2015 Business Law Statutes: Ex-Officio Directors, Notaries and More

With the start of each New Year come the effective dates of numerous statutes crafted by the California Legislature and approved by the Governor. 2015 proved to be no different, bringing into effect new business law statutes regarding ex officio directors of nonprofit corporations, notarial acknowledgements, social purpose corporations, and Secretary of State filing processes.

Ex Officio Directors. New Corporations Code section 5047 clarifies the persons who are considered directors of non-profit corporations. Historically, many nonprofit corporations have designated persons holding specific positions within the corporation or outside the corporation as ex officio members of their governing boards. The new statute confirms that, if such a person is so designated without limiting that person’s right to vote as a member of the governing board, the person is a director for all purposes and has the same rights and obligations as other elected directors. On the other hand, the statue also confirms that, is a person does not have authority to vote as a member of the governing board, the person is not a “director” for purposes of the nonprofit corporation law. The bottom line is that a “non-voting ex officio member” of a governing board is not a director.

Notarial Acknowledgements. Amended Civil Code sections 1189 and 1195 and Government Code section 8202 alter the required formats for certificates of acknowledgement, certificates for proof of execution and jurats provided by a notary public or other authorized officer. All such certificates executed after January 1, 2015 must now include a ”boxed notice” as follows:

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

Start revising your form documents and/or order updated stand-alone certificates to assure that your post-2014 notarized documents will not be defective.

Social Purpose Corporations. Senate Bill No. 1301 made several changes to the Corporate Flexibility Act of 2011 (Corporations Code section 2501 et seq.) which established a new corporate entity called a “flexible purpose corporation.” The Bill renames the act the “Social Purpose Corporations Act” and changes name of the corporate entities regulated thereunder to “social purpose corporations.” Existing flexible propose corporations are not required to change their names or amend their articles of incorporation to comply with those changes. Among the various changes made by the Bill, directors will now be required (formerly, they were just permitted) to consider the corporation’s stated social purpose when making decisions. Existing flexible purpose corporations are encouraged to review the details of the Bill in order to assure that they maintain compliance with its provisions.

Secretary of State Filing Processes. Senate Bill No. 1041 amends various sections of the Corporations Code in an effort to standardize business entity filing processes with the Secretary of State. Previously, filing processes for a business entity could vary depending upon its type (corporation, limited liability company, limited partnership, etc.) and whether it was a California domestic entity or a foreign entity qualified to do business in California. Accordingly, changes have been made to the requirements for conversions, terminations, name registrations and reservations, agent for service of process resignations, disclaimers and signature requirements.

Recap. Annual statutory changes are a fact of life in California and businesses are encouraged to keep abreast of changes and to be proactive in implementing the changes that affect them. Nonprofit corporations with ex officio board members are encouraged to review their articles of incorporation and bylaws to assure that the persons that they intend to be directors are, in fact, directors under Corporations Code section 5047. Real estate-related businesses, notaries and other persons regularly using notaries are urged to update their forms as soon as practicable. Existing flexible purpose corporations and those intending to form social purpose corporations would be well served by reviewing the revised Social Purpose Corporations Act. And, for all of us making filings with the Secretary of State in the near future, let’s take a little extra time to assure that we are following the new streamlined processes and using the correct forms—it may save us the aggravation of having to redo deficient filings. Fare thee well in 2015!