Section 202 of the California Corporations Code lists those provisions that must be included in a California corporation’s articles of incorporation in order for them the be accepted by the Secretary of State for filing. There are a number of other provisions that although not required to be included in the articles won’t be effective unless they are included. Thus, placing these provisions in the bylaws alone won’t suffice. Here is a short list of some of these provisions:
- The power to levy assessments on shares;
- Preemptive rights;
- Qualifications to be shareholders;
- Limited corporate duration;
- Super-majority vote requirement (shareholder and/or board of directors);*
- Limitations or restrictions on corporate business or powers;
- Conferring on debt holders the right to vote;
- Shareholder approval requirements;
- Elimination or limitations on director liability; and
- Authorization of indemnification of agents in excess of that expressly permitted by Section 317.
This list, as well as additional important details can be found in Section 204(a) of the Corporations Code. What does this mean for private agreements? The final section of that statute provides: “Nothing contained in this subdivision (a) shall affect the enforceability, as between the parties thereto, of any lawful agreement not otherwise contrary to public policy”. In other words, Section 204(a) is not intended to be a basis for invalidating private agreements among shareholders that don’t otherwise violate public policy. Of course, agreements bind only those shareholders who are parties.
* A future post will discuss a 1976 amendment providing that the bylaws may specify a specific type of board approval requirement.