Corporations Committee and Non Profit Organizations Committee Report on AB 663 Adding Flexibility for Corporate Governance since the pandemic

Two BLS Standing Committees, Corporations and Non Profit Organizations, sponsored new legislation signed by Governor Newsom on October 5, 2021.  AB 663 (Assemblymember Chen) amends the General Corporation Law and the Corporations Code provisions relating to Nonprofit Public Benefit, Mutual Benefit and Religious Corporations and Cooperative Corporations. It will allow California corporations in non-emergency circumstances to use remote participation (including telephonic participation), while preserving the ability of shareholders and members to attend a meeting in person if they want to do so by requiring a meeting to be “hybrid” (i.e., also have a physical location) unless all shareholders or members consent to a “virtual” meeting. The bill also provides delegates the ability to conduct virtual meetings.

When an emergency does arise, the corporation may use available technology for conducting shareholder or member meetings solely in a “virtual” venue (without the requirement for unanimous shareholder or member consent) when that is the only realistic means available to the corporation for doing so. In any such situation, a corporation opting for a “hybrid” or “virtual” meeting will be required to provide remotely participating shareholders, proxyholders, or members a reasonable opportunity to participate in and vote at the meeting; to record votes taken by remote communication; and to verify that persons participating in the meeting are shareholders, proxyholders, or members.

The new legislation provides needed flexibility to corporations in both emergency and non-emergency circumstances.