Code Section Group

Corporations Code - CORP

TITLE 1. CORPORATIONS [100 - 14631]

  ( Title 1 enacted by Stats. 1947, Ch. 1038. )

DIVISION 1. GENERAL CORPORATION LAW [100 - 2319]

  ( Division 1 repealed and added by Stats. 1975, Ch. 682. )

CHAPTER 7. Voting of Shares [700 - 711]
  ( Chapter 7 added by Stats. 1975, Ch. 682. )

700.
  

(a) Except as provided in Section 708 and except as may be otherwise provided in the articles, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of shareholders.

(b) Any holder of shares entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or vote them against the proposal, other than elections to office, but, if the shareholder fails to specify the number of shares such shareholder is voting affirmatively, it will be conclusively presumed that the shareholder’s approving vote is with respect to all shares such shareholder is entitled to vote.

(Added by Stats. 1975, Ch. 682.)

701.
  

(a) In order that the corporation may determine the shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days prior to the date of such meeting nor more than 60 days prior to any other action.

(b) If no record date is fixed:

(1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held.

(2) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the board has been taken, shall be the day on which the first written consent is given.

(3) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board adopts the resolution relating thereto, or the 60th day prior to the date of such other action, whichever is later.

(c) A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the board fixes a new record date for the adjourned meeting, but the board shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting.

(d) Shareholders at the close of business on the record date are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the articles or by agreement or in this division.

(Amended by Stats. 1977, Ch. 235.)

702.
  

(a) Subject to subdivision (c) of Section 703, shares held by an administrator, executor, guardian, conservator or custodian may be voted by such holder either in person or by proxy, without a transfer of such shares into the holder’s name; and shares standing in the name of a trustee may be voted by the trustee, either in person or by proxy, but no trustee shall be entitled to vote shares held by such trustee without a transfer of such shares into the trustee’s name.

(b) Shares standing in the name of a receiver may be voted by such receiver; and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into the receiver’s name if authority to do so is contained in the order of the court by which such receiver was appointed.

(c) Subject to the provisions of Section 705 and except where otherwise agreed in writing between the parties, a shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred.

(d) Shares standing in the name of a minor may be voted and the corporation may treat all rights incident thereto as exercisable by the minor, in person or by proxy, whether or not the corporation has notice, actual or constructive, of the nonage, unless a guardian of the minor’s property has been appointed and written notice of such appointment given to the corporation.

(e) If authorized to vote the shares by the power of attorney by which the attorney in fact was appointed, shares held by or under the control of an attorney in fact may be voted and the corporation may treat all rights incident thereto as exercisable by the attorney in fact, in person or by proxy, without the transfer of the shares into the name of the attorney in fact.

(Amended by Stats. 1985, Ch. 403, Sec. 13.)

703.
  

(a) Shares standing in the name of another corporation, domestic or foreign, may be voted by an officer, agent, or proxyholder as the bylaws of the other corporation may prescribe or, in the absence of such provision, as the board of the other corporation may determine or, in the absence of that determination, by the chairperson of the board, president or any vice president of the other corporation, or by any other person authorized to do so by the chairperson of the board, president, or any vice president of the other corporation. Shares which are purported to be voted or any proxy purported to be executed in the name of a corporation (whether or not any title of the person signing is indicated) shall be presumed to be voted or the proxy executed in accordance with the provisions of this subdivision, unless the contrary is shown.

(b) Shares of a corporation owned by its subsidiary shall not be entitled to vote on any matter.

(c) Shares held by the issuing corporation in a fiduciary capacity, and shares of an issuing corporation held in a fiduciary capacity by its subsidiary, shall not be entitled to vote on any matter, except as follows:

(1) To the extent that the settlor or beneficial owner possesses and exercises a right to vote or to give the corporation binding instructions as to how to vote such shares.

(2) Where there are one or more cotrustees who are not affected by the prohibition of this subdivision, in which case the shares may be voted by the cotrustees as if it or they are the sole trustee.

(Amended by Stats. 2015, Ch. 98, Sec. 8. Effective January 1, 2016.)

704.
  

(a) If shares stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, spouses as community property, tenants by the entirety, voting trustees, persons entitled to vote under a shareholder voting agreement or otherwise, or if two or more persons (including proxyholders) have the same fiduciary relationship respecting the same shares, unless the secretary of the corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect:

(1) If only one votes, such act binds all.

(2) If more than one vote, the act of the majority so voting binds all.

(3) If more than one vote, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionately.

(b) If the instrument so filed or the registration of the shares shows that any such tenancy is held in unequal interests, a majority or even split for the purpose of this section shall be a majority or even split in interest.

(Amended by Stats. 2016, Ch. 50, Sec. 21. Effective January 1, 2017.)

705.
  

(a) Every person entitled to vote shares may authorize another person or persons to act by proxy with respect to such shares. Any proxy purporting to be executed in accordance with the provisions of this division shall be presumptively valid.

(b) No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every proxy continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto, except as otherwise provided in this section. Such revocation may be effected by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting, or as to any meeting by attendance at such meeting and voting in person by the person executing the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed.

(c) A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the corporation.

(d) Except when other provision shall have been made by written agreement between the parties, the recordholder of shares which such person holds as pledgee or otherwise as security or which belong to another shall issue to the pledgor or to the owner of such shares, upon demand therefor and payment of necessary expenses thereof, a proxy to vote or take other action thereon.

(e) A proxy which states that it is irrevocable is irrevocable for the period specified therein (notwithstanding subdivision (c)) when it is held by any of the following or a nominee of any of the following:

(1) A pledgee.

(2) A person who has purchased or agreed to purchase or holds an option to purchase the shares or a person who has sold a portion of such person’s shares in the corporation to the maker of the proxy.

(3) A creditor or creditors of the corporation or the shareholder who extended or continued credit to the corporation or the shareholder in consideration of the proxy if the proxy states that it was given in consideration of such extension or continuation of credit and the name of the person extending or continuing credit.

(4) A person who has contracted to perform services as an employee of the corporation, if a proxy is required by the contract of employment and if the proxy states that it was given in consideration of such contract of employment, the name of the employee and the period of employment contracted for.

(5) A person designated by or under an agreement under Section 706.

(6) A beneficiary of a trust with respect to shares held by the trust.

Notwithstanding the period of irrevocability specified, the proxy becomes revocable when the pledge is redeemed, the option or agreement to purchase is terminated or the seller no longer owns any shares of the corporation or dies, the debt of the corporation or the shareholder is paid, the period of employment provided for in the contract of employment has terminated, the agreement under Section 706 has terminated, or the person ceases to be a beneficiary of the trust. In addition to the foregoing clauses (1) through (5), a proxy may be made irrevocable (notwithstanding subdivision (c)) if it is given to secure the performance of a duty or to protect a title, either legal or equitable, until the happening of events which, by its terms, discharge the obligations secured by it.

(f) A proxy may be revoked, notwithstanding a provision making it irrevocable, by a transferee of shares without knowledge of the existence of the provision unless the existence of the proxy and its irrevocability appears, in the case of certificated securities, on the certificate representing such shares, or in the case of uncertificated securities, on the initial transaction statement and written statements.

(Amended by Stats. 1986, Ch. 766, Sec. 22.)

706.
  

(a) Notwithstanding any other provision of this division, an agreement between two or more shareholders of a corporation, if in writing and signed by the parties thereto, may provide that in exercising any voting rights the shares held by them shall be voted as provided by the agreement, or as the parties may agree or as determined in accordance with a procedure agreed upon by them, and the parties may but need not transfer the shares covered by such an agreement to a third party or parties with authority to vote them in accordance with the terms of the agreement. Such an agreement shall not be denied specific performance by a court on the ground that the remedy at law is adequate or on other grounds relating to the jurisdiction of a court of equity.

(b) Shares in any corporation may be transferred by written agreement to trustees in order to confer upon them the right to vote and otherwise represent the shares for such period of time, not exceeding 10 years, as may be specified in the agreement. The validity of a voting trust agreement, otherwise lawful, shall not be affected during a period of 10 years from the date when it was created or last extended as hereinafter provided by the fact that under its terms it will or may last beyond such 10-year period. At any time within two years prior to the time of expiration of any voting trust agreement as originally fixed or as last extended as provided in this subdivision, one or more beneficiaries under the voting trust agreement may, by written agreement and with the written consent of the voting trustee or trustees, extend the duration of the voting trust agreement with respect to their shares for an additional period not exceeding 10 years from the expiration date of the trust as originally fixed or as last extended as provided in this subdivision. A duplicate of the voting trust agreement and any extension thereof shall be filed with the secretary of the corporation and shall be open to inspection by a shareholder, a holder of a voting trust certificate or the agent of either, upon the same terms as the record of shareholders of the corporation is open to inspection.

(c) No agreement made pursuant to subdivision (a) shall be held to be invalid or unenforceable on the ground that it is a voting trust that does not comply with subdivision (b) or that it is a proxy that does not comply with Section 705.

(d) This section shall not invalidate any voting or other agreement among shareholders or any irrevocable proxy complying with subdivision (e) of Section 705, which agreement or proxy is not otherwise illegal.

(Amended by Stats. 1997, Ch. 136, Sec. 3. Effective January 1, 1998.)

707.
  

(a) In advance of any meeting of shareholders the board may appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any meeting of shareholders may, and on the request of any shareholder or a shareholder’s proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse) at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed.

(b) The inspectors of election shall determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders.

(c) The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein.

(Added by Stats. 1975, Ch. 682.)

708.
  

(a) Except as provided in Sections 301.5 and 708.5, every shareholder complying with subdivision (b) and entitled to vote at any election of directors may cumulate such shareholder’s votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder’s shares are normally entitled, or distribute the shareholder’s votes on the same principle among as many candidates as the shareholder thinks fit.

(b) No shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes that the shareholder normally is entitled to cast) unless the candidate or candidates’ names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting prior to the voting of the shareholder’s intention to cumulate the shareholder’s votes. If any one shareholder has given that notice, all shareholders may cumulate their votes for candidates in nomination.

(c) Except as provided in Section 708.5, in any election of directors, the candidates receiving the highest number of affirmative votes of the shares entitled to be voted for them up to the number of directors to be elected by those shares are elected; votes against the director and votes withheld shall have no legal effect.

(d) Subdivision (a) applies to the shareholders of any mutual water company organized or existing for the purpose of delivering water to its shareholders at cost on lands located within the boundaries of one or more reclamation districts now or hereafter legally existing in this state and created by or formed under the provisions of any statute of this state, but does not otherwise apply to the shareholders of mutual water companies unless their articles or bylaws so provide.

(e) Elections for directors need not be by ballot unless a shareholder demands election by ballot at the meeting and before the voting begins or unless the bylaws so require.

(Amended by Stats. 2006, Ch. 871, Sec. 1. Effective January 1, 2007.)

708.5.
  

(a) For purposes of this section,the following definitions shall apply:

(1) “Uncontested election” means an election of directors in which, at the expiration of the time fixed under the articles of incorporation or bylaws requiring advance notification of director candidates or, absent such a provision in the articles of incorporation or bylaws, at a time fixed by the board of directors that is not more than 14 days before notice is given of the meeting at which the election is to occur, the number of candidates for election does not exceed the number of directors to be elected by the shareholders at that election.

(2) “Listed corporation” means a domestic corporation that qualifies as a listed corporation under subdivision (d) of Section 301.5.

(b) Notwithstanding paragraph (5) of subdivision (a) of Section 204, a listed corporation that has eliminated cumulative voting pursuant to subdivision (a) of Section 301.5 may amend its articles of incorporation or bylaws to provide that, in an uncontested election, approval of the shareholders, as specified in Section 153, shall be required to elect a director.

(c) Notwithstanding subdivision (b) of Section 301, if an incumbent director fails to be elected by approval of the shareholders (Section 153) in an uncontested election of a listed corporation that has amended its articles of incorporation or bylaws pursuant to subdivision (b), then, unless the incumbent director has earlier resigned, the term of the incumbent director shall end on the date that is the earlier of 90 days after the date on which the voting results are determined pursuant to Section 707 or the date on which the board of directors selects a person to fill the office held by that director pursuant to subdivision (d).

(d) Any vacancy on the board of directors resulting from any failure of a candidate to be elected by approval of the shareholders (Section 153) in an uncontested election of a listed corporation that has amended its articles of incorporation or bylaws pursuant to subdivision (b) shall be filled in accordance with the procedures set forth in Section 305.

(Added by Stats. 2006, Ch. 871, Sec. 2. Effective January 1, 2007.)

709.
  

(a) Upon the filing of an action therefor by any shareholder or by any person who claims to have been denied the right to vote, the superior court of the proper county shall try and determine the validity of any election or appointment of any director of any domestic corporation, or of any foreign corporation if the election was held or the appointment was made in this state. In the case of a foreign corporation the action may be brought at the option of the plaintiff in the county in which the corporation has its principal office in this state or in the county in which the election was held or the appointment was made.

(b) Upon the filing of the complaint, and before any further proceedings are had, the court shall enter an order fixing a date for the hearing, which shall be within five days unless for good cause shown a later date is fixed, and requiring notice of the date for the hearing and a copy of the complaint to be served upon the corporation and upon the person whose purported election or appointment is questioned and upon any person (other than the plaintiff) whom the plaintiff alleges to have been elected or appointed, in the manner in which a summons is required to be served, or, if the court so directs, by registered mail; and the court may make such further requirements as to notice as appear to be proper under the circumstances.

(c) The court may determine the person entitled to the office of director or may order a new election to be held or appointment to be made, may determine the validity, effectiveness and construction of voting agreements and voting trusts, the validity of the issuance of shares and the right of persons to vote and may direct such other relief as may be just and proper.

(Added by Stats. 1975, Ch. 682.)

710.
  

(a) This section applies to a corporation with outstanding shares held of record by 100 or more persons (determined as provided in Section 605) that files an amendment of articles or certificate of determination containing a “supermajority vote” provision on or after January 1, 1989. This section shall not apply to a corporation that files an amendment of articles or certificate of determination on or after January 1, 1994, if, at the time of filing, the corporation has (1) outstanding shares of more than one class or series of stock, (2) no class of equity securities registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, and (3) outstanding shares held of record by fewer than 300 persons determined as provided by Section 605.

(b) A “supermajority vote” is a requirement set forth in the articles or in a certificate of determination authorized under any provision of this division that specified corporate action or actions be approved by a larger proportion of the outstanding shares than a majority, or by a larger proportion of the outstanding shares of a class or series than a majority, but no supermajority vote that is subject to this section shall require a vote in excess of 662/3 percent of the outstanding shares or 662/3 percent of the outstanding shares of any class or series of those shares.

(c) An amendment of the articles or a certificate of determination that includes a supermajority vote requirement shall be approved by at least as large a proportion of the outstanding shares (Section 152) as is required pursuant to that amendment or certificate of determination for the approval of the specified corporate action or actions.

(d) The amendments made to this section by the act amending this section in the 2001–02 Regular Session shall not affect the rights of minority shareholders existing under law.

(Amended by Stats. 2006, Ch. 57, Sec. 2. Effective January 1, 2007.)

711.
  

(a) The Legislature finds and declares that:

Many of the residents of this state are the legal and beneficial owners or otherwise the ultimate beneficiaries of shares of stock of domestic and foreign corporations, title to which may be held by a variety of intermediate owners as defined in subdivision (b). The informed and active involvement of such beneficial owners and beneficiaries in holding legal owners and, through them, management, accountable in their exercise of corporate power is essential to the interest of those beneficiaries and beneficial owners and to the economy and well-being of this state.

The purpose of this section is to serve the public interest by ensuring that voting records are maintained and disclosed as provided in this section. In the event that by statute or regulation pursuant to the federal Employee Retirement Income Security Act of 1974 (29 U.S.C. Sec. 1001 et seq.), there are imposed upon investment managers as defined in Sec. 2(38) thereof, duties substantially the same as those set forth in this section, compliance with those statutory or regulatory requirements by persons subject to this section shall be deemed to fulfill the obligations contained in this section.

This section shall be construed liberally to achieve that purpose.

(b) For purposes of this section, a person on whose behalf shares are voted includes, but is not limited to:

(1) A participant or beneficiary of an employee benefit plan with regard to shares held for the benefit of the participant or beneficiary.

(2) A shareholder, beneficiary, or contract owner of any entity (or of any portfolio of any entity) as defined in Section 3(a) of the federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), as amended, to the extent the entity (or portfolio) holds the shares for which the record is requested.

(c) For the purposes of this section, a person on whose behalf shares are voted does not include:

(1) A person who possesses the right to terminate or withdraw from the shareholder, contract owner, participant, or beneficiary relationship with any entity (or any portfolio of any entity) defined in subdivision (b). This exclusion does not apply in the event the right of termination or withdrawal cannot be exercised without automatic imposition of a tax penalty. The right to substitute a relationship with an entity or portfolio, the shares of which are voted by or subject to the direction of the investment adviser (as defined in Section 2 of the federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), as amended), of the prior entity or portfolio, or an affiliate of the investment adviser, shall not be deemed to be a right of termination or withdrawal within the meaning of this subdivision.

(2) A person entitled to receive information about a trust pursuant to Section 16061 of the Probate Code.

(3) A beneficiary, participant, contract owner, or shareholder whose interest is funded through the general assets of a life insurance company authorized to conduct business in this state.

(d) Every person possessing the power to vote shares of stock on behalf of another shall maintain a record of the manner in which the shares were voted. The record shall be maintained for a period of 12 consecutive months from the effective date of the vote.

(e) Upon a reasonable written request, the person possessing the power to vote shares of stock on behalf of another, or a designated agent, shall disclose the voting record with respect to any matter involving a specific security or securities in accordance with the following procedures:

(1) Except as set forth in paragraph (2), disclosure shall be made to the person making the request. The person making the disclosure may require identification sufficient to identify the person making the request as a person on whose behalf the shares were voted. A request for identification, if made, shall be reasonable, shall be made promptly, and may include a request for the person’s social security number.

(2) If the person possessing the power to vote shares on behalf of another holds that power pursuant to an agreement entered into with a party other than the person making the request for disclosure, the person maintaining and disclosing the record pursuant to this section may, instead, make the requested disclosure to that party. Disclosure to that party shall be deemed compliance with the disclosure requirement of this section. If disclosure is made to that party and not to the person making the request, subdivision (i) shall not apply. However, nothing herein shall prohibit that party and the person possessing the power to vote on shares from entering into an agreement between themselves for the payment or assessment of a reasonable charge to defray expenses of disclosing the record.

(f) Where the entity subject to the requirements of this section is organized as a unit investment trust as defined in Section 4(2) of the federal Investment Company Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), the open-ended investment companies underlying the unit investment trust shall promptly make available their proxy voting records to the unit investment trust upon evidence of a bona fide request for voting record information pursuant to subdivision (e).

(g) Signing a proxy on another’s behalf and forwarding it for disposition or receiving voting instructions does not constitute the power to vote. A person forwarding proxies or receiving voting instructions shall disclose the identity of the person having the power to vote shares upon reasonable written request by a person entitled to request a voting record under subdivision (c).

(h) For purposes of this section, if one or more persons has the power to vote shares on behalf of another, unless a governing instrument provides otherwise, the person or persons may designate an agent who shall maintain and disclose the record in accordance with subdivisions (b) and (c).

(i) Except as provided in paragraph (2) of subdivision (e), or as otherwise provided by law or a governing instrument, a person maintaining and disclosing a record pursuant to this section may assess a reasonable charge to the requesting person in order to defray expenses of disclosing the record in accordance with subdivision (e). Disclosure shall be made within a reasonable period after payment is received.

(j) Upon the petition of any person who successfully brings an action pursuant to or to enforce this section, the court may award costs and reasonable attorney’s fees if the court finds that the defendant willfully violated this section.

(k) The obligation to maintain and disclose a voting record in accordance with subdivisions (b) and (c) shall commence January 1, 1990.

(Added by Stats. 1988, Ch. 1360, Sec. 1.)

CORPCorporations Code - CORP