Category Archives: Business Law

Commercial Law

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Commercial Law

Commercial Law

Basics of commercial law in the State of California. There is also additional information and resources on related topics in California.

Uniform Commercial Code, Article 1: General Provisions

Welcome to the California legal encyclopedia's introductory part covering the Uniform Commercial Code, Article 1: general provisions laws of California, with explanations of the various implications of Uniform Commercial Code, Article 1: general provisions in California and the statutes enforced in California in connexion with Uniform Commercial Code, Article 1: general provisions. This introductory section covers case law related to Uniform Commercial Code, Article 1: general provisions in California, the legal approach on Uniform Commercial Code, Article 1: general provisions in the United States and related topics. The information below provides an California-specific general overview of the legal regime of Uniform Commercial Code, Article 1: general provisions in California.

Uniform Commercial Code, Article 1: General Provisions in relation to Commercial Law

This section analizes the legal issue of Uniform Commercial Code, Article 1: general provisions in this context, and provides information on its relation with Uniform Commercial Code.

Resources

See Also

Electronic Transaction

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Electronic Transaction in California

The Uniform Electronic Transactions Act and the E-Commerce Law: e-signature

California enacted UETA and it took effect January 1, 2000. For more information on electronic transactions in the United States, see here.

Applicability

Civil Code Sec. 1633.3

Application of title provides:” (a) Except as otherwise provided in subdivisions (b) and (c), this title applies to electronic records and electronic signatures relating to a transaction.(b) This title does not apply to transactions subject to…” There is a long list of types of transactions that are NOT valid if electronic. These deal mainly with notices regarding real property, vehicles health and many other transactions that if left to e-mail could end up in fraud to the consumer.

Civil Code Sec. 1633.4

Next, this provision provides that the new law “applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored on or after January 1, 2000.” E-signatures alone (without paper backup) may not be valid if “signed” before this date.

Record or signature requirement; agreement to transact electronically: Section 1633.5. provides two requirements and a non-requirement. Part (a) states that the new law, “does not require a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in electronic form.” This means that if the record is in paper form it is as valid an e-signature as if in electronic form.

Part (b) provides the CRUX of validity: if the parties to an e-transaction “each of which has agreed to conduct the transaction by electronic means,” then the Act applies to make it valid. “Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.” for example if a person is online and goes to an online business, click “I Accept” they are, from these circumstances, making an electronic agreement (contract).

Note that this part also provides that if there is an “an agreement to conduct a transaction by electronic means may not be contained in a standard form contract that is not an electronic record.” Though this language is a bit cryptic, it is believed to be intended to mean that if there is a standard from paper agreement, it may not validly contain an agreement to conduct business by e-means.

Therefore, if an e-transaction is to be valid and enforceable the agreement to do business by e-means must be shown by:

  • the surrounding circumstances of the transaction,
  • by a separate agreement whether on paper or in e-format (not in a standard contract however),
  • a form contract the sole purpose of which is to approve or agree that the agreement is to be conducted by electronic means.

Then what if the person does not want to make all transaction by e-means? Section 1633.5 (c) provides, “A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. If a seller sells goods or services by both electronic and nonelectronic means and a buyer purchases the goods or services by conducting the transaction by electronic means, the buyer may refuse to conduct further transactions regarding the goods or services by electronic means.”

Others

Note that this part also states, “This subdivision may not be varied by agreement.” Of course, if the only format of business is e-business then the person would have to stop signing and would be unable to do further business with that company. You may not thus not tell the user that they need to agree to conduct all transactions by e-means.

If an agreement is “signed” by an e-signature it is valid IF certain requirements are met. First is that IF there needs to be an electronic record of the signature, this can be on disk, server or eventually printed on paper. The e-record is needed to prove that at the moment the accepting party clicked on “I Accept” he/she actually sent data to the offeror and the offeror, under the circumstances of the transaction, took the click as a signature. From then on the parties are bound by the acceptance of the agreement just as if it were on paper.

Requirement to provide, send, or deliver information in writing

Section 1633.8. electronic satisfaction: (a) If parties have agreed to conduct a transaction by electronic means and a law requires a person to provide, send, or deliver information in writing to another person, that requirement is satisfied if the information is provided, sent, or delivered, as the case may be, in an electronic record capable of retention by the recipient at the time of receipt. An electronic record is not capable of retention by the recipient if the sender or its information processing system inhibits the ability of the recipient to print or store the electronic record.

“Section 1633.7. Legal effect or enforceability of electronic record, signature, or contract: (a) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.(b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.(c) If a law requires a record to be in writing, an electronic record satisfies the law.(d) If a law requires a signature, an electronic signature satisfies the law.”

Alarm Companies: Electronic Transactions (AB 1097) in California

The Alarm Companies: Electronic Transactions (AB 1097) is an act to amend Section 7599.54 of, and to add Section 7599.56 to, the Business and Professions Code, and to amend, repeal, and add Section 1633.3 of the Civil Code, relating to alarm companies. Decided: California Assembly Act (2015-2016 Regular Session – AB 1097)

Deceptive Practices

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Deceptive Practices

California Deceptive and Unfair Business Practices

General overview of California laws prohibiting businesses from engaging in unfair and deceptive trade tactics and practices, such as false advertising in California, bait and switch, or tampering with a car's odometer, with cross-references to additional information and resources on related topics in California.

Deceptive Practices and False Personation

Welcome to the California legal encyclopedia's introductory part covering the deceptive practices and false personation laws of California, with explanations of the various implications of deceptive practices and false personation in California and the statutes enforced in California in connexion with deceptive practices and false personation. This introductory section covers case law related to deceptive practices and false personation in California, the legal approach on deceptive practices and false personation in the United States and related topics. The information below provides an California-specific general overview of the legal regime of deceptive practices and false personation in California.

Deceptive Practices and False Personation in relation to Criminal Law & Procedure

This section analizes the legal issue of deceptive practices and false personation in this context, and provides information on its relation with Particular Crimes and Offenses.

Resources

See Also

Identity Theft

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Identity Theft

California Identity Theft Laws

An overview of California's various laws and regulations handling the crime of identity theft in California, in which an individual's personal identifying information is used to secure credit or purchase goods.

Welcome to the California legal encyclopedia's introductory entry covering the identity theft laws of California, with explanations of the various implications of identity theft in California and the criminal statutes enforced in California in connexion with identity theft. This introductory entry covers case law related to identity theft in California, the legal approach on identity theft in the United States and related topics.

California criminal laws on identity theft identify unlawful conduct related to identity theft that is made punishable by sanctions, such as imprisonment and/or fines. The information below provides an California-specific general overview of the legal regime of identity theft in California.

Resources

See Also

Corporate Law

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Corporate Law

Corporation Law

Basics of corporation regulation in the State of California. Here you will find a summary on choosing a legal structure in California (such as a partnership, limited liability company, or corporation). There is also additional information and resources on related topics in California.

Corporate Incidents

Welcome to the California legal encyclopedia's introductory part covering the corporate incidents laws of California, with explanations of the various implications of corporate incidents in California and the statutes enforced in California in connexion with corporate incidents. This introductory section covers case law related to corporate incidents in California, the legal approach on corporate incidents in the United States and related topics. The information below provides an California-specific general overview of the legal regime of corporate incidents in California.

Corporate Incidents in relation to Business Relationships

This section analizes the legal issue of corporate incidents in this context, and provides information on its relation with Corporations.

Termination of Corporate Existence

Welcome to the California legal encyclopedia's introductory part covering the termination of corporate existence laws of California, with explanations of the various implications of termination of corporate existence in California and the statutes enforced in California in connexion with termination of corporate existence. This introductory section covers case law related to termination of corporate existence in California, the legal approach on termination of corporate existence in the United States and related topics. The information below provides an California-specific general overview of the legal regime of termination of corporate existence in California.

Termination of Corporate Existence in relation to Business Relationships

This section analizes the legal issue of termination of corporate existence in this context, and provides information on its relation with Corporations.

Resources

See Also

Resources

See Also

Corporation

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Corporation in California

“When a corporation and its counsel refuse to produce directly relevant information an opposing party is entitled to receive, they have abandoned these basic principles [of
litigation] in favor of their own interests. The little voice in every attorney’s conscience that murmurs turn over all material information was ignored.”

— Judge Roslyn O. Silve

For-profit businesses with Formal Social and Environmental Responsibility

by Jesse Finfrock (2011)

California is poised to lead the nation in putting social and environmental good on an equal footing with a business’s profits. Two bills wending their way through Sacramento this summer would allow companies to become a benefit corporation (AB 361) or a flexible purpose corporation (SB 201), fundamentally changing California’s Corporations Code.

Currently if a company wants to undertake a mission other than earning profits, it faces substantial limitations, some say, especially during a merger or acquisition. To get around this, directors rely on the so-called business judgment rule, which permits them to do what they believe is best for shareholders’ long-term interest even at the expense of short-term profits. Yet when a company decides to sell, directors are obligated to take reasonable steps to maximize shareholders’ investment and accept the highest offer, which could put a company’s social benefits practices at risk.

But a new generation of consumers, entrepreneurs, and investors are demanding change. Nationwide, they are pushing legislation that allows for-profit businesses to formally incorporate social and environmental responsibility into their missions. Bills similar to California’s AB 361, have already been passed in Hawaii, Maryland, New Jersey, Vermont, and Virginia, and introduced in five additional states.

The benefit and flexible purpose corporation bills share some basic components, such as ensuring the dissenting rights of shareholders and protecting directors from liability. This has spawned a debate over whether the bills would compliment or compete with each other. “Each of the bills responds to a totally different need,” argues Jonathan S. Storper, a partner at Hanson Bridgett and a drafter of AB 361.

The bill requires a benefit corporation to meet independent, third-party standards of social and environmental responsibility and transparency; a company could lose its benefit corporation status if the requirements are not satisfied. But according to Susan Mac Cormac, cochair of Morrison & Foerster’s Business Department, SB 201 requires a flexible purpose corporation to detail its social purpose and provide shareholders with a progress report (permissibly its own). “There is nothing companies can do through AB 361 that they cannot do through SB 201,” Mac Cormac says.

“There may be issues with each of the bills, and they will be sorted out in the courts over time,” says professor Eric Talley at UC Berkeley School of Law. “We cannot know what forms do and do not work unless we try them.”

California Corporation

This section covers California-specific basic information on corporation and related topics. Many of California's laws on corporation are similar to those of other U.S. states, with some differences (in some cases, minor differences). California corporation laws on corporation are created and revised by the actions of lawmakers and the courts. Use the cross-references and topics below to learn more about California statutes and laws on corporation, which is a basic matter in California law.

Resources

See Also

Statute of Limitations

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Statute of Limitations

California Civil Statute of Limitations

Summary of California's civil statute of limitations, which dictates time limits for filing a civil action and is intended to maintain the integrity of evidence and ensure greater efficiency. There is a list of California's statutes of limitations for various kinds of civil actions, including defamation; professional malpractice; fraud; personal injury; false imprisonment; damage to personal property; trespassing; and other types of civil actions.

Legal Forms

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Legal Forms in California

Research Guide – California Legal Forms

California Civil Procedure Formbooks

These include:

  • California Affirmative Defenses 2d, Bancroft Whitney, 5 volumes. These forms are for defenses to civil actions. This publication is also available on Westlaw (Formerly, CAAFDEF).
  • California Civil Litigation Forms Manual, Continuing Education of the Bar, 2 volumes. The forms in this practice guide are derived from CEB civil procedure and civil discovery books. Sample forms are including.
  • California Civil Procedure Before Trial, 3rd ed., Continuing Education of the Bar, 3 volumes. This publication is also available on Lexis (formerly, ceb;cebcpt).
  • California Forms of Pleading and Practice, Annotated, Matthew Bender, 55 volumes. This is a very comprehensive and current set of California legal forms. It includes relevant laws and the procedures for using the forms. It is organized by subject. These forms are available on Lexis.
  • California Practice Guide: Alternative Dispute Resolution, Rutter Group. This publication is also available on Westlaw (Formerly, TRG-CAADR).
  • California Practice Guide: Civil Appeals and Writs, Rutter Group, 2 volumes. This publication is also available on Westlaw (Formerly, TRG-CACIVAPP).
  • California Practice Guide: Civil Procedure Before Trial, Rutter Group, 3 volumes. This publication is also available on Westlaw (Formerly, TRG-CACIVP).
  • California Practice Guide: Civil Trials and Evidence, Rutter Group, 3 volumes. This publication is also available on Westlaw (Formerly, TRG-CACIVEV).
  • California Practice Guide: Enforcing Judgments and Debts, Rutter Group, 2 volumes. This publication is also available on Westlaw (Formerly, TRG-CADEBT).
  • Debt Collection Practice in California, Continuing Education of the Bar, 2 volumes.
  • Practicing California Judicial Arbitration, Continuing Education of the Bar.

Judicial Council Forms

These include:

  • California Forms of Pleading and Practice, Annotated, Matthew Bender. A three volume supplement, Judicial Council Forms, contains forms for use in discovery, wage garnishment, family law, juvenile court law, guardianship, civil harassment, and small claims proceedings.
    These forms are available on Lexis.
  • California Judicial Council Forms Manual, Continuing Education of the Bar, 4 volumes. Forms can be removed for copying and are accepted by the California courts. Set includes table of contents, alphabetical list of forms, and table of statutes and rules.
  • West’s California Judicial Council Forms, 4 volumes. For use in conjunction with West’s Annotated California Codes. Forms are effective through current year.

Judicial Council Forms are also available through the California Courts’ Internet homepage.

Jury Instructions and Selection

  • [CACI] California Jury Instructions: Civil, Plain English, This publication is also available on Westlaw (Formerly, CA-CACI) and Lexis (Formerly, cal;cjcjur).
  • [BAJI] California Jury Instructions: Civil, 9th ed., 2 volumes. This publication is also available on Westlaw and Lexis.
  • Bennett’s Guide to Jury Selection and Trial Dynamics:California Civil Litigation, West Publishing Company. Forms for jury selection, including sample questionnaires for different types of trials. These forms are also available on Westlaw (formerly, through the LTG-TP database). Hint: To limit your search to Bennett’s, add “ci (bennett)” to your search.
  • [CALCRIM] California Jury Instructions: Criminal, Plain English, 2 volumes. This publication is also available on Westlaw and Lexis.
  • [CALJIC] California Jury Instructions: Criminal, 6th ed., 2 volumes. This publication is also available on Westlaw and Lexis.
  • Bennett’s Guide to Jury Selection and Trial Dynamics:California Criminal Litigation, West Publishing Company. Forms for jury selection, including sample questionnaires for different types of trials. These forms are also available on Westlaw (formerly, through the LTG-TP database). Hint: To limit your search to Bennett’s, add “CI (bennett)” to your search.
  • California Forms of Jury Instructions, Matthew Bender, 4 volumes. These forms are also available on Lexis.
  • California’s New Civil Jury Instructions are available through the California Courts’ web page at http://www.courtinfo.ca.gov/reference/documents/civiljuryinst.pdf. There is a conversion chart at the end for cross-referencing BAJI numbers with the correct numbers for the new instructions.
  • FORECITE: Latest Developments in California Criminal Jury Instructions. This looseleaf volume supplements and updates CALJIC.

Formbooks Organized by Subject Specialization

Multi-Subject Formbook Sets:

  • California Legal Forms: Transaction Guide, Matthew Bender, 36 volumes. Includes forms for business and nonprofit organizations, real estate transactions, commercial transactions, wills & trusts, contracts & obligations, performance of services, and personal transactions.
    These forms are also available on Lexis.
  • West’s California Code Forms With Practice Commentaries, 46 volumes. For use with West’s Annotated California Codes. Includes volumes devoted to Business and Professions, Civil, Civil Procedure, Commercial, Corporations, Education, Elections, Fish & Game, Food & Agricultural, Insurance, Government, Labor, Probate, Public Utilities, and Revenue & Taxation. This publication is also available on Westlaw.

Attorney’s Fees:

  • California Attorney Fee Awards, 2nd ed., Continuing Education of the Bar. This guide includes forms for recovering attorney’s fees.
  • Fee Agreement Forms Manual, Continuing Education of the Bar. This guide provides a complete and practical guide to planning and drafting attorney-client fee agreements that meet the requirements of the fee agreements statute.

Businesses and Business Entities:

  • Advising California Employers and Employees, 2nd ed., Continuing Education of the Bar, 3 volumes. These forms are available on Lexis.
  • Advising California Partnerships, Continuing Education of the Bar. These forms are also available on Lexis.
  • California Practice Guide: Corporations, The Rutter Group, 2 volumes. These forms are also available on Westlaw.
  • California Corporation Laws, Ballantine & Sterling, 7 volumes. These forms are also available on Lexis.
  • California Transactions Forms : Business Entities, Bancroft-Whitney, 6 volumes. These forms are also available on Westlaw.
  • California Transactions Forms: Business Transactions, Bancroft-Whitney, 6 volumes. These forms are also available on Westlaw.
  • Financing and Protecting California Businesses, Continuing Education of the Bar. Forms for business startups.
  • Drafting Business Contracts: Principles, Techniques & Forms, Continuing Education of the Bar. These forms are also available on Lexis.
  • Forming & Operating California Limited Liability Companies, Continuing Education of the Bar. These forms are also available on Lexis.
  • Selecting & Forming Business Entities, Continuing Education of the Bar, 3 volumes. These forms are also available on Lexis.

Class Actions:

  • Cohelan on California Class Actions, West Group. This publication has forms and samples for filing class actions.

Criminal Law:

  • California Criminal Practice, Motions, Jury Instructions and Sentencing, 3rd ed., Thomson-West, 5 volumes.
  • California Criminal Law Forms Manual, Continuing Education of the Bar.

Family Law:

  • California Family Law: Practice and Procedure, Matthew Bender, 6 volumes. These forms are also available on Lexis. Includes a supplement with Judicial Council Forms.
  • California Family Law Trial Guide, Matthew Bender, 4 volumes. This publication is also available on Lexis.
  • California Marital Settlement and Other Family Law Agreements, 3rd ed., California Continuing Education of the Bar.
  • California Practice Guide: Family Law, Rutter Group, 3 volumes. This publication is also available on Westlaw.
  • California Transaction Forms: Family Law, West Group, 2 volumes. Also available on Westlaw.

Insurance Law:

California Practice Guide: Insurance Litigation, The Rutter Group, 3 volumes.
These forms are also available on Westlaw.

Landlord-Tenant Law:

  • California Eviction Defense Manual, Continuing Education of the Bar, 2 volumes. This publication is also available on Lexis.
  • California Landlord-Tenant Practice, Continuing Education of the Bar, 2 volumes. This publication is also available on Lexis.
  • California Practice Guide: Landlord-Tenant, Rutter Group, 2 volumes. This publication is also available on Westlaw.
  • California Tenants: A Guide to Residential Tenants’ and Landlords’ Rights and Responsibilities, State of California. Available online at http://www.dca.ca.gov/legal/landlordbook/index.html. Published by the California Department of Consumer Affairs.
  • California Tenants’ Rights, Nolo Press.
  • The California Landlord’s Law Book: Rights and Responsibilities, Nolo Press.

Real Property, Financing, and Construction Law:

  • California Practice Guide: Real Property Transactions, Rutter Group, 2 volumes. This publication is also available on Westlaw.
  • California Real Estate Forms,2nd ed., [Miller and Starr] Bancroft-Whitney, 4 volumes. These forms accompany Miller and Starr, California Real Estate 2d, the preeminent treatise on real estate law in California. Volume 1 contains forms pertaining to the purchase and sale of real property; Volume 2 contains forms pertaining to leasing transactions. Also available on Westlaw.
  • California Real Property Practice Forms Manual, Continuing Education of the Bar. This practice guide collects forms from CEB’s most commonly used real property books in one easy-to-use volume. Readers can remove forms for easy photocopying.
  • California Construction Contracts and Disputes, Continuing Education of the Bar. This practice guide has forms for drafting California construction contracts. This publication is also available on Lexis.
  • California Lis Pendens Practice, 2nd ed., Continuing Education of the Bar. This practice guide has forms for filing and perfecting notices of pending actions.
  • California Mechanics Liens and Related Construction Remedies, 3rd ed., Continuing Education of the Bar. This practice guide has forms for statutory remedies on public and private construction projects. This publication is also available on Lexis.
  • Condemnation Practice in California, 3rd ed., Continuing Education of the Bar, 2 volumes. Litigation forms are available in this publication.
  • Financing and Protecting California Businesses, Continuing Education of the Bar, 2 volumes.
  • Forming California Common Interest Developments, Continuing Education of the Bar, 2 volumes. This publication has forms for creating a common interest development.
  • Ground Lease Practice, Continuing Education of the Bar. This practice guide has forms for drafting building leases.
  • Office Leasing: Drafting and Negotiating the Lease, Continuing Education of the Bar, 2 volumes. The practice guide has forms for drafting commercial leases. This publication is also available on Lexis.
  • Real Property Exchanges, Continuing Education of the Bar.

Taxation:

  • Print: For tax forms, looseleaf services with forms are pageable. Also, state tax formbooks for the current year are in the Reference Collection.
  • Internet: California tax forms are available on the Internet at: http://www.ftb.ca.gov/forms/index.html and federal tax forms are available at: http://www.irs.ustreas.gov/formspubs/index.html

Tort Law:

  • California Practice Guide: Personal Injury, Rutter Group, 2 volumes. Also available on Westlaw.
  • California Products Liability Actions, Matthew Bender. Also available on Lexis.

Wills & Trusts and Elder Law:

  • California Elder Law: An Advocate’s Guide, Continuing Education of the Bar, 2 volumes. Also available on Lexis.
  • California Practice Guide: Probate, Rutter Group, 2 volumes. This publication is also available on Westlaw.
  • California Transaction Forms: Estate Planning, 2nd ed., West Group, 4 volumes. This publication is also available on Westlaw.
  • California Will Drafting, Continuing Education of the Bar, 3 volumes. Also available on Lexis.
  • Drafting California Revocable Trusts, Continuing Education of the Bar. This publication is also available on Lexis.
  • Drafting California Irrevocable Trusts, California Continuing Education of the Bar, 2 volumes. This publication is also available on Lexis.
  • California Conservatorship Practice,Continuing Education of the Bar, 2 volumes.
  • This publication is also available on Lexis.

California Forms on the Internet

  • FindLaw California: Legal Forms
  • Judicial Council Legal Forms
  • California Business Portal: http://www.ss.ca.gov/business/corp/corp_formsfees.htm
  • Internet Legal Resource Guide: Legal Forms Archive – http://www.ilrg.com/forms
  • LexisONE provided access to more than 6,000 forms, as well as forms from the extensive Matthew Bender collection. While the forms are free to view, there is a charge to use the interactive forms, and users must register and select a password.
  • The California Superior Court hosts EZLegalFile at http://www.ezlegalfile.org, where interactive forms for family, marriage, divorce, small claims, evictions, guardianship, and domestic violence can be filled out online and printed in a form suitable for filing.

California Forms on Lexis and Westlaw

  • LEXIS: There are many California legal forms on Lexis in the Matthew Bender Treatises and the CEB publications.
  • WESTLAW: There are numerous California legal forms available on Westlaw. To locate the list of forms, go to the online Westlaw directory, select “State Materials”, then select “California”, and then select “Forms, Treatises, CLEs and Other Practice Material”.

Benefit Corporation

This is a Non Profit Project. We don't collect personal data and we don't use cookies.

Benefit Corporation in California

By Jonathan S. Storper. He is a partner at Hanson Bridgett in San Francisco, where he chairs the firm’s benefit corporation practice group.

Benefit corporations can pursue social aims and profits.

Abenefit corporation is a recent legal phenomenon – a for-profit entity with three attributes that go beyond creating shareholder value: purpose, accountability, and transparency. A series of California statutes lead the way for entrepreneurs who wish to take advantage of this option. (See Cal. Corp. Code §§ 14600-14631.)

  • Purpose. Benefit corporations fundamentally change the way a company is permitted to act. In addition to creating shareholder value like other for-profit companies, a benefit corporation must provide general public benefit – namely a material positive impact on society and the environment taken as a whole (§ 14601(c)). (1)
  • Accountability. A benefit corporation must assess its overall social and environmental performance annually using an independent third-party standard. However, the assessment need not be audited or certified by a third party (§ 14630). The standard must be developed by an entity that has no material financial relationship with the corporation, and the criteria must be publicly available. (2)
  • Transparency. A benefit corporation must report on its overall social and environmental performance to its shareholders and the public in an annual benefit report. (3)

Directors’ Duties

Each director of the benefit corporation must act in good faith, in a manner that he or she believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinary prudent person in a similar position would use under similar circumstances (§ 14620(a)).

Directors must consider the impact of any action upon the shareholders, employees, customers, the community, the environment, short- or long-term interests of the corporation, and the ability of the corporation to accomplish its public benefit purpose (§ 14620(b)). That said, the code clearly dictates that directors owe their duty to the corporation; they do not owe a fiduciary duty to the general public (§ 14620(i)).

In discharging their duties, directors are not required to give priority to any particular factor or person unless the corporation so stated in its articles (§ 14620(d)).

Enforcement, Change, Taxes

If the directors fail to discharge their duties as described above, or if the corporation fails to pursue its public benefit purposes, assess its performance, or issue the benefit report, the shareholders may bring an action in court to force the corporation to do so. No monetary damages are available in such a derivative action, though the court may order reimbursement of attorneys fees (§ 14623).

The articles of the corporation must state that it is a benefit corporation and describe any specific public purposes (§ 14602). Stock certificates must identify the corporation as a benefit corporation (§ 14631). Conversion or merger into or out of a benefit corporation requires at least a vote of two-thirds of the outstanding shares (§§ 14603, 14604). Shareholders who oppose the conversion or merger are entitled to dissenters rights under the code (§ 14604(d)).

For tax purposes, a benefit corporation may elect to be a C or an S corporation. They also may be subject to various local preferences. For example, in San Francisco a benefit corporation enjoys a 4 percent bidding preference on city contracts.

Benefit corporations represent a new breed of American capitalism, paving the way for a sustainable economy with no trade-off between purpose and long-term profit.

Resources

Notes and References

  1. Examples include providing low-income individuals or communities with beneficial products or services; preserving the environment; promoting economic opportunity; improving health; and promoting arts, science, and knowledge (§ 14601(e)). The state’s general corporation law applies to benefit corporations except when it is in conflict with the special provisions enacted to create this new type of enterprise (§ 14600).
  2. In addition, the amount and sources of financial support for the third-party entity developing the standard must be publicly disclosed, along with any relationships that could reasonably be considered to present a potential conflict of interest (§ 14601(g)). The purpose of these requirements is to prevent the corporation from using an assessment tool that is self-serving.
  3. This report must include information on the third-party standard selection process, a description of how the benefit corporation pursued any general or specific public benefit during the year, and any circumstances that hindered the creation of the public benefit (§ 14630(a)-(c)).

See Also

Business Names
Piercing the Corporate Veil