February 17, 2019

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Governor Green Lights Bill Authorizing Immortal Ex Officio Directors

California's Nonprofit Corporation Law embraces several different types of nonprofit corporations.  Part 1 of the Nonprofit Corporation Law includes provisions that are applicable to three categories of nonprofit corporations -  public benefit, mutual benefit, and religious corporations.  Section 5047, which is included in Part 1, contemplates that some directors may hold their seats by virtue of some other office:

"If the articles or bylaws designate that a natural person is a director or a member of the governing body of the corporation by reason of occupying a specified position within the corporation or outside the corporation, without limiting that person’s right to vote as a member of the governing body, that person shall be a director for all purposes and shall have the same rights and obligations, including voting rights, as the other directors."

Notwithstanding this statute, the Nonprofit Organizations Committee of the Business Law Section of the California Lawyers Association sponsored legislation, AB 2557 (Maienschein) to provide for ex officio directors.  This bill, signed yesterday by Governor Brown, will permit all or a portion of the directors of a public benefit, mutual benefit, religious or cooperative corporation, if authorized in the articles or bylaws, to hold office by virtue of occupying a specified position, either within or outside of the corporation. 

The bill will require the term of office of ex officio directors to coincide with their respective term of office for the position entitling them to serve on the board of directors, and to meet other specified conditions regarding their resignation or removal.  Oddly, the bill doesn't provide for the automatic loss of a director's seat upon his or her death.

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About this Author

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

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...