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California Approves New Procedure to Ratify Noncompliant Corporate Actions

December 30, 2022

California Laws Governing Business Entities Annotated

California corporations now have a mechanism to retroactively remedy defective corporate actions, after lawmakers approved new procedures to allow corporations to petition the superior court to ratify corporate acts not in compliance (or purportedly not in compliance).

The new legislation, similar to Delaware’s Section 204 of the DGCL enacted in 2014, allows corporations to correct mistakes that could have severe legal and financial consequences for a corporation and its shareholders.

A corporation seeking to ratify a corporate act deemed voidable or void must first get approval from the board of directors and then promptly notify shareholders. If the

If the corporate action to be ratified relates to the election of the initial directors, a majority of the corporation's existing directors must approve of the ratification by adopting resolutions that set forth the name of initial directors, the date they were elected, and a statement that the ratification is approved.

No corporate action may be ratified by a dissolved or foreign corporation, according to the new legislation.

The new State law is one of more than 200 sections of the state’s Corporations Code and related codes enacted or amended during the 2022 legislative session. Other changes include continued authorization of remote shareholder meetings, changes to laws regarding conversion, and new restrictions on franchise agreements. 

The changes are captured in the 2023 Edition of California Laws Governing Business Entities Annotated, releasing this month from CSCPublishing in collaboration with LexisNexis.

The 2023 Edition includes a Table of Sections Affected listing all legislative changes, as well as Blackline Amendment Notes that indicate exactly how the laws have changed. Legislative Analysis summarizes the most important changes to the law.

More than three dozen new case notes from state and federal courts interpreting the law have been included in this edition, as well as five full-text cases discussing the latest legal developments regarding alter ego doctrine, inspection of documents, derivative suits, buy-out proceedings, and dissolution of an LLC. New cases are listed in the Table of New Annotations and marked with gray bars in the body of the book.

Readers also get online access to more than 190 state and county forms for incorporation/formation, qualification, mergers, dissolution, and name reservation for all business entity types via the LexisNexis® Bookstore download center. A listing of forms and contact information for the California Secretary of State are included in the book’s appendix.

There’s also an up-to-date California Fee Schedule showing required fees for business filings with the Secretary of State.

California Laws Governing Business Entities Annotated is available as a softbound book or as an ebook, compatible with dedicated e-reader devices, computers, tablets and smartphones that use e-reader software or applications. It’s also available on the LexisNexis Digital Library.

To learn more about the 2023 Edition of California Laws Governing Business Entities Annotated, call 1.800.533.1637 or visit us online at www.lexisnexis.com/csc.