AB 1233 - Amends Nonprofit Corporation Statute in the Corporations Code

Feldsott & Lee
A Law Corporation

Assembly Bill 1233 (hereinafter “AB 1233”) makes technical and clarifying changes to various sections of the Corporations Code pertaining to the organization and operation of nonprofit and consumer cooperative corporations. Specifically:

1. AB 1233 clarifies that a person who does not have authority to act as a member of the governing board is not a director. However, if the articles or bylaws designate that a person is a director or a member of the governing body by nature of the position that he or she occupies, then that person is a director for all purposes and shall have the same rights, including voting rights, as other directors.

2. AB 1233 authorizes the articles or bylaws to require the presence of one or more specified directors in order to constitute a quorum of the board to transact business.

3. AB 1233 prohibits a committee exercising authority of the board from including, as members, persons who are not directors. However, the bill authorizes the board to create other committees with nondirectors that do not exercise the authority of the board.

4. AB 1233 requires a nonprofit corporation or consumer cooperative to have a chair or a president or both, a secretary, a treasurer or a chief financial officer or both, and other officers as provided in the bylaws or determined by the board. The bill also specifies that if there is no chief financial officer, the treasurer is the chief financial officer.

5. AB 1233 prohibits a cause of action against officers and directors if the nonprofit corporations or associations maintain a liability insurance policy that covers the claim. Existing law provides a limitation of personal liability for officers and directors only if the corporations or associations maintain a “general liability” insurance policy that is in force both at the time of the injury and the time that the claim is made. Under AB 1233, the key measurement need only be that the policy covers the claim.

6. AB 1233 authorizes a nonprofit corporation or consumer cooperative meeting certain requirements, including the lack of a quorum, to elect to voluntarily wind up and dissolve.

7. AB 1233 authorizes an unincorporated association to merge into a specific corporation, limited partnership, general partnership, or limited liability company.