Monday, October 3, 2011

Governor Brown Signs AB 1211 - Changes to California Nonprofit Corporation Law

Governor Brown signed AB 1211 today, and this bill will become effective January 1, 2012.  AB 1211 was proposed and sponsored by the Nonprofit Organizations Committee of the Business Law Section of the State Bar of California and authored by Assembly Member Jim Silva.  Much like AB 1233 , the NPO Committee sponsored bill from the prior 2009-2010 legislative session,  AB 1211 makes primarily technical, clarifying and non-controversial changes to the California Nonprofit Corporation law.  Among the specific changes enacted by this bill:

1. AB 1211 will make it clearer as to when the vote of an interested director is not required for a unanimous written consent. This is important because "interested directors" of public benefit corporations who vote on a transaction in which they are interested face certain liabilities, and the transaction itself may be void or voidable. The amendments in AB1211 clarify the law so that nonprofit corporations know who is an "interested director" and whether their vote is required for the corporation to act by written consent.

2. AB 1211 will exempt ballot measure committees formed as public benefit corporations from the Attorney General's supervision upon dissolution. The current Corporations Code requires all public benefit corporations to obtain a waiver from the Attorney General's office in order to file dissolution documents with the Secretary of State. Ballot measure corporations are not currently exempted from this requirement, despite the fact that the primary oversight of them is by the California Fair Political Practices Commission. The result has been that public benefit ballot measure corporations have to submit substantial documentation to the Attorney General's office in order to obtain the waiver letter, essentially a formality. This has needlessly involved the waste of time, resources, attention, and money by the Attorney General's office and the dissolving public benefit ballot measure corporation.

3. Finally, AB 1211 would provide cross-references to various other California Code sections that apply to nonprofit corporations and unincorporated associations. In particular, the bill adds references to the provisions of Government Code Section 12586. These provisions affecting the organization, governance and reporting obligations of nonprofit organizations are within the subject matter scope of existing sections of the Corporations Code, but were codified in the Government Code in the 2004 California Nonprofit Integrity Act. These cross-references in the Corporations Code will help make nonprofit organizations and practitioners aware of these significant obligations.

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