This division shall be known and may be cited as the Social Purpose Corporations Act.
Chapter 1General Provisions and Definitions
Section § 2500
This part of the law is called the Social Purpose Corporations Act.
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Section § 2501
This section says that the rules that usually apply to different types of corporations also apply to what's called a 'social purpose corporation.' If any of those rules mention types of corporations like 'domestic' or 'foreign,' they should be understood to include social purpose corporations too, unless it specifically says otherwise.
Except as otherwise expressly stated, the provisions of Division 1 (commencing with Section 100) shall apply to corporations organized under this division, and references in that division to the terms “close corporation,” “constituent corporation,” “corporation,” “disappearing corporation,” “domestic corporation,” “foreign corporation,” “surviving corporation,” and similar terms shall be read to apply, in the same manner, to include the similar “social purpose corporation.”
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Section § 2502
This law section explains that it applies specifically to social purpose corporations, which are special types of businesses with certain societal goals. It includes corporations newly created as such, as well as those that have been changed into social purpose corporations by merging or converting. This applies even to older types, known as flexible purpose corporations, that were formed before 2015. However, there are some exceptions mentioned in other parts of the law.
This division applies only to social purpose corporations organized expressly under this division whether organized or existing under this division or amended, merged or converted into a social purpose corporation in accordance with Chapter 9 (commencing with Section 900) of Division 1, Chapter 11 (commencing with Section 1100) of Division 1 or Chapter 11.5 (commencing with Section 1150) of Division 1, including all flexible purpose corporations formed under this division prior to January 1, 2015, and now existing except as provided in paragraph (2) of subdivision (b) of Section 2601 and paragraph (3) of subdivision (b) of Section 2602.
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Section § 2502.01
This law states that any social purpose corporation in California or a similar foreign corporation, whose entire capital stock is owned by the U.S. government or its agencies, is automatically considered an agency or tool of the U.S. government. As such, these corporations enjoy all the same rights and protections as U.S. agencies.
Every social purpose corporation organized under the laws of this state or similar foreign social purpose corporation, all of the capital stock of which is beneficially owned by the United States, an agency or instrumentality of the United States or any social purpose corporation or similar foreign social purpose corporation the whole of the capital stock of which is owned by the United States or by an agency or instrumentality of the United States, is conclusively presumed to be an agency and instrumentality of the United States and is entitled to all privileges and immunities to which the holders of all of its stock are entitled as agencies of the United States.
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Section § 2502.02
This law says that when other state or federal laws are mentioned in this division, it includes any changes made to those laws over time, both past and future.
Unless otherwise expressly provided, whenever reference is made in this division to any other state or federal statute, that reference is to that statute as it may be amended from time to time, whether before or after the enactment of this division.
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Section § 2502.03
A social purpose corporation can be taken to court and sued just like any other ordinary corporation under the existing civil rules.
A social purpose corporation may be sued in the same manner as a corporation as provided in the Code of Civil Procedure.
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Section § 2502.04
A social purpose corporation in California has to follow the same rules as other corporations when it comes to having its property seized or attached by court order.
A social purpose corporation formed under this division shall, in respect of its property, as a condition of its existence as a social purpose corporation, be subject, in the same manner as a corporation, to the provisions of the Code of Civil Procedure authorizing the attachment of corporate property.
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Section § 2502.05
This law states that when social purpose corporations file documents with the Secretary of State, they will pay the same fees as other types of corporations, based on the fees outlined in another part of the Government Code.
The fees of the Secretary of State for filing instruments by or on behalf of social purpose corporations shall be the same fees prescribed for corporations in Article 3 (commencing with Section 12180) of Chapter 3 of Part 2 of Division 3 of Title 2 of the Government Code.
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Section § 2502.06
This law allows certain parts of a corporation's legal documents, like its founding articles or merger agreements, to rely on facts that are described outside those documents, as long as it's clearly explained how those facts affect the document. If any of these parts refer to an outside agreement or document, the corporation has to keep a copy at its main office and give free copies to shareholders if they ask. Any major changes to any linked agreements that affect shareholders' rights or responsibilities must be approved by the shareholders. This includes changes to shareholder rights or restrictions, changes in merger terms, or changes affecting the transferability of shares.
(a)CA Corporations Code § 2502.06(a) Provisions of the articles described in paragraph (3) of subdivision (e) of Section 2602 and subdivisions (a) and (b) of Section 2603 may be made dependent upon facts ascertainable outside of the articles, if the manner in which those facts shall operate upon those provisions is clearly and expressly set forth in the articles. Similarly, any of the terms of an agreement of merger pursuant to Section 1101 may be made dependent upon facts ascertainable outside of that agreement, if the manner in which those facts shall operate upon the terms of the agreement is clearly and expressly set forth in the agreement of merger.
(b)CA Corporations Code § 2502.06(b) Notwithstanding subdivision (a), when any provisions or terms
of articles or an agreement of merger are made dependent upon facts ascertainable outside of the filed instrument through a reference to an agreement or similar document, the social purpose corporation filing that instrument shall maintain at its principal office a copy of that referenced agreement or document and all amendments, and shall provide to its shareholders, in the case of articles, or to shareholders of any constituent corporation or other business entity, in the case of an agreement of merger, a copy of them upon written request and without charge.
(c)CA Corporations Code § 2502.06(c) For the purposes of this section, “referenced agreement” means an agreement or contract to which the social purpose corporation is a party. An amendment or revision of a referenced agreement shall require shareholder approval, in addition to any other required approvals, upon any of
the following circumstances:
(1)CA Corporations Code § 2502.06(c)(1) If the amendment or revision of the referenced agreement would result in a material change in the rights, preferences, privileges, or restrictions of a class or series of shares, the amendment or revision shall be approved by the outstanding shares, as defined in Section 152, of that class or series.
(2)CA Corporations Code § 2502.06(c)(2) If the amendment or revision of the referenced agreement would result in a material change in the rights or liabilities of any class or series of shares with respect to the subject matter of paragraph (1), (2), (3), (5), or (9) of subdivision (a) of Section 2603, the amendment or revision shall be approved by the outstanding shares, as defined in Section 152, of that class or series.
(3)CA Corporations Code § 2502.06(c)(3) If
the amendment or revision of the referenced agreement would result in a material change in the restrictions on transfer or
hypothecation of any class or series of shares, the amendment or revision shall be approved by the outstanding shares, as defined in Section 152, of that class or series.
(4)CA Corporations Code § 2502.06(c)(4) If the amendment or revision of the referenced agreement would result in a change of any of the principal terms of an agreement of merger, the amendment or revision shall be approved in the same manner as required by Section 3504 for a change in the principal terms of an agreement of merger.
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Section § 2502.07
This section clarifies that nothing in this division changes the rules in another specific section related to exemptions. It means that the existing rules and conditions for getting an exemption still apply as they are stated there.
Nothing contained in this division shall be construed to modify the provisions of subdivision (h) of Section 25102, or the conditions provided therein to the availability of an exemption under that subdivision.
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Section § 2503
An 'annual report' refers to the report that corporations must file each year, containing specific information as detailed in a different section of the law.
“Annual report” means the report required by subdivision (a) of Section 3500, including the information specified in subdivision (b) of Section 3500.
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Section § 2503.1
This law defines a "close social purpose corporation" as a type of corporation that serves a social purpose and is also a close corporation, meaning it typically has fewer shareholders and operates with more informality.
“Close social purpose corporation” means a social purpose corporation that is also a close corporation.
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Section § 2504
This law section defines what a 'constituent social purpose corporation' is. It refers to a social purpose corporation that has been merged with, or into, other corporations or business entities. It also includes any social purpose corporation that comes out of such a merger as the surviving entity.
“Constituent social purpose corporation” means a social purpose corporation that is merged with or into one or more corporations or one or more other business entities and includes a surviving social purpose corporation.
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Section § 2505
Conversion, in this context, refers to the process of changing one type of business entity into another following specific legal procedures outlined in other sections of corporate law.
“Conversion” means a conversion pursuant to Chapter 11.5 (commencing with Section 1150) of Division 1 and Chapter 9 (commencing with Section 3300) of this division.
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Section § 2506
A "disappearing social purpose corporation" is a social purpose corporation involved in a merger or acquisition that does not continue to exist afterward. It essentially describes a company that merges into another and ceases to exist as an independent entity.
“Disappearing social purpose corporation” means a constituent social purpose corporation that is not the surviving entity.
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Section § 2507
A 'domestic social purpose corporation' is a type of company set up according to specific rules in this part of the law.
“Domestic social purpose corporation” means a corporation organized under this division.
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Section § 2509
A "social purpose corporation" is a specific type of corporation that's organized according to the rules in this division, unless it's clearly stated otherwise somewhere else.
“Social purpose corporation,” unless otherwise expressly provided, refers only to a corporation organized under this division.
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Section § 2510
This law section defines a 'social purpose corporation subject to the Banking Law' in California. It includes corporations that, with approval, can engage in commercial banking, industrial banking, or trust businesses. Additionally, it covers corporations that have authorization to conduct both title insurance and trust business. Finally, it includes corporations allowed to conduct specific types of business under a separate financial code. Approval from the Commissioner of Financial Protection and Innovation is essential for these activities.
“Social purpose corporation subject to the Banking Law” means any of the following:
(a)CA Corporations Code § 2510(a) A social purpose corporation that, with the approval of the Commissioner of Financial Protection and Innovation, is incorporated for the purpose of engaging in, or that is authorized by the Commissioner of Financial Protection and Innovation to engage in, the commercial banking business under the Banking Law (Division 1.1 (commencing with Section 1000) of the Financial Code).
(b)CA Corporations Code § 2510(b) Any social purpose corporation that, with the approval of the Commissioner of Financial Protection and Innovation, is incorporated for the purpose of engaging in, or that is authorized by the Commissioner of Financial Protection and Innovation to engage in, the
industrial banking business under the Banking Law (Division 1.1 (commencing with Section 1000) of the Financial Code).
(c)CA Corporations Code § 2510(c) Any social purpose corporation, other than a social purpose corporation described in subdivision (d), that, with the approval of the Commissioner of Financial Protection and Innovation, is incorporated for the purpose of engaging in, or that is authorized by the Commissioner of Financial Protection and Innovation to engage in, the trust business under the Banking Law (Division 1.1 (commencing with Section 1000) of the Financial Code).
(d)CA Corporations Code § 2510(d) Any social purpose corporation that is authorized by the Commissioner of Financial Protection and Innovation and the Commissioner of Insurance to maintain a title insurance department to engage in title insurance business and a trust department to engage in trust business.
(e)CA Corporations Code § 2510(e) Any social purpose corporation that, with the approval of the Commissioner of Financial Protection and Innovation, is incorporated for the purpose of engaging in, or that is authorized by the Commissioner of Financial Protection and Innovation to engage in, business under Article 1 (commencing with Section 1850) of Chapter 21 of Division 1.1 of the Financial Code.
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Section § 2510.1
This law defines a 'social purpose corporation' that must follow specific rules because it acts like an insurance company. To qualify, the corporation needs to meet certain criteria laid out in other sections.
“Social purpose corporation subject to the Insurance Code as an insurer” means a social purpose corporation that has met the requirements of Sections 201.5, 201.6, and 201.7.
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Section § 2511
In California corporate law, 'reorganization' refers to three main types of business changes. A 'merger reorganization' involves combining companies under specific legal guidelines. An 'exchange reorganization' happens when one company gains control of another by exchanging equity securities like stocks. Lastly, a 'sale-of-assets reorganization' occurs when a company acquires most or all of another company's assets using equity or certain types of debt securities, particularly those with long-term maturity.
“Reorganization” means a merger reorganization, an exchange reorganization, or a sale of assets reorganization.
(a)CA Corporations Code § 2511(a) “Merger reorganization” means a merger pursuant to Chapter 11 (commencing with Section 1100) of Division 1 and Chapter 8 (commencing with Section 3200), of this division, other than a short-form merger.
(b)CA Corporations Code § 2511(b) “Exchange reorganization” means the acquisition by one domestic social purpose corporation, foreign social purpose corporation, or other business entity in exchange, in whole or in part, for its equity securities, or the equity securities of a domestic social purpose corporation, a foreign social purpose corporation, or an other business entity that is in control of
the acquiring entity, of equity securities of another domestic social purpose corporation, foreign social purpose corporation, or other business entity if, immediately after the acquisition, the acquiring entity has control of the other entity.
(c)CA Corporations Code § 2511(c) “Sale-of-assets reorganization” means the acquisition by one domestic social purpose corporation, foreign social purpose corporation, or other business entity in exchange in whole or in part for its equity securities, or the equity securities of a domestic social purpose corporation, a foreign social purpose corporation, or an other business entity that is in control of the acquiring entity, or for its debt securities, or debt securities of a domestic social purpose corporation, foreign social purpose corporation, or other business entity that is in control of the acquiring entity, that are not adequately secured and that have a maturity date in excess of five years after the consummation of the
reorganization, or both, of all or substantially all of the assets of another domestic social purpose corporation, foreign social purpose corporation, or other business entity.
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Section § 2512
A 'share exchange tender offer' happens when one social purpose corporation buys shares from another corporation using its own shares, or shares from a corporation it controls. This is different from other types of mergers or reorganizations.
“Share exchange tender offer” means any acquisition by one social purpose corporation in exchange in whole or in part for its equity securities, or the equity securities of a corporation or a social purpose corporation that is in control of the acquiring social purpose corporation, of shares of another corporation or social purpose corporation, other than an exchange reorganization (subdivision (b) of Section 2511).
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Section § 2513
This section defines 'special purpose' as the specific goal or mission outlined in the articles of a social purpose corporation, as specified in another related section.
“Special purpose” means the special purpose set forth in a social purpose corporation’s articles pursuant to subdivision (b) of Section 2602.
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Section § 2514
This section defines a "special purpose current report" as a report that a social purpose corporation must file according to Section 3501.
“Special purpose current report” means the report required of a social purpose corporation pursuant to Section 3501.
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Section § 2515
This law defines “special purpose MD&A” as the specific management discussion and analysis that a social purpose corporation is required to prepare according to another part of the law.
“Special purpose MD&A” means the management discussion and analysis required of a social purpose corporation pursuant to subdivision (b) of Section 3500.
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Section § 2516
This law section defines 'special purpose objectives' for social purpose corporations, indicating they are the goals set by management and directors to assess how well the company is achieving its identified social mission. These objectives must align with what is outlined in another part of the law, Section 3500.
“Special purpose objectives” means those objectives set forth by management and the directors of a social purpose corporation for purposes of measuring the impact of the social purpose corporation’s efforts relating to its special purpose in accordance with Section 3500.
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Section § 2517
This law defines a 'surviving social purpose corporation' as a type of corporation that continues to exist after combining with one or more other companies or business entities.
“Surviving social purpose corporation” means a social purpose corporation into which one or more other corporations or one or more other business entities is merged.
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