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Volume XI, Number 337

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A Corporation May Get Religion, But Not Easily

Section 206 of the California Corporations Code provides that a corporation organized under the General Corporation Law may engage in any "business activity", subject to any limitation contained in its articles of incorporation and compliance with any other applicable laws.   The idea that corporations formed under the GCL are limited to business activities is reinforced by Section 207 which provides that "a corporation shall have all of the powers of a natural person in carrying out its business activities . . ." (emphasis added).   What if a corporation "gets religion" and wishes to operate exclusively for religious purposes?

California has enacted a separate law allowing for the formation of nonprofit religious corporations.   Cal. Corp. Code § 9110 et seq.   While other avenues may be available, Section 911 specifically authorizes a corporation to change its status to a nonprofit religious corporation, among other types of entities.   The procedure involves neither a merger nor a conversion.  Rather, the change of status is effected by simply amending the corporation's articles of incorporation.  That may be easier said than done because the statute requires approval by all of the outstanding shares of all classes regardless of limitations or restrictions upon the voting rights.   While the GCL provides a pathway for businesses to "get religion" the way is not easy and I suspect seldom trod.

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 293
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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