The General Corporation Law provides for the formation of domestic general corporations by the execution and filing of articles of incorporation with the Secretary of State. Under that law, the business and affairs of these corporations are generally managed by, and all corporate powers exercised by or under, the direction of their boards of directors, and each director is elected by shareholder vote, with certain exceptions, as specified. That law also allows foreign corporations to transact intrastate business by obtaining certificates of qualification from the Secretary of State and requires foreign corporations that meet certain criteria to comply with specified provisions applicable to domestic general corporations to the exclusion of the law of the jurisdiction in which the foreign corporation is incorporated.

The General Corporation Law requires the accounting books, records, and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping records in this state or having its principal executive office in this state, upon written demand of any shareholder or holder of a voting trust certificate, to be made available for inspection, as specified.

This bill would revise that provision to permit, if the original has been lost, destroyed, or is not normally physically located within this state, a true and accurate copy of the above-described documents to be open to inspection at the corporations principal office in this state or, if there is none, at the physical location for the corporations registered agent for service of process. The bill would permit a shareholder or holder of a voting trust certificate, as an alternative to this procedure, to request that the corporation produce these documents by mail or electronically, if the shareholder or holder of a voting trust certificate pays the reasonable costs for copy or converting the requested documents to electronic format. The bill would also make related and conforming changes.

The General Corporation Law provides for the formation of domestic general corporations by the execution and filing of articles of incorporation with the Secretary of State. Under that law, the business and affairs of these corporations are generally managed by, and all corporate powers exercised by or under, the direction of their boards of directors, and each director is elected by shareholder vote, with certain exceptions, as specified. That law also allows foreign corporations to transact intrastate business by obtaining certificates of qualification from the Secretary of State and requires foreign corporations that meet certain criteria to comply with specified provisions applicable to domestic general corporations to the exclusion of the law of the jurisdiction in which the foreign corporation is incorporated.

The General Corporation Law requires the accounting books, records, and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping records in this state or having its principal executive office in this state, upon written demand of any shareholder or holder of a voting trust certificate, to be made available for inspection, as specified.

This bill would revise that provision to permit, if the original has been lost, destroyed, or is not normally physically located within this state, a true and accurate copy of the above-described documents to be open to inspection at the corporations principal office in this state or, if there is none, at the physical location for the corporations registered agent for service of process. The bill would permit a shareholder or holder of a voting trust certificate, as an alternative to this procedure, to request that the corporation produce these documents by mail or electronically, if the shareholder or holder of a voting trust certificate pays the reasonable costs for copy or converting the requested documents to electronic format. The bill would also make related and conforming changes.

The General Corporation Law provides for the formation of domestic general corporations by the execution and filing of articles of incorporation with the Secretary of State. Under that law, the business and affairs of these corporations are generally managed by, and all corporate powers exercised by or under, the direction of their boards of directors, and each director is elected by shareholder vote, with certain exceptions, as specified. That law also allows foreign corporations to transact intrastate business by obtaining certificates of qualification from the Secretary of State and requires foreign corporations that meet certain criteria to comply with specified provisions applicable to domestic general corporations to the exclusion of the law of the jurisdiction in which the foreign corporation is incorporated.

The General Corporation Law requires the accounting books, records, and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping records in this state or having its principal executive office in this state, upon written demand of any shareholder or holder of a voting trust certificate, to be made available for inspection, as specified.

This bill would revise that provision to permit, if the original has been lost, destroyed, or is not normally physically located within this state, a true and accurate copy of the above-described documents to be open to inspection at the corporations principal office in this state or, if there is none, at the physical location for the corporations registered agent for service of process. The bill would permit a shareholder, shareholder or holder of a voting trust certificate, as an alternative to this procedure, to request that the corporation produce the records these documents by mail or electronically, if the shareholder or holder of a voting trust certificate pays the reasonable costs for copy or converting the records requested documents to electronic format. The bill would also make related and conforming changes.

The General Corporation Law provides for the formation of domestic general corporations by the execution and filing of articles of incorporation with the Secretary of State. Under that law, the business and affairs of these corporations are generally managed by, and all corporate powers exercised by or under, the direction of their boards of directors, and each director is elected by shareholder vote, with certain exceptions, as specified. That law also allows foreign corporations to transact intrastate business by obtaining certificates of qualification from the Secretary of State and requires foreign corporations that meet certain criteria to comply with specified provisions applicable to domestic general corporations to the exclusion of the law of the jurisdiction in which the foreign corporation is incorporated.

The General Corporation Law requires the accounting books, records, and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping records in this state or having its principal executive office in this state, upon written demand of any shareholder or holder of a voting trust certificate, to be made available for inspection, as specified.

This bill would revise that provision to permit, if the original has been lost, destroyed, or is not normally physically located within this state, a true and accurate copy of the above-described documents to be open to inspection at the corporations principal office in this state or, if there is none, at the physical location for the corporations registered agent for service of process. The bill would permit a shareholder, as an alternative to this procedure, to request that the corporation produce the records by mail or electronically, if the shareholder pays the reasonable costs for copy or converting the records to electronic format. The bill would also make related and conforming changes.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2237

Author:(Maienschein)

As Amended Ver:May 21, 2018

Majority vote

Original Committee Reference: B. & F.

SUMMARY: Makes changes in the Corporations Code requiring licensed corporations make available certain documents to shareholders within the state, as specified. Specifically, this bill:

1. Requires accounting books, records and minutes of corporate proceedings for California licensed corporations be made available within the state, as specified.
   1. Records shall be open to inspection at the corporation’s principal office in this state, or if none, at the physical location for the corporation’s registered agent for service of process.
   2. If records are lost, destroyed or not normally stored in state, a true copy shall be made available upon request of a shareholder.
2. As an alternative to providing physical access to the documents, the shareholder may elect to request that the corporation produce the records by mail or electronically, if the shareholder pays for the reasonable costs for copying or converting the records to electronic format.

The Senate amendments are technical and clarifying in nature.

EXISTING LAW: The General Corporation Law requires the accounting books, records, and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping records in this state or having its principal executive office in this state, upon written demand of any shareholder or holder of a voting trust certificate, to be made available for inspection, as specified.

FISCAL EFFECT: None

COMMENTS: Corporations Code requires that all corporations licensed in the State of California make available for inspection the corporate records, minutes of meetings and accounting books to shareholders. However, the law does not specifically require these corporations to make these documents available within the State.

In a legal finding in the First District Court of Appeals, Innes v. Diablo Controls, (2016) 248 Cal.App.4th 139, the court noted that Corporations Code Section 1601 does not require that the requested records be brought in state, but rather is silent on the issue. The Court went on to find that there was no obligation on the part of the corporation to bring the requested records to California for inspection.

This bill seeks to remedy that situation by requiring corporations that are licensed within the state to make these records available at a location within the state. Additionally, if a shareholder requests, the corporations must make available electronically these documents as long as the requesting shareholder pays for the reasonable costs for copying or converting the records to electronic format.

Analysis Prepared by: William Herms / B. & F. / (916) 319-3081 FN: 0003531

 CONSENT  

Bill No: AB 2237

Author:

:

Vote:

SENATE BANKING & F.I. COMMITTEE: 6-0, 6/6/18

AYES: Bradford, Vidak, Gaines, Galgiani, Hueso, Portantino

NO VOTE RECORDED: Lara

ASSEMBLY FLOOR: 74-0, 5/7/18 - See last page for vote

SUBJECT:

SOURCE: Conference of California Bar Associations

DIGEST:

This bill provides a variety of different ways in which the shareholders and holders of voting trust certificates of California corporations may review the books, records, and minutes of those corporations at locations in this state.

ANALYSIS:

Existing law:

1. Makes accounting books, records, and minutes of proceedings of shareholders, the board of directors, or one or more committees of the board of directors open to inspection subject to the written demand of any shareholder or holder of a voting trust certificate, as follows (Corporations Code Section 1601):
   1. The corporation must be a domestic corporation or a foreign corporation that keeps such records in the state or that has its principal executive office in this state.
   2. The books, records, and minutes must be requested for a purpose reasonably related to the requester’s interests as a shareholder or as the holder of the voting trust certificate.
   3. The books, records, and minutes must be made available at any reasonable time during usual business hours.
2. Clarifies that the right of inspection summarized above extends to the records of each subsidiary of a corporation subject to the requirement above.
3. Provides that the inspection by a shareholder or holder of a voting trust certificate may be made in person or by agent or attorney, and provides that the right of inspection includes the right to copy and make extracts.
4. Provides, further, that the right of shareholders to inspect the corporate records may not be limited by the articles or bylaws of the corporation.

This bill:

1. Allows corporations to comply with the requirements of Corporations Code Section 1601 by making a true and accurate copy of books, records, and minutes available, if the original has been lost, destroyed, or is not normally physically located in the state, and by allowing the inspection to occur at the corporation’s principal physical office in this state or, if none exists, at the physical location for the corporation’s registered agent for service
   of process in this state.
2. Authorizes, as an alternative to the inspection procedure described immediately above, a shareholder or holder of a voting trust certificate to elect to request that a corporation produce desired documents by mail or electronically, if the shareholder pays for the reasonable costs for copying or converting the requested documents to electronic format.

Background

Under existing law, as interpreted by a California appellate court (Innes v. Diablo Controls (2016), 248 Cal.App.4th 139), a Californian who holds shares in a California corporation may have to travel to a different state to review the corporations books, records, and minutes. In the cited case, the court was asked whether a corporation had to produce its records for shareholder inspection in California (where the corporation was incorporated and the shareholder was located) or could do so in Illinois, where those records were maintained. Noting that Corporations Code Section 1601 does not require that the requested records be brought into the state and instead requires the records to be made available for inspection at the office where they are kept, the court held that the corporation was not obligated to produce the records for inspection in California. This bill attempts to ensure that California shareholders of California corporations may inspect those corporations’ records in this state.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/7/18)

Conference of California Bar Associations (source)

OPPOSITION: (Verified 6/7/18)

None received

ARGUMENTS IN SUPPORT: The Conference of California Bar Associations, sponsor of this bill, writes, “It is simply wrong to require a California shareholder in the California corporation to travel across the country to inspect the corporation’s books and records. AB 2237 corrects the problem in an equitable, cost-effective manner by requiring any California corporation to produce for shareholder inspection a true and accurate copy of its corporate records at its principal California office, or if none, at the physical location for the corporation’s registered agent for service of process. Alternatively, the shareholder may elect to request the corporation produce the records by mail or electronically if the shareholder pays for the reasonable costs in copying or converting the records to electronic format. This provides the shareholder with the opportunity to inspect a copy of the records in a timely, convenient manner, without imposing an excessive burden on the corporation in its record-keeping.”

ASSEMBLY FLOOR: 74-0, 5/7/18

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Brough, Burke, Caballero, Calderon, Carrillo, Cervantes, Chau, Chávez, Chiu, Choi, Chu, Cooley, Cooper, Dahle, Daly, Eggman, Flora, Fong, Frazier, Friedman, Gallagher, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Bonta, Chen, Cunningham, Cristina Garcia

Prepared by:

6/7/18 15:12:45

**** END ****

SENATE COMMITTEE ON

BANKING AND FINANCIAL INSTITUTIONS

Senator Steven Bradford, Chair

2017 - 2018 Regular

Bill No: AB 2237 Hearing Date: June 6, 2018

Subject: Corporations: corporate records.

SUMMARY

This bill provides a variety of different ways in which the shareholders and holders of voting trust certificates of California corporations may review the books, records, and minutes of those corporations at locations in this state.

EXISTING LAW

1. Makes accounting books, records, and minutes of proceedings of shareholders, the board of directors, or one or more committees of the board of directors open to inspection subject to the written demand of any shareholder or holder of a voting trust certificate, as follows (Corporations Code Section 1601):
   
   1. The corporation must be a domestic corporation or a foreign corporation that keeps such records in the state or that has its principal executive office in this state.
      
   2. The books, records, and minutes must be requested for a purpose reasonably related to the requester’s interests as a shareholder or as the holder of the voting trust certificate.
      
   3. The books, records, and minutes must be made available at any reasonable time during usual business hours.
      
2. Clarifies that the right of inspection summarized above extends to the records of each subsidiary of a corporation subject to the requirement above.
   
3. Provides that the inspection by a shareholder or holder of a voting trust certificate may be made in person or by agent or attorney, and provides that the right of inspection includes the right to copy and make extracts.
   
4. Further provides that the right of shareholders to inspect the corporate records may not be limited by the articles or bylaws of the corporation.

THIS BILL

1. Allows corporations to comply with the requirements of Corporations Code Section 1601 by making a true and accurate copy of books, records, and minutes available, if the original has been lost, destroyed, or is not normally physically located in the state, and by allowing the inspection to occur at the corporation’s principal physical office in this state or, if none exists, at the physical location for the corporation’s registered agent for service
   of process in this state.
   
2. As an alternative to the inspection procedure described immediately above, authorizes a shareholder or holder of a voting trust certificate to elect to request that a corporation produce desired documents by mail or electronically, if the shareholder pays for the reasonable costs for copying or converting the requested documents to electronic format.
   

COMMENTS

1. Purpose: This bill is sponsored by the Conference of California Bar Associations to minimize the burden on California shareholders, who want to review corporate records that are maintained in a different state.
   
2. Background and Discussion: Under existing law, as interpreted by a California appellate court (Innes v. Diablo Controls (2016), 248 Cal.App.4^th 139), a Californian who holds shares in a California corporation may have to travel to a different state to review the corporations books, records, and minutes. In the cited case, the court was asked whether a corporation had to produce its records for shareholder inspection in California (where the corporation was incorporated and the shareholder was located) or could do so in Illinois, where those records were maintained. Noting that Corporations Code Section 1601 does not require that the requested records be brought into the state and instead requires the records to be made available for inspection at the office where they are kept, the court held that the corporation was not obligated to produce the records for inspection in California.
   
   This bill attempts to ensure that California shareholders of California corporations may inspect those corporations’ records in this state.
   
3. Support: The Conference of California Bar Associations, sponsor of this bill, writes, “It is simply wrong to require a California shareholder in the California corporation to travel across the country to inspect the corporation’s books and records. AB 2237 corrects the problem in an equitable, cost-effective manner by requiring any California corporation to produce for shareholder inspection a true and accurate copy of its corporate records at its principal California office, or if none, at the physical location for the corporation’s registered agent for service of process. Alternatively, the shareholder may elect to request the corporation produce the records by mail or electronically if the shareholder pays for the reasonable costs in copying or converting the records to electronic format. This provides the shareholder with the opportunity to inspect a copy of the records in a timely, convenient manner, without imposing an excessive burden on the corporation in its record-keeping.”
4. Opposition: None received.

LIST OF REGISTERED SUPPORT/OPPOSITION

Support

Conference of California Bar Associations (sponsor)

Opposition

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 2237

Author:(Maienschein)

As Introduced Ver:February 13, 2018

Majority vote

SUMMARY: Makes changes in the Corporations Code requiring licensed corporations make available certain documents to shareholders within the state, as specified. Specifically, this bill:

1. Requires accounting books, records and minutes of corporate proceedings for California licensed corporations be made available within the state, as specified.
   1. Records shall be open to inspection at the corporation's principal office in this state, or if none, at the physical location for the corporation's registered agent for service of process.
   2. If records are lost, destroyed or not normally stored in state, a true copy shall be made available upon request of a shareholder.
2. As an alternative to providing physical access to the documents, the shareholder may elect to request that the corporation produce the records by mail or electronically, if the shareholder pays for the reasonable costs for copying or converting the records to electronic format.

EXISTING LAW: The General Corporation Law requires the accounting books, records, and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping records in this state or having its principal executive office in this state, upon written demand of any shareholder or holder of a voting trust certificate, to be made available for inspection, as specified.

FISCAL EFFECT: Unknown

COMMENTS: Corporations Code requires that all corporations licensed in the State of California make available for inspection the corporate records, minutes of meetings and accounting books to shareholders. However, the law does not specifically require these corporations to make these documents available within the State.

In a legal finding in the First District Court of Appeals, Innes v. Diablo Controls, (2016) 248 Cal.App.4th 139, the court noted that Corporations Code 1601 does not require that the requested records be brought in state, but rather is silent on the issue. The Court went on to find that there was no obligation on the part of the corporation to bring the requested records to California for inspection.

This bill seeks to remedy that situation by requiring corporations that are licensed within the state to make these records available at a location within the state. Additionally, if a shareholder requests, the corporations must make available electronically these documents as long as the requesting shareholder pays for the reasonable costs for copying or converting the records to electronic format.

Analysis Prepared by: William Herms / B. & F. / (916) 319-3081 FN: 0002769

Date of Hearing: April 30, 2018

ASSEMBLY COMMITTEE ON BANKING AND FINANCE

Monique Limón, Chair

ABPCA Bill Id:AB 2237 (

Author:Maienschein) – As Introduced Ver:February 13, 2018

SUBJECT: Corporations: corporate records

SUMMARY: Makes changes in the Corporations Code requiring licensed corporations make available certain documents to shareholders within the state, as specified. Specifically, this bill:

1. Requires accounting books, records and minutes of corporate proceedings for California licensed corporations be made available within the state, as specified.
   1. Records shall be open to inspection at the corporation’s principal office in this state, or if none, at the physical location for the corporation’s registered agent for service of process.
   2. If records are lost, destroyed or not normally stored in state, a true copy shall be made available upon request of a shareholder.
2. As an alternative to providing physical access to the documents, the shareholder may elect to request that the corporation produce the records by mail or electronically, if the shareholder pays for the reasonable costs for copying or converting the records to electronic format.
   
   

EXISTING LAW: The General Corporation Law requires the accounting books, records, and minutes of proceedings of the shareholders and the board and committees of the board of any domestic corporation, and of any foreign corporation keeping records in this state or having its principal executive office in this state, upon written demand of any shareholder or holder of a voting trust certificate, to be made available for inspection, as specified.

FISCAL EFFECT: Unknown

COMMENTS: Corporations Code requires that all corporations licensed in the State of California make available for inspection the corporate records, minutes of meetings and accounting books to shareholders. However, the law does not specifically require these corporations to make these documents available within the State.

In a legal finding in the First District Court of Appeals, Innes v. Diablo Controls, (2016) 248 Cal.App.4^th 139, the court noted that Corporations Code 1601 does not require that the requested records be brought in state, but rather is silent on the issue. The Court went on to find that there was no obligation on the part of the corporation to bring the requested records to California for inspection.

This bill seeks to remedy that situation by requiring corporations that are licensed within the state to make these records available at a location within the state. Additionally, if a shareholder requests, the corporations must make available electronically these documents as long as the requesting shareholder pays for the reasonable costs for copying or converting the records to electronic format.

REGISTERED SUPPORT / OPPOSITION:

Support

Conference of California Bar Associations (Sponsor)

Opposition

None on file

Analysis Prepared by: William Herms / B. & F. / (916) 319-3081