Incorporating Your Club Requires No Conversion

Often a club or other  will begin informally without formal incorporation.  In California, such an unincorporated club or group, whether organized for profit or not, is classified as an "unincorporated association" and it will be governed by California's Unincorporated Association Law.  Cal. Corp. Code § 18000 et seq.  If the club's primary common purpose is other than to operate a business for profit, it is defined as a "nonprofit association" under the UAL.  Cal. Corp. Code § 18020(a).   While the UAL provides some rudimentary provisions governing property ownership and liability, some clubs may eventually desire a more formal corporate structure.

Sections 5121, 7121, and 9121 of the Nonprofit Corporation Law allow existing unincorporated association to change its status to that of a corporation.  All that is required is "proper authorization" for that change "in accordance with its rules and procedures" and the filing articles of incorporation.  The articles must be accompanied by a verified statement of any two officers or governing board members of the association stating that the incorporation has been approved "in accordance with its rules and procedures".  "Aye, there's the rub".  It is unlikely that an unincorporated association will have rules and procedures specifying how it may be incorporated.  The UAL does provide that if an association's governing principles do not provide a procedure to amend the association's governing documents, the governing documents may be amended by a vote of the members.  Cal. Corp. Code § 18340.  Assuming this statute applies to incorporation pursuant to the Nonprofit Corporation Law, the statute fails to specify the quantum of vote required.  Is it a majority of the members?  A majority of the members at a meeting?  Something else?  Given this uncertainty, some may balk at signing such a verification.

Judge Rules AB 979 Unconstitutional

Because AB 979 (Holden) imposes arbitrary racial, ethnic and sexual orientation quotas, its constitutional infirmity was obvious.  Yet, I was the only person to testify before legislature that the bill was "divisive, arbitrary and unconstitutional".  As I reported late on Friday last, California Superior Court Judge Terry Green has now ruled AB 979 unconstitutional.  Crest v. Padilla (No. 20ST-CV-37513).