Bill Text: CA AB2260 | 2011-2012 | Regular Session | Amended
Bill Title: Foreign corporations.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Engrossed - Dead) 2012-07-03 - In committee: Set, first hearing. Failed passage. [AB2260 Detail]
Download: California-2011-AB2260-Amended.html
BILL NUMBER: AB 2260 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 29, 2012
INTRODUCED BY Assembly Member Hagman
FEBRUARY 24, 2012
An act to amend amend Section 2200 of, and
to repeal and add Section 2115 of , the
Corporations Code, relating to foreign corporations.
LEGISLATIVE COUNSEL'S DIGEST
AB 2260, as amended, Hagman. Foreign corporations.
Existing law requires foreign corporations , qualified to
conduct business in the state, meeting certain tests, and excluding a
wholly-owned or publicly traded foreign corporation, to abide
by specified provisions of the Corporations Code, to the
exclusion of comparable provisions of the state corporate law under
which the foreign corporation is incorporated, including
provisions relating to the election and removal of directors,
shareholders' rights, vote requirements, and mergers.
This bill would repeal these provisions.
Existing law imposes on directors of a foreign corporation
transacting intrastate business liability to the corporation, its
shareholders, creditors, receiver, liquidator, or trustee in
bankruptcy for making an unauthorized dividend or other specified
actions constituting a violation of official duty under the domestic
laws under which the corporation is incorporated or organized.
Existing law also authorizes courts of this state to enforce that
liability.
This bill would make a technical, nonsubstantive change
to these provisions. specify that these provisions
pertaining to foreign corporations qualified to do business in the
state shall not be construed to authorize the state to regulate the
organization or internal affairs of those foreign
corporations, except to the ex tent of the existing law
provisions imposing liability on directors of a foreign corporation,
and authorizing courts of this state to enforce that liability. The
bill would make conforming changes.
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 2115 of the
Corporations Code is repealed.
2115. (a) A foreign corporation (other than a foreign association
or foreign nonprofit corporation but including a foreign parent
corporation even though it does not itself transact intrastate
business) is subject to the requirements of subdivision (b)
commencing on the date specified in subdivision (d) and continuing
until the date specified in subdivision (e) if:
(1) The average of the property factor, the payroll factor, and
the sales factor (as defined in Sections 25129, 25132, and 25134 of
the Revenue and Taxation Code) with respect to it is more than 50
percent during its latest full income year and
(2) more than one-half of its outstanding voting securities are
held of record by persons having addresses in this state appearing on
the books of the corporation on the record date for the latest
meeting of shareholders held during its latest full income year or,
if no meeting was held during that year, on the last day of the
latest full income year. The property factor, payroll factor, and
sales factor shall be those used in computing the portion of its
income allocable to this state in its franchise tax return or, with
respect to corporations the allocation of whose income is governed by
special formulas or that are not required to file separate or any
tax returns, which would have been so used if they were governed by
this three-factor formula. The determination of these factors with
respect to any parent corporation shall be made on a consolidated
basis, including in a unitary computation (after elimination of
intercompany transactions) the property, payroll, and sales of the
parent and all of its subsidiaries in which it owns directly or
indirectly more than 50 percent of the outstanding shares entitled to
vote for the election of directors, but deducting a percentage of
the property, payroll, and sales of any subsidiary equal to the
percentage minority ownership, if any, in the subsidiary. For the
purpose of this subdivision, any securities held to the knowledge of
the issuer in the names of broker-dealers, nominees for
broker-dealers (including clearing corporations), or banks,
associations, or other entities holding securities in a nominee name
or otherwise on behalf of a beneficial owner (collectively "nominee
holders"), shall not be considered outstanding. However, if the
foreign corporation requests all nominee holders to certify, with
respect to all beneficial owners for whom securities are held, the
number of shares held for those beneficial owners having addresses
(as shown on the records of the nominee holder) in this state and
outside of this state, then all shares so certified shall be
considered outstanding and held of record by persons having addresses
either in this state or outside of this state as so certified,
provided that the certification so provided shall be retained with
the record of shareholders and made available for inspection and
copying in the same manner as is provided in Section 1600 with
respect to that record. A current list of beneficial owners of a
foreign corporation's securities provided to the corporation by one
or more nominee holders or their agent pursuant to the requirements
of Rule 14b-1(b)(3) or 14b-2(b)(3) as adopted on January 6, 1992,
promulgated under the Securities Exchange Act of 1934, shall
constitute an acceptable certification with respect to beneficial
owners for the purposes of this subdivision.
(b) Except as provided in subdivision (c), the following chapters
and sections of this division shall apply to a foreign corporation as
defined in subdivision (a) (to the exclusion of the law of the
jurisdiction in which it is incorporated):
Chapter 1 (general provisions and definitions), to the extent
applicable to the following provisions;
Section 301 (annual election of directors);
Section 303 (removal of directors without cause);
Section 304 (removal of directors by court proceedings);
Section 305, subdivision (c) (filling of director vacancies where
less than a majority in office elected by shareholders);
Section 309 (directors' standard of care);
Section 316 (excluding paragraph (3) of subdivision (a) and
paragraph (3) of subdivision (f)) (liability of directors for
unlawful distributions);
Section 317 (indemnification of directors, officers, and others);
Sections 500 to 505, inclusive (limitations on corporate
distributions in cash or property);
Section 506 (liability of shareholder who receives unlawful
distribution);
Section 600, subdivisions (b) and (c) (requirement for annual
shareholders' meeting and remedy if same not timely held);
Section 708, subdivisions (a), (b), and (c) (shareholder's right
to cumulate votes at any election of directors);
Section 710 (supermajority vote requirement);
Section 1001, subdivision (d) (limitations on sale of assets);
Section 1101 (provisions following subdivision (e)) (limitations
on mergers);
Section 1151 (first sentence only) (limitations on conversions);
Section 1152 (requirements of conversions);
Chapter 12 (commencing with Section 1200) (reorganizations);
Chapter 13 (commencing with Section 1300) (dissenters' rights);
Sections 1500 and 1501 (records and reports);
Section 1508 (action by Attorney General);
Chapter 16 (commencing with Section 1600) (rights of inspection).
(c) This section does not apply to any corporation (1) with
outstanding securities listed on the New York Stock Exchange, the
NYSE Amex, the NASDAQ Global Market, or the NASDAQ Capital Market, or
(2) if all of its voting shares (other than directors' qualifying
shares) are owned directly or indirectly by a corporation or
corporations not subject to this section.
(d) For purposes of subdivision (a), the requirements of
subdivision (b) shall become applicable to a foreign corporation only
upon the first day of the first income year of the corporation (1)
commencing on or after the 135th day of the income year immediately
following the latest income year with respect to which the tests
referred to in subdivision (a) have been met or (2) commencing on or
after the entry of a final order by a court of competent jurisdiction
declaring that those tests have been met.
(e) For purposes of subdivision (a), the requirements of
subdivision (b) shall cease to be applicable to a foreign corporation
(1) at the end of the first income year of the corporation
immediately following the latest income year with respect to which at
least one of the tests referred to in subdivision (a) is not met or
(2) at the end of the income year of the corporation during which a
final order has been entered by a court of competent jurisdiction
declaring that one of those tests is not met, provided that a
contrary order has not been entered before the end of the income
year.
(f) Any foreign corporation that is subject to the requirements of
subdivision (b) shall advise any shareholder of record, any officer,
director, employee, or other agent (within the meaning of Section
317) and any creditor of the corporation in writing, within 30 days
of receipt of written request for that information, whether or not it
is subject to subdivision (b) at the time the request is received.
Any party who obtains a final determination by a court of competent
jurisdiction that the corporation failed to provide to the party
information required to be provided by this subdivision or provided
the party information of the kind required to be provided by this
subdivision that was incorrect, then the court, in its discretion,
shall have the power to include in its judgment recovery by the party
from the corporation of all court costs and reasonable attorneys'
fees incurred in that legal proceeding to the extent they relate to
obtaining that final determination.
SEC. 2. Section 2115 is added to the
Corporations Code , to read:
2115. Except as otherwise provided in Section 2116, this chapter
shall not be construed to authorize the state to regulate the
organization or internal affairs of a foreign corporation qualified
to do business in this state.
SEC. 3. Section 2200 of the
Corporations Code is amended to read:
2200. Every corporation that neglects, fails, or refuses: (a) to
keep or cause to be kept or maintained the record of shareholders or
books of account required by this division to be kept or maintained
, or (b) to prepare or cause to be
prepared or submitted the financial statements required by this
division to be prepared or submitted, or (c) to give any
shareholder of record the advice required by subdivision (f) of
Section 2115, is subject to penalty as provided in this
section.
The penalty shall be twenty-five dollars ($25) for each day that
the failure or refusal continues, up to a maximum of one thousand
five hundred dollars ($1,500), beginning 30 days after receipt of the
written request that the duty be performed from one entitled to make
the request, except that, in the case of a failure to give
advice required by subdivision (f) of Section 2115, the 30-day period
shall run from the date of receipt of the request made pursuant to
subdivision (f) of Section 2115, and no additional request
is shall be required by this section.
The penalty shall be paid to the shareholder or shareholders
jointly making the request for performance of the duty, and damaged
by the neglect, failure, or refusal, if suit therefor is commenced
within 90 days after the written request is made , including
any request made pursuant to subdivision (f) of Section 2115
; but the maximum daily penalty because of failure to
comply with any number of separate requests made on any one day or
for the same act shall be two hundred fifty dollars ($250).
SECTION 1. Section 2115 of the Corporations
Code is amended to read:
2115. (a) A foreign corporation (other than a foreign association
or foreign nonprofit corporation but including a foreign parent
corporation even though it does not itself transact intrastate
business) is subject to the requirements of subdivision (b)
commencing on the date specified in subdivision (d) and continuing
until the date specified in subdivision (e) if:
(1) The average of the property factor, the payroll factor, and
the sales factor (as defined in Sections 25129, 25132, and 25134 of
the Revenue and Taxation Code) with respect to it is more than 50
percent during its latest full income year, and
(2) more than one-half of its outstanding voting securities are
held of record by persons having addresses in this state appearing on
the books of the corporation on the record date for the latest
meeting of shareholders held during its latest full income year or,
if no meeting was held during that year, on the last day of the
latest full income year. The property factor, payroll factor, and
sales factor shall be those used in computing the portion of its
income allocable to this state in its franchise tax return or, with
respect to corporations the allocation of whose income is governed by
special formulas or that are not required to file separate or any
tax returns, which would have been so used if they were governed by
this three-factor formula. The determination of these factors with
regard to any parent corporation shall be made on a consolidated
basis, including in a unitary computation (after elimination of
intercompany transactions) the property, payroll, and sales of the
parent and all of its subsidiaries in which it owns directly or
indirectly more than 50 percent of the outstanding shares entitled to
vote for the election of directors, but deducting a percentage of
the property, payroll, and sales of any subsidiary equal to the
percentage minority ownership, if any, in the subsidiary. For the
purpose of this subdivision, any securities held to the knowledge of
the issuer in the names of broker-dealers, nominees for
broker-dealers (including clearing corporations), or banks,
associations, or other entities holding securities in a nominee name
or otherwise on behalf of a beneficial owner (collectively "nominee
holders"), shall not be considered outstanding. However, if the
foreign corporation requests all nominee holders to certify, with
respect to all beneficial owners for whom securities are held, the
number of shares held for those beneficial owners having addresses
(as shown on the records of the nominee holder) in this state and
outside of this state, then all shares so certified shall be
considered outstanding and held of record by persons having addresses
either in this state or outside of this state as so certified,
provided that the certification so provided shall be retained with
the record of shareholders and made available for inspection and
copying in the same manner as is provided in Section 1600 with
respect to that record. A current list of beneficial owners of a
foreign corporation's securities provided to the corporation by one
or more nominee holders or their agent pursuant to the requirements
of Rule 14b-1(b)(3) or 14b-2(b)(3) as adopted on January 6, 1992,
promulgated under the Securities Exchange Act of 1934, shall
constitute an acceptable certification with respect to beneficial
owners for the purposes of this subdivision.
(b) Except as provided in subdivision (c), the following chapters
and sections of this division shall apply to a foreign corporation as
defined in subdivision (a) (to the exclusion of the law of the
jurisdiction in which it is incorporated):
Chapter 1 (general provisions and definitions), to the extent
applicable to the following provisions;
Section 301 (annual election of directors);
Section 303 (removal of directors without cause);
Section 304 (removal of directors by court proceedings);
Section 305, subdivision (c) (filling of director vacancies where
less than a majority in office elected by shareholders);
Section 309 (directors' standard of care);
Section 316 (excluding paragraph (3) of subdivision (a) and
paragraph (3) of subdivision (f)) (liability of directors for
unlawful distributions);
Section 317 (indemnification of directors, officers, and others);
Sections 500 to 505, inclusive (limitations on corporate
distributions in cash or property);
Section 506 (liability of shareholder who receives unlawful
distribution);
Section 600, subdivisions (b) and (c) (requirement for annual
shareholders' meeting and remedy if same not timely held);
Section 708, subdivisions (a), (b), and (c) (shareholder's right
to cumulate votes at any election of directors);
Section 710 (supermajority vote requirement);
Section 1001, subdivision (d) (limitations on sale of assets);
Section 1101 (provisions following subdivision (e)) (limitations
on mergers);
Section 1151 (first sentence only) (limitations on conversions);
Section 1152 (requirements of conversions);
Chapter 12 (commencing with Section 1200) (reorganizations);
Chapter 13 (commencing with Section 1300) (dissenters' rights);
Sections 1500 and 1501 (records and reports);
Section 1508 (action by Attorney General);
Chapter 16 (commencing with Section 1600) (rights of inspection).
(c) This section does not apply to any corporation (1) with
outstanding securities listed on the New York Stock Exchange, the
NYSE Amex, the NASDAQ Global Market, or the NASDAQ Capital Market, or
(2) if all of its voting shares (other than directors' qualifying
shares) are owned directly or indirectly by a corporation or
corporations not subject to this section.
(d) For purposes of subdivision (a), the requirements of
subdivision (b) shall become applicable to a foreign corporation only
upon the first day of the first income year of the corporation (1)
commencing on or after the 135th day of the income year immediately
following the latest income year with respect to which the tests
referred to in subdivision (a) have been met or (2) commencing on or
after the entry of a final order by a court of competent jurisdiction
declaring that those tests have been met.
(e) For purposes of subdivision (a), the requirements of
subdivision (b) shall cease to be applicable to a foreign corporation
(1) at the end of the first income year of the corporation
immediately following the latest income year with respect to which at
least one of the tests referred to in subdivision (a) is not met or
(2) at the end of the income year of the corporation during which a
final order has been entered by a court of competent jurisdiction
declaring that one of those tests is not met, provided that a
contrary order has not been entered before the end of the income
year.
(f) Any foreign corporation that is subject to the requirements of
subdivision (b) shall advise any shareholder of record, any officer,
director, employee, or other agent (within the meaning of Section
317) and any creditor of the corporation in writing, within 30 days
of receipt of written request for that information, whether or not it
is subject to subdivision (b) at the time the request is received.
Any party who obtains a final determination by a court of competent
jurisdiction that the corporation failed to provide to the party
information required to be provided by this subdivision or provided
the party information of the kind required to be provided by this
subdivision that was incorrect, then the court, in its discretion,
shall have the power to include in its judgment recovery by the party
from the corporation of all court costs and reasonable attorneys'
fees incurred in that legal proceeding to the extent they relate to
obtaining that final determination.
