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CALIFORNIA CORPORATE & SECURITIES LAW

Bylaws And Supermajority Board Voting Requirements

Yesterday’s post concerned various provisions that, although not required to be included in the articles of incorporation, must be included if they are to be effective.  One of these provisions relates to supermajority voting requirements:

A provision requiring, for any or all corporate actions (except as provided in Section 303 [removal of directors without cause], subdivision (b) of Section 402.5 [preferred shares], subdivision (c) of Section 708 [election of directors] and Section 1900 [voluntary dissolution]) the vote of a larger proportion or of all of the shares of any class or series, or the vote or quorum for taking action of a larger proportion or of all of the directors, than is otherwise required by this division.

Cal. Corp. Code § 204(a)(5).  Does this mean that in the absence a provision in the articles, the bylaws may not impose a higher vote requirement actions by directors?  The answer is “not always”.  An amendment enacted in 1976 appended the following sentence to Section 204(a):

Notwithstanding this subdivision, bylaws may require for all or any actions by the board the affirmative vote of a majority of the authorized number of directors.

This sentence relaxes Section 204(a)(5) only somewhat.  Section 307(j) establishes the basic rule for action by directors: the affirmative vote of a majority of the directors present at a meeting at which a quorum is present.  The added sentence merely authorizes a bylaw to require a majority of the authorized directors.  The sentence does not authorize a bylaw that imposes other supermajority requirements such as a bylaw requiring 2/3 vote of the authorized number of directors.  To be effective, those other supermajority provisions must be included in the articles of incorporation.

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