Don’t Go Out On A Limb And Seek Enforcement Of These Voting Agreements

California has a number of varieties of nonprofit companies.  The “Big Three” are the general public profit company, mutual profit company and spiritual company.  The statutes relevant to those three entities are comparable in most respects however there are important variations.  One such distinction pertains to voting agreements and voting belief agreements.

Companies Code Part 5614 prohibits, with out exception, the enforcement of a voting settlement or voting belief settlement within the case of a public profit company:

A voting settlement or voting belief settlement entered into by a member or members of an organization shall not be enforced.

This ban applies to agreements entered into by “members”, which within the case of a public profit company is outlined in Part 5056 as any one that pursuant to a particular provision within the company’s articles or bylaws has the precise to vote for the election of director(s), on a disposition of all or considerably the entire company’s belongings, on a merger, on a dissolution, or on adjustments to the articles or bylaws.  Many public profit companies check with affiliated individuals as “members” however these so-called members will not be members for functions of Part 5056.  Cal. Corp. Code § 5332.

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