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California And Delaware Corporate Law Differ In Many Respects, Including The Authority Of Committees

Both California and Delaware allow the formation of committees of the Board of Directors.  Both states also allow these committees to exercise the authority of the board, but with certain exceptions.  California, however, has far more exceptions than Delaware.  For example, California does not allow the board to delegate its authority with respect to the fixing of compensation of directors for board or committee service.  Below is a table that summarizes the statutory exceptions.  Note that the table is based on Delaware General Corporation Law Section 141(c)(2) which is applicable to corporations organized on or after July 1, 1996 (and those incorporated before that date if a majority of the whole board has adopted an election to be governed by paragraph (c)(2)).

Section 311 of the California Corporations Code generated a fair amount of comment.  I found it interesting that one commenter, Robert LaNoue, favored imposing tight restriction on the authority of committees because "the use of committees has been one of the more notable devices used to frustrate the purposes of cumulative voting".  Mr. LaNoue served as Acting Commissioner of Corporations in 1979 and 1980.

Statutory Exceptions to Committee Authority

California (§ 311)

Delaware (§ 141(c)(2))

The approval of any action for which the CGCL also requires shareholders’ approval or approval of the outstanding shares. Approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to the stockholders for approval.
Amendment or repeal of bylaws or the adoption of new bylaws Adopting, amending or repealing any bylaw.
The filling of vacancies on the board or in any committee.
The fixing of compensation of the directors for serving on the board or on any committee.
The amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable.
A distribution (§ 166), except at a rate, in a periodic amount or within a price range set forth in the articles or determined by the board.
The appointment of other committees of the board or the members thereof.
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30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
Partner at Allen Matkins
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