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Why Taxonomy Matters Under The General Corporation Law

By Keith Paul Bishop on August 8, 2012 in Corporate Governance

In college, I aspired to be a botanist and took classes with such scintillating titles as ”Plant Physiology” and “Vascular Plant Taxonomy”.  I found botany particularly appealing because plants don’t bleed or generally stink like members of those other kingdoms.*  It also had the added benefit of requiring publication in Latin, another of my passions.  Sadly, the powers that be (the International Botanical Congress) jettisoned this requirement as of January 1, 2012.  See “Botanists finally ditch Latin and paper, enter 21st century“.  These plant descriptions weren’t literature but at least they were in Latin.

Taxonomy is the science of classification.  Essentially it involves putting things in their proper place, whether those things be animal, vegetable or mineral.  Proper classification is a very important even under the California Corporations Code, as was evidence by a recent question that I received regarding Section 313.

That statute provides that a contract or other instrument is not invalidated as to a corporation by any lack of authority when it is signed by the chairman of the board, the president or any vice president and the secretary, any assistant secretary, the chief financial officer or any assistant treasurer of the corporation (in the absence of actual knowledge on the part of the other person that the signing officers had no authority).  I was asked whether Section 313 applies to non-California corporations.  My answer was no, but what led me to that conclusion?

My answer was based on my understanding of the taxonomy of corporations under the Corporation Code.  Section 313 refers to a “corporation”.  Section 162 defines “corporation” as essentially a corporation organized under the California General Corporation Law (Division 1 of the Corporations Code).  The code separately defines “domestic corporation” and “foreign corporation”.  Thus, it is clear that Section 313 doesn’t apply to foreign corporations.  It is also clear that it doesn’t even apply to all California corporations.  Non-profit corporations, for example, are not organized under Division 1 but Division 2 of the Corporations Code.

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*Plants don’t generally stink, but some do.  Check out these amazing pictures of Rafflesia arnoldii (aka the corpse flower).

lack of authoritySection 162Section 313
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