Bill Text: CA AB1686 | 2015-2016 | Regular Session | Amended
Bill Title: Close corporations.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2016-11-30 - From committee without further action. [AB1686 Detail]
Download: California-2015-AB1686-Amended.html
BILL NUMBER: AB 1686 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 17, 2016
INTRODUCED BY Assembly Member Travis Allen
JANUARY 20, 2016
An act to amend Section 1002 of the Financial Code,
relating to banking. Section 158 of the Corporations
Code, relating to corporations.
LEGISLATIVE COUNSEL'S DIGEST
AB 1686, as amended, Travis Allen. Banking.
Close corporations.
Existing law, the General Corporation Law, defines different types
of business entities and corporations and prescribes their powers
and duties. Existing law defines a close corporation as a corporation
the articles of which contain, in addition to other things, a
provision requiring that all of the corporation's issued shares of
all classes be held of record by a specified number of people, not to
exceed 35.
This bill would raise the maximum number of people who can hold
shares in a close corporation, as described above, to 40.
Existing law regulates the practice of banking in California and
classifies these institutions as commercial banks, industrial banks,
and trust companies. Existing law prohibits a bank from being a close
corporation, as defined.
This bill would make nonsubstantive changes to the prohibition on
banks as close corporations.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 158 of the
Corporations Code is amended to read:
158. (a) "Close corporation" means a corporation, including a
close social purpose corporation, whose articles contain, in addition
to the provisions required by Section 202, a provision that all of
the corporation's issued shares of all classes shall be held of
record by not more than a specified number of persons, not exceeding
35, 40, and a statement "This
corporation is a close corporation."
(b) The special provisions referred to in subdivision (a) may be
included in the articles by amendment, but if such amendment is
adopted after the issuance of shares only by the affirmative vote of
all of the issued and outstanding shares of all classes.
(c) The special provisions referred to in subdivision (a) may be
deleted from the articles by amendment, or the number of shareholders
specified may be changed by amendment, but if such amendment is
adopted after the issuance of shares only by the affirmative vote of
at least two-thirds of each class of the outstanding shares;
provided, however, that the articles may provide for a lesser vote,
but not less than a majority of the outstanding shares, or may deny a
vote to any class, or both.
(d) In determining the number of shareholders for the purposes of
the provision in the articles authorized by this section, a husband
and wife and the personal representative of either shall be counted
as one regardless of how shares may be held by either or both of
them, a trust or personal representative of a decedent holding shares
shall be counted as one regardless of the number of trustees or
beneficiaries and a partnership or corporation or business
association holding shares shall be counted as one (except that any
such trust or entity the primary purpose of which was the acquisition
or voting of the shares shall be counted according to the number of
beneficial interests therein).
(e) A corporation shall cease to be a close corporation upon the
filing of an amendment to its articles pursuant to subdivision (c) or
if it shall have more than the maximum number of holders of record
of its shares specified in its articles as a result of an inter vivos
transfer of shares which is not void under subdivision (d) of
Section 418, the transfer of shares on distribution by will or
pursuant to the laws of descent and distribution, the dissolution of
a partnership or corporation or business association or the
termination of a trust which holds shares, by court decree upon
dissolution of a marriage or otherwise by operation of law. Promptly
upon acquiring more than the specified number of holders of record of
its shares, a close corporation shall execute and file an amendment
to its articles deleting the special provisions referred to in
subdivision (a) and deleting any other provisions not permissible for
a corporation which is not a close corporation, which amendment
shall be promptly approved and filed by the board and need not be
approved by the outstanding shares.
(f) Nothing contained in this section shall invalidate any
agreement among the shareholders to vote for the deletion from the
articles of the special provisions referred to in subdivision (a)
upon the lapse of a specified period of time or upon the occurrence
of a certain event or condition or otherwise.
(g) The following sections contain specific references to close
corporations: Sections 186, 202, 204, 300, 418, 421, 1111, 1201,
1800, and 1904.
SECTION 1. Section 1002 of the Financial Code
is amended to read:
1002. A bank shall not be a close corporation, as defined in
Section 158 of the Corporations Code.
