Flexible purpose corporations: corporate mergers.

Existing law authorizes and regulates the formation and operation of corporations and nonprofit corporations and specifies the respective purposes for which they may lawfully be formed. Existing law specifies the duties of corporate directors and the rights of shareholders. This bill would enact the Corporate Flexibility Act of 2010 and would authorize and regulate the formation and operation of a new form of corporate entity known as a flexible purpose corporation. The bill would authorize existing corporations and other forms of business entities to merge into or convert into a flexible purpose corporation upon completion of specified requirements, including approval of the transaction by a supermajority 23 vote of shareholders, or a greater vote if required in the articles, as specified. The bill would also authorize a flexible purpose corporation to convert into a nonprofit corporation, a corporation, or a domestic other business entity, upon satisfaction of equivalent conditions. The bill would also provide dissenters' rights of appraisal for shareholders voting against certain transactions, as specified. The bill would specify the required and permitted contents of articles of incorporation that a flexible purpose corporation would be required to file with the Secretary of State, including the special purposes, in addition to any other lawful purpose, that the corporation shall engage in, that may include, but not be limited to, charitable and public purpose activities that could be carried out by a nonprofit public benefit corporation. The bill would also require management and directors to specify objectives for measuring the impact of the flexible purpose corporation's efforts relating to its special purpose, and to include an analysis of those efforts in annual reports, together with specified financial statements, to shareholders and would require specified information to be made publicly available, as specified. The bill would also specify that a flexible purpose corporation is subject to many existing provisions of the Corporations Code. The bill would also make conforming changes. Existing law imposes specified requirements with respect to the merger of one or more corporations and other business entities, including, but not limited to, a requirement that the surviving entity shall file a specified agreement of merger or certificate of merger with the Secretary of State. This bill would prohibit the filing of an agreement of merger or certificate of merger until a certification of satisfaction of the Franchise Tax Board has been filed certifying that all taxes of the party to be terminated by the merger have been paid or secured.