(a) Written Notice to Attorney General of Self-Dealing Transaction.
Corporations Code section 5233(e) provides that an action under section 5233(c) seeking remedies for a self-dealing transaction must be filed within two years after written notice setting forth the material facts of the transaction and the director's interest is filed with the Attorney General in accordance with regulations adopted by the Attorney General.
For purposes of section 5233(e), a written notice of a self-dealing transaction shall be deemed filed with the Attorney General when it is submitted in accordance with subsection 999.1(a) of these regulations.
The written notice of a self-dealing transaction to the Attorney General shall contain the following:
(1) A letter signed on behalf of the corporation by an authorized director or officer thereof, or by or on behalf of a director or officer of the corporation setting forth a detailed description of the self-dealing transaction, the extent to which any director has a material financial interest in the self-dealing transaction, and all material facts concerning the self-dealing transaction. "Material facts" are defined in subsection 999.1(c) of these regulations.
(2) A copy of the corporation's current financial statement as of a date within ninety days preceding the filing of the notice or request, except to the extent already on file with the Registry of Charitable Trusts.
(3) A copy of the articles of incorporation and amendments thereto, except to the extent already on file with the Registry of Charitable Trusts.
(b) Written Request for Attorney General's Approval of Self-Dealing Transaction.
Corporations Code section 5233(d) provides that no remedies shall be granted in any action for a self-dealing transaction if the Attorney General or the court has approved the transaction before or after it was consummated.
A request for approval by the Attorney General of a self-dealing transaction shall be submitted in writing in accordance with subsection 999.1(a) of these regulations.
A request for approval by the Attorney General of a self-dealing transaction shall contain the following:
(1) A letter signed on behalf of the corporation by an authorized director or officer thereof, or by or on behalf of a director of the corporation, setting forth a detailed description of the self-dealing transaction, the extent to which any director has a material financial interest in the self-dealing transaction, and all material facts concerning the self-dealing transaction. "Material facts" are defined in subsection 999.1(c) of these regulations.
(2) A copy of the corporation's current financial statement as of a date within ninety days preceding the filing of the notice or request, except to the extent already on file with the Registry of Charitable Trusts.
(3) A copy of the articles of incorporation and amendments thereto, except to the extent already on file with the Registry of Charitable Trusts.
(4) A copy of the bylaws and amendments thereto, except to the extent already on file with the Registry of Charitable Trusts.
(5) Copies of all minutes of meetings of the board of directors and committees of the board of directors that reflect any discussions or evaluations of the self-dealing transaction.
(6) A letter signed by the interested director setting forth a description of the director's material financial interest in the self-dealing transaction, listing all material facts, as defined in subsection 999.1(c) of these regulations, concerning the transaction, and all facts disclosed by the interested director to the board of directors concerning the transaction. (Note: Disclosure of this information in the corporation's letter, pursuant to subsection 999.2(b)(1), may eliminate the need for the letter from the interested director, to the extent the information in the interested director's letter would duplicate information in the corporation's letter.)
(7) The Attorney General may require submission of additional information by the corporation and its directors in order to complete an analysis of the self-dealing transaction.
(c) Attorney General's Approval of Loans or Guarantees to a Director.
Corporations Code section 5236 prohibits a public benefit corporation from making any loan or guaranty to any director or officer, unless approved by the Attorney General.
For purposes of section 5236, a request for the Attorney General's approval of a loan or guaranty to a director or officer shall be submitted in writing in accordance with subsection 999.1(a) of these regulations.
The written request for Attorney General's approval of a loan or guaranty shall contain the following:
(1) A letter signed on behalf of the corporation by an authorized director or officer thereof, or by or on behalf of a director or officer of the corporation, setting forth a detailed description of the loan or guaranty and all material facts concerning the loan or guaranty. "Material facts" are defined in subsection 999.1(c) of these regulations.
(2) Copies of the loan or guaranty agreement, note and related security agreements;
(3) A copy of the corporation's current financial statement as of a date within ninety days preceding the filing of the notice or request, except to the extent already on file with the Registry of Charitable Trusts.
(4) A copy of the articles of incorporation and amendments thereto, except to the extent already on file with the Registry of Charitable Trusts.
(5) A copy of the bylaws and amendments thereto, except to the extent already on file with the Registry of Charitable Trusts.
(6) Copies of all minutes of meetings of the board of directors and committees of the board of directors that reflect any discussions or evaluations of the loan or guaranty.
(7) A letter signed by the interested director setting forth a description of the director's material financial interest in the loan or guaranty, listing all material facts, as defined in subsection 999.1(c) of these regulations, concerning the transaction, and all facts disclosed by the interested director to the board of directors concerning the transaction. (Note: Disclosure of this information in the corporation's letter, pursuant to subsection 999.2(c)(1), may eliminate the need for the letter from the interested director, to the extent the information in the interested director's letter would duplicate information in the corporation's letter.)
(8) The Attorney General may require submission of additional information by the corporation and its directors in order to complete an analysis of the loan or guaranty.
(d) Request for Attorney General's Ruling on Amendment of Corporate Articles of Incorporation.
Corporations Code section 5820 provides that the Attorney General may, at the corporation's request, give rulings as to whether the Attorney General will or may oppose a proposed amendment to the articles of incorporations, as inconsistent with or proscribed by the requirement of a charitable trust.
For purposes of section 5820, a request for the Attorney General's ruling on a proposed amendment to the articles of incorporation shall be submitted in writing in accordance with section 999.1(a) of these regulations.
The written request for the Attorney General's ruling shall contain the following:
(1) A letter signed on behalf of the corporation by any officer or director thereof setting forth a detailed description of the proposed amendment to the articles of incorporation and all material facts concerning the amendment. Material facts shall include the reasons for the amendment, the benefit such amendment will confer upon the corporation, whether the board of directors has approved the amendment, and the criteria used by the board to evaluate and approve the amendment.
(2) A copy of the corporation's current financial statement as of a date within ninety days preceding the filing of the notice or request, except to the extent already on file with the Registry of Charitable Trusts.
(3) A copy of the articles of incorporation and amendments thereto, except to the extent already on file with the Registry of Charitable Trusts.
(4) A copy of the bylaws and amendments thereto, except to the extent already on file with the Registry of Charitable Trusts.
(5) Copies of all minutes of meetings of the board of directors and committees of the board of directors that reflect any discussions or evaluations of the article amendment to the articles of incorporation.
(6) The Attorney General may require submission of additional information by the corporation and its directors in order to complete an analysis of the article amendment.
(e) Giving Notice to the Attorney General; Attorney General's Involvement.
The following sections of the Corporations Code provide for the involvement of the Attorney General, and, where appropriate, for notice to the Attorney General, in certain actions and proceedings by, or relating to, a public benefit corporation:
Corp. Code § 5142 (action for breach of trust)
Corp. Code § 5223 (removal for fraud)
Corp. Code § 5225 (deadlock)
Corp. Code § 5226 (resignation by last director)
Corp. Code § 5233 (self-dealing)
Corp. Code § 5236 (loan to a director or officer)
Corp. Code § 5238(c)(3) (indemnity)
Corp. Code § 5617(b) (validity of election)
Corp. Code § 5913 (sale of assets)
Corp. Code § 5914 (proposed transfer of health facilities)
Corp. Code § 5920 (proposed transfer of health facilities)
Corp. Code § 6010 (merger)
Corp. Code §§ 6510(d), 6716(b)(c) (involuntary dissolution)
Corp. Code §§ 6611(a),6612(a), 6613(c), 6617(b), 6716(b)(c) (voluntary dissolution)
Corp. Code § 6721(a) and (b) (recovery of distribution)
Communications and notices to the Attorney General pursuant to the foregoing sections shall be submitted in writing in accordance with subsection 999.1(a) of these regulations.
In addition to the information required in the Corporations Code and in these regulations for communications and notices to the Attorney General under specific circumstances, notice to the Attorney General pursuant to the foregoing sections of the Corporations Code shall contain written information sufficient to enable the Attorney General to review and evaluate the action or proceeding, the time, date and place at which the action or proceeding will occur, or has occurred, and a statement indicating whether an approval, ruling, waiver or other action by the Attorney General is sought.
Cal. Code Regs. Tit. 11, § 999.2
Note: Authority cited: Sections 5914(b) and 5918, Corporations Code. Reference: Sections 5142, 5223, 5225, 5226, 5233, 5236, 5238(c)(3), 5617, 5820, 5913, 5914(b), 5918, 6010, 6510(d), 6611(a), 6612(a), 6613(c), 6617(b), 6716(b) and (c) and 6721(a) and (b), Corporations Code.
1. Amendment of last paragraph and Notefiled 5-22-96; operative 6-21-96 (Register 96, No. 21).
2. New subsection (e), subsection relettering, and amendment of newly designated subsection (f) and Notefiled 1-17-97 as an emergency; operative 1-17-97 (Register 97, No. 3). A Certificate of Compliance must be transmitted to OAL by 5-19-97 or emergency language will be repealed by operation of on the following day.
3. Certificate of Compliance as to 1-17-97 order transmitted to OAL 5-7-97 and filed 6-19-97 (Register 97, No. 25).
4. Repealer of subsection (e) (reserved) and amendment of subsection (f) filed 2-4-2000 as an emergency; operative 2-4-2000 (Register 2000, No. 5). A Certificate of Compliance must be transmitted to OAL by 6-5-2000 or emergency language will be repealed by operation of law on the following day.
5. Repealer of subsection (e) (reserved) and amendment of subsection (f) refiled 6-5-2000 as an emergency; operative 6-5-2000 (Register 2000, No. 23). A Certificate of Compliance must be transmitted to OAL by 10-3-2000 or emergency language will be repealed by operation of law on the following day.
6. Repealer of subsection (e) (reserved) and amendment of subsection (f) refiled 10-2-2000 as an emergency; operative 10-2-2000 (Register 2000, No. 40). A Certificate of Compliance must be transmitted to OAL by 1-30-2001 or emergency language will be repealed by operation of law on the following day.
7. Repealer of subsection (e) (reserved) and amendment of subsection (f) refiled 1-30-2001 as an emergency; operative 1-30-2001 (Register 2001, No. 5). A Certificate of Compliance must be transmitted to OAL by 5-30-2001 or emergency language will be repealed by operation of law on the following day.
8. Certificate of Compliance as to 1-30-2001 order transmitted to OAL 3-9-2001 and filed 4-20-2001; operative 5-20-2001 (Register 2001, No. 16).
9. Change without regulatory effect amending section filed 1-9-2006 pursuant to section 100, title 1, California Code of Regulations (Register 2006, No. 2).
10. Change without regulatory effect repealing subsection (e) [Reserved] and relettering subsection (f) to subsection (e) filed 7-12-2006 pursuant to section 100, title 1, California Code of Regulations (Register 2006, No. 28).