September 27, 2022

Volume XII, Number 270

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September 26, 2022

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How A Corporation Can Become Religious Without Converting

Although I have yet to encounter the situation, California provides a mechanism for a corporation formed under the General Corporation Law to become a nonprofit religious corporation.  Since religion is involved, it may come as a surprise that no conversion pursuant to Chapter 11.5 of the GCL is required.   All that is required is the amendment of the corporation's articles of incorporation pursuant to Section 911 of the Corporations Code.   

The amendment must (i) revise the statement of purpose; (ii) delete the authorization for shares as well as any other provisions relating to authorized or issued shares; and (iii) make such other changes "as may be necessary or desired".  What happens if there are outstanding shares?  The statute provides that the amendment  must provide either for the cancellation of those shares or for the conversion of those shares to memberships.  

That is the easy part.  If shares have been issued, the amendment must be approved by all outstanding shares of all classes, regardless of limitations or restrictions on voting rights.  

The statute also permits a change in status to a social purpose corporation, nonprofit public benefit corporation, nonprofit mutual benefit corporation, or cooperative corporation.  However, different shareholder approval requirements apply when the change of status is to a cooperative corporation, social purpose corporation or nonprofit mutual benefit corporation.  Section 911 makes no reference to benefit corporations.  A change in status of corporation to a benefit corporation is governed by Section 14603 of the Corporations Code.

© 2010-2022 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XII, Number 227
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About this Author

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