1. (a) Written Notice to Attorney General of Self-Dealing Transaction. Corporations Code section 7238 provides that where a mutual benefit corporation holds assets in charitable trust, the conduct of its directors shall be governed by the standards of conduct for directors of public benefit corporations, in respect to the assets held in charitable trust. Thus, Corporations Code section 7238 applies the provisions of section 5233 to self-dealing transactions by a mutual benefit corporation in respect to assets held in charitable trust.

   1. (1) A letter signed on behalf of the corporation by an authorized director or officer thereof, or by or on behalf of a director or officer of the corporation, setting forth a detailed description of the self-dealing transaction, the extent to which any director has a material financial interest in the self-dealing transaction, and all material facts concerning the self-dealing transaction. “Material facts” are defined in section 328, subdivision (c), of these regulations.
   2. (2) A copy of the corporation's current financial statement as of a date within ninety days preceding the filing of the notice or request, except to the extent already on file with the Registry of Charities and Fundraisers.
   3. (3) A copy of the articles of incorporation and amendments thereto, except to the extent already on file with the Registry of Charities and Fundraisers.

   Corporations Code section 5233, subdivision (e), provides that an action under section 5233, subdivision (c), seeking remedies for a self-dealing transaction must be filed within two years after written notice setting forth the material facts of the transaction and the director's interest is filed with the Attorney General in accordance with regulations adopted by the Attorney General.

   For purposes of sections 7238 and 5233, subdivision (e), a written notice of a self-dealing transaction shall be deemed filed with the Attorney General when the written notice of the self-dealing transaction is submitted in accordance with section 328, subdivision (a), of these regulations.

   The written notice of a self-dealing transaction to the Attorney General shall contain the following:

2. (b) Written Request for Attorney General's Approval of Self-Dealing Transaction. Corporations Code section 7238 provides that where a mutual benefit corporation holds assets in charitable trust, the conduct of its directors shall be governed by the standards of conduct for directors of public benefit corporations in respect to the assets held in charitable trust. Thus, Corporations Code section 7238 applies the provisions of section 5233 to self-dealing transactions by a mutual benefit corporation in respect to assets held in charitable trust.

   1. (1) A letter signed on behalf of the corporation by an authorized director or officer thereof, or by or on behalf of a director of the corporation, setting forth a detailed description of the self-dealing transaction, the extent to which any director has a material financial interest in the self-dealing transaction, and all material facts concerning the self-dealing transaction. “Material facts” are defined in section 328, subdivision (c), of these regulations.
   2. (2) A copy of the corporation's current financial statement as of a date within ninety days preceding the filing of the notice or request, except to the extent already on file with the Registry of Charities and Fundraisers.
   3. (3) A copy of the articles of incorporation and amendments thereto, except to the extent already on file with the Registry of Charities and Fundraisers.
   4. (4) A copy of the bylaws and amendments thereto, except to the extent already on file with the Registry of Charities and Fundraisers.
   5. (5) Copies of all minutes of meetings of the board of directors and committees of the board of directors that reflect any discussions or evaluations of the self-dealing transaction.
   6. (6) A letter signed by the interested director setting forth a description of the director's material financial interest in the self-dealing transaction, listing all material facts, as defined in section 328, subdivision (c), of these regulations, concerning the transaction, and all facts disclosed by the interested director to the board of directors concerning the transaction. (Note: Disclosure of this information in the corporation's letter, pursuant to subdivision (b)(1), may eliminate the need for the letter from the interested director to the extent the information in the interested director's letter would duplicate information in the corporation's letter.)
   7. (7) The Attorney General may require submission of additional information by the corporation and its directors in order to complete analysis of the self-dealing transaction.

   Corporations Code section 5233, subdivision (d), provides that no remedies shall be granted in any action for a self-dealing transaction if the Attorney General or the court has approved the transaction before or after it was consummated.

   A request for approval by the Attorney General of a self-dealing transaction shall be submitted in writing in accordance with section 328, subdivision (a), of these regulations.

   A request for approval by the Attorney General of a self-dealing transaction shall contain the following:

3. (c) Attorney General's Approval of Loans or Guaranties to a Director. Corporations Code section 7238 provides that where a mutual benefit corporation holds assets in charitable trust, the conduct of its directors shall be governed by the standards of conduct for directors of public benefit corporations in respect to the assets held in charitable trust. Thus, Corporations Code section 7238 applies the provisions of section 5236 to director or officer loans or guaranties by a mutual benefit corporation, if such loans or guaranties consist of, or are secured by, assets held in charitable trust.

   1. (1) A letter signed on behalf of the corporation by an authorized director or officer thereof, or by or on behalf of a director or officer of the corporation, setting forth a detailed description of the loan or guaranty and all material facts concerning the loan or guaranty. “Material facts” are defined in section 328, subdivision (c), of these regulations.
   2. (2) Copies of the loan or guaranty agreement, note and related security agreements.
   3. (3) A copy of the corporation's current financial statement as of a date within ninety days preceding the filing of the notice or request, except to the extent already on file with the Registry of Charities and Fundraisers.
   4. (4) A copy of the articles of incorporation and amendments thereto, except to the extent already on file with the Registry of Charities and Fundraisers.
   5. (5) A copy of the bylaws and amendments thereto, except to the extent already on file with the Registry of Charities and Fundraisers.
   6. (6) Copies of all minutes of meetings of the board of directors and committees of the board of directors that reflect any discussions or evaluations of the loan or guaranty.
   7. (7) A letter signed by the interested director setting forth a description of the director's material financial interest in the loan or guaranty, listing all material facts, as defined in section 328, subdivision (c), of these regulations, concerning the transaction and all facts disclosed by the interested director to the board of directors concerning the transaction. (Note: Disclosure of this information in the corporation's letter, pursuant to subdivision (c)(1), may eliminate the need for the letter from the interested director to the extent the information in the interested director's letter would duplicate information in the corporation's letter.)
   8. (8) The Attorney General may require submission of additional information by the corporation and its directors in order to complete an analysis of the loan or guaranty.

   Corporations Code section 5236 prohibits a public benefit corporation from making any loan or guaranty to any director or officer, unless approved by the Attorney General.

   For purposes of sections 7238 and 5236, a request for the Attorney General's approval of a loan or guaranty to a director or officer shall be submitted in writing in accordance with section 328, subdivision (a), of these regulations.

   The written request for Attorney General's approval of a loan or guaranty shall contain the following:

4. (d) Request for Attorney General's Ruling on Amendment of Corporate Articles of Incorporation. Corporations Code section 7820 provides that the Attorney General may, at the corporation's request, give rulings as to whether the Attorney General will or may oppose a proposed amendment to the articles of incorporation, as inconsistent with, or proscribed by, the requirement of a charitable trust.

   1. (1) A letter signed on behalf of the corporation by any officer or director thereof setting forth a detailed description of the proposed amendment to the articles of incorporation and all material facts concerning the amendment. Material facts shall include the reasons for the amendment, the benefit the amendment will confer upon the corporation, whether the board of directors has approved the amendment, and the criteria used by the board to evaluate and approve the amendment.
   2. (2) A copy of the corporation's current financial statement as of a date within ninety days preceding the filing of the notice or request, except to the extent already on file with the Registry of Charities and Fundraisers.
   3. (3) A copy of the articles of incorporation and amendments thereto, except to the extent already on file with the Registry of Charities and Fundraisers.
   4. (4) A copy of the bylaws and amendments thereto, except to the extent already on file with the Registry of Charities and Fundraisers.
   5. (5) Copies of all minutes of meetings of the board of directors and committees of the board of directors, that reflect any discussions or evaluations of the amendments to the articles of incorporation.
   6. (6) The Attorney General may require submission of additional information by the corporation and its directors in order to complete an analysis of the amendments to the articles of incorporation.

   For purposes of section 7820, a request for the Attorney General's ruling on a proposed amendment to the articles of incorporation shall be submitted in writing in accordance with section 328, subdivision (a), of these regulations.

   The written request for the Attorney General's ruling shall contain the following:

5. (e) Giving Notice to the Attorney General; Attorney General's Involvement. The following sections of the Corporations Code provide for the involvement of the Attorney General, and, where appropriate, for notice to the Attorney General, in certain actions and proceedings by or relating to a mutual benefit corporation:

   Corporations Code section 7142, subdivision (a) (action for breach of charitable trust)

   Corporations Code section 7223, subdivision (c) (action to remove director for fraud)

   Corporations Code section 7225, subdivision (c) (appointment of provisional director where board deadlocked)

   Corporations Code section 5233 (through section 7238) (self-dealing)

   Corporations Code section 5236 (through section 7238) (loan to a director or officer)

   Corporations Code section 5238, subdivision (c)(3) (through section 7238) (indemnity)

   Corporations Code section 7616, subdivision (b) (action to determine validity of election)

   Corporations Code section 7913 (disposal or sale of assets)

   Corporations Code section 8010 (merger with public benefit, religious corporation)

   Corporations Code sections 8510, subdivision (e), 8611, subdivision (a), 8612, subdivision (a), 8613, subdivision (c), 8617, subdivision (b), 8716, subdivisions (b) and (c) (dissolution)

   Corporations Code section 8723, subdivision (b) (suit against corporation after dissolution)

   Communications and notices to the Attorney General pursuant to the foregoing sections shall be submitted in writing in accordance with section 328, subdivision (a), of these regulations.

   In addition to the information required in the Corporations Code and in these regulations for communications and notices to the Attorney General under specific circumstances, notice to the Attorney General pursuant to the foregoing sections of the Corporations Code shall contain written information sufficient to enable the Attorney General to review and evaluate the action or proceeding, the time, date and place at which the action or proceeding will occur, or has occurred, and a statement indicating whether an approval, ruling, waiver or other action by the Attorney General is sought.

Note: Authority cited: Section 7820, Corporations Code; and Section 12598, Government Code. Reference: Sections 7142, 7223, 7225, 7238, 7616, 7913, 8010, 8510, 8611, 8612, 8613, 8617, 8716 and 8723, Corporations Code.

History

1. Renumbering of section 999.3 to new section 330, including amendment of section and Note, filed 3-26-2024; operative 3-26-2024 pursuant to Government Code section 11343.4(b)(3) (Register 2024, No. 13).