Senate Bill 218 (SB 218) authorizes the Superior Court to validate or ratify otherwise lawful corporate actions, not in compliance, or purportedly not in compliance, with the General Corporation Law, the articles, bylaws, or a plan or agreement to which the corporation is a party in effect at the time of a corporate action if the requirements outlined in the bill are met.
If the corporate action is not related to the election of the initial directors, the Board must ratify the corporate action by resolutions that set forth: (1) each action to be ratified, (2) the date the action took place, and the date the action is effective, if different; (3) the nature of the noncompliance or purposed noncompliance of each action; and (4) a statement that the ratification of each action is approved. If the corporate action is related to the election of the initial directors, the resolution must set forth: (1) the name of the person or persons who first took action in the name of the corporation as the initial directors; (2) the earlier date of which such person took action or was purported to have been elected as initial directors and the date the persons shall be deemed to become the initial directors; and (3) a statement that the ratification of each election is approved.
The corporation must file a certificate of ratification with the Secretary of State if the ratified corporate action would have required filing or if any document previously filed becomes inaccurate or incomplete after giving effect to the ratification. The code sets forth the required provisions that must be included in the certificate of ratification.
If the Secretary of State refuses to file the certificate of ratification because it would render prior filings inaccurate, ambiguous, or unintelligible, an authorized person may file a Petition with the superior court to determine the validity of the corporate action. An “authorized person” is defined as the corporation, any successor entity to the corporation, any director, or any other person that claims to be substantially and adversely affected by the ratification of corporate action. The petition must be filed in the superior court in the county where the principal office of the corporation is located. The authorized person must serve the petition on the corporation’s registered agent and does not need to join any other party. The code sets forth the required provisions that must be included in the petition.
The corporation must file a certificate of validation with the Secretary of State if the corporate action validated by the Superior Court would have required filing or if any document previously filed becomes inaccurate or incomplete after giving effect to the validation. The code sets forth the required provisions that must be included in the certificate of validation.
(SB 218 amends Section 110 of, and adds Section 119 to, the Corporations Code.)