California 2011-2012 Regular Session Status: Enacted

AB 571 — Corporations: distributions.

Last action — Chaptered by Secretary of State - Chapter 203, Statutes of 2011.

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  1. ✓
    Introduced
  2. ✓
    In Committee
  3. ✓
    Passed Assembly
  4. ✓
    Passed Senate
  5. ✓
    To Executive
  6. 6
    Enacted

This bill has been enacted into law. Introduced February 16, 2011. Enacted.

Prognosis

Likely to advance 74% · moderate confidence

Where this bill stands today.

Odds of enactment

High

How often bills like it became law.

  • Enacted

    Current position in the legislative process.

  • 3 sponsors

    1 primary, 2 co-sponsors signed on.

  • Cleared a recorded vote

    Passed 5 recorded votes so far.

Prognosis reads this bill's own signals — stage, sponsorship breadth, committee status, recorded votes and cross-state momentum. Odds come from a model trained on which bills have become law.

Summary

Existing law provides for the formation and governance of corporations. Existing law allows a corporation to make a distribution of cash or property to shareholders, including a dividend or a repurchase or redemption of shares, only if either the corporation has retained earnings prior to the distribution equal to or exceeding the amount of the distribution or the corporation can satisfy specified balance sheet test and liquidity requirements after giving effect to the distribution, and the distribution will not render the corporation insolvent. This bill would allow a corporation to distribute cash or property to shareholders, including a dividend or repurchase or redemption of shares, if the amount of the corporation's retained earnings prior to the distribution equals or exceeds the sum of the distribution and the cumulative dividends in arrears on certain preferred stock and, after giving effect to the distribution, the value of the corporation's assets equals or exceeds the sum of its liabilities and the liquidation preference of any preferred stock, except as specified. The bill would provide that a board of directors may base a determination that the value of its assets exceeds the amount of liabilities on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances, a fair valuation, or any other method that is reasonable under the circumstances. Existing law provides that a shareholder who knowingly receives an improper distribution is liable to the corporation's creditors and holders of preferred shares, as specified, and that those parties may bring suit in the name of the corporation to enforce those liabilities. This bill would provide that holders of shares having preferential rights with respect to cumulative dividends in arrears shall not have the right to bring suit with respect to an improper distribution unless the amounts owed those holders, as specified, is greater than zero. The bill would also provide that a cause of action with respect to an obligation to return an improper distribution shall be extinguished unless brought within 4 years of the distribution date. Existing law requires a corporation to provide notice, as specified, to shareholders, with respect to a dividend other than one chargeable to retained earnings, stating that the dividend is being made from a source other than retained earnings, and stating the accounting treatment of the dividend. This bill would eliminate that requirement. The bill would make technical, conforming amendments.

Bill Text

Action History

  1. Chaptered by Secretary of State - Chapter 203, Statutes of 2011.

  2. Approved by the Governor.

  3. Enrolled and presented to the Governor at 11:30 a.m.

  4. Senate amendments concurred in. To Engrossing and Enrolling. (Ayes 72. Noes 0. Page 2441.).

  5. In Assembly. Concurrence in Senate amendments pending. May be considered on or after August 12 pursuant to Assembly Rule 77.

  6. Read third time. Passed. Ordered to the Assembly. (Ayes 37. Noes 0. Page 1857.).

  7. Read second time. Ordered to third reading.

  8. Read third time and amended. Ordered to second reading.

  9. Read second time. Ordered to third reading.

  10. From committee: Do pass. (Ayes 6. Noes 0.) (June 29).

  11. In committee: Hearing postponed by committee.

  12. Referred to Com. on B. & F.I.

  13. In Senate. Read first time. To Com. on RLS. for assignment.

  14. Read third time. Passed. Ordered to the Senate. (Ayes 74. Noes 0. Page 1281.)

  15. Read second time. Ordered to consent calendar.

  16. From committee: Do pass. To consent calendar. (Ayes 11. Noes 0.) (May 2).

  17. Re-referred to Com. on B. & F.

  18. From committee chair, with author's amendments: Amend, and re-refer to Com. on B. & F. Read second time and amended.

  19. Referred to Com. on B. & F.

  20. From printer. May be heard in committee March 19.

  21. Read first time. To print.

Sponsors

  • Garrick · Cosponsor
  • Hagman · Primary
  • Mansoor · Cosponsor

Sponsorship breakdown

Export CSV (upgrade) →

1 sponsors · 2 co-sponsors · 119 not signed on

Sponsors (1)

  • Hagman

Co-sponsors (2)

  • Garrick
  • Mansoor

Not signed on (119)

119 members have not signed on to this bill.

Show all 119 →

"Not signed on" means a member has not sponsored or co-sponsored this bill — it does not imply opposition. Members flagged Voted No have a recorded No vote on this bill.

Whip count is in markup. Polling the chamber and every recorded vote this session. Only the first open is slow. It’s instant for you after this. Calling the roll · Tallying · Engrossing

Votes

AB 571 HAGMAN Concurrence in Senate Amendments

Passed 72 Yea · 0 Nay · 8 Other
Party YeaNayPresentNot Voting
Unaffiliated 69008
Republican 2000
Democratic 1000
Total 72008
% of votes cast 90%0%0%10%
How each member voted (80)
Member Party Vote
Gorell — Not Voting
Halderman — Yea
Carter — Yea
Olsen — Yea
Fong — Yea
Butler — Yea
Furutani — Yea
Galgiani — Yea
Gatto — Yea
Gordon — Yea
Campos — Yea
Portantino — Yea
John A. Pérez — Yea
Mitchell — Yea
Hagman — Yea
Fletcher — Yea
Hall — Yea
Harkey — Yea
Cedillo — Yea
Hill — Not Voting
Atkins — Yea
Huber — Yea
Huffman — Yea
Bonilla — Not Voting
Allen — Not Voting
Beall — Yea
Block — Yea
Chesbro — Yea
Conway — Yea
Davis — Yea
Donnelly — Yea
Jeffries — Yea
Knight — Yea
Logue — Yea
Mendoza — Yea
Monning — Yea
Morrell — Yea
Nielsen — Yea
Norby — Yea
Pan — Yea
Silva — Yea
Smyth — Not Voting
Solorio — Yea
Torres — Not Voting
Valadao — Not Voting
Wieckowski — Yea
Williams — Yea
Achadjian — Yea
Alejo — Yea
Ammiano — Yea
Blumenfield — Yea
Bradford — Yea
Brownley — Yea
Buchanan — Yea
Hayashi — Yea
Hueso — Yea
Lara — Not Voting
Ma — Yea
Mansoor — Yea
Miller — Yea
Nestande — Yea
Perea — Yea
Skinner — Yea
Swanson — Yea
Wagner — Yea
Cook — Yea
Eng — Yea
Feuer — Yea
Dickinson — Yea
Fuentes — Yea
Garrick — Yea
Yamada — Yea
Beth Gaines — Yea
Bill Berryhill — Yea
Bonnie Lowenthal — Yea
Roger Hernández — Yea
V. Manuel Pérez — Yea
Calderon, Lisa Democratic Yea
Grove, Shannon Republican Yea
Jones, Brian W. Republican Yea

Official roll call →

3rd Reading AB571 Hagman By Walters

Passed 37 Yea · 0 Nay · 3 Other
Party YeaNayPresentNot Voting
Unaffiliated 34003
Republican 1000
Democratic 2000
Total 37003
% of votes cast 93%0%0%8%
How each member voted (40)
Member Party Vote
Yee — Yea
Wyland — Yea
Runner — Yea
Lowenthal — Yea
Cannella — Yea
De León — Yea
Fuller — Yea
Negrete McLeod — Yea
Hancock — Yea
Rubio — Yea
Hernandez — Yea
Corbett — Yea
Huff — Yea
Kehoe — Yea
Dutton — Yea
Anderson — Yea
Blakeslee — Yea
Leno — Yea
Lieu — Yea
Liu — Yea
Pavley — Yea
Price — Yea
Simitian — Yea
Vargas — Yea
Wolk — Not Voting
Alquist — Yea
Harman — Not Voting
Steinberg — Yea
Walters — Yea
Wright — Not Voting
Emmerson — Yea
Correa — Yea
Evans — Yea
DeSaulnier — Yea
Beth Gaines — Yea
Bill Berryhill — Yea
La Malfa — Yea
Calderon, Lisa Democratic Yea
Padilla, Stephen C. Democratic Yea
Strickland, Tony Republican Yea

Official roll call →

Do pass.

Passed 6 Yea · 0 Nay · 1 Other
Party YeaNayPresentNot Voting
Unaffiliated 5001
Democratic 1000
Total 6001
% of votes cast 86%0%0%14%
How each member voted (7)
Member Party Vote
Evans — Not Voting
Blakeslee — Yea
Vargas — Yea
Walters — Yea
Kehoe — Yea
Liu — Yea
Padilla, Stephen C. Democratic Yea

Official roll call →

AB 571 HAGMAN Consent Calendar Second Day

Passed 74 Yea · 0 Nay · 5 Other
Party YeaNayPresentNot Voting
Unaffiliated 69005
Republican 2000
Democratic 3000
Total 74005
% of votes cast 94%0%0%6%
How each member voted (79)
Member Party Vote
Gorell — Not Voting
Hagman — Yea
Yamada — Yea
Butler — Not Voting
Portantino — Yea
John A. Pérez — Yea
Mitchell — Yea
Fuentes — Yea
Fletcher — Yea
Galgiani — Yea
Gatto — Yea
Campos — Yea
Gordon — Yea
Bonilla — Yea
Atkins — Yea
Halderman — Yea
Hall — Yea
Hayashi — Yea
Block — Yea
Chesbro — Yea
Donnelly — Yea
Hueso — Yea
Jeffries — Yea
Lara — Yea
Mendoza — Yea
Miller — Yea
Monning — Yea
Nestande — Yea
Nielsen — Yea
Pan — Yea
Silva — Yea
Smyth — Not Voting
Solorio — Yea
Torres — Yea
Valadao — Yea
Wieckowski — Yea
Carter — Yea
Furutani — Yea
Cedillo — Yea
Alejo — Yea
Conway — Yea
Cook — Yea
Hill — Yea
Huber — Yea
Logue — Yea
Perea — Yea
Swanson — Yea
Wagner — Yea
Achadjian — Yea
Ammiano — Yea
Beall — Yea
Blumenfield — Yea
Bradford — Yea
Brownley — Yea
Buchanan — Yea
Harkey — Yea
Huffman — Yea
Knight — Yea
Ma — Yea
Mansoor — Not Voting
Morrell — Yea
Norby — Yea
Olsen — Yea
Skinner — Yea
Williams — Yea
Eng — Yea
Feuer — Yea
Davis — Yea
Dickinson — Yea
Garrick — Not Voting
Bill Berryhill — Yea
Bonnie Lowenthal — Yea
Roger Hernández — Yea
V. Manuel Pérez — Yea
Allen, Benjamin Democratic Yea
Calderon, Lisa Democratic Yea
Fong, Mike Democratic Yea
Grove, Shannon Republican Yea
Jones, Brian W. Republican Yea

Official roll call →

Do pass, to Consent Calendar.

Passed 11 Yea · 0 Nay · 1 Other
Party YeaNayPresentNot Voting
Unaffiliated 10000
Democratic 1001
Total 11001
% of votes cast 92%0%0%8%
How each member voted (12)
Member Party Vote
Fletcher — Yea
Lara — Yea
Morrell — Yea
Perea — Yea
Torres — Yea
Achadjian — Yea
Harkey — Yea
Eng — Yea
Gatto — Yea
Roger Hernández — Yea
Calderon, Lisa Democratic Not Voting
Fong, Mike Democratic Yea

Official roll call →

Subjects

finance
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Frequently asked questions

What does AB 571 do?
Existing law provides for the formation and governance of corporations. Existing law allows a corporation to make a distribution of cash or property to shareholders, including a dividend or a repurchase or redemption of shares, only if either the corporation has retained earnings prior to the distribution equal to or exceeding the amount of the distribution or the corporation can satisfy specified balance sheet test and liquidity requirements after giving effect to the distribution, and the distribution will not render the corporation insolvent. This bill would allow a corporation to distribute cash or property to shareholders, including a dividend or repurchase or redemption of shares, if the amount of the corporation's retained earnings prior to the distribution equals or exceeds the sum of the distribution and the cumulative dividends in arrears on certain preferred stock and, after giving effect to the distribution, the value of the corporation's assets equals or exceeds the sum of its liabilities and the liquidation preference of any preferred stock, except as specified. The bill would provide that a board of directors may base a determination that the value of its assets exceeds the amount of liabilities on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances, a fair valuation, or any other method that is reasonable under the circumstances. Existing law provides that a shareholder who knowingly receives an improper distribution is liable to the corporation's creditors and holders of preferred shares, as specified, and that those parties may bring suit in the name of the corporation to enforce those liabilities. This bill would provide that holders of shares having preferential rights with respect to cumulative dividends in arrears shall not have the right to bring suit with respect to an improper distribution unless the amounts owed those holders, as specified, is greater than zero. The bill would also provide that a cause of action with respect to an obligation to return an improper distribution shall be extinguished unless brought within 4 years of the distribution date. Existing law requires a corporation to provide notice, as specified, to shareholders, with respect to a dividend other than one chargeable to retained earnings, stating that the dividend is being made from a source other than retained earnings, and stating the accounting treatment of the dividend. This bill would eliminate that requirement. The bill would make technical, conforming amendments.
Who sponsors AB 571?
AB 571 is sponsored by Garrick, Hagman, and Mansoor.
What is the current status of AB 571?
This bill has been enacted into law. Introduced February 16, 2011. Enacted.
Where can I track AB 571?
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