SECTIONS 13400-13410 - California Statutes

CORPORATIONS CODE

SECTION 13400-13410

13400. This part shall be known and may be cited as the
"Moscone-Knox Professional Corporation Act."

13401. As used in this part:
(a) "Professional services" means any type of professional
services that may be lawfully rendered only pursuant to a license,
certification, or registration authorized by the Business and
Professions Code, the Chiropractic Act, or the Osteopathic Act.
(b) "Professional corporation" means a corporation organized under
the General Corporation Law or pursuant to subdivision (b) of
Section 13406 that is engaged in rendering professional services in a
single profession, except as otherwise authorized in Section
13401.5, pursuant to a certificate of registration issued by the
governmental agency regulating the profession as herein provided and
that in its practice or business designates itself as a professional
or other corporation as may be required by statute. However, any
professional corporation or foreign professional corporation
rendering professional services by persons duly licensed by the
Medical Board of California or any examining committee under the
jurisdiction of the board, the Osteopathic Medical Board of
California, the Dental Board of California, the California State
Board of Pharmacy, the Veterinary Medical Board, the California
Architects Board, the Court Reporters Board of California, the Board
of Behavioral Sciences, the Speech-Language Pathology and Audiology
Board, the Board of Registered Nursing, or the State Board of
Optometry shall not be required to obtain a certificate of
registration in order to render those professional services.
(c) "Foreign professional corporation" means a corporation
organized under the laws of a state of the United States other than
this state that is engaged in a profession of a type for which there
is authorization in the Business and Professions Code for the
performance of professional services by a foreign professional
corporation.
(d) "Licensed person" means any natural person who is duly
licensed under the provisions of the Business and Professions Code,
the Chiropractic Act, or the Osteopathic Act to render the same
professional services as are or will be rendered by the professional
corporation or foreign professional corporation of which he or she is
or intends to become, an officer, director, shareholder, or
employee.
(e) "Disqualified person" means a licensed person who for any
reason becomes legally disqualified (temporarily or permanently) to
render the professional services that the particular professional
corporation or foreign professional corporation of which he or she is
an officer, director, shareholder, or employee is or was rendering.

13401.3. As used in this part, "professional services" also means
any type of professional services that may be lawfully rendered only
pursuant to a license, certification, or registration authorized by
the Yacht and Ship Brokers Act (Article 2 (commencing with Section
700) of Chapter 5 of Division 3 of the Harbors and Navigation Code).

13401.5. Notwithstanding subdivision (d) of Section 13401 and any
other provision of law, the following licensed persons may be
shareholders, officers, directors, or professional employees of the
professional corporations designated in this section so long as the
sum of all shares owned by those licensed persons does not exceed 49
percent of the total number of shares of the professional corporation
so designated herein, and so long as the number of those licensed
persons owning shares in the professional corporation so designated
herein does not exceed the number of persons licensed by the
governmental agency regulating the designated professional
corporation:
(a) Medical corporation.
(1) Licensed doctors of podiatric medicine.
(2) Licensed psychologists.
(3) Registered nurses.
(4) Licensed optometrists.
(5) Licensed marriage and family therapists.
(6) Licensed clinical social workers.
(7) Licensed physician assistants.
(8) Licensed chiropractors.
(9) Licensed acupuncturists.
(10) Naturopathic doctors.
(b) Podiatric medical corporation.
(1) Licensed physicians and surgeons.
(2) Licensed psychologists.
(3) Registered nurses.
(4) Licensed optometrists.
(5) Licensed chiropractors.
(6) Licensed acupuncturists.
(7) Naturopathic doctors.
(c) Psychological corporation.
(1) Licensed physicians and surgeons.
(2) Licensed doctors of podiatric medicine.
(3) Registered nurses.
(4) Licensed optometrists.
(5) Licensed marriage and family therapists.
(6) Licensed clinical social workers.
(7) Licensed chiropractors.
(8) Licensed acupuncturists.
(9) Naturopathic doctors.
(d) Speech-language pathology corporation.
(1) Licensed audiologists.
(e) Audiology corporation.
(1) Licensed speech-language pathologists.
(f) Nursing corporation.
(1) Licensed physicians and surgeons.
(2) Licensed doctors of podiatric medicine.
(3) Licensed psychologists.
(4) Licensed optometrists.
(5) Licensed marriage and family therapists.
(6) Licensed clinical social workers.
(7) Licensed physician assistants.
(8) Licensed chiropractors.
(9) Licensed acupuncturists.
(10) Naturopathic doctors.
(g) Marriage and family therapy corporation.
(1) Licensed physicians and surgeons.
(2) Licensed psychologists.
(3) Licensed clinical social workers.
(4) Registered nurses.
(5) Licensed chiropractors.
(6) Licensed acupuncturists.
(7) Naturopathic doctors.
(h) Licensed clinical social worker corporation.
(1) Licensed physicians and surgeons.
(2) Licensed psychologists.
(3) Licensed marriage and family therapists.
(4) Registered nurses.
(5) Licensed chiropractors.
(6) Licensed acupuncturists.
(7) Naturopathic doctors.
(i) Physician assistants corporation.
(1) Licensed physicians and surgeons.
(2) Registered nurses.
(3) Licensed acupuncturists.
(4) Naturopathic doctors.
(j) Optometric corporation.
(1) Licensed physicians and surgeons.
(2) Licensed doctors of podiatric medicine.
(3) Licensed psychologists.
(4) Registered nurses.
(5) Licensed chiropractors.
(6) Licensed acupuncturists.
(7) Naturopathic doctors.
(k) Chiropractic corporation.
(1) Licensed physicians and surgeons.
(2) Licensed doctors of podiatric medicine.
(3) Licensed psychologists.
(4) Registered nurses.
(5) Licensed optometrists.
(6) Licensed marriage and family therapists.
(7) Licensed clinical social workers.
(8) Licensed acupuncturists.
(9) Naturopathic doctors.
(l) Acupuncture corporation.
(1) Licensed physicians and surgeons.
(2) Licensed doctors of podiatric medicine.
(3) Licensed psychologists.
(4) Registered nurses.
(5) Licensed optometrists.
(6) Licensed marriage and family therapists.
(7) Licensed clinical social workers.
(8) Licensed physician assistants.
(9) Licensed chiropractors.
(10) Naturopathic doctors.
(m) Naturopathic doctor corporation.
(1) Licensed physicians and surgeons.
(2) Licensed psychologists.
(3) Registered nurses.
(4) Licensed physician assistants.
(5) Licensed chiropractors.
(6) Licensed acupuncturists.
(7) Licensed physical therapists.
(8) Licensed doctors of podiatric medicine.
(9) Licensed marriage, family, and child counselors.
(10) Licensed clinical social workers.
(11) Licensed optometrists.
(n) Dental corporation.
(1) Licensed physicians and surgeons.
(2) Dental assistants.
(3) Registered dental assistants.
(4) Registered dental assistants in extended functions.
(5) Registered dental hygienists.
(6) Registered dental hygienists in extended functions.
(7) Registered dental hygienists in alternative practice.

13402. (a) This part shall not apply to any corporation now in
existence or hereafter organized which may lawfully render
professional services other than pursuant to this part, nor shall
anything herein contained alter or affect any right or privilege,
whether under any existing or future provision of the Business and
Professions Code or otherwise, in terms permitting or not prohibiting
performance of professional services through the use of any form of
corporation permitted by the General Corporation Law.
(b) The conduct of a business in this state by a corporation
pursuant to a license or registration issued under any state law,
except laws relating to taxation, shall not be considered to be the
conduct of a business as a professional corporation if the business
is conducted by, and the license or registration is issued to, a
corporation which is not a professional corporation within the
meaning of this part, whether or not a professional corporation could
conduct the same business, or portions of the same business, as a
professional corporation.

13403. The provisions of the General Corporation Law shall apply to
professional corporations, except where such provisions are in
conflict with or inconsistent with the provisions of this part. A
professional corporation which has only one shareholder need have
only one director who shall be such shareholder and who shall also
serve as the president and treasurer of the corporation. The other
officers of the corporation in such situation need not be licensed
persons. A professional corporation which has only two shareholders
need have only two directors who shall be such shareholders. The two
shareholders between them shall fill the offices of president, vice
president, secretary and treasurer.
A professional medical corporation may establish in its articles
or bylaws the manner in which its directors are selected and removed,
their powers, duties, and compensation. Each term of office may not
exceed three years. Notwithstanding the foregoing, the articles or
bylaws of a professional medical corporation with more than 200
shareholders may provide that directors who are officers of the
corporation or who are responsible for the management of all medical
services at one or more medical centers may have terms of office, as
directors, of up to six years; however, no more than 50 percent of
the members of the board, plus one additional member of the board,
may have six-year terms of office.

13404. A corporation may be formed under the General Corporation
Law or pursuant to subdivision (b) of Section 13406 for the purposes
of qualifying as a professional corporation in the manner provided in
this part and rendering professional services. The articles of
incorporation of a professional corporation shall contain a specific
statement that the corporation is a professional corporation within
the meaning of this part. Except as provided in subdivision (b) of
Section 13401, no professional corporation shall render professional
services in this state without a currently effective certificate of
registration issued by the governmental agency regulating the
profession in which such corporation is or proposes to be engaged,
pursuant to the applicable provisions of the Business and Professions
Code or the Chiropractic Act expressly authorizing such professional
services to be rendered by a professional corporation.

13404.5. (a) A foreign professional corporation may qualify as a
foreign corporation to transact intrastate business in this state in
accordance with Chapter 21 (commencing with Section 2100) of Division
1. A foreign professional corporation shall be subject to the
provisions of the General Corporation Law applicable to foreign
corporations, except where those provisions are in conflict with or
inconsistent with the provisions of this part. The statement and
designation filed by the foreign professional corporation pursuant to
Section 2105 shall contain a specific statement that the corporation
is a foreign professional corporation within the meaning of this
part.
(b) No foreign professional corporation shall render professional
services in this state without a currently effective certificate of
registration issued by the governmental agency regulating the
profession in which that corporation proposes to be engaged, pursuant
to the applicable provisions of the Business and Professions Code
expressly authorizing those professional services to be rendered by a
foreign professional corporation.
(c) If the California board, commission, or other agency that
prescribes the rules or regulations governing a particular profession
either now or hereafter requires that the shareholders of the
professional corporation bear any degree of personal liability for
the acts of the corporation, either by personal guarantee or in some
other form that the governing agency prescribes, the shareholders of
a foreign corporation that has been qualified to do business in this
state in the same profession shall, as a condition of doing business
in this state, be subject, with regard to the rendering of
professional services by the professional corporation in California,
or for California residents, to the same degree of personal
liability, if any, as is prescribed by the governing agency for
shareholders of a California professional corporation rendering
services in the same profession.
(d) Each application by a foreign professional corporation to
qualify to do business in this state shall contain the following
statement:
"The shareholders of the undersigned foreign professional
corporation shall be subject, with regard to the rendering of
professional services by the professional corporation in California,
or for California residents, to the same degree of personal
liability, if any, in California as is from time to time prescribed
by the agency governing the profession in this state for shareholders
in a California professional corporation rendering services in the
same profession. This application accordingly constitutes a
submission to the jurisdiction of the courts of California to the
same extent, but only to the same extent, as applies to the
shareholders of a California professional corporation in the same
profession. The foregoing submission to jurisdiction is a condition
of qualification to do business in this state."

13405. (a) Subject to the provisions of Section 13404, a
professional corporation may lawfully render professional services in
this state, but only through employees who are licensed persons. The
corporation may employ persons not so licensed, but such persons
shall not render any professional services rendered or to be rendered
by that corporation in this state. A professional corporation may
render professional services outside of this state, but only through
employees who are licensed to render the same professional services
in the jurisdiction or jurisdictions in which the person practices.
Nothing in this section is intended to prohibit the rendition of
occasional professional services in another jurisdiction as an
incident to the licensee's primary practice, so long as it is
permitted by the governing agency that regulates the particular
profession in the jurisdiction. Nothing in this section is intended
to prohibit the rendition of occasional professional services in this
state as an incident to a professional employee's primary practice
for a foreign professional corporation qualified to render
professional services in this state, so long as it is permitted by
the governing agency that regulates the particular profession in this
state.
(b) Subject to Section 13404.5, a foreign professional corporation
qualified to render professional services in this state may lawfully
render professional services in this state, but only through
employees who are licensed persons, and shall render professional
services outside of this state only through persons who are licensed
to render the same professional services in the jurisdiction or
jurisdictions in which the person practices. The foreign professional
corporation may employ persons in this state who are not licensed in
this state, but those persons shall not render any professional
services rendered or to be rendered by the corporation in this state.
(c) Nothing in this section or in this part is intended to, or
shall, augment, diminish or otherwise alter existing provisions of
law, statutes or court rules relating to services by a California
attorney in another jurisdiction, or services by an out-of-state
attorney in California. These existing provisions, including, but not
limited to, admission pro hac vice and the taking of depositions in
a jurisdiction other than the one in which the deposing attorney is
admitted to practice, shall remain in full force and effect.

13406. (a) Subject to the provisions of subdivision (b), shares of
capital stock in a professional corporation may be issued only to a
licensed person or to a person who is licensed to render the same
professional services in the jurisdiction or jurisdictions in which
the person practices, and any shares issued in violation of this
restriction shall be void. Unless there is a public offering of
securities by a professional corporation or by a foreign professional
corporation in this state, its financial statements shall be treated
by the Commissioner of Corporations as confidential, except to the
extent that such statements shall be subject to subpoena in
connection with any judicial or administrative proceeding, and may be
admissible in evidence therein. No shareholder of a professional
corporation or of a foreign professional corporation qualified to
render professional services in this state shall enter into a voting
trust, proxy, or any other arrangement vesting another person (other
than another person who is a shareholder of the same corporation)
with the authority to exercise the voting power of any or all of his
or her shares, and any such purported voting trust, proxy or other
arrangement shall be void.
(b) A professional law corporation may be incorporated as a
nonprofit public benefit corporation under the Nonprofit Public
Benefit Corporation Law under either of the following circumstances:
(1) The corporation is a qualified legal services project or a
qualified support center within the meaning of subdivisions (a) and
(b) of Section 6213 of the Business and Professions Code.
(2) The professional law corporation otherwise meets all of the
requirements and complies with all of the provisions of the Nonprofit
Public Benefit Corporation Law, as well as all of the following
requirements:
(A) All of the members of the corporation, if it is a membership
organization as described in the Nonprofit Corporation Law, are
persons licensed to practice law in California.
(B) All of the members of the professional law corporation's board
of directors are persons licensed to practice law in California.
(C) Seventy percent of the clients to whom the corporation
provides legal services are lower income persons as defined in
Section 50079.5 of the Health and Safety Code, and to other persons
who would not otherwise have access to legal services.
(D) The corporation shall not enter into contingency fee contracts
with clients.
(c) A professional law corporation incorporated as a nonprofit
public benefit corporation that is a recipient in good standing as
defined in subdivision (c) of Section 6213 of the Business and
Professions Code shall be deemed to have satisfied all of the filing
requirements of a professional law corporation under Sections 6161.1,
6162, and 6163 of the Business and Professions Code.

13407. Shares in a professional corporation or a foreign
professional corporation qualified to render professional services in
this state may be transferred only to a licensed person, to a
shareholder of the same corporation, to a person licensed to practice
the same profession in the jurisdiction or jurisdictions in which
the person practices, or to a professional corporation, and any
transfer in violation of this restriction shall be void, except as
provided herein.
A professional corporation may purchase its own shares without
regard to any restrictions provided by law upon the repurchase of
shares, if at least one share remains issued and outstanding.
If a professional corporation or a foreign professional
corporation qualified to render professional services in this state
shall fail to acquire all of the shares of a shareholder who is
disqualified from rendering professional services in this state or of
a deceased shareholder who was, on his or her date of death,
licensed to render professional services in this state, or if such a
disqualified shareholder or the representative of such a deceased
shareholder shall fail to transfer said shares to the corporation, to
another shareholder of the corporation, to a person licensed to
practice the same profession in the jurisdiction or jurisdictions in
which the person practices, or to a licensed person, within 90 days
following the date of disqualification, or within six months
following the date of death of the shareholder, as the case may be,
then the certificate of registration of the corporation may be
suspended or revoked by the governmental agency regulating the
profession in which the corporation is engaged. In the event of such
a suspension or revocation, the corporation shall cease to render
professional services in this state.
Notwithstanding any provision in this part, upon the death or
incapacity of a dentist, any individual named in subdivision (a) of
Section 1625.3 of the Business and Professions Code may employ
licensed dentists and dental assistants and charge for their
professional services for a period not to exceed 12 months from the
date of death or incapacity of the dentist. The employment of
licensed dentists and dental assistants shall not be deemed the
practice of dentistry within the meaning of Section 1625 of the
Business and Professions Code, provided that all of the requirements
of Section 1625.4 of the Business and Professions Code are met. If an
individual listed in Section 1625.3 of the Business and Professions
Code is employing licensed persons and dental assistants, then the
shares of a deceased or incapacitated dentist shall be transferred as
provided in this section no later than 12 months from the date of
death or incapacity of the dentist.

13408. The following shall be grounds for the suspension or
revocation of the certificate of registration of a professional
corporation or a foreign professional corporation qualified to render
professional services in this state: (a) if all shareholders who are
licensed persons of such corporation shall at any one time become
disqualified persons, or (b) if the sole shareholder shall become a
disqualified person, or (c) if such corporation shall knowingly
employ or retain in its employment a disqualified person, or (d) if
such corporation shall violate any applicable rule or regulation
adopted by the governmental agency regulating the profession in which
such corporation is engaged, or (e) if such corporation shall
violate any statute applicable to a professional corporation or to a
foreign professional corporation, or (f) any ground for such
suspension or revocation specified in the Business and Professions
Code relating to the profession in which such corporation is engaged.
In the event of such suspension or revocation of its certificate of
registration such corporation shall cease forthwith to render
professional services in this state.

13408.5. No professional corporation may be formed so as to cause
any violation of law, or any applicable rules and regulations,
relating to fee splitting, kickbacks, or other similar practices by
physicians and surgeons or psychologists, including, but not limited
to, Section 650 or subdivision (e) of Section 2960 of the Business
and Professions Code. A violation of any such provisions shall be
grounds for the suspension or revocation of the certificate of
registration of the professional corporation. The Commissioner of
Corporations or the Director of the Department of Managed Health Care
may refer any suspected violation of such provisions to the
governmental agency regulating the profession in which the
corporation is, or proposes to be engaged.

13409. (a) A professional corporation may adopt any name permitted
by a law expressly applicable to the profession in which such
corporation is engaged or by a rule or regulation of the governmental
agency regulating such profession. The provisions of subdivision (b)
of Section 201 shall not apply to the name of a professional
corporation if such name shall contain and be restricted to the name
or the last name of one or more of the present, prospective, or
former shareholders or of persons who were associated with a
predecessor person, partnership or other organization or whose name
or names appeared in the name of such predecessor organization, and
the Secretary of State shall have no authority by reason of
subdivision (b) of Section 201 to refuse to file articles of
incorporation which set forth such a name; provided, however, that
such name shall not be substantially the same as the name of a
domestic corporation, the name of a foreign corporation qualified to
render professional services in this state which is authorized to
transact business in this state, or a name which is under reservation
for another corporation. The Secretary of State may require proof by
affidavit or otherwise establishing that the name of the
professional corporation complies with the requirements of this
section and of the law governing the profession in which such
professional corporation is engaged. The statements of fact in such
affidavits may be accepted by the Secretary of State as sufficient
proof of the facts.
(b) A foreign professional corporation qualified to render
professional services in this state may transact intrastate business
in this state by any name permitted by a law expressly applicable to
the profession in which the corporation is engaged, or by a rule or
regulation of the governmental agency regulating the rendering of
professional services in this state by the corporation. The
provisions of subdivision (b) of Section 201 shall not apply to the
name of a foreign professional corporation if the name contains and
is restricted to the name or the last name of one or more of the
present, prospective, or former shareholders or of persons who were
associated with a predecessor person, partnership, or other
organization, or whose name or names appeared in the name of the
predecessor organization, and the Secretary of State shall have no
authority by reason of subdivision (b) of Section 201 to refuse to
issue a certificate of qualification to a foreign professional
corporation that sets forth that name in its statement and
designation; provided, however, that such a name shall not be
substantially the same as the name of a domestic corporation, the
name of a foreign corporation qualified to render professional
services in the state, or a name that is under reservation for
another corporation. The Secretary of State may require proof by
affidavit or otherwise establishing that the name of the foreign
professional corporation qualified to render professional services in
this state complies with the requirements of this section and of the
law governing the profession in which the foreign professional
corporation qualified to render professional services in this state
proposes to engage in this state. The statements of fact in such
affidavits may be accepted by the Secretary of State as sufficient
proof of the facts.

13410. (a) A professional corporation or a foreign professional
corporation qualified to render professional services in this state
shall be subject to the applicable rules and regulations adopted by,
and all the disciplinary provisions of the Business and Professions
Code expressly governing the practice of the profession in this
state, and to the powers of, the governmental agency regulating the
profession in which such corporation is engaged. Nothing in this part
shall affect or impair the disciplinary powers of any such
governmental agency over licensed persons or any law, rule or
regulation pertaining to the standards for professional conduct of
licensed persons or to the professional relationship between any
licensed person furnishing professional services and the person
receiving such services.
(b) With respect to any foreign professional corporation qualified
to render professional services in this state, each such
governmental agency shall adopt rules, regulations, and orders as
appropriate to restrict or prohibit any disqualified person from
doing any of the following:
(1) Being a shareholder, director, officer, or employee of the
corporation.
(2) Rendering services in any profession in which he or she is a
disqualified person.
(3) Participating in the management of the corporation.
(4) Sharing in the income of the corporation.