Conversions - - CA Corporations

Section § 3300

This section explains the definitions used when talking about social purpose corporations and how they can change from one form of a business entity to another. It defines terms like 'converted' and 'converting' entities, whether they're social purpose corporations, domestic, or foreign business entities. It also references other sections in the corporate code for more detailed definitions of some business entities.

For purposes of this chapter, the following definitions shall apply:

(a) “Converted social purpose corporation” means a social purpose corporation that results from a conversion of an other business entity or a foreign other business entity or a foreign corporation pursuant to Section 3307.

(b) “Converted entity” means a domestic other business entity that results from a conversion of a social purpose corporation under this chapter.

(c) “Converting social purpose corporation” means a social purpose corporation that converts into a domestic other business entity pursuant to this chapter.

(d) “Converting entity” means an other business entity or a foreign other business entity or foreign corporation that converts into a social purpose corporation pursuant to Section 3307.

(e) “Domestic other business entity” has the meaning provided in Section 167.7.

(f) “Foreign other business entity” has the meaning provided in Section 171.07.

(g) “Other business entity” has the meaning provided in Section 174.5.

social purpose corporation converted social purpose corporation converted entity converting social purpose corporation converting entity domestic other business entity foreign other business entity business conversion Section 3307 Section 167.7 Section 171.07 Section 174.5

(Amended by Stats. 2014, Ch. 694, Sec. 55. (SB 1301) Effective January 1, 2015.)

Section § 3301

This law outlines how a social purpose corporation in California can change into another type of business, like a limited liability company or a partnership. First, all shares of the same type must be treated equally unless all shareholders agree otherwise. Second, at least two-thirds of the shareholders need to agree to the change. Third, certain shares can't be exchanged for lesser securities unless all shareholders consent. Fourth, shareholders can appoint managers or partners in the new business. Additionally, the law where the new business will exist must allow for such a conversion, and all other legal requirements must be followed.

(a) A social purpose corporation may be converted into a domestic other business entity pursuant to this chapter if, pursuant to the proposed conversion, each of the following conditions is met:

(1) Each share of the same class or series of the converting social purpose corporation shall, unless all the shareholders of the class or series consent, be treated equally with respect to any cash, rights, securities, or other property to be received by, or any obligations or restrictions to be imposed on, the holder of that share.

(2) The conversion is 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.

(3) Nonredeemable common shares of the converting social purpose corporation shall be converted only into nonredeemable equity securities of the converted entity unless all of the shareholders of the class consent.

(4) Paragraph (1) shall not restrict the ability of the shareholders of a converting social purpose corporation to appoint one or more managers, if the converted entity is a limited liability company, or one or more general partners, if the converted entity is a limited partnership, in the plan of conversion or in the converted entity’s governing documents.

(b) Notwithstanding subdivision (a), the conversion of a social purpose corporation into a domestic other business entity may be effected only if both of the following conditions are met:

(1) The law under which the converted entity will exist expressly permits the formation of that entity pursuant to a conversion.

(2) The social purpose corporation complies with any and all other requirements of any other law that applies to conversion to the converted entity.

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(Amended by Stats. 2014, Ch. 694, Sec. 56. (SB 1301) Effective January 1, 2015.)

Section § 3302

This law explains the process for a social purpose corporation in California to change into another type of business, like a partnership or LLC. To do this, they need a detailed plan that outlines how the conversion will happen, including details like how shareholder shares will be turned into new ownership in the new business. The board and shareholders must approve this plan, particularly if major changes are made. If the conversion involves new roles like becoming a general partner, those taking on those roles also need to agree. Shareholders can opt-out if they disagree, under certain rights. Amendments and abandonment of the plan are possible if the proper approvals are obtained. After conversion, the new business must keep the plan accessible, especially if requested by a shareholder.

(a) A social purpose corporation that desires to convert to a domestic other business entity shall approve a plan of conversion. The plan of conversion shall state all of the following:

(1) The terms and conditions of the conversion.

(2) The jurisdiction of the organization of the converted entity and of the converting social purpose corporation and the name of the converted entity after conversion.

(3) The manner of converting the shares of each of the shareholders of the converting social purpose corporation into securities of, or interests in, the converted entity.

(4) The provisions of the governing documents for the converted entity, including the articles and bylaws, partnership agreement or limited liability company articles of organization and operating agreement, to which the holders of interests in the converted entity are to be bound.

(5) Any other details or provisions that are required by the laws under which the converted entity is organized, or that are desired by the converting social purpose corporation.

(b) The plan of conversion shall be approved by the board of the converting social purpose corporation, and the principal terms of the plan of the conversion shall be approved by 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 of the converting social purpose corporation. The approval of at least two-thirds of the outstanding shares may be given before or after approval by the board. If the plan 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.

(c) If the social purpose corporation is converting into a general or limited partnership or into a limited liability company, then in addition to the approval of the shareholders set forth in subdivision (b), the plan of conversion shall be approved by each shareholder who will become a general partner or manager, as applicable, of the converted entity pursuant to the plan of conversion unless the shareholders have dissenters’ rights pursuant to Section 3305 and Chapter 13 (commencing with Section 1300) of Division 1.

(d) Upon the effectiveness of the conversion, all shareholders of the converting social purpose corporation, except those that exercise dissenters’ rights as provided in Section 3305 and Chapter 13 (commencing with Section 1300) of Division 1, shall be deemed parties to any agreement or agreements constituting the governing documents for the converted entity adopted as part of the plan of conversion, regardless of whether a shareholder has executed the plan of conversion or those governing documents for the converted entity. Any adoption of governing documents made pursuant thereto shall be effective at the effective time or date of the conversion.

(e) Notwithstanding its prior approval by the board and the outstanding shares, or either of them, a plan of conversion may be amended before the conversion takes effect if the amendment is approved by the board and, if it changes any of the principal terms of the plan of conversion, by the shareholders of the converting social purpose corporation in the same manner and to the same extent as was required for approval of the original plan of conversion.

(f) A plan of conversion may be abandoned by the board of a converting social purpose corporation, or by the shareholders of a converting social purpose corporation if the abandonment is approved by the outstanding shares, in each case in the same manner as required for approval of the plan of conversion, subject to the contractual rights of third parties, at any time before the conversion is effective.

(g) The converted entity shall keep the plan of conversion at the principal place of business of the converted entity if the converted entity is a domestic partnership, or at the office at which records are to be kept under Section 15901.14 if the converted entity is a domestic limited partnership, or at the office at which records are to be kept under Section 17701.13 if the converted entity is a domestic limited liability company. Upon the request of a shareholder of a converting social purpose corporation, the authorized person on behalf of the converted entity shall promptly deliver to the shareholder, at the expense of the converted entity, a copy of the plan of conversion. A waiver by a shareholder of the rights provided in this subdivision shall be unenforceable.

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(Amended by Stats. 2014, Ch. 694, Sec. 57. (SB 1301) Effective January 1, 2015.)

Section § 3303

Once a social purpose corporation decides to convert into another type of business entity, it must file necessary documents to make that change official. This includes a certificate or statement of conversion, which once approved and dated by the Secretary of State, confirms the conversion is valid and completed.

(a) After the approval, as provided in Section 3302, of a plan of conversion by the board and the outstanding shares of a social purpose corporation converting into a domestic other business entity, the converting social purpose corporation shall cause the filing of all documents required by law to effect the conversion and create the converted entity, which documents shall include a certificate of conversion or a statement of conversion as required by Section 3304, and the conversion shall thereupon be effective.

(b) A copy of the statement of partnership authority, certificate of limited partnership, or articles of organization complying with Section 3304, duly certified by the Secretary of State on or after the effective date, shall be conclusive evidence of the conversion of the social purpose corporation.

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(Amended by Stats. 2014, Ch. 694, Sec. 58. (SB 1301) Effective January 1, 2015.)

Section § 3304

This law section explains how a social purpose corporation in California can convert into different types of business entities, like partnerships or LLCs. It outlines the necessary statements or certificates that need to be completed and filed, and what they should include. For example, these documents must identify the corporation, the voting results on the conversion plan, and details of the new business entity. Filing these documents has the same effect as dissolving the original corporation, and the new entity takes over responsibilities for taxes and filings.

(a) To convert a social purpose corporation:

(1) If the social purpose corporation is converting into a domestic limited partnership, a statement of conversion shall be completed on the certificate of limited partnership for the converted entity.

(2) If the social purpose corporation is converting into a domestic partnership, a statement of conversion shall be completed on the statement of partnership authority for the converted entity, or if no statement of partnership authority is filed, then a certificate of conversion shall be filed separately.

(3) If the social purpose corporation is converting into a domestic limited liability company, a statement of conversion shall be completed on the articles of organization for the converted entity.

(b) Any statement or certificate of conversion of a converting social purpose corporation shall be executed and acknowledged by those officers of the converting social purpose corporation as would be required to sign an officers’ certificate, and shall set forth all of the following:

(1) The name and the Secretary of State’s file number of the converting social purpose corporation.

(2) A statement of the total number of outstanding shares of each class entitled to vote on the conversion, that the principal terms of the plan of conversion were approved by a vote of the number of shares of each class which equaled or exceeded the vote required under Section 3302, specifying each class entitled to vote and the percentage vote required of each class.

(3) The name, form, and jurisdiction of organization of the converted entity.

(4) The name and street address of the converted entity’s agent for service of process. If a corporation qualified under Section 1505 is designated as the agent, no address for it shall be set forth.

(d) The filing with the Secretary of State of a statement of conversion on an organizational document or a certificate of conversion as set forth in subdivision (a) shall have the effect of the filing of a certificate of dissolution by the converting social purpose corporation and no converting social purpose corporation that has made the filing is required to file a certificate of election under Section 1901 or a certificate of dissolution under Section 1905 as a result of that conversion.

(e) Upon the effectiveness of a conversion pursuant to this chapter, a converted entity that is a domestic partnership, domestic limited partnership, or domestic limited liability company shall be deemed to have assumed the liability of the converting social purpose corporation to prepare and file or cause to be prepared and filed all tax and information returns otherwise required of the converting social purpose corporation under the Corporation Tax Law (Part 11 (commencing with Section 23001) of Division 2 of the Revenue and Taxation Code) and to pay any tax liability determined to be due pursuant to that law.

social purpose corporation conversion domestic limited partnership domestic partnership domestic limited liability company statement of conversion certificate of conversion officers' certificate outstanding shares vote jurisdiction of organization agent for service of process certificate of dissolution Corporation Tax Law tax liability Secretary of State filing

(Amended by Stats. 2014, Ch. 834, Sec. 9.5. (SB 1041) Effective January 1, 2015.)

Section § 3305

If a social purpose corporation in California decides to change its structure, also known as a conversion, shareholders who disagree have certain rights. These rights are the same as those given to shareholders when their corporation goes through major changes like mergers. Essentially, the corporation and shareholders must follow specific rules designed for reorganizations, even though this change, known as a conversion, isn't usually classified as a reorganization. It's treated the same way just for the purpose of these rules.

The shareholders with dissenting rights, as defined in subdivision (b) of Section 1300, of a converting social purpose corporation shall have all of the rights under Chapter 13 (commencing with Section 1300) of Division 1 of the shareholders of a corporation involved in a reorganization requiring the approval of its outstanding shares, and the converting social purpose corporation shall have all of the obligations under Chapter 13 (commencing with Section 1300) of Division 1 of a corporation involved in the reorganization. Solely for purposes of applying the provisions of Chapter 13 (commencing with Section 1300) of Division 1, and not for purposes of this chapter, a conversion pursuant to Section 3301 or 3307 shall be deemed to constitute a reorganization.

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(Amended by Stats. 2014, Ch. 694, Sec. 60. (SB 1301) Effective January 1, 2015.)

Section § 3306

This law states that the Secretary of State can charge a fee up to $150 when a business entity changes its structure, under specific rules outlined in a certain chapter.

Notwithstanding any other provision of law, the Secretary of State shall charge an entity a fee not to exceed one hundred fifty dollars ($150) for its conversion made under this chapter.

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(Added by Stats. 2011, Ch. 740, Sec. 12. (SB 201) Effective January 1, 2012.)

Section § 3307

This law explains how businesses or corporations from different locations can change into a social purpose corporation in California. The process involves getting approval from the existing entity's partners, members, or shareholders according to the rules where it was originally organized. Once approved, the entity must file a statement with the Secretary of State including details like the entity's name and jurisdiction. This filing also means foreign entities no longer need to file separate cancellation paperwork and gives up any rights to do business in California if it was a foreign corporation.

(a) An other business entity or a foreign other business entity or a foreign corporation may be converted into a social purpose corporation pursuant to this chapter only if the converting entity is authorized by the laws under which it is organized to effect the conversion.

(b) An other business entity or a foreign other business entity or a foreign corporation that desires to convert into a social purpose corporation shall approve a plan of conversion or other instrument as is required to be approved to effect the conversion pursuant to the laws under which that entity is organized.

(c) The conversion of an other business entity or a foreign other business entity or a foreign corporation shall be approved by the number or percentage of the partners, members, shareholders, or other holders of interest of the converting entity that is required by the laws under which that entity is organized, or a greater or lesser percentage as may be set forth in the converting entity’s partnership agreement, articles of organization, operating agreement, articles of incorporation, or other governing document in accordance with applicable laws.

(d) The conversion by an other business entity or a foreign other business entity or a foreign corporation shall be effective under this chapter upon the filing with the Secretary of State of the articles of incorporation of the converted corporation, containing a statement of conversion that complies with subdivision (e).

(e) A statement of conversion of an entity converting into a social purpose corporation pursuant to this chapter shall set forth all of the following:

(1) The name, form, and jurisdiction of organization of the converting entity.

(2) The Secretary of State’s file number, if any, of the converting entity.

(3) If the converting entity is a foreign other business entity or a foreign corporation, the statement of conversion shall contain the following:

(A) A statement that the converting entity is authorized to effect the conversion by the laws under which it is organized.

(B) A statement that the converting entity has approved a plan of conversion or other instrument as is required to be approved to effect the conversion pursuant to the laws under which the converting entity is organized.

(C) A statement that the conversion has been approved by the number or percentage of the partners, members, shareholders, or other holders of interest of the converting entity that is required by the laws under which that entity is organized, or a greater or lesser percentage as may be set forth in the converting entity’s partnership agreement, articles of organization, operating agreement, articles of incorporation, or other governing document in accordance with applicable laws.

(f) The filing with the Secretary of State of articles of incorporation containing a statement pursuant to subdivision (e) shall have the effect of the filing of a certificate of cancellation by a converting foreign limited liability company or foreign limited partnership, and no converting foreign limited liability company or foreign limited partnership that has made the filing is required to file a certificate of cancellation under Section 17708.06 or 15909.07 as a result of that conversion. If a converting entity is a foreign corporation qualified to transact business in this state, the foreign corporation shall, by virtue of the filing, automatically surrender its right to transact intrastate business.

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(Added by Stats. 2014, Ch. 694, Sec. 61. (SB 1301) Effective January 1, 2015.)