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AB-1161 Cooperative corporations.(2011-2012)

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AB1161:v98#DOCUMENT

Amended  IN  Assembly  April 14, 2011

CALIFORNIA LEGISLATURE— 2011–2012 REGULAR SESSION

Assembly Bill
No. 1161


Introduced  by  Assembly Member Skinner

February 18, 2011


An act to amend Sections 1113, 12200, 12201, 12243, 12253, 12310, 12330, 12404, 12446, and 12461 of, and 12213, 12230, 12235, 12240, 12243, 12248, 12253, 12310, 12311, 12313, 12320, 12330, 12331, 12340, 12354, 12364, 12376, 12401, 12402, 12404, 12410, 12440, 12442, 12443, 12446, 12451, 12452, 12453, 12454, 12460, 12461, 12490, 12521, 12530, 12531, 12533, 12534, 12535, 12536, 12537, 12540.1, 12560, 12591, 12626, 12628, 12633, 12634, 12637, 12656, 12658, 12659, 12672, 12673, and 12674 of, to amend the heading of Part 2 (commencing with Section 12200) of Division 3 of, and to add Section 12246.5 to, the Corporations Code, relating to cooperative corporations.


LEGISLATIVE COUNSEL'S DIGEST


AB 1161, as amended, Skinner. Cooperative corporations.
Existing law, the Consumer Cooperative Corporation Law, provides for the organization and operation of primarily consumer cooperatives, and is also applicable to other cooperatives. Existing law provides for, among other things, information to be included in a corporation’s bylaws, definitions necessary for purposes of defining patrons, and requirements as to voting rights of members and time periods for sending notice of meetings at which members are entitled to vote.
This bill would rename the law as the Cooperative Corporation Law, and provide alternative provisions to which a cooperative corporation may elect to be subject by designating itself as a worker cooperative in its bylaws. This bill would limit a member of a worker cooperative to only one vote on a matter to be voted on by all classes voting together as a single class, regardless of the number of voting classes in which the person is a member. The bill would also require notice of a meeting in which members of a worker cooperative are entitled to vote to be sent no more than 24 hours before the time of the meeting. The bill would also make conforming changes.
Existing law provides that members may elect a director at any time to fill a vacancy. Existing law requires a cooperative corporation to include in its name the word “cooperative.” Existing law provides that a member may not transfer a membership, unless authorized under the cooperative corporation’s articles or bylaws.
This bill would provide that, in the case of a corporation with no members, the board may fill the vacancy and would specify the manners in which vacancies may be filled by the sole remaining director or by directors then in office when that number is less than a quorum. The bill would require a worker cooperative corporation to include in its name the words “worker cooperative.” The bill would provide that a membership in a worker cooperative corporation is nontransferable.
Existing law limits a distribution by a cooperative corporation in any fiscal year to 15%, multiplied by contributions to capital. Under existing law, the board of a cooperative corporation may abandon a merger, at any time before the merger is effective, as specified. Existing law requires a cooperative corporation to prepare an annual report not later than 120 days after the close of the corporation’s fiscal year.
This bill would exclude distributions by a worker cooperative corporation from the distribution limit. The bill would prohibit the board of a worker cooperative corporation from abandoning a merger. The bill would require a worker cooperative corporation to prepare an annual report not later than 360 days after the close of the corporation’s fiscal year.
Violation of specified provisions of the existing law is a crime.
Because this bill would expand existing crimes, this bill would create a state-mandated local program.
The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 1113 of the Corporations Code is amended to read:

1113.
 (a) Any one or more corporations may merge with one or more other business entities (Section 174.5). One or more domestic corporations (Section 167) not organized under this division and one or more foreign corporations (Section 171) may be parties to the merger. Notwithstanding the provisions of this section, the merger of any number of corporations with any number of other business entities may be effected only if:
(1) In a merger in which a domestic corporation not organized under this division or a domestic other business entity is a party, it is authorized by the laws under which it is organized to effect the merger.
(2) In a merger in which a foreign corporation is a party, it is authorized by the laws under which it is organized to effect the merger.
(3) In a merger in which a foreign other business entity is a party, it is authorized by the laws under which it is organized to effect the merger.
(b) Each corporation and each other party which desires to merge shall approve, and shall be a party to, an agreement of merger. Other persons, including a parent party (Section 1200), may be parties to the agreement of merger. The board of each corporation which desires to merge, and, if required the shareholders, shall approve the agreement of merger. The agreement of merger shall be approved on behalf of each party by those persons required to approve the merger by the laws under which it is organized. The agreement of merger shall state:
(1) The terms and conditions of the merger.
(2) The name and place of incorporation or organization of each party to the merger and the identity of the surviving party.
(3) The amendments, if any, subject to Sections 900 and 907, to the articles of the surviving corporation, if applicable, to be effected by the merger. If any amendment changes the name of the surviving corporation, if applicable, the new name may be, subject to subdivision (b) of Section 201, the same as or similar to the name of a disappearing party to the merger.
(4) The manner of converting the shares of each constituent corporation into shares, interests, or other securities of the surviving party. If any shares of any constituent corporation are not to be converted solely into shares, interests or other securities of the surviving party, the agreement of merger shall state (i) the cash, rights, securities, or other property which the holders of those shares are to receive in exchange for the shares, which cash, rights, securities, or other property may be in addition to or in lieu of shares, interests or other securities of the surviving party, or (ii) that the shares are canceled without consideration.
(5) Any other details or provisions required by the laws under which any party to the merger is organized, including, if a public benefit corporation or a religious corporation is a party to the merger, Section 6019.1, or, if a mutual benefit corporation is a party to the merger, Section 8019.1, or, if a cooperative corporation is a party to the merger, Section 12540.1, or, if a domestic limited partnership is a party to the merger, Section 15678.2 or 15911.12, or, if a domestic partnership is a party to the merger, Section 16911, or, if a domestic limited liability company is a party to the merger, Section 17551.
(6) Any other details or provisions as are desired, including, without limitation, a provision for the payment of cash in lieu of fractional shares or for any other arrangement with respect thereto consistent with the provisions of Section 407.
(c) Each share of the same class or series of any constituent corporation (other than the cancellation of shares held by a party to the merger or its parent, or a wholly owned subsidiary of either, in another constituent corporation) shall, unless all shareholders of the class or series consent and except as provided in Section 407, be treated equally with respect to any distribution of cash, rights, securities, or other property. Notwithstanding paragraph (4) of subdivision (b), the unredeemable common shares of a constituent corporation may be converted only into unredeemable common shares of a surviving corporation or a parent party (Section 1200) or unredeemable equity securities of a surviving party other than a corporation if another party to the merger or its parent owns, directly or indirectly, prior to the merger shares of that corporation representing more than 50 percent of the voting power of that corporation, unless all of the shareholders of the class consent and except as provided in Section 407.
(d) Notwithstanding its prior approval, an agreement of merger may be amended prior to the filing of the agreement of merger or the certificate of merger, as is applicable, if the amendment is approved by the board of each constituent corporation and, if the amendment changes any of the principal terms of the agreement, by the outstanding shares (Section 152), if required by Chapter 12 (commencing with Section 1200), in the same manner as the original agreement of merger. If the agreement of merger as so amended and approved is also approved by each of the other parties to the agreement of merger, the agreement of merger as so amended shall then constitute the agreement of merger.
(e) The board of a constituent corporation may, in its discretion, abandon a merger, subject to the contractual rights, if any, of third parties, including other parties to the agreement of merger, without further approval by the outstanding shares (Section 152), at any time before the merger is effective.
(f) Each constituent corporation shall sign the agreement of merger by its chairperson of the board, president or a vice president and also by its secretary or an assistant secretary acting on behalf of their respective corporations.
(g) (1) If the surviving party is a corporation or a foreign corporation, or if a public benefit corporation (Section 5060), a mutual benefit corporation (Section 5059), a religious corporation (Section 5061), or a corporation organized under the Cooperative Corporation Law (Section 12200) is a party to the merger, after required approvals of the merger by each constituent corporation through approval of the board (Section 151) and any approval of the outstanding shares (Section 152) required by Chapter 12 (commencing with Section 1200) and by the other parties to the merger, the surviving party shall file a copy of the agreement of merger with an officers’ certificate of each constituent domestic and foreign corporation attached stating the total number of outstanding shares or membership interests of each class entitled to vote on the merger (and identifying any other person or persons whose approval is required), that the agreement of merger in the form attached or its principal terms, as required, were approved by that corporation by a vote of a number of shares or membership interests of each class that equaled or exceeded the vote required, specifying each class entitled to vote and the percentage vote required of each class and, if applicable, by that other person or persons whose approval is required, or that the merger agreement was entitled to be and was approved by the board alone (as provided in Section 1201, in the case of corporations subject to that section). If equity securities of a parent party (Section 1200) are to be issued in the merger, the officers’ certificate of that controlled party shall state either that no vote of the shareholders of the parent party was required or that the required vote was obtained. In lieu of an officers’ certificate, a certificate of merger, on a form prescribed by the Secretary of State, shall be filed for each constituent other business entity. The certificate of merger shall be executed and acknowledged by each domestic constituent limited liability company by all managers of the limited liability company (unless a lesser number is specified in its articles of organization or operating agreement) and by each domestic constituent limited partnership by all general partners (unless a lesser number is provided in its certificate of limited partnership or partnership agreement) and by each domestic constituent general partnership by two partners (unless a lesser number is provided in its partnership agreement) and by each foreign constituent limited liability company by one or more managers and by each foreign constituent general partnership or foreign constituent limited partnership by one or more general partners, and by each constituent reciprocal insurer by the chairperson of the board, president, or vice president, and by the secretary or assistant secretary, or, if a constituent reciprocal insurer has not appointed those officers, by the chairperson of the board, president, or vice president, and by the secretary or assistant secretary of the constituent reciprocal insurer’s attorney-in-fact, and by each other party to the merger by those persons required or authorized to execute the certificate of merger by the laws under which that party is organized, specifying for that party the provision of law or other basis for the authority of the signing persons. The certificate of merger shall set forth, if a vote of the shareholders, members, partners, or other holders of interests of the constituent other business entity was required, a statement setting forth the total number of outstanding interests of each class entitled to vote on the merger and that the agreement of merger in the form attached or its principal terms, as required, were approved by a vote of the number of interests of each class that equaled or exceeded the vote required, specifying each class entitled to vote and the percentage vote required of each class, and any other information required to be set forth under the laws under which the constituent other business entity is organized, including, if a domestic limited partnership is a party to the merger, subdivision (a) of Section 15678.4 or subdivision (a) of Section 15911.14, if a domestic partnership is a party to the merger, subdivision (b) of Section 16915, and, if a domestic limited liability company is a party to the merger, subdivision (a) of Section 17552. The certificate of merger for each constituent foreign other business entity, if any, shall also set forth the statutory or other basis under which that foreign other business entity is authorized by the laws under which it is organized to effect the merger. The merger and any amendment of the articles of the surviving corporation, if applicable, contained in the agreement of merger shall be effective upon filing of the agreement of merger with an officer’s certificate of each constituent domestic and foreign corporation and a certificate of merger for each constituent other business entity, subject to subdivision (c) of Section 110 and subject to the provisions of subdivision (j), and the several parties thereto shall be one entity. If a domestic reciprocal insurer organized after 1974 to provide medical malpractice insurance is a party to the merger, the agreement of merger or certificate of merger shall not be filed until there has been filed the certificate issued by the Insurance Commissioner approving the merger pursuant to Section 1555 of the Insurance Code. The Secretary of State may certify a copy of the agreement of merger separate from the officers’ certificates and certificates of merger attached thereto.
(2) If the surviving entity is an other business entity, and no public benefit corporation (Section 5060), mutual benefit corporation (Section 5059), religious corporation (Section 5061), or corporation organized under the Cooperative Corporation Law (Section 12200) is a party to the merger, after required approvals of the merger by each constituent corporation through approval of the board (Section 151) and any approval of the outstanding shares (Section 152) required by Chapter 12 (commencing with Section 1200) and by the other parties to the merger, the parties to the merger shall file a certificate of merger in the office of, and on a form prescribed by, the Secretary of State. The certificate of merger shall be executed and acknowledged by each constituent domestic and foreign corporation by its chairperson of the board, president or a vice president and also by its secretary or an assistant secretary and by each domestic constituent limited liability company by all managers of the limited liability company (unless a lesser number is specified in its articles of organization or operating agreement) and by each domestic constituent limited partnership by all general partners (unless a lesser number is provided in its certificate of limited partnership or partnership agreement) and by each domestic constituent general partnership by two partners (unless a lesser number is provided in its partnership agreement) and by each foreign constituent limited liability company by one or more managers and by each foreign constituent general partnership or foreign constituent limited partnership by one or more general partners, and by each constituent reciprocal insurer by the chairperson of the board, president, or vice president, and by the secretary or assistant secretary, or, if a constituent reciprocal insurer has not appointed those officers, by the chairperson of the board, president, or vice president, and by the secretary or assistant secretary of the constituent reciprocal insurer’s attorney-in-fact. The certificate of merger shall be signed by each other party to the merger by those persons required or authorized to execute the certificate of merger by the laws under which that party is organized, specifying for that party the provision of law or other basis for the authority of the signing persons. The certificate of merger shall set forth all of the following:
(A) The name, place of incorporation or organization, and the Secretary of State’s file number, if any, of each party to the merger, separately identifying the disappearing parties and the surviving party.
(B) If the approval of the outstanding shares of a constituent corporation was required by Chapter 12 (commencing with Section 1200), a statement setting forth the total number of outstanding shares of each class entitled to vote on the merger and that the principal terms of the agreement of merger were approved by a vote of the number of shares of each class entitled to vote and the percentage vote required of each class.
(C) The future effective date or time, not more than 90 days subsequent to the date of filing of the merger, if the merger is not to be effective upon the filing of the certificate of merger with the office of the Secretary of State.
(D) A statement, by each party to the merger which is a domestic corporation not organized under this division, a foreign corporation, or an other business entity, of the statutory or other basis under which that party is authorized by the laws under which it is organized to effect the merger.
(E) Any other information required to be stated in the certificate of merger by the laws under which each party to the merger is organized, including, if a domestic limited liability company is a party to the merger, subdivision (a) of Section 17552, if a domestic partnership is a party to the merger, subdivision (b) of Section 16915, and, if a domestic limited partnership is a party to the merger, subdivision (a) of Section 15678.4 or subdivision (a) of Section 15911.14.
(F) Any other details or provisions that may be desired.
Unless a future effective date or time is provided in a certificate of merger, in which event the merger shall be effective at that future effective date or time, a merger shall be effective upon the filing of the certificate of merger in the office of the Secretary of State and the several parties thereto shall be one entity. The surviving other business entity shall keep a copy of the agreement of merger at its principal place of business which, for purposes of this subdivision, shall be the office referred to in Section 17057 if a domestic limited liability company, at the business address specified in paragraph (5) of subdivision (a) of Section 17552 if a foreign limited liability company, at the office referred to in subdivision (a) of Section 16403 if a domestic general partnership, at the business address specified in subdivision (f) of Section 16911 if a foreign partnership, at the office referred to in subdivision (a) of Section 15614 or in subdivision (a) of Section 15901.14 if a domestic limited partnership, or at the business address specified in paragraph (5) of subdivision (a) of Section 15678.4 or paragraph (3) of subdivision (a) of Section 15909.02 if a foreign limited partnership. Upon the request of a holder of equity securities of a party to the merger, a person with authority to do so on behalf of the surviving other business entity shall promptly deliver to that holder, a copy of the agreement of merger. A waiver by that holder of the rights provided in the foregoing sentence shall be unenforceable. If a domestic reciprocal insurer organized after 1974 to provide medical malpractice insurance is a party to the merger the agreement of merger or certificate of merger shall not be filed until there has been filed the certificate issued by the Insurance Commissioner approving the merger in accordance with Section 1555 of the Insurance Code.
(h) (1) A copy of an agreement of merger certified on or after the effective date by an official having custody thereof has the same force in evidence as the original and, except as against the state, is conclusive evidence of the performance of all conditions precedent to the merger, the existence on the effective date of the surviving party to the merger and the performance of the conditions necessary to the adoption of any amendment to the articles, if applicable, contained in the agreement of merger.
(2) For all purposes for a merger in which the surviving entity is a domestic other business entity and the filing of a certificate of merger is required by paragraph (2) of subdivision (g), a copy of the certificate of merger duly certified by the Secretary of State is conclusive evidence of the merger of the constituent corporations, either by themselves or together with the other parties to the merger, into the surviving other business entity.
(i) (1) Upon a merger pursuant to this section, the separate existences of the disappearing parties to the merger cease and the surviving party to the merger shall succeed, without other transfer, to all the rights and property of each of the disappearing parties to the merger and shall be subject to all the debts and liabilities of each in the same manner as if the surviving party to the merger had itself incurred them.
(2) All rights of creditors and all liens upon the property of each of the constituent corporations and other parties to the merger shall be preserved unimpaired, provided that those liens upon property of a disappearing party shall be limited to the property affected thereby immediately prior to the time the merger is effective.
(3) Any action or proceeding pending by or against any disappearing corporation or disappearing party to the merger may be prosecuted to judgment, which shall bind the surviving party, or the surviving party may be proceeded against or substituted in its place.
(4) If a limited partnership or a general partnership is a party to the merger, nothing in this section is intended to affect the liability a general partner of a disappearing limited partnership or general partnership may have in connection with the debts and liabilities of the disappearing limited partnership or general partnership existing prior to the time the merger is effective.
(j) (1) The merger of domestic corporations with foreign corporations or foreign other business entities in a merger in which one or more other business entities is a party shall comply with subdivision (a) and this subdivision.
(2) If the surviving party is a domestic corporation or domestic other business entity, the merger proceedings with respect to that party and any domestic disappearing corporation shall conform to the provisions of this section. If the surviving party is a foreign corporation or foreign other business entity, then, subject to the requirements of subdivision (c), and of Section 407 and Chapter 12 (commencing with Section 1200) and Chapter 13 (commencing with Section 1300), and, if applicable, corresponding provisions of the Nonprofit Corporation Law or the Cooperative Corporation Law, with respect to any domestic constituent corporations, Chapter 13 (commencing with Section 17600) of Title 2.5 with respect to any domestic constituent limited liability companies, Article 6 (commencing with Section 16601) of Chapter 5 of Title 2 with respect to any domestic constituent general partnerships, and Article 7.6 (commencing with Section 15679.1) of Chapter 3, and Article 11.5 (commencing with Section 15911.20) of Chapter 5.5 of Title 2 with respect to any domestic constituent limited partnerships, the merger proceedings may be in accordance with the laws of the state or place of incorporation or organization of the surviving party.
(3) If the surviving party is a domestic corporation or domestic other business entity, the certificate of merger or the agreement of merger with attachments shall be filed as provided in subdivision (g) and thereupon, subject to subdivision (c) of Section 110 or paragraph (2) of subdivision (g), as is applicable, the merger shall be effective as to each domestic constituent corporation and domestic constituent other business entity.
(4) If the surviving party is a foreign corporation or foreign other business entity, the merger shall become effective in accordance with the law of the jurisdiction in which the surviving party is organized, but, except as provided in paragraph (5), the merger shall be effective as to any domestic disappearing corporation as of the time of effectiveness in the foreign jurisdiction upon the filing in this state of a copy of the agreement of merger with an officers’ certificate of each constituent foreign and domestic corporation and a certificate of merger of each constituent other business entity attached, which officers’ certificates and certificates of merger shall conform to the requirements of paragraph (1) of subdivision (g). If one or more domestic other business entities is a disappearing party in a merger pursuant to this subdivision in which a foreign other business entity is the surviving entity, a certificate of merger required by the laws under which that domestic other business entity is organized, including subdivision (a) of Section 15678.4, subdivision (a) of Section 15911.14, subdivision (b) of Section 16915, or subdivision (a) of Section 17552, as is applicable, shall also be filed at the same time as the filing of the agreement of merger.
(5) If the date of the filing in this state pursuant to this subdivision is more than six months after the time of the effectiveness in the foreign jurisdiction, or if the powers of a domestic disappearing corporation are suspended at the time of effectiveness in the foreign jurisdiction, the merger shall be effective as to the domestic disappearing corporation as of the date of filing in this state.
(6) In a merger described in paragraph (3) or (4), each foreign disappearing corporation that is qualified for the transaction of intrastate business shall by virtue of the filing pursuant to this subdivision, subject to subdivision (c) of Section 110, automatically surrender its right to transact intrastate business in this state. The filing of the agreement of merger or certificate of merger, as is applicable, pursuant to this subdivision, by a disappearing foreign other business entity registered for the transaction of intrastate business in this state shall, by virtue of that filing, subject to subdivision (c) of Section 110, automatically cancels the registration for that foreign other business entity, without the necessity of the filing of a certificate of cancellation.

SEC. 2.

 Section 12200 of the Corporations Code is amended to read:

12200.
 This part shall be known as the Cooperative Corporation Law. This part is intended primarily to apply to the organization and operation of consumer cooperatives and worker cooperatives. It is also applicable to other cooperatives, including, but not limited to, cooperatives formed for the purpose of recycling or treating hazardous wastes, which elect to incorporate under it.

SEC. 3.

 Section 12201 of the Corporations Code is amended to read:

12201.
 (a) Subject to any other provision of law of this state applying to the particular class of corporation or line of activity, a corporation may be formed under this part for any lawful purpose provided that, in the case of a worker cooperative, the workers of the corporation shall constitute the members, or one class of members, and, in the case of a consumer cooperative, it shall be organized and shall conduct its business primarily for the mutual benefit of its members as patrons of the corporation. The earnings, savings, or benefits of the corporation shall be used for the general welfare of the members or shall be proportionately and equitably distributed to some or all of its members or its patrons, based upon their patronage (Section 12243) of the corporation, in the form of cash, property, evidences of indebtedness, capital credits, memberships, or services.
(b) Those corporations that are democratically controlled and are not organized to make a profit for themselves, as such, or for their members, as such, but primarily for their members as patrons (Section 12243).
(c) A corporation organized under this part that has designated in its bylaws that it is a worker cooperative shall also designate that its workers constitute its members or one class of its members.

SEC. 4.

 Section 12213 of the Corporations Code is amended to read:

12213.
 Any agreement, certificate, or other instrument filed pursuant to the provisions of this part, may be corrected with respect to any misstatement of fact contained therein, any defect in the execution thereof or any other error or defect contained therein, by filing a certificate of correction entitled “Certificate of Correction of ____ (insert here the title of the agreement, certificate or other instrument to be corrected and the name of the corporation or corporations).” However, no such certificate of correction shall alter the wording of any resolution which was in fact adopted by the board or, in the case of a corporation that is not a worker cooperation, by the members or delegates and, in the case of a corporation that is a worker cooperative, by the members or effect a corrected amendment of articles which amendment as so corrected would not in all respects have complied with the requirements of this part, at the time of filing of the agreement, certificate or other instrument being corrected. Such certificate of correction shall be signed and verified or acknowledged as provided in this part with respect to the agreement, certificate or other instrument being corrected. It shall set forth the following:
(a) The name or names of the corporation or corporations.
(b) The date the agreement, certificate or other instrument being corrected was filed.
(c) The provision in the agreement, certificate or other instrument as corrected and, if the execution was defective, wherein it was defective.
The filing of the certificate of correction shall not alter the effective time of the agreement, certificate or other instrument being corrected, which shall remain as its original effective time, and such filing shall not affect any right or liability accrued or incurred before such filing, except that any right or liability accrued or incurred by reason of the error or defect being corrected shall be extinguished by such filing if the person having such right has not detrimentally relied on the original instrument.

SEC. 5.

 Section 12230 of the Corporations Code is amended to read:

12230.
 “Class” refers to those memberships or shares which: (a) are identified in the articles or bylaws as being a different type of membership or share; or (b) have the same rights with respect to voting, dissolution, redemption, distributions and transfer. For the purpose of this section, rights shall be considered the same if they are determined by a formula applied uniformly.

SEC. 6.

 Section 12235 of the Corporations Code is amended to read:

12235.
 “Distribution” means the distribution of any gains, profits or dividends to any member person as such, but does not include patronage distributions.

SEC. 7.

 Section 12240 of the Corporations Code is amended to read:

12240.
 “Membership certificate,” as used in this part, means a document evidencing a proprietary membership interest in a corporation.

SEC. 4.SEC. 8.

 Section 12243 of the Corporations Code is amended to read:

12243.
 (a) If the corporation is organized to provide goods or services to its members, the corporation’s “patrons” are those who purchase those types of goods from, or use those types of service of, the corporation. If the corporation is organized to market, process or otherwise handle its members’ products or services, the corporation’s “patrons” are those persons whose products or services are so marketed, processed, or handled by the corporation.
(b) With respect to a corporation that is organized as a worker cooperative, the corporation’s “patrons” are its workers, those persons who purchase goods or services from the corporation, and those persons whose products or services are marketed, processed, or handled by the corporation.
(c) “Patronage” of a patron is measured by the volume or value, or both, of a patron’s labor provided for, purchases of products from, and use of services furnished by, the corporation, and by the products and services provided by the patron to the corporation for marketing.

SEC. 9.

 Section 12246.5 is added to the Corporations Code, to read:

12246.5.
 “Share” means a unit of proprietary interest of a shareholder.

SEC. 10.

 Section 12248 of the Corporations Code is amended to read:

12248.
 “Share certificate” shall have the same meaning as “membership certificate” as defined in Section 12240 certificate,” as used in this part, means a document evidencing a proprietary interest of a shareholder in a corporation.

SEC. 5.SEC. 11.

 Section 12253 of the Corporations Code is amended to read:

12253.
 (a) “Voting power” means the power to vote for the election of directors at the time any determination of voting power is made and does not include the right to vote upon the happening of some condition or event which has not yet occurred. In any case where different classes of memberships are entitled to vote as separate classes for different members of the board, the determination of percentage of voting power shall be made on the basis of the percentage of the total number of authorized directors which the memberships in question (whether of one or more classes) have the power to elect in an election at which all memberships then entitled to vote for the election of any directors are voted.
(b) If a worker cooperative corporation has authorized voting rights for a worker member class and one or more additional classes of members, then at least a majority of the authorized directors shall be elected by the worker member class.

SEC. 6.SEC. 12.

 Section 12310 of the Corporations Code is amended to read:

12310.
 The articles of incorporation of a corporation formed under this part shall set forth:
(a) The name of the corporation.
(b) The following statement:
“This corporation is a cooperative corporation organized under the Cooperative Corporation Law. The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under such law.”
[The articles may include a further description of the corporation’s purposes.]
(c) The name and address in this state of the corporation’s initial agent for service of process in accordance with subdivision (b) of Section 12570.
(d) Whether the voting power or the proprietary interests of the members and shareholders are equal or unequal. If the voting power or proprietary interests of the members are unequal, the articles shall state either (i) the general rule or rules by which the voting power and proprietary interests of the members and shareholders shall be determined or (ii) that such rule or rules shall be prescribed in the corporation’s bylaws. Equal voting power means voting power apportioned on the basis of one vote for each member. Equal proprietary rights means property rights apportioned on the basis of one proprietary unit for each member or shareholder.

SEC. 13.

 Section 12311 of the Corporations Code is amended to read:

12311.
 (a) The names of all corporations formed under this part shall include the word “cooperative.” The names of all corporations formed under this part as a worker cooperative shall include the words “worker cooperative.” No corporation shall be formed under this part unless there is affixed or prefixed to its name some word or abbreviation which will indicate that it is a corporation, as distinguished from a natural person, a firm, or an unincorporated association.
(b) No person shall adopt or use the word “cooperative” or any abbreviation or derivation thereof, or any word similar thereto, as part of the name or designation under which it does business in this state, unless incorporated as provided in this part or unless incorporated as a nonprofit cooperative association under Chapter 1 (commencing with Section 54001) of Division 20 of the Food and Agricultural Code, as a stock cooperative, as defined in Section 11003.2 of the Business and Professions Code, as a limited-equity housing cooperative, as defined in Section 33007.5 of the Health and Safety Code, as a credit union or organization owned for the mutual benefit of credit unions, or under some other law of this state enabling it to do so. However, the foregoing prohibition shall be inapplicable to any credit union or organization owned for the mutual benefit of credit unions, any housing cooperative, the financing of which is insured, guaranteed, or provided, in whole or in part, by a public or statutorily chartered entity pursuant to a program created for housing cooperatives, a nonprofit corporation, a majority of whose membership is composed of cooperative corporations, or an academic institution that serves cooperative corporations.
(c) A domestic or foreign corporation or association which did business in this state under a name or designation including the word “cooperative” prior to September 19, 1939, and which conducts business on a cooperative basis substantially as set forth in this part, may continue to do business under that name or designation.
(d) Any person, firm, individual, partnership, trust, domestic corporation, foreign corporation, or association which did business in this state under a name or designation including the word “cooperative” prior to September 19, 1939, but which does not conduct business on a cooperative basis as contemplated by Section 12201 of this part, may continue to do business under that name or designation if the words “not organized under the law relating to cooperative corporations” are always placed immediately after the name or designation wherever it is used.
(e) Any foreign corporation, organized under and complying with the cooperative law of the state or other jurisdiction of its creation, may use the term “cooperative” in this state if it has complied with the laws of this state applicable to foreign corporations, insofar as those laws are applicable to it, and if it is doing business on a cooperative basis as contemplated by Section 12201.

SEC. 14.

 Section 12313 of the Corporations Code is amended to read:

12313.
 (a) The articles of incorporation may set forth any or all of the following provisions, which shall not be effective unless expressly provided in the articles:
(1) A provision limiting the duration of the corporation’s existence to a specified date.
(2) A provision providing for the distribution of the remaining assets of the corporation, after payment or adequate provision for all of its debts and liabilities, to a charitable trust.
(b) Nothing contained in subdivision (a) shall affect the enforceability, as between the parties thereto, of any lawful agreement not otherwise contrary to public policy.
(c) The articles of incorporation may set forth any or all of the following provisions:
(1) The names and addresses of the persons appointed to act as initial directors.
(2) Provisions concerning the transfer of memberships or shares, in accordance with Section 12410.
(3) The classes of members or shareholders, if any, and if there are two or more classes, the rights, privileges, preferences, restrictions and conditions attaching to each class.
(4) Any other provision, not in conflict with law, for the management of the activities and for the conduct of the affairs of the corporation, including any provision which is required or permitted by this part to be stated in the bylaws.
(5) A provision conferring upon members the right to determine the consideration for which memberships shall be issued.

SEC. 15.

 Section 12320 of the Corporations Code is amended to read:

12320.
 Subject to any limitations contained in the articles or bylaws and to compliance with other provisions of this part and any other applicable laws, a corporation, in carrying out its activities, shall have all of the powers of a natural person, including, without limitation, the power to:
(a) Adopt, use, and at will alter a corporate seal, but failure to affix a seal does not affect the validity of any instrument.
(b) Adopt, amend, and repeal bylaws.
(c) Qualify to conduct its activites activities in any other state, territory, dependency or foreign country.
(d) Issue, purchase, redeem, receive, take or otherwise acquire, own, sell, lend, exchange, transfer or otherwise dispose of, pledge, use and otherwise deal in and with its own memberships, shares, bonds, debentures, notes and debt securities.
(e) Pay pensions, and establish and carry out pension, deferred compensation, saving, thrift and other retirement, incentive and benefit plans, trusts and provisions for any or all of its directors, officers, employees, and persons providing services to it or any of its subsidiary or related or associated corporations, and to indemnify and purchase and maintain insurance on behalf of any fiduciary of such plans, trusts, or provisions.
(f) Issue certificates evidencing membership and shares in accordance with the provisions of Section 12401 and issue identity cards to identify those persons eligible to use the corporation’s facilities.
(g) Levy dues, assessments, and membership and transfer fees.
(h) Make donations for the public welfare or for community funds, hospital, charitable, educational, scientific, civic, religious or similar purposes.
(i) Assume obligations, enter into contracts, including contracts of guarantee or suretyship, incur liabilities, borrow or lend money or otherwise use its credit, and secure any of its obligations, contracts or liabilities by mortgage, pledge or other encumbrance of all or any part of its property and income.
(j) Participate with others in any partnership, joint venture or other association, transaction or arrangement of any kind whether or not such participation involves sharing or delegation of control with or to others.
(k) Act as trustee under any trust incidental to the principal objects of the corporation, and receive, hold, administer, exchange, and expend funds and property subject to such trust.
(l) Carry on a business at a profit and apply any profit that results from the business activity to any activity in which it may lawfully engage.

SEC. 7.SEC. 16.

 Section 12330 of the Corporations Code is amended to read:

12330.
 (a) Except as provided in subdivision (c) and Sections 12331, 12360, 12364, 12462, and 12484, bylaws may be adopted, amended, or repealed by the board unless the action would:
(1) Materially and adversely affect the rights or obligations of members as to voting, dissolution, redemption, transfer, distributions, patronage distributions, patronage, property rights, or rights to repayment of contributed capital;
(2) Increase or decrease the number or members authorized in total or for any class;
(3) Effect an exchange, reclassification or cancellation of all or part of the memberships; or
(4) Authorize a new class of membership.
(b) Bylaws may be adopted, amended or repealed by approval of the members (Section 12224); provided, however, that adoption, amendment, or repeal also requires approval by the members of a class if that action would:
(1) Materially and adversely affect the rights or obligations of that class as to voting, dissolution, redemption, transfer, distributions, patronage distributions, patronage, property rights, or rights to repayment of contributed capital, in a manner different than such action affects another class;
(2) Materially and adversely affect such class as to voting, dissolution, redemption, transfer, distributions, patronage distributions, patronage, property rights, or rights to repayment of contributed capital, by changing the rights, privileges, preferences, restrictions or conditions of another class;
(3) Increase or decrease the number of memberships authorized for such class;
(4) Increase the number of memberships authorized for another class;
(5) Effect an exchange, reclassification or cancellation of all or part of the memberships of such class; or
(6) Authorize a new class of memberships.
(c) The articles or bylaws may restrict or eliminate the power of the board to adopt, amend or repeal any or all bylaws, subject to subdivision (e) of Section 12331.
(d) Bylaws may also provide that repeal or amendment of those bylaws, or the repeal or amendment of specified portions of those bylaws, may occur only with the approval in writing of a specified person or persons other than the board or members. However, this approval requirement, unless the articles or the bylaws specify otherwise, shall not apply if any of the following circumstances exist:
(1) The specified person or persons have died or ceased to exist.
(2) If the right of the specified person or persons to approve is in the capacity of an officer, trustee, or other status and the office, trust, or status has ceased to exist.
(3) If the corporation has a specific proposal for amendment or repeal, and the corporation has provided written notice of that proposal, including a copy of the proposal, to the specified person or persons at the most recent address for each of them, based on the corporation’s records, and the corporation has not received written approval or nonapproval within the period specified in the notice, which shall not be less than 10 nor more than 30 days commencing at least 20 days after the notice has been provided.
(e) If the corporation elects to be governed by provisions of this part pertaining specifically to a worker cooperative, the corporation shall state in its bylaws that it is a worker cooperative.

SEC. 17.

 Section 12331 of the Corporations Code is amended to read:

12331.
 (a) The bylaws shall set forth (unless such provision is contained in the articles, in which case it may only be changed by an amendment of the articles) the number of directors of the corporation, or the method of determining the number of directors of the corporation, or that the number of directors shall be not less than a stated minimum or more than a stated maximum with the exact number of directors to be fixed, within the limits specified, by approval of the board or the members (Sections 12222 and 12224), in the manner provided in the bylaws, subject to subdivision (e). The number or minimum number of directors shall not be less than three. Alternate directors may be permitted, in which event, the bylaws shall specify the manner and times of their election and the conditions to their service in place of a director.
(b) Once members have been admitted, a bylaw specifying or changing a fixed number of directors or the maximum or minimum number or changing from a fixed to a variable board or vice versa may only be adopted by approval of the members.
(c) The bylaws may contain any provision, not in conflict with law or the articles, for the management of the activities and for the conduct of the affairs of the corporation, including but not limited to:
(1) Any provision referred to in subdivision (c) of Section 12313.
(2) The time, place and manner of calling, conducting and giving notice of members’, directors’, and committee meetings, or of conducting mail ballots.
(3) The qualifications, duties and compensation of directors; the time of their election; and the requirements of a quorum for directors’ and committee meetings.
(4) The appointment of committees, composed of directors or nondirectors or both, by the board or any officer and the authority of any such committees.
(5) The appointment, duties, compensation and tenure of officers.
(6) The mode of determination of members or shareholders of record.
(7) The making of reports and financial statements to members or shareholders.
(8) Setting, imposing and collecting dues, assessments, and membership and transfer fees.
(9) The time and manner of patronage distributions consistent with this part.
(d) The bylaws may provide for eligibility, the manner of admission, withdrawal, suspension, and expulsion of members, and the suspension or termination of memberships consistent with the requirements of Section 12431.
(e) The bylaws may require, for any or all corporate actions, the vote of a larger proportion of, or all of, the members or the members of any class, unit, or grouping of members or the vote of a larger proportion of, or all of, the directors, than is otherwise required by this part. Such a provision in the bylaws requiring such greater vote shall not be altered, amended or repealed except by such greater vote, unless otherwise provided in the bylaws.
(f) The bylaws may contain a provision limiting the number of members or shareholders, in total or of any class, which the corporation is authorized to admit.
(g) The bylaws may provide for the establishment by the corporation of a program for the education of its members, officers, employees and the general public in the principles and techniques of cooperation.

SEC. 18.

 Section 12340 of the Corporations Code is amended to read:

12340.
 Every corporation shall keep at its principal office in this state the original or a copy of its articles and bylaws as amended to date, which shall be open to inspection by the members and shareholders at all reasonable times during office hours. If the corporation has no office in this state, it shall upon the written request of any member or shareholder furnish to such member or shareholder a copy of the articles or bylaws as amended to date.

SEC. 19.

 Section 12354 of the Corporations Code is amended to read:

12354.
 Subject to the provisions of subdivision (a) of Section 12321, any note, mortgage, evidence of indebtedness, contract, conveyance or other instrument in writing, and any assignment or endorsement thereof, executed or entered into between any corporation and any other person, when signed by any one of the chairman chairperson of the board, the president or any vice president and by any one of the secretary, any assistant secretary, the chief financial officer or any assistant treasurer of such corporation, is not invalidated as to the corporation by any lack of authority of the signing officers in the absence of actual knowledge on the part of the other person that the signing officers had no authority to execute the same.

SEC. 20.

 Section 12364 of the Corporations Code is amended to read:

12364.
 (a) Unless otherwise provided in the articles or bylaws and except for a vacancy created by the removal of a director, vacancies on the board may be filled by approval of the board (Section 12222) or, if the number of directors then in office is less than a quorum, by (1) the unanimous written consent of the directors then in office, (2) the affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice complying with Section 12351, or (3) a sole remaining director. Unless the articles or a bylaw approved by the members (Section 12224) provide that the board may fill vacancies occurring in the board by reason of the removal of directors, such vacancies may be filled only by approval of the members (Section 12224).
(b) The members may elect a director at any time to fill any vacancy not filled by the directors. In the case of a corporation with no members, a vacancy on the board may be filled by approval of the board (Section 12222) or, if the number of directors then in office is less than a quorum, by any of the following:
(1) The unanimous written consent of the directors then in office.
(2) The affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice complying with Section 12351.
(3) A sole remaining director.
(c) Any director may resign effective upon giving written notice to the chairman chairperson of the board, the president, the secretary or the board of directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective.

SEC. 21.

 Section 12376 of the Corporations Code is amended to read:

12376.
 (a) Subject to the provisions of Section 12371, directors of a corporation who approve any of the following corporate actions are jointly and severally liable to the corporation for the benefit of all of the creditors entitled to institute an action under paragraph (1) or (2) of subdivision (c) or to the corporation in an action by members under paragraph (3) of subdivision (c):
(1) The making of any distribution or purchase or redemption of memberships or shares contrary to Chapter 4 (commencing with Section 12450).
(2) The distribution of assets after institution of dissolution proceedings of the corporation, without paying or adequately providing for all known liabilities of the corporation, excluding any claims not filed by creditors within the time limit set by the court in a notice given to creditors under Chapters 15 (commencing with Section 12620), 16 (commencing with Section 12630), and 17 (commencing with Section 12650).
(3) The making of any loan or guarantee contrary to Section 12375.
(b) A director who is present at a meeting of the board, or any committee thereof, at which action specified in subdivision (a) is taken and who abstains from voting shall be considered to have approved the action.
(c) Suit may be brought in the name of the corporation to enforce the liability:
(1) Under paragraph (1) of subdivision (a) against any or all directors liable by the persons entitled to sue under subdivision (c) of Section 12455.
(2) Under paragraph (2) or (3) of subdivision (a) against any or all directors liable by any one or more creditors of the corporation whose debts or claims arose prior to the time of the corporate action who have not consented to the corporate action, whether or not they have reduced their claims to judgment.
(3) Under paragraph (3) of subdivision (a) against any or all directors liable by any one or more members at the time of any corporate action specified in paragraph (3) of subdivision (a) who have not consented to the corporate action, without regard to the provisions of Section 12490.
(d) The damages recoverable from a director under this section shall be the amount of the illegal distribution, or if the illegal distribution consists of property, the fair market value of that property at the time of the illegal distribution, plus interest thereon from the date of the distribution at the legal rate on judgments until paid, together with all reasonably incurred costs of appraisal or other valuation, if any, of that property, or the loss suffered by the corporation as a result of the illegal loan or guarantee, but not exceeding, in the case of an action for the benefit of creditors, the liabilities of the corporation owed to nonconsenting creditors at the time of the violation.
(e) Any director sued under this section may implead all other directors liable and may compel contribution, either in that action or in an independent action against directors not joined in that action.
(f) Directors liable under this section shall also be entitled to be subrogated to the rights of the corporation:
(1) With respect to paragraph (1) of subdivision (a), against the persons who received the distribution.
(2) With respect to paragraph (2) of subdivision (a), against the persons who received the distribution.
(3) With respect to paragraph (3) of subdivision (a), against the person who received the loan or guarantee.
Any director sued under this section may file a cross-complaint against the person or persons who are liable to the director as a result of the subrogation provided for in this subdivision or may proceed against them in an independent action.

SEC. 22.

 Section 12401 of the Corporations Code is amended to read:

12401.
 (a) A corporation may issue, but is not required to issue, membership or share certificates. In the event that membership certificates are issued, the certificates shall state the information required to be contained in the disclosure document described in subdivision (b). Nothing in this section shall restrict a corporation from issuing identity cards or similar devices to members which serve to identify members qualifying to use facilities or services of the corporation.
(b) Except as provided in subdivision (e), prior to issuing a membership, the corporation shall provide the purchaser of a membership a prospective member with a disclosure document. The disclosure document may be a prospectus, offering circular, brochure, or similar document, a specimen copy of the membership certificate, or a receipt which the corporation proposes to issue. The disclosure document shall contain the following information:
(1) A statement that the corporation is a cooperative corporation, and, in the case of a worker cooperative corporation, a statement to that effect.
(2) A statement that a copy of the corporation’s articles and bylaws will be furnished without charge to a member or prospective member upon written request, and the address of the office of the corporation and the address to which such a written request is to be directed.
(3) If there are restrictions imposed by the corporation upon the transfer of membership or shares, a statement to that effect and the restrictions imposed on transfer.
(4) If the corporation may levy dues, assessments, or membership or transfer fees, a statement to that effect and the conditions under which the corporation may make such a levy.
(5) If the member is required to contribute services to the corporation, a statement to that effect and the amount and nature of the services to be contributed to the corporation.
(6) Whether the membership or share is redeemable and the conditions under which the membership or share may be redeemed at the option of the corporation or the member or shareholder.
(7) If the voting power or the proprietary interests of the members and shareholders is unequal, a statement to that effect and the rule or rules by which the voting power and proprietary rights are to be determined.
(8) In lieu of specifying verbatim in the disclosure document the restrictions on the transfer of a membership and shares, conditions of levy, amount and nature of services to be contributed, conditions under which memberships are redeemable, or the rules by which the voting power and proprietary rights of members and shareholders are to be determined, the disclosure document may contain a statement that such information will be provided free of charge to a member or prospective member or shareholder or prospective shareholder who requests it in writing. If the disclosure document contains such a statement it shall also set forth the address of the office of the corporation and the address to which such a request is to be directed.
(c) If the articles or bylaws are amended so that any statement required by subdivision (a) on outstanding membership certificates is no longer accurate, the board may cancel the outstanding certificates and issue in their place new certificates conforming to the articles or bylaws amendments.
(d) When new membership certificates are issued in accordance with subdivision (c), the board may order holders of outstanding certificates to surrender and exchange them for new certificates within a reasonable time fixed by the board. The board may further provide that the holder of the certificate to be surrendered shall not be entitled to exercise any of the rights of membership until the certificate is surrendered, but such rights shall be suspended only after notice of the order is given to the holder of the certificate and only until the certificate is surrendered. The requirement to surrender outstanding certificates may be enforced by civil action.
(e) A corporation shall issue a membership certificate, receipt, or written advice of purchase to anyone purchasing a membership upon the member’s first purchase of a membership of any class. No disclosure document need be provided to an existing member prior to the purchase of additional memberships if that member has previously been provided with a disclosure document which is accurate and correct as of the date of the purchase of the additional memberships.
(f) If a corporation does not issue new certificates as contemplated by subdivisions (c) and (d), and if a transferee of a membership certificate has not previously been provided with a disclosure statement which is accurate and correct as of the date of registration of the transfer, then the corporation shall provide a disclosure document to the transferee upon registration with the corporation of the transfer of the certificate.

SEC. 23.

 Section 12402 of the Corporations Code is amended to read:

12402.
 (a) A corporation may issue a new membership or share certificate in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate or the owner’s legal representative to give the corporation a bond (or other adequate security) sufficient to indemnify it against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
(b) If a corporation refuses to issue a new membership or share certificate or other certificate in place of one theretofore issued by it, or by any corporation of which it is the lawful successor, alleged to have been lost, stolen or destroyed, the owner of the lost, stolen or destroyed certificate or the owner’s legal representative may bring an action in the superior court of the proper county for an order requiring the corporation to issue a new certificate in place of the one lost, stolen or destroyed.

SEC. 8.SEC. 24.

 Section 12404 of the Corporations Code is amended to read:

12404.
 (a) Except as permitted in Section 12314, the voting power of members having voting rights shall be equal.
(b) Within each class in which a member of a worker cooperative has voting rights, each member shall have one vote on any matter put before the class for a vote; provided, however, that when members are entitled to vote together as a single class on a matter, each member shall have only one vote regardless of the number of voting classes to which the member belongs.

SEC. 25.

 Section 12410 of the Corporations Code is amended to read:

12410.
 (a) Unless the articles or bylaws otherwise provide, and except as provided by subdivision (d):
(1) No member or shareholder may transfer a membership or share or any right arising therefrom; and
(2) Subject to the provisions of subdivision (b), Section 12422, and Section 12445, all rights as a member of the corporation cease upon the member’s death or dissolution or the dissolution of a member which is a business entity.
(b) The articles or bylaws may provide for, or may authorize the board to provide for, the transfer of memberships, or of memberships or shares within any class or classes, with or without restriction or limitation, including transfer upon the death, dissolution, merger, or reorganization of a member or shareholder.
(c) Where transfer rights have been provided, no restriction of them shall be binding with respect to memberships issued prior to the adoption of the restriction, unless the holders of such memberships or shares voted in favor of the restriction.
(d) A membership in a worker cooperative corporation shall be nontransferable.

SEC. 26.

 Section 12440 of the Corporations Code is amended to read:

12440.
 (a) A member or shareholder of a corporation is not, as such, personally liable for the debts, liabilities, or obligations of the corporation.
(b) No person is liable for any obligation arising from membership unless the person was admitted to membership upon the person’s application or with the person’s consent.
(c) The ownership of an interest in real property, when a condition of its ownership is membership in a corporation, shall be considered consent to such membership for the purpose of this section.

SEC. 27.

 Section 12442 of the Corporations Code is amended to read:

12442.
 A person holding a membership or share as pledgee or a membership or share as executor, administrator, guardian, trustee, receiver or in any representative or fiduciary capacity is not personally liable for any unpaid balance of the purchase price of the membership or share, or for any amount owing to the corporation by the member or shareholder, because the membership or share is so held, but the estate and funds in the hands of such fiduciary or representative are liable and the membership or share subject to sale therefor.

SEC. 28.

 Section 12443 of the Corporations Code is amended to read:

12443.
 (a) No action shall be brought by or on behalf of any creditor to reach and apply the liability, if any, of a member or shareholder to the corporation to pay the amount due on such member’s membership or shareholder’s shares or otherwise due to the corporation unless final judgment has been rendered in favor of the creditor against the corporation and execution has been returned unsatisfied in whole or in part or unless such proceedings would be useless.
(b) All creditors of the corporation, with or without reducing their claims to judgment, may intervene in any such creditor’s action to reach and apply unpaid amounts due the corporation and any or all members or shareholders who owe amounts to the corporation may be joined in such action. Several judgments may be rendered for and against the parties to the action or in favor of a receiver for the benefit of the respective parties thereto.
(c) All amounts paid by any member or shareholder in any such action shall be credited on the unpaid balance due the corporation by such member or shareholder.

SEC. 9.SEC. 29.

 Section 12446 of the Corporations Code is amended to read:

12446.
 (a) Subject to the provisions of subdivision (b), the provisions of Chapter 7 (commencing with Section 1500) of Title 10 of Part 3 of the Code of Civil Procedure shall not apply to any proprietary interest in a cooperative corporation. Any proprietary interest that would otherwise escheat to the state pursuant to Chapter 7 (commencing with Section 1500) of Title 10 of Part 3 of the Code of Civil Procedure shall instead become the property of the corporation.
(b) Notwithstanding the provisions of subdivision (a), no proprietary interest shall become the property of the corporation under this section unless the following requirements are satisfied:
(1) The articles or bylaws shall specifically provide for the transfer of ownership of the otherwise escheated proprietary interests to the corporation.
(2) At least 60 days prior notice of the proposed transfer of the proprietary interest to the corporation is given to the affected member by first-class or second-class mail to the last address of the member shown on the corporation’s records, and by publication in a newspaper of general circulation in the county in which the corporation has its principal office. Notice given in the foregoing manner shall be deemed actual notice.
(3) No proprietary interest shall become the property of the corporation under this section if written notice objecting thereto is received by the corporation from the affected member prior to the date of the proposed transfer.
(c) For purposes of this section, a “proprietary interest” shall mean and include any membership, membership certificate, membership share, or share certificate of any class representing a proprietary interest in, and issued by, the corporation together with all accrued and unpaid dividends and patronage distributions relating thereto.

SEC. 30.

 Section 12451 of the Corporations Code is amended to read:

12451.
 Distributions Except in the case of a worker cooperative corporation, distributions (Section 12235) in any fiscal year shall not exceed 15 percent, multiplied by contributions (whether by membership fees, capital credits, or otherwise) to capital.

SEC. 31.

 Section 12452 of the Corporations Code is amended to read:

12452.
 A corporation may, subject to meeting the requirements of Section 12453 and any additional restrictions authorized by Section 12454, purchase or redeem memberships or shares.

SEC. 32.

 Section 12453 of the Corporations Code is amended to read:

12453.
 Neither a corporation nor any of its subsidiaries shall purchase or redeem memberships or shares, or make a patronage distribution to members out of earnings of the corporation on nonmember patronage, or make a distribution, if the corporation or the subsidiary purchasing or redeeming memberships or making the distribution is, or as a result thereof would be, likely to be unable to meet its liabilities (except those whose payment is otherwise adequately provided for) as they mature.

SEC. 33.

 Section 12454 of the Corporations Code is amended to read:

12454.
 Nothing in this chapter prohibits additional restrictions upon the purchase or redemption of a membership or share, upon distributions, or upon patronage distributions, by provision in a corporation’s articles or bylaws or agreement entered into by the corporation.

SEC. 34.

 Section 12460 of the Corporations Code is amended to read:

12460.
 (a) Meetings of members may be held at a place within or without this state that is stated in or fixed in accordance with the bylaws. If no other place is so stated or fixed, meetings of members shall be held at the principal executive office of the corporation. Unless prohibited by the bylaws of the corporation, if authorized by the board of directors in its sole discretion, and subject to the requirement of consent in clause (b) of Section 20 and those guidelines and procedures as the board of directors may adopt, members not physically present in person at a meeting of members may, by electronic transmission by and to the corporation (Sections 20 and 21) or by electronic video screen communication, participate in a meeting of members, be deemed present in person, and vote at a meeting of members whether that meeting is to be held at a designated place or in whole or in part by means of electronic transmission by and to the corporation or by electronic video screen communication, in accordance with subdivision (f).
(b) A regular meeting of members shall be held annually. In any year in which directors are elected, the election shall be held at the regular meeting unless the directors are chosen in some other manner authorized by law. Any other proper business may be transacted at the meeting.
(c) If a corporation fails to hold the regular meeting for a period of 60 days after the date designated therefor or, if no date has been designated, for a period of 15 months after the formation of the corporation or after its last regular meeting, or if the corporation fails to hold a written ballot for a period of 60 days after the date designated therefor, then the superior court of the proper county may summarily order the meeting to be held or the ballot to be conducted upon the application of a member, after notice to the corporation giving it an opportunity to be heard.
(d) The votes represented at a meeting called or by written ballot ordered pursuant to subdivision (c) and entitled to be cast on the business to be transacted shall constitute a quorum, notwithstanding any provision of the articles or bylaws or in this part to the contrary. The court may issue such orders as may be appropriate including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote, and the form of notice of the meeting.
(e) Special meetings of members for any lawful purpose may be called by the board, the chairman chairperson of the board, the president, or such other persons, if any, as are specified in the bylaws. In addition, special meetings of members for any lawful purpose may be called by 5 percent or more of the members.
(f) A meeting of the members may be conducted, in whole or in part, by electronic transmission by and to the corporation or by electronic video screen communication (1) if the corporation implements reasonable measures to provide members a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to read or hear the proceedings of the meeting concurrently with those proceedings, and (2) if any member votes or takes other action at the meeting by means of electronic transmission to the corporation or electronic video screen communication, a record of that vote or action is maintained by the corporation. Any request by a corporation to a member pursuant to clause (b) of Section 20 for consent to conduct a meeting of members by electronic transmission by and to the corporation, shall include a notice that absent consent of the member pursuant to clause (b) of Section 20, the meeting shall be held at a physical location in accordance with subdivision (a).

SEC. 10.SEC. 35.

 Section 12461 of the Corporations Code is amended to read:

12461.
 (a) (1) Whenever members who are not worker members of a worker cooperative are required or permitted to take any action at a meeting, a written notice of the meeting shall be given not less than 10 nor more than 90 days before the date of the meeting to each nonworker member who, on the record date for notice of the meeting, is entitled to vote at the meeting; provided, however, that if notice is given by mail, and the notice is not mailed by first-class, registered, or certified mail, that notice shall be given not less than 20 days before the meeting.
(2) Whenever worker members of a worker cooperative are required or permitted to take any action at a meeting, notice of the meeting shall be given not less that 24 hours before the time of the meeting to each worker member who, on the record date for notice of the meeting, is entitled to vote at the meeting.
(3) Subject to subdivision (f), and subdivision (b) of Section 12462, that notice shall state the place, date and time of the meeting, the means of electronic transmission by and to the corporation (Sections 20 and 21) or electronic video screen communication, if any, by which members may participate in that meeting, and (1) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (2) in the case of the regular meeting, those matters which the board, at the time the notice is given, intends to present for action by the members, but, except as provided in subdivision (b) of Section 12462, any proper matter may be presented at the meeting for such action. The notice of any meeting at which directors are to be elected shall include the names of all those who are nominees at the time the notice is given to members.
(b) Notice of a members’ meeting or any report shall be given personally, by electronic transmission by the corporation, or by mail or other means of written communication, addressed to a member at the address of such member appearing on the books of the corporation or given by the member to the corporation for purpose of notice; or if no such address appears or is given, at the place where the principal office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal office is located. An affidavit of giving of any notice or report in accordance with the provisions of this part, executed by the secretary, assistant secretary or any transfer agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the member at the address of such member appearing on the books of the corporation is returned to the corporation by the United States Postal Service marked to indicate the United States Postal Service is unable to deliver the notice or report to the member at such address, all future notices or reports shall be deemed to have been duly given without further mailing if the same shall be available for the member upon written demand of the member at the principal office of the corporation for a period of one year from the date of the giving of the notice or report to all other members.
Notice given by electronic transmission by the corporation under this subdivision shall be valid only if it complies with Section 20. Notwithstanding the foregoing, notice shall not be given by electronic transmission by the corporation under this subdivision after either of the following:
(1) The corporation is unable to deliver two consecutive notices to the member by that means.
(2) The inability to so deliver the notices to the member becomes known to the secretary, any assistant secretary, the transfer agent, or other person responsible for the giving of the notice.
(c) Upon request in writing to the corporation addressed to the attention of the chairman chairperson of the board, president, vice president or secretary by any person (other than the board) entitled to call a special meeting of members, the officer forthwith shall cause notice to be given to the members entitled to vote that a meeting will be held at a time fixed by the board not less than 35 nor more than 90 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice or the superior court of the proper county shall summarily order the giving of the notice, after notice to the corporation giving it an opportunity to be heard. The court may issue such orders as may be appropriate, including, without limitation, orders designating the time and place of the meeting, the record date for determination of members entitled to vote and the form of notice.
(d) When a members’ meeting is adjourned to another time or place, unless the bylaws otherwise require and except as provided in this subdivision, notice need not be given of the adjourned meeting if the time and place thereof (or the means of electronic transmission by and to the corporation or electronic video screen communication, if any, by which members may participate) are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each member of record entitled to vote at the meeting.
(e) The transactions of any meeting of members however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present, and if, either before or after the meeting, each of the persons entitled to vote, not present in person, provides a waiver of notice or consent to the holding of the meeting or an approval of the minutes thereof in writing. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Attendance of a person at a meeting shall constitute a waiver of notice of and presence at such meeting, except when the person objects, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened and except that attendance at a meeting is not a waiver of any right to object to the consideration of matters required by this part to be included in the notice but not so included, if such objection is expressly made at the meeting. Neither the business to be transacted at nor the purpose of any regular or special meeting of members need be specified in any written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof, unless otherwise provided in the articles or bylaws, except as provided in subdivision (f).
(f) Any approval of the members required under Section 12362, 12364, 12373, 12502 or 12658 other than unanimous approval by those entitled to vote, shall be valid only if the general nature of the proposal so approved was stated in the notice of meeting or in any written waiver of notice.
(g) A court may find that notice not given in conformity with this section is still valid, if it was given in a fair and reasonable manner.
(h) Subject to the provisions of subdivision (i), and unless prohibited by the articles or bylaws, prior to any regular or special meeting of members, the board may authorize distribution of a written ballot to every member entitled to vote at the meeting. Such ballot shall set forth the action proposed to be taken at the meeting, shall provide an opportunity to specify approval or disapproval of the proposed action, and shall state that unless revoked by the member voting in person at the meeting, the ballot will be counted if received by the corporation on or before the time of the meeting with respect to which it was sent. If ballots are so distributed with respect to a meeting, the number of members voting at the meeting by unrevoked written ballots shall be deemed present at the meeting for purposes of determining the existence of a quorum pursuant to subdivision (a) of Section 12462 but only with respect to the proposed action referred to in the ballots. These ballots shall be distributed in a manner consistent with the requirements of subdivision (b) and Section 12464.
(i) Unless prohibited by the articles or bylaws, written ballots may be distributed in a manner contemplated by subdivision (h) with respect to the election of directors, except, in the case of a cooperative corporation that is not a worker cooperative corporation, that no ballots may be so distributed with respect to the election of directors if cumulative voting is permitted pursuant to Section 12484.

SEC. 36.

 Section 12490 of the Corporations Code is amended to read:

12490.
 (a) Subdivisions (c) through (f) notwithstanding, no motion to require security shall be granted in an action brought by the lesser of 100 members or shareholders or 5 percent of the members or shareholders.
(b) No action may be instituted or maintained in the right of any corporation by any member or shareholder of such the corporation unless both of the following conditions exist:
(1) The plaintiff alleges in the complaint that plaintiff was a member or shareholder at the time of the transaction or any part thereof of which plaintiff complains, or that plaintiff’s membership or shareownership thereafter devolved upon plaintiff by operation of law from a holder who was a holder at the time of transaction or any part thereof complained of; and
(2) The plaintiff alleges in the complaint with particularity plaintiff’s efforts to secure from the board such action as plaintiff desires, or the reasons for not making such effort, and alleges further that plaintiff has either informed the corporation or the board in writing of the ultimate facts of each cause of action against each defendant or delivered to the corporation or the board a true copy of the complaint which plaintiff proposes to file.
(c) Subject to subdivision (a), in any action referred to in subdivision (b), at any time within 30 days after service of summons upon the corporation or upon any defendant who is an officer or director of the corporation, or held such office at the time of the acts complained of, the corporation or such defendant may move the court for an order, upon notice and hearing, requiring the plaintiff to furnish security as hereinafter provided. The motion shall be based upon one or both of the following grounds:
(1) That there is no reasonable possibility that the prosecution of the cause of action alleged in the complaint against the moving party will benefit the corporation or its members or shareholders economically or otherwise.
(2) That the moving party, if other than the corporation, did not participate in the transaction complained of in any capacity.
The court on application of the corporation or any defendant may, for good cause shown, extend the 30-day period for an additional period or periods not exceeding 60 days.
(d) At the hearing upon any motion pursuant to subdivision (c), the court shall consider such evidence, written or oral, by witnesses or affidavit, as may be material (1) to the ground or grounds upon which the motion is based, or (2) to a determination of the probable reasonable expenses, including attorneys’ fees, of the corporation and the moving party which will be incurred in the defense of the action. If the court determines, after hearing the evidence adduced by the parties, that the moving party has established a probability in support of any of the grounds upon which the motion is based, the court shall fix the nature and amount of security, not to exceed fifty thousand dollars ($50,000), to be furnished by the plaintiff for reasonable expenses, including attorneys’ fees, which may be incurred by the moving party and the corporation in connection with the action, including expenses for which the corporation may become liable pursuant to Section 12377. A ruling by the court on the motion shall not be a determination of any issue in the action or of the merits thereof. The amount of the security may thereafter be increased or decreased in the discretion of the court upon a showing that the security provided has or may become inadequate or is excessive, but the court may not in any event increase the total amount of the security beyond fifty thousand dollars ($50,000) in the aggregate for all defendants. If the court, upon any such motion, makes a determination that security shall be furnished by the plaintiff as to any one or more defendants, the action shall be dismissed as to such defendant or defendants, unless the security required by the court shall have been furnished within such reasonable time as may be fixed by the court. The corporation and the moving party shall have recourse to the security in such amount as the court shall determine upon the termination of the action.
(e) If the plaintiff shall, either before or after a motion is made pursuant to subdivision (c), or any order or determination pursuant to such motion, post good and sufficient bond or bonds in the aggregate amount of fifty thousand dollars ($50,000) to secure the reasonable expenses of the parties entitled to make the motion, the plaintiff has complied with the requirements of this section and with any order for security theretofore made pursuant hereto, and any such motion then pending shall be dismissed and no further or additional bond or other security shall be required.
(f) If a motion is filed pursuant to subdivision (c), no pleadings need be filed by the corporation or any other defendant and the prosecution of the action shall be stayed until 10 days after the motion has been disposed of.

SEC. 37.

 Section 12521 of the Corporations Code is amended to read:

12521.
 (a) A corporation may sell, lease, convey, exchange, transfer, or otherwise dispose of all or substantially all of its assets when the principal terms and conditions, including, without limitation, the consideration, are:
(1) Approved by the board; and.
(2) Unless the transaction is in the usual and regular course of its activities approved by the members (Section 12224) and, in the case of a worker cooperative corporation, by the worker-member class, either before or after approval by the board and before or after the transaction.
(b) Notwithstanding Except in the case of a worker cooperative corporation, notwithstanding approval by the members (Section 12224), the board may abandon the proposed transaction without further action by the members, subject to the contractual rights, if any, of third parties.
(c) Such Except in the case of a worker cooperative corporation, a sale, lease, conveyance, exchange, transfer, or other disposition pursuant to this section may be made upon such the terms and conditions and for such the consideration as the board may deem in the best interests of the corporation.

SEC. 38.

 Section 12530 of the Corporations Code is amended to read:

12530.
 Any corporation may merge with another domestic corporation, foreign corporation, or other business entity (Section 12242.5) pursuant to an agreement of merger that shall be approved by the board and by the members (Section 12224) and, in the case of a worker cooperative corporation, either before or after approval by the board. However, a merger with a public benefit corporation or a religious corporation must have the prior written consent of the Attorney General.

SEC. 39.

 Section 12531 of the Corporations Code is amended to read:

12531.
 The board of each corporation that desires to merge shall approve an agreement of merger. The constituent corporations shall be parties to the agreement of merger and other persons may be parties to the agreement of merger. The agreement shall state all of the following:
(a) The terms and conditions of the merger.
(b) The amendments, subject to Sections 12500 and 12505 to the articles of the surviving corporation to be effected by the merger, if any; if any amendment changes the name of the surviving corporation, the new name may be the same as or similar to the name of a disappearing corporation, subject to subdivision (c) of Section 12302.
(c) The amendments to the bylaws of the surviving corporation to be effected by the merger, if any.
(d) The name and place of incorporation of each constituent corporation and which of the constituent corporations is the surviving corporation.
(e) The manner, if any, of converting memberships or securities of the constituent corporations into memberships or securities of the surviving corporation and, if any memberships or securities of any of the constituent corporations are not to be converted solely into memberships or securities of the surviving corporation, the cash, property, rights or securities of any corporation that the holders of those memberships or securities are to receive in exchange for the memberships or securities, which cash, property, rights or securities of any corporation may be in addition to or in lieu of memberships or securities of the surviving corporation or that the memberships are to be canceled without consideration.
(f) Other details or provisions as are desired, if any, including, without limitation, if not prohibited by this chapter, a provision for the payment of cash in lieu of fractional memberships or for any other arrangement with respect thereto.

SEC. 40.

 Section 12533 of the Corporations Code is amended to read:
12533.

(a)The principal terms of the merger shall be approved by the members (Section 12224) of each class of each corporation which desires to merge. The approval by the members may be given before or after the approval by the board.

(b)

12533.
 Any member of any constituent corporation who voted against the merger may, without prior notice, but within 30 days following the effective date of the merger, resign from membership and, in the event of resignation, shall be both of the following:

(1)

(a) Thereafter excused from all contractual obligations to the corporation which have not accrued prior to resignation; and.

(2)

(b) Shall be entitled to the same rights as would have existed if there had been no merger and the membership had been terminated.

SEC. 41.

 Section 12534 of the Corporations Code is amended to read:

12534.
 Each constituent corporation shall sign the agreement by the chairman chairperson of its board, president or a vice president and secretary or an assistant secretary acting on behalf of their respective corporations.

SEC. 42.

 Section 12535 of the Corporations Code is amended to read:

12535.
 After approval of a merger by the board and any approval by the members under Section 12533 12530, the surviving corporation shall file a copy of the agreement of merger with an officers’ certificate of each constituent corporation attached stating the total number of memberships of each class entitled to vote on the merger, and that the principal terms of the agreement in the form attached were duly approved by the required vote of the members. The merger and any amendment of the articles of the surviving corporation contained in the merger agreement shall thereupon be effective (subject to subdivision (c) of Section 12214 and subject to the provisions of Section 12539) and the several parties thereto shall be one corporation. The Secretary of State may certify a copy of the merger agreement separate from the officers’ certificates attached thereto.

SEC. 43.

 Section 12536 of the Corporations Code is amended to read:

12536.
 (a) Any In the case of a corporation other than a worker cooperative corporation, any amendment to the agreement may be adopted and the agreement so amended may be approved by the board and, if it changes any of the principal terms of the agreement, by the members, as required by Section 12533 12530 of any constituent corporation in the same manner as the original agreement.
(b) In the case of a worker cooperative corporation, any amendment to the agreement may be adopted and the agreement so amended may be approved by the board and by the members, as required by Section 12530 of any constituent corporation.

(b)

(c) If the agreement so amended is approved as provided in subdivision (a), the agreement so amended shall then constitute the agreement of merger.

SEC. 44.

 Section 12537 of the Corporations Code is amended to read:

12537.
 The Except in the case of a worker cooperative corporation, the board may, in its discretion, abandon a merger, subject to the contractual rights, if any, of third parties, including other constituent corporations, without further approval by the members at any time before the merger is effective.

SEC. 45.

 Section 12540.1 of the Corporations Code is amended to read:

12540.1.
 (a) Any one or more corporations may merge with one or more other business entities (Section 12242.5). Subject to the provisions of Section 12530, one or more other domestic corporations or foreign corporations (Section 12237) may be parties to the merger.
Notwithstanding the provisions of this section, such a merger may be effected only if:
(1) In a merger in which a domestic corporation or domestic other business entity is a party, it is authorized by the laws under which it is organized to effect the merger.
(2) In a merger in which a foreign corporation is a party, it is authorized by the laws under which it is organized to effect the merger.
(3) In a merger in which a foreign other business entity is a party, it is authorized by the laws under which it is organized to effect the merger.
(b) Each corporation, other domestic corporation, foreign corporation, and other business entity which desires to merge shall approve an agreement of merger. The board and the members of each corporation which desires to merge shall approve (Sections 12222 and 12224) the agreement of merger. The agreement of merger shall be approved on behalf of each other constituent party by those persons authorized or required to approve the merger by the laws under which it is organized.
The parties desiring to merge shall be parties to the agreement of merger and other persons, including a parent party (Section 12242.6), may be parties to the agreement of merger. The agreement of merger shall state all of the following:
(1) The terms and conditions of the merger.
(2) The name and place of incorporation or organization of each party and the identity of the surviving party.
(3) The amendments, if any, subject to Sections 12500 and 12507, to the articles of the surviving corporation, if applicable, to be effected by the merger. The name of the surviving corporation may be, subject to subdivisions (b) and (c) of Section 12302, the same as, or similar to, the name of a disappearing party to the merger.
(4) The manner, if any, of converting the memberships or securities of each of the constituent corporations into shares, memberships, interests, or other securities of the surviving party and, if any memberships or securities of any of the constituent corporations are not to be converted solely into shares, memberships, interests, or other securities of the surviving party, the cash, rights, securities, or other property which the holders of those memberships or securities are to receive in exchange for the memberships or securities, which cash, rights, securities, or other property may be in addition to or in lieu of shares, memberships, interests, or other securities of the surviving party.
(5) Any other details or provisions required by the laws under which any party to the merger is organized, including, if a domestic limited partnership is a party to the merger, subdivision (a) of Section 15678.2 or 15911.12, or, if a domestic general partnership is a party to the merger, subdivision (a) of Section 16911, or, if a domestic limited liability company is a party to the merger, subdivision (a) of Section 17551.
(6) Any other details or provisions as are desired.
(c) Each membership of the same class of any constituent corporation (other than the cancellation of memberships held by a party to the merger or its parent or a wholly owned subsidiary of either in another constituent corporation) shall be treated equally with respect to any distribution of cash, property, rights, or securities unless (i) all members of the class consent or (ii) the commissioner has approved the terms and conditions of the transaction and the fairness of those terms pursuant to Section 25142.
(d) Notwithstanding its prior approval, an agreement of merger may be amended prior to the filing of the agreement of merger if the amendment is approved by each constituent corporation in the same manner as the original agreement of merger. If the agreement of merger as so amended and approved is also approved by each of the other parties to the agreement of merger, as so amended it shall then constitute the agreement of merger.
(e) The Except in the case of a worker cooperative corporation, the board of a constituent corporation may, in its discretion, abandon a merger, subject to the contractual rights, if any, of third parties, including other parties to the agreement of merger, without further approval by the members (Section 12224), at any time before the merger is effective.
(f) Each constituent corporation shall sign the agreement of merger by its chairperson of the board, president, or a vice president and also by its secretary or an assistant secretary acting on behalf of their respective corporations.
(g) After required approvals of the merger by each constituent corporation and each other party to the merger, the surviving party shall file a copy of the agreement of merger with an officers’ certificate of each constituent domestic and foreign corporation attached stating the total number of outstanding shares or membership interests of each class entitled to vote on the merger (and identifying any other person or persons whose approval is required), that the agreement of merger in the form attached or its principal terms, as required, were approved by that corporation by a vote of a number of shares or membership interests of each class which equaled or exceeded the vote required, specifying each class entitled to vote and the percentage vote required of each class, and, if applicable, by that other person or persons whose approval is required.
If equity securities of a parent party (Section 12242.6) are to be issued in the merger, the officers’ certificate or certificate of merger of the controlled party shall state either that no vote of the shareholders of the parent party was required or that the required vote was obtained. The merger and any amendment of the articles of the surviving corporation, if applicable, contained in the agreement of merger shall be effective upon the filing of the agreement of merger, subject to the provisions of subdivision (i). If a domestic reciprocal insurer organized after 1974 to provide medical malpractice insurance is a party to the merger, the agreement of merger or certificate of merger shall not be filed until there has been filed the certificate issued by the Insurance Commissioner approving the merger pursuant to Section 1555 of the Insurance Code.
In lieu of an officers’ certificate, a certificate of merger, on a form prescribed by the Secretary of State, shall be filed for each constituent other business entity. The certificate of merger shall be executed and acknowledged by each domestic constituent limited liability company by all of the managers of the limited liability company (unless a lesser number is specified in its articles of organization or operating agreement) and by each domestic constituent limited partnership by all general partners (unless a lesser number is provided in its certificate of limited partnership or partnership agreement) and by each domestic constituent general partnership by two partners (unless a lesser number is provided in its partnership agreement) and by each foreign constituent general partnership or foreign constituent limited liability company by one or more managers and by each foreign constituent limited partnership by one or more general partners, and by each constituent reciprocal insurer by the chairperson of the board, president, or vice president, and by the secretary or assistant secretary, or, if a constituent reciprocal insurer has not appointed such officers, by the chairperson of the board, president, or vice president, and by the secretary or assistant secretary of the constituent reciprocal insurer’s attorney-in-fact, and by each other party to the merger by those persons required or authorized to execute the certificate of merger by the laws under which that party is organized, specifying for such party the provision of law or other basis for the authority of the signing persons.
The certificate of merger shall set forth, if a vote of the shareholders, members, partners, or other holders of interests of the constituent other business entity was required, a statement setting forth the total number of outstanding interests of each class entitled to vote on the merger and that the agreement of merger or its principal terms, as required, were approved by a vote of the number of interests of each class which equaled or exceeded the vote required, specifying each class entitled to vote and the percentage vote required of each class, and any other information required to be set forth under the laws under which the constituent other business entity is organized, including, if a domestic limited partnership is a party to the merger, subdivision (a) of Section 15678.4 or 15911.14, if a domestic general partnership is a party to the merger, subdivision (b) of Section 16915, and, if a domestic limited liability company is a party to the merger, subdivision (a) of Section 17552. The certificate of merger for each constituent foreign other business entity, if any, shall also set forth the statutory or other basis under which that foreign other business entity is authorized by the laws under which it is organized to effect the merger.
The Secretary of State may certify a copy of the agreement of merger separate from the officers’ certificates and certificates of merger attached thereto.
(h) A copy of an agreement of merger certified on or after the effective date by an official having custody thereof has the same force in evidence as the original and, except as against the state, is conclusive evidence of the performance of all conditions precedent to the merger, the existence on the effective date of the surviving party to the merger, the performance of the conditions necessary to the adoption of any amendment to the articles, if applicable, contained in the agreement of merger, and of the merger of the constituent corporations, either by themselves or together with other constituent parties, into the surviving party to the merger.
(i) (1) The merger of domestic corporations with foreign corporations or foreign other business entities in a merger in which one or more other business entities is a party shall comply with subdivisions (a) and (g) and this subdivision.
(2) Subject to subdivision (c) of Section 12214 and paragraph (3), the merger shall be effective as to each domestic constituent corporation and domestic constituent other business entity upon filing of the agreement of merger with attachments as provided in subdivision (g).
(3) If the surviving party is a foreign corporation or foreign other business entity, except as provided in paragraph (4), the merger shall be effective as to any domestic disappearing corporation as of the time of effectiveness in the foreign jurisdiction upon the filing in this state of a copy of the agreement of merger with an officers’ certificate of the surviving foreign corporation and of each constituent foreign and domestic corporation and a certificate of merger of each constituent other business entity attached, which officers’ certificates and certificates of merger shall conform to the requirements of subdivision (g).
If one or more domestic other business entities is a disappearing party in a merger pursuant to this subdivision in which a foreign other business entity is the surviving entity, a certificate of merger required by the laws under which each domestic other business entity is organized, including subdivision (a) of Section 15678.4 or 15911.14, subdivision (b) of Section 16915 or subdivision (a) of Section 17552, if applicable, shall also be filed at the same time as the filing of the agreement of merger.
(4) If the date of the filing in this state pursuant to this subdivision is more than six months after the time of the effectiveness in the foreign jurisdiction, or if the powers of a domestic disappearing corporation are suspended at the time of effectiveness in the foreign jurisdiction, the merger shall be effective as to the domestic disappearing corporation as of the date of filing in this state.
(5) Each foreign disappearing corporation that is qualified for the transaction of intrastate business shall automatically by the filing pursuant to subdivision (g) surrender its right to transact intrastate business as of the date of filing in this state or, if later, the effective date of the merger. With respect to each foreign disappearing other business entity previously registered for the transaction of intrastate business in this state, the filing of the agreement of merger pursuant to subdivision (g) automatically has the effect of a cancellation of registration for that foreign other business entity without the necessity of the filing of a certificate of cancellation.

SEC. 46.

 Section 12560 of the Corporations Code is amended to read:

12560.
 Any proceeding, initiated with respect to a corporation, under any applicable statute of the United States, as now existing or hereafter enacted, relating to reorganizations of corporations, shall be governed by the provisions of Chapter 14 (commencing with Section 1400) of Division 1 of Title 1, and for this purpose the reference in Chapter 14 to “shareholders” shall be deemed to be a reference to members and shareholders and the reference to “this division” shall be deemed to be a reference to this part.

SEC. 47.

 Section 12591 of the Corporations Code is amended to read:

12591.
 (a) A corporation shall notify each member yearly of the member’s right to receive a financial report pursuant to this subdivision. Except as provided in subdivision (c), upon written request of a member, the board shall promptly cause the most recent annual report to be sent to the requesting member. An In the case of a corporation that is not a worker cooperative corporation, an annual report shall be prepared not later than 120 days after the close of the corporation’s fiscal year. In the case of a worker cooperative corporation, an annual report shall be prepare not later than 360 days after the close of a the corporation’s fiscal year. Unless otherwise provided by the articles or bylaws and if approved by the board of directors, that report and any accompanying material sent pursuant to this section may be sent by electronic transmission by the corporation (Section 20). That report shall contain in appropriate detail the following:
(1) A balance sheet as of the end of that fiscal year and an income statement and a statement of cashflows for that fiscal year.
(2) A statement of the place where the names and addresses of the current members are located.
(3) Any information required by Section 12592.
(b) The report required by subdivision (a) shall be accompanied by any report thereon of independent accountants, or, if there is no report, the certificate of an authorized officer of the corporation that the statements were prepared without audit from the books and records of the corporation.
(c) This section does not apply to corporations that do not have more than 25 members at any time during the fiscal year.

SEC. 48.

 Section 12626 of the Corporations Code is amended to read:

12626.
 When an involuntary proceeding for winding up has been commenced, the jurisdiction of the court includes:
(a) The requirement of the proof of all claims and demands against the corporation, whether due or not yet due, contingent, unliquidated, or sounding only in damages, and the barring from participation of creditors and claimants failing to make and present claims and proof as required by any order.
(b) The determination or compromise of all claims of every nature against the corporation or any of its property, and the determination of the amount of money or assets required to be retained to pay or provide for the payment of claims.
(c) The determination of the rights of members and shareholders and of all classes of members and shareholders in and to the assets of the corporation.
(d) The presentation and filing of intermediate and final accounts of the directors or other persons appointed to conduct the winding up and hearing thereon, the allowance, disallowance, or settlement thereof, and the discharge of the directors or such other persons from their duties and liabilities.
(e) The appointment of a commissioner to hear and determine any or all matters, with such power or authority as the court may deem proper.
(f) The filing of any vacancies on the board which the directors or the members are unable to fill.
(g) The removal of any director if it appears that the director has been guilty of dishonesty, misconduct, neglect, or breach of trust in conducting the winding up or if the director is unable to act. The court may order an election to fill the vacancy so caused, and may enjoin, for such time as it considers proper, the reelection of the director so removed; or the court, in lieu of ordering an election, may appoint a director to fill the vacancy caused by such removal. Any director so appointed by the court shall serve until the next regular meeting of members or until a successor is elected or appointed.
(h) The staying of the prosecution of any suit, proceeding, or action against the corporation and requiring the parties to present and prove their claims in the manner required of other creditors.
(i) The determination of whether adequate provision has been made for payment or satisfaction of all debts and liabilities not actually paid.
(j) The making of orders for the withdrawal or termination of proceedings, to wind up and dissolve, subject to conditions for the protection of members, shareholders, and creditors.
(k) The making of an order, upon the allowance or settlement of the final accounts of the directors or such other persons, that the corporation has been duly wound up and is dissolved. Upon the making of such order, the corporate existence shall cease except for purposes of further winding up if needed.
(l) The making of orders for the bringing in of new parties as the court deems proper for the determination of all questions and matters.
(m) The disposition of assets held in charitable trust.

SEC. 49.

 Section 12628 of the Corporations Code is amended to read:

12628.
 (a) Upon the final settlement of the accounts of the directors or other persons appointed pursuant to Section 12625 and the determination that the corporation’s affairs are in condition for it to be dissolved, the court may make an order declaring the corporation duly wound up and dissolved. The order shall declare:
(1) That the corporation has been duly wound up, that a final franchise tax return, as described by Section 23332 of the Revenue and Taxation Code, has been filed with the Franchise Tax Board, as required under Part 10.2 (commencing with Section 18401) of Division 2 of the Revenue and Taxation Code and that its known debts and liabilities have been paid or adequately provided for, or that those debts and liabilities have been paid as far as its assets permitted, as the case may be. If there are known debts or liabilities for payment of which adequate provision has been made, the order shall state what provision has been made, setting forth the name and address of the corporation, person, or governmental agency that has assumed or guaranteed the payment, or the name and address of the depositary with which deposit has been made or such other information as may be necessary to enable the creditor or other person to whom payment is to be made to appear and claim payment of the debt or liability.
(2) That its known assets have been distributed to the persons entitled thereto or that it acquired no known assets, as the case may be.
(3) That the accounts of directors or such other persons have been settled and that they are discharged from their duties and liabilities to creditors, shareholders, and members.
(4) That the corporation is dissolved.
(b) The court may make such additional orders and grant such further relief as it deems proper upon the evidence submitted.
(c) Upon the making of the order declaring the corporation dissolved, corporate existence shall cease except for the purposes of further winding up if needed; and the directors or such other persons shall be discharged from their duties and liabilities, except in respect to completion of the winding up.

SEC. 50.

 Section 12633 of the Corporations Code is amended to read:

12633.
 (a) Voluntary proceedings for winding up the corporation commence upon the adoption of the resolution required by Section 12630 by the members or by the board, electing to wind up and dissolve.
(b) When a voluntary proceeding for winding up has commenced, the board shall continue to act as a board and shall have full powers to wind up and settle its affairs, both before and after the filing of the certificate of dissolution.
(c) When a voluntary proceeding for winding up has commenced, the corporation shall cease to conduct its activities except to the extent necessary for the beneficial winding up thereof, to the extent necessary to carry out its purposes, and except during such period as the board may deem necessary to preserve the corporation’s goodwill or going-concern value pending a sale or other disposition of its assets, or both, in whole or in part. The board shall cause written notice of the commencement of the proceeding for voluntary winding up to be given by mail to all its members (except no notice need be given to the members who voted in favor of winding up and dissolving the corporation), to all known creditors and shareholders, and claimants whose addresses appear on the records of the corporation.

SEC. 51.

 Section 12634 of the Corporations Code is amended to read:

12634.
 If a corporation is in the process of voluntary winding up, the superior court of the proper county, upon the petition of (a) the corporation, or (b) a member or members possessing 5 percent or more of the voting power, or (c) three or more creditors, and upon such notice to the corporation and to other persons interested in the corporation as members and creditors as the court may order, may take jurisdiction over such voluntary winding up proceeding if that appears necessary for the protection of any parties in interest. The court, if it assumes jurisdiction, may make such orders as to any and all matters concerning the winding up of the affairs of the corporation and the protection of its members, shareholders, and creditors as justice and equity may require. The provisions of Chapter 15 (commencing with Section 12620) (except Sections 12620 and 12621) shall apply to such court proceedings.

SEC. 52.

 Section 12637 of the Corporations Code, as added by Section 3 of Chapter 1625 of the Statutes of 1982, is amended to read:

12637.
 (a) The board, in lieu of filing the certificate of dissolution, may petition the superior court of the proper county for an order declaring the corporation duly wound up and dissolved. Such petition shall be filed in the name of the corporation.
(b) Upon the filing of the petition, the court shall make an order requiring all interested persons to show cause why an order shall not be made declaring the corporation duly wound up and dissolved and shall direct that the order be served by notice to all creditors, claimants, shareholders, and members in the same manner as the notice given under subdivision (b) of Section 12627.
(c) Any person claiming to be interested as member, shareholder, creditor, or otherwise may appear in the proceeding at any time before the expiration of 30 days from the completion of publication of the order to show cause and contest the petition, and upon failure to appear such person’s claim shall be barred.
(d) Thereafter an order shall be entered and filed and have the effect as prescribed in Sections 12628 and 12629.

SEC. 53.

 Section 12656 of the Corporations Code is amended to read:

12656.
 After complying with the provisions of Section 12653 and except as otherwise provided in Section 12655, assets held by a corporation shall be disposed of on dissolution as follows:
(a) If the articles or bylaws provide the manner of disposition, the assets shall be disposed of in that manner.
(b) If the articles or bylaws do not provide the manner of disposition, the assets shall be distributed among the members and shareholders in accordance with their respective rights therein.

SEC. 54.

 Section 12658 of the Corporations Code is amended to read:

12658.
 (a) If a corporation in process of winding up has more than one class of memberships or shares outstanding, a plan of distribution of the memberships, obligations, or securities of any other corporation, domestic or foreign, or assets other than money which is not in accordance with the liquidation rights of any class or classes as specified in the articles or bylaws may nevertheless be adopted if approved by (1) the board and (2) by approval by the members (Section 12224) of each class. The plan may provide that such distribution is in complete or partial satisfaction of the rights of any of such members or shareholders upon distribution and liquidation of the assets.
(b) A plan of distribution so approved shall be binding upon all the members and shareholders. The board shall cause notice of the adoption of the plan to be given by mail within 20 days after its adoption to all shareholders and holders of memberships having a liquidation preference.

SEC. 55.

 Section 12659 of the Corporations Code is amended to read:

12659.
 (a) If any members, shareholders, creditors, or other persons are unknown or fail or refuse to accept their payment or distribution in cash or property or their whereabouts cannot be ascertained after diligent inquiry, or the existence or amount of a claim of a creditor, member, shareholder, or other person is contingent, contested, or not determined, or if the ownership of any memberships or shares is in dispute, the corporation may deposit any such payment, distribution, or the maximum amount of the claim with the Controller in trust for the benefit of those lawfully entitled to the payment, distribution, or the amount of the claim. The payment or distribution shall be paid over by the depositary to the lawful owners, their representatives or assigns, upon satisfactory proof of title.
(b)For the purpose of providing for the transmittal, receipt, accounting for, claiming, management, and investment of all money or other property deposited with the Controller under subdivision (a), the money or other property shall be deemed to be paid or delivered for deposit with the Controller under Chapter 7 (commencing with Section 1500) of Title 10 of Part 3 of the Code of Civil Procedure, and may be recovered in the manner prescribed in that chapter.

SEC. 56.

 Section 12672 of the Corporations Code, as added by Section 3 of Chapter 1625 of the Statutes of 1982, is amended to read:

12672.
 Any director of any corporation who concurs in any vote or act of the directors of the corporation or any of them, knowingly and with dishonest or fraudulent purpose, to make any distribution of assets, except in the case and in the manner allowed by this part, either with the design of defrauding creditors, shareholders, or members or of giving a false appearance to the value of the membership and thereby defrauding purchasers is guilty of a crime. Each such crime is punishable by imprisonment in a state prison, or by a fine of not more than one thousand dollars ($1,000) or imprisonment in county jail for not more than one year, or by both such fine and imprisonment.

SEC. 57.

 Section 12673 of the Corporations Code is amended to read:

12673.
 (a) Every director or officer of any corporation is guilty of a crime if such director or officer knowingly concurs in making or publishing, either generally or privately, to members, shareholders, or other persons (1) any materially false report or statement as to the financial condition of the corporation, or (2) any willfully or fraudulently exaggerated report, prospectus, account, or statement of operations, financial condition, or prospects, or (3) any other paper intended to give, and having a tendency to give, a membership or share in such corporation a greater or lesser value than it really possesses.
(b) Every director or officer of any corporation is guilty of a crime who refuses to make or direct to be made any book entry or the posting of any notice required by law in the manner required by law.
(c) A violation of subdivision (a) or (b) of this section shall be punishable by imprisonment in state prison or by a fine of not more than one thousand dollars ($1,000) or imprisonment in the county jail for not more than one year or both such fine and imprisonment.

SEC. 58.

 Section 12674 of the Corporations Code is amended to read:

12674.
 (a) Every director, officer or agent of any corporation, who knowingly receives or acquires possession of any property of the corporation, otherwise than in payment of a just demand, and, with intent to defraud, omits to make, or to cause or direct to be made, a full and true entry thereof in the books or accounts of the corporation is guilty of a crime.
(b) Every director, officer, agent, shareholder, or member of any corporation who, with intent to defraud, destroys, alters, mutilates or falsifies any of the books, papers, writings, or securities belonging to the corporation or makes or concurs in omitting to make any material entry in any book of accounts or other record or document kept by the corporation is guilty of a crime.
(c) Each crime specified in this section is punishable by imprisonment in state prison, or by imprisonment in a county jail for not exceeding one year, or a fine not exceeding one thousand dollars ($1,000), or both such fine and imprisonment.

SEC. 11.SEC. 59.

 The heading of Part 2 (commencing with Section 12200) of Division 3 of Title 1 of the Corporations Code is amended to read:

PART 2. COOPERATIVE CORPORATIONS

SEC. 12.SEC. 60.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.