Corporations Code, 1947

This section keeps certain Real Estate Syndicate Act permits, orders, consents, and related conditions in effect, and routes related applications and review proceedings under specified rules.

This section keeps certain permits, orders, conditions, applications, actions, and review proceedings tied to the old rules or the new division depending on timing.

A qualifying group may form a social purpose corporation by filing articles of incorporation. If initial directors are named, those directors must sign and acknowledge the articles; if not, one or more qualifying incorporators must sign them. Corporate existence starts when the articles are filed and continues perpetually unless law or the articles say otherwise.

A qualifying trust-organized business association may incorporate under this division if its trustees and required beneficial-interest holders approve, and the filing papers meet the section’s requirements.

The Secretary of State cannot file certain corporate articles unless a required approval certificate is attached, and social purpose corporations must use names that are not misleading and are distinguishable on the Secretary of State’s records.

Social purpose corporation articles must include specific name, purpose, address, and share information, and they may not add extra purpose-or-power statements except in limited cases.

A social purpose corporation’s articles of incorporation may include listed governance provisions, but they are only effective if expressly stated in the articles.

Most social purpose corporations may engage in any business activity, but only if they comply with article limits, other applicable laws, and the corporation’s special purpose. Banking Law and professional social purpose corporations are limited to activities not prohibited by the statutes and regulations that apply to them.

A social purpose corporation has broad powers to run its business, subject to its articles, other applicable laws, and its special purpose.

This section sets duties and liability rules for directors of a social purpose corporation.

Words used in this division generally take the meanings given in Part 1 of the Corporate Securities Law, unless the provision or context indicates otherwise or this chapter expressly provides otherwise.

This section defines “security” for this division to include the items listed in Section 25019, plus shares, stock, and investment certificates defined in the Savings Association Law.

This section defines “individual” for this division and lists several people and organizations that are included or excluded.

If part of this division is held invalid, the rest of the division still remains effective.

Directors of a social purpose corporation can be jointly and severally liable for approving certain unlawful distributions, asset distributions, loans, or guaranties.

A social purpose corporation may indemnify agents, advance defense expenses, and buy insurance for agents, subject to stated limits and exceptions.

An individual who, in California, solicits or collects money or subscriptions from security owners for the purpose of protecting or representing their rights is subject to this division.

An individual may not, in this securities-related setting, use fraud, false statements, deceptive practices, or misappropriation of another person’s property.

A person who solicits, receives, collects, or contracts for payment of contributions, fees, funds, or other compensation in violation of this division must return the full amount and pay reasonable attorney’s fees.

A lawsuit to enforce liability under Section 27200 must be filed within the stated time limits.

An individual who willfully violates Section 27101 commits a public offense and may be fined, imprisoned, or both.

This section defines key terms used in Chapter 1 on fair investment practices by venture capital companies.

A covered entity must report specified venture-capital funding information to the department, update contact information, and follow survey and disclosure rules before and after investments.

The department must make certain reports easy to access online. Covered entities must keep related records for at least five years, and the commissioner may inspect records and require documents or written answers.

The commissioner may, at their discretion, investigate and publish information about possible violations under this chapter.

The commissioner and department may enforce this chapter against covered entities, including ordering them to stop violations and pay penalties.

This section sets the hearing, final-order, review, enforcement, and service rules for orders against a covered entity.

The commissioner may issue, amend, and cancel rules, forms, and orders needed to carry out this chapter, and money collected under the chapter must be deposited in the Financial Protection Fund.

Share certificates for social purpose corporations must include required legends and statements; certain transfer restrictions are only enforceable if stated, and some older corporations may reissue certificates.

This division may be cited as the “Capital Access Company Law.”

This division must be interpreted broadly to carry out its purposes.

The Corporate Securities Law of 1968 applies to licensees.

The Legislature states that California should license and regulate capital access companies to help them operate under a federal exemption and support jobs and small business growth.

This section says the division is intended to license and regulate capital access companies, and the commissioner must administer the division according to that stated purpose.

The definitions in this article apply throughout this division, unless the context requires otherwise, and subject to any additional definitions in the division for specific provisions.

“Accredited investor” is defined as a person meeting the listed federal-securities criteria or a person designated by the Securities and Exchange Commission, and who buys a licensee’s securities to provide investment funds for small business financing.

This section defines “Affiliate” as a person or group of persons that controls, is controlled by, or is under common control with other specified persons.

This section defines “Commissioner” as the Commissioner of Financial Protection and Innovation, or that person’s designee for a particular matter.

This section defines “company” as certain business entities organized under California law.

“Control” means having the direct or indirect power to direct, or cause the direction of, another person’s management and policies.

This section defines “controlling person” as a person who controls a specified person, directly or indirectly, including through intermediaries.

This section defines “insolvent” for a person.

This section defines “license” for this division as a license that authorizes a licensee to do business as a capital access company.

This section defines “licensee” as a company licensed under this division.

This section defines “officer” for a corporation and for certain other specified persons.

This section defines “order” as certain case-specific actions or requirements issued by the commissioner, and it also includes license conditions and agreements with the commissioner.

This section defines “Parent” for a specified person that is not a natural person.

“Person” includes many entity types and, for control-related use, can also mean two or more persons acting in concert.

This section defines “principal security holder” as a person who owns 10% or more of the issuer’s voting power, directly or indirectly, and whether of record or beneficially.

This section defines “to provide financing assistance to a person” as buying securities issued by that person, either directly or through a securities underwriter.

“Security” is defined by reference to Section 25019.

This section defines “small business firm” for this chapter.

“Smaller business firm” means a business that operates regularly in California and meets the stated net worth and income limits.

This section defines “subsidiary” for a non-natural person as a person controlled directly or indirectly through one or more intermediaries.

This section defines “voting power” by pointing to Section 194.5.

The commissioner must administer and enforce this division in a way that supports the legislative purposes in Section 28004 and protects investors.

When the commissioner issues an order or license under this division, the commissioner may add conditions the commissioner considers necessary to carry out the division.

The commissioner may require applications filed under this division to use a required form and to be accompanied, signed, and verified in a required manner.

The commissioner may consider an applicant’s proposals when deciding whether to approve an application, and must add conditions if approval is based on a proposal.

The commissioner may investigate, publish violation information, and use subpoenas and evidence-gathering powers; the superior court may order compliance when someone ignores a subpoena.

The commissioner may share or receive information about a licensee, or its parent or subsidiary, with any governmental agency.

If the commissioner lets certain persons inspect or copy a record, or provides the record or a copy, specified Government Code confidentiality provisions continue to apply to that record as they did before.

The commissioner may refer evidence of certain criminal violations to the county district attorney, and the district attorney may start criminal proceedings with or without that referral.

Before a license is issued, the applicant and its parents/subsidiaries must file an irrevocable consent with the commissioner for service of process. New parents or subsidiaries must file within 30 days. If service is left at the commissioner’s office, notice, mailing, and an affidavit are also required for the service to be effective.

If a person engages in covered conduct and personal jurisdiction cannot otherwise be obtained, the person is treated as appointing the commissioner to receive service of process. Service can be made by leaving a copy with the commissioner’s office, but it is effective only if notice and a copy are promptly mailed or otherwise given, and an affidavit is filed on time.

Applications and certain examinations under this section require fees paid to the commissioner, and filing fees are not refundable.

The commissioner may treat certain compliant small business investment company licensees as complying with this division, with listed exceptions.

People other than licensees may not use a name or title that suggests they are a capital access company or a licensee, unless subdivision (b) allows it for certain license applicants.

A license under this division may not be issued to anyone who does not meet the definition of a licensee.

The commissioner must approve a license application if the listed financial and fitness requirements are met, and must deny it if they are not after notice and a hearing.

The commissioner may find that certain people connected to an applicant are not of good character, or that the applicant is unlikely to comply, if there has been a fraud- or dishonesty-related conviction or nolo contendere plea.

A license may not be transferred or assigned, except as allowed by Section 28551.

A licensee may not falsely imply commissioner approval or publish misleading advertising about its business, and may not omit material facts needed to keep statements truthful.

The licensee’s organizational documents must include specific restrictions on its activities, securities, investors, and investments.

A licensee may not do business under a name other than its corporate name unless it first gives written notice to the commissioner.

Each licensee must have a board of directors, executive committee, or other policy body with at least three members.

Each licensee’s board, executive committee, or other policy body must meet at least once every calendar year.

Each licensee’s board, executive committee, or other policy body must approve the contract with a person who will make recommendations about investing the licensee’s funds.

A licensee must notify the commissioner before moving its head office, and must file notice with the commissioner after establishing, relocating, or closing any other office.

A licensee may only do the listed business activities, and at least 20% of its financing assistance must be through purchases of securities of smaller business firms in California or businesses proposed to operate there.

A licensee must not provide financing assistance to a small business firm if the purpose is to evade this division’s requirements.

This section creates an exempt class of persons and says the constitutional interest-rate restrictions do not apply to evidence of indebtedness purchased by a licensee.

Each licensee must keep books, accounts, and other records in whatever form, manner, place, and retention period the commissioner requires by regulation or order.

Each licensee must file an audit report with the commissioner within 90 days after the end of each fiscal year, unless the commissioner sets a longer period.

Covered licensees and related persons must file commissioner-required reports on the required timeline and in the required form.

The commissioner must examine each licensee at least once a year and may also examine certain related entities at any time.

A licensee may let another person keep its books and records only after approval by the licensee’s board or similar policy body; if another person does so, the division’s rules still apply to that person as if they were the licensee or affiliate.

The commissioner may make public any report filed under this division, subject to Rules 250.10 and 250.10.5.

A person may not acquire control of a licensee unless the commissioner gives prior written approval.

The commissioner must approve an application to acquire control of a licensee only after notice and a hearing, and only if the stated findings are made.

The commissioner may find that certain applicants, directors, or officers are not of good character, and may find that a management-change plan is detrimental when it would put a person with fraud- or dishonesty-related convictions into a director or officer role.

This section defines “acquiring licensee,” “disappearing company,” and “surviving company” for this chapter.

A licensee may not merge with another company unless the merger is first approved by the commissioner, with different conditions depending on whether the licensee survives or disappears in the merger.

A licensee may not buy all or substantially all of another person’s business unless the commissioner first approves the purchase.

A licensee may not sell all or substantially all of its business unless the buyer is also a licensee and the sale is first approved by the commissioner.

The commissioner may approve a merger, purchase, or sale application only after notice and a hearing, and only if the required findings are made.

A licensee may offer to surrender its license by filing the license and a report with the commissioner.

A voluntary surrender of a license becomes effective when the commissioner issues an order accepting it, together with the required Section 28650 report, unless subdivision (b) applies.

This section defines “office with a licensee” and “subject person” for this chapter.

If the commissioner believes a violation may have occurred or may occur, the commissioner may sue in superior court to stop the violation or enforce compliance. The court can grant injunctive relief, appoint a receiver or conservator, and cannot require the commissioner to post bond.

The commissioner may order someone to stop violating Section 28150 until the person is licensed, and the person can ask for a hearing and later judicial review.

The commissioner may issue a cease and desist order, including corrective action, after notice and a hearing if specified violations or unsafe practices are found.

The commissioner may issue a cease and desist order, including corrective action, if specific statutory conditions are met.

The commissioner may, after notice and a hearing, order a subject person removed from office and barred from further participating in the licensee’s business if specified misconduct and harm findings are made.

The commissioner may remove a subject person from office and bar further participation in the licensee’s business, unless the commissioner consents.

The commissioner may suspend a subject person and bar further participation in the licensee’s business if specified findings are made.

The commissioner may suspend or remove certain licensee-related persons and bar them from participating in the licensee’s business if specified dishonesty- or trust-related criminal findings are made. Affected persons may request a hearing, and the commissioner must begin it within 15 business days after the request or the order is rescinded.

A person subject to certain orders may ask the commissioner to modify or cancel the order, and the commissioner may grant it only if doing so is in the public interest and the person is reasonably expected to comply with applicable rules and orders.

The commissioner may suspend or revoke a license after notice and a hearing if certain grounds are found.

The commissioner may suspend or revoke a license if certain factors are found and public protection requires it.

If a person’s license is suspended or revoked, they must immediately deliver the license to the commissioner.

A person subject to certain orders may ask the commissioner to modify or rescind the order, but the commissioner may grant it only if doing so is in the public interest and future compliance is reasonably likely.

If certain conditions are met, the commissioner may take possession of a licensee’s property and business; the licensee may seek court review within 10 days; and the commissioner must conserve or liquidate the property and business once in possession.

Government Code sections 11041, 11042, and 11043 do not apply to the Commissioner of Financial Protection and Innovation.

A person must not tamper with records or make false entries, and must not make untrue statements to the commissioner, when doing so to obstruct this division’s administration or enforcement.

A person may not willfully make a false material statement or willfully omit a required material fact in filings made to the commissioner under this division or related regulations/orders.

A person who controls a licensee’s books or records must not willfully refuse the commissioner’s request to inspect or copy them.

A person must not, with intent to deceive specified people or agencies, make false entries in a licensee’s books or records, omit required entries, or alter, conceal, or destroy those records.

This section defines “associate” and “close relative” for this article.

Licensees and their associates are restricted from conflicted financial assistance, borrowing, and benefit-taking unless the commissioner gives prior written approval or an exemption in specified cases.

A person who willfully violates any provision in this chapter can be fined or imprisoned, or both.

This section says the division does not limit the state's power to punish crimes under any statute.

After notice and a hearing, the commissioner may order a person who violated this division, or a related regulation or order, to pay a civil penalty.

Section 28901 says Section 28900 is additive to other enforcement provisions, but a person finally convicted under Chapter 12 is not liable for a civil penalty under Section 28900 for that same violation.

Liability under this division does not apply to acts or omissions done in good faith and in line with specified official rules, forms, permits, orders, or interpretive opinions.

The commissioner may issue, change, or cancel rules, forms, and orders for this law, define terms, classify persons, set different requirements for different classes, waive requirements when not needed in the public interest, and exempt persons or transactions by regulation or order.

The commissioner may honor requests from interested persons for interpretive opinions.

In proceedings under this law, the person claiming an exemption or exception from a definition must prove it.

The commissioner’s final orders, decisions, licenses, and other official acts may be reviewed by a court under applicable law.

This section says the chapter does not limit the commissioner’s authority or powers under the Corporate Securities Law of 1968.

If part of this division is held invalid, the rest remains effective if it can still operate without the invalid part.

The commissioner and the commissioner’s employees must not use nonpublic information they obtain for personal gain, and must not make securities trades based on that information before the market has had time to absorb it.

This section says the program must be funded with money appropriated by the Legislature from the State Corporations Fund.

Shareholders of a social purpose corporation may bring a derivative lawsuit, but non-shareholders generally may not sue in the corporation’s right. In some cases the court can require a plaintiff bond of up to $50,000, and the action may be stayed while a bond motion is pending.

The chapter’s definitions apply to this division unless the provision or context requires otherwise.

This section defines “person” to include individuals, business entities, and associations, whether domestic or foreign, and whether acting for themselves or for another.

This section defines “trustee” and “trust.”

This section defines “contract” to include any agreement, trade, or transaction.

This section defines “securities” to include shares, debt instruments, certain rights and similar property interests, and options to buy or sell them.

This section defines “commodities” as anything movable that is bought and sold.

“Bucket shop” is defined as a place where a bucketing or bucket shopping contract is made or offered.

“Keeper” means a person who owns, keeps, manages, operates, promotes, or helps promote a bucket shop.

This section defines “bucketing” or “bucket shopping” as certain securities or commodities contracts or sales tied to market quotations without a bona fide purchase, sale, receipt, or delivery, and includes a seller’s failure to credit proceeds immediately and provide a written report by the next business day.

A person who makes or offers a bucketing contract, makes a bucketing sale, or keeps a bucket shop is guilty of a felony.

A person may not communicate, receive, exhibit, or display quotations of prices for securities or commodities when doing so to make, offer to make, or help make a bucketing contract under Section 29008.

Felonies in this chapter are punishable, with different penalties depending on whether the offender is a corporation.

A corporation’s prosecution, conviction, or punishment under this chapter is not treated as the prosecution, conviction, or punishment of its officers, directors, or shareholders.

Contracts for share trades made without any real intention to deliver or receive the shares, and instead only betting on price differences, are void.

It is unlawful to tamper with records or objects, or to make an untrue statement to the commissioner, when done knowingly and with intent to obstruct or influence enforcement of this division.

Brokers and certain broker agents must keep permanent, correct transaction records at their office or business, and those records must be open to inspection by specified financial regulators.

On written demand, a person who executed an order for a customer or principal must provide a written statement with the seller/buyer name, time, place, and price of the transaction.

This section names the division the California Commodity Law of 1990 and says references to “this law” mean the applicable provisions of the division unless context shows otherwise.

“Board of trade” is defined as a person or group of persons engaged in buying or selling a commodity, or receiving a commodity for sale on consignment, regardless of how the marketplace is described.

“Business days” means all days except Saturdays, Sundays, and holidays specified or provided for in the Government Code.

This section defines “Commissioner” as the Commissioner of Financial Protection and Innovation.

This section defines “commodity” broadly, but excludes certain numismatic coins and certain works of art.

This section defines “commodity contract” and excludes certain physically delivered contracts completed within 28 calendar days after full payment in good funds.

This section defines “Commodity Exchange Act” as the federal statute of that name, including amendments made before or after January 1, 1991.

This section defines “Commodity Futures Trading Commission” as the independent regulatory agency established by Congress to administer the Commodity Exchange Act.

“CFTC Rule” means certain Commodity Futures Trading Commission rules, regulations, or orders, including later amendments, unless the commissioner disallows their application within 10 days.

This section defines “commodity merchant” to include several specified types of market participants and others required to register with the CFTC.

This section defines “commodity option” and excludes options traded on a registered national securities exchange.

This section defines “financial institution” for this part of the code.

“Good funds” means verified receipt of immediately available funds under federal Regulation CC.

“Offer” includes offers to sell, offers to purchase, and offers to enter into a commodity contract or commodity option.

This section defines “person” to include several kinds of entities and governments.

“Precious metal” includes silver, gold, platinum, palladium, and copper, and can also include other items the commissioner specifies by rule or order.

“Purchase price” means all money paid by or for a purchaser to a seller for a commodity contract or commodity option, including listed fees and charges tied to the sale.

“Sale” or “sell” includes sales, contracts to sell, and other dispositions for value.

Except as provided in Sections 29530, 29531, and 29532, a person may not sell, buy, offer to sell or buy, or enter into commodity contracts or commodity options.

Section 29530 exempts certain transactions from the Section 29520 prohibitions when specific listed persons are the buyer or seller, subject to stated conditions and limits.

Section 29531 says the Section 29520 prohibitions do not apply to several listed commodity-contract situations.

A person may not act as a commodity merchant unless registered, temporarily licensed, or exempt; a board of trade may not trade or host trading of certain commodity contracts unless properly designated.

Any person may not use fraud, false statements, deceit, or misappropriation in commodity-related purchases, sales, offers, or entries.

This section says when certain securities provisions apply based on where an offer is made or accepted, and defines when an offer is treated as made or accepted in this state.

It is unlawful for any person to knowingly tamper with records or make false entries, or to knowingly make an untrue statement to the commissioner, when done to impede enforcement of this division.

The commissioner may sue to stop violations or force compliance, and the court may grant injunction-type relief and appoint court fiduciaries.

The commissioner may investigate, publish violations, and compel evidence; courts may enforce subpoenas and contempt, while compelled testimony does not excuse self-incrimination-based refusal, though some immunity is provided.

The commissioner may order a person to stop violating the law or related rules. If the person asks for a hearing in writing within 30 days, a hearing must be held, and the commissioner gets the powers available under the Administrative Procedure Act.

The commissioner may refer evidence of a violation to the Attorney General or county district attorney, and those prosecutors may start criminal proceedings with or without that referral.

A person who willfully violates this law or a rule or order under it can face a civil penalty of up to $25,000 per violation.

The commissioner may take actions authorized by the referenced federal law, and this section does not limit the commissioner’s other powers.

The commissioner may, at discretion, honor requests from interested parties for interpretive opinions.

A person who willfully violates this law, its rules, or its orders can be fined or jailed; for Section 29536, the jail term can be two, three, or four years.

This section says the state’s power to punish conduct under other statutes is not limited by this law.

A person who materially assists in a violation of this law, or a commissioner rule or order under it, is jointly and severally liable for that violation.

A lawsuit to enforce liability under Section 29552 must be filed within the stated time limit.

A cause of action under this law continues after a person's death.

This section says private parties generally cannot get civil liability from violations of this law or its rules/orders by implication, unless the law explicitly says otherwise.

Liability under this law does not apply to acts or omissions done in good faith and in line with certain commissioner or Attorney General guidance.

The commissioner may issue, change, or cancel rules, forms, and orders to carry out this law, define terms, classify covered commodities and persons, set different requirements for different classes, and waive requirements when not needed in the public interest.

A person claiming an exemption or exception from a definition must prove it in any proceeding under this law.

The commissioner’s final orders, decisions, certificates, registrations, and other official acts are subject to judicial review under law.

This section says the chapter does not reduce or change the commissioner’s authority or powers under the Corporate Securities Law of 1968.

If part of this law is invalid, the rest still applies when it can work without the invalid part.

The commissioner and the commissioner’s employees must not use nonpublic information for personal gain or trade securities or commodities based on it before the market has had time to absorb the information.

The program under this division is to be funded through legislative appropriations from the State Corporations Fund.

People already holding office under repealed acts keep those offices if this code continues them, and they keep the same tenure they had before.

The board manages the corporation’s business and affairs and may delegate day-to-day operations, but the board keeps ultimate direction.