California Corporations Code 12375 – (a) Unless prohibited by the articles or bylaws, a corporation …
(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.
Terms Used In California Corporations Code 12375
- Corporation: as used in this part means a corporation which is organized under, or subject to this part, including a central organization. See California Corporations Code 12232
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Directors: means natural persons, designated in the articles or bylaws or elected by the incorporators, and their successors and natural persons designated, elected, or appointed by any other name or title to act as members of the governing body of the corporation. See California Corporations Code 12233
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Statute: A law passed by a legislature.
(2) Prior to consummating the transaction or any part thereof, the loan or guaranty is either:
(A) Approved by the members (Section 12224), without counting the vote of the director or officer, if a member.
(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, for any expenses reasonably anticipated to be incurred in the performance of the duties of the director or officer, 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.
(Repealed and added by Stats. 1983, Ch. 792, Sec. 17.)