SECTIONS 1150-1160 - California Statutes

CORPORATIONS CODE

SECTION 1150-1160

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 or 15901.11 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, 15909.07, 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.