ARTICLE
22 October 2021

A Corporation May Get Religion, But Not Easily

AM
Allen Matkins Leck Gamble Mallory & Natsis LLP

Contributor

Allen Matkins Leck Gamble Mallory & Natsis LLP logo
Allen Matkins, founded in 1977, is a California-based law firm with more than 200 attorneys in four major metropolitan areas of California: Los Angeles, Orange County, San Diego, and San Francisco. The firm's areas of focus include real estate, construction, land use, environmental and natural resources, corporate and securities, real estate and commercial finance, bankruptcy, restructurings and creditors' rights, joint ventures, and tax; labor and employment, and trials, litigation, risk management, and alternative dispute resolution in all of these areas. For more information about Allen Matkins please visit www.allenmatkins.com.
Section 206 of the California Corporations Code provides that a corporation organized under the General Corporation Law may engage in any "business activity"...
United States California Corporate/Commercial Law

Section 206 of the California Corporations Code provides that a corporation organized under the General Corporation Law may engage in any "business activity", subject to any limitation contained in its articles of incorporation and compliance with any other applicable laws.   The idea that corporations formed under the GCL are limited to business activities is reinforced by Section 207 which provides that "a corporation shall have all of the powers of a natural person in carrying out its business activities . . ."  (emphasis added).   What if a corporation "gets religion" and wishes to operate exclusively for religious purposes?

California has enacted a separate law allowing for the formation of nonprofit religious corporations.   Cal. Corp. Code § 9110 et seq.    While other avenues may be available, Section 911 specifically authorizes a corporation to change its status to a nonprofit religious corporation, among other types of entities.   The procedure involves neither a merger nor a conversion.  Rather, the change of status is effected by simply amending the corporation's articles of incorporation.  That may be easier said than done because the statute requires approval by all of the outstanding shares of all classes regardless of limitations or restrictions upon the voting rights.   While the GCL provides a pathway for businesses to "get religion" the way is not easy and I suspect seldom trod.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More