Code Section Group

Corporations Code - CORP

TITLE 1. CORPORATIONS [100 - 14631]

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

DIVISION 1.5. SOCIAL PURPOSE CORPORATIONS ACT [2500 - 3503]

  ( Heading of Division 1.5 amended by Stats. 2014, Ch. 694, Sec. 12. )

CHAPTER 11. Records and Reports [3500 - 3503]
  ( Chapter 11 added by Stats. 2011, Ch. 740, Sec. 12. )

3500.
  

(a) The board of a social purpose corporation shall cause an annual report to be sent to the shareholders not later than 120 days after the close of the fiscal year. The annual report shall contain (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, accompanied by any report thereon of independent accountants or, if there is no report, the certificate of an authorized officer of the social purpose corporation that the statements were prepared without audit from the books and records of the corporation, and (2) the information required by subdivision (b).

(b) The board shall cause to be provided with the annual report, a management discussion and analysis (special purpose MD&A) concerning the social purpose corporation’s stated purpose or purposes as set forth in its articles pursuant to paragraph (2) of subdivision (b) of Section 2602, and, to the extent consistent with reasonable confidentiality requirements, shall cause the special purpose MD&A to be made publicly available by posting it on the social purpose corporation’s Internet Web site or providing it through similar electronic means. The special purpose MD&A shall include the information specified in this subdivision and any other information that the social purpose corporation’s officers and directors believe to be reasonably necessary or appropriate to an understanding of the social purpose corporation’s efforts in connection with its special purpose or purposes. The special purpose MD&A shall also include the following information:

(1) Identification and discussion of the overall objectives of the social purpose corporation relating to its special purpose or purposes, and an identification and explanation of any changes made in those special purpose objectives during the fiscal year.

(2) Identification and discussion of the material actions taken by the social purpose corporation during the fiscal year to achieve its special purpose objectives, the impact of those actions, including the causal relationships between the actions and the reported outcomes, and the extent to which those actions achieved the special purpose objectives for the fiscal year.

(3) Identification and discussion of material actions, including the intended impact of those actions, that the social purpose corporation expects to take in the short term and long term with respect to achievement of its special purpose objectives.

(4) A description of the process for selecting, and an identification and description of, the financial, operating, and other measures used by the social purpose corporation during the fiscal year for evaluating its performance in achieving its special purpose objectives, including an explanation of why the social purpose corporation selected those measures and identification and discussion of the nature and rationale for any material changes in those measures made during the fiscal year.

(5) Identification and discussion of any material operating and capital expenditures incurred by the social purpose corporation during the fiscal year in furtherance of achieving the special purpose objectives, a good faith estimate of any additional material operating or capital expenditures the social purpose corporation expects to incur over the next three fiscal years in order to achieve its special purpose objectives, and other material expenditures of resources incurred by the social purpose corporation during the fiscal year, including employee time, in furtherance of achieving the special purpose objectives, including a discussion of the extent to which that capital or use of other resources serves purposes other than and in addition to furthering the achievement of the special purpose objectives.

(c) Except as may otherwise be excused pursuant to subdivision (h) of Section 1501.5, the reports specified in subdivisions (a) and (b) shall be sent to the shareholders at least 15 days, or, if sent by bulk mail, 35 days, prior to the annual meeting of shareholders to be held during the next fiscal year. This requirement shall not limit the requirement for holding an annual meeting as required by Section 600.

(d) If no annual report for the last fiscal year has been sent to shareholders, the social purpose corporation shall, upon the written request of any shareholder made more than 120 days after the end of that fiscal year, deliver or mail to the person making the request within 30 days following the request, the statements required by subdivisions (a) and (b) for that fiscal year.

(e) A shareholder or shareholders holding at least 5 percent of the outstanding shares of any class of a social purpose corporation may make a written request to the social purpose corporation for an income statement of the social purpose corporation for the three-month, six-month, or nine-month period of the current fiscal year ended more than 30 days prior to the date of the request and a balance sheet of the social purpose corporation as at the end of that period and, in addition, if no annual report for the most recent fiscal year has been sent to the shareholders, the statements referred to in subdivisions (a) and (b) relating to that fiscal year. The statements shall be delivered or mailed to the person making the request within 30 days following the request. A copy of the statements shall be kept on file in the principal office of the social purpose corporation for 12 months and shall be exhibited at all reasonable times to any shareholder demanding an examination of the statements or a copy shall be mailed to the shareholder. The quarterly income statements and balance sheets referred to in this subdivision shall be accompanied by the report thereon, if any, of any independent accountants engaged by the social purpose corporation or the certificate of an authorized officer of the social purpose corporation that the financial statements were prepared without audit from the books and records of the social purpose corporation.

(Amended by Stats. 2014, Ch. 694, Sec. 64. Effective January 1, 2015.)

3501.
  

(a) The board shall cause a special purpose current report to be sent to the shareholders not later than 45 days following the occurrence of any one or more of the events specified in subdivision (b) or (c), and, to the extent consistent with reasonable confidentiality requirements, shall cause the special purpose current report to be made publicly available by posting it on the social purpose corporation’s Internet Web site or providing it through similar electronic means.

(b) Unless previously reported in the most recent annual report, the special purpose current report shall identify and discuss, in reasonable detail, any expenditure or group of related or planned expenditures, excluding compensation of officers and directors, made in furtherance of the special purpose objectives, whether an operating expenditure, a capital expenditure, or some other expenditure of corporate resources, including, but not limited to, employee time, whether the expenditure was direct or indirect, and whether the expenditure was categorized as overhead or otherwise where the expenditure has or is likely to have a material adverse impact on the social purpose corporation’s results of operations or financial condition for a quarterly or annual fiscal period.

(c) Unless previously reported in the most recent annual report, the special purpose current report shall identify and discuss, in reasonable detail, any decision by the board or action by management to do either of the following:

(1) Withhold expenditures or a group of related or planned expenditures, whether temporarily or permanently, that were to have been made in furtherance of the special purpose as contemplated in the most recent annual report, whether those planned expenditures were an operating expenditure, a capital expenditure, or some other expenditure of corporate resources, including, but not limited to, employee time, whether the planned expenditure was direct or indirect, and whether the planned expenditure to be made would have been categorized as overhead or otherwise, in any case, where the planned expenditure was likely to have had a material positive impact on the social purpose corporation’s impact in furtherance of its special purpose objectives, as contemplated in the most recent annual report.

(2) Determine that the special purpose has been satisfied or should no longer be pursued, whether temporarily or permanently.

(Amended by Stats. 2014, Ch. 694, Sec. 65. Effective January 1, 2015.)

3502.
  

(a) Nothing contained in subdivision (b) of Section 3500 or Section 3501 shall require a detailing or itemization of every relevant expenditure incurred, or planned or action taken or planned, by the corporation. Management and the board shall use their discretion in providing that information, including the reasonable detail that a reasonable investor would consider important in understanding the corporation’s objectives, actions, impacts, measures, rationale, and results of operations as they relate to the nature and achievement of the special purpose objectives.

(b) Where best practices emerge for providing the information required by subdivision (b) of Section 3500 or Section 3501, use of those best practices shall create a presumption that the social purpose corporation caused all the information required by those provisions to be provided. This presumption can only be rebutted by showing that the reporting contained either a misstatement of a material fact or omission of a material fact.

(c) Notwithstanding subdivision (b) of Section 3500 and Section 3501, under no circumstances shall the social purpose corporation be required to provide information that would result in a violation of state or federal securities laws or other applicable laws.

(d) The social purpose corporation and its officers and directors are expressly excluded from liability for any and all forward looking statements supplied in the report required by subdivision (b) of Section 3500 and Section 3501, so long as those statements are supplied in good faith. Statements are deemed to be forward looking as that term is defined in the federal securities laws.

(e) The special purpose MD&A and any special purpose current report shall be written in plain English and shall be provided in an efficient and understandable manner, avoiding repetition and disclosure of immaterial information.

(f) Unless otherwise provided by the articles or bylaws, and if approved by the board of directors, the reports specified in Sections 3500 and 3501 and any accompanying material sent pursuant to this section may be sent by electronic transmission by the corporation.

(g) The financial statements of any social purpose corporation with fewer than 100 holders of record of its shares, determined as provided in Section 605, required to be furnished by Sections 3500 and 3501 are not required to be prepared in conformity with generally accepted accounting principles if they reasonably set forth the assets and liabilities and the income and expense of the social purpose corporation and disclose the accounting basis used in their preparation.

(h) The requirements described in Section 3500 shall be satisfied if a corporation with an outstanding class of securities registered under Section 12 of the Securities Exchange Act of 1934 both complies with Section 240.14a-16 of Title 17 of the Code of Federal Regulations, as amended from time to time, with respect to the obligation of a corporation to furnish an annual report to shareholders pursuant to Section 240.14a-3(b) of Title 17 of the Code of Federal Regulations, and includes the information required by subdivision (b) of Section 3500 in the annual report.

(i) The requirements described in Section 3501 shall be satisfied if a corporation with an outstanding class of securities registered under Section 12 of the Securities Exchange Act of 1934 both complies with Section 240.13a-13 of Title 17 of the Code of Federal Regulations, as amended from time to time, with respect to the obligation of a corporation to furnish a quarterly report to shareholders, and includes the information required by subdivision (b) of Section 3501 in the quarterly report.

(j) In addition to the penalties provided for in this division, the superior court of the proper county shall enforce the duty of making and mailing or delivering the information and financial statements required by Sections 3500 and 3501 and, for good cause shown, may extend the time therefor.

(k) In any action or proceeding with respect to Section 3500 or 3501, if the court finds the failure of the social purpose corporation to comply with the requirements of those sections to have been without justification, the court may award an amount sufficient to reimburse the shareholder for the reasonable expenses incurred by the shareholder, including attorney’s fees, in connection with the action or proceeding.

(l) Section 3500 and Section 3501 apply to any domestic social purpose corporation and also to a foreign social purpose corporation having its principal executive office in this state or customarily holding meetings of its board in this state.

(m) All reports and notices required by Section 3500 and Section 3501 shall be maintained by the social purpose corporation, in an electronic form for a period of not less than 10 years.

(Amended by Stats. 2014, Ch. 694, Sec. 66. Effective January 1, 2015.)

3503.
  

Any officers, directors, employees, or agents of a social purpose corporation who do any of the following shall be liable jointly and severally for all the damages resulting therefrom to the social purpose corporation or any person injured by those actions who relied on those actions or to both:

(a) Make, issue, deliver, or publish any prospectus, report, including the reports required pursuant to Sections 3500 and 3501, circular, certificate, financial statement, balance sheet, public notice, or document respecting the social purpose corporation or its shares, assets, liabilities, capital, dividends, business, earnings, or accounts which is false in any material respect, knowing it to be false, or participate in the making, issuance, delivery, or publication thereof with knowledge that the same is false in a material respect.

(b) Make or cause to be made in the books, minutes, records, or accounts of a social purpose corporation any entry that is false in any material particular knowing it to be false.

(c) Remove, erase, alter, or cancel any entry in any books or records of the social purpose corporation, with intent to deceive.

(d) With respect to the reports required pursuant to subdivision (b) of Section 3500 and Section 3501, omit to state any material fact necessary in order to make the statements contained therein, in light of the circumstances under which those statements were made, not misleading in a material respect, knowing the omission to be misleading.

(Amended by Stats. 2014, Ch. 694, Sec. 67. Effective January 1, 2015.)

CORPCorporations Code - CORP