October 3, 2022

Volume XII, Number 276

Advertisement

September 30, 2022

Subscribe to Latest Legal News and Analysis

Don't Go Out On A Limb And Seek Enforcement Of These Voting Agreements

California has multiple types of nonprofit corporations.  The "Big Three" are the public benefit corporation, mutual benefit corporation and religious corporation.  The statutes applicable to these three entities are similar in most respects but there are significant differences.  One such difference relates to voting agreements and voting trust agreements.

Corporations Code Section 5614 prohibits, without exception, the enforcement of a voting agreement or voting trust agreement in the case of a public benefit corporation:

A voting agreement or voting trust agreement entered into by a member or members of a corporation shall not be enforced.

This ban applies to agreements entered into by "members", which in the case of a public benefit corporation is defined in Section 5056 as any person who pursuant to a specific provision in the corporation's articles or bylaws has the right to vote for the election of director(s), on a disposition of all or substantially all of the corporation's assets, on a merger, on a dissolution, or on changes to the articles or bylaws.  Many public benefit corporations refer to affiliated persons as "members" but these so-called members are not members for purposes of Section 5056.  Cal. Corp. Code § 5332.

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 151
Advertisement
Advertisement
Advertisement
Advertisement

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...

949-851-5428
Advertisement
Advertisement
Advertisement