May 27, 2020

May 26, 2020

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What Does The Governor's Proclamation Of Statewide Emergency Have To Do With the General Corporation Law?

Late last month, Governor Gavin Newsom declared a statewide emergency due to the effects of unprecedented high-wind events which have resulted in fires and evacuations across California.  The Governor's declaration has implications for California corporations.  Section 207(i) of the Corporations Code empowers corporations to take a number of actions, some of which can be taken in anticipation of an emergency.  During an emergency, for example, a corporation may deem one or more corporate officers present at a board meeting to be a director as necessary to achieve a quorum for that meeting.  Actions taken in good faith under the statute bind the corporation and may not be used to impose liability on a corporate director, officer, employee or agent.

The statute defines "emergency" as any one of a number of specified events, including a gubernatorial or presidential declaration of an emergency.  However, an emergency exists only so long as, a quorum of a corporation's board of directors cannot be readily convened for action.

Corporations Code Section 212(c) also authorize the bylaws to include provisions, not in conflict with the articles, to manage and conduct the ordinary business affairs of the corporation effective only in an emergency as defined in Section 207.

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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...