Bill Text: CA SB870 | 2019-2020 | Regular Session | Amended
Bill Title: Corporations: ratification or validation of noncompliant corporate actions.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2020-05-12 - Referral to Com. on JUD. rescinded due to the shortened 2020 Legislative Calendar. [SB870 Detail]
Download: California-2019-SB870-Amended.html
|
Amended
IN
Senate
March 09, 2020 |
CALIFORNIA LEGISLATURE—
2019–2020 REGULAR SESSION
Senate Bill
No. 870
| Introduced by Senator Jones |
January 21, 2020 |
An act to amend Section 110 of, and to add Section 119 to to, the Corporations Code, relating to corporations.
LEGISLATIVE COUNSEL'S DIGEST
SB 870, as amended, Jones.
Corporations: ratification or validation of noncompliant corporate actions.
The General Corporation Law provides for the formation of domestic general corporations by the execution and filing of articles of incorporation with the Secretary of State. Under that law, the business and affairs of these corporations are generally managed by, and all corporate powers exercised by or under, the direction of their boards of directors, and each director is elected by shareholder vote, with certain exceptions, as specified.
Existing law requires the Secretary of State, upon receipt of any instrument for filing, to file and provide the date of endorsed filing, if that instrument conforms to law. Existing law permits an instrument that does not conform to law to be resubmitted in accordance with specified procedures. Existing law also permits an agreement, certificate, or other
instrument relating to a domestic or foreign corporation filed under the General Corporation Law to be corrected with respect to any misstatement of fact contained therein, as provided.
This bill, except as provided, would authorize otherwise lawful corporate actions not in compliance, or purportedly not in compliance, with the General Corporation Law or the articles or bylaws in effect at the time of a corporate action, to be ratified, or validated by the superior court, in conformity with certain procedures. The bill would require, among other things, that the ratification of a corporate action pursuant to the bill’s provisions be approved by the board and, as applicable, approved by the shareholders or approved by the outstanding shares in accordance with the General Corporation Law and the articles and bylaws in effect at the time of ratification, except as specified.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 110 of the Corporations Code is amended to read:110.
(a) Upon receipt of any instrument by the Secretary of State for filing pursuant to this division, if it conforms to law, it shall be filed by, and in the office of, the Secretary of State and the date of filing endorsed thereon. Except for instruments filed pursuant to Section 119 or 1502, the date of filing shall be the date the instrument is received by the Secretary of State unless the instrument provides that it is to be withheld from filing until a future date or unless in the judgment of the Secretary of State the filing is intended to be coordinated with the filing of some other corporate document which cannot be filed. The Secretary of State shall file a document as of any requested future date not more than 90 days after its receipt, including a Saturday, Sunday, or legal holiday, if the document is received in the Secretary of State’s office at least one business day prior to the requested date of filing. An instrument does not fail to conform to law because it is not accompanied by the full filing fee if the unpaid portion of the fee does not exceed the limits established by the policy of the Secretary of State for extending credit in these cases.(b) If the Secretary of State determines that an instrument submitted for filing or otherwise submitted does not conform to law and returns it to the person submitting it, the instrument may be resubmitted accompanied by a written opinion of the member of the State Bar of California submitting the instrument, or representing the person submitting it, to the effect that the specific provision of the instrument objected to by the Secretary of State does conform to law and stating the points and authorities
upon which the opinion is based. The Secretary of State shall rely, with respect to any disputed point of law (other than the application of Sections 201, 2101, and 2106), upon that written opinion in determining whether the instrument conforms to law. The date of filing in that case shall be the date the instrument is received on resubmission.
(c) Any instrument filed with respect to a corporation (other corporation, other than original articles) articles or certificates of ratification filed pursuant to Section 119, may provide that it is to become effective not
more than 90 days subsequent to its filing date. In case such a delayed effective date is specified, the instrument may be prevented from becoming effective by a certificate stating that by appropriate corporate action it has been revoked and is null and void, executed in the same manner as the original instrument and filed before the specified effective date. In the case of a merger agreement, the certificate revoking the earlier filing need only be executed on behalf of one of the constituent corporations. If no revocation certificate is filed, the instrument becomes effective on the date specified.
SECTION 1.SEC. 2.
Section 119 is added to the Corporations Code, to read:119.
(a) (1) Other than ratifications or validations not permitted by subdivisions (d) and (h), otherwise lawful corporate actions not in compliance, or purportedly not in compliance, with this division or the articles or bylaws in effect at the time of the corporate action may be ratified, or validated by the superior court, in accordance with the provisions of this section.(2) Except as otherwise determined by the superior court pursuant to subdivision (h), a ratification or validation of a corporate action in accordance with this section is conclusive in the absence of actual fraud in the ratification or validation process.
(3) Ratification or validation under this section is not the exclusive means by which a corporate action may be ratified or validated. This section does not limit the authority of the board, the shareholders, or the corporation to effect any other lawful means of ratification or validation of a corporate action or correction of a record, including, but not limited to, any of the following actions: record.
(1)Approval of the board.
(2)Approval of the shareholders or approval of the outstanding shares.
(3)Filing a certificate of correction pursuant to Section 109.
(b) A ratification of a corporate action pursuant to this section shall be approved by the board and, as applicable, approved by the shareholders or approved by the outstanding shares in accordance with this division and the articles and bylaws in effect at the time of ratification, unless a higher approval standard was or would have been applicable to the original taking or purported taking of the corporate action, in which case the ratification shall be approved in accordance with such higher approval standard. If the corporate action to be ratified relates to the election of the initial directors pursuant to Section 210, a majority of the persons who, at the time of the ratification, are exercising the powers of directors may approve that ratification. The votes of any shares issued, or purportedly issued, pursuant to the corporate action being
ratified shall be disregarded for all purpose of approval of that corporate action as required by this subdivision, including, but not limited to, for the purpose of determining a quorum at a meeting of shareholders or required class vote.
(c) Notice of any ratification of a corporate action pursuant to this section shall be given either before or promptly after ratification pursuant to subdivision (b) to each shareholder and holder of shares purportedly issued at the time of the ratification, regardless of whether approval of the shareholders or of the outstanding shares is required for the ratification. The notice shall be given as provided in subdivision (b) of Section 601 and shall include a copy of any resolutions proposed to be or
adopted pursuant to subdivision (b) and a copy of this section. If a corporation that is subject to the reporting requirements of Section 13 or 15(d) of the federal Securities Exchange Act of 1934 includes the disclosures required by this section in a report, proxy statement, or information statement filed with or furnished to the Securities and Exchange Commission, notice shall be deemed given when that report or statement is filed with or furnished to the Securities and Exchange Commission.
(d) Ratification or validation of a corporate action under this section shall not be permitted and shall be void if, by virtue of the ratification or validation of a corporate action, an instrument previously filed with the Secretary of State or provision within an instrument previously filed with the Secretary of State would become
incorrect or incomplete.
(e) (1) A corporation may file a Certificate of Ratification pursuant to this subdivision if a ratification or validation of a corporate action affirms an instrument previously filed with the Secretary of State or a provision within an instrument previously filed with the Secretary of State and both of the following are met:
(A) At the time of the previous instrument’s filing, that instrument was not in compliance or purportedly not in compliance with this division or the articles or bylaws in effect at the time of that corporate action.
(B) The previous instrument accurately reflected the corporate action as so ratified or validated.
(2) A Certificate of Ratification shall consist of an officer’s certificate setting forth all of the following:
(A) The name of the corporation and the Secretary of State’s file number of the corporation.
(B) The title of the agreement, certificate, or other instrument being ratified or validated.
(C) The date the agreement, certificate, or other instrument being ratified or validated was filed with the Secretary of State.
(D) A statement relating to both of the following:
(i) That the necessary approvals of the ratification pursuant to subdivision (b) were obtained and, if applicable, the total number of
outstanding shares of each class entitled to vote with respect to the ratification.
(ii) That the number of shares of each class voting in favor of the ratification equaled or exceeded the vote required, specifying the percentage vote required of each class entitled to vote.
(E) A statement that the agreement, certificate, or other instrument or provisions listed therein have been ratified or validated pursuant to this section and that a copy of the notice required pursuant to subdivision (c) has been given.
(f) When filed with the Secretary of State, a Certificate of Ratification under subdivision (e) is effective retroactively to the effective date of the record being ratified, but the ratified corporate action is
effective when filed as to persons that previously relied on the original record and would be adversely affected by the retroactive effect.
(g) A Certificate of Ratification filed with the Secretary of State may not have a future file date or future effective date.
(h) Upon the filing of a civil action in superior court by the corporation, any successor entity to the corporation, any director, any shareholder or holder of shares purportedly issued pursuant to a corporate action ratified pursuant to this section, or any other person claiming to be substantially and adversely affected by the ratification of a corporate action pursuant to this section, the superior court of the proper county may determine the validity of any ratification taken pursuant to this section. The superior court may
also make orders as to any and all matters concerning the ratification as justice and equity may require, other than validating an action not permitted to be ratified or validated pursuant to paragraph (1) of subdivision (a) or subdivision (d), or altering the effective date of any filing with the Secretary of State. This section does not prescribe or circumscribe the facts and circumstances the superior court may consider or which remedies the superior court may grant in exercising its jurisdiction under this section, except as described in this subdivision. Any civil action relating to a ratification taken or proposed to be taken pursuant to this section shall be filed not later than 180 days after the notice required by subdivision
(c) is given.
(i) Unless otherwise determined by the superior court pursuant to subdivision (h) and unless the ratification or validation affects an instrument previously filed with the Secretary of State, a ratification or validation of a corporate action in accordance with this section relates back to the date of the corporate action. In the case of a ratification or validation affecting any instrument previously filed with the Secretary of State, Section 110 shall govern the effective date of any instrument previously filed with the Secretary of State.
(j) No ratification or validation made in accordance with
this section shall modify the effective date of any instrument previously filed with the Secretary of State. The effective date of that instrument shall be governed by Section 110.
(j)
(k) As used in this section:
(1) “Corporate action” means any of the following:
(A) Any action or purported action of the board.
(B) Any action or purported action of the shareholders.
(C) Any other action or transaction taken, or purportedly taken, by or on behalf of the corporation, including, but not limited to, any issuance, or purported issuance, of shares or other securities of the corporation.
(2) “Higher approval standard” means any provision set forth in the articles or bylaws in effect at the time of the original taking or purported taking of a corporate action, including any of the following:
(A) Requiring action of the board or shareholders, at a meeting or by written consent, to be taken by a proportion greater than otherwise would have been required pursuant to this division if the articles and bylaws were silent as to the required proportion.
(B) Requiring a greater proportion
of the directors or shareholders to constitute a quorum for the transaction of business at a meeting than otherwise would have been required pursuant to this division if the articles and bylaws were silent as to the required proportion.
(C) Requiring, prohibiting, or prescribing conditions on action of the board or shareholders at a meeting or by written consent.
(D) Requiring separate action of the holders of any class or series of the corporation’s shares, unless no shares of that class or series are outstanding at the time of the ratification of the corporate action pursuant to this section.
(E) Requiring separate action of the holders of securities of the corporation other than shares, unless those securities are not outstanding
at the time of the ratification of the corporate action pursuant to this section.
(F) Requiring separate action of any specified person or persons.
