7230. (a) Any duties and liabilities set forth in this article
shall apply without regard to whether a director is compensated by
the corporation.
(b) Part 4 (commencing with Section 16000) of Division 9 of the
Probate Code does not apply to the directors of any corporation.
7231. (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner such director
believes to be in the best interests of the corporation and with such
care, including reasonable inquiry, as an ordinarily prudent person
in a like position would use under similar circumstances.
(b) In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case
prepared or presented by:
(1) One or more officers or employees of the corporation whom the
director believes to be reliable and competent in the matters
presented;
(2) Counsel, independent accountants or other persons as to
matters which the director believes to be within such person's
professional or expert competence; or
(3) A committee upon which the director does not serve that is
composed exclusively of any or any combination of directors, persons
described in paragraph (1), or persons described in paragraph (2), as
to matters within the committee's designated authority, which
committee the director believes to merit confidence, so long as, in
any case, the director acts in good faith, after reasonable inquiry
when the need therefor is indicated by the circumstances and without
knowledge that would cause such reliance to be unwarranted.
(c) A person who performs the duties of a director in accordance
with subdivisions (a) and (b) shall have no liability based upon any
alleged failure to discharge the person's obligations as a director,
including, without limiting the generality of the foregoing, any
actions or omissions which exceed or defeat a public or charitable
purpose to which assets held by a corporation are dedicated.
7231.5. (a) Except as provided in Section 7233 or 7236, there is no
monetary liability on the part of, and no cause of action for
damages shall arise against, any volunteer director or volunteer
executive officer of a nonprofit corporation subject to this part
based upon any alleged failure to discharge the person's duties as a
director or officer if the duties are performed in a manner that
meets all of the following criteria:
(1) The duties are performed in good faith.
(2) The duties are performed in a manner such director or officer
believes to be in the best interests of the corporation.
(3) The duties are performed with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances.
(b) "Volunteer" means the rendering of services without
compensation. "Compensation" means remuneration whether by way of
salary, fee, or other consideration for services rendered. However,
the payment of per diem, mileage, or other reimbursement expenses to
a director or executive officer does not affect that person's status
as a volunteer within the meaning of this section.
(c) "Executive officer" means the president, vice president,
secretary, or treasurer of a corporation or other individual serving
in like capacity who assists in establishing the policy of the
corporation.
(d) This section shall apply only to trade, professional, and
labor organizations incorporated pursuant to this part which operate
exclusively for fraternal, educational, and other nonprofit purposes,
and under the provisions of Section 501(c) of the United States
Internal Revenue Code.
(e) This section shall not be construed to limit the provisions of
Section 7231.
7232. (a) Section 7231 governs the duties of directors as to any
acts or omissions in connection with the election, selection, or
nomination of directors.
(b) This section shall not be construed to limit the generality of
Section 7231.
7233. (a) No contract or other transaction between a corporation
and one or more of its directors, or between a corporation and any
domestic or foreign corporation, firm or association in which one or
more of its directors has a material financial interest, is either
void or voidable because such director or directors or such other
corporation, business corporation, firm or association are parties or
because such director or directors are present at the meeting of the
board or a committee thereof which authorizes, approves or ratifies
the contract or transaction, if:
(1) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the members and
such contract or transaction is approved by the members (Section
5034) in good faith, with any membership owned by any interested
director not being entitled to vote thereon;
(2) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the board or
committee, and the board or committee authorizes, approves or
ratifies the contract or transaction in good faith by a vote
sufficient without counting the vote of the interested director or
directors and the contract or transaction is just and reasonable as
to the corporation at the time it is authorized, approved or
ratified; or
(3) As to contracts or transactions not approved as provided in
paragraph (1) or (2) of this subdivision, the person asserting the
validity of the contract or transaction sustains the burden of
proving that the contract or transaction was just and reasonable as
to the corporation at the time it was authorized, approved or
ratified.
A mere common directorship does not constitute a material
financial interest within the meaning of this subdivision. A director
is not interested within the meaning of this subdivision in a
resolution fixing the compensation of another director as a director,
officer or employee of the corporation, notwithstanding the fact
that the first director is also receiving compensation from the
corporation.
(b) No contract or other transaction between a corporation and any
corporation, business corporation or association of which one or
more of its directors are directors is either void or voidable
because such director or directors are present at the meeting of the
board or a committee thereof which authorizes, approves or ratifies
the contract or transaction, if:
(1) The material facts as to the transaction and as to such
director's other directorship are fully disclosed or known to the
board or committee, and the board or committee authorizes, approves
or ratifies the contract or transaction in good faith by a vote
sufficient without counting the vote of the common director or
directors or the contract or transaction is approved by the members
(Section 5034) in good faith; or
(2) As to contracts or transactions not approved as provided in
paragraph (1) of this subdivision, the contract or transaction is
just and reasonable as to the corporation at the time it is
authorized, approved or ratified.
This subdivision does not apply to contracts or transactions
covered by subdivision (a).
7234. Interested or common directors may be counted in determining
the presence of a quorum at a meeting of the board or a committee
thereof which authorizes, approves or ratifies a contract or
transaction as provided in Section 7233.
7235. (a) Unless prohibited by the articles or bylaws, a
corporation may loan money or property to, or guarantee the
obligation of, any director or officer of the corporation or of its
parent, affiliate or subsidiary, provided:
(1) The board determines the loan or guaranty may reasonably be
expected to benefit the corporation.
(2) Prior to consummating the transaction or any part thereof, the
loan or guaranty is either:
(A) Approved by the members (Section 5034), without counting the
vote of the director or officer, if a member, or
(B) Approved by the vote of a majority of the directors then in
office, without counting the vote of the director who is to receive
the loan or the benefit of the guaranty.
(b) Notwithstanding subdivision (a), a corporation may advance
money to a director or officer of the corporation or of its parent,
affiliate or subsidiary, for any expenses reasonably anticipated to
be incurred in the performance of the duties of the director or
officer of the corporation or of its parent, affiliate or subsidiary,
provided that in the absence of such an advance the director or
officer would be entitled to be reimbursed for these expenses by the
corporation, its parent, affiliate, or subsidiary.
(c) The provisions of subdivisions (a) and (b) do not apply to
credit unions, or to the payment of premiums in whole or in part by a
corporation on a life insurance policy on the life of a director or
officer so long as repayment to the corporation of the amount paid by
it is secured by the proceeds of the policy and its cash surrender
value, or to loans permitted under any statute regulating any special
class of corporations.
7236. (a) Subject to the provisions of Section 7231, directors of a
corporation who approve any of the following corporate actions shall
be jointly and severally liable to the corporation for the benefit
of all of the creditors entitled to institute an action under
paragraph (1) or (2) of subdivision (c) or to the corporation in an
action by the head organization or members under paragraph (1) or (3)
of subdivision (c):
(1) The making of any distribution contrary to Chapter 4
(commencing with Section 7410).
(2) The distribution of assets after institution of dissolution
proceedings of the corporation, without paying or adequately
providing for all known liabilities of the corporation, excluding any
claims not filed by creditors within the time limit set by the court
in a notice given to creditors under Chapter 15 (commencing with
Section 8510), Chapter 16 (commencing with Section 8610), and Chapter
17 (commencing with Section 8710).
(3) The making of any loan or guaranty contrary to Section 7235.
(b) A director who is present at a meeting of the board, or any
committee thereof, at which an action specified in subdivision (a) is
taken and who abstains from voting shall be considered to have
approved the action.
(c) Suit may be brought in the name of the corporation to enforce
the liability:
(1) Under paragraph (1) of subdivision (a), against any or all
directors liable by the persons entitled to sue under subdivision (c)
of Section 7420.
(2) Under paragraph (2) or (3) of subdivision (a), against any or
all directors liable by any one or more creditors of the corporation
whose debts or claims arose prior to the time of the corporate action
who have not consented to the corporate action, whether or not they
have reduced their claims to judgment.
(3) Under paragraph (3) of subdivision (a), against any or all
directors liable by any one or more members at the time of any
corporate action specified in paragraph (3) of subdivision (a) who
have not consented to the corporate action, without regard to the
provisions of Section 7710.
(d) The damages recoverable from a director under this section
shall be the amount of the illegal distribution, or if the illegal
distribution consists of property, the fair market value of that
property at the time of the illegal distribution, plus interest
thereon from the date of the distribution at the legal rate on
judgments until paid, together with all reasonably incurred costs of
appraisal or other valuation, if any, of that property, or the loss
suffered by the corporation as a result of the illegal loan or
guaranty, but not exceeding, in the case of an action for the benefit
of creditors, the liabilities of the corporation owed to
nonconsenting creditors at the time of the violation.
(e) Any director sued under this section may implead all other
directors liable and may compel contribution, either in that action
or in an independent action against directors not joined in that
action.
(f) Directors liable under this section shall also be entitled to
be subrogated to the rights of the corporation:
(1) With respect to paragraph (1) of subdivision (a), against the
persons who received the distribution.
(2) With respect to paragraph (2) of subdivision (a), against the
persons who received the distribution.
(3) With respect to paragraph (3) of subdivision (a), against the
person who received the loan or guaranty.
Any director sued under this section may file a cross-complaint
against the person or persons who are liable to the director as a
result of the subrogation provided for in this subdivision or may
proceed against them in an independent action.
7237. (a) For the purposes of this section, "agent" means any
person who is or was a director, officer, employee or other agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation
of the corporation or of another enterprise at the request of such
predecessor corporation; "proceeding" means any threatened, pending
or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without
limitation attorneys' fees and any expenses of establishing a right
to indemnification under subdivision (d) or paragraph (3) of
subdivision (e).
(b) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the corporation to
procure a judgment in its favor, an action brought under Section 5233
of Part 2 (commencing with Section 5110) made applicable pursuant to
Section 7238, or an action brought by the Attorney General or a
person granted relator status by the Attorney General for any breach
of duty relating to assets held in charitable trust) by reason of the
fact that such person is or was an agent of the corporation, against
expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with such proceeding if such
person acted in good faith and in a manner such person reasonably
believed to be in the best interests of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the
conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in the best interests of
the corporation or that the person had reasonable cause to believe
that the person's conduct was unlawful.
(c) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of the corporation,
or brought under Section 5233 of Part 2 (commencing with Section
5110) made applicable pursuant to Section 7238, or brought by the
Attorney General or a person granted relator status by the Attorney
General for breach of duty relating to assets held in charitable
trust, to procure a judgment in its favor by reason of the fact that
such person is or was an agent of the corporation, against expenses
actually and reasonably incurred by such person in connection with
the defense or settlement of such action if such person acted in good
faith, in a manner such person believed to be in the best interests
of the corporation and with such care, including reasonable inquiry,
as an ordinarily prudent person in a like position would use under
similar circumstances. No indemnification shall be made under this
subdivision:
(1) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation in
the performance of such person's duty to the corporation, unless and
only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall
determine;
(2) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(3) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval unless such action concerns assets held in charitable trust
and is settled with the approval of the Attorney General.
(d) To the extent that an agent of a corporation has been
successful on the merits in defense of any proceeding referred to in
subdivision (b) or (c) or in defense of any claim, issue or matter
therein, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
(e) Except as provided in subdivision (d), any indemnification
under this section shall be made by the corporation only if
authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because
the agent has met the applicable standard of conduct set forth in
subdivision (b) or (c), by:
(1) A majority vote of a quorum consisting of directors who are
not parties to such proceeding;
(2) Approval of the members (Section 5034), with the persons to be
indemnified not being entitled to vote thereon; or
(3) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or
other person rendering services in connection with the defense,
whether or not such application by the agent, attorney or other
person is opposed by the corporation.
(f) Expenses incurred in defending any proceeding may be advanced
by the corporation prior to the final disposition of such proceeding
upon receipt of an undertaking by or on behalf of the agent to repay
such amount unless it shall be determined ultimately that the agent
is entitled to be indemnified as authorized in this section. The
provisions of subdivision (a) of Section 7235 do not apply to
advances made pursuant to this subdivision.
(g) No provision made by a corporation to indemnify its or its
subsidiary's directors or officers for the defense of any proceeding,
whether contained in the articles, bylaws, a resolution of members
or directors, an agreement or otherwise, shall be valid unless
consistent with this section. Nothing contained in this section shall
affect any right to indemnification to which persons other than such
directors and officers may be entitled by contract or otherwise.
(h) No indemnification or advance shall be made under this
section, except as provided in subdivision (d) or paragraph (3) of
subdivision (e), in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the
articles, bylaws, a resolution of the members or an agreement in
effect at the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits
indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
(i) A corporation shall have power to purchase and maintain
insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity
or arising out of the agent's status as such whether or not the
corporation would have the power to indemnify the agent against such
liability under the provisions of this section.
(j) This section does not apply to any proceeding against any
trustee, investment manager or other fiduciary of an employee benefit
plan in such person's capacity as such, even though such person may
also be an agent as defined in subdivision (a) of the employer
corporation. A corporation shall have power to indemnify such
trustee, investment manager or other fiduciary to the extent
permitted by subdivision (f) of Section 207.
7238. Where a corporation holds assets in charitable trust, the
conduct of its directors or of any person performing functions
similar to those performed by a director, shall, in respect to the
assets held in charitable trust, be governed by the standards of
conduct set forth in Article 3 (commencing with Section 5230) of
Chapter 2 of Part 2 for directors of nonprofit public benefit
corporations. This does not limit any additional requirements which
may be specifically set forth in this part regarding corporations
holding assets in charitable trust.
7230. (a) Any duties and liabilities set forth in this article
shall apply without regard to whether a director is compensated by
the corporation.
(b) Part 4 (commencing with Section 16000) of Division 9 of the
Probate Code does not apply to the directors of any corporation.
7231. (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner such director
believes to be in the best interests of the corporation and with such
care, including reasonable inquiry, as an ordinarily prudent person
in a like position would use under similar circumstances.
(b) In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case
prepared or presented by:
(1) One or more officers or employees of the corporation whom the
director believes to be reliable and competent in the matters
presented;
(2) Counsel, independent accountants or other persons as to
matters which the director believes to be within such person's
professional or expert competence; or
(3) A committee upon which the director does not serve that is
composed exclusively of any or any combination of directors, persons
described in paragraph (1), or persons described in paragraph (2), as
to matters within the committee's designated authority, which
committee the director believes to merit confidence, so long as, in
any case, the director acts in good faith, after reasonable inquiry
when the need therefor is indicated by the circumstances and without
knowledge that would cause such reliance to be unwarranted.
(c) A person who performs the duties of a director in accordance
with subdivisions (a) and (b) shall have no liability based upon any
alleged failure to discharge the person's obligations as a director,
including, without limiting the generality of the foregoing, any
actions or omissions which exceed or defeat a public or charitable
purpose to which assets held by a corporation are dedicated.
7231.5. (a) Except as provided in Section 7233 or 7236, there is no
monetary liability on the part of, and no cause of action for
damages shall arise against, any volunteer director or volunteer
executive officer of a nonprofit corporation subject to this part
based upon any alleged failure to discharge the person's duties as a
director or officer if the duties are performed in a manner that
meets all of the following criteria:
(1) The duties are performed in good faith.
(2) The duties are performed in a manner such director or officer
believes to be in the best interests of the corporation.
(3) The duties are performed with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances.
(b) "Volunteer" means the rendering of services without
compensation. "Compensation" means remuneration whether by way of
salary, fee, or other consideration for services rendered. However,
the payment of per diem, mileage, or other reimbursement expenses to
a director or executive officer does not affect that person's status
as a volunteer within the meaning of this section.
(c) "Executive officer" means the president, vice president,
secretary, or treasurer of a corporation or other individual serving
in like capacity who assists in establishing the policy of the
corporation.
(d) This section shall apply only to trade, professional, and
labor organizations incorporated pursuant to this part which operate
exclusively for fraternal, educational, and other nonprofit purposes,
and under the provisions of Section 501(c) of the United States
Internal Revenue Code.
(e) This section shall not be construed to limit the provisions of
Section 7231.
7232. (a) Section 7231 governs the duties of directors as to any
acts or omissions in connection with the election, selection, or
nomination of directors.
(b) This section shall not be construed to limit the generality of
Section 7231.
7233. (a) No contract or other transaction between a corporation
and one or more of its directors, or between a corporation and any
domestic or foreign corporation, firm or association in which one or
more of its directors has a material financial interest, is either
void or voidable because such director or directors or such other
corporation, business corporation, firm or association are parties or
because such director or directors are present at the meeting of the
board or a committee thereof which authorizes, approves or ratifies
the contract or transaction, if:
(1) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the members and
such contract or transaction is approved by the members (Section
5034) in good faith, with any membership owned by any interested
director not being entitled to vote thereon;
(2) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the board or
committee, and the board or committee authorizes, approves or
ratifies the contract or transaction in good faith by a vote
sufficient without counting the vote of the interested director or
directors and the contract or transaction is just and reasonable as
to the corporation at the time it is authorized, approved or
ratified; or
(3) As to contracts or transactions not approved as provided in
paragraph (1) or (2) of this subdivision, the person asserting the
validity of the contract or transaction sustains the burden of
proving that the contract or transaction was just and reasonable as
to the corporation at the time it was authorized, approved or
ratified.
A mere common directorship does not constitute a material
financial interest within the meaning of this subdivision. A director
is not interested within the meaning of this subdivision in a
resolution fixing the compensation of another director as a director,
officer or employee of the corporation, notwithstanding the fact
that the first director is also receiving compensation from the
corporation.
(b) No contract or other transaction between a corporation and any
corporation, business corporation or association of which one or
more of its directors are directors is either void or voidable
because such director or directors are present at the meeting of the
board or a committee thereof which authorizes, approves or ratifies
the contract or transaction, if:
(1) The material facts as to the transaction and as to such
director's other directorship are fully disclosed or known to the
board or committee, and the board or committee authorizes, approves
or ratifies the contract or transaction in good faith by a vote
sufficient without counting the vote of the common director or
directors or the contract or transaction is approved by the members
(Section 5034) in good faith; or
(2) As to contracts or transactions not approved as provided in
paragraph (1) of this subdivision, the contract or transaction is
just and reasonable as to the corporation at the time it is
authorized, approved or ratified.
This subdivision does not apply to contracts or transactions
covered by subdivision (a).
7234. Interested or common directors may be counted in determining
the presence of a quorum at a meeting of the board or a committee
thereof which authorizes, approves or ratifies a contract or
transaction as provided in Section 7233.
7235. (a) Unless prohibited by the articles or bylaws, a
corporation may loan money or property to, or guarantee the
obligation of, any director or officer of the corporation or of its
parent, affiliate or subsidiary, provided:
(1) The board determines the loan or guaranty may reasonably be
expected to benefit the corporation.
(2) Prior to consummating the transaction or any part thereof, the
loan or guaranty is either:
(A) Approved by the members (Section 5034), without counting the
vote of the director or officer, if a member, or
(B) Approved by the vote of a majority of the directors then in
office, without counting the vote of the director who is to receive
the loan or the benefit of the guaranty.
(b) Notwithstanding subdivision (a), a corporation may advance
money to a director or officer of the corporation or of its parent,
affiliate or subsidiary, for any expenses reasonably anticipated to
be incurred in the performance of the duties of the director or
officer of the corporation or of its parent, affiliate or subsidiary,
provided that in the absence of such an advance the director or
officer would be entitled to be reimbursed for these expenses by the
corporation, its parent, affiliate, or subsidiary.
(c) The provisions of subdivisions (a) and (b) do not apply to
credit unions, or to the payment of premiums in whole or in part by a
corporation on a life insurance policy on the life of a director or
officer so long as repayment to the corporation of the amount paid by
it is secured by the proceeds of the policy and its cash surrender
value, or to loans permitted under any statute regulating any special
class of corporations.
7236. (a) Subject to the provisions of Section 7231, directors of a
corporation who approve any of the following corporate actions shall
be jointly and severally liable to the corporation for the benefit
of all of the creditors entitled to institute an action under
paragraph (1) or (2) of subdivision (c) or to the corporation in an
action by the head organization or members under paragraph (1) or (3)
of subdivision (c):
(1) The making of any distribution contrary to Chapter 4
(commencing with Section 7410).
(2) The distribution of assets after institution of dissolution
proceedings of the corporation, without paying or adequately
providing for all known liabilities of the corporation, excluding any
claims not filed by creditors within the time limit set by the court
in a notice given to creditors under Chapter 15 (commencing with
Section 8510), Chapter 16 (commencing with Section 8610), and Chapter
17 (commencing with Section 8710).
(3) The making of any loan or guaranty contrary to Section 7235.
(b) A director who is present at a meeting of the board, or any
committee thereof, at which an action specified in subdivision (a) is
taken and who abstains from voting shall be considered to have
approved the action.
(c) Suit may be brought in the name of the corporation to enforce
the liability:
(1) Under paragraph (1) of subdivision (a), against any or all
directors liable by the persons entitled to sue under subdivision (c)
of Section 7420.
(2) Under paragraph (2) or (3) of subdivision (a), against any or
all directors liable by any one or more creditors of the corporation
whose debts or claims arose prior to the time of the corporate action
who have not consented to the corporate action, whether or not they
have reduced their claims to judgment.
(3) Under paragraph (3) of subdivision (a), against any or all
directors liable by any one or more members at the time of any
corporate action specified in paragraph (3) of subdivision (a) who
have not consented to the corporate action, without regard to the
provisions of Section 7710.
(d) The damages recoverable from a director under this section
shall be the amount of the illegal distribution, or if the illegal
distribution consists of property, the fair market value of that
property at the time of the illegal distribution, plus interest
thereon from the date of the distribution at the legal rate on
judgments until paid, together with all reasonably incurred costs of
appraisal or other valuation, if any, of that property, or the loss
suffered by the corporation as a result of the illegal loan or
guaranty, but not exceeding, in the case of an action for the benefit
of creditors, the liabilities of the corporation owed to
nonconsenting creditors at the time of the violation.
(e) Any director sued under this section may implead all other
directors liable and may compel contribution, either in that action
or in an independent action against directors not joined in that
action.
(f) Directors liable under this section shall also be entitled to
be subrogated to the rights of the corporation:
(1) With respect to paragraph (1) of subdivision (a), against the
persons who received the distribution.
(2) With respect to paragraph (2) of subdivision (a), against the
persons who received the distribution.
(3) With respect to paragraph (3) of subdivision (a), against the
person who received the loan or guaranty.
Any director sued under this section may file a cross-complaint
against the person or persons who are liable to the director as a
result of the subrogation provided for in this subdivision or may
proceed against them in an independent action.
7237. (a) For the purposes of this section, "agent" means any
person who is or was a director, officer, employee or other agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation
of the corporation or of another enterprise at the request of such
predecessor corporation; "proceeding" means any threatened, pending
or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without
limitation attorneys' fees and any expenses of establishing a right
to indemnification under subdivision (d) or paragraph (3) of
subdivision (e).
(b) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the corporation to
procure a judgment in its favor, an action brought under Section 5233
of Part 2 (commencing with Section 5110) made applicable pursuant to
Section 7238, or an action brought by the Attorney General or a
person granted relator status by the Attorney General for any breach
of duty relating to assets held in charitable trust) by reason of the
fact that such person is or was an agent of the corporation, against
expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with such proceeding if such
person acted in good faith and in a manner such person reasonably
believed to be in the best interests of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the
conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in the best interests of
the corporation or that the person had reasonable cause to believe
that the person's conduct was unlawful.
(c) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of the corporation,
or brought under Section 5233 of Part 2 (commencing with Section
5110) made applicable pursuant to Section 7238, or brought by the
Attorney General or a person granted relator status by the Attorney
General for breach of duty relating to assets held in charitable
trust, to procure a judgment in its favor by reason of the fact that
such person is or was an agent of the corporation, against expenses
actually and reasonably incurred by such person in connection with
the defense or settlement of such action if such person acted in good
faith, in a manner such person believed to be in the best interests
of the corporation and with such care, including reasonable inquiry,
as an ordinarily prudent person in a like position would use under
similar circumstances. No indemnification shall be made under this
subdivision:
(1) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation in
the performance of such person's duty to the corporation, unless and
only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall
determine;
(2) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(3) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval unless such action concerns assets held in charitable trust
and is settled with the approval of the Attorney General.
(d) To the extent that an agent of a corporation has been
successful on the merits in defense of any proceeding referred to in
subdivision (b) or (c) or in defense of any claim, issue or matter
therein, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
(e) Except as provided in subdivision (d), any indemnification
under this section shall be made by the corporation only if
authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because
the agent has met the applicable standard of conduct set forth in
subdivision (b) or (c), by:
(1) A majority vote of a quorum consisting of directors who are
not parties to such proceeding;
(2) Approval of the members (Section 5034), with the persons to be
indemnified not being entitled to vote thereon; or
(3) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or
other person rendering services in connection with the defense,
whether or not such application by the agent, attorney or other
person is opposed by the corporation.
(f) Expenses incurred in defending any proceeding may be advanced
by the corporation prior to the final disposition of such proceeding
upon receipt of an undertaking by or on behalf of the agent to repay
such amount unless it shall be determined ultimately that the agent
is entitled to be indemnified as authorized in this section. The
provisions of subdivision (a) of Section 7235 do not apply to
advances made pursuant to this subdivision.
(g) No provision made by a corporation to indemnify its or its
subsidiary's directors or officers for the defense of any proceeding,
whether contained in the articles, bylaws, a resolution of members
or directors, an agreement or otherwise, shall be valid unless
consistent with this section. Nothing contained in this section shall
affect any right to indemnification to which persons other than such
directors and officers may be entitled by contract or otherwise.
(h) No indemnification or advance shall be made under this
section, except as provided in subdivision (d) or paragraph (3) of
subdivision (e), in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the
articles, bylaws, a resolution of the members or an agreement in
effect at the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits
indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
(i) A corporation shall have power to purchase and maintain
insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity
or arising out of the agent's status as such whether or not the
corporation would have the power to indemnify the agent against such
liability under the provisions of this section.
(j) This section does not apply to any proceeding against any
trustee, investment manager or other fiduciary of an employee benefit
plan in such person's capacity as such, even though such person may
also be an agent as defined in subdivision (a) of the employer
corporation. A corporation shall have power to indemnify such
trustee, investment manager or other fiduciary to the extent
permitted by subdivision (f) of Section 207.
7238. Where a corporation holds assets in charitable trust, the
conduct of its directors or of any person performing functions
similar to those performed by a director, shall, in respect to the
assets held in charitable trust, be governed by the standards of
conduct set forth in Article 3 (commencing with Section 5230) of
Chapter 2 of Part 2 for directors of nonprofit public benefit
corporations. This does not limit any additional requirements which
may be specifically set forth in this part regarding corporations
holding assets in charitable trust.
7230. (a) Any duties and liabilities set forth in this article
shall apply without regard to whether a director is compensated by
the corporation.
(b) Part 4 (commencing with Section 16000) of Division 9 of the
Probate Code does not apply to the directors of any corporation.
7231. (a) A director shall perform the duties of a director,
including duties as a member of any committee of the board upon which
the director may serve, in good faith, in a manner such director
believes to be in the best interests of the corporation and with such
care, including reasonable inquiry, as an ordinarily prudent person
in a like position would use under similar circumstances.
(b) In performing the duties of a director, a director shall be
entitled to rely on information, opinions, reports or statements,
including financial statements and other financial data, in each case
prepared or presented by:
(1) One or more officers or employees of the corporation whom the
director believes to be reliable and competent in the matters
presented;
(2) Counsel, independent accountants or other persons as to
matters which the director believes to be within such person's
professional or expert competence; or
(3) A committee upon which the director does not serve that is
composed exclusively of any or any combination of directors, persons
described in paragraph (1), or persons described in paragraph (2), as
to matters within the committee's designated authority, which
committee the director believes to merit confidence, so long as, in
any case, the director acts in good faith, after reasonable inquiry
when the need therefor is indicated by the circumstances and without
knowledge that would cause such reliance to be unwarranted.
(c) A person who performs the duties of a director in accordance
with subdivisions (a) and (b) shall have no liability based upon any
alleged failure to discharge the person's obligations as a director,
including, without limiting the generality of the foregoing, any
actions or omissions which exceed or defeat a public or charitable
purpose to which assets held by a corporation are dedicated.
7231.5. (a) Except as provided in Section 7233 or 7236, there is no
monetary liability on the part of, and no cause of action for
damages shall arise against, any volunteer director or volunteer
executive officer of a nonprofit corporation subject to this part
based upon any alleged failure to discharge the person's duties as a
director or officer if the duties are performed in a manner that
meets all of the following criteria:
(1) The duties are performed in good faith.
(2) The duties are performed in a manner such director or officer
believes to be in the best interests of the corporation.
(3) The duties are performed with such care, including reasonable
inquiry, as an ordinarily prudent person in a like position would use
under similar circumstances.
(b) "Volunteer" means the rendering of services without
compensation. "Compensation" means remuneration whether by way of
salary, fee, or other consideration for services rendered. However,
the payment of per diem, mileage, or other reimbursement expenses to
a director or executive officer does not affect that person's status
as a volunteer within the meaning of this section.
(c) "Executive officer" means the president, vice president,
secretary, or treasurer of a corporation or other individual serving
in like capacity who assists in establishing the policy of the
corporation.
(d) This section shall apply only to trade, professional, and
labor organizations incorporated pursuant to this part which operate
exclusively for fraternal, educational, and other nonprofit purposes,
and under the provisions of Section 501(c) of the United States
Internal Revenue Code.
(e) This section shall not be construed to limit the provisions of
Section 7231.
7232. (a) Section 7231 governs the duties of directors as to any
acts or omissions in connection with the election, selection, or
nomination of directors.
(b) This section shall not be construed to limit the generality of
Section 7231.
7233. (a) No contract or other transaction between a corporation
and one or more of its directors, or between a corporation and any
domestic or foreign corporation, firm or association in which one or
more of its directors has a material financial interest, is either
void or voidable because such director or directors or such other
corporation, business corporation, firm or association are parties or
because such director or directors are present at the meeting of the
board or a committee thereof which authorizes, approves or ratifies
the contract or transaction, if:
(1) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the members and
such contract or transaction is approved by the members (Section
5034) in good faith, with any membership owned by any interested
director not being entitled to vote thereon;
(2) The material facts as to the transaction and as to such
director's interest are fully disclosed or known to the board or
committee, and the board or committee authorizes, approves or
ratifies the contract or transaction in good faith by a vote
sufficient without counting the vote of the interested director or
directors and the contract or transaction is just and reasonable as
to the corporation at the time it is authorized, approved or
ratified; or
(3) As to contracts or transactions not approved as provided in
paragraph (1) or (2) of this subdivision, the person asserting the
validity of the contract or transaction sustains the burden of
proving that the contract or transaction was just and reasonable as
to the corporation at the time it was authorized, approved or
ratified.
A mere common directorship does not constitute a material
financial interest within the meaning of this subdivision. A director
is not interested within the meaning of this subdivision in a
resolution fixing the compensation of another director as a director,
officer or employee of the corporation, notwithstanding the fact
that the first director is also receiving compensation from the
corporation.
(b) No contract or other transaction between a corporation and any
corporation, business corporation or association of which one or
more of its directors are directors is either void or voidable
because such director or directors are present at the meeting of the
board or a committee thereof which authorizes, approves or ratifies
the contract or transaction, if:
(1) The material facts as to the transaction and as to such
director's other directorship are fully disclosed or known to the
board or committee, and the board or committee authorizes, approves
or ratifies the contract or transaction in good faith by a vote
sufficient without counting the vote of the common director or
directors or the contract or transaction is approved by the members
(Section 5034) in good faith; or
(2) As to contracts or transactions not approved as provided in
paragraph (1) of this subdivision, the contract or transaction is
just and reasonable as to the corporation at the time it is
authorized, approved or ratified.
This subdivision does not apply to contracts or transactions
covered by subdivision (a).
7234. Interested or common directors may be counted in determining
the presence of a quorum at a meeting of the board or a committee
thereof which authorizes, approves or ratifies a contract or
transaction as provided in Section 7233.
7235. (a) Unless prohibited by the articles or bylaws, a
corporation may loan money or property to, or guarantee the
obligation of, any director or officer of the corporation or of its
parent, affiliate or subsidiary, provided:
(1) The board determines the loan or guaranty may reasonably be
expected to benefit the corporation.
(2) Prior to consummating the transaction or any part thereof, the
loan or guaranty is either:
(A) Approved by the members (Section 5034), without counting the
vote of the director or officer, if a member, or
(B) Approved by the vote of a majority of the directors then in
office, without counting the vote of the director who is to receive
the loan or the benefit of the guaranty.
(b) Notwithstanding subdivision (a), a corporation may advance
money to a director or officer of the corporation or of its parent,
affiliate or subsidiary, for any expenses reasonably anticipated to
be incurred in the performance of the duties of the director or
officer of the corporation or of its parent, affiliate or subsidiary,
provided that in the absence of such an advance the director or
officer would be entitled to be reimbursed for these expenses by the
corporation, its parent, affiliate, or subsidiary.
(c) The provisions of subdivisions (a) and (b) do not apply to
credit unions, or to the payment of premiums in whole or in part by a
corporation on a life insurance policy on the life of a director or
officer so long as repayment to the corporation of the amount paid by
it is secured by the proceeds of the policy and its cash surrender
value, or to loans permitted under any statute regulating any special
class of corporations.
7236. (a) Subject to the provisions of Section 7231, directors of a
corporation who approve any of the following corporate actions shall
be jointly and severally liable to the corporation for the benefit
of all of the creditors entitled to institute an action under
paragraph (1) or (2) of subdivision (c) or to the corporation in an
action by the head organization or members under paragraph (1) or (3)
of subdivision (c):
(1) The making of any distribution contrary to Chapter 4
(commencing with Section 7410).
(2) The distribution of assets after institution of dissolution
proceedings of the corporation, without paying or adequately
providing for all known liabilities of the corporation, excluding any
claims not filed by creditors within the time limit set by the court
in a notice given to creditors under Chapter 15 (commencing with
Section 8510), Chapter 16 (commencing with Section 8610), and Chapter
17 (commencing with Section 8710).
(3) The making of any loan or guaranty contrary to Section 7235.
(b) A director who is present at a meeting of the board, or any
committee thereof, at which an action specified in subdivision (a) is
taken and who abstains from voting shall be considered to have
approved the action.
(c) Suit may be brought in the name of the corporation to enforce
the liability:
(1) Under paragraph (1) of subdivision (a), against any or all
directors liable by the persons entitled to sue under subdivision (c)
of Section 7420.
(2) Under paragraph (2) or (3) of subdivision (a), against any or
all directors liable by any one or more creditors of the corporation
whose debts or claims arose prior to the time of the corporate action
who have not consented to the corporate action, whether or not they
have reduced their claims to judgment.
(3) Under paragraph (3) of subdivision (a), against any or all
directors liable by any one or more members at the time of any
corporate action specified in paragraph (3) of subdivision (a) who
have not consented to the corporate action, without regard to the
provisions of Section 7710.
(d) The damages recoverable from a director under this section
shall be the amount of the illegal distribution, or if the illegal
distribution consists of property, the fair market value of that
property at the time of the illegal distribution, plus interest
thereon from the date of the distribution at the legal rate on
judgments until paid, together with all reasonably incurred costs of
appraisal or other valuation, if any, of that property, or the loss
suffered by the corporation as a result of the illegal loan or
guaranty, but not exceeding, in the case of an action for the benefit
of creditors, the liabilities of the corporation owed to
nonconsenting creditors at the time of the violation.
(e) Any director sued under this section may implead all other
directors liable and may compel contribution, either in that action
or in an independent action against directors not joined in that
action.
(f) Directors liable under this section shall also be entitled to
be subrogated to the rights of the corporation:
(1) With respect to paragraph (1) of subdivision (a), against the
persons who received the distribution.
(2) With respect to paragraph (2) of subdivision (a), against the
persons who received the distribution.
(3) With respect to paragraph (3) of subdivision (a), against the
person who received the loan or guaranty.
Any director sued under this section may file a cross-complaint
against the person or persons who are liable to the director as a
result of the subrogation provided for in this subdivision or may
proceed against them in an independent action.
7237. (a) For the purposes of this section, "agent" means any
person who is or was a director, officer, employee or other agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, or was a director, officer, employee or agent of a
foreign or domestic corporation which was a predecessor corporation
of the corporation or of another enterprise at the request of such
predecessor corporation; "proceeding" means any threatened, pending
or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes without
limitation attorneys' fees and any expenses of establishing a right
to indemnification under subdivision (d) or paragraph (3) of
subdivision (e).
(b) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the corporation to
procure a judgment in its favor, an action brought under Section 5233
of Part 2 (commencing with Section 5110) made applicable pursuant to
Section 7238, or an action brought by the Attorney General or a
person granted relator status by the Attorney General for any breach
of duty relating to assets held in charitable trust) by reason of the
fact that such person is or was an agent of the corporation, against
expenses, judgments, fines, settlements and other amounts actually
and reasonably incurred in connection with such proceeding if such
person acted in good faith and in a manner such person reasonably
believed to be in the best interests of the corporation and, in the
case of a criminal proceeding, had no reasonable cause to believe the
conduct of such person was unlawful. The termination of any
proceeding by judgment, order, settlement, conviction or upon a plea
of nolo contendere or its equivalent shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in the best interests of
the corporation or that the person had reasonable cause to believe
that the person's conduct was unlawful.
(c) A corporation shall have power to indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of the corporation,
or brought under Section 5233 of Part 2 (commencing with Section
5110) made applicable pursuant to Section 7238, or brought by the
Attorney General or a person granted relator status by the Attorney
General for breach of duty relating to assets held in charitable
trust, to procure a judgment in its favor by reason of the fact that
such person is or was an agent of the corporation, against expenses
actually and reasonably incurred by such person in connection with
the defense or settlement of such action if such person acted in good
faith, in a manner such person believed to be in the best interests
of the corporation and with such care, including reasonable inquiry,
as an ordinarily prudent person in a like position would use under
similar circumstances. No indemnification shall be made under this
subdivision:
(1) In respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation in
the performance of such person's duty to the corporation, unless and
only to the extent that the court in which such proceeding is or was
pending shall determine upon application that, in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for the expenses which such court shall
determine;
(2) Of amounts paid in settling or otherwise disposing of a
threatened or pending action, with or without court approval; or
(3) Of expenses incurred in defending a threatened or pending
action which is settled or otherwise disposed of without court
approval unless such action concerns assets held in charitable trust
and is settled with the approval of the Attorney General.
(d) To the extent that an agent of a corporation has been
successful on the merits in defense of any proceeding referred to in
subdivision (b) or (c) or in defense of any claim, issue or matter
therein, the agent shall be indemnified against expenses actually and
reasonably incurred by the agent in connection therewith.
(e) Except as provided in subdivision (d), any indemnification
under this section shall be made by the corporation only if
authorized in the specific case, upon a determination that
indemnification of the agent is proper in the circumstances because
the agent has met the applicable standard of conduct set forth in
subdivision (b) or (c), by:
(1) A majority vote of a quorum consisting of directors who are
not parties to such proceeding;
(2) Approval of the members (Section 5034), with the persons to be
indemnified not being entitled to vote thereon; or
(3) The court in which such proceeding is or was pending upon
application made by the corporation or the agent or the attorney or
other person rendering services in connection with the defense,
whether or not such application by the agent, attorney or other
person is opposed by the corporation.
(f) Expenses incurred in defending any proceeding may be advanced
by the corporation prior to the final disposition of such proceeding
upon receipt of an undertaking by or on behalf of the agent to repay
such amount unless it shall be determined ultimately that the agent
is entitled to be indemnified as authorized in this section. The
provisions of subdivision (a) of Section 7235 do not apply to
advances made pursuant to this subdivision.
(g) No provision made by a corporation to indemnify its or its
subsidiary's directors or officers for the defense of any proceeding,
whether contained in the articles, bylaws, a resolution of members
or directors, an agreement or otherwise, shall be valid unless
consistent with this section. Nothing contained in this section shall
affect any right to indemnification to which persons other than such
directors and officers may be entitled by contract or otherwise.
(h) No indemnification or advance shall be made under this
section, except as provided in subdivision (d) or paragraph (3) of
subdivision (e), in any circumstance where it appears:
(1) That it would be inconsistent with a provision of the
articles, bylaws, a resolution of the members or an agreement in
effect at the time of the accrual of the alleged cause of action
asserted in the proceeding in which the expenses were incurred or
other amounts were paid, which prohibits or otherwise limits
indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
(i) A corporation shall have power to purchase and maintain
insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity
or arising out of the agent's status as such whether or not the
corporation would have the power to indemnify the agent against such
liability under the provisions of this section.
(j) This section does not apply to any proceeding against any
trustee, investment manager or other fiduciary of an employee benefit
plan in such person's capacity as such, even though such person may
also be an agent as defined in subdivision (a) of the employer
corporation. A corporation shall have power to indemnify such
trustee, investment manager or other fiduciary to the extent
permitted by subdivision (f) of Section 207.
7238. Where a corporation holds assets in charitable trust, the
conduct of its directors or of any person performing functions
similar to those performed by a director, shall, in respect to the
assets held in charitable trust, be governed by the standards of
conduct set forth in Article 3 (commencing with Section 5230) of
Chapter 2 of Part 2 for directors of nonprofit public benefit
corporations. This does not limit any additional requirements which
may be specifically set forth in this part regarding corporations
holding assets in charitable trust.
