BILL NUMBER: SB 201	CHAPTERED
	BILL TEXT

	CHAPTER  740
	FILED WITH SECRETARY OF STATE  OCTOBER 9, 2011
	APPROVED BY GOVERNOR  OCTOBER 9, 2011
	PASSED THE SENATE  SEPTEMBER 1, 2011
	PASSED THE ASSEMBLY  AUGUST 30, 2011
	AMENDED IN ASSEMBLY  AUGUST 25, 2011
	AMENDED IN ASSEMBLY  AUGUST 22, 2011
	AMENDED IN SENATE  MARCH 14, 2011

INTRODUCED BY   Senator DeSaulnier
   (Coauthor: Senator Wolk)

                        FEBRUARY 8, 2011

   An act to amend Sections 102, 107, 158, 201, 1100, 1113, 1152,
1155, 1201, 5122, 7122, and 9122 of, to add Sections 171.08 and
1112.5 to, and to add Division 1.5 (commencing with Section 2500) to
Title 1 of, the Corporations Code, relating to corporations.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 201, DeSaulnier. Flexible purpose corporations.
   Existing law authorizes and regulates the formation and operation
of corporations and nonprofit corporations and specifies the
respective purposes for which they may lawfully be formed. Existing
law specifies the duties of corporate directors and the rights of
shareholders.
   This bill would enact the Corporate Flexibility Act of 2011 and
would authorize and regulate the formation and operation of a new
form of corporate entity known as a flexible purpose corporation. The
bill would authorize existing corporations and other forms of
business entities to merge into or convert into a flexible purpose
corporation upon completion of specified requirements, including
approval of the transaction by a supermajority 2/3 vote of
shareholders, or a greater vote if required in the articles, as
specified. The bill would also authorize a flexible purpose
corporation to convert into a nonprofit corporation, a corporation,
or a domestic other business entity, upon satisfaction of equivalent
conditions. The bill would also provide dissenters' rights of
appraisal for shareholders voting against certain transactions, as
specified. The bill would specify the required and permitted contents
of articles of incorporation that a flexible purpose corporation
would be required to file with the Secretary of State, including the
special purposes, in addition to any other lawful purpose, that the
corporation shall engage in, which may include, but are not limited
to, charitable and public purpose activities that could be carried
out by a nonprofit public benefit corporation. The bill would also
require management and directors to specify objectives for measuring
the impact of the flexible purpose corporation's efforts relating to
its special purpose, and to include an analysis of those efforts in
annual reports, together with specified financial statements, to
shareholders and would require specified information to be made
publicly available, as specified. The bill would also specify that a
flexible purpose corporation is subject to many existing provisions
of the Corporations Code. The bill would also make conforming
changes.
   This bill would incorporate additional changes to Section 1113 of
the Corporations Code proposed by AB 1211, to be operative only if AB
1211 and this bill are both chaptered and become effective on or
before January 1, 2012, and this bill is chaptered last.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 102 of the Corporations Code is amended to
read:
   102.  (a) Subject to Chapter 23 (commencing with Section 2300)
(transition provisions), this division applies to corporations
organized under this division and to domestic corporations that are
not subject to Division 1.5 (commencing with Section 2500), and to
domestic corporations that are not subject to Division 2 (commencing
with Section 5000) or Part 1 (commencing with Section 12000), 2
(commencing with Section 12200), 3 (commencing with Section 13200),
or 5 (commencing with Section 14000) of Division 3 on December 31,
1976, and that are not organized or existing under any statute of
this state other than this code; this division applies to any other
corporation only to the extent expressly included in a particular
provision of this division.
   (b) The existence of corporations formed or existing on the date
of enactment or reenactment of this division shall not be affected by
the enactment or reenactment of this division nor by any change in
the requirements for the formation of corporations nor by the
amendment or repeal of the laws under which they were formed or
created.
   (c) Neither the repeals effected by the enactment or reenactment
of this division nor the enactment of this title nor the amendment
thereof shall impair or take away any existing liability or cause of
action against any corporation, its shareholders, directors, or
officers incurred prior to the time of the enactment, reenactment, or
amendment.
  SEC. 2.  Section 107 of the Corporations Code is amended to read:
   107.  No corporation, flexible purpose corporation, association or
individual shall issue or put in circulation, as money, anything but
the lawful money of the United States.
  SEC. 3.  Section 158 of the Corporations Code is amended to read:
   158.  (a) "Close corporation" means a corporation, including a
close flexible purpose corporation, whose articles contain, in
addition to the provisions required by Section 202, a provision that
all of the corporation's issued shares of all classes shall be held
of record by not more than a specified number of persons, not
exceeding 35, and a statement "This corporation is a close
corporation."
   (b) The special provisions referred to in subdivision (a) may be
included in the articles by amendment, but if such amendment is
adopted after the issuance of shares only by the affirmative vote of
all of the issued and outstanding shares of all classes.
   (c) The special provisions referred to in subdivision (a) may be
deleted from the articles by amendment, or the number of shareholders
specified may be changed by amendment, but if such amendment is
adopted after the issuance of shares only by the affirmative vote of
at least two-thirds of each class of the outstanding shares;
provided, however, that the articles may provide for a lesser vote,
but not less than a majority of the outstanding shares, or may deny a
vote to any class, or both.
   (d) In determining the number of shareholders for the purposes of
the provision in the articles authorized by this section, a husband
and wife and the personal representative of either shall be counted
as one regardless of how shares may be held by either or both of
them, a trust or personal representative of a decedent holding shares
shall be counted as one regardless of the number of trustees or
beneficiaries and a partnership or corporation or business
association holding shares shall be counted as one (except that any
such trust or entity the primary purpose of which was the acquisition
or voting of the shares shall be counted according to the number of
beneficial interests therein).
   (e) A corporation shall cease to be a close corporation upon the
filing of an amendment to its articles pursuant to subdivision (c) or
if it shall have more than the maximum number of holders of record
of its shares specified in its articles as a result of an inter vivos
transfer of shares which is not void under subdivision (d) of
Section 418, the transfer of shares on distribution by will or
pursuant to the laws of descent and distribution, the dissolution of
a partnership or corporation or business association or the
termination of a trust which holds shares, by court decree upon
dissolution of a marriage or otherwise by operation of law. Promptly
upon acquiring more than the specified number of holders of record of
its shares, a close corporation shall execute and file an amendment
to its articles deleting the special provisions referred to in
subdivision (a) and deleting any other provisions not permissible for
a corporation which is not a close corporation, which amendment
shall be promptly approved and filed by the board and need not be
approved by the outstanding shares.
   (f) Nothing contained in this section shall invalidate any
agreement among the shareholders to vote for the deletion from the
articles of the special provisions referred to in subdivision (a)
upon the lapse of a specified period of time or upon the occurrence
of a certain event or condition or otherwise.
   (g) The following sections contain specific references to close
corporations: Sections 186, 202, 204, 300, 418, 421, 1111, 1201, 1800
and 1904.
  SEC. 4.  Section 171.08 is added to the Corporations Code, to read:

   171.08.  "Flexible purpose corporation" means any flexible purpose
corporation formed under Division 1.5 (commencing with Section
2500).
  SEC. 5.  Section 201 of the Corporations Code is amended to read:
   201.  (a) The Secretary of State shall not file articles setting
forth a name in which "bank," " trust," "trustee" or related words
appear, unless the certificate of approval of the Commissioner of
Financial Institutions is attached thereto. This subdivision does not
apply to the articles of any corporation subject to the Banking Law
on which is endorsed the approval of the Commissioner of Financial
Institutions.
   (b) The Secretary of State shall not file articles which set forth
a name which is likely to mislead the public or which is the same
as, or resembles so closely as to tend to deceive, the name of a
domestic corporation, the name of a foreign corporation which is
authorized to transact intrastate business or has registered its name
pursuant to Section 2101, a name which a foreign corporation has
assumed under subdivision (b) of Section 2106, a name which will
become the record name of a domestic or foreign corporation upon the
effective date of a filed corporate instrument where there is a
delayed effective date pursuant to subdivision (c) of Section 110 or
subdivision (c) of Section 5008, or a name which is under reservation
for another corporation pursuant to this title, except that a
corporation may adopt a name that is substantially the same as an
existing domestic corporation or foreign corporation which is
authorized to transact intrastate business or has registered its name
pursuant to Section 2101, upon proof of consent by such domestic or
foreign corporation and a finding by the Secretary of State that
under the circumstances the public is not likely to be misled.
   The use by a corporation of a name in violation of this section
may be enjoined notwithstanding the filing of its articles by the
Secretary of State.
   (c) Any applicant may, upon payment of the fee prescribed therefor
in the Government Code, obtain from the Secretary of State a
certificate of reservation of any name not prohibited by subdivision
(b), and upon the issuance of the certificate the name stated therein
shall be reserved for a period of 60 days. The Secretary of State
shall not, however, issue certificates reserving the same name for
two or more consecutive 60-day periods to the same applicant or for
the use or benefit of the same person, partnership, firm or
corporation; nor shall consecutive reservations be made by or for the
use or benefit of the same person, partnership, firm or corporation
of names so similar as to fall within the prohibitions of subdivision
(b).
  SEC. 6.  Section 1100 of the Corporations Code is amended to read:
   1100.  Any two or more corporations may be merged into one of
those corporations. A corporation may merge with one or more domestic
corporations (Section 167), flexible purpose corporations (Section
171.08), foreign corporations (Section 171), or other business
entities (Section 174.5) pursuant to this chapter. Mergers in which a
foreign corporation but no other business entity is a constituent
party are governed by Section 1108, mergers in which a flexible
purpose corporation but no other business entity is a constituent
party are governed by Section 1112.5, and mergers in which an other
business entity is a constituent party are governed by Section 1113.
  SEC. 7.  Section 1112.5 is added to the Corporations Code, to read:

   1112.5.  If a disappearing corporation in a merger is a
corporation governed by this division and the surviving corporation
is a flexible purpose corporation, both of the following shall apply:

   (a) The merger shall be approved by the affirmative vote of at
least two-thirds of each class, or a greater vote if required in the
articles, of the outstanding shares (Section 152) of the disappearing
corporation, notwithstanding any provision of Chapter 12 (commencing
with Section 1200).
   (b) The shareholders of the disappearing corporation shall have
all of the rights under Chapter 13 (commencing with Section 1300) of
the shareholders of a corporation involved in a reorganization
requiring the approval of its outstanding shares (Section 152), and
the disappearing corporation shall have all of the obligations under
Chapter 13 (commencing with Section 1300) of a corporation involved
in the reorganization.
  SEC. 8.  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 that 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 that 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 consumer cooperative
corporation is a party to the merger, Section 12540.1, or, if a
domestic limited partnership is a party to the merger, Section
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 flexible purpose corporation (Section 171.08), a
public benefit corporation (Section 5060), a mutual benefit
corporation (Section 5059), a religious corporation (Section 5061),
or a corporation organized under the Consumer 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 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 Consumer 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 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 15901.14 if a domestic limited
partnership, or at the business address specified in 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 Consumer 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 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 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. 8.5.  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 that 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 that 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 consumer cooperative
corporation is a party to the merger, Section 12540.1, or if an
unincorporated association is a party to the merger, Section 18370,
or, if a domestic limited partnership is a party to the merger,
Section 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 flexible purpose corporation (Section 171.08), a
public benefit corporation (Section 5060), a mutual benefit
corporation (Section 5059), a religious corporation (Section 5061),
or a corporation organized under the Consumer 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 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 Consumer 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 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 15901.14 if a domestic limited
partnership, or at the business address specified in 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 Consumer 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 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 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. 9.  Section 1152 of the Corporations Code is amended to read:
   1152.  (a) A corporation that desires to convert to a domestic
other business entity shall approve a plan of conversion. The plan of
conversion shall state all of the following:
   (1) The terms and conditions of the conversion.
   (2) The jurisdiction of the organization of the converted entity
and of the converting corporation and the name of the converted
entity after conversion.
   (3) The manner of converting the shares of each of the
shareholders of the converting corporation into securities of, or
interests in, the converted entity.
   (4) The provisions of the governing documents for the converted
entity, including the partnership agreement or limited liability
company articles of organization and operating agreement, to which
the holders of interests in the converted entity are to be bound.
   (5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the converting corporation.
   (b) The plan of conversion shall be approved by the board of the
converting corporation (Section 151), and the principal terms of the
plan of the conversion shall be approved by the outstanding shares
(Section 152) of each class of the converting corporation. The
approval of the outstanding shares may be given before or after
approval by the board. Notwithstanding the foregoing, if a converting
corporation is a close corporation, the conversion shall be approved
by the affirmative vote of at least two-thirds of each class, or a
greater vote if required in the articles, of outstanding shares
(Section 152) of that converting corporation; provided, however, that
the articles may provide for a lesser vote, but not less than a
majority of the outstanding shares of each class.
   (c) If the corporation is converting into a general or limited
partnership or into a limited liability company, then in addition to
the approval of the shareholders set forth in subdivision (b), the
plan of conversion shall be approved by each shareholder who will
become a general partner or manager, as applicable, of the converted
entity pursuant to the plan of conversion unless the shareholders
have dissenters' rights pursuant to Section 1159 and Chapter 13
(commencing with Section 1300).
   (d) If the corporation is converting into a flexible purpose
corporation, both of the following shall apply:
   (1) Notwithstanding subdivision (b), the plan of conversion shall
be approved by the affirmative vote of at least two-thirds of each
class, or a greater vote if required in the articles, of outstanding
shares (Section 152) of that converting corporation.
   (2) The shareholders of the converting corporation shall have all
of the rights under Chapter 13 (commencing with Section 1300) of the
shareholders of a corporation involved in a reorganization requiring
the approval of its outstanding shares (Section 152), and the
converting corporation shall have all of the obligations under
Chapter 13 (commencing with Section 1300) of a corporation involved
in a reorganization, without regard to whether the conversion
constitutes a reorganization requiring a shareholder vote under
Chapter 12 (commencing with Section 1200).
   (e) Upon the effectiveness of the conversion, all shareholders of
the converting corporation, except those that exercise dissenters'
rights as provided in Section 1159 and Chapter 13 (commencing with
Section 1300), shall be deemed parties to any agreement or agreements
constituting the governing documents for the converted entity
adopted as part of the plan of conversion, irrespective of whether or
not a shareholder has executed the plan of conversion or those
governing documents for the converted entity. Any adoption of
governing documents made pursuant thereto shall be effective at the
effective time or date of the conversion.
   (f) Notwithstanding its prior approval by the board and the
outstanding shares or either of them, a plan of conversion may be
amended before the conversion takes effect if the amendment is
approved by the board and, if it changes any of the principal terms
of the plan of conversion, by the shareholders of the converting
corporation in the same manner and to the same extent as was required
for approval of the original plan of conversion.
   (g) A plan of conversion may be abandoned by the board of a
converting corporation, or by the shareholders of a converting
corporation if the abandonment is approved by the outstanding shares,
in each case in the same manner as required for approval of the plan
of conversion, subject to the contractual rights of third parties,
at any time before the conversion is effective.
   (h) The converted entity shall keep the plan of conversion at (1)
the principal place of business of the converted entity if the
converted entity is a domestic partnership or (2) at the office at
which records are to be kept under Section 15614 or 15901.11 if the
converted entity is a domestic limited partnership or at the office
at which records are to be kept under Section 17057 if the converted
entity is a domestic limited liability company. Upon the request of a
shareholder of a converting corporation, the authorized person on
behalf of the converted entity shall promptly deliver to the
shareholder, at the expense of the converted entity, a copy of the
plan of conversion. A waiver by a shareholder of the rights provided
in this subdivision shall be unenforceable.
  SEC. 10.  Section 1155 of the Corporations Code is amended to read:

   1155.  (a) To convert a corporation:
   (1) If the corporation is converting into a domestic limited
partnership, a statement of conversion shall be completed on the
certificate of limited partnership for the converted entity.
   (2) If the corporation is converting into a domestic partnership,
a statement of conversion shall be completed on the statement of
partnership authority for the converted entity, or if no statement of
partnership authority is filed then a certificate of conversion
shall be filed separately.
   (3) If the corporation is converting into a domestic limited
liability company, a statement of conversion shall be completed on
the articles of organization for the converted entity.
   (4) If the corporation is converting into a flexible purpose
corporation, a statement of conversion shall be completed on the
articles for the converted entity.
   (b) Any statement or certificate of conversion of a converting
corporation shall be executed and acknowledged by those officers of
the converting corporation as would be required to sign an officers'
certificate (Section 173), and shall set forth all of the following:
   (1) The name and the Secretary of State's file number of the
converting corporation.
   (2) A statement of the total number of outstanding shares of each
class entitled to vote on the conversion, that the principal terms of
the plan of conversion were approved by a vote of the number of
shares of each class which equaled or exceeded the vote required
under Section 1152, specifying each class entitled to vote and the
percentage vote required of each class.
   (3) The name, form, and jurisdiction of organization of the
converted entity.
   (c) For the purposes of this chapter, the certificate of
conversion shall be on a form prescribed by the Secretary of State.
   (d) The filing with the Secretary of State of a statement of
conversion on an organizational document or a certificate of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of dissolution by the converting
corporation and no converting corporation that has made the filing is
required to file a certificate of election under Section 1901 or a
certificate of dissolution under Section 1905 as a result of that
conversion.
   (e) Upon the effectiveness of a conversion pursuant to this
chapter, a converted entity that is a flexible purpose corporation,
domestic partnership, domestic limited partnership or domestic
limited liability company shall be deemed to have assumed the
liability of the converting corporation (1) to prepare and file or
cause to be prepared and filed all tax and information returns
otherwise required of the converting corporation under the
Corporation Tax Law (Part 11 (commencing with Section 23001) of
Division 2 of the Revenue and Taxation Code) and (2) to pay any tax
liability determined to be due pursuant to that law.
  SEC. 11.  Section 1201 of the Corporations Code is amended to read:

   1201.  (a) The principal terms of a reorganization shall be
approved by the outstanding shares (Section 152) of each class of
each corporation the approval of whose board is required under
Section 1200, except as provided in subdivision (b) and except that
(unless otherwise provided in the articles) no approval of any class
of outstanding preferred shares of the surviving or acquiring
corporation or parent party shall be required if the rights,
preferences, privileges and restrictions granted to or imposed upon
that class of shares remain unchanged (subject to the provisions of
subdivision (c)). For the purpose of this subdivision, two classes of
common shares differing only as to voting rights shall be considered
as a single class of shares.
   (b) No approval of the outstanding shares (Section 152) is
required by subdivision (a) in the case of any corporation if that
corporation, or its shareholders immediately before the
reorganization, or both, shall own (immediately after the
reorganization) equity securities, other than any warrant or right to
subscribe to or purchase those equity securities, of the surviving
or acquiring corporation or a parent party (subdivision (d) of
Section 1200) possessing more than five-sixths of the voting power of
the surviving or acquiring corporation or parent party. In making
the determination of ownership by the shareholders of a corporation,
immediately after the reorganization, of equity securities pursuant
to the preceding sentence, equity securities which they owned
immediately before the reorganization as shareholders of another
party to the transaction shall be disregarded. For the purpose of
this section only, the voting power of a corporation shall be
calculated by assuming the conversion of all equity securities
convertible (immediately or at some future time) into shares entitled
to vote but not assuming the exercise of any warrant or right to
subscribe to or purchase those shares.
   (c) Notwithstanding subdivision (b), the principal terms of a
reorganization shall be approved by the outstanding shares (Section
152) of the surviving corporation in a merger reorganization if any
amendment is made to its articles that would otherwise require that
approval.
   (d) Notwithstanding subdivision (b), the principal terms of a
reorganization shall be approved by the outstanding shares (Section
152) of any class of a corporation that is a party to a merger or
sale-of-assets reorganization if holders of shares of that class
receive shares of the surviving or acquiring corporation or parent
party having different rights, preferences, privileges or
restrictions than those surrendered. Shares in a foreign corporation
received in exchange for shares in a domestic corporation have
different rights, preferences, privileges and restrictions within the
meaning of the preceding sentence.
   (e) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the affirmative vote of at
least two-thirds of each class, or a greater vote if required in the
articles, of the outstanding shares (Section 152) of any close
corporation if the reorganization would result in their receiving
shares of a corporation that is not a close corporation. However, the
articles may provide for a lesser vote, but not less than a majority
of the outstanding shares of each class.
   (f) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by at least two-thirds of each
class, or a greater vote if required in the articles, of the
outstanding shares (Section 152) of a corporation that is a party to
a merger reorganization if holders of shares receive shares of a
surviving flexible purpose corporation in the merger.
   (g) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the outstanding shares
(Section 152) of any class of a corporation that is a party to a
merger reorganization if holders of shares of that class receive
interests of a surviving other business entity in the merger.
   (h) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by all shareholders of any
class or series if, as a result of the reorganization, the holders of
that class or series become personally liable for any obligations of
a party to the reorganization, unless all holders of that class or
series have the dissenters' rights provided in Chapter 13 (commencing
with Section 1300).
   (i) Any approval required by this section may be given before or
after the approval by the board. Notwithstanding approval required by
this section, the board may abandon the proposed reorganization
without further action by the shareholders, subject to the
contractual rights, if any, of third parties.
  SEC. 12.  Division 1.5 (commencing with Section 2500) is added to
Title 1 of the Corporations Code, to read:

      DIVISION 1.5.  CORPORATE FLEXIBILITY ACT OF 2011


      CHAPTER 1.  GENERAL PROVISIONS AND DEFINITIONS


   2500.  This division shall be known and may be cited as the
Corporate Flexibility Act of 2011.
   2501.  Except as otherwise expressly stated, the provisions of
Division 1 (commencing with Section 100) shall apply to corporations
organized under this division, and references in that division to the
terms "close corporation," "constituent corporation," "corporation,"
"disappearing corporation," "domestic corporation," "foreign
corporation," "surviving corporation," and similar terms shall be
read to apply, in the same manner, to include the similar "flexible
purpose corporation" organized under this division.
   2502.  This division applies only to flexible purpose corporations
organized expressly under this division whether organized or
existing under this division or merged or converted into a flexible
purpose corporation in accordance with Chapter 11 (commencing with
Section 1100) of Division 1 or Chapter 11.5 (commencing with Section
1150) of Division 1.
   2502.01.  Every flexible purpose corporation organized under the
laws of this state or similar foreign flexible purpose corporation,
all of the capital stock of which is beneficially owned by the United
States, an agency or instrumentality of the United States or any
flexible purpose corporation or similar foreign flexible purpose
corporation the whole of the capital stock of which is owned by the
United States or by an agency or instrumentality of the United
States, is conclusively presumed to be an agency and instrumentality
of the United States and is entitled to all privileges and immunities
to which the holders of all of its stock are entitled as agencies of
the United States.
   2502.02.  Unless otherwise expressly provided, whenever reference
is made in this division to any other state or federal statute, that
reference is to that statute as it may be amended from time to time,
whether before or after the enactment of this division.
   2502.03.  A flexible purpose corporation may be sued in the same
manner as a corporation as provided in the Code of Civil Procedure.
   2502.04.  A flexible purpose corporation formed under this
division shall, in respect of its property, as a condition of its
existence as a flexible purpose corporation, be subject, in the same
manner as a corporation, to the provisions of the Code of Civil
Procedure authorizing the attachment of corporate property.
   2502.05.  The fees of the Secretary of State for filing
instruments by or on behalf of flexible purpose corporations shall be
the same fees prescribed for corporations in Article 3 (commencing
with Section 12180) of Chapter 3 of Part 2 of Division 3 of Title 2
of the Government Code.
   2502.06.  (a) Provisions of the articles described in paragraph
(3) of subdivision (e) of Section 2602 and subdivisions (a) and (b)
of Section 2603 may be made dependent upon facts ascertainable
outside of the articles, if the manner in which those facts shall
operate upon those provisions is clearly and expressly set forth in
the articles. Similarly, any of the terms of an agreement of merger
pursuant to Section 1101 may be made dependent upon facts
ascertainable outside of that agreement, if the manner in which those
facts shall operate upon the terms of the agreement is clearly and
expressly set forth in the agreement of merger.
   (b) Notwithstanding subdivision (a), when any provisions or terms
of articles or an agreement of merger are made dependent upon facts
ascertainable outside of the filed instrument through a reference to
an agreement or similar document, the flexible purpose corporation
filing that instrument shall maintain at its principal executive
office a copy of that referenced agreement or document and all
amendments, and shall provide to its shareholders, in the case of
articles, or to shareholders of any constituent corporation or other
business entity, in the case of an agreement of merger, a copy of
them upon written request and without charge.
   (c) For the purposes of this section, "referenced agreement" means
an agreement or contract to which the flexible purpose corporation
is a party. An amendment or revision of a referenced agreement shall
require shareholder approval, in addition to any other required
approvals, upon any of the following circumstances:
   (1) If the amendment or revision of the referenced agreement would
result in a material change in the rights, preferences, privileges,
or restrictions of a class or series of shares, the amendment or
revision shall be approved by the outstanding shares, as defined in
Section 152, of that class or series.
   (2) If the amendment or revision of the referenced agreement would
result in a material change in the rights or liabilities of any
class or series of shares with respect to the subject matter of
paragraph (1), (2), (3), (5), or (9) of subdivision (a) of Section
2603, the amendment or revision shall be approved by the outstanding
shares, as defined in Section 152, of that class or series.
   (3) If the amendment or revision of the referenced agreement would
result in a material change in the restrictions on transfer or
hypothecation of any class or series of shares, the amendment or
revision shall be approved by the outstanding shares, as defined in
Section 152, of that class or series.
   (4) If the amendment or revision of the referenced agreement would
result in a change of any of the principal terms of an agreement of
merger, the amendment or revision shall be approved in the same
manner as required by Section 3504 for a change in the principal
terms of an agreement of merger.
   2502.07.  Nothing contained in this division shall be construed to
modify the provisions of subdivision (h) of Section 25102, or the
conditions provided therein to the availability of an exemption under
that subdivision.
   2503.  "Annual report" means the report required by subdivision
(a) of Section 3500, including the information specified in
subdivision (b) of Section 3500.
   2503.1.  "Close flexible purpose corporation" means a flexible
purpose corporation that is also a close corporation.
   2504.  "Constituent flexible purpose corporation" means a flexible
purpose corporation that is merged with or into one or more
corporations or one or more other business entities and includes a
surviving flexible purpose corporation.
   2505.  "Conversion" means a conversion pursuant to Chapter 11.5
(commencing with Section 1150) of Division 1 and Chapter 9
(commencing with Section 3300) of this division.
   2506.  "Disappearing flexible purpose corporation" means a
constituent flexible purpose corporation that is not the surviving
entity.
   2507.  "Domestic flexible purpose corporation" means a corporation
organized under this division.
   2509.  "Flexible purpose corporation," unless otherwise expressly
provided, refers only to a corporation organized under this division.

   2510.  "Flexible purpose corporation subject to the Banking Law"
means any of the following:
   (a) A flexible purpose corporation that, with the approval of the
Commissioner of Financial Institutions, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner of
Financial Institutions to engage in, the commercial banking business
under the Banking Law (Division 1 (commencing with Section 99) of the
Financial Code).
   (b) Any flexible purpose corporation that, with the approval of
the Commissioner of Financial Institutions, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner of
Financial Institutions to engage in, the industrial banking business
under the Banking Law (Division 1 (commencing with Section 99) of the
Financial Code).
   (c) Any flexible purpose corporation, other than a flexible
purpose corporation described in subdivision (d), that, with the
approval of the Commissioner of Financial Institutions, is
incorporated for the purpose of engaging in, or that is authorized by
the Commissioner of Financial Institutions to engage in, the trust
business under the Banking Law (Division 1 (commencing with Section
99) of the Financial Code).
   (d) Any flexible purpose corporation that is authorized by the
Commissioner of Financial Institutions and the Commissioner of
Insurance to maintain a title insurance department to engage in title
insurance business and a trust department to engage in trust
business.
   (e) Any flexible purpose corporation that, with the approval of
the Commissioner of Financial Institutions, is incorporated for the
purpose of engaging in, or that is authorized by the Commissioner of
Financial Institutions to engage in, business under Article 1
(commencing with Section 3500) of Chapter 19 of Division 1 of the
Financial Code.
   2510.1.  "Flexible purpose corporation subject to the Insurance
Code as an insurer" means a flexible purpose corporation that has met
the requirements of Sections 201.5, 201.6, and 201.7.
           2511.   "Reorganization" means a merger reorganization, an
exchange reorganization, or a sale of assets reorganization.
   (a) "Merger reorganization" means a merger pursuant to Chapter 11
(commencing with Section 1100) of Division 1 and Chapter 8
(commencing with Section 3200), of this division, other than a
short-form merger.
   (b) "Exchange reorganization" means the acquisition by one
domestic flexible purpose corporation, foreign flexible purpose
corporation, or other business entity in exchange, in whole or in
part, for its equity securities, or the equity securities of a
domestic flexible purpose corporation, a foreign flexible purpose
corporation, or an other business entity that is in control of the
acquiring entity, of equity securities of another domestic flexible
purpose corporation, foreign flexible purpose corporation, or other
business entity if, immediately after the acquisition, the acquiring
entity has control of the other entity.
   (c) "Sale-of-assets reorganization" means the acquisition by one
domestic flexible purpose corporation, foreign flexible purpose
corporation, or other business entity in exchange in whole or in part
for its equity securities, or the equity securities of a domestic
flexible purpose corporation, a foreign flexible purpose corporation,
or an other business entity that is in control of the acquiring
entity, or for its debt securities, or debt securities of a domestic
flexible purpose corporation, foreign flexible purpose corporation,
or other business entity that is in control of the acquiring entity,
that are not adequately secured and that have a maturity date in
excess of five years after the consummation of the reorganization, or
both, of all or substantially all of the assets of another domestic
flexible purpose corporation, foreign flexible purpose corporation,
or other business entity.
   2512.  "Share exchange tender offer" means any acquisition by one
flexible purpose corporation in exchange in whole or in part for its
equity securities, or the equity securities of a corporation or a
flexible purpose corporation that is in control of the acquiring
flexible purpose corporation, of shares of another corporation or
flexible purpose corporation, other than an exchange reorganization
(subdivision (b) of Section 2511).
   2513.  "Special purpose" means the special purpose set forth in a
flexible purpose corporation's articles pursuant to subdivision (b)
of Section 2602.
   2514.  "Special purpose current report" means the report required
of a flexible purpose corporation pursuant to Section 3501.
   2515.  "Special purpose MD&A" means the management discussion and
analysis required of a flexible purpose corporation pursuant to
subdivision (b) of Section 3500.
   2516.  "Special purpose objectives" means those objectives set
forth by management and the directors of a flexible purpose
corporation for purposes of measuring the impact of the flexible
purpose corporation's efforts relating to its special purpose in
accordance with Section 3500.
   2517.  "Surviving flexible purpose corporation" means a flexible
purpose corporation into which one or more other corporations or one
or more other business entities is merged.
      CHAPTER 2.  ORGANIZATION AND BYLAWS


   2600.  (a) One or more natural persons, partnerships,
associations, flexible purpose corporations, or corporations,
domestic or foreign, may form a flexible purpose corporation under
this division by executing and filing articles of incorporation.
   (b) If initial directors are named in the articles, each director
named in the articles shall sign and acknowledge the articles. If
initial directors are not named in the articles, the articles shall
be signed by one or more incorporators who shall be persons described
in subdivision (a).
   (c) The corporate existence begins upon the filing of the articles
and continues perpetually, unless otherwise expressly provided by
law or in the articles.
   2600.5.  (a) An existing business association organized as a trust
under the laws of this state or of a foreign jurisdiction may
incorporate under this division upon approval by its board of
trustees or similar governing body and approval by the affirmative
vote of a majority of the outstanding voting shares of beneficial
interest, or a greater proportion of the outstanding shares of
beneficial interest or the vote of those other classes of shares of
beneficial interest as may be specifically required by its
declaration of trust or bylaws, and the filing of articles with a
certificate attached pursuant to this chapter.
   (b) In addition to the matters required to be set forth in the
articles pursuant to Section 2602, the articles filed pursuant to
this section shall state that an existing unincorporated association,
stating its name, is being incorporated by the filing of the
articles.
   (c) The articles filed pursuant to this section shall be signed by
the president, or any vice president, and the secretary, or any
assistant secretary, of the existing association and shall be
accompanied by a certificate signed and verified by those officers
signing the articles and stating that the incorporation of the
association has been approved by the trustees and by the required
vote of holders of shares of beneficial interest in accordance with
subdivision (a).
   (d) Upon the filing of articles pursuant to this section, the
flexible purpose corporation shall succeed automatically to all of
the rights and property of the association being incorporated and
shall be subject to all of its debts and liabilities in the same
manner as if the flexible purpose corporation had itself incurred
them. The incumbent trustees of the association shall constitute the
initial directors of the flexible purpose corporation and shall
continue in office until the next annual meeting of the shareholders
or their earlier death, resignation, or removal. All rights of
creditors and all liens upon the property of the association shall be
preserved unimpaired. Any action or proceeding pending by or against
the association may be prosecuted to judgment, which shall bind the
flexible purpose corporation, or the flexible purpose corporation may
be proceeded against or substituted in its place.
   (e) The filing for record in the office of the county recorder of
any county in this state in which any of the real property of the
association is located of a copy of the articles filed pursuant to
this section, certified by the Secretary of State, shall evidence
record ownership in the flexible purpose corporation of all interests
of the association in and to the real property located in that
county.
   2601.  (a) The Secretary of State shall not file articles setting
forth a name in which "bank," "trust," "trustee" or related words
appear, unless the certificate of approval of the Commissioner of
Financial Institutions is attached to the articles. This subdivision
does not apply to the articles of any flexible purpose corporation
subject to the Banking Law on which is endorsed the approval of the
Commissioner of Financial Institutions.
   (b) The Secretary of State shall not file articles that set forth
a name that is likely to mislead the public or that is the same as,
or resembles so closely as to tend to deceive, the name of a domestic
corporation, the name of a domestic flexible purpose corporation, or
the name of a foreign corporation that is authorized to transact
intrastate business or has registered its name pursuant to Section
2101, a name that a foreign corporation has assumed under subdivision
(b) of Section 2106, a name that will become the record name of a
corporation or flexible purpose corporation or a foreign corporation
upon the effective date of a filed corporate instrument where there
is a delayed effective date pursuant to subdivision (c) of Section
110 or subdivision (c) of Section 5008, or a name that is under
reservation for another corporation or flexible purpose corporation
pursuant to this title, except that a flexible purpose corporation
may adopt a name that is substantially the same as an existing
corporation or flexible purpose corporation, foreign or domestic,
which is authorized to transact intrastate business or has registered
its name pursuant to Section 2101, upon proof of consent by the
domestic or foreign corporation or flexible purpose corporation and a
finding by the Secretary of State that under the circumstances the
public is not likely to be misled. The use by a flexible purpose
corporation of a name in violation of this section may be enjoined
notwithstanding the filing of its articles by the Secretary of State.

   (c) Any applicant may, upon payment of the fee prescribed in the
Government Code, obtain from the Secretary of State a certificate of
reservation of any name not prohibited by subdivision (b), and upon
the issuance of the certificate the name stated in the certificate
shall be reserved for a period of 60 days. The Secretary of State
shall not, however, issue certificates reserving the same name for
two or more consecutive 60-day periods to the same applicant or for
the use or benefit of the same person, partnership, firm,
corporation, or flexible purpose corporation. No consecutive
reservations shall be made by or for the use or benefit of the same
person, partnership, firm, corporation or flexible purpose
corporation of names so similar as to fall within the prohibitions of
subdivision (b).
   2602.  The articles of incorporation shall set forth:
   (a) The name of the flexible purpose corporation that shall
contain the words "flexible purpose corporation" or an abbreviation
of those words.
   (b) (1) Either of the following statements, as applicable:
   (A) "The purpose of this flexible purpose corporation is to engage
in any lawful act or activity for which a flexible purpose
corporation may be organized under Division 1.5 of the California
Corporations Code, other than the banking business, the trust company
business or the practice of a profession permitted to be
incorporated by the California Corporations Code, for the benefit of
the long-term and the short-term interests of the flexible purpose
corporation and its shareholders and in furtherance of the following
enumerated purposes ____."
   (B) "The purpose of this flexible purpose corporation is to engage
in the profession of ____ (with the insertion of a profession
permitted to be incorporated by the California Corporations Code) and
any other lawful activities, other than the banking or trust company
business, not prohibited to a flexible purpose corporation engaging
in that profession by applicable laws and regulations, for the
benefit of the long-term and the short-term interests of the flexible
purpose corporation and its shareholders."
   (2) A statement that a purpose of the flexible purpose corporation
is to engage in one or more of the following purposes, in addition
to the purpose stated pursuant to paragraph (1):
   (A) One or more charitable or public purpose activities that a
nonprofit public benefit corporation is authorized to carry out.
   (B) The purpose of promoting positive short-term or long-term
effects of, or minimizing adverse short-term or long-term effects of,
the flexible purpose corporation's activities upon any of the
following:
   (i) The flexible purpose corporation's employees, suppliers,
customers, and creditors.
   (ii) The community and society.
   (iii) The environment.
   (3) A statement that the flexible purpose corporation is organized
as a flexible purpose corporation under the Corporate Flexibility
Act of 2011.
   (4) If the flexible purpose corporation is a flexible purpose
corporation subject to the Banking Law (Division 1 (commencing with
Section 99) of the Financial Code), the articles shall set forth a
statement of purpose that is prescribed by the applicable provision
of the Banking Law (Division 1 (commencing with Section 99) of the
Financial Code).
   (5) If the flexible purpose corporation is a flexible purpose
corporation subject to the Insurance Code as an insurer, the articles
shall additionally state that the business of the flexible purpose
corporation is to be an insurer.
   (6) If the flexible purpose corporation is intended to be a
professional corporation within the meaning of the Moscone-Knox
Professional Corporation Act (Part 4 (commencing with Section 13400)
of Division 3), the articles shall additionally contain the statement
required by Section 13404. The articles shall not set forth any
further or additional statement with respect to the purposes or
powers of the flexible purpose corporation, except by way of
limitation or except as expressly required by any law of this state,
other than this division, or any federal or other statute or
regulation, including the Internal Revenue Code and regulations
thereunder as a condition of acquiring or maintaining a particular
status for tax purposes.
   (7) If the flexible purpose corporation is a close flexible
purpose corporation, a statement as required by subdivision (a) of
Section 158.
   (c) The name and address in this state of the flexible purpose
corporation's initial agent for service of process.
   (d) If the flexible purpose corporation is authorized to issue
only one class of shares, the total number of shares that the
flexible purpose corporation is authorized to issue.
   (e) If the flexible purpose corporation is authorized to issue
more than one class of shares, or if any class of shares is to have
two or more series, the articles shall state:
   (1) The total number of shares of each class that the flexible
purpose corporation is authorized to issue and the total number of
shares of each series that the flexible purpose corporation is
authorized to issue or that the board is authorized to fix the number
of shares of any such series.
   (2) The designation of each class and the designation of each
series or that the board may determine the designation of any such
series.
   (3) The rights, preferences, privileges, and restrictions granted
to or imposed upon the respective classes or series of shares or the
holders thereof, or that the board, within any limits and
restrictions stated, may determine or alter the rights, preferences,
privileges, and restrictions granted to or imposed upon any wholly
unissued class of shares or any wholly unissued series of any class
of shares. As to any series the number of shares of which is
authorized to be fixed by the board, the articles may also authorize
the board, within the limits and restrictions stated in the article
or in any resolution or resolutions of the board originally fixing
the number of shares constituting any series, to increase or
decrease, but not below the number of shares of such series then
outstanding, the number of shares of any series subsequent to the
issue of shares of that series. If the number of shares of any series
shall be so decreased, the shares constituting that decrease shall
resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of that series.
   2603.  The articles of incorporation may set forth:
   (a) Any or all of the following provisions, which shall not be
effective unless expressly provided in the articles:
   (1) Granting, with or without limitations, the power to levy
assessments upon the shares or any class of shares.
   (2) Granting to shareholders preemptive rights to subscribe to any
or all issues of shares or securities.
   (3) Special qualifications of persons who may be shareholders.
   (4) A provision limiting the duration of the flexible purpose
corporation's existence to a specified date.
   (5) A provision requiring, for any or all corporate actions,
except as provided in Section 303, subdivision (b) of Section 402.5,
subdivision (c) of Section 708, and Section 1900, the vote of a
larger proportion or of all of the shares of any class or series, or
the vote or quorum for taking action of a larger proportion or of all
of the directors, than is otherwise required by Division 1
(commencing with Section 100) or this division.
   (6) So long as consistent with the purpose of the flexible purpose
corporation as set forth in the articles in accordance with
subdivision (b) of Section 2602, a provision limiting or restricting
the business in which the flexible purpose corporation may engage or
the powers which the flexible purpose corporation may exercise, or
both.
   (7) A provision conferring upon the holders of any evidences of
indebtedness, issued or to be issued by the flexible purpose
corporation, the right to vote in the election of the directors and
on any other matters on which shareholders may vote.
   (8) A provision conferring upon shareholders the right to
determine the consideration for which shares shall be issued.
   (9) A provision requiring the approval of the shareholders
(Section 153) or the approval of the outstanding shares (Section 152)
for any corporate action, even though not otherwise required by
Division 1 (commencing with Section 100) or this division.
   (10) Provisions eliminating or limiting the personal liability of
a director for monetary damages in an action brought by or in the
right of the flexible purpose corporation for breach of a director's
duties to the flexible purpose corporation and its shareholders, as
set forth in Section 2700, subject to the following:
   (A) The provision may not eliminate or limit the liability of
directors (i) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (ii) for acts
or omissions that a director believes to be contrary to the best
interests of the flexible purpose corporation or its shareholders and
its corporate purposes as expressed in its articles, or that involve
the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal
benefit, (iv) for acts or omissions that show a reckless disregard
for the director's duty to the flexible purpose corporation or its
shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the flexible
purpose corporation, its shareholders, or its corporate purposes as
expressed in its articles, (v) for acts or omissions that constitute
an unexcused pattern of inattention that amounts to an abdication of
the director's duty to the flexible purpose corporation, its
shareholders, or its corporate purposes as expressed in its articles
pursuant to Section 2602, or (vi) under Section 310 or 2701.
   (B) The provision shall not eliminate or limit the liability of a
director for any act or omission occurring prior to the date on which
the provision becomes effective.
   (C) The provision shall not eliminate or limit the liability of an
officer for any act or omission as an officer, notwithstanding that
the officer is also a director or that his or her actions, if
negligent or improper, have been ratified by the directors.
   (11) A provision authorizing, whether by bylaw, agreement, or
otherwise, the indemnification of agents of the flexible purpose
corporation for breach of duty to the flexible purpose corporation
and its shareholders, provided, however, that the provision may not
provide for indemnification of any agent for any acts or omissions or
transactions from which a director may not be relieved of liability
as described in subparagraphs (A), (B), and (C) of paragraph (10).
   Notwithstanding this subdivision, bylaws may require, for all or
any actions by the board, the affirmative vote of a majority of the
authorized number of directors. Nothing contained in this subdivision
shall affect the enforceability, as between the parties thereto, of
any lawful agreement not otherwise contrary to public policy.
   (b) Reasonable restrictions upon the right to transfer or
hypothecate shares of any class or classes or series, except that no
restriction shall be binding with respect to shares issued prior to
the adoption of the restriction unless the holders of those shares
voted in favor of the restriction.
   (c) The names and addresses of the persons appointed to act as
initial directors.
   (d) Any other provision, not in conflict with law, for the
management of the business and for the conduct of the affairs of the
flexible purpose corporation, including any provision that is
required or permitted by this division to be stated in the bylaws.
   2604.  Subject to any limitation contained in the articles, to
compliance with any other applicable laws, and to consistency with
the special purpose of the flexible purpose corporation, any flexible
purpose corporation other than a flexible purpose corporation
subject to the Banking Law or a professional flexible purpose
corporation may engage in any business activity. A flexible purpose
corporation subject to the Banking Law or a professional flexible
purpose corporation may engage in any business activity not
prohibited by the respective statutes and regulations to which it is
subject.
   2605.  Subject to any limitations contained in the articles, to
compliance with other provisions of this division and any other
applicable laws, and to consistency with the special purpose of the
flexible purpose corporation, a flexible purpose corporation shall
have all the powers of a natural person in carrying out its business
activities, including, without limitation, the power to:
   (a) Adopt, use, and at will alter a corporate seal. Failure to
affix a seal does not affect the validity of any instrument.
   (b) Adopt, amend, and repeal bylaws.
   (c) Qualify to do business in any other state, territory,
dependency, or foreign country.
   (d) Subject to the provisions of Section 510, issue, purchase,
redeem, receive, take or otherwise acquire, own, hold, sell, lend,
exchange, transfer or otherwise dispose of, pledge, use, and
otherwise deal in and with its own shares, bonds, debentures, and
other securities.
   (e) Make donations, regardless of specific corporate benefit, for
the public welfare or for a community fund, hospital, charitable,
educational, scientific, civic, or similar purposes.
   (f) Pay pensions, and establish and carry out pension,
profit-sharing, share bonus, share purchase, share option, savings,
thrift, and other retirement, incentive, and benefit plans, trusts
and provisions for any or all of the directors, officers, and
employees of the flexible purpose corporation or any of its
subsidiaries or affiliates, and to indemnify and purchase and
maintain insurance on behalf of any fiduciary of these plans, trusts,
or provisions.
   (g) Subject to the provisions of Section 315, assume obligations,
enter into contracts, including contracts of guaranty or suretyship,
incur liabilities, borrow and lend money and 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, franchises and income.
   (h) Participate with others in any partnership, joint venture, or
other association, transaction, or arrangement of any kind, whether
or not that participation involves sharing or delegation of control
with or to others.
      CHAPTER 3.  DIRECTORS AND MANAGEMENT


   2700.  (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner the director
believes to be in the best interests of the flexible purpose
corporation and its shareholders, and with that care, including
reasonable inquiry, as an ordinarily prudent person in a like
position would use under similar circumstances.
   (b) In performing the duties of a director, a director shall be
entitled to rely upon information, opinions, reports, or statements,
including financial statements and other financial data, in each case
prepared or presented by any of the following:
   (1) An officer or employee of the flexible purpose corporation
whom the director believes to be reliable and competent in the
matters presented.
   (2) Counsel, independent accountants, or other persons as to
matters which the director believes to be within that person's
professional or expert competence.
   (3) A committee of the board upon which the director does not
serve, as to matters within its designated authority, which committee
the director believes to merit confidence, so long as the director
acts in good faith, after reasonable inquiry when the need therefor
is indicated by the circumstances and without knowledge that would
cause that reliance to be unwarranted.
   (c) In discharging his or her duties, a director may consider
those factors, and give weight to those factors, as the director
deems relevant, including the short-term and long-term prospects of
the flexible purpose corporation, the best interests of the flexible
purpose corporation and its shareholders, and the purposes of the
flexible purpose corporation as set forth in its articles.
   (d) A person who performs the duties of a director in accordance
with subdivisions (a), (b), and (c) shall have no liability based
upon any alleged failure to discharge the person's obligations as a
director. The liability of a director for monetary damages may be
eliminated or limited by a flexible purpose corporation's articles to
the extent provided in paragraph (10) of subdivision (a) of Section
2603.
   (e) Notwithstanding any of the purposes set forth in its articles,
a flexible purpose corporation shall not be deemed to hold any of
its assets for the benefit of any party other than its shareholders.
However, nothing in this division shall be construed as negating
existing charitable trust principles or the Attorney General's
authority to enforce any charitable trust created.
   (f) Nothing in this section, express or implied, is intended to
create or grant or shall create or grant any right in or for any
person or any cause of action by or for any person, and a director
shall not be responsible to any party other than the flexible purpose
corporation and its shareholders.
   2701.  (a) Subject to Section 2700, directors of a flexible
purpose corporation who approve any of the following corporate
actions shall be jointly and severally liable to the flexible purpose
corporation for the benefit of all of the creditors or shareholders
entitled to institute an action under subdivision (c):
   (1) The making of any distribution to its shareholders to the
extent that it is contrary to the provisions of Sections 500 to 503,
inclusive.
   (2) The distribution of assets to shareholders after institution
of dissolution proceedings of the flexible purpose corporation,
without paying or adequately
         providing for all known liabilities of the flexible purpose
corporation, excluding any claims not filed by creditors within the
time limit set by the court in a notice given to creditors under
Chapter 18 (commencing with Section 1800) of Division 1, Chapter 20
(commencing with Section 1900) of Division 1, and Chapter 20
(commencing with Section 2000).
   (3) The making of any loan or guaranty contrary to Section 2715.
   (b) A director who is present at a meeting of the board, or any
committee of the board, at which an action specified in subdivision
(a) is taken and who abstains from voting, shall be deemed to have
approved the action.
   (c) Suit may be brought in the name of the flexible purpose
corporation to enforce the liability as follows:
   (1) Under paragraph (1) of subdivision (a) against any or all
directors liable, by the persons entitled to sue under subdivision
(b) of Section 506.
   (2) Under paragraph (2) or (3) of subdivision (a) against any or
all directors liable, by any one or more creditors of the flexible
purpose corporation whose debts or claims arose prior to the time of
any of the corporate actions specified in paragraph (2) or (3) of
subdivision (a) and who have not consented to the corporate action,
regardless of whether 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 holders of shares outstanding 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 2900.
   (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 loss
suffered by the flexible purpose corporation as a result of the
illegal loan or guaranty, respectively, but not exceeding the
liabilities of the flexible purpose corporation owed to nonconsenting
creditors at the time of the violation and the injury suffered by
nonconsenting shareholders.
   (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 flexible purpose corporation:
   (1) With respect to paragraph (1) of subdivision (a), against
shareholders who received the distribution.
   (2) With respect to paragraph (2) of subdivision (a), against
shareholders who received the distribution of assets.
   (3) With respect to paragraph (3) of subdivision (a), against the
person who received the loan or guaranty.
   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.
   2702.  (a) For the purposes of this section:
   (1) "Agent" means any person who is or was a director, officer,
employee, or other agent of the flexible purpose corporation, or is
or was serving at the request of the flexible purpose corporation as
a director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, or other enterprise,
or was a director, officer, employee, or agent of a foreign or
domestic corporation which was a predecessor corporation of the
flexible purpose corporation or of another enterprise at the request
of the predecessor corporation.
   (2) "Proceeding" means any threatened, pending, or completed
action or proceeding, whether civil, criminal, administrative, or
investigative.
   (3) "Expenses" includes without limitation attorneys' fees and any
expenses of establishing a right to indemnification under
subdivision (b).
   (b) Subject to the standards and restrictions, if any, set forth
in its articles or bylaws, and subject to the limitations required by
paragraph (11) of subdivision (a) of Section 2603, a flexible
purpose corporation may indemnify and hold harmless any agent or any
other person from and against any and all claims and demands
whatsoever.
   (c) Expenses incurred in defending any proceeding may be advanced
by the flexible purpose corporation prior to the final disposition of
the proceeding. The provisions of subdivision (a) of Section 315 do
not apply to advances made pursuant to this subdivision.
   (d) A flexible purpose corporation may purchase and maintain
insurance on behalf of any of its agents against any liability
asserted against or incurred by the agent in that capacity or arising
out of the agent's status as an agent regardless of whether the
flexible purpose corporation would have the power to indemnify the
agent against that liability under this section. The fact that a
flexible purpose corporation owns all or a portion of the shares of
the company issuing a policy of insurance shall not render this
subdivision inapplicable if either of the following conditions are
satisfied:
   (1) The insurance provided by this subdivision is limited as
indemnification is required to be limited by paragraph (11) of
subdivision (a) of Section 2603.
   (2) (A) The company issuing the insurance policy is organized,
licensed, and operated in a manner that complies with the insurance
laws and regulations applicable to its jurisdiction of organization.
   (B) The company issuing the policy provides procedures for
processing claims that do not permit that company to be subject to
the direct control of the flexible purpose corporation that purchased
that policy.
   (C) The policy issued provides for some manner of risk sharing
between the issuer and purchaser of the policy, on one hand, and some
unaffiliated person or persons, on the other, such as by providing
for more than one unaffiliated owner of the company issuing the
policy or by providing that a portion of the coverage furnished will
be obtained from some unaffiliated insurer or reinsurer.
   (e) This section does not apply to any proceeding against any
trustee, investment manager, or other fiduciary of an employee
benefit plan in that person's capacity as such, even though the
person may also be an agent as defined in subdivision (a) of the
employer flexible purpose corporation. A flexible purpose corporation
shall have power to indemnify a trustee, investment manager, or
other fiduciary to the extent permitted by subdivision (f) of Section
2605.
      CHAPTER 4.  SHARES AND SHARE CERTIFICATES


   2800.  (a) All certificates representing shares of a flexible
purpose corporation shall contain, in addition to any other
statements required by this section, the following conspicuous
language on the face of the certificate.


   "This entity is a flexible purpose corporation organized under
Division 1.5 of the California Corporations Code. The articles of
this corporation state one or more purposes required by law. Refer to
the articles on file with the Secretary of State, and the bylaws and
any agreements on file with the secretary of the corporation, for
further information."


   (b) There shall also appear on the certificate, the initial
transaction statement, and written statements, unless stated or
summarized under subdivision (a) or (b) of Section 417, the
statements required by all of the following, to the extent
applicable:
   (1) The fact that the shares are subject to restrictions upon
transfer.
   (2) If the shares are assessable or are not fully paid, a
statement that they are assessable or the statements required by
subdivision (d) of Section 409 if they are not fully paid.
   (3) The fact that the shares are subject to a voting agreement
under subdivision (a) of Section 706 or an irrevocable proxy under
subdivision (e) of Section 705 or restrictions upon voting rights
contractually imposed by the flexible purpose corporation.
   (4) The fact that the shares are redeemable.
   (5) The fact that the shares are convertible and the period for
conversion.
   Statements or references to statements on the face of the
certificate, the initial transaction statement, and written
statements required by paragraph (1) or (2) shall be conspicuous.
   (c) Unless stated on the certificate, the initial transaction
statement, and written statements as required by subdivision (a), no
restriction upon transfer, no right of redemption and no voting
agreement under subdivision (a) of Section 706, no irrevocable proxy
under subdivision (e) of Section 705, and no voting restriction
imposed by the flexible purpose corporation shall be enforceable
against a transferee of the shares without actual knowledge of the
restriction, right, agreement, or proxy. With regard only to
liability to assessment or for the unpaid portion of the subscription
price, unless stated on the certificate as required by subdivision
(a), that liability shall not be enforceable against a transferee of
the shares. For the purpose of this subdivision, "transferee"
includes a purchaser from the flexible purpose corporation.
   (d) All certificates representing shares of a close flexible
purpose corporation shall contain, in addition to any other
statements required by this section, the following conspicuous legend
on the face thereof:


   "This flexible purpose corporation is a close flexible purpose
corporation. The number of holders of record of its shares of all
classes cannot exceed ____ (a number not in excess of 35). Any
attempted voluntary inter vivos transfer which would violate this
requirement is void. Refer to the articles, bylaws and any agreements
on file with the secretary of the flexible purpose corporation for
further restrictions."


   (e) Any attempted voluntary inter vivos transfer of the shares of
a close flexible purpose corporation that would result in the number
of holders of record of its shares exceeding the maximum number
specified in its articles is void if the certificate contains the
legend required by subdivision (c).
      CHAPTER 5.  SHAREHOLDER DERIVATIVE ACTIONS


   2900.  (a) As used in this section:
   (1) "Flexible purpose corporation" includes an unincorporated
association.
   (2) "Board" includes the managing body of an unincorporated
association.
   (3) "Shareholder" includes a member of an unincorporated
association.
   (4) "Shares" includes memberships in an unincorporated
association.
   (b) No action may be instituted or maintained in right of any
domestic or foreign flexible purpose corporation under this section
by any party other than a shareholder of the flexible purpose
corporation.
   (c) No action may be instituted or maintained in right of any
domestic or foreign flexible purpose corporation by any holder of
shares or of voting trust certificates of the flexible purpose
corporation unless both of the following conditions exist:
   (1) The plaintiff alleges in the complaint that plaintiff was a
shareholder, of record or beneficially, or the holder of voting trust
certificates at the time of the transaction or any part thereof of
which plaintiff complains or that plaintiff's shares or voting trust
certificates thereafter devolved upon plaintiff by operation of law
from a holder who was a holder at the time of the transaction or any
part thereof complained of. Any shareholder who does not meet these
requirements may nevertheless be allowed, in the discretion of the
court, to maintain the action on a preliminary showing to and
determination by the court, by motion and after a hearing, at which
the court shall consider the evidence by affidavit or testimony, as
it deems material, of all of the following:
   (i) There is a strong prima facie case in favor of the claim
asserted on behalf of the flexible purpose corporation.
   (ii) No other similar action has been or is likely to be
instituted.
   (iii) The plaintiff acquired the shares before there was
disclosure to the public or to the plaintiff of the wrongdoing of
which plaintiff complains.
   (iv) Unless the action can be maintained the defendant may retain
a gain derived from defendant's willful breach of a fiduciary duty.
   (v) The requested relief will not result in unjust enrichment of
the flexible purpose corporation or any shareholder of the flexible
purpose corporation.
   (2) The plaintiff alleges in the complaint with particularity
plaintiff's efforts to secure from the board the action as plaintiff
desires, or the reasons for not making that effort, and alleges
further that plaintiff has either informed the flexible purpose
corporation or the board in writing of the ultimate facts of each
cause of action against each defendant or delivered to the flexible
purpose corporation or the board a true copy of the complaint which
plaintiff proposes to file.
   (d) In any action referred to in subdivision (b), at any time
within 30 days after service of summons upon the flexible purpose
corporation or upon any defendant who is an officer or director of
the flexible purpose corporation, or held that office at the time of
the acts complained of, the flexible purpose corporation or the
defendant may move the court for an order, upon notice and hearing,
requiring the plaintiff to furnish a bond as hereinafter provided.
The motion shall be based upon one or both of the following grounds:
   (1) There is no reasonable possibility that the prosecution of the
cause of action alleged in the complaint against the moving party
will benefit the flexible purpose corporation or its shareholders.
   (2) The moving party, if other than the flexible purpose
corporation, did not participate in the transaction complained of in
any capacity.
   The court on application of the flexible purpose corporation or
any defendant may, for good cause shown, extend the 30-day period for
an additional period or periods not exceeding 60 days.
   (e) At the hearing upon any motion pursuant to subdivision (c),
the court shall consider the evidence, written or oral, by witnesses
or affidavit, as may be material to the ground or grounds upon which
the motion is based, or to a determination of the probable reasonable
expenses, including attorneys' fees, of the flexible purpose
corporation and the moving party that 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 amount of the bond, 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 flexible purpose corporation in
connection with the action, including expenses for which the flexible
purpose corporation may become liable pursuant to Section 2702. A
ruling by the court on the motion shall not be a determination of any
issue in the action or of the merits thereof. If the court, upon the
motion, makes a determination that a bond shall be furnished by the
plaintiff as to any one or more defendants, the action shall be
dismissed as to the defendant or defendants, unless the bond required
by the court has been furnished within such reasonable time as may
be fixed by the court.
   (f) If the plaintiff, either before or after a motion is made
pursuant to subdivision (c), or any order or determination pursuant
to the motion, furnishes a bond 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 shall be deemed to
have complied with the requirements of this section and with any
order for a bond theretofore made, and any motion then pending shall
be dismissed and no further or additional bond shall be required.
   (g) If a motion is filed pursuant to subdivision (c), no pleadings
need be filed by the flexible purpose corporation or any other
defendant and the prosecution of the action shall be stayed until 10
days after the motion has been disposed of.
      CHAPTER 6.  AMENDMENT OF ARTICLES


   3000.  (a) A proposed amendment to the articles of a flexible
purpose corporation shall be approved by the outstanding shares of a
class, regardless of whether that class is entitled to vote thereon
by the provisions of the articles, if the amendment would:
   (1) Increase or decrease the aggregate number of authorized shares
of that class, other than an increase as provided in either
subdivision (b) of Section 405 or subdivision (b) of Section 902.
   (2) Effect an exchange, reclassification, or cancellation of all
or part of the shares of that class, including a reverse stock split
but excluding a stock split.
   (3) Effect an exchange, or create a right of exchange, of all or
part of the shares of another class into the shares of that class.
   (4) Change the rights, preferences, privileges or restrictions of
the shares of that class.
   (5) Create a new class of shares having rights, preferences, or
privileges prior to the shares of that class, or increase the rights,
preferences, or privileges or the number of authorized shares of any
class having rights, preferences, or privileges prior to the shares
of that class.
   (6) In the case of preferred shares, divide the shares of any
class into series having different rights, preferences, privileges,
or restrictions or authorize the board to do so.
   (7) Cancel or otherwise affect dividends on the shares of that
class that have accrued but have not been paid.
   (b) A proposed amendment shall be approved by an affirmative vote
of at least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
if the amendment would materially alter any special purpose of the
flexible purpose corporation stated in the articles pursuant to
paragraph (2) of subdivision (b) of Section 2602, regardless of
whether that purpose, as amended, would comply with the provisions of
that paragraph.
   (c) Different series of the same class shall not constitute
different classes for the purpose of voting by classes except when a
series is adversely affected by an amendment in a different manner
than other shares of the same class.
   (d) In addition to approval by a class as provided in subdivisions
(a) and (b), a proposed amendment shall also be approved by the
outstanding voting shares (Section 152).
   3001.  (a) A flexible purpose corporation may, by amendment of its
articles pursuant to this section, convert to a nonprofit public
benefit corporation, nonprofit mutual benefit corporation, nonprofit
religious corporation, or cooperative corporation.
   (b) The amendment of the articles to convert to a nonprofit
corporation shall revise the statement of purpose, delete the
authorization for shares and any other provisions relating to
authorized or issued shares, make other changes as may be necessary
or desired, and, if any shares have been issued, provide either for
the cancellation of those shares or for the conversion of those
shares to memberships of the nonprofit corporation. The amendment of
the articles to convert to a cooperative corporation shall revise the
statement of purpose, make other changes as may be necessary or
desired, and, if any shares have been issued, provide for the
cancellation of those shares or for the conversion of those shares to
memberships of the cooperative corporation, if necessary.
   (c) If shares have been issued, an amendment to convert to a
nonprofit corporation shall be approved by all of the outstanding
shares of all classes regardless of limitations or restrictions on
their voting rights and an amendment to convert to a cooperative
corporation shall be approved by the outstanding shares of each class
regardless of limitations or restrictions on their voting rights.
   (d) If an amendment pursuant to this section is included in a
merger agreement, the provisions of this section shall apply, except
that any provision for cancellation or conversion of shares shall be
in the merger agreement rather than in the amendment of the articles.

   (e) Notwithstanding subdivision (c), if a flexible purpose
corporation is a mutual water company within the meaning of Section
2705 of the Public Utilities Code and under the terms of the
conversion each outstanding share is converted to a membership of a
nonprofit mutual benefit corporation, an amendment to convert to a
nonprofit mutual benefit corporation shall be approved by the
outstanding shares of each class regardless of limitations or
restrictions on their voting rights.
   3002.  (a) A flexible purpose corporation may, by amendment of its
articles pursuant to this section, convert to a domestic
corporation.
   (b) The amendment of the articles to convert to a domestic
corporation shall revise the statement of purpose to delete any
provisions in the articles that are permitted by Section 2602, but
that are not permitted to be in the articles of a domestic
corporation.
   (c) If shares have been issued, an amendment to convert to a
domestic corporation shall be approved by an affirmative vote of at
least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles.
   (d) If an amendment pursuant to this section is included in a
merger agreement, the provisions of this section shall apply, except
that any provision for cancellation or conversion of shares shall be
in the merger agreement rather than in the amendment of the articles.

      CHAPTER 7.  SALES OF ASSETS


   3100.  (a) A flexible purpose corporation may sell, lease, convey,
exchange, transfer, or otherwise dispose of all or substantially all
of its assets when the principal terms of the transaction are
approved by the board and are approved by an affirmative vote of at
least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
either before or after approval by the board and before the
transaction. A transaction constituting a reorganization shall be
subject to Chapter 12 (commencing with Section 1200) of Division 1
and Chapter 10 (commencing with Section 3400) of this division and
shall not be subject to this section, other than subdivision (d). A
transaction constituting a conversion shall be subject to Chapter
11.5 (commencing with Section 1150) of Division 1 and Chapter 9
(commencing with Section 3300) of this division and shall not be
subject to this section.
   (b) Notwithstanding approval of the outstanding shares, the board
may abandon the proposed transaction without further action by the
shareholders, subject to the contractual rights, if any, of third
parties.
   (c) The sale, lease, conveyance, exchange, transfer, or other
disposition may be made upon those terms and conditions and for that
consideration as the board may deem in the best interests of the
flexible purpose corporation. The consideration may be money,
securities, or other property.
   (d) If the acquiring party in a transaction pursuant to
subdivision (a) or subdivision (g) of Section 2001 is in control of
or under common control with the disposing flexible purpose
corporation, the principal terms of the sale shall be approved by at
least 90 percent of the voting power of the disposing flexible
purpose corporation unless the disposition is to a domestic or
foreign other business entity or flexible purpose corporation, the
articles of incorporation of which specify materially the same
purposes, in consideration of the nonredeemable common shares or
nonredeemable equity securities of the acquiring party or its parent.

   (e) Subdivision (d) shall not apply to a transaction if the
Commissioner of Corporations, the Commissioner of Financial
Institutions, the Insurance Commissioner, or the Public Utilities
Commission has approved the terms and conditions of the transaction
and the fairness of those terms and conditions pursuant to Section
25142, Section 696.5 of the Financial Code, Section 838.5 of the
Insurance Code, or Section 822 of the Public Utilities Code.
      CHAPTER 8.  MERGER


   3200.  If any disappearing flexible purpose corporation in a
merger is a close flexible purpose corporation and the surviving
flexible purpose corporation is not a close flexible purpose
corporation, the merger shall be approved by an affirmative vote of
at least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
of the disappearing flexible purpose corporation. The articles may
provide for a lesser vote, but not less than a majority of the
outstanding shares of each class.
   3201.  If any disappearing corporation in a merger is a flexible
purpose corporation and the surviving entity is not a flexible
purpose corporation, or is a flexible purpose corporation the
articles of incorporation of which set forth materially different
purposes, the merger shall be approved by an affirmative vote of at
least two-thirds of the outstanding shares of each class, or a
greater vote if required in the articles, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
of the disappearing flexible purpose corporation.
   3202.  If a disappearing flexible purpose corporation in a merger
is a flexible purpose corporation governed by this division and the
surviving corporation is a nonprofit public benefit corporation, a
nonprofit mutual benefit corporation, or a nonprofit religious
corporation, the merger shall be approved by all of the outstanding
shares of all classes of the disappearing flexible purpose
corporation, regardless of limitations or restrictions on their
voting rights, notwithstanding any provision of Chapter 10
(commencing with Section 3400).
   3203.  (a) Any one or more flexible purpose corporations may merge
with one or more other business entities. One or more domestic
flexible purpose corporations not organized under this division and
one or more foreign corporations may be parties to the merger.
Notwithstanding this section, the merger of any number of flexible
purpose corporations with any number of
                other business entities may be effected only if:
   (1) In a merger in which a domestic flexible purpose 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 flexible purpose corporation and each other party that
desires to merge shall approve, and shall be a party to, an agreement
of merger. Other persons, including a parent party, may be parties
to the agreement of merger. The board of each flexible purpose
corporation that 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, 902, 907, and
3002 to the articles of the surviving flexible purpose corporation,
if applicable, to be effected by the merger. If any amendment changes
the name of the surviving flexible purpose corporation, if
applicable, the new name may be, subject to subdivision (b) of
Section 2601, 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
flexible purpose corporation into shares, interests, or other
securities of the surviving party. If any shares of any constituent
flexible purpose corporation are not to be converted solely into
shares, interests, or other securities of the surviving party, the
agreement of merger shall state (A) the cash, rights, securities, or
other property that 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 (B) 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 domestic
corporation is a party to the merger, Section 3203, if a public
benefit corporation or a religious corporation is a party to the
merger, Section 6019.1, if a mutual benefit corporation is a party to
the merger, Section 8019.1, if a consumer cooperative corporation is
a party to the merger, Section 12540.1, if a domestic limited
partnership is a party to the merger, Section 15911.12, if a domestic
partnership is a party to the merger, Section 16911, and 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
flexible purpose 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 flexible purpose
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
nonredeemable common shares of a constituent flexible purpose
corporation may be converted only into nonredeemable common shares of
a surviving flexible purpose corporation or a parent party or
nonredeemable equity securities of a surviving party other than a
flexible purpose 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 flexible purpose 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 flexible purpose corporation and,
if the amendment changes any of the principal terms of the agreement,
by the outstanding shares, if required by Chapter 10 (commencing
with Section 3400), 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 flexible purpose 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, at any time before the merger is effective.
   (f) Each constituent flexible purpose 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 domestic flexible purpose
corporation, or if a domestic corporation or a foreign corporation, a
public benefit corporation, a mutual benefit corporation, a
religious corporation, or a corporation organized under the Consumer
Cooperative Corporation Law (Part 2 (commencing with Section 12200)
of Division 3) is a party to the merger, after required approvals of
the merger by each constituent flexible purpose corporation through
approval of the board and any approval of the outstanding shares
required by Chapter 13 (commencing with Section 3400) 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 flexible purpose corporation and foreign
flexible purpose 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
flexible purpose 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 3401, in the case of a flexible purpose corporation
subject to that section. If equity securities of a parent party 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 or 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 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
flexible purpose 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
corporation and foreign corporation and a certificate of merger for
each constituent other business entity, subject to subdivision (c) of
Section 153 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, mutual benefit corporation, religious
corporation, or corporation organized under the Consumer Cooperative
Corporation Law (Part 2 (commencing with Section 12200) of Division
3) is a party to the merger, after required approvals of the merger
by each constituent flexible purpose corporation through approval of
the board and any approval of the outstanding shares required by
Chapter 10 (commencing with Section 3400) 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 flexible
purpose 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
flexible purpose corporation was required by Chapter 10 (commencing
with Section 3400), 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
Secretary of State.
   (D) A statement, by each party to the merger that is a domestic
corporation not organized under this division, a foreign corporation
or foreign other business entity, 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 respective 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 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 with 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 15901.14 if a domestic limited partnership, or at the
business address specified in paragraph (5) of subdivision (a) of
Section 15911.14 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 flexible purpose 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 flexible purpose 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) Nothing in this section shall be construed 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 flexible purpose 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 flexible purpose
corporation or domestic other business entity, the merger proceedings
with respect to that party and any domestic disappearing flexible
purpose 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), Section 407, Chapter 10 (commencing with Section 3400), and
Chapter 13 (commencing with Section 1300) of Division 1, and, if
applicable, corresponding provisions of the Nonprofit Corporation Law
(Division 2 (commencing with Section 5002)) or the Consumer
Cooperative Corporation Law (Part 2 (commencing with Section 12200)
of Division 3), 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 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 flexible purpose
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 153 or paragraph (2) of subdivision (g), as applicable,
the merger shall be effective as to each domestic constituent
flexible purpose 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 flexible
purpose 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 flexible purpose 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 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 flexible purpose corporation are suspended at
the time of effectiveness in the foreign jurisdiction, the merger
shall be effective as to the domestic disappearing flexible purpose
corporation as of the date of filing in this state.
   (6) In a merger described in paragraph (3) or (4), each foreign
disappearing flexible purpose 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
2508, 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 2508, automatically cancel the registration for that foreign
other business entity, without the necessity of the filing of a
certificate of cancellation.
      CHAPTER 9.  CONVERSIONS


   3300.  For purposes of this chapter, the following definitions
shall apply:
   (a) "Converted flexible purpose corporation" means a flexible
purpose corporation that results from a conversion of an other
business entity or a foreign other business entity or a foreign
corporation pursuant to Section 1158.
   (b) "Converted entity" means a domestic other business entity that
results from a conversion of a flexible purpose corporation under
this chapter.
   (c) "Converting flexible purpose corporation" means a flexible
purpose corporation that converts into a domestic or foreign other
business entity pursuant to this chapter.
   (d) "Converting entity" means an other business entity or a
foreign other business entity or foreign corporation that converts
into a flexible purpose corporation pursuant to Section 3607.
   (e) "Domestic other business entity" has the meaning provided in
Section 167.7.
   (f) "Foreign other business entity" has the meaning provided in
Section 171.05.
   (g) "Other business entity" has the meaning provided in Section
174.5.
   3301.  (a) A flexible purpose corporation may be converted into a
domestic other business entity pursuant to this chapter if, pursuant
to the proposed conversion, each of the following conditions is met:
   (1) Each share of the same class or series of the converting
flexible purpose corporation shall, unless all the shareholders of
the class or series consent, be treated equally with respect to any
cash, rights, securities, or other property to be received by, or any
obligations or restrictions to be imposed on, the holder of that
share.
   (2) The conversion is approved by an affirmative vote of at least
two-thirds of the outstanding shares (Section 152) of each class, or
a greater vote if required in the articles, regardless of whether
that class is entitled to vote thereon by the provisions of the
articles.
   (3) Nonredeemable common shares of the converting flexible purpose
corporation shall be converted only into nonredeemable equity
securities of the converted entity unless all of the shareholders of
the class consent.
   (4) Paragraph (1) shall not restrict the ability of the
shareholders of a converting flexible purpose corporation to appoint
one or more managers, if the converted entity is a limited liability
company, or one or more general partners, if the converted entity is
a limited partnership, in the plan of conversion or in the converted
entity's governing documents.
                                                         (b)
Notwithstanding subdivision (a), the conversion of a flexible purpose
corporation into a domestic other business entity may be effected
only if both of the following conditions are met:
   (1) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
   (2) The flexible purpose corporation complies with any and all
other requirements of any other law that applies to conversion to the
converted entity.
   3302.  (a) A flexible purpose corporation that desires to convert
to a domestic other business entity shall approve a plan of
conversion. The plan of conversion shall state all of the following:
   (1) The terms and conditions of the conversion.
   (2) The jurisdiction of the organization of the converted entity
and of the converting flexible purpose corporation and the name of
the converted entity after conversion.
   (3) The manner of converting the shares of each of the
shareholders of the converting flexible purpose corporation into
securities of, or interests in, the converted entity.
   (4) The provisions of the governing documents for the converted
entity, including the articles and bylaws, partnership agreement or
limited liability company articles of organization and operating
agreement, to which the holders of interests in the converted entity
are to be bound.
   (5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired by
the converting flexible purpose corporation.
   (b) The plan of conversion shall be approved by the board of the
converting flexible purpose corporation, and the principal terms of
the plan of the conversion shall be approved by at least two-thirds
of the outstanding shares of each class, or a greater vote if
required in the articles, regardless of whether that class is
entitled to vote thereon by the provisions of the articles of the
converting flexible purpose corporation. The approval of the
outstanding shares may be given before or after approval by the
board.
   (c) If the flexible purpose corporation is converting into a
general or limited partnership or into a limited liability company,
then in addition to the approval of the shareholders set forth in
subdivision (b), the plan of conversion shall be approved by each
shareholder who will become a general partner or manager, as
applicable, of the converted entity pursuant to the plan of
conversion unless the shareholders have dissenters' rights pursuant
to Section 3305 and Chapter 13 (commencing with Section 1300) of
Division 1.
   (d) Upon the effectiveness of the conversion, all shareholders of
the converting flexible purpose corporation, except those that
exercise dissenters' rights as provided in Section 3305 and Chapter
13 (commencing with Section 1300) of Division 1, shall be deemed
parties to any agreement or agreements constituting the governing
documents for the converted entity adopted as part of the plan of
conversion, regardless of whether a shareholder has executed the plan
of conversion or those governing documents for the converted entity.
Any adoption of governing documents made pursuant thereto shall be
effective at the effective time or date of the conversion.
   (e) Notwithstanding its prior approval by the board and the
outstanding shares, or either of them, a plan of conversion may be
amended before the conversion takes effect if the amendment is
approved by the board and, if it changes any of the principal terms
of the plan of conversion, by the shareholders of the converting
flexible purpose corporation in the same manner and to the same
extent as was required for approval of the original plan of
conversion.
   (f) A plan of conversion may be abandoned by the board of a
converting flexible purpose corporation, or by the shareholders of a
converting flexible purpose corporation if the abandonment is
approved by the outstanding shares, in each case in the same manner
as required for approval of the plan of conversion, subject to the
contractual rights of third parties, at any time before the
conversion is effective.
   (g) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the converted
entity is a domestic partnership, or at the office at which records
are to be kept under Section 15901.14 if the converted entity is a
domestic limited partnership, or at the office at which records are
to be kept under Section 17057 if the converted entity is a domestic
limited liability company. Upon the request of a shareholder of a
converting flexible purpose corporation, the authorized person on
behalf of the converted entity shall promptly deliver to the
shareholder, at the expense of the converted entity, a copy of the
plan of conversion. A waiver by a shareholder of the rights provided
in this subdivision shall be unenforceable.
   3303.  (a) After the approval, as provided in Section 3302, of a
plan of conversion by the board and the outstanding shares of a
flexible purpose corporation converting into a domestic other
business entity, the converting flexible purpose corporation shall
cause the filing of all documents required by law to effect the
conversion and create the converted entity, which documents shall
include a certificate of conversion or a statement of conversion as
required by Section 3304, and the conversion shall thereupon be
effective.
   (b) A copy of the statement of partnership authority, certificate
of limited partnership, or articles of organization complying with
Section 1156, duly certified by the Secretary of State on or after
the effective date, shall be conclusive evidence of the conversion of
the flexible purpose corporation.
   3304.  (a) To convert a flexible purpose corporation:
   (1) If the flexible purpose corporation is converting into a
domestic limited partnership, a statement of conversion shall be
completed on the certificate of limited partnership for the converted
entity.
   (2) If the flexible purpose corporation is converting into a
domestic partnership, a statement of conversion shall be completed on
the statement of partnership authority for the converted entity, or
if no statement of partnership authority is filed, then a certificate
of conversion shall be filed separately.
   (3) If the flexible purpose corporation is converting into a
domestic limited liability company, a statement of conversion shall
be completed on the articles of organization for the converted
entity.
   (4) If the flexible purpose corporation is converting into a
domestic corporation, a statement of conversion shall be completed on
the articles for the converted entity.
   (b) Any statement or certificate of conversion of a converting
flexible purpose corporation shall be executed and acknowledged by
those officers of the converting flexible purpose corporation as
would be required to sign an officers' certificate, and shall set
forth all of the following:
   (1) The name and the Secretary of State's file number of the
converting flexible purpose corporation.
   (2) A statement of the total number of outstanding shares of each
class entitled to vote on the conversion, that the principal terms of
the plan of conversion were approved by a vote of the number of
shares of each class which equaled or exceeded the vote required
under Section 3602, specifying each class entitled to vote and the
percentage vote required of each class.
   (3) The name, form, and jurisdiction of organization of the
converted entity.
   (c) The certificate of conversion shall be on a form prescribed by
the Secretary of State.
   (d) The filing with the Secretary of State of a statement of
conversion on an organizational document or a certificate of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of dissolution by the converting flexible
purpose corporation and no converting flexible purpose corporation
that has made the filing is required to file a certificate of
election under Section 1901 or a certificate of dissolution under
Section 1905 as a result of that conversion.
   (e)  Upon the effectiveness of a conversion pursuant to this
chapter, a converted entity that is a domestic partnership, domestic
limited partnership or domestic limited liability company shall be
deemed to have assumed the liability of the converting flexible
purpose corporation to prepare and file or cause to be prepared and
filed all tax and information returns otherwise required of the
converting flexible purpose corporation under the Corporation Tax Law
(Part 11 (commencing with Section 23001) of Division 2 of the
Revenue and Taxation Code) and to pay any tax liability determined to
be due pursuant to that law.
   3305.  The shareholders of a converting flexible purpose
corporation shall have all of the rights under Chapter 13 (commencing
with Section 1300) of Division 1 of the shareholders of a
corporation involved in a reorganization requiring the approval of
its outstanding shares, and the converting flexible purpose
corporation shall have all of the obligations under Chapter 13
(commencing with Section 1300) of Division 1 of a corporation
involved in the reorganization. Solely for purposes of applying the
provisions of Chapter 13 (commencing with Section 1300) of Division
1, and not for purposes of this chapter, a conversion pursuant to
Section 3301 or 1158 shall be deemed to constitute a reorganization.
   3306.  Notwithstanding any other provision of law, the Secretary
of State shall charge an entity a fee not to exceed one hundred fifty
dollars ($150) for its conversion made under this chapter.
      CHAPTER 10.  REORGANIZATIONS


   3400.  A reorganization or a share exchange tender offer shall be
approved by the board of all of the following:
   (a) Each constituent flexible purpose corporation in a merger
reorganization.
   (b) The acquiring flexible purpose corporation in an exchange
reorganization.
   (c) The acquiring flexible purpose corporation and the flexible
purpose corporation whose property and assets are acquired in a
sale-of-assets reorganization.
   (d) The acquiring flexible purpose corporation in a share exchange
tender offer.
   (e) The flexible purpose corporation in control of any constituent
or acquiring domestic or foreign flexible purpose corporation or
other business entity under subdivision (a), (b), or (c) and whose
equity securities are issued, transferred, or exchanged in the
reorganization, hereafter a "parent party."
   3401.  (a) The principal terms of a reorganization shall be
approved by the outstanding shares of each class of each flexible
purpose corporation the approval of whose board is required under
Section 3400, except as provided in subdivision (b) and except that,
unless otherwise provided in the articles, no approval of any class
of outstanding preferred shares of the surviving or acquiring
flexible purpose corporation or parent party shall be required if the
rights, preferences, privileges, and restrictions granted to or
imposed upon that class of shares remain unchanged, subject to the
provisions of subdivision (c). For the purpose of this subdivision,
two classes of common shares differing only as to voting rights shall
be considered as a single class of shares.
   (b) No approval of the outstanding shares is required by
subdivision (a) if the flexible purpose corporation, or its
shareholders immediately before the reorganization, or both, shall
own, immediately after the reorganization, equity securities, other
than any warrant or right to subscribe to or purchase those equity
securities, of the surviving or acquiring flexible purpose
corporation or a parent party possessing more than five-sixths of the
voting power of the surviving or acquiring flexible purpose
corporation or parent party. In making the determination of ownership
by the shareholders of a flexible purpose corporation, immediately
after the reorganization, of equity securities pursuant to the
preceding sentence, equity securities that they owned immediately
before the reorganization as shareholders of another party to the
transaction shall be disregarded. For the purpose of this section,
the voting power of a flexible purpose corporation shall be
calculated by assuming the conversion of all equity securities
convertible, immediately or at some future time, into shares entitled
to vote but not assuming the exercise of any warrant or right to
subscribe to or purchase those shares.
   (c) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the outstanding shares of
the surviving flexible purpose corporation in a merger
reorganization, as otherwise required by Chapter 11 (commencing with
Section 3500), if any amendment is made to its articles that would
otherwise require that approval.
   (d) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the outstanding shares of
any class of a flexible purpose corporation that is a party to a
merger or sale-of-assets reorganization if holders of shares of that
class receive shares of the surviving or acquiring flexible purpose
corporation or parent party having different rights, preferences,
privileges, or restrictions than those surrendered. Shares in a
foreign corporation received in exchange for shares in a domestic
flexible purpose corporation shall be deemed to have different
rights, preferences, privileges, and restrictions within the meaning
of the preceding sentence.
   (e) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by the affirmative vote of at
least two-thirds of each class, or a greater vote if required in the
articles, of the outstanding shares of any flexible purpose
corporation that is a close flexible purpose corporation if the
reorganization would result in the holders receiving shares or other
interests of a corporation or other business entity that is not a
close flexible purpose corporation. The articles may provide for a
lesser vote, but not less than a majority of the outstanding shares
of each class.
   (f) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by a vote of at least
two-thirds of the outstanding shares of each class, or a greater vote
if required in the articles, of a flexible purpose corporation that
is a party to a merger reorganization, regardless of whether that
class is entitled to vote thereon by the provisions of the articles,
if holders of shares of that class receive interests of a surviving
other business entity in the merger that is not a flexible purpose
corporation, or receive interests of a surviving flexible purpose
corporation the articles of incorporation of which specify a
materially different purpose as part of the reorganization.
   (g) Notwithstanding subdivisions (a) and (b), the principal terms
of a reorganization shall be approved by all shareholders of any
class or series if, as a result of the reorganization, the holders of
that class or series become personally liable for any obligations of
a party to the reorganization, unless all holders of that class or
series have the dissenters' rights provided in Chapter 13 (commencing
with Section 1300) of Division 1.
   (h) Any approval required by this section may be given before or
after the approval by the board. Notwithstanding approval required by
this section, the board may abandon the proposed reorganization
without further action by the shareholders, subject to the
contractual rights, if any, of third parties.
      CHAPTER 11.  RECORDS AND REPORTS


   3500.  (a) The board of a flexible 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
flexible 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 flexible 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 flexible 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 flexible purpose corporation's officers and directors
believe to be reasonably necessary or appropriate to an understanding
of the flexible 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 short-term and long-term
objectives of the flexible 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 flexible 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 flexible 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 flexible purpose corporation during the
fiscal year for evaluating its performance in achieving its special
purpose objectives, including an explanation of why the flexible
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 flexible 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 flexible 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 flexible 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 flexible 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 flexible purpose corporation
may make a written request to the flexible purpose corporation for
an income statement of the flexible 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 flexible 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
flexible 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 flexible purpose
corporation or the certificate of an authorized officer of the
flexible purpose corporation that the financial statements were
prepared without audit from the books and records of the flexible
purpose corporation.
   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 flexible
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 flexible 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 flexible 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.
   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 flexible
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 flexible 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 flexible 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
subdivision (b) of Section 3500 and Section 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 flexible purpose corporation
with fewer than 100 holders of record of its shares, determined as
provided in Section 605, required to be furnished by subdivision (b)
of Section 3500 and Section 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 flexible
purpose corporation and disclose the accounting basis used in their
preparation.
   (h) Any corporation with fewer than 100 holders of record of its
shares, determined as provided in Section 605, shall not be required
to prepare and furnish the reports required by subdivision (b) of
Section 3500 and Section 3501, if and only if, the flexible purpose
corporation holds unrevoked waivers of such compliance executed by
shareholders holding two-thirds of the outstanding shares. That
waiver shall remain valid and in effect for each fiscal year that the
flexible purpose corporation provides each waiving shareholder with
notice, prior to the end of that year, that the shareholder may
revoke the waiver and, on the 30th day following the end of the
fiscal year, the flexible purpose corporation holds unrevoked waivers
to that compliance executed by shareholders holding two-thirds of
the outstanding shares. The shareholder notice may be sent by
electronic transmission pursuant to Section 20.
   (i) 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.
   (j) 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.
   (k) 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 subdivision (b) of Section 3500 and Section
3501 and, for good cause shown, may extend the time therefor.
   (l) In any action or proceeding with respect to Section 3500 or
3501, if the court finds the failure of the flexible 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.
   (m) Subdivision (b) of Section 3500 and Section 3501 apply to any
domestic flexible purpose corporation and also to a foreign flexible
purpose corporation having its principal executive office in this
state or customarily holding meetings of its board in this state.
   (n) All reports and notices required by subdivision (b) of Section
3500 and Section 3501 shall be maintained by the flexible purpose
corporation, in an electronic form for a period of not less than 10
years.
   3503.  Any officers, directors, employees, or agents of a flexible
purpose corporation who do any of the following shall be liable
jointly and severally for all the damages resulting therefrom to the
flexible 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 subdivision (b) of Section
3500 and Section 3501, circular, certificate, financial statement,
balance sheet, public notice, or document respecting the flexible
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 flexible 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 flexible 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.
  SEC. 13.  Section 5122 of the Corporations Code is amended to read:

   5122.  (a) The Secretary of State shall not file articles setting
forth a name in which "bank," "trust," "trustee" or related words
appear, unless the certificate of approval of the Commissioner of
Financial Institutions is attached thereto.
   (b) The Secretary of State shall not file articles which set forth
a name which is likely to mislead the public or which is the same
as, or resembles so closely as to tend to deceive, the name of a
domestic corporation, the name of a foreign corporation which is
authorized to transact intrastate business or has registered its name
pursuant to Section 2101, a name which a foreign corporation has
assumed under subdivision (b) of Section 2106 or a name which will
become the record name of a domestic or foreign corporation upon the
effective date of a filed corporate instrument where there is a
delayed effective date pursuant to subdivision (c) of Section 110, or
subdivision (c) of Section 5008, or a name which is under
reservation pursuant to this title, except that a corporation may
adopt a name that is substantially the same as an existing domestic
or foreign corporation which is authorized to transact intrastate
business or has registered its name pursuant to Section 2101, upon
proof of consent by such corporation and a finding by the Secretary
of State that under the circumstances the public is not likely to be
misled.
   The use by a corporation of a name in violation of this section
may be enjoined notwithstanding the filing of its articles by the
Secretary of State.
   (c) Any applicant may, upon payment of the fee prescribed therefor
in the Government Code, obtain from the Secretary of State a
certificate of reservation of any name not prohibited by subdivision
(b), and upon the issuance of the certificate the name stated therein
shall be reserved for a period of 60 days. The Secretary of State
shall not, however, issue certificates reserving the same name for
two or more consecutive 60-day periods to the same applicant or for
the use or benefit of the same person; nor shall consecutive
reservations be made by or for the use or benefit of the same person
of names so similar as to fall within the prohibitions of subdivision
(b).
  SEC. 14.  Section 7122 of the Corporations Code is amended to read:

   7122.  (a) The Secretary of State shall not file articles setting
forth a name in which "bank," "trust," "trustee" or related words
appear, unless the certificate of approval of the Commissioner of
Financial Institutions is attached thereto.
   (b) The Secretary of State shall not file articles pursuant to
this part setting forth a name which may create the impression that
the purpose of the corporation is public, charitable or religious or
that it is a charitable foundation.
   (c) The Secretary of State shall not file articles which set forth
a name which is likely to mislead the public or which is the same
as, or resembles so closely as to tend to deceive, the name of a
domestic corporation, the name of a foreign corporation which is
authorized to transact intrastate business or has registered its name
pursuant to Section 2101, a name which a foreign corporation has
assumed under subdivision (b) of Section 2106, a name which will
become the record name of a domestic or foreign corporation upon the
effective date of a filed corporate instrument where there is a
delayed effective date pursuant to subdivision (c) of Section 110, or
subdivision (c) of Section 5008, or a name which is under
reservation pursuant to this title, except that a corporation may
adopt a name that is substantially the same as an existing domestic
or foreign corporation which is authorized to transact intrastate
business or has registered its name pursuant to Section 2101, upon
proof of consent by such corporation and a finding by the Secretary
of State that under the circumstances the public is not likely to be
misled.
   The use by a corporation of a name in violation of this section
may be enjoined notwithstanding the filing of its articles by the
Secretary of State.
   (d) Any applicant may, upon payment of the fee prescribed therefor
in the Government Code, obtain from the Secretary of State a
certificate of reservation of any name not prohibited by subdivision
(c), and upon the issuance of the certificate the name stated therein
shall be reserved for a period of 60 days. The Secretary of State
shall not, however, issue certificates reserving the same name for
two or more consecutive 60-day periods to the same applicant or for
the use or benefit of the same person; nor shall consecutive
reservations be made by or for the use or benefit of the same person
of names so similar as to fall within the prohibitions of subdivision
(c).
  SEC. 15.  Section 9122 of the Corporations Code is amended to read:

   9122.  (a) The Secretary of State shall not file articles setting
forth a name in which "bank," "trust," "trustee" or related words
appear, unless the certificate of approval of the Commissioner of
Financial Institutions is attached thereto.
   (b) The Secretary of State shall not file articles which set forth
a name which is likely to mislead the public or which is the same
as, or resembles so closely as to tend to deceive, the name of a
domestic corporation, the name of a foreign corporation which is
authorized to transact intrastate business or has registered its name
pursuant to Section 2101, a name which a foreign corporation has
assumed under subdivision (b) of Section 2106 or a name which will
become the record name of a domestic or foreign corporation upon the
effective date of a filed corporate instrument where there is a
delayed effective date pursuant to subdivision (c) of Section 110 or
subdivision (c) of Section 5008, or a name which is under reservation
pursuant to this title, except that a corporation may adopt a name
that is substantially the same as an existing domestic or foreign
corporation which is authorized to transact intrastate business or
has registered its name pursuant to Section 2101, upon proof of
consent by such corporation and a finding by the Secretary of State
that under the circumstances the public is not likely to be misled.
   The use by a corporation of a name in violation of this section
may be enjoined notwithstanding the filing of its articles by the
Secretary of State.
   (c) Any applicant may, upon payment of the fee prescribed therefor
in the Government Code, obtain from the Secretary of State a
certificate of reservation of any name not prohibited by subdivision
(b), and upon the issuance of the certificate the name stated therein
shall be reserved for a period of 60 days. The Secretary of State
shall not, however, issue certificates reserving the same name for
two or more consecutive 60-day periods to the same applicant or for
the use or benefit of the same person; nor shall consecutive
reservations be made by or for the use or benefit of the same person
of names so similar as to fall within the prohibitions of subdivision
(b).
  SEC. 16.  Section 8.5 of this bill incorporates amendments to
Section 1113 of the Corporations Code proposed by both this bill and
Assembly Bill 1211. It shall only become operative if (1) both bills
are enacted and become effective on or before January 1, 2012, (2)
each bill amends Section 1113 of the Corporations Code, and (3) this
bill is enacted after Assembly Bill 1211, in which case Section 8 of
this bill shall not become operative.