Amendment Of Articles - - CA Corporations

Section § 3000

This law explains how proposed changes to a social purpose corporation's foundational documents, known as articles, must be approved by shareholders. If a change affects the number of shares, modifies share rights, merges share classes, or adds new classes, shareholders of that class must agree. For changes affecting the core mission of the corporation, at least two-thirds of shareholders must agree. Even if specific groups are directly impacted, all voting shareholders get a say in these major decisions.

(a) A proposed amendment to the articles of a social purpose corporation shall be approved by the outstanding shares of a class, regardless of whether that class is entitled to vote thereon by the provisions of the articles, if the amendment would:

(1) Increase or decrease the aggregate number of authorized shares of that class, other than an increase as provided in either subdivision (b) of Section 405 or subdivision (b) of Section 902.

(2) Effect an exchange, reclassification, or cancellation of all or part of the shares of that class, including a reverse stock split but excluding a stock split.

(3) Effect an exchange, or create a right of exchange, of all or part of the shares of another class into the shares of that class.

(4) Change the rights, preferences, privileges, or restrictions of the shares of that class.

(5) Create a new class of shares having rights, preferences, or privileges prior to the shares of that class, or increase the rights, preferences, or privileges or the number of authorized shares of any class having rights, preferences, or privileges prior to the shares of that class.

(6) In the case of preferred shares, divide the shares of any class into series having different rights, preferences, privileges, or restrictions or authorize the board to do so.

(7) Cancel or otherwise affect dividends on the shares of that class that have accrued but have not been paid.

(b) A proposed amendment shall be approved by an affirmative vote of at least two-thirds of the outstanding shares of each class, or a greater vote if required in the articles, regardless of whether that class is entitled to vote thereon by the provisions of the articles, if the amendment would materially alter any special purpose of the social purpose corporation stated in the articles pursuant to paragraph (2) of subdivision (b) of Section 2602, regardless of whether that purpose, as amended, would comply with the provisions of that paragraph.

(c) Different series of the same class shall not constitute different classes for the purpose of voting by classes except when a series is adversely affected by an amendment in a different manner than other shares of the same class.

(d) In addition to approval by a class as provided in subdivisions (a) and (b), a proposed amendment shall also be approved by the outstanding voting shares (Section 152).

social purpose corporation proposed amendment articles of incorporation outstanding shares shareholder approval class voting share rights exchange of shares stock split preferred shares dividends special purpose voting shares material alteration class rights

(Amended by Stats. 2014, Ch. 694, Sec. 47. (SB 1301) Effective January 1, 2015.)

Section § 3001

This section describes how a social purpose corporation in California can change its status to a nonprofit or cooperative corporation. It involves amending the corporation's articles to alter its purpose, remove share authorizations, and make necessary adjustments. If shares have been issued, they need to be either canceled or converted into memberships. For changes to a nonprofit corporation, approval from all outstanding shares is required, regardless of voting restrictions. When merging, these changes must be included in the merger agreement rather than the articles. Special rules apply for social purpose corporations that are mutual water companies.

(a) A social purpose corporation may, by amendment of its articles pursuant to this section, change its status to that of a nonprofit public benefit corporation, nonprofit mutual benefit corporation, nonprofit religious corporation, or cooperative corporation.

(b) The amendment of the articles to change its status to a nonprofit corporation shall revise the statement of purpose, delete the authorization for shares and any other provisions relating to authorized or issued shares, make other changes as may be necessary or desired, and, if any shares have been issued, provide either for the cancellation of those shares or for the conversion of those shares to memberships of the nonprofit corporation. The amendment of the articles to change status to a cooperative corporation shall revise the statement of purpose, make other changes as may be necessary or desired, and, if any shares have been issued, provide for the cancellation of those shares or for the change of those shares to memberships of the cooperative corporation, if necessary.

(c) If shares have been issued, an amendment to change status to a nonprofit corporation shall be approved by all of the outstanding shares of all classes regardless of limitations or restrictions on their voting rights and an amendment to change status to a cooperative corporation shall be approved by the outstanding shares of each class regardless of limitations or restrictions on their voting rights.

(d) If an amendment pursuant to this section is included in a merger agreement, the provisions of this section shall apply, except that any provision for cancellation or conversion of shares shall be in the merger agreement rather than in the amendment of the articles.

(e) Notwithstanding subdivision (c), if a social purpose corporation is a mutual water company within the meaning of Section 2705 of the Public Utilities Code and under the terms of the status change each outstanding share is converted to a membership of a nonprofit mutual benefit corporation, an amendment to change status to a nonprofit mutual benefit corporation shall be approved by the outstanding shares of each class regardless of limitations or restrictions on their voting rights.

social purpose corporation status change nonprofit corporation cooperative corporation amendment of articles shares cancellation shares conversion voting rights merger agreement mutual water company nonprofit mutual benefit corporation statement of purpose class of shares

(Amended by Stats. 2014, Ch. 694, Sec. 48. (SB 1301) Effective January 1, 2015.)

Section § 3002

This law explains how a social purpose corporation in California can change its status to become a regular business corporation. To do this, they must amend their foundational documents, specifically removing any parts that are not allowed in a typical business corporation. If the company has issued shares, at least two-thirds of the shareholders must vote in favor of this change. Also, shareholders who disagree with the change have certain rights they can exercise. If this status change is part of a merger, special rules apply regarding share treatment.

(a) A social purpose corporation may, by amendment of its articles pursuant to this section, change its status to that of a business corporation.

(b) The amendment of the articles to change status to a business corporation shall revise the statement of purpose to delete any provisions in the articles that are permitted by Section 2602, but that are not permitted to be in the articles of a domestic corporation.

(c) If shares have been issued, an amendment to change status to a business corporation shall be approved by an affirmative vote of at least two-thirds of the outstanding shares of each class, or a greater vote if required in the articles, regardless of whether that class is entitled to vote thereon by the provisions of the articles. If the status change is approved, shareholders with dissenting shares, as defined in subdivision (b) of Section 1300, may exercise dissenters’ rights pursuant to Section 3305 and Chapter 13 (commencing with Section 1300) of Division 1.

social purpose corporation business corporation amendment of articles shareholder vote dissenters' rights merger agreement conversion of shares outstanding shares statement of purpose Section 2602 Section 1300 Section 3305

(Amended by Stats. 2014, Ch. 694, Sec. 49. (SB 1301) Effective January 1, 2015.)