A Corporation May Get Religion, But Not Easily

Allen Matkins
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Allen Matkins

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.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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