed by the board of directors of a corporation to determine the course of action on a loan application pursuant to Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7 of the Government Code.

(n) “Microbusiness lender” means a microbusiness lender as defined in Section 13997.2 of the Government Code.

(o) “Program manager” means the manager of the California Small Business Finance Center as designated to this title by the executive director of the bank.

(p) “Trust fund” means the money from the expansion fund that is held in trust by a financial institution or financial company. A trust fund is not a deposit of state funds and is not subject to the requirements of Section 16506 of the Government Code.

(q) “Trust fund account” means an account within the trust fund that is either allocated to a particular corporation or shared by multiple corporations for the purpose of paying loan defaults and claims on bond guarantees or other financial products and program uses provided in this chapter.

title: 1. CORPORATIONS

article: 2. Definitions

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. California Small Business Financial Development Corporations > 2. Definitions


citation: CORP § 14004

text:
(a) The program manager shall do all of the following:

(1) Administer this chapter.

(2) Make recommendations to the executive director and the bank board on the approval or disapproval of the articles of incorporation. This determination shall be based upon the following:

(A) Review of the articles of incorporation and bylaws of the corporation to determine whether they contain the provisions required by this chapter and conform with the directives and requirements adopted by the bank board pursuant to this chapter.

(B) A determination as to whether the legislative intent expressed in Section 14001 shall be served by the proposed corporation.

(C) A determination as to whether the responsibility, character, and general fitness of the individuals who will manage the corporation are such as to command the confidence of the state and to warrant the belief that the business of the proposed corporation will be honestly and efficiently conducted in accordance with the intent and purpose of this chapter and that they include representatives of the financial and business community, as well as the economically disadvantaged.

(D) A determination by the program manager that there is significant need for a new corporation.

(3) Have the accounts of each corporation formed under this chapter examined and audited as of the close of business on June 30 of each year. Material examination exceptions that are not corrected by the corporation within a reasonable period of time may result in the suspension or termination of the corporation pursuant to Section 63089.3 of the Government Code.

(4) Have the portfolio of each corporation examined a minimum of once a year. Material examination exceptions that are not corrected by the corporation within a reasonable period of time may result in the suspension or termination of the corporation pursuant to Section 63089.3 of the Government Code.

(5) Review reports from the Department of Financial Protection and Innovation and inform corporations as to what corrective action is required.

(6) Examine, or cause to be examined, at any reasonable time, all books, records, and documents of every kind, and the physical properties of a corporation. The inspection shall include the right to make copies, extracts, and search records.

(b) The program manager may attend and participate at corporation meetings. The program manager, or their designee, shall be an ex officio, nonvoting representative on the board of directors and loan committees of each corporation. The program manager shall meet through telecommunication or in person with the board of directors of each corporation at least once each fiscal year, commencing January 1, 2014.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 64. (SB 1498) Effective January 1, 2023.)

title: 1. CORPORATIONS

article: 3. Program Manager

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. California Small Business Financial Development Corporations > 3. Program Manager


text:
(a) The California Small Business Board is hereby continued and created as an advisory board to the California Infrastructure and Economic Development Bank Board, the executive director, and the program manager. The California Small Business Board may also advise the Governor and the Small Business Advocate regarding issues and programs affecting California’s small business community, including, but not limited to, business innovation and expansion, export finance, state procurement, management and technical assistance, venture capital, and financial assistance.

(b) The California Small Business Board consists of the following membership:

(1) The Director of Finance or his or her designee.

(2) The Director of the Office of the Small Business Advocate or his or her designee.

(3) The Treasurer or his or her designee.

(4) A representative from two different corporations selected by the corporations.

(5) Four members appointed by the Governor, one of whom will serve as chair of the California Small Business Board, who are actively involved in the California small business community.

(6) Two persons actively involved in the business or agricultural communities, one appointed by the Speaker of the Assembly and one appointed by the Senate Committee on Rules.

(7) Two Members of the Legislature, or their designees, one appointed by the Speaker of the Assembly and one appointed by the Senate Committee on Rules, so long as it does not conflict with their duties as legislators.

(c) The California Small Business Board shall advise the program manager on matters regarding this chapter and Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7 of the Government Code.

(d) The public members of the California Small Business Board, at the discretion of the bank board, may be reimbursed per diem and travel expenses pursuant to state law.

history: (History: Added by Stats. 2013, Ch. 537, Sec. 2. (AB 1247) Effective October 4, 2013.)

title: 1. CORPORATIONS

article: 3. Program Manager


text:
The bank board shall approve new corporations recommended by the program manager, based on an examination of each of the following:

(a) Review of the articles of incorporation and bylaws of the corporation to determine whether they contain the provisions required by this chapter and conform with the directives and requirements adopted by the bank board pursuant to this chapter.

(b) Determination as to whether the legislative intent expressed in Section 14001 will be served by the proposed corporation.

(c) Determination as to whether the responsibility, character, and general fitness of the individuals who will manage the corporation are able to command the confidence of the state and to warrant the belief that the business of the proposed corporation will be honestly and efficiently conducted in accordance with the intent and purpose of this chapter and that they include representatives of the financial and business community, as well as the economically disadvantaged.

(d) Determination of the program manager that there is significant need for a new corporation.

title: 1. CORPORATIONS

article: 3. Program Manager


citation: CORP § 14005

text:
Upon approval by the bank board to become a corporation, an entity shall adopt or amend its articles of incorporation to comply with the following:

(a) The name of the corporation shall include the words “small business financial development corporation,” except for those corporations formed pursuant to this chapter prior to 2002, which may also be called “small business development corporations,” or those formed prior to 1985, which may also be called “rural or urban development corporations.”

(b) The purposes for which the corporation is formed, which shall be those specified in Section 14001. This requirement shall not be deemed to preclude a statement of powers.

(c) A geographical description of the corporation’s primary service area.

(d) The name and addresses of seven or more persons who are to act in the capacity of directors until the selection of their successors.

(e) That the corporation is organized pursuant to the California Small Business Financial Development Corporation Law.

title: 1. CORPORATIONS

article: 4. New Corporations

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. California Small Business Financial Development Corporations > 4. New Corporations


citation: CORP § 14006

text: If the bank board concurs with the findings of the program manager pursuant to Section 14004, the bank board shall direct the program manager to approve the articles of incorporation and endorse the approval thereon and forward the same to the Secretary of State for his or her approval and filing. Likewise, the program manager shall review all amendments to the articles of incorporation to ensure consistency with the purposes of this chapter.

title: 1. CORPORATIONS

article: 4. New Corporations


citation: CORP § 14007

text:
(a) The corporation’s existence as a small business financial development corporation begins upon the filing of the articles with the Secretary of State and continues perpetually, unless otherwise expressly provided for by law.

(b) If a corporation is terminated from participation in all programs, in order to continue its existence as a nonprofit corporation pursuant to the Nonprofit Public Benefit Corporation Law (Part 2 (commencing with Section 5110) of Division 2 of Title 1 of the Corporations Code), the corporation shall amend its articles of incorporation in accordance with Chapter 8 (commencing with Section 5180) of Part 2 of Division 2 of Title 1 to remove the provisions required by Section 14005, including an amendment to remove the words “small business financial development corporation,” “small business development corporation,” or “rural or urban development corporation,” as applicable, from the corporate name, and shall no longer be registered with the Secretary of State as a small business financial development corporation. A corporation shall not enjoy any of the benefits of a small business financial development corporation following termination.

title: 1. CORPORATIONS

article: 4. New Corporations


citation: CORP § 14009

text:
(a) Each corporation shall have provisions establishing a grievance procedure for employees, clients, or potential clients, to appeal a decision or obtain redress of an action done by the staff or loan committee of the corporation. The procedures shall be established in writing during the probationary period of a new corporation.

(b) The bylaws of the corporation shall authorize the removal of officers only by a two-thirds vote of the directors of the corporation.

title: 1. CORPORATIONS

article: 4. New Corporations


citation: CORP § 14011

text: The Nonprofit Public Benefit Corporation Law (Part 2 (commencing with Section 5110) of Division 2 of this title) applies to corporations formed under this chapter, except as to matters otherwise provided for in this chapter.

title: 1. CORPORATIONS

article: 4. New Corporations


citation: CORP § 14012

text: For six months following the establishment of a corporation, commencing upon filing of the articles of incorporation with the Secretary of State, a corporation shall be on probation. While on probation, a corporation may be suspended if suspension is recommended by the program manager and affirmed by the executive director. This suspension is nonappealable and not subject to the procedures for suspension applicable to a corporation not on probation.

title: 1. CORPORATIONS

article: 4. New Corporations


citation: CORP § 14013

text: The corporate powers of a corporation shall be exercised by its board of directors.

title: 1. CORPORATIONS

article: 5. Corporation Board

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. California Small Business Financial Development Corporations > 5. Corporation Board


citation: CORP § 14014

text:
The bank shall enter into a contract with each corporation that shall require that:

(a) A person may not serve on a corporation’s board of directors who is not a resident of, or person conducting business in, the primary service area described in the articles of incorporation.

(b) A corporation’s board of directors shall include representatives from all of the following:

(1) The financial community.

(2) The business community.

(3) The economically disadvantaged.

(c) The chief executive officer of a corporation, or his or her designee, is the only employee of the corporation who may serve on its board of directors.

(d) A person who has a financial interest related to a matter over which the board of directors has authority may not make, participate in making, or in any way attempt to influence that matter.

title: 1. CORPORATIONS

article: 5. Corporation Board


citation: CORP § 14015

text: If any director ceases to meet the qualifications established in Section 14014, he or she shall immediately vacate his or her position as a director and the position shall be deemed vacant.

title: 1. CORPORATIONS

article: 5. Corporation Board


citation: CORP § 14016

text: If any vacancy occurs in the elective membership of the board of directors through death, resignation, or otherwise, the remaining directors shall elect a person representing the appropriate category to fill the vacancy for the unexpired term.

title: 1. CORPORATIONS

article: 5. Corporation Board


citation: CORP § 14017

text: The bank board shall direct the program manager to establish new small business financial development corporations pursuant to the directives and requirements. The directives and requirements shall include steps to achieve a goal of ensuring that small businesses in all areas of the state would have reasonable access to the financial products authorized by Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7 of the Government Code for which they are eligible.

title: 1. CORPORATIONS

article: 5. Corporation Board


citation: CORP § 14018

text: Every corporation shall provide for, and maintain a central staff to perform, all administrative requirements of the corporation, including all those functions required of a corporation by the contract and this chapter.

title: 1. CORPORATIONS

article: 6. Corporations, Miscellaneous

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. California Small Business Financial Development Corporations > 6. Corporations, Miscellaneous


citation: CORP § 14019

text: Reasonable costs incurred by a corporation in the creation and maintenance of a central staff shall be paid to the corporation from state funds, including a portion of the interest earned on the expansion fund and the corporation’s trust fund account, if the corporation has a trust fund account, otherwise, on the expansion fund.

title: 1. CORPORATIONS

article: 6. Corporations, Miscellaneous


citation: CORP § 14020

text: A corporation shall report to the program manager, or his or her designated representative, all statistical and other reports required by this chapter and Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7 of the Government Code, including responses to audit reports, budget requirements, and other information relating to the establishment, monitoring, and suspension or termination of a corporation.

title: 1. CORPORATIONS

article: 6. Corporations, Miscellaneous


citation: CORP § 14021

text: A corporation shall make a report to the program manager, as required by Chapter 6 (commencing with Section 63088) of Division 1 of Title 6.7 of the Government Code.

title: 1. CORPORATIONS

article: 6. Corporations, Miscellaneous


citation: CORP § 14022

text:
It shall be unlawful for a member of the bank board or for the executive director, program manager, or any person who is an officer, director, contractor, or employee of a corporation, or who is a member of a loan committee, or who is an employee of the California Infrastructure and Economic Development Bank to do any of the following:

(a) Ask for, consent, or agree to receive, any commission, emolument, gratuity, money, property, or thing of value for his or her own use, benefit, or personal advantage, for procuring or endeavoring to procure for any person, partnership, joint venture, association, or corporation, any loan, guarantee, financial, or other assistance from any corporation.

(b) Borrow money, property, or to benefit knowingly, directly or indirectly, from the use of the money, credit, or property of any corporation.

(c) Make, maintain, or attempt to make or maintain, a deposit of the funds of a corporation with any other corporation or association on condition, or with the understanding, expressed or implied, that the corporation or association receiving the deposit shall pay any money or make a loan or advance, directly or indirectly, to any person, partnership, joint venture, association, or corporation, other than to a corporation formed under this chapter.

title: 1. CORPORATIONS

article: 7. Conflict of Interest

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. California Small Business Financial Development Corporations > 7. Conflict of Interest


citation: CORP § 14023

text: It shall be unlawful for a member of the bank board or for the executive director, program manager, or any person who is an officer or director of a corporation, or who is an employee of the California Infrastructure and Economic Development Bank to purchase or receive, or to be otherwise interested in the purchase or receipt, directly or indirectly, of any asset of a corporation, without paying to the corporation the fair market value of the asset at the time of the transaction.

title: 1. CORPORATIONS

article: 7. Conflict of Interest


citation: CORP § 14024

text: Violation of any provision of this article shall constitute a felony.

title: 1. CORPORATIONS

article: 7. Conflict of Interest


citation: CORP § 14200

text: The Legislature finds and declares that the formation of employee-owned businesses and the participation of employees in the management of businesses in this state will promote the stabilization of local economies, anchor business activity, and increase productivity. The Legislature further finds that the encouragement of employee-owned businesses will increase and broaden community investments in this state and encourage new capital formation through employee ownership.

history: (History: Added by Stats. 1989, Ch. 429, Sec. 1.)

part: 6. EMPLOYEE-OWNED BUSINESSES

title: 1. CORPORATIONS

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. California Small Business Financial Development Corporations > 6. EMPLOYEE-OWNED BUSINESSES


citation: CORP § 14300

text:
(a) Any corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for irrigation purposes may provide, and any corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for domestic use shall provide, in its articles or bylaws that water shall be sold, distributed, supplied, or delivered only to owners of its shares and that the shares shall be appurtenant to certain lands when the same are described in the certificate issued therefor; and when the certificate is so issued and a certified copy of the articles or bylaws recorded in the office of the county recorder in the county where the lands are situated the shares of stock shall become appurtenant to the lands and shall only be transferred therewith, except after sale or forfeiture for delinquent assessments thereon as provided in Section 14303. Notwithstanding this provision in its articles or bylaws, any such corporation may sell water to the state, or any department or agency thereof, or to any school district, or to any public agency, or, to any other mutual water company or, during any emergency resulting from fire or other disaster involving danger to public health or safety, to any person at the same rates as to holders of shares of the corporations; and provided further, that any corporation may enter into a contract with a county fire protection district to furnish water to fire hydrants and for fire suppression or fire prevention purposes at a flat rate per hydrant or other connection. In the event lands to which any stock is appurtenant are owned or purchased by the state, or any department or agency thereof, or any school district, or public agency, the stock shall be canceled by the secretary, but shall be reissued to any person later acquiring title to the land from the state department, agency, or school district, or public agency.

(b) A corporation described in subdivision (a) shall be known as a mutual water company.

history: (History: Amended by Stats. 2011, Ch. 512, Sec. 2. (AB 54) Effective January 1, 2012.)

title: 1. CORPORATIONS

chapter: 1. Water Companies

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 1. Water Companies


text: For purposes of this chapter, “public water system” shall have the same meaning as provided in Section 116275 of the Health and Safety Code.

history: (History: Added by Stats. 2011, Ch. 512, Sec. 3. (AB 54) Effective January 1, 2012.)

title: 1. CORPORATIONS


citation: CORP § 14301

text:
A corporation, including a nonprofit corporation organized for or engaged in the business of developing, distributing, supplying, or delivering water for irrigation or domestic use, or both, may provide in its articles, or may amend its articles to provide, that its only purpose shall be to develop, distribute, supply, or deliver water for irrigation or domestic use, or both, to its members or shareholders, at actual cost plus necessary expenses.

The amendment of the articles may be accomplished by:

(a) The passage by a three-fourths vote of the members of the board of directors of the corporation of a resolution adopting as the purpose of the corporation the purpose set forth in this section.

(b) The signing, verification, and filing of a certificate setting forth the resolution and the manner of its adoption.

The corporation shall not distribute any gains, profits, or dividends to its members or shareholders except upon the dissolution of the corporation.

history: (History: Added by Stats. 1997, Ch. 598, Sec. 3. Effective January 1, 1998.)

title: 1. CORPORATIONS


text:
(a) No later than December 31, 2012, each mutual water company that operates a public water system shall submit to the local agency formation commission for its county a map depicting the approximate boundaries of the property that the mutual water company serves.

(b) A mutual water company that operates a public water system shall respond to a request from a local agency formation commission, located within a county that the mutual water company operates in, for information in connection with the preparation of municipal service reviews or spheres of influence pursuant to Chapter 4 (commencing with Section 56425) of Part 2 of Division 3 of Title 5 of the Government Code within 45 days of the request. The mutual water company shall provide all reasonably available nonconfidential information relating to the operation of the public water system. The mutual water company shall explain, in writing, why any requested information is not reasonably available. The mutual water company shall not be required to disclose any information pertaining to the names, addresses, or water usage of any specific shareholder. This subdivision shall not be interpreted to require a mutual water company to undertake any study or investigation. A mutual water company may comply with this section by submitting to the local agency formation commission the same information that the mutual water company submitted to the State Department of Public Health.

(c) A mutual water company that operates a public water system shall be subject to the requirements of, and has the powers granted by, subdivision (b) of Section 116755 of the Health and Safety Code.

history: (History: Added by Stats. 2011, Ch. 512, Sec. 4. (AB 54) Effective January 1, 2012.)

title: 1. CORPORATIONS


text: Each board member of a mutual water company that operates a public water system shall comply with the training requirements set out in subdivision (a) of Section 116755 of the Health and Safety Code.

history: (History: Added by Stats. 2011, Ch. 512, Sec. 5. (AB 54) Effective January 1, 2012.)

title: 1. CORPORATIONS


text:
(a) All construction on public water systems operated by a mutual water company shall be designed and constructed to comply with the applicable California Waterworks standards, as provided in Chapter 16 (commencing with Section 64551) of Division 4 of Title 22 of the California Code of Regulations.

(b) A mutual water company that operates a public water system shall maintain a financial reserve fund for repairs and replacements to its water production, transmission, and distribution facilities at a level sufficient for continuous operation of facilities in compliance with the federal Safe Drinking Water Act (42 U.S.C. Sec. 300f et seq.) and the California Safe Drinking Water Act (Chapter 4 (commencing with Section 116270) of Part 12 of Division 104 of the Health and Safety Code).

history: (History: Amended by Stats. 2012, Ch. 162, Sec. 23. (SB 1171) Effective January 1, 2013.)

title: 1. CORPORATIONS


citation: CORP § 14302

text: Whenever the owner of real property to which water stock by the terms of the certificate thereof is appurtenant at the time of conveyance, by properly executed conveyance, transfers to another the real property with the appurtenances belonging to the property, or whenever title to the property passes by execution sale, or by foreclosure or probate proceedings, the secretary of the water company that issued the stock shall, upon exhibition to him or her of a deed of the land duly recorded, or the necessary court order duly recorded, issue to the grantee named in the conveyance a new certificate of stock for the number of shares appurtenant to the land as shown by the books and records of the company. The secretary of the water company shall enter the name of the grantee upon the books of the company as the owner of the shares of stock and shall cancel on the books the number of former shares of stock so appurtenant to the land in the name of the grantor or of any previous owner of the land, or of any other person.

title: 1. CORPORATIONS


citation: CORP § 14303

text: A corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for irrigation purposes or domestic use, and not as a public utility, may levy assessments upon its shares, whether or not fully paid, unless otherwise provided in its articles or bylaws. If any shares of the corporation that have been made appurtenant to any land as provided in this chapter, become delinquent in the payment of assessments, the right to receive water or dividends thereon may be denied, and they may be sold and transferred without those lands as if not appurtenant thereto, and the purchaser shall acquire the right to receive water as provided in the articles or bylaws of the corporation, or they may be forfeited to the corporation.

title: 1. CORPORATIONS


citation: CORP § 14304

text: If a shareholder of a mutual water company has not timely paid any rate, charge, or assessment arising from, or related to, water service provided by the mutual water company to the shareholder’s property, and if authorized by its articles or bylaws, then after providing at least 20 days’ written notice to the shareholder, the board of directors of the mutual water company may authorize the recording of a notice of lien against that shareholder’s property to secure the collection of the rates, charges, and assessments owed to the mutual water company by the shareholder.

history: (History: Added by Stats. 2013, Ch. 633, Sec. 1. (AB 240) Effective January 1, 2014.)

title: 1. CORPORATIONS


citation: CORP § 14305

text:
(a) (1) This section shall be known and may be cited as the Mutual Water Company Open Meeting Act.

(2) This section shall only apply to a mutual water company that operates a public water system.

(b) (1) (A) A board of directors of a mutual water company shall allow an eligible person to personally attend a meeting of the board, if the eligible person gave the board at least 24 hours advance written notice of his or her intent to personally attend the meeting.

(B) Notwithstanding any other law, the board of directors may use teleconferencing to provide any eligible person access to the meeting that otherwise would be denied attendance at a meeting of the board for failure to provide this notice, or because the number of eligible persons having already provided notice of attendance exceeds the room capacity of the place of the meeting described in the notice issued pursuant to subdivision (f). The teleconferenced meeting or proceeding shall comply with this section and all other applicable provisions of law relating to a specific type of meeting or proceeding conducted by a mutual water company. If the board uses teleconferencing, the board shall provide to an eligible person attending a meeting by teleconference, before the meeting begins, an electronic copy or photocopy of all documents not related to an executive session to be discussed at the meeting. A board of directors of a mutual water company shall not prohibit an eligible person from attending a meeting of the board either in person, so long as the eligible person has complied with the notice requirement of paragraph (A), or by teleconference except as provided by paragraph (2). A board of directors may allow an eligible person to attend the meeting personally in lieu of using teleconferencing pursuant to this paragraph.

(C) For purposes of this subdivision, the term “teleconference” means, to the extent it is technologically feasible, any electronic means, that includes either audio or video or both, that allows an eligible person to hear a meeting and verbally interact with the board, including, but not limited to, a telephone, cellular telephone with speaker phone technology, or computer, or a device using internet-based video or audio conference technology.

(2) A board of directors of a mutual water company shall only meet in executive session during a meeting. A board may prohibit an eligible person from attending an executive session to consider pending or potential litigation, matters relating to the formation of contracts with third parties, including matters relating to the potential acquisition of real property or water rights, member or shareholder discipline, personnel matters, or to meet with a member or shareholder, upon the member or shareholder’s request, regarding the member or shareholder’s payment of assessments, as specified in Section 14303.

(3) The board of directors of a mutual water company shall meet in executive session, if requested by a member or shareholder who may be subject to a fine, penalty, or other form of discipline, and the member shall be entitled to attend the executive session.

(4) An eligible person shall be entitled to attend a teleconference meeting, as specified in paragraph (3) of subdivision (o), or the portion of the teleconference meeting that is open to eligible persons, and shall be entitled to attend with or without fulfilling the notice requirement in paragraph (1). The teleconference meeting or portion of the meeting that is open to eligible persons shall be audible to the eligible person in a location specified in the notice of the meeting.

(c) Any matter discussed in executive session shall be generally noted in the minutes of the meeting at which the executive session occurred.

(d) The minutes, minutes proposed for adoption that are marked to indicate draft status, or a summary of the minutes, of any meeting of the board of directors of a mutual water company, conducted on or after January 1, 2014, other than an executive session, shall be available to eligible persons within 30 days of the meeting. The minutes, proposed minutes, or summary minutes shall be provided to any eligible person upon request and upon reimbursement of the mutual water company’s costs for providing the minutes.

(e) The pro forma budget required in Section 14306 shall be available to eligible persons within 30 days of the meeting at which the budget was adopted. The budget shall be provided to any eligible person upon request and upon reimbursement of the mutual water company’s costs.

(f) Unless the bylaws provide for a longer period of notice, eligible persons shall be given notice of the time and place of a meeting as defined in subdivision (o), except for an emergency meeting, at least four days prior to the meeting. Notice shall be given by posting the notice in a prominent, publicly accessible place or places within the territory served by the mutual water company and by mail to any eligible person who had requested notification of board meetings by mail, at the address requested by the eligible person. Eligible persons requesting notice by mail shall pay the costs of reproduction and mailing of the notice in advance. Notice may also be given by mail, by delivery of the notice to each unit served by the mutual water company, or, with the consent of the eligible person, by electronic means. The notice shall contain the agenda for the meeting.

(g) An emergency meeting of the board may be called by the chief executive officer of the mutual water company, or by any two members of the board of directors other than the chief executive officer, if there are circumstances that could not have been reasonably foreseen which require immediate attention and possible action by the board, and which of necessity make it impracticable to provide notice as required by this section.

(h) The board of directors of a mutual water company shall permit any eligible person to speak at any meeting of the mutual water company or the board of directors, except for any portion of a meeting that is held in executive session outside the presence of eligible persons. A reasonable time limit for all eligible persons to speak to the board of directors or before a meeting of the mutual water company shall be established by the board of directors.

(i) (1) Except as described in paragraphs (2) to (4), inclusive, the board of directors of the mutual water company shall not discuss or take action on any item at a nonemergency meeting unless the item was placed on the agenda included in the notice that was posted and distributed pursuant to subdivision (f). This subdivision does not prohibit an eligible person who is not a member of the board from speaking on issues not on the agenda.

(2) Notwithstanding paragraph (1), a member of the board of directors, mutual water company officers, or a member of the staff of the mutual water company, may do any of the following:

(A) Briefly respond to statements made or questions posed by a person speaking at a meeting as described in subdivision (h).

(B) Ask a question for clarification, make an announcement, or make a brief report on his or her own activities, whether in response to questions posed by an eligible person or based upon his or her own initiative.

(3) Notwithstanding paragraph (1), the board of directors or a member of the board of directors, subject to rules or procedures of the board of directors, may do any of the following:

(A) Provide a reference to, or provide other resources for factual information to, the mutual water company’s officers or staff.

(B) Request the mutual water company’s officers or staff to report back to the board of directors at a subsequent meeting concerning any matter, or take action to direct the mutual water company’s officers or staff to place a matter of business on a future agenda.

(C) Direct the mutual water company’s officers or staff to perform administrative tasks that are necessary to carry out this subdivision.

(4) (A) Notwithstanding paragraph (1), the board of directors may take action on any item of business not appearing on the agenda posted and distributed pursuant to subdivision (f) under any of the following conditions:

(i) Upon a determination made by a majority of the board of directors present at the meeting that an emergency situation exists. An emergency situation exists if there are circumstances that could not have been reasonably foreseen by the board, that require immediate attention and possible action by the board, and that, of necessity, make it impracticable to provide notice.

(ii) Upon a determination made by the board by a vote of two-thirds of the members present at the meeting, or, if less than two-thirds of total membership of the board is present at the meeting, by a unanimous vote of the members present, that there is a need to take immediate action and that the need for action came to the attention of the board after the agenda was posted and distributed pursuant to subdivision (f).

(iii) The item appeared on an agenda that was posted and distributed pursuant to subdivision (f) for a prior meeting of the board of directors that occurred not more than 30 calendar days before the date that action is taken on the item and, at the prior meeting, action on the item was continued to the meeting at which the action is taken.

(B) Before discussing any item pursuant to this paragraph, the board of directors shall openly identify the item to the members in attendance at the meeting.

(j) (1) Notwithstanding any other law, the board of directors shall not take action on any item of business outside of a meeting.

(2) (A) Notwithstanding any other provision of law, the board of directors shall not conduct a meeting via a series of electronic transmissions, including, but not limited to, electronic mail, except as specified in subparagraph (B).

(B) Electronic transmissions may be used as a method of conducting an emergency meeting if all members of the board, individually or collectively, consent in writing to that action, and if the written consent or consents are filed with the minutes of the meeting of the board. These written consents may be transmitted electronically.

(k) (1) An eligible person may bring a civil action for declaratory or equitable relief for a violation of this section by a mutual water company for which he or she is defined as an eligible person for a judicial determination that an action taken by the board is null and void under this section.

(2) Prior to the commencement of an action pursuant to paragraph (1), the eligible person shall make a demand on the board to cure or correct the action alleged to be taken in violation of this section. The demand shall be in writing, and submitted within 90 days from the date the action was taken. The demand shall state the challenged action of the board and the nature of the alleged violation.

(3) Within 30 days of receipt of the demand, the board shall cure or correct the challenged action and inform the demanding party in writing of its actions to cure or correct, or inform the demanding party in writing of its decision not to cure or correct the challenged action.

(4) Within 15 days of receipt of the written notice of the board’s decision to cure or correct or not to cure or correct, or within 15 days of the expiration of the 30-day period to cure or correct, whichever is earlier, the demanding party shall commence the action pursuant to paragraph (1). If the demanding party fails to commence the action pursuant to paragraph (1), that party shall be barred from commencing the action thereafter.

(l) A board action that is alleged to have been taken in violation of this section shall not be determined to be void if the action taken was in substantial compliance with this section.

(m) The fact that the board of directors of a mutual water company takes subsequent action to cure or correct an action taken pursuant to this section shall not be construed as, or admissible as evidence of, a violation of this section.

(n) An eligible person who prevails in a civil action to enforce his or her rights pursuant to this section shall be entitled to reasonable attorney’s fees and court costs. A prevailing mutual water company shall not recover any costs, unless the court finds the action to be frivolous, unreasonable, or without foundation.

(o) As used in this section:

(1) “Eligible person” means a person who is any of the following:

(A) A shareholder or member of the mutual water company.

(B) A person who is an occupant, pursuant to a lease or a rental agreement, of commercial space or a dwelling unit to which the mutual water company sells, distributes, supplies, or delivers drinking water.

(C) An elected official of a city or county who represents people who receive drinking water directly from the mutual water company on a retail basis.

(D) Any other person eligible to participate in the mutual water company’s meetings under provisions of the company’s articles or bylaws.

(2) “Item of business” means any action within the authority of the board, except those actions that the board has validly delegated to any other person or persons, officer of the mutual water company, or committee of the board comprising less than a majority of the directors.

(3) “Meeting” means either of the following:

(A) A congregation of a majority of the members of the board at the same time and place to hear, discuss, or deliberate upon any item of business that is within the authority of the board.

(B) A teleconference in which a majority of the members of the board, in different locations, are connected by electronic means, through audio or video or both. A teleconference meeting shall be conducted in a manner that protects the rights of members of the mutual water company and otherwise complies with the requirements of this title. The notice of the teleconference meeting shall identify at least one physical location so that members of the mutual water company may attend and at least one member of the board of directors or a person designated by the board shall be present at that location. Participation by board members in a teleconference meeting constitutes presence at that meeting as long as all board members participating in the meeting are able to hear one another and members of the mutual water company speaking on matters before the board.

(4) “Mutual water company” means a mutual water company, as defined in Section 14300, that operates a public water system, as defined in Section 14300.5.

history: (History: Amended by Stats. 2015, Ch. 669, Sec. 2. (AB 1077) Effective January 1, 2016.)

title: 1. CORPORATIONS


citation: CORP § 14306

text:
(a) The board of a mutual water company that operates a public water system shall adopt, in an open meeting, an annual budget on or before the start of each fiscal year of the mutual water company.

(b) The board of a mutual water company that operates a public water system shall contract with a certified public accountant or public accountant to conduct an annual review of the financial records and reports of the mutual water company. The review shall be subject to generally accepted accounting standards.

(c) Eligible persons may request a copy of the report, and shall reimburse the mutual water company for the costs of providing the report.

(d) For purposes of this section, the term “eligible persons” has the same meaning as that term is defined in subdivision (o) of Section 14305.

history: (History: Added by Stats. 2013, Ch. 633, Sec. 3. (AB 240) Effective January 1, 2014.)

title: 1. CORPORATIONS


citation: CORP § 14307

text:
(a) (1) Unless its governing documents impose more stringent standards, a mutual water company that operates a public water system shall make the following records promptly available upon written request to an eligible person upon payment of fees covering direct costs of duplication:

(A) Agendas and minutes of board meetings conducted on or after January 1, 2014.

(B) A copy of an annual budget adopted pursuant to subdivision (a) of Section 14306.

(C) A copy of an accounting report prepared pursuant to subdivision (b) of Section 14306.

(D) A copy of any records reporting the results of a water quality test.

(E) A copy of an annual report that has been distributed to the mutual water company’s shareholder or members.

(2) Any request for records pursuant to this subdivision shall be limited to the three calendar years preceding the written request for the records.

(b) For the purposes of this section, “eligible person” means a person who is any of the following:

(1) A stockholder or member of the mutual water company.

(2) A person who is an occupant, pursuant to a lease or a rental agreement, of commercial space or a dwelling unit to which the mutual water company sells, distributes, supplies, or delivers drinking water.

(3) An elected official of a city or county who represents people who receive drinking water directly from the mutual water company on a retail basis.

(4) Any other person eligible to obtain copies of the records listed in subdivision (a) under provisions of the mutual water company’s articles or bylaws.

history: (History: Added by Stats. 2013, Ch. 633, Sec. 4. (AB 240) Effective January 1, 2014.)

title: 1. CORPORATIONS


citation: CORP § 14310

text:
(a) It is the intent of the Legislature to ensure both of the following:

(1) That when a mutual water company is formed or is about to be formed in connection with a subdivision, as defined in Sections 11000 and 11004.5 of the Business and Professions Code, an adequate potable water supply and distribution system exists for domestic use and fire protection.

(2) That adequate disclosure and protection to the security holders exist with respect to rights and duties arising from their security holdings in a mutual water company.

(b) For purposes of this chapter, the use of the term “subdivision” has the same definition as “subdivision” as defined in Sections 11000 and 11004.5 of the Business and Professions Code.

title: 1. CORPORATIONS

path: 1. CORPORATIONS > 3. CORPORATIONS FOR SPECIFIC PURPOSES > 2. Mutual Water Companies Formed in Connection With Subdivided Lands


citation: CORP § 14311

text: A mutual water company formed on or after January 1, 1998, in connection with the offering for sale or lease, or with the sale or lease, of lots within a subdivision and organized to sell, distribute, supply, or deliver water for domestic use to owners of lots in the subdivision shall meet all the requirements of this chapter. A mutual water company described in this section and formed before January 1, 1998, may elect to meet all the requirements of this chapter.

title: 1. CORPORATIONS

chapter: 2. Mutual Water Companies Formed in Connection With Subdivided Lands


citation: CORP § 14312

text:
(a) Any person who intends to offer for sale or lease lots within a subdivision within this state and to provide water for domestic use to purchasers of the lots within a subdivision through the formation of a mutual water corporation described in Section 14311, shall include as part of the application for a public report, as described in Section 11010 of the Business and Professions Code, a separate document containing all of the following information, representations, and assurances:

(1) That the provisions of this chapter have been complied with.

(2) That the area in which the mutual water company proposes to deliver water encompasses and includes the entire subdivision and, when applicable, will include parcels to be annexed to the subdivision.

(3) That the mutual water company has contacted the Public Utilities Commission and the county local agency formation commission to determine if the proposed area described in paragraph (2) will overlap an existing water service area or if an existing water service area could more appropriately serve the subdivision.

(4) That the mutual water company has a source of, and title to, a water supply, distribution, and fire protection system sufficient to satisfy expected demands for water from the subdivision.

(5) That copies of the contracts and other documents relating to the acquisition by the mutual water company of the water supply, distribution, and fire protection system have been delivered to, and are on file with, the mutual water company and that these contracts and documents evidence the mutual water company’s title to the water supply, distribution, and fire protection system.

(6) That the subdivider or applicant has executed and entered into a written contract with the mutual water company wherein the subdivider or applicant has agreed to pay monthly a proportional part of the repair and replacement fund according to a ratio of the number of lots owned or controlled by the subdivider or applicant to the total number of lots in the subdivision.

(7) That an engineer’s report has been prepared in accordance with this chapter and Sections 260.504.2 to 260.504.2.4, inclusive, of Title 10 of the California Code of Regulations and is on file with the mutual water company.

(8) That the mutual water company will distribute potable water for domestic use and has obtained, and has on file, a copy of the permit issued by the State Water Resources Control Board, as required pursuant to Section 116540 of the Health and Safety Code, or by a local primacy agency that has been delegated the authority to issue permits to small water systems, with the concurrence of the State Water Resources Control Board.

(9) That the securities of the mutual benefit water corporation will be sold or issued only to purchasers of lots in the subdivision, or to successors in interest of purchasers of lots in the subdivision, and not sold or issued to the subdivider, applicant, or to the successor in interest of the subdivider or applicant, and that the securities will be sold or issued only after a public report for the subdivision has been issued by the Real Estate Commissioner.

(10) That the securities to be issued by the mutual water company are appurtenant to the land pursuant to Section 14300.

(11) That the water supply and distribution system will serve each lot in the subdivision and be completed prior to the issuance of the public report by the Real Estate Commissioner.

(12) That there is a statement, signed by either the engineer who prepared the engineer’s report referred to in paragraph (7) or a person employed or acting on behalf of a public agency or other independent qualified person, that the water supply and distribution system has been examined and tested and that the water supply and distribution system operates in accordance with the design standards of the water supply and distribution system required by this chapter, and that a copy of this statement is on file with the mutual water company.

(13) That the articles of incorporation or bylaws of the mutual water company contain all of the following:

(A) A statement to the effect that the mutual water company shall provide water to all members or shareholders. If there will be an owners’ association of the subdivision, an additional statement that water shall also be provided to the common areas.

(B) A provision directing the board of directors to establish a rate structure that will result in the accumulation and maintenance of a fund for the repair, administration, maintenance, and replacement of the water supply, distribution, and fire protection system, that the rate charged shall bear a reasonable relationship to the cost of furnishing water and maintaining the system, and that unimproved lots included within the area to be served shall bear a proportionate share of the cost of repair and replacement of the water supply, distribution, and fire protection system, as well as a proportionate share of the cost of maintaining the fund.

(C) A statement evidencing a reasonable relationship between each unit of the securities to be issued and each unit of the area to be served, such as one share of common stock issued for each subdivision lot purchased.

(D) A prohibition on the issuance of fractional shares or securities.

(E) A statement, meeting the requirements of Section 14300, that the securities are appurtenant to the land within the area to be served.

(F) Provision for the transfer of the securities, voting rights of the security holders, inspection of books and records by security holders, necessary or contemplated expansion of the facilities of the mutual water company, and further subdivision, where applicable, of the area to be served.

(G) The limitation on the salaries paid to the persons operating, or employed by, the mutual water company, including officers and directors.

(H) A provision for annual meetings of the security holders accompanied by a provision for adequate notice.

(I) A provision for the annual distribution to each security holder of fiscal yearend financial statements within 105 days of the close of the fiscal year.

(J) In the case of a mutual water company that purchases water for distribution from a public utility, municipal water company, or water district, a provision for charging all security holders a pro rata amount of the cost of water supplied to an entity providing fire protection service.

(K) A provision that a share certificate shall be issued to each lot purchased.

(L) In the case of a mutual water company serving a residential subdivision, the following statements: (i) the mutual water company shall be a separate corporation formed and organized for the purpose described in Section 14311; and (ii) if a shareholder becomes delinquent in paying assessments, the right to receive water or dividends may be denied or forfeited but those rights shall not be sold or transferred without the land.

(14) That an offering circular has been prepared and will be used in any offer and sale of the securities of the mutual water company.

(15) That the writings and documents evidencing compliance with all of the above provisions of the subdivision are on file as part of the permanent record of the mutual water company.

(b) The contracts and documents described in paragraph (5) of subdivision (a) shall include all of the following:

(1) Any bill of sale transferring all personal property used and usable in the operation of the mutual water company.

(2) A copy of any recorded deed to the wells and water tanks to be used by the mutual water company in the supply, distribution, and fire protection system.

(3) Copies of any recorded deeds granting easements for construction, repair, maintenance, and improvements of the water supply, distribution, and fire protection system.

(c) The written contract described in paragraph (6) of subdivision (a) shall provide that, in consideration of the transfer by the subdivider or applicant to the mutual water company of the water supply, distribution, and fire protection system, the mutual water company agrees to do all of the following:

(1) Sell and issue securities to the purchasers of the remaining lots in the subdivision on the same terms, except for the price if the difference is justified, as for the initial purchasers.

(2) Cooperate with the subdivider or applicant in the operation, maintenance, and improvement of the present and contemplated water supply, distribution, and fire protection system.

(3) Contract with the subdivider, applicant, or a successor in interest, if a reasonable request is made to do so, for the management of the mutual water company for as long as lots in the subdivision remain unsold. The terms of the contract shall be subject to approval by the board of directors of the mutual water company, including terms related to the compensation to the subdivider, applicant, or successor in interest, if any.

(d) The offering circular described in paragraph (14) of subdivision (a) shall be delivered to each prospective purchaser of the securities and shall include, among other things, all of the following:

(1) A discussion of the water supply, distribution, and fire protection system.

(2) A summary of the opinion of the engineer along with the engineer’s consent, as required by Sections 260.504.2 to 260.504.2.4, inclusive, of Title 10 of the California Code of Regulations.

(3) The area in which the mutual water company intends to provide water service.

(4) A discussion of the rights and duties of the security holders of the mutual water company as set forth in its articles of incorporation and bylaws, including the consequence of failure to pay for water or assessments.

(5) The fact that the articles of incorporation or bylaws provide that the shares or securities of the mutual water company may not be sold separately from the right to water evidenced by the security of the mutual water company and prohibit issuance of fractional shares or securities of the mutual water company.

(6) A discussion of the certificate issued by the State Water Resources Control Board certifying that the water is fit for domestic use.

(7) The limitation imposed on salaries to be paid to personnel operating, or employed by, the mutual water company, including officers and directors.

(8) A discussion of the transferability of the securities, the voting rights of the security holders, access to books and records, necessary or contemplated expansion of the facilities of the mutual water company, and further subdivision of the area to be served, if applicable.

(9) A discussion of the subdivider’s duties with respect to maintenance and repair or replacement of the water supply, distribution, or fire protection system; and a discussion of the establishment and maintenance of the operating, repair, and replacement fund.

(e) The following exhibits shall also be attached to the offering circular:

(1) A copy of the articles of incorporation and bylaws of the mutual water company, including the articles of incorporation or bylaws recorded under Section 14300.

(2) A copy of financial statements of the mutual water company. If the mutual water company has not yet commenced operations, a detailed operating budget for the first six months of operations should be included as an exhibit to the offering circular. The operating budget must include estimated monthly fees to be charged to the water users.

(3) A specimen certificate evidencing the security to be issued and meeting the requirements of Section 14300.

(f) The Real Estate Commissioner shall prescribe the form and content of the document required by this section.

history: (History: Amended by Stats. 2019, Ch. 143, Sec. 37. (SB 251) Effective January 1, 2020.)

title: 1. CORPORATIONS


citation: CORP § 14313

text:
The engineer’s report prepared pursuant to the document under Section 14312 shall contain all relevant information pertaining to the proposed water supply, distribution, and fire protection system, including, but not limited to, the following:

(a) A system map of the area to be served showing all of the following:

(1) The total acreage.

(2) The number and location of lots into which the area is or can be subdivided and the location of the connection for water service.

(3) The location of all sources of supply, principal pumping stations, diversion works, water treatment and filter plants, and storage facilities.

(4) The size, character, and location of all mains and ditches.

(5) The location of all valves and gates, gauges, interconnections with other systems, and fire hydrants.

(6) The location, size, and kind of each service pipe.

(7) The layout of all principal pumping stations and water treatment and filter plants to show size, location, and character of all major equipment, pipelines, connections, valves, and other equipment used in connection therewith.

(8) The date of construction and condition of all principal items of plant and extensions of all mains.

(b) A description of the sources of supply, including, in the case of wells, information on the depth, diameter, and casing of the well, and a statement indicating that the proposed water supply and distribution system complies with this section, supported by reports showing the sustained capacity of source of supply, or, if all or some water is to be obtained from another source, copies of contracts for obtaining such water, together with estimates of the present and ultimate water consumption in the area to be served.

(c) A statement indicating in detail the cost of the water supply, distribution, and fire protection system, and indicating the cost of any required repairs or replacement.

(d) An opinion by the engineer to the effect that the water supply, distribution, and fire protection system will adequately, dependably, and safely meet the total requirements for all water consumers under maximum consumption and will meet the requirements of Section 14314. The opinion shall have attached to it the calculations and data used in estimating the water requirements.

(e) A statement by the engineer of the estimated cost of maintenance of the system, the estimated useful life of the components of the system, the estimated cost of replacement of the system, and the monthly or annual amount which should be charged to establish a reasonable reserve for maintenance and replacement of the system based on these estimates.

title: 1. CORPORATIONS


citation: CORP § 14314

text:
The water supply and distribution system of a mutual water company described in Section 14311 that proposes to distribute water for domestic use pursuant to this chapter shall comply with all of the following design standards:

(a) The system shall be adequate to maintain normal operating pressure of not less than 25 pounds per square inch, nor more than 125 pounds per square inch, at the service connection; provided, however, that during periods of hourly maximum demand, or at the time of peak seasonal loads, the pressure may be reduced to not less than 20 pounds per square inch, and during periods of hourly minimum demand the pressure may increase to not more than 150 pounds per square inch. Variations in pressure under normal operation shall not exceed 50 percent of the average operating pressure. The average operating pressure shall be determined by computing the arithmetical average of at least 24 consecutive hourly pressure readings.

(b) The quantity of water delivered to the distribution system from all source facilities shall be sufficient to supply adequately, dependably, and safely the total requirements of all water consumers under maximum consumption, and shall be sufficient to maintain the pressure specified by subdivision (a).

(c) The distribution system shall provide at least one connection per service and, to the extent feasible, shall be designed in a property segmented grid so as to do both of the following:

(1) Minimize the extent of interruption in water service when repairs are necessary.

(2) Avoid dead ends in its water mains.

title: 1. CORPORATIONS


citation: CORP § 14315

text:
(a) The mutual water company described in Section 14311 shall provide at least a minimum level of water service to its customers for fire protection purposes as an inherent part of the water system design in accordance with the standards set forth in this section. The standards set forth in this section are the minimum levels of water service that the mutual water company shall provide and shall not preclude the mutual water company from designing a fire protection system that meets higher standards, nor preclude any governmental agency from setting higher standards in any area subject to its jurisdiction. A mutual water company may request a fire protection agency to approve a fire protection system that does not meet the standards set forth in this chapter upon a showing by the mutual water company that the proposed system is adequate for fire protection purposes.

(b) In the initial construction, extension, or modification of a water system, any one of which is required to serve (1) a new user or (2) a change in use, the facilities constructed, extended, or modified shall be designed to be capable of providing, for a sustained period of at least two hours, in addition to the requirements of the average daily demand within the area to be served, the minimum flow requirements set forth below opposite the classification of land use to be served:Land UseMinimum Flow1.Rural, residential with a lot density of two or fewer units per acre primarily for recreational and retirement use 250 gpm2.Lot density of less than one single-family residential unit per acre500 gpm3.Lot density of one or two single-family residential units per acre750 gpm4.Lot density of three or more single-family residential units per acre1,000 gpm5.Duplex residential units, neighborhood business of one story1,500 gpm6.Multiple residential, one and two stories; light commercial or light industrial2,000 gpm7.Multiple residential, three stories or higher; heavy commercial or heavy industrial2,500 gpm

title: 1. CORPORATIONS