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DEERING'S CALIFORNIA CODES ANNOTATED
2002 REGULAR SESSION CHAPTER 480 (Senate Bill No. 399)
2002 Cal ALS 480; 2002 Cal SB 399; Stats 2002 ch 480
[Approved by Governor September 11, 2002. Filed with Secretary of
State September 12, 2002.] Urgency legislation is effective
immediately, Non-urgency legislation will become effective January
1, 2003
--------------------------------------------------------------*
DIGEST: SB 399, Ackerman. Business organizations: conversions.
Existing law provides for the creation of various forms of
business organizations, including various forms of partnerships,
corporations, and limited liability companies, and provides for
conversion of certain of these forms of business organizations,
other than corporations, into other forms of business
organizations. Under existing law, a business organization is
required to file specified documents with the Secretary of State.
The Secretary of State is authorized to charge a fee in connection
with the filing that is paid into the Secretary of State's Business
Fees Fund.
This bill would establish procedures for the conversion of
California corporations into domestic limited liability companies,
limited partnerships, or general partnerships. The bill would also
establish procedures for the formation of a California corporation
upon the conversion of a foreign or domestic limited liability
company, limited partnership, or general partnership or upon the
conversion of a foreign corporation. The bill would impose a fee of
$ 250 for the conversion of an entity under these provisions, which
would be decreased to $ 150 on January 1, 2005.
This bill would incorporate additional changes to Section 25005.1
of the Corporations Code made by SB 1926 if it is enacted prior to
this bill.
SYNOPSIS: An act to amend Sections 407, 601, 603, 1001, 2115,
15677.2, 15677.3, 15677.6, 15677.7, 15677.8, 15677.9, 16902, 16903,
16904, 16905, 16906, 16907, 16908, 16909, 17540.2, 17540.3,
17540.6, 17540.7, 17540.8, and 25005.1 of, to add Sections 161.9
and 1313 to, and to add Chapter 11.5 (commencing with Section 1150)
to Division 1 of Title 1 of, the Corporations Code, and to add and
repeal Section 12184 of the Government Code, relating to business
organizations.
NOTICE: [A> Uppercase text within these symbols is added
TEXT: The people of the State of California do enact as follows:
[*1] SECTION 1. Section 161.9 is added to the Corporations Code,
to read:
@ 161.9. "Conversion" means a conversion pursuant to Chapter 11.5
(commencing with Section 1150).
[*2] SECTION 2. Section 407 of the Corporations Code is amended to
read:
@ 407. A corporation may, but is not required to, issue fractions
of a share originally or upon transfer. If it does not issue
fractions of a share, it shall in connection with any original
issuance of shares (a) arrange for the disposition of fractional
interests by those entitled thereto, (b) pay in cash the fair value
of fractions of a share as of the time when those entitled to
receive [A> THOSE THE THAT , CONVERSION, THAT ,
CONVERSION, OR CONVERSION THAT THAT
[*3] SECTION 3. Section 601 of the Corporations Code is amended to
read:
@ 601.
(a) Whenever shareholders are required or permitted to take any
action at a meeting a written notice of the meeting shall be given
not less than 10 (or, if sent by third-class mail, 30) nor more
than 60 days before the date of the meeting to each shareholder
entitled to vote thereat. [A> THAT THAT THAT
(b) Notice of a shareholders' meeting or any report shall be given
either personally or by first-class mail, or, in the case of a
corporation with outstanding shares held of record by 500 or more
persons (determined as
provided in Section 605) on the record date for the shareholders'
meeting, notice may be sent third-class mail, or other means of
written communication, addressed to the shareholder at the address
of [A> THAT
If any notice or report addressed to the shareholder at the
address of [A> THAT
POSTAL SERVICE
POSTAL SERVICE THAT
(c) Upon request in writing to the [A> CHAIRPERSON THAT
(d) When a shareholders' meeting is adjourned to another time or
place, unless the bylaws otherwise require and except as provided
in this subdivision, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting
at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business [A> THAT
(e) The transactions of any meeting of shareholders, however
called and noticed, and wherever held, are as valid as though had
at a meeting duly held after regular call and notice, if a quorum
is present either in person or by proxy, and if, either before or
after the meeting, each of the persons entitled to vote, not
present in person or by proxy, signs a written waiver of notice or
a consent to the holding of the meeting or an approval of the
minutes thereof. All [A> THOSE THE THE
(f) Any shareholder approval at a meeting, other than unanimous
approval by those entitled to vote, pursuant to Section 310, 902,
[A> 1152,
[*4] SECTION 4. Section 603 of the Corporations Code is amended to
read:
@ 603.
(a) Unless otherwise provided in the articles, any action [A> THAT
THAT
(b) Unless the consents of all shareholders entitled to vote have
been solicited in writing, (1) Notice of any shareholder approval
pursuant to Section 310, 317, [A> 1152, THAT THAT
(c) Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal
representative of the shareholder or their respective proxyholders,
may revoke the consent by a writing received by the corporation
prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the
secretary of the corporation, but may not do so thereafter. [A> THE
(d) Notwithstanding subdivision (a), directors may not be elected
by written consent except by unanimous written consent of all
shares entitled to vote for the election of directors; provided
that the shareholders may elect a director to fill a vacancy, other
than a vacancy created by removal, by the written consent of a
majority of the outstanding shares entitled to vote.
[*5] SECTION 5. Section 1001 of the Corporations Code is amended
to read:
@ 1001.
(a) A corporation may sell, lease, convey, exchange, transfer, or
otherwise dispose of all or substantially all of its assets when
the principal terms are approved by the board, and, unless the
transaction is in the usual and regular course of its business,
approved by the outstanding shares (Section 152), either before or
after approval by the board and before or after the transaction. A
transaction constituting a reorganization (Section 181) is subject
to the provisions of Chapter 12 (commencing with Section 1200) and
not this section (other than subdivision (d)). [A> A TRANSACTION
CONSTITUTING A CONVERSION
(SECTION 161.9) IS SUBJECT TO THE PROVISIONS OF CHAPTER 11.5
(COMMENCING WITH SECTION 1150) AND NOT THIS SECTION.
(b) Notwithstanding approval of the outstanding shares (Section
152), the board may abandon the proposed transaction without
further action by the shareholders, subject to the contractual
rights, if any, of third parties.
(c) The sale, lease, conveyance, exchange, transfer or other
disposition may be made upon those terms and conditions and for
that consideration as the board may deem in the best interests of
the corporation. The consideration may be money, securities, or
other property.
(d) If the acquiring party in a transaction pursuant to
subdivision (a) of this section or subdivision (g) of Section 2001
is in control of or under common control with the disposing
corporation, the principal terms of the sale must be approved by at
least 90 percent of the voting power of the disposing corporation
unless the disposition is to a domestic or foreign corporation or
other business entity in consideration of the nonredeemable common
shares or nonredeemable equity securities of the acquiring party or
its parent.
(e) Subdivision (d) does not apply to any transaction if the
Commissioner of Corporations, the Commissioner of Financial
Institutions, the Insurance Commissioner or the Public Utilities
Commission has approved the terms and conditions of the transaction
and the fairness of those terms and conditions pursuant to Section
25142, Section 696.5 of the Financial Code, Section 838.5 of the
Insurance Code, or Section 822 of the Public Utilities Code.
[*6] SECTION 6. Chapter 11.5 (commencing with Section 1150) is
added to Division 1 of Title 1 of the Corporations Code, to read:
CHAPTER 11.5 Conversions @ 1150. For purposes of this chapter, the
following definitions shall apply:
(a) "Converted corporation" means a corporation that results from
a conversion of an other business entity or a foreign other
business entity or a foreign corporation pursuant to Section 1157.
(b) "Converted entity" means a domestic other business entity that
results from a conversion of a corporation under this chapter.
(c) "Converting corporation" means a corporation that converts
into a domestic other business entity pursuant to this chapter.
(d) "Converting entity" means an other business entity or a
foreign other business entity or foreign corporation that converts
into a corporation pursuant to Section 1157.
(e) "Domestic other business entity" has the meaning provided in
Section 167.7.
(f) "Foreign other business entity" has the meaning provided in
Section 171.07.
(g) "Other business entity" has the meaning provided in Section 174.5.
@ 1151.
(a) A corporation may be converted into a domestic other business
entity pursuant to this chapter if, pursuant to the proposed
conversion, (1) each share of the same class or series of the
converting corporation shall, unless all the shareholders of the
class or series consent, be treated equally with respect to any
cash, rights, securities, or other property to be received by, or
any obligations or restrictions to be imposed on, the holder of
that share, and (2) nonredeemable common shares of the converting
corporation shall be converted only into nonredeemable equity
securities of the converted entity unless all of the shareholders
of the class consent; provided, however, that clause (1) shall not restrict the ability of the
shareholders of a converting
corporation to appoint one or more managers, if the converted
entity is a limited liability company, or one or more general
partners, if the converted entity is a limited partnership, in the
plan of conversion or in the converted entity's governing
documents.
(b) Notwithstanding this section, the conversion of a corporation
into a domestic other business entity may be effected only if both
of the following conditions are complied with:
(1) The law under which the converted entity will exist expressly
permits the formation of that entity pursuant to a conversion.
(2) The corporation complies with any and all other requirements
of any other law that applies to conversion to the converted
entity.
@ 1152.
(a) A corporation that desires to convert to a domestic other
business entity shall approve a plan of conversion. The plan of
conversion shall state all of the following:
(1) The terms and conditions of the conversion.
(2) The jurisdiction of the organization of the converted entity
and of the converting corporation and the name of the converted
entity after conversion.
(3) The manner of converting the shares of each of the
shareholders of the converting corporation into securities of, or
interests in, the converted entity.
(4) The provisions of the governing documents for the converted
entity, including the partnership agreement or limited liability
company articles of organization and operating agreement, to which
the holders of interests in the converted entity are to be bound.
(5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired
by the converting corporation.
(b) The plan of conversion shall be approved by the board of the
converting corporation (Section 151), and the principal terms of
the plan of the conversion shall be approved by the outstanding
shares (Section 152) of each class of the converting corporation.
The approval of the outstanding shares may be given before or after
approval by the board. Notwithstanding the foregoing, if a
converting corporation is a close corporation, the conversion shall
be approved by the affirmative vote of at least two-thirds of each
class of outstanding shares of that converting corporation;
provided, however, that the articles may provide for a lesser vote,
but not less than a majority of the outstanding shares of each
class.
(c) If the corporation is converting into a general or limited
partnership or into a limited liability company, then in addition
to the approval of the shareholders set forth in subdivision (b),
the plan of conversion shall be approved by each shareholder who
will become a general partner or manager, as applicable, of the
converted entity pursuant to the plan of conversion unless the
shareholders have dissenters' rights pursuant to Section 1159 and
Chapter 13 (commencing with Section 1300).
(d) Upon the effectiveness of the conversion, all shareholders of
the converting corporation, except those that exercise dissenters'
rights as provided in Section 1159 and Chapter 13 (commencing with
Section 1300), shall be deemed parties to any agreement or
agreements constituting the governing documents for the converted
entity adopted as part of the plan of conversion, irrespective of
whether or not a shareholder has executed the plan of conversion or
those governing documents for the converted entity. Any adoption of
governing documents made pursuant thereto shall be effective at the
effective time or date of the conversion.
(e) Notwithstanding its prior approval by the board and the
outstanding shares or either of them, a plan of conversion may be
amended before the conversion takes effect if the amendment is
approved by the board and, if it changes any of the principal terms
of the plan of conversion, by the shareholders of the converting
corporation in the same manner and to the same extent as was
required for approval of the original plan of conversion.
(f) A plan of conversion may be abandoned by the board of a
converting corporation, or by the shareholders of a converting
corporation if the abandonment is approved by the outstanding
shares, in each case in the same manner as required for approval of
the plan of conversion, subject to the contractual rights of third
parties, at any time before the conversion is effective.
(g) The converted entity shall keep the plan of conversion at (1)
the principal place of business of the converted entity if the
converted entity is a domestic partnership or (2) at the office at
which records are to be kept under Section 15614 if the converted
entity is a domestic limited partnership or at the office at which
records are to be kept under Section 17057 if the converted entity
is a domestic limited liability company. Upon the request of a
shareholder of a converting corporation, the authorized person on
behalf of the converted entity shall promptly deliver to the
shareholder, at the expense of the converted entity, a copy of the
plan of conversion. A waiver by a shareholder of the rights
provided in this subdivision shall be unenforceable.
@ 1153.
(a) After the approval, as provided in Section 1152, of a plan of
conversion by the board and the outstanding shares of a corporation
converting into a domestic other business entity, the converting
corporation shall cause the filing of all documents required by law
to effect the conversion and create the converted entity, which
documents shall include a certificate of conversion or a statement
of conversion as required by Section 1155, and the conversion shall
thereupon be effective.
(b) A copy of the statement of partnership authority, certificate
of limited partnership, or articles of organization complying with
Section 1155, duly certified by the Secretary of State on or after
the effective date, is conclusive evidence of the conversion of the
corporation.
@ 1155.
(a) To convert a corporation:
(1) If the corporation is converting into a domestic limited
partnership, a statement of conversion shall be completed on the
certificate of limited partnership for the converted entity.
(2) If the corporation is converting into a domestic partnership,
a statement of conversion shall be completed on the statement of
partnership authority for the converted entity, or if no statement
of partnership authority is filed then a certificate of conversion
shall be filed separately.
(3) If the corporation is converting into a domestic limited
liability company, a statement of conversion shall be completed on
the articles of organization for the converted entity.
(b) Any statement or certificate of conversion of a converting
corporation shall be executed and acknowledged by those officers of
the converting corporation as would be required to sign an
officers' certificate (Section 173), and shall set forth all of the
following:
(1) The name and the Secretary of State's file number of the
converting corporation.
(2) A statement of the total number of outstanding shares of each
class entitled to vote on the conversion, that the principal terms
of the plan of conversion were approved by a vote of the number of
shares of each class which
equaled or exceeded the vote required under Section 1152,
specifying each class entitled to vote and the percentage vote
required of each class.
(3) The name, form, and jurisdiction of organization of the
converted entity.
(c) For the purposes of this chapter, the certificate of
conversion shall be on a form prescribed by the Secretary of State.
(d) The filing with the Secretary of State of a statement of
conversion on an organizational document or a certificate of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of dissolution by the converting
corporation and no converting corporation that has made the filing
is required to file a certificate of election under Section 1901 or
a certificate of dissolution under Section 1905 as a result of that
conversion.
(e) No statement or certificate of conversion shall be filed with
the Secretary of State until there has been filed by or on behalf
of the converting corporation the certificate of satisfaction of
the Franchise Tax Board that all taxes imposed by the Bank and
Corporation Tax Law (Part 11 (commencing with Section 23001) of
Division 2 of the Revenue and Taxation Code) have been paid or
secured. Notwithstanding the foregoing, if the converted entity is
a domestic partnership, domestic limited partnership or domestic
limited liability company, the Secretary of State shall file the
statement or certificate of conversion without the certificate of
satisfaction of the Franchise Tax Board and shall notify the
Franchise Tax Board of the conversion. Upon the effectiveness of a
conversion pursuant to this chapter, a converted entity that is a
domestic partnership, domestic limited partnership or domestic
limited liability company shall be deemed to have assumed the
liability of the converting corporation (1) to prepare and file or
cause to be prepared and filed all tax and information returns
otherwise required of the converting corporation under the Bank and
Corporation Tax Law (Part 11 (commencing with Section 23001) of
Division 2 of the Revenue and Taxation Code) and (2) to pay any tax
liability determined to be due pursuant to that law.
@ 1156.
(a) Whenever a corporation or other business entity having any
real property in this state converts into a corporation or an other
business entity pursuant to the laws of this state or of the state
or place in which the corporation or other business entity was
organized, and the laws of the state or place of organization,
including this state, of the converting corporation or other
converting entity provide substantially that the conversion vests
in the converted corporation or other converted entity all the real
property of the converting corporation or other converting entity,
the filing for record in the office of the county recorder of any
county in this state in which any of the real property of the
converting corporation or other converting entity is located of
either (1) a certificate of conversion or a statement of
partnership authority, certificate of limited partnership or
articles of organization containing a statement of conversion
complying with Section 1155 and certified on or after the effective
date of the conversion by the Secretary of State or (2) a copy of
a certificate of conversion or a statement of partnership
authority, certificate of limited partnership, articles of
organization, articles of incorporation, or other comparable
organizing document evidencing the creation of a foreign other
business entity or foreign corporation, containing a statement of
conversion, meeting the requirements of subdivision (b) and
certified on or after the effective date of the conversion by the
Secretary of State or any other authorized public official of the
state or place pursuant to the laws of which the converted entity
is organized, shall evidence record ownership in the converted
corporation or other converted entity of all interest of the
converting corporation or other converting entity in and to the real property located in that county.
(b) A filed and, if appropriate, recorded certificate of
conversion or a statement of partnership authority, certificate of
limited partnership, articles of organization, articles of
incorporation, or other comparable organizing document evidencing
the formation of a foreign other business entity or a foreign
corporation referred to in clause (2) of subdivision (a) above
which contains a statement of conversion, stating the name of the
converting corporation or other converting entity in whose name
property was held before the conversion and the name of the
converted entity or converted corporation, but not containing all
of the other information required by Section 1155, operates with
respect to the converted entity named to the extent provided in
subdivision (a).
(c) Recording of a certificate of conversion or a statement of
partnership authority, certificate of limited partnership, articles
of organization, articles of incorporation, or other comparable
organizing document evidencing the creation of an other business
entity or a corporation, containing a statement of conversion, in
accordance with subdivision (a), shall create, in favor of bona
fide purchasers or encumbrances for value, a conclusive presumption
that the conversion was validly completed.
@ 1157.
(a) An other business entity or a foreign other business entity or
a foreign corporation may be converted into a corporation pursuant
to this chapter only if the converting entity is authorized by the
laws under which it is organized to effect the conversion.
(b) An other business entity or a foreign other business entity or
a foreign corporation that desires to convert into a corporation
shall approve a plan of conversion or other instrument as is
required to be approved to effect the conversion pursuant to the
laws under which that entity is organized.
(c) The conversion of an other business entity or a foreign other
business entity or a foreign corporation shall be approved by the
number or percentage of the partners, members, shareholders, or
other holders of interest of the converting entity that is required
by the laws under which that entity is organized, or a greater or
lesser percentage as may be set forth in the converting entity's
partnership agreement, articles of organization, operating
agreement, articles of incorporation or other governing document in
accordance with applicable laws.
(d) The conversion by an other business entity or a foreign other
business entity or a foreign corporation shall be effective under
this chapter upon the filing with the Secretary of State of the
articles of incorporation of the converted corporation, containing
a statement of conversion that complies with subdivision (e).
(e) A statement of conversion of an entity converting into a
corporation pursuant to this chapter shall set forth all of the
following:
(1) The name, form, and jurisdiction of organization of the
converting entity.
(2) The Secretary of State's file number, if any, of the
converting entity.
(3) If the converting entity is a foreign other business entity or
a foreign corporation, the statement of conversion shall contain
the following:
(A) A statement that the converting entity is authorized to effect
the conversion by the laws under which it is organized.
(B) A statement that the converting entity has approved a plan of
conversion or other instrument as is required to be approved to
effect the conversion pursuant to the laws under which the
converting entity is organized.
(C) A statement that the conversion has been approved by the
number or percentage of the partners, members, shareholders, or
other holders of interest of the converting entity that is required
by the laws under which that entity is organized, or a greater or
lesser percentage as may be set forth in the converting entity's
partnership agreement, articles of organization, operating
agreement, articles of incorporation, or other governing document
in accordance with applicable laws.
(f) The filing with the Secretary of State of articles of
incorporation containing a statement pursuant to subdivision (e)
shall have the effect of the filing of a certificate of
cancellation by a converting foreign limited liability company or
foreign limited partnership, and no converting foreign limited
liability company or foreign limited partnership that has made the
filing is required to file a certificate of cancellation under
Section 15696 or 17455 as a result of that conversion. If a
converting entity is a foreign corporation qualified to transact
business in this state, the foreign corporation shall, by virtue of
the filing, automatically surrender its right to transact
intrastate business.
@ 1158.
(a) An entity that converts into another entity pursuant to this
chapter is for all purposes other than for the purposes of Part 10
(commencing with Section 17001) of, Part 10.20 (commencing with
Section 18401) of, and Part 11 (commencing with Section 23001) of,
Division 2 of the Revenue and Taxation Code, the same entity that
existed before the conversion.
(b) Upon a conversion taking effect, all of the following apply:
(1) All the rights and property, whether real, personal, or mixed,
of the converting entity or converting corporation are vested in
the converted entity or converted corporation.
(2) All debts, liabilities, and obligations of the converting
entity or converting corporation continue as debts, liabilities,
and obligations of the converted entity or converted corporation.
(3) All rights of creditors and liens upon the property of the
converting entity or converting corporation shall be preserved
unimpaired and remain enforceable against the converted entity or
converted corporation to the same extent as against the converting
entity or converting corporation as if the conversion had not
occurred.
(4) Any action or proceeding pending by or against the converting
entity or converting corporation may be continued against the
converted entity or converted corporation as if the conversion had
not occurred.
(c) A shareholder of a converting corporation is liable for:
(1) All obligations of the converting corporation for which the
shareholder was personally liable before the conversion, but only
to the extent that the shareholder was personally liable for the
obligations of the converting corporation before the conversion.
(2) All obligations of the converted entity incurred after the
conversion takes effect if (A) the shareholder becomes a general
partner of a converted entity that is a general or limited
partnership and, as a general partner, has liability under the laws
under which the converted entity is organized or under the
converted entity's governing documents or (B) the shareholder
becomes a holder of other interests in the converted entity and, as
a holder, has liability under the laws under which the converted
entity is organized or under the converted entity's governing
documents.
(d) A shareholder of a converted corporation remains liable for
any and all obligations of the converting entity for which the
shareholder was personally liable before the conversion, but only
to the extent that the shareholder was personally liable for the
obligations of the converting entity prior to the conversion.
(e) If a party to a transaction with a converted corporation that
converted
from a partnership reasonably believes when entering into the
transaction that a shareholder of the converted corporation
continues to be a general partner of the converting entity after
the conversion is effective, and the shareholder was a general
partner of the partnership that converted into the converted
corporation, the shareholder is liable for an obligation incurred
by the converted corporation within 90 days after the conversion
takes effect. The shareholder's liability for all other obligations
of the converted corporation incurred after the conversion takes
effect is that of a shareholder of a corporation.
(f) The converted entity shall cause written notice of the
conversion to be given by mail within 90 days after the effective
date of the conversion to all known creditors and claimants whose
addresses appear on the records of the converting entity. Failure
to comply with this subdivision shall not affect the validity of
the conversion, extend the 90-day period set forth in subdivision
(e), or otherwise affect the rights of a creditor or claimant under
this section.
@ 1159. The shareholders of a converting corporation shall have
all of the rights under Chapter 13 (commencing with Section 1300)
of the shareholders of a corporation involved in a reorganization
requiring the approval of its outstanding shares (Section 152), and
the converting corporation shall have all of the obligations under
Chapter 13 (commencing with Section 1300) of a corporation involved
in the reorganization. Solely for purposes of applying the
provisions of Chapter 13 (and not for purposes of Chapter 12), a
conversion pursuant to Section 1151 or 1157 shall be deemed to
constitute a reorganization. @ 1160.
(a) Notwithstanding any other provision of law, the Secretary of
State shall charge an entity a fee not to exceed two hundred fifty
dollars ($ 250) for its conversion made under this chapter. (b)
This section shall remain in effect only until January 1, 2005, and
as of that date is repealed, unless a later enacted statute, that
is enacted before January 1, 2005, deletes or extends that date.
@ 1160.
(a) Notwithstanding any other provision of law, the Secretary of
State shall charge an entity a fee not to exceed one hundred fifty
dollars ($ 150) for its conversion made under this chapter.
(b) This section shall become operative on January 1, 2005.
[*7] SECTION 7. Section 1313 is added to the Corporations Code, to
read:
@ 1313. A conversion pursuant to Chapter 11.5 (commencing with
Section 1150) shall be deemed to constitute a reorganization for
purposes of applying the provisions of this chapter, in accordance
with and to the extent provided in Section 1159.
[*8] SECTION 8. Section 2115 of the Corporations Code is amended
to read:
@ 2115.
(a) A foreign corporation (other than a foreign association or
foreign nonprofit corporation but including a foreign parent
corporation even though it does not itself transact intrastate
business) is subject to the requirements of subdivision (b)
commencing on the date specified in subdivision (d) and continuing
until the date specified in subdivision (e) if:
(1) the average of the property factor, the payroll factor, and
the sales factor (as defined in Sections 25129, 25132, and 25134 of
the Revenue and Taxation Code) with respect to it is more than 50
percent during its latest full income year and
(2) more than one-half of its outstanding voting securities are
held of
record by persons having addresses in this state appearing on the
books of the corporation on the record date for the latest meeting
of shareholders held during its latest full income year or, if no
meeting was held during that year, on the last day of the latest
full income year. The property factor, payroll factor, and sales
factor shall be those used in computing the portion of its income
allocable to this state in its franchise tax return or, with
respect to corporations the allocation of whose income is governed
by special formulas or that are not required to file separate or
any tax returns, which would have been so used if they were
governed by this three-factor formula. The determination of these
factors with respect to any parent corporation shall be made on a
consolidated basis, including in a unitary computation (after
elimination of intercompany transactions) the property, payroll,
and sales of the parent and all of its subsidiaries in which it
owns directly or indirectly more than 50 percent of the outstanding
shares entitled to vote for the election of directors, but
deducting a percentage of the property, payroll, and sales of any
subsidiary equal to the percentage minority ownership, if any, in
the subsidiary. For the purpose of this subdivision, any securities
held to the knowledge of the issuer in the names of broker-dealers,
nominees for broker-dealers (including clearing corporations), or
banks, associations, or other entities holding securities in a
nominee name or otherwise on behalf of a beneficial owner
(collectively "[A> NOMINEE HOLDERS
NOMINEE HOLDERS NOMINEE HOLDER NOMINEE HOLDERS
(b) Except as provided in subdivision (c), the following chapters
and sections of this division shall apply to a foreign corporation
as defined in subdivision (a)(to the exclusion of the law of the
jurisdiction in which it is incorporated):
Chapter 1 (general provisions and definitions), to the extent
applicable to the following provisions; Section 301 (annual
election of directors); Section 303 (removal of directors without
cause); Section 304 (removal of directors by court proceedings);
Section 305, subdivision (c)(filling of director vacancies where
less than a majority in office elected by shareholders); Section
309 (directors' standard of care); Section 316 (excluding paragraph
(3) of subdivision (a) and paragraph (3) of subdivision (f))
(liability of directors for unlawful distributions); Section 317
(indemnification of directors, officers, and others); Sections 500
to 505, inclusive (limitations on corporate distributions in cash
or property); Section 506 (liability of shareholder who receives
unlawful distribution); Section 600, subdivisions (b) and
(c)(requirement for annual shareholders'
meeting and remedy if same not timely held); Section 708,
subdivisions (a), (b), and (c)(shareholder's right to cumulate
votes at any election of directors); Section 710 (supermajority
vote requirement); Section 1001, subdivision (d)(limitations on
sale of assets); Section 1101 (provisions following subdivision
(e)) (limitations on mergers); [A> SECTION 1151 (FIRST SENTENCE
ONLY)(LIMITATIONS ON CONVERSIONS); SECTION 1152
(REQUIREMENTS OF CONVERSIONS);
(c) This section does not apply to any corporation (1) with
outstanding securities listed on the New York Stock Exchange or the
American Stock Exchange, or (2) with outstanding securities
designated as qualified for trading on the Nasdaq National Market
(or any successor thereto) of the Nasdaq Stock Market operated by
the Nasdaq Stock Market Inc., or (3) if all of its voting shares
(other than directors' qualifying shares) are owned directly or
indirectly by a corporation or corporations not subject to this
section.
(d) For purposes of subdivision (a), the requirements of
subdivision (b) shall become applicable to a foreign corporation
only upon the first day of the first income year of the corporation
[A> (1) (2)
(e) For purposes of subdivision (a), the requirements of
subdivision (b) shall cease to be applicable to a foreign
corporation [A> (1) (2)
(f) Any foreign corporation that is subject to the requirements of
subdivision (b) shall advise any shareholder of record, any
officer, director, employee, or other agent (within the meaning of
Section 317) and any creditor of the corporation in writing, within
30 days of receipt of written request for that information, whether
or not it is subject to subdivision (b) at the time the request is
received. Any party who obtains a final determination by a court of
competent jurisdiction that the corporation failed to provide to
the party information required to be provided by this subdivision
or provided the party information of the kind required to be
provided by this subdivision that was incorrect, then the court, in
its discretion, shall have the power to include in its judgment
recovery by the party from the corporation of all court costs and
reasonable attorneys' fees incurred in that legal proceeding to the
extent they relate to obtaining that final determination.
[*9] SECTION 9. Section 15677.2 of the Corporations Code is
amended to read:
@ 15677.2.
(a) A limited partnership may be converted into [A> ANOTHER (1) A INTO A DOMESTIC OR FOREIGN
PARTNERSHIP OR LIMITED LIABILITY COMPANY OR INTO A FOREIGN LIMITED
PARTNERSHIP , AND (2)
PURSUANT TO A CONVERSION INTO AN OTHER BUSINESS ENTITY OR FOREIGN
OTHER BUSINESS ENTITY NOT SPECIFIED IN CLAUSE (1) ABOVE, BOTH OF
THE FOLLOWING OCCUR: (A) EACH LIMITED PARTNERSHIP INTEREST OF THE
SAME CLASS IS TREATED EQUALLY WITH RESPECT TO ANY DISTRIBUTION OF
CASH, PROPERTY, RIGHTS, INTERESTS, OR SECURITIES OF THE CONVERTED
ENTITY, UNLESS ALL LIMITED PARTNERS OF THE CLASS CONSENT, AND (B)
THE NONREDEEMABLE LIMITED PARTNERSHIP INTERESTS OF THE CONVERTING
LIMITED PARTNERSHIP ARE CONVERTED ONLY INTO NONREDEEMABLE
INTERESTS
OR SECURITIES OF THE CONVERTED ENTITY, UNLESS ALL HOLDERS OF THE
NONREDEEMABLE INTERESTS CONSENT
[A> (B)
[A> (1)
[A> (2)
[*10] SECTION 10. Section 15677.3 of the Corporations Code is
amended to read:
@ 15677.3.
(a) A limited partnership that desires to convert to an other
business entity or a foreign other business entity or a foreign
limited partnership shall approve a plan of conversion. The plan of
conversion shall state all of the following:
(1) The terms and conditions of the conversion.
(2) The place of the organization of the converted entity and of
the converting limited partnership and the name of the converted
entity after conversion.
(3) The manner of converting the limited and general partnership
interests of each of the partners into [A> SHARES OF,
(4) The provisions of the governing documents for the converted
entity, including the partnership agreement[A> , OR ARTICLES OR CERTIFICATE OF INCORPORATION IF THE CONVERTED
ENTITY IS A CORPORATION,
(5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired
by the parties.
(b) The plan of conversion shall be approved by all general
partners of the converting limited partnership and by a majority in
interest of each class of limited partners of the converting
limited partnership, unless a greater or lesser approval is
required by the partnership agreement of the converting limited
partnership. However, if the limited partners of the limited
partnership would become personally liable for any obligations of
the converted entity as a result of the conversion, the plan of
conversion shall be approved by all of the limited partners of the
converting limited partnership, unless the plan of conversion
provides that all limited partners will have dissenters' rights as
provided in Article 7.6 (commencing with Section 15679.1).
(c) Upon the effectiveness of the conversion, all partners of the
converting limited partnership, except those that exercise
dissenters' rights as provided
in Article 7.6 (commencing with Section 15679.1), shall be deemed
parties to any governing documents for the converted entity adopted
as part of the plan of conversion, irrespective of whether or not
the partner has executed the plan of conversion or the governing
documents for the converted entity. Any adoption of governing
documents made pursuant thereto shall be effective at the effective
time or date of the conversion.
(d) Notwithstanding its prior approval, a plan of conversion may
be amended before the conversion takes effect if the amendment is
approved by all general partners of the converting limited
partnership and, if the amendment changes any of the principal
terms of the plan of conversion, the amendment is approved by the
limited partners of the converting limited partnership in the same
manner and to the same extent as required for the approval of the
original plan of conversion.
(e) The general partners of a converting limited partnership may,
by unanimous approval at any time before the conversion is
effective, in their discretion, abandon a conversion, without
further approval by the limited partners, subject to the
contractual rights of third parties other than limited partners.
(f) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the
converted entity is a domestic partnership or foreign other
business entity[A> , AT THE PRINCIPAL EXECUTIVE OFFICE OF, OR
REGISTRAR OR TRANSFER AGENT OF, THE CONVERTED ENTITY, IF THE
CONVERTED ENTITY IS A DOMESTIC CORPORATION, SHARES, ,
[*11] SECTION 11. Section 15677.6 of the Corporations Code is
amended to read:
@ 15677.6.
(a) Upon conversion of a limited partnership one of the following
applies:
(1) If the limited partnership is converting into a domestic
limited liability company, a statement of conversion shall be
completed on the articles of organization for the converted entity.
(2) If the limited partnership is converting into a domestic
partnership, a statement of conversion shall be completed on the
statement of partnership authority for the converted entity, or if
no statement of partnership authority is filed, then a certificate
of conversion shall be filed separately.
(3) If the limited partnership is converting [A> INTO A DOMESTIC
CORPORATION, A STATEMENT OF CONVERSION SHALL BE COMPLETED ON THE
ARTICLES OF INCORPORATION FOR THE CONVERTED ENTITY. (4) IF
THE LIMITED PARTNERSHIP IS CONVERTING
(b) Any certificate or statement of conversion shall be executed
and acknowledged by all general partners, unless a lesser number is
provided in the certificate of limited partnership, and shall set
forth all of the following:
(1) The name and the Secretary of State's file number of the
converting limited partnership.
(2) A statement that the principal terms of the plan of conversion
were approved by a vote of the partners, which equaled or exceeded
the vote
required under Section 15677.3, specifying each class entitled to
vote and the percentage vote required of each class.
(3) The form of organization of the converted entity.
(4) The mailing address of the converted entity's agent for
service of process and the chief executive office of the converted
entity.
(c) The filing with the Secretary of State of a certificate of
conversion or a statement of partnership authority[A> , , OR ARTICLES OR CERTIFICATE OF
INCORPORATION
[*12] SECTION 12. Section 15677.7 of the Corporations Code is
amended to read:
@ 15677.7.
(a) Whenever a limited partnership or other business entity having
any real property in this state converts into a limited partnership
or an other business entity pursuant to the laws of this state or
of the state or place in which the limited partnership or other
business entity was organized, and the laws of the state or place
of organization, including this state, of the converting limited
partnership or other converting entity provide substantially that
the conversion vests in the converted limited partnership or other
converted entity all the real property of the converting limited
partnership or other converting entity, the filing for record in
the office of the county recorder of any county in this state in
which any of the real property of the converting limited
partnership or other converting entity is located of either (1) a
certificate of conversion or statement of partnership authority, *
* * a certificate of limited partnership, articles of
incorporation, or articles of organization complying with Section
15677.6, in the form prescribed and certified by the Secretary of
State, or (2) a copy of a certificate of conversion [A> OR A
STATEMENT OF PARTNERSHIP AUTHORITY, CERTIFICATE OF LIMITED
PARTNERSHIP, ARTICLES OF ORGANIZATION, ARTICLES OR CERTIFICATE OF
INCORPORATION, OR OTHER CERTIFICATE OR DOCUMENT EVIDENCING THE
CREATION OF A FOREIGN OTHER BUSINESS IS EFFECTED, SHALL EVIDENCE RECORD OWNERSHIP IN THE
CONVERTED LIMITED PARTNERSHIP OR OTHER CONVERTED ENTITY OF ALL
INTEREST OF THE CONVERTING LIMITED PARTNERSHIP OR OTHER CONVERTING
ENTITY IN AND TO THE REAL PROPERTY LOCATED IN THAT COUNTY.
(B) A FILED AND, IF APPROPRIATE, RECORDED CERTIFICATE OF CONVERSION
OR A STATEMENT OF PARTNERSHIP AUTHORITY, CERTIFICATE OF LIMITED
PARTNERSHIP, ARTICLES OF ORGANIZATION, ARTICLES OR CERTIFICATE OF
INCORPORATION,
(c) Recording of a certificate of conversion, or a statement of
partnership authority, certificate of limited partnership, articles
of organization, [A> ARTICLES OR CERTIFICATE OF INCORPORATION,
the creation of an other business entity or a limited partnership
by conversion, containing a statement of conversion, in accordance
with subdivision (a), shall create, in favor of bona fide
purchasers or encumbrances for value, a conclusive presumption that
the conversion was validly completed.
[*13] SECTION 13. Section 15677.8 of the Corporations Code is
amended to read:
@ 15677.8.
(a) An other business entity or a foreign other business entity or
a foreign limited partnership may be converted to a domestic
limited partnership pursuant to this article only if the converting
entity is authorized by the laws under which it is organized to
effect the conversion.
(b) An other business entity or a foreign other business entity or
a foreign limited partnership that desires to convert into a
domestic limited partnership shall approve a plan of conversion or
an other instrument as is required to be approved to effect the
conversion pursuant to the laws under which that entity is
organized.
(c) The conversion of an other business entity or a foreign other
business entity or a foreign limited partnership into a domestic
limited partnership shall be approved by the number or percentage
of the partners, members, [A> SHAREHOLDERS, ARTICLES OR CERTIFICATE OF INCORPORATION,
(d) The conversion by an other business entity or a foreign other
business entity or a foreign limited partnership into a domestic
limited partnership shall be effective under this article at the
time the conversion is effective under the laws under which the
converting entity is organized as long as a certificate of limited
partnership containing a statement of conversion has been filed
with the Secretary of State. If the converting entity's governing
law is silent as to the effectiveness of the conversion, the
conversion shall be effective upon the completion of all acts
required under this title to form a limited partnership.
(e) The filing with the Secretary of State of a certificate of
conversion or a certificate of limited partnership containing a
statement of conversion pursuant to subdivision (a) shall have the
effect of the filing of a certificate of cancellation by the
converting foreign limited partnership or foreign limited liability
company and no converting foreign limited partnership or foreign
limited liability company that has made the filing is required to
file a certificate of cancellation under Section 15696 or 17455 as
a result of that conversion. If a converting other business entity
is a foreign corporation qualified to transact business in this
state, the foreign corporation shall, by virtue of the filing,
automatically surrender its right to transact intrastate business.
[*14] SECTION 14. Section 15677.9 of the Corporations Code is
amended to read:
@ 15677.9.
(a) An entity that converts into another entity pursuant to this
article is for all purposes the same entity that existed before the
conversion.
(b) Upon a conversion taking effect, all of the following apply:
(1) All the rights and property, whether real, personal, or mixed,
of the converting entity or converting limited partnership are
vested in the converted entity or converted limited partnership.
(2) All debts, liabilities, and obligations of the converting
entity or converting limited partnership continue as debts,
liabilities, and obligations of the converted entity or converted
limited partnership.
(3) All rights of creditors and liens upon the property of the
converting entity or converting limited partnership shall be
preserved unimpaired and remain enforceable against the converted
entity or converted limited partnership to the same extent as
against the converting entity or converting limited partnership as
if the conversion had not occurred.
(4) Any action or proceeding pending by or against the converting
entity or converting limited partnership may be continued against
the converted entity or converted limited partnership as if the
conversion had not occurred.
(c) A partner of a converting limited partnership is liable for:
(1) All obligations of the converting limited partnership for
which the partner was personally liable before the conversion.
(2) All obligations of the converted entity incurred after the
conversion takes effect, but those obligations may be satisfied
only out of property of the entity if that partner is a limited
partner, [A> OR
(d) A partner of a converted limited partnership remains liable
for any and all obligations of the converting entity for which the
partner was personally liable before the conversion, but only to
the extent that the partner was liable for the obligations of the
converting entity prior to the conversion.
(e) If the other party to a transaction with the limited
partnership reasonably believes when entering the transaction that
the limited partner is a general partner, the limited partner is
liable for an obligation incurred by the limited partnership within
90 days after the conversion takes effect. The limited partner's
liability for all other obligations of the limited partnership
incurred after the conversion takes effect is that of a limited
partner.
[*15] SECTION 15. Section 16902 of the Corporations Code is
amended to read:
@ 16902.
(a) A partnership, other than a registered limited liability
partnership, may be converted into a domestic [A> OTHER BUSINESS
ENTITY , (1) A INTO
A DOMESTIC OR FOREIGN LIMITED PARTNERSHIP OR LIMITED LIABILITY
COMPANY, , AND (2)
PURSUANT TO A CONVERSION INTO AN OTHER BUSINESS ENTITY OR FOREIGN
OTHER BUSINESS ENTITY NOT SPECIFIED IN CLAUSE (1) ABOVE, EACH OF
THE PARTNERSHIP INTERESTS OF THE SAME CLASS IS TREATED EQUALLY WITH
RESPECT TO ANY DISTRIBUTION OF CASH, PROPERTY, RIGHTS, INTERESTS,
OR SECURITIES OF THE CONVERTED OTHER BUSINESS ENTITY UNLESS ALL
PARTNERS OF THE SAME CLASS CONSENT. (B)
and (2) the partnership complies with any and all other
requirements of [A> THAT
[*16] SECTION 16. Section 16903 of the Corporations Code is
amended to read:
@ 16903.
(a) A partnership that desires to convert to a domestic * * * or
foreign other business entity shall approve a plan of conversion.
The plan of conversion shall state the following:
(1) The terms and conditions of the conversion.
(2) The place of the organization of the converted entity and of
the converting partnership and the name of the converted entity
after conversion, if different from that of the converting
partnership.
(3) The manner of converting the partnership interests of each of
the partners into [A> SHARES OF, ,
(4) The provisions of the governing [A> DOCUMENTS INCLUDING THE , OR ARTICLES OR
CERTIFICATE OF INCORPORATION IF THE CONVERTED ENTITY IS A
CORPORATION,
(5) Any other details or provisions as are required by laws under
which the converted entity is organized.
(6) Any other details or provisions that are desired.
(b) The plan of conversion shall be approved by that number or
percentage of partners required by the partnership agreement to
approve a conversion of the partnership as set forth in the
partnership agreement. If the partnership agreement fails to
specify the required partner approval for a conversion of the
partnership, the plan of conversion shall be approved by that
number or percentage of partners required by the partnership
agreement to approve an amendment to the partnership agreement
unless the conversion effects a change for which the partnership
agreement requires a greater number or percentage of partners than
that required to amend the partnership agreement, in which case the
plan of conversion shall be approved by that greater number or
percentage. If the partnership agreement fails to specify the vote
required to amend the partnership agreement, the plan of conversion
shall be approved by all partners.
(c) If the partnership is converting into a limited partnership,
in addition to the approval of the partners as set forth in
subdivision (b), the plan of conversion shall be approved by all
partners who will become general partners of the converted limited
partnership pursuant to the plan of conversion.
(d) All partners of the converting partnership except those that
dissociate upon effectiveness of the conversion pursuant to
subdivision (e) of Section 16909 shall be deemed parties to any
partnership or operating [A> AGREEMENT, ARTICLES OR CERTIFICATE OF
INCORPORATION, AGREEMENT, ARTICLES OR CERTIFICATE OF INCORPORATION, , OR ARTICLES OR CERTIFICATE OF INCORPORATION,
(e) Notwithstanding its prior approval, a plan of conversion may
be amended before the conversion takes effect if the amendment is
approved by the
partnership in the same manner, and by the same number or
percentage of partners, as was required for approval of the
original plan of conversion.
(f) The partners of a converting partnership may, at any time
before the conversion is effective, in their discretion, abandon a
conversion, without further approval by the partners, in the same
manner, and by the same number or percentage of partners, as was
required for approval of the original plan of conversion at any
time before the conversion is effective, subject to the contractual
rights of third parties.
(g) The converted entity shall keep the plan of conversion at: (1)
the principal place of business of the converted entity, if the
converted entity is a foreign other business entity [A> OR A
CORPORATION
[*17] SECTION 17. Section 16904 of the Corporations Code is
amended to read:
@ 16904.
(a) A conversion into a domestic [A> OTHER BUSINESS ENTITY
(1) The approval of the plan of conversion by the partners of the
converting partnership as provided in Section 16903.
(2) The filing of all documents required by law to create the
converted [A> OTHER BUSINESS ENTITY,
(3) The effective date, if set forth in the plan of conversion,
shall have occurred.
(b) A copy of the certificate of limited partnership[A> , ARTICLES
OF ORGANIZATION, INCORPORATION,
[*18] SECTION 18. Section 16905 of the Corporations Code is
amended to read:
@ 16905.
(a) The conversion of a partnership into a foreign other business
entity shall comply with Section 16902.
(b) If the partnership is converting into a foreign other business
entity, then the conversion proceedings shall be in accordance with
the laws of the state or place of organization of the foreign other
business entity and the conversion shall become effective in
accordance with that law.
(c)(1) Unless a statement of conversion has been filed to effect
the conversion, the converted foreign * * * other business entity
shall promptly notify the Secretary of State of the mailing address
of its agent for service of process, its chief executive office,
and of any change of address. To enforce an obligation of a
partnership that has converted to a* * * foreign other business
entity, the Secretary of State shall only be the agent for service
of process in an action or proceeding against the converted* * *
foreign other business entity, if the agent designated for the
service of process for that entity is a natural person and cannot
be found with due diligence or if the agent is a
corporation and no person, to whom delivery may be made, may be
located with due diligence, or if no agent has been designated and
if no one of the officers, partners, managers, members, or agents
of that entity may be located after diligent search, and it is so
shown by affidavit to the satisfaction of the court. The court then
may make an order that service be made by personal delivery to the
Secretary of State or to an assistant or deputy Secretary of State
of two copies of the process together with two copies of the order,
and the order shall set forth an address to which the process shall
be sent by the Secretary of State. Service in this manner is deemed
complete on the 10th day after delivery of the process to the
Secretary of State.
(2) Upon receipt of the process and order and the fee set forth in
Section [A> 12197
(3) The Secretary of State shall keep a record of all process
served upon the Secretary of State and shall record therein the
time of service and the Secretary of State's action with respect
thereto. The certificate of the Secretary of State, under the
Secretary of State's official seal, certifying to the receipt of
process, the providing of notice thereof to the entity, and the
forwarding of the process, shall be competent and prima facie
evidence of the matters stated therein.
[*19] SECTION 19. Section 16906 of the Corporations Code is
amended to read:
@ 16906.
(a) If the converting partnership has filed a statement of
partnership authority under Section 16303 that is effective at the
time of the conversion, then upon conversion to a domestic limited
partnership[A> , OR CORPORATION,
, ARTICLES OF
ORGANIZATION, INCORPORATION , OR CORPORATION,
, OR ARTICLES OF INCORPORATION,
(1) The name and the Secretary of State's file number, if any, of
the converting partnership.
(2) A statement that the principal terms of the plan of conversion
were approved by a vote of the partners, which equaled or exceeded
the vote required under Section 16903.
(b) A partnership converting to a foreign other business entity
that has filed a statement of partnership authority under Section
16303 that is effective at the time of conversion may file a
certificate of conversion with the Secretary of State. The
certificate of conversion shall contain the following:
(1) The names of the converting partnership and the converted
entity.
(2) The street address of the converted entity's chief executive
office and of an office in this state, if any.
(3) The form of organization of the converted entity.
(c) The filing with the Secretary of State of a certificate of
limited partnership[A> , ARTICLES OF ORGANIZATION,
INCORPORATION
[*20] SECTION 20. Section 16907 of the Corporations Code is
amended to read:
@ 16907.
(a) Whenever a partnership or other business entity having any
real property in this state converts into a partnership or an other
business entity pursuant to the laws of this state or of the state
or place in which the other business entity was organized, and the
laws of the state or place of organization (including this state)
of the converting partnership or other business entity provide
substantially that the conversion of a converting entity vests in
the converted partnership or other business entity all the real
property of the converting partnership or converting other business
entity, the filing for record in the office of the county recorder
of any county in this state in which any of the real property of
the converting partnership or converting other business entity is
located of either (1) a certificate of conversion or a certificate
of limited partnership[A> , ARTICLES OF ORGANIZATION, INCORPORATION, THE ARTICLES OR CERTIFICATE OF
INCORPORATION,
(b) A filed and, if appropriate, recorded certificate of
conversion, certificate of limited partnership, articles of
organization, [A> ARTICLES OR CERTIFICATE OF INCORPORATION,
(c) Recording of a certificate of conversion, * * * a certificate
of limited partnership, [A> ARTICLES OF ORGANIZATION, ARTICLES OR
CERTIFICATE OF INCORPORATION,
[*21] SECTION 21. Section 16908 of the Corporations Code is
amended to read:
@ 16908.
(a) A domestic limited partnership[A> , , OR CORPORATION,
entity is authorized by the laws under which it is organized to
effect the conversion.
(b) An entity that desires to convert into a domestic partnership
shall approve a plan of conversion or the instrument that is
required to be approved to effect the conversion pursuant to the
laws under which the entity is organized.
(c) The conversion of a domestic limited partnership[A> , , OR CORPORATION, SHAREHOLDERS, , OR
ARTICLES OR CERTIFICATE OF ORGANIZATION,
(d) The conversion by a domestic limited partnership[A> , , OR CORPORATION,
(e) The filing with the Secretary of State of a certificate of
conversion or a statement of partnership authority containing a
statement of conversion pursuant to subdivision (a) shall have the
effect of the filing of a certificate of cancellation by the
converting foreign limited partnership or foreign limited liability
company, and no converting foreign limited partnership or foreign
limited liability company that has made the filing is required to
file a certificate of cancellation under Section 15696 or 17455 as
a result of that conversion. If a converting other business entity
is a foreign corporation qualified to transact business in this
state, the foreign corporation shall, by virtue of the filing,
automatically surrender its right to transact intrastate business.
[*22] SECTION 22. Section 16909 of the Corporations Code is
amended to read:
@ 16909.
(a) An entity that converts into another entity pursuant to this
article is for all purposes the same entity that existed before the
conversion.
(b) When a conversion takes effect, all of the following apply:
(1) All the rights and property, whether real, personal, or mixed,
of the converting entity remains vested in the converted entity.
(2) All debts, liabilities, and obligations of the converting
entity continue as debts, liabilities, and obligations of the
converted entity.
(3) All rights of creditors and liens upon the property of the
converting entity shall be preserved unimpaired and remain
enforceable against the converted entity to the same extent as
against the converting entity as if the conversion had not
occurred.
(4) Any action or proceeding pending by or against the converting
entity may be continued against the converted entity as if the
conversion had not occurred.
(c) A partner of a converting partnership is liable for:
(1) All obligations of the converting partnership for which the
partner was personally liable before the conversion.
(2) All obligations of the converted entity incurred after the
conversion takes effect, but those obligations may be satisfied
only out of property of the entity if (A) the converted other
business entity is a limited partnership and the partner becomes a
limited partner[A> ,
business entity is a limited liability company and the partner
becomes a member, unless the articles of organization or the
operating agreement of the limited liability company provide
otherwise[A> , OR (C) THE CONVERTED OTHER BUSINESS ENTITY IS A
CORPORATION AND THE PARTNER BECOMES A SHAREHOLDER.
(d) A partner of a partnership that converted from an other
business entity is liable for any and all obligations of the
converting other business entity for which the partner was
personally liable before the conversion, but only to the extent the
partner was liable for the obligation of the converting entity
prior to the conversion.
(e) A partner of a converting partnership, who does not vote in
favor of the conversion and does not agree to become a partner,
member, [A> SHAREHOLDER, THAT
[*23] SECTION 23. Section 17540.2 of the Corporations Code is
amended to read:
@ 17540.2. [A> (A) (1) A CONVERSION INTO A
DOMESTIC OR FOREIGN GENERAL PARTNERSHIP OR LIMITED PARTNERSHIP OR
INTO A FOREIGN LIMITED LIABILITY COMPANY, , AND (2) PURSUANT TO A CONVERSION INTO
AN OTHER BUSINESS ENTITY OR FOREIGN OTHER BUSINESS ENTITY NOT
SPECIFIED IN CLAUSE (1) ABOVE, BOTH OF THE FOLLOWING OCCUR: (A)
EACH OF THE MEMBERSHIP INTERESTS OF THE SAME CLASS IS TREATED
EQUALLY WITH RESPECT TO ANY DISTRIBUTION OF CASH, PROPERTY, RIGHTS,
INTERESTS, OR SECURITIES OF THE CONVERTED ENTITY, UNLESS ALL
MEMBERS OF THE CLASS CONSENT, AND (B) THE NONREDEEMABLE MEMBERSHIP
INTERESTS OF THE CONVERTING LIMITED LIABILITY COMPANY ARE CONVERTED
ONLY INTO NONREDEEMABLE INTERESTS OR SECURITIES OF THE CONVERTED
ENTITY, UNLESS ALL HOLDERS OF THE NONREDEEMABLE INTERESTS CONSENT.
(B)
[A> (1)
permits the formation of that entity pursuant to a conversion.
[A> (2)
[*24] SECTION 24. Section 17540.3 of the Corporations Code is
amended to read:
@ 17540.3.
(a) A limited liability company that desires to convert to an
other business entity or a foreign other business entity or a
foreign limited liability company shall approve a plan of
conversion.
The plan of conversion shall state all of the following:
(1) The terms and conditions of the conversion.
(2) The place of the organization of the converted entity and of
the converting limited liability company and the name of the
converted entity after conversion.
(3) The manner of converting the membership interests of each of
the members into securities of, [A> SHARES OF,
(4) The provisions of the governing documents for the converted
entity, including the [A> ARTICLES OR CERTIFICATE OF INCORPORATION
IF THE CONVERTED ENTITY IS A DOMESTIC OR FOREIGN CORPORATION, THE
PARTNERSHIP AGREEMENT, OR THE LIMITED LIABILITY COMPANY ARTICLES OF
ORGANIZATION AND OPERATING
(5) Any other details or provisions that are required by the laws
under which the converted entity is organized, or that are desired
by the parties.
(b) The plan of conversion shall be approved by a vote of a
majority in interest of the members of the converting limited
liability company, or a greater percentage of the voting interests
of members as may be specified in the articles of organization or
written operating agreement of the converting limited liability
company. However, if the members of the limited liability company
would become personally liable for any obligations of the converted
entity as a result of the conversion, the plan of conversion shall
be approved by all of the members of the converting limited
liability company, unless the plan of conversion provides that all
members will have dissenters' rights as provided in Chapter 13
(commencing with Section 17600).
(c) If the limited liability company is converting into a limited
partnership, then in addition to the approval of the members set
forth in subdivision (b), the plan of conversion shall be approved
by those members who will become general partners of the converted
limited partnership pursuant to the plan of conversion.
(d) Upon the effectiveness of the conversion, all members of the
converting limited liability company, except those that exercise
dissenters' rights as provided in Chapter 13 (commencing with
Section 17600)[A> , THE
(e) Notwithstanding its prior approval, a plan of conversion may
be amended before the conversion takes effect if the amendment is
approved by the members of the converting limited liability company
in the same manner as was required for approval of the original
plan of conversion.
(f) A plan of conversion may be abandoned by the members of a
converting limited liability company in the manner as required for
approval of the plan of conversion, subject to the contractual
rights of third parties, at any time
before the conversion is effective.
(g) The converted entity shall keep the plan of conversion at the
principal place of business of the converted entity if the
converted entity is a domestic partnership or foreign other
business entity[A> , AT THE PRINCIPAL EXECUTIVE OFFICE OF OR
REGISTRAR OR TRANSFER AGENT OF THE CONVERTED ENTITY IF THE
CONVERTED ENTITY IS A DOMESTIC CORPORATION, , SHARES,
[*25] SECTION 25. Section 17540.6 of the Corporations Code is
amended to read:
@ 17540.6.
(a) Upon conversion of a limited liability company:
(1) If the limited liability company is converting into a domestic
limited partnership, a statement of conversion shall be completed
on the certificate of limited partnership for the converted entity.
(2) If the limited liability company is converting into a domestic
partnership, a statement of conversion shall be completed on the
statement of partnership authority for the converted entity, or if
no statement of partnership authority is filed then a certificate
of conversion shall be filed separately.
(3) If the limited liability company is converting [A> TO A
DOMESTIC CORPORATION, A STATEMENT OF CONVERSION SHALL BE COMPLETED
ON THE ARTICLES OF INCORPORATION FOR THE CONVERTED ENTITY.
(4) IF THE LIMITED LIABILITY COMPANY IS CONVERTING
(b) Any certificate or statement of conversion shall be executed
and acknowledged by all of the managers, unless a lesser number is
provided in the articles of organization or the operating agreement
of the converting limited liability company, and shall set forth
all of the following:
(1) The name and the Secretary of State's file number of the
converting limited liability company.
(2) A statement that the principal terms of the plan of conversion
were approved by a vote of the members, which equaled or exceeded
the vote required under Section 17540.3, specifying each class
entitled to vote and the percentage vote required of each class.
(3) The form of organization of the converted entity.
(c) The filing with the Secretary of State of a certificate of
conversion or an organizational document containing a statement of
conversion as set forth in subdivision (a) shall have the effect of
the filing of a certificate of cancellation by the converting
limited liability company and no converting limited liability
company that has made the filing is required to file a certificate
of dissolution or a certificate of cancellation under Section 17356
as a result of that conversion.
[*26] SECTION 26. Section 17540.7 of the Corporations Code is
amended to read:
@ 17540.7.
(a) Whenever a limited liability company or other business entity
having
any real property in this state converts into a limited liability
company or an other business entity pursuant to the laws of this
state or of the state or place in which the limited liability
company or other business entity was organized, and the laws of the
state or place of organization, including this state, of the
converting limited liability company or other converting entity
provide substantially that the conversion vests in the converted
limited liability company or other converted entity all the real
property of the converting limited liability company or other
converting entity, the filing for record in the office of the
county recorder of any county in this state in which any of the
real property of the converting limited liability company or other
converting entity is located of either (1) a certificate of
conversion, statement of partnership authority, certificate of
limited partnership, or articles of organization complying with
Section 17540.6, in the form prescribed and certified by the
Secretary of State, or (2) a copy of a certificate of conversion,
or a statement of partnership authority, certificate of limited
partnership, articles of organization, [A> ARTICLES OR CERTIFICATE
OF INCORPORATION, OR DOCUMENT
(b) A filed and, if appropriate, recorded certificate of
conversion, or a statement of partnership authority, certificate of
limited partnership[A> , , ARTICLES
OR CERTIFICATE OF INCORPORATION,
(c) Recording of a certificate of conversion or a statement of
partnership authority, certificate of limited partnership[A> , OR ARTICLES OR CERTIFICATE OF
INCORPORATION,
[*27] SECTION 27. Section 17540.8 of the Corporations Code is
amended to read:
@ 17540.8.
(a) An other business entity or a foreign other business entity or
a foreign limited liability company may be converted to a domestic
limited liability company pursuant to this chapter only if the
converting entity is authorized by the laws under which it is
organized to effect the conversion.
(b) An other business entity or a foreign other business entity or
a foreign limited liability company that desires to convert into a
domestic limited liability company shall approve a plan of
conversion or an other instrument as is required to be approved to
effect the conversion pursuant to the laws under which that entity
is organized.
(c) The conversion of an other business entity or a foreign other
business
entity or a foreign limited liability company into a domestic
limited liability
company shall be approved by that number or percentage of the
partners, members,
[A> SHAREHOLDERS, ARTICLES OR CERTIFICATE OF INCORPORATION,
(d) The conversion by an other business entity or a foreign other
business
entity or a foreign limited liability company into a domestic
limited liability
company shall be effective under this chapter at the time the
conversion is
effective under the laws under which the converting entity is
organized as long
as the articles of organization containing a statement of
conversion have been
filed with the Secretary of State. If the converting entity's
governing law is
silent as to the effectiveness of the conversion, the conversion
shall be
effective upon the completion of all acts required under this title
to form a
limited liability company.
(e) The filing with the Secretary of State of a certificate of
conversion or
articles of organization containing a statement of conversion
pursuant to
subdivision (a) shall have the effect of the filing of a
certificate of
cancellation by the converting foreign limited liability company or
foreign
limited partnership, and no converting foreign limited liability
company or
foreign limited partnership that has made the filing is required to
file a
certificate of cancellation under Section 15696 or 17455 as a
result of that
conversion. If a converting other business entity is a foreign
corporation
qualified to transact business in this state, the foreign
corporation shall, by
virtue of the filing, automatically surrender its right to transact
intrastate
business.
[*28] SECTION 28. Section 25005.1 of the Corporations Code is
amended to
read:
@ 25005.1. "Entity conversion transaction" means a conversion
pursuant to Section [A>
1151, 1157,
[*28x5] SECTION 28.5. Section 25005.1 of the Corporations Code is
amended
to read:
@ 25005.1. "Entity conversion transaction" means a conversion
pursuant to Section [A>
1151, 1157, , OR
A CONVERSION THAT OCCURS ENTIRELY OUT OF STATE,
[*29] SECTION 29. Section 12184 is added to the Government Code,
to
read:
@ 12184.
(a) The Secretary of State shall charge and collect a fee of two
hundred
fifty dollars ($ 250) from an entity for its conversion made
pursuant to Chapter
11.5 (commencing with Section 1150) of Division 1 of Title 1 of the
Corporations
Code. (b) This section shall remain in effect only until January 1,
2005, and as
of that date is repealed, unless a later enacted statute, that is
enacted before
January 1, 2005, deletes or extends that date.
[*30] SECTION 30. Section 12184 is added to the Government Code,
to read:
@ 12184.
(a) The Secretary of State shall charge and collect a fee of one
hundred
fifty dollars ($ 150) from an entity for its conversion made
pursuant to Chapter
11.5 (commencing with Section 1150) of Division 1 of Title 1 of the
Corporations
Code.
(b) This section shall become operative on January 1, 2005.
[*31] SECTION 31. Section 28.5 of this bill incorporates
amendments to
Section 25005.1 of the Corporations Code proposed by both this bill
and SB 1926.
It shall only become operative if (1) both bills are enacted and
become
effective on or before January 1, 2003, (2) each bill amends
Section 25005.1 of
the Corporations Code, and (3) this bill is enacted after SB 1926,
in which case
Section 28 of this bill shall not become operative.
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