Sections 1150-1160

California Corporations Code > Sections 1150-1160
CALIFORNIA GENERAL CORPORATION LAW - CHAPTER 11.5

Section 1150. For purposes of this chapter, the following definitions shall apply: (a) "Converted corporation" means a corporation that results from a conversion of an other business entity or a foreign other business entity or a foreign corporation pursuant to Section 1157. (b) "Converted entity" means a domestic other business entity that results from a conversion of a corporation under this chapter. (c) "Converting corporation" means a corporation that converts into a domestic other business entity pursuant to this chapter. (d) "Converting entity" means an other business entity or a foreign other business entity or foreign corporation that converts into a corporation pursuant to Section 1157. (e) "Domestic other business entity" has the meaning provided in Section 167.7. (f) "Foreign other business entity" has the meaning provided in Section 171.07. (g) "Other business entity" has the meaning provided in Section 174.5.

1151. (a) A corporation may be converted into a domestic other business entity pursuant to this chapter if, pursuant to the proposed conversion, (1) each share of the same class or series of the converting corporation shall, unless all the shareholders of the class or series consent, be treated equally with respect to any cash, rights, securities, or other property to be received by, or any obligations or restrictions to be imposed on, the holder of that share, and (2) nonredeemable common shares of the converting corporation shall be converted only into nonredeemable equity securities of the converted entity unless all of the shareholders of the class consent; provided, however, that clause (1) shall not restrict the ability of the shareholders of a converting corporation to appoint one or more managers, if the converted entity is a limited liability company, or one or more general partners, if the converted entity is a limited partnership, in the plan of conversion or in the converted entity's governing documents. (b) Notwithstanding this section, the conversion of a corporation into a domestic other business entity may be effected only if both of the following conditions are complied with: (1) The law under which the converted entity will exist expressly permits the formation of that entity pursuant to a conversion. (2) The corporation complies with any and all other requirements of any other law that applies to conversion to the converted entity.

1152. (a) A corporation that desires to convert to a domestic other business entity shall approve a plan of conversion. The plan of conversion shall state all of the following: (1) The terms and conditions of the conversion. (2) The jurisdiction of the organization of the converted entity and of the converting corporation and the name of the converted entity after conversion. (3) The manner of converting the shares of each of the shareholders of the converting corporation into securities of, or interests in, the converted entity. (4) The provisions of the governing documents for the converted entity, including the partnership agreement or limited liability company articles of organization and operating agreement, to which the holders of interests in the converted entity are to be bound. (5) Any other details or provisions that are required by the laws under which the converted entity is organized, or that are desired by the converting corporation. (b) The plan of conversion shall be approved by the board of the converting corporation (Section 151), and the principal terms of the plan of the conversion shall be approved by the outstanding shares (Section 152) of each class of the converting corporation. The approval of the outstanding shares may be given before or after approval by the board. Notwithstanding the foregoing, if a converting corporation is a close corporation, the conversion shall be approved by the affirmative vote of at least two-thirds of each class of outstanding shares of that converting corporation; provided, however, that the articles may provide for a lesser vote, but not less than a majority of the outstanding shares of each class. (c) If the corporation is converting into a general or limited partnership or into a limited liability company, then in addition to the approval of the shareholders set forth in subdivision (b), the plan of conversion shall be approved by each shareholder who will become a general partner or manager, as applicable, of the converted entity pursuant to the plan of conversion unless the shareholders have dissenters' rights pursuant to Section 1159 and Chapter 13 (commencing with Section 1300). (d) Upon the effectiveness of the conversion, all shareholders of the converting corporation, except those that exercise dissenters' rights as provided in Section 1159 and Chapter 13 (commencing with Section 1300), shall be deemed parties to any agreement or agreements constituting the governing documents for the converted entity adopted as part of the plan of conversion, irrespective of whether or not a shareholder has executed the plan of conversion or those governing documents for the converted entity. Any adoption of governing documents made pursuant thereto shall be effective at the effective time or date of the conversion. (e) Notwithstanding its prior approval by the board and the outstanding shares or either of them, a plan of conversion may be amended before the conversion takes effect if the amendment is approved by the board and, if it changes any of the principal terms of the plan of conversion, by the shareholders of the converting corporation in the same manner and to the same extent as was required for approval of the original plan of conversion. (f) A plan of conversion may be abandoned by the board of a converting corporation, or by the shareholders of a converting corporation if the abandonment is approved by the outstanding shares, in each case in the same manner as required for approval of the plan of conversion, subject to the contractual rights of third parties, at any time before the conversion is effective. (g) The converted entity shall keep the plan of conversion at (1) the principal place of business of the converted entity if the converted entity is a domestic partnership or (2) at the office at which records are to be kept under Section 15614 if the converted entity is a domestic limited partnership or at the office at which records are to be kept under Section 17057 if the converted entity is a domestic limited liability company. Upon the request of a shareholder of a converting corporation, the authorized person on behalf of the converted entity shall promptly deliver to the shareholder, at the expense of the converted entity, a copy of the plan of conversion. A waiver by a shareholder of the rights provided in this subdivision shall be unenforceable.

1153. (a) After the approval, as provided in Section 1152, of a plan of conversion by the board and the outstanding shares of a corporation converting into a domestic other business entity, the converting corporation shall cause the filing of all documents required by law to effect the conversion and create the converted entity, which documents shall include a certificate of conversion or a statement of conversion as required by Section 1155, and the conversion shall thereupon be effective. (b) A copy of the statement of partnership authority, certificate of limited partnership, or articles of organization complying with Section 1155, duly certified by the Secretary of State on or after the effective date, is conclusive evidence of the conversion of the corporation.

1155. (a) To convert a corporation: (1) If the corporation is converting into a domestic limited partnership, a statement of conversion shall be completed on the certificate of limited partnership for the converted entity. (2) If the corporation is converting into a domestic partnership, a statement of conversion shall be completed on the statement of partnership authority for the converted entity, or if no statement of partnership authority is filed then a certificate of conversion shall be filed separately. (3) If the corporation is converting into a domestic limited liability company, a statement of conversion shall be completed on the articles of organization for the converted entity. (b) Any statement or certificate of conversion of a converting corporation shall be executed and acknowledged by those officers of the converting corporation as would be required to sign an officers' certificate (Section 173), and shall set forth all of the following:

(1) The name and the Secretary of State's file number of the converting corporation. (2) A statement of the total number of outstanding shares of each class entitled to vote on the conversion, that the principal terms of the plan of conversion were approved by a vote of the number of shares of each class which equaled or exceeded the vote required under Section 1152, specifying each class entitled to vote and the percentage vote required of each class. (3) The name, form, and jurisdiction of organization of the converted entity. (c) For the purposes of this chapter, the certificate of conversion shall be on a form prescribed by the Secretary of State. (d) The filing with the Secretary of State of a statement of conversion on an organizational document or a certificate of conversion as set forth in subdivision (a) shall have the effect of the filing of a certificate of dissolution by the converting corporation and no converting corporation that has made the filing is required to file a certificate of election under Section 1901 or a certificate of dissolution under Section 1905 as a result of that conversion. (e) The Secretary of State shall notify the Franchise Tax Board and shall notify the Franchise Tax Board of the conversion. Upon the effectiveness of a conversion pursuant to this chapter, a converted entity that is a domestic partnership, domestic limited partnership or domestic limited liability company shall be deemed to have assumed the liability of the converting corporation (1) to prepare and file or cause to be prepared and filed all tax and information returns otherwise required of the converting corporation under the Bank and Corporation Tax Law (Part 11 (commencing with Section 23001) of Division 2 of the Revenue and Taxation Code) and (2) to pay any tax liability determined to be due pursuant to that law.

1156. (a) Whenever a corporation or other business entity having any real property in this state converts into a corporation or an other business entity pursuant to the laws of this state or of the state or place in which the corporation or other business entity was organized, and the laws of the state or place of organization, including this state, of the converting corporation or other converting entity provide substantially that the conversion vests in the converted corporation or other converted entity all the real property of the converting corporation or other converting entity, the filing for record in the office of the county recorder of any county in this state in which any of the real property of the converting corporation or other converting entity is located of either (1) a certificate of conversion or a statement of partnership authority, certificate of limited partnership or articles of organization containing a statement of conversion complying with Section 1155 and certified on or after the effective date of the conversion by the Secretary of State or (2) a copy of a certificate of conversion or a statement of partnership authority, certificate of limited partnership, articles of organization, articles of incorporation, or other comparable organizing document evidencing the creation of a foreign other business entity or foreign corporation, containing a statement of conversion, meeting the requirements of subdivision (b) and certified on or after the effective date of the conversion by the Secretary of State or any other authorized public official of the state or place pursuant to the laws of which the converted entity is organized, shall evidence record ownership in the converted corporation or other converted entity of all interest of the converting corporation or other converting entity in and to the real property located in that county. (b) A filed and, if appropriate, recorded certificate of conversion or a statement of partnership authority, certificate of limited partnership, articles of organization, articles of incorporation, or other comparable organizing document evidencing the formation of a foreign other business entity or a foreign corporation referred to in clause (2) of subdivision (a) above which contains a statement of conversion, stating the name of the converting corporation or other converting entity in whose name property was held before the conversion and the name of the converted entity or converted corporation, but not containing all of the other information required by Section 1155, operates with respect to the converted entity named to the extent provided in subdivision (a). (c) Recording of a certificate of conversion or a statement of partnership authority, certificate of limited partnership, articles of organization, articles of incorporation, or other comparable organizing document evidencing the creation of an other business entity or a corporation, containing a statement of conversion, in accordance with subdivision (a), shall create, in favor of bona fide purchasers or encumbrances for value, a conclusive presumption that the conversion was validly completed.

1157. (a) An other business entity or a foreign other business entity or a foreign corporation may be converted into a corporation pursuant to this chapter only if the converting entity is authorized by the laws under which it is organized to effect the conversion. (b) An other business entity or a foreign other business entity or a foreign corporation that desires to convert into a corporation shall approve a plan of conversion or other instrument as is required to be approved to effect the conversion pursuant to the laws under which that entity is organized. (c) The conversion of an other business entity or a foreign other business entity or a foreign corporation shall be approved by the number or percentage of the partners, members, shareholders, or other holders of interest of the converting entity that is required by the laws under which that entity is organized, or a greater or lesser percentage as may be set forth in the converting entity's partnership agreement, articles of organization, operating agreement, articles of incorporation or other governing document in accordance with applicable laws. (d) The conversion by an other business entity or a foreign other business entity or a foreign corporation shall be effective under this chapter upon the filing with the Secretary of State of the articles of incorporation of the converted corporation, containing a statement of conversion that complies with subdivision (e). (e) A statement of conversion of an entity converting into a corporation pursuant to this chapter shall set forth all of the following: (1) The name, form, and jurisdiction of organization of the converting entity. (2) The Secretary of State's file number, if any, of the converting entity. (3) If the converting entity is a foreign other business entity or a foreign corporation, the statement of conversion shall contain the following: (A) A statement that the converting entity is authorized to effect the conversion by the laws under which it is organized. (B) A statement that the converting entity has approved a plan of conversion or other instrument as is required to be approved to effect the conversion pursuant to the laws under which the converting entity is organized. (C) A statement that the conversion has been approved by the number or percentage of the partners, members, shareholders, or other holders of interest of the converting entity that is required by the laws under which that entity is organized, or a greater or lesser percentage as may be set forth in the converting entity's partnership agreement, articles of organization, operating agreement, articles of incorporation, or other governing document in accordance with applicable laws. (f) The filing with the Secretary of State of articles of incorporation containing a statement pursuant to subdivision (e) shall have the effect of the filing of a certificate of cancellation by a converting foreign limited liability company or foreign limited partnership, and no converting foreign limited liability company or foreign limited partnership that has made the filing is required to file a certificate of cancellation under Section 15696 or 17455 as a result of that conversion. If a converting entity is a foreign corporation qualified to transact business in this state, the foreign corporation shall, by virtue of the filing, automatically surrender its right to transact intrastate business.

1158. (a) An entity that converts into another entity pursuant to this chapter is for all purposes other than for the purposes of Part 10 (commencing with Section 17001) of, Part 10.20 (commencing with Section 18401) of, and Part 11 (commencing with Section 23001) of, Division 2 of the Revenue and Taxation Code, the same entity that existed before the conversion. (b) Upon a conversion taking effect, all of the following apply: (1) All the rights and property, whether real, personal, or mixed, of the converting entity or converting corporation are vested in the converted entity or converted corporation. (2) All debts, liabilities, and obligations of the converting entity or converting corporation continue as debts, liabilities, and obligations of the converted entity or converted corporation. (3) All rights of creditors and liens upon the property of the converting entity or converting corporation shall be preserved unimpaired and remain enforceable against the converted entity or converted corporation to the same extent as against the converting entity or converting corporation as if the conversion had not occurred. (4) Any action or proceeding pending by or against the converting entity or converting corporation may be continued against the converted entity or converted corporation as if the conversion had not occurred. (c) A shareholder of a converting corporation is liable for: (1) All obligations of the converting corporation for which the shareholder was personally liable before the conversion, but only to the extent that the shareholder was personally liable for the obligations of the converting corporation before the conversion. (2) All obligations of the converted entity incurred after the conversion takes effect if (A) the shareholder becomes a general partner of a converted entity that is a general or limited partnership and, as a general partner, has liability under the laws under which the converted entity is organized or under the converted entity's governing documents or (B) the shareholder becomes a holder of other interests in the converted entity and, as a holder, has liability under the laws under which the converted entity is organized or under the converted entity's governing documents. (d) A shareholder of a converted corporation remains liable for any and all obligations of the converting entity for which the shareholder was personally liable before the conversion, but only to the extent that the shareholder was personally liable for the obligations of the converting entity prior to the conversion. (e) If a party to a transaction with a converted corporation that converted from a partnership reasonably believes when entering into the transaction that a shareholder of the converted corporation continues to be a general partner of the converting entity after the conversion is effective, and the shareholder was a general partner of the partnership that converted into the converted corporation, the shareholder is liable for an obligation incurred by the converted corporation within 90 days after the conversion takes effect. The shareholder's liability for all other obligations of the converted corporation incurred after the conversion takes effect is that of a shareholder of a corporation. (f) The converted entity shall cause written notice of the conversion to be given by mail within 90 days after the effective date of the conversion to all known creditors and claimants whose addresses appear on the records of the converting entity. Failure to comply with this subdivision shall not affect the validity of the conversion, extend the 90-day period set forth in subdivision (e), or otherwise affect the rights of a creditor or claimant under this section.

1159. The shareholders of a converting corporation shall have all of the rights under Chapter 13 (commencing with Section 1300) of the shareholders of a corporation involved in a reorganization requiring the approval of its outstanding shares (Section 152), and the converting corporation shall have all of the obligations under Chapter 13 (commencing with Section 1300) of a corporation involved in the reorganization. Solely for purposes of applying the provisions of Chapter 13 (and not for purposes of Chapter 12), a conversion pursuant to Section 1151 or 1157 shall be deemed to constitute a reorganization.

1160. (a) Notwithstanding any other provision of law, the Secretary of State shall charge an entity a fee not to exceed one hundred fifty dollars ($150) for its conversion made under this chapter. (b) This section shall become operative on January 1, 2005.

California Corporations Code > Sections 1150-1160
< Section 1100-1113 | Sections 1200-1203>