California Corporations code section to know
118. Any reference in this division to the time a notice is given
or sent means, unless otherwise expressly provided, (a) the time a
written notice by mail is deposited in the United States mails,
postage prepaid; or (b) the time any other written notice, including
facsimile, telegram, or electronic mail message, is personally
delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice
by electronic means, to the recipient; or (c) the time any oral
notice is communicated, in person or by telephone, including a voice
messaging system or other system or technology designed to record and
communicate messages, or wireless, to the recipient, including the
recipient's designated voice mailbox or address on such a system, or
to a person at the office of the recipient who the person giving the
notice has reason to believe will promptly communicate it to the
recipient. [notice can be given by electronic means]
152. "Approved by (or approval of) the outstanding shares" means
approved by the affirmative vote of a majority of the outstanding
shares entitled to vote. Such approval shall include the affirmative
vote of a majority of the outstanding shares of each class or series
entitled, by any provision of the articles or of this division, to
vote as a class or series on the subject matter being voted upon and
shall also include the affirmative vote of such greater proportion
(including all) of the outstanding shares of any class or series if
such greater proportion is required by the articles or this division.
153. "Approved by (or approval of) the shareholders" means approved
or ratified by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute at least a
majority of the required quorum) or by the written consent of
shareholders (Section 603) or by the affirmative vote or written
consent of such greater proportion (including all) of the shares of
any class or series as may be provided in the articles or in this
division for all or any specified shareholder action.
200. (a) One or more natural persons, partnerships, associations or
corporations, domestic or foreign, may form a corporation under this
division by executing and filing articles of incorporation.
(b) If initial directors are named in the articles, each director
named in the articles shall sign and acknowledge the articles; if
initial directors are not named in the articles, the articles shall
be signed by one or more persons described in subdivision (a) who
thereupon are the incorporators of the corporation.
(c) The corporate existence begins upon the filing of the articles
and continues perpetually, unless otherwise expressly provided by
law or in the articles.
202. The articles of incorporation shall set forth:
(a) The name of the corporation; provided, however, that in order
for the corporation to be subject to the provisions of this division
applicable to a close corporation (Section 158), the name of the
corporation must contain the word "corporation", "incorporated" or
"limited" or an abbreviation of one of such words.
(b) (1) The applicable one of the following statements:
(i) The purpose of the corporation is to engage in any lawful act
or activity for which a corporation may be organized under the
General Corporation Law of California other than the banking
business, the trust company business or the practice of a profession
permitted to be incorporated by the California Corporations Code; or
(ii) The purpose of the corporation is to engage in the profession
of ____ (with the insertion of a profession permitted to be
incorporated by the California Corporations Code) and any other
lawful activities (other than the banking or trust company business)
not prohibited to a corporation engaging in such profession by
applicable laws and regulations.
(2) In case the corporation is a corporation subject to the
Banking Law, the articles shall set forth a statement of purpose
which is prescribed in the applicable provision of the Banking Law.
(3) In case the corporation is a corporation subject to the
Insurance Code as an insurer, the articles shall additionally state
that the business of the corporation is to be an insurer.
The articles shall not set forth any further or additional
statement with respect to the purposes or powers of the corporation,
except by way of limitation or except as expressly required by any
law of this state other than this division or any federal or other
statute or regulation (including the Internal Revenue Code and
regulations thereunder as a condition of acquiring or maintaining a
particular status for tax purposes).
(c) The name and address in this state of the corporation's
initial agent for service of process in accordance with subdivision
(b) of Section 1502.
(d) If the corporation is authorized to issue only one class of
shares, the total number of shares which the corporation is
authorized to issue.
(e) If the corporation is authorized to issue more than one class
of shares, or if any class of shares is to have two or more series:
(1) The total number of shares of each class the corporation is
authorized to issue, and the total number of shares of each series
which the corporation is authorized to issue or that the board is
authorized to fix the number of shares of any such series;
(2) The designation of each class, and the designation of each
series or that the board may determine the designation of any such
(3) The rights, preferences, privileges and restrictions granted
to or imposed upon the respective classes or series of shares or the
holders thereof, or that the board, within any limits and
restrictions stated, may determine or alter the rights, preferences,
privileges and restrictions granted to or imposed upon any wholly
unissued class of shares or any wholly unissued series of any class
of shares. As to any series the number of shares of which is
authorized to be fixed by the board, the articles may also authorize
the board, within the limits and restrictions stated therein or
stated in any resolution or resolutions of the board originally
fixing the number of shares constituting any series, to increase or
decrease (but not below the number of shares of such series then
outstanding) the number of shares of any such series subsequent to
the issue of shares of that series. In case the number of shares of
any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption
of the resolution originally fixing the number of shares of such
207. Subject to any limitations contained in the articles and to
compliance with other provisions of this division and any other
applicable laws, a corporation shall have all of the powers of a
natural person in carrying out its business activities, including,
without limitation, the power to:
(a) Adopt, use and at will alter a corporate seal, but failure to
affix a seal does not affect the validity of any instrument.
(b) Adopt, amend and repeal bylaws.
(c) Qualify to do business in any other state, territory,
dependency or foreign country.
(d) Subject to the provisions of Section 510, issue, purchase,
redeem, receive, take or otherwise acquire, own, hold, sell, lend,
exchange, transfer or otherwise dispose of, pledge, use and otherwise
deal in and with its own shares, bonds, debentures and other
(e) Make donations, regardless of specific corporate benefit, for
the public welfare or for community fund, hospital, charitable,
educational, scientific, civic or similar purposes.
(f) Pay pensions, and establish and carry out pension,
profit-sharing, share bonus, share purchase, share option, savings,
thrift and other retirement, incentive and benefit plans, trusts and
provisions for any or all of the directors, officers and employees of
the corporation or any of its subsidiary or affiliated corporations,
and to indemnify and purchase and maintain insurance on behalf of
any fiduciary of such plans, trusts or provisions.
(g) Subject to the provisions of Section 315, assume obligations,
enter into contracts, including contracts of guaranty or suretyship,
incur liabilities, borrow and lend money and otherwise use its
credit, and secure any of its obligations, contracts or liabilities
by mortgage, pledge or other encumbrance of all or any part of its
property, franchises and income.
(h) Participate with others in any partnership, joint venture or
other association, transaction or arrangement of any kind, whether or
not such participation involves sharing or delegation of control
with or to others.
208. (a) No limitation upon the business, purposes or powers of the
corporation or upon the powers of the shareholders, officers or
directors, or the manner of exercise of such powers, contained in or
implied by the articles or by Chapters 18, 19 and 20 or by any
shareholders' agreement shall be asserted as between the corporation
or any shareholder and any third person, except in a proceeding (1)
by a shareholder or the state to enjoin the doing or continuation of
unauthorized business by the corporation or its officers, or both, in
cases where third parties have not acquired rights thereby, or (2)
to dissolve the corporation or (3) by the corporation or by a
shareholder suing in a representative suit against the officers or
directors of the corporation for violation of their authority.
(b) Any contract or conveyance made in the name of a corporation
which is authorized or ratified by the board, or is done within the
scope of the authority, actual or apparent, conferred by the board or
within the agency power of the officer executing it, except as the
board's authority is limited by law other than this division, binds
the corporation, and the corporation acquires rights thereunder,
whether the contract is executed or wholly or in part executory.
(c) This section applies to contracts and conveyances made by
foreign corporations in this state and to all conveyances by foreign
corporations of real property situated in this state.
212. (a) The bylaws shall set forth (unless such provision is
contained in the articles, in which case it may only be changed by an
amendment of the articles) the number of directors of the
corporation; or that the number of directors shall be not less than a
stated minimum nor more than a stated maximum (which in no case
shall be greater than two times the stated minimum minus one), with
the exact number of directors to be fixed, within the limits
specified, by approval of the board or the shareholders (Section 153)
in the manner provided in the bylaws, subject to paragraph (5) of
subdivision (a) of Section 204. The number or minimum number of
directors shall not be less than three; provided, however, that (1)
before shares are issued, the number may be one, (2) before shares
are issued, the number may be two, (3) so long as the corporation has
only one shareholder, the number may be one, (4) so long as the
corporation has only one shareholder, the number may be two, and (5)
so long as the corporation has only two shareholders, the number may
be two. After the issuance of shares, a bylaw specifying or changing
a fixed number of directors or the maximum or minimum number or
changing from a fixed to a variable board or vice versa may only be
adopted by approval of the outstanding shares (Section 152);
provided, however, that a bylaw or amendment of the articles reducing
the fixed number or the minimum number of directors to a number less
than five cannot be adopted if the votes cast against its adoption
at a meeting or the shares not consenting in the case of action by
written consent are equal to more than 162/3 percent of the
outstanding shares entitled to vote.
(b) The bylaws may contain any provision, not in conflict with law
or the articles for the management of the business and for the
conduct of the affairs of the corporation, including but not limited
(1) Any provision referred to in subdivision (b), (c) or (d) of
(2) The time, place and manner of calling, conducting and giving
notice of shareholders', directors' and committee meetings.
(3) The manner of execution, revocation and use of proxies.
(4) The qualifications, duties and compensation of directors; the
time of their annual election; and the requirements of a quorum for
directors' and committee meetings.
(5) The appointment and authority of committees of the board.
(6) The appointment, duties, compensation and tenure of officers.
(7) The mode of determination of holders of record of its shares.
(8) The making of annual reports and financial statements to the
300. (a) Subject to the provisions of this division and any
limitations in the articles relating to action required to be
approved by the shareholders (Section 153) or by the outstanding
shares (Section 152), or by a less than majority vote of a class or
series of preferred shares (Section 402.5), the business and affairs
of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board. [this makes it very clear that it is the BOD which manages the corporation.] The board may
delegate the management of the day-to-day operation of the business
of the corporation to a management company or other person provided
that the business and affairs of the corporation shall be managed and
all corporate powers shall be exercised under the ultimate direction
of the board.
(b) Notwithstanding subdivision (a) or any other provision of this
division, but subject to subdivision (c), no shareholders'
agreement, which relates to any phase of the affairs of a close
corporation, including but not limited to management of its business,
division of its profits or distribution of its assets on
liquidation, shall be invalid as between the parties thereto on the
ground that it so relates to the conduct of the affairs of the
corporation as to interfere with the discretion of the board or that
it is an attempt to treat the corporation as if it were a partnership
or to arrange their relationships in a manner that would be
appropriate only between partners. A transferee of shares covered by
such an agreement which is filed with the secretary of the
corporation for inspection by any prospective purchaser of shares,
who has actual knowledge thereof or notice thereof by a notation on
the certificate pursuant to Section 418, is bound by its provisions
and is a party thereto for the purposes of subdivision (d). Original
issuance of shares by the corporation to a new shareholder who does
not become a party to the agreement terminates the agreement, except
that if the agreement so provides it shall continue to the extent it
is enforceable apart from this subdivision. The agreement may not be
modified, extended or revoked without the consent of such a
transferee, subject to any provision of the agreement permitting
modification, extension or revocation by less than unanimous
agreement of the parties. A transferor of shares covered by such an
agreement ceases to be a party thereto upon ceasing to be a
shareholder of the corporation unless the transferor is a party
thereto other than as a shareholder. An agreement made pursuant to
this subdivision shall terminate when the corporation ceases to be a
close corporation, except that if the agreement so provides it shall
continue to the extent it is enforceable apart from this subdivision.
This subdivision does not apply to an agreement authorized by
subdivision (a) of Section 706.
(c) No agreement entered into pursuant to subdivision (b) may
alter or waive any of the provisions of Sections 158, 417, 418, 500,
501, and 1111, subdivision (e) of Section 1201, Sections 2009, 2010,
and 2011, or of Chapters 15 (commencing with Section 1500), 16
(commencing with Section 1600), 18 (commencing with Section 1800),
and 22 (commencing with Section 2200). All other provisions of this
division may be altered or waived as between the parties thereto in a
shareholders' agreement, except the required filing of any document
with the Secretary of State.
(d) An agreement of the type referred to in subdivision (b) shall,
to the extent and so long as the discretion or powers of the board
in its management of corporate affairs is controlled by such
agreement, impose upon each shareholder who is a party thereto
liability for managerial acts performed or omitted by such person
pursuant thereto that is otherwise imposed by this division upon
directors, and the directors shall be relieved to that extent from
(e) The failure of a close corporation to observe corporate
formalities relating to meetings of directors or shareholders in
connection with the management of its affairs, pursuant to an
agreement authorized by subdivision (b), shall not be considered a
factor tending to establish that the shareholders have personal
liability for corporate obligations.
307. notice requirements
600. (a) Meetings of shareholders may be held at such place within
or without this state as may be stated in or fixed in accordance with
the bylaws. If no other place is stated or so fixed, shareholder
meetings shall be held at the principal executive office of the
(b) An annual meeting of shareholders shall be held for the
election of directors on a date and at a time stated in or fixed in
accordance with the bylaws. However, if the corporation is a
regulated management company, as defined in Section 23701m of the
Revenue and Taxation Code, a meeting of shareholders shall be held as
required by the Federal Investment Company Act of 1940 (15 U.S.C.
Sec. 80a-1, et seq.). Any other proper business may be transacted at
the annual meeting.
(c) If there is a failure to hold the annual meeting for a period
of 60 days after the date designated therefor or, if no date has been
designated, for a period of 15 months after the organization of the
corporation or after its last annual meeting, the superior court of
the proper county may summarily order a meeting to be held upon the
application of any shareholder after notice to the corporation giving
it an opportunity to be heard. The shares represented at such
meeting, either in person or by proxy, and entitled to vote thereat
shall constitute a quorum for the purpose of such meeting,
notwithstanding any provision of the articles or bylaws or in this
division to the contrary. The court may issue such orders as may be
appropriate, including, without limitation, orders designating the
time and place of such meeting, the record date for determination of
shareholders entitled to vote and the form of notice of such meeting.
(d) Special meetings of the shareholders may be called by the
board, the chairman of the board, the president or the holders of
shares entitled to cast not less than 10 percent of the votes at the
meeting or such additional persons as may be provided in the articles
601. (a) Whenever shareholders are required or permitted to take
any action at a meeting a written notice of the meeting shall be
given not less than 10 (or, if sent by third-class mail, 30) nor more
than 60 days before the date of the meeting to each shareholder
entitled to vote thereat. Such notice shall state the place, date
and hour of the meeting and (1) in the case of a special meeting, the
general nature of the business to be transacted, and no other
business may be transacted, or (2) in the case of the annual meeting,
those matters which the board, at the time of the mailing of the
notice, intends to present for action by the shareholders, but
subject to the provisions of subdivision (f) any proper matter may be
presented at the meeting for such action. The notice of any meeting
at which directors are to be elected shall include the names of
nominees intended at the time of the notice to be presented by the
board for election.
(b) Notice of a shareholders' meeting or any report shall be given
either personally or by first-class mail, or, in the case of a
corporation with outstanding shares held of record by 500 or more
persons (determined as provided in Section 605) on the record date
for the shareholders' meeting, notice may be sent third-class mail,
or other means of written communication, addressed to the shareholder
at the address of such shareholder appearing on the books of the
corporation or given by the shareholder to the corporation for the
purpose of notice; or if no such address appears or is given, at the
place where the principal executive office of the corporation is
located or by publication at least once in a newspaper of general
circulation in the county in which the principal executive office is
located. The notice or report shall be deemed to have been given at
the time when delivered personally or deposited in the mail or sent
by other means of written communication. An affidavit of mailing of
any notice or report in accordance with the provisions of this
division, executed by the secretary, assistant secretary or any
transfer agent, shall be prima facie evidence of the giving of the
notice or report.
If any notice or report addressed to the shareholder at the
address of such shareholder appearing on the books of the corporation
is returned to the corporation by the United States postal service
marked to indicate that the United States postal service is unable to
deliver the notice or report to the shareholder at such address, all
future notices or reports shall be deemed to have been duly given
without further mailing if the same shall be available for the
shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one year from the
date of the giving of the notice or report to all other
(c) Upon request in writing to the chairman of the board,
president, vice president or secretary by any person (other than the
board) entitled to call a special meeting of shareholders, the
officer forthwith shall cause notice to be given to the shareholders
entitled to vote that a meeting will be held at a time requested by
the person or persons calling the meeting, not less than 35 nor more
than 60 days after the receipt of the request. If the notice is not
given within 20 days after receipt of the request, the persons
entitled to call the meeting may give the notice or the superior
court of the proper county shall summarily order the giving of the
notice, after notice to the corporation giving it an opportunity to
be heard. The procedure provided in subdivision (c) of Section 305
shall apply to such application. The court may issue such orders as
may be appropriate, including, without limitation, orders designating
the time and place of the meeting, the record date for determination
of shareholders entitled to vote and the form of notice.
(d) When a shareholders' meeting is adjourned to another time or
place, unless the bylaws otherwise require and except as provided in
this subdivision, notice need not be given of the adjourned meeting
if the time and place thereof are announced at the meeting at which
the adjournment is taken. At the adjourned meeting the corporation
may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than 45 days or if
after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting.
(e) The transactions of any meeting of shareholders, however
called and noticed, and wherever held, are as valid as though had at
a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after
the meeting, each of the persons entitled to vote, not present in
person or by proxy, signs a written waiver of notice or a consent to
the holding of the meeting or an approval of the minutes thereof.
All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute a waiver of
notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened and
except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters required by this division to
be included in the notice but not so included, if such objection is
expressly made at the meeting. Neither the business to be transacted
at nor the purpose of any regular or special meeting of shareholders
need be specified in any written waiver of notice, consent to the
holding of the meeting or approval of the minutes thereof, unless
otherwise provided in the articles or bylaws, except as provided in
(f) Any shareholder approval at a meeting, other than unanimous
approval by those entitled to vote, pursuant to Section 310, 902,
1201, 1900 or 2007 shall be valid only if the general nature of the
proposal so approved was stated in the notice of meeting or in any
written waiver of notice.
902. (a) After any shares have been issued, amendments may be
adopted if approved by the board and approved by the outstanding
shares (Section 152), either before or after the approval by the
board.[shareholders cannot amend articles by themselves; requires approval of the board]
(b) Notwithstanding subdivision (a), an amendment extending the
corporate existence or making the corporate existence perpetual may
be adopted by a corporation organized prior to August 14, 1929, with
approval by the board alone.
(c) Notwithstanding subdivision (a), unless the corporation has
more than one class of shares outstanding, an amendment effecting
only a stock split (including an increase in the authorized number of
shares in proportion thereto) may be adopted with approval by the
(d) Notwithstanding subdivision (a), an amendment deleting the
names and addresses of the first directors or the name and address of
the initial agent may be adopted with approval by the board alone.
(e) Whenever the articles require for corporate action the vote of
a larger proportion or of all of the shares of any class or series,
or of a larger proportion or of all of the directors, than is
otherwise required by this division, the provision in the articles
requiring such greater vote shall not be altered, amended or repealed
except by such greater vote unless otherwise provided in the
(f) Notwithstanding subdivision (a), any amendment reducing the
vote required for an amendment pursuant to subdivision (c) of Section
158 may not be adopted unless approved by the affirmative vote of at
least two-thirds of each class of outstanding shares or such other
vote as may then be specified by the articles of the corporation.
1001. (a) A corporation may sell, lease, convey, exchange, transfer
or otherwise dispose of all or substantially all of its assets when
the principal terms are (1) Approved by the board, and (2) Unless
the transaction is in the usual and regular course of its business,
approved by the outstanding shares (Section 152), either before or
after approval by the board and before or after the transaction. A
transaction constituting a reorganization (Section 181) is subject to
the provisions of Chapter 12 (commencing with Section 1200) and not
this section (other than subdivision (d) hereof). [needs to be approved by both the BOD and the outstanding shares.]
16101. (7) "Partnership" means an association of two or more persons to
carry on as co-owners a business for profit formed under Section
16202, predecessor law, or comparable law of another jurisdiction,
and includes, for all purposes of the laws of this state, a
registered limited liability partnership.
16103. (a) Except as otherwise provided in subdivision (b),
relations among the partners and between the partners and the
partnership are governed by the partnership agreement. To the extent
the partnership agreement does not otherwise provide, this chapter
governs relations among the partners and between the partners and the
(b) The partnership agreement may not do any of the following:
(1) Vary the rights and duties under Section 16105 except to
eliminate the duty to provide copies of statements to all of the
(2) Unreasonably restrict the right of access to books and records
under subdivision (b) of Section 16403, or the right to be furnished
with information under subdivision (c) of Section 16403.
(3) Eliminate the duty of loyalty under subdivision (b) of Section
16404 or paragraph (3) of subdivision (b) of Section 16603, but, if
not manifestly unreasonable, may do either of the following:
(A) The partnership agreement may identify specific types or
categories of activities that do not violate the duty of loyalty.
(B) All of the partners or a number or percentage specified in the
partnership agreement may authorize or ratify, after full disclosure
of all material facts, a specific act or transaction that otherwise
would violate the duty of loyalty.
(4) Unreasonably reduce the duty of care under subdivision (c) of
Section 16404 or paragraph (3) of subdivision (b) of Section 16603.
(5) Eliminate the obligation of good faith and fair dealing under
subdivision (d) of Section 16404, but the partnership agreement may
prescribe the standards by which the performance of the obligation is
to be measured, if the standards are not manifestly unreasonable.
(6) Vary the power to dissociate as a partner under subdivision
(a) Section 16602, except to require the notice under paragraph (1)
of Section 16601 to be in writing.
(7) Vary the right of a court to expel a partner in the events
specified in paragraph (5) of Section 16601.
(8) Vary the requirement to wind up the partnership business in
cases specified in paragraph (4), (5), or (6) of Section 16801.
(9) Restrict rights of third parties under this chapter.
(10) Vary the law applicable to a registered limited liability
partnership under subdivision (b) of Section 16106.
16202. (a) Except as otherwise provided in subdivision (b), the
association of two or more persons to carry on as coowners a business
for profit forms a partnership, whether or not the persons intend to
form a partnership.
16302. (a) Partnership property may be transferred as follows:
(1) Subject to the effect of a statement of partnership authority
under Section 16303, partnership property held in the name of the
partnership may be transferred by an instrument of transfer executed
by a partner in the partnership name.
(2) Partnership property held in the name of one or more partners
with an indication in the instrument transferring the property to
them of their capacity as partners or of the existence of a
partnership, but without an indication of the name of the
partnership, may be transferred by an instrument of transfer executed
by the persons in whose name the property is held.
(3) Partnership property held in the name of one or more persons
other than the partnership, without an indication in the instrument
transferring the property to them of their capacity as partners or of
the existence of a partnership, may be transferred by an instrument
of transfer executed by the persons in whose name the property is
(b) A partnership may recover partnership property from a
transferee only if it proves that execution of the instrument of
initial transfer did not bind the partnership under Section 16301 and
either of the following applies:
(1) As to a subsequent transferee who gave value for property
transferred under paragraph (1) or (2) of subdivision (a), proves
that the subsequent transferee knew or had received a notification
that the person who executed the instrument of initial transfer
lacked authority to bind the partnership.
(2) As to a transferee who gave value for property transferred
under paragraph (3) of subdivision (a), proves that the transferee
knew or had received a notification that the property was partnership
property and that the person who executed the instrument of initial
transfer lacked authority to bind the partnership.
(c) A partnership may not recover partnership property from a
subsequent transferee if the partnership would not have been entitled
to recover the property, under subdivision (b), from any earlier
transferee of the property.
(d) If a person holds all of the partners' interests in the
partnership, all of the partnership property vests in that person.
The person may execute a document in the name of the partnership to
evidence vesting of the property in that person and may file or
record the document.
16306. (a) Except as otherwise provided in subdivisions (b) and (c), all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law.
16308. Except with respect to registered limited liability
partnerships and foreign limited liability partnerships:
(a) If a person, by words or conduct, purports to be a partner, or
consents to being represented by another as a partner, in a
partnership or with one or more persons not partners, the purported
partner is liable to a person to whom the representation is made, if
that person, relying on the representation, enters into a transaction
with the actual or purported partnership. If the representation,
either by the purported partner or by a person with the purported
partner's consent, is made in a public manner, the purported partner
is liable to a person who relies upon the purported partnership even
if the purported partner is not aware of being held out as a partner
to the claimant. If partnership liability results, the purported
partner is liable with respect to that liability as if the purported
partner were a partner. If no partnership liability results, the
purported partner is liable with respect to that liability jointly
and severally with any other person consenting to the representation.
(b) If a person is thus represented to be a partner in an existing
partnership, or with one or more persons not partners, the purported
partner is an agent of persons consenting to the representation to
bind them to the same extent and in the same manner as if the
purported partner were a partner, with respect to persons who enter
into transactions in reliance upon the representation. If all of the
partners of the existing partnership consent to the representation,
a partnership act or obligation results. If fewer than all of the
partners of the existing partnership consent to the representation,
the person acting and the partners consenting to the representation
are jointly and severally liable.
(c) A person is not liable as a partner merely because the person
is named by another in a statement of partnership authority.
(d) A person does not continue to be liable as a partner merely
because of a failure to file a statement of dissociation or to amend
a statement of partnership authority to indicate the partner's
dissociation from the partnership.
(e) Except as otherwise provided in subdivisions (a) and (b),
persons who are not partners as to each other are not liable as
partners to other persons.
16401. (a) Each partner is deemed to have an account that is
subject to both of the following:
(1) Credited with an amount equal to the money plus the value of
any other property, net of the amount of any liabilities, the partner
contributes to the partnership and the partner's share of the
(2) Subject to Sections 16306 and 16957, charged with an amount
equal to the money plus the value of any other property, net of the
amount of any liabilities, distributed by the partnership to the
partner and the partner's share of the partnership losses.
(b) Each partner is entitled to an equal share of the partnership
profits and, subject to Sections 16306 and 16957, is chargeable with
a share of the partnership losses in proportion to the partner's
share of the profits.
(c) A partnership shall reimburse a partner for payments made and
indemnify a partner for liabilities incurred by the partner in the
ordinary course of the business of the partnership or for the
preservation of its business or property.
(d) A partnership shall reimburse a partner for an advance to the
partnership beyond the amount of capital the partner agreed to
(e) A payment or advance made by a partner that gives rise to a
partnership obligation under subdivision (c) or (d) constitutes a
loan to the partnership that accrues interest from the date of the
payment or advance.
(f) Each partner has equal rights in the management and conduct of
the partnership business.
(g) A partner may use or possess partnership property only on
behalf of the partnership.
(h) A partner is not entitled to remuneration for services
performed for the partnership, except for reasonable compensation for
services rendered in winding up the business of the partnership.
(i) A person may become a partner only with the consent of all of
(j) A difference arising as to a matter in the ordinary course of
business of a partnership may be decided by a majority of the
partners. An act outside the ordinary course of business of a
partnership and an amendment to the partnership agreement may be
undertaken only with the consent of all of the partners.
(k) This section does not affect the obligations of a partnership
to other persons under Section 16301.
16404. (a) The fiduciary duties a partner owes to the partnership
and the other partners are the duty of loyalty and the duty of care
set forth in subdivisions (b) and (c).
(b) A partner's duty of loyalty to the partnership and the other
partners includes all of the following:
(1) To account to the partnership and hold as trustee for it any
property, profit, or benefit derived by the partner in the conduct
and winding up of the partnership business or derived from a use by
the partner of partnership property or information, including the
appropriation of a partnership opportunity.
(2) To refrain from dealing with the partnership in the conduct or
winding up of the partnership business as or on behalf of a party
having an interest adverse to the partnership.
(3) To refrain from competing with the partnership in the conduct
of the partnership business before the dissolution of the
(c) A partner's duty of care to the partnership and the other
partners in the conduct and winding up of the partnership business is
limited to refraining from engaging in grossly negligent or reckless
conduct, intentional misconduct, or a knowing violation of law.
(d) A partner shall discharge the duties to the partnership and
the other partners under this chapter or under the partnership
agreement and exercise any rights consistently with the obligation of
good faith and fair dealing.
(e) A partner does not violate a duty or obligation under this
chapter or under the partnership agreement merely because the partner'
s conduct furthers the partner's own interest.
(f) A partner may lend money to and transact other business with
the partnership, and as to each loan or transaction, the rights and
obligations of the partner regarding performance or enforcement are
the same as those of a person who is not a partner, subject to other
(g) This section applies to a person winding up the partnership
business as the personal or legal representative of the last
surviving partner as if the person were a partner.
16405. (a) A partnership may maintain an action against a partner
for a breach of the partnership agreement, or for the violation of a
duty to the partnership, causing harm to the partnership.
(b) A partner may maintain an action against the partnership or
another partner for legal or equitable relief, with or without an
accounting as to partnership business, to do any of the following:
(1) Enforce the partner's rights under the partnership agreement.
(2) Enforce the partner's rights under this chapter, including all
of the following:
(A) The partner's rights under Section 16401, 16403, or 16404.
(B) The partner's right on dissociation to have the partner's
interest in the partnership purchased pursuant to Section 16701 or
16701.5, or to enforce any other right under Article 6 (commencing
with Section 16601) or 7 (commencing with Section 16701).
(C) The partner's right to compel a dissolution and winding up of
the partnership business under Section 16801 or enforce any other
right under Article 8 (commencing with Section 16801).
(3) Enforce the rights and otherwise protect the interests of the
partner, including rights and interests arising independently of the
(c) The accrual of, and any time limitation on, a right of action
for a remedy under this section is governed by other law. A right to
an accounting upon a dissolution and winding up does not revive a
claim barred by law.
16807. (a) In winding up a partnership's business, the assets of
the partnership, including the contributions of the partners required
by this section, shall be applied to discharge its obligations to
creditors, including, to the extent permitted by law, partners who
are creditors. Any surplus shall be applied to pay in cash the net
amount distributable to partners in accordance with their right to
distributions under subdivision (b).
(b) Each partner is entitled to a settlement of all partnership
accounts upon winding up the partnership business. In settling
accounts among the partners, the profits and losses that result from
the liquidation of the partnership assets shall be credited and
charged to the partners' accounts. The partnership shall make a
distribution to a partner in an amount equal to any excess of the
credits over the charges in the partner's account. Except for
registered limited liability partnerships and foreign limited
liability partnerships, a partner shall contribute to the partnership
an amount equal to any excess of the charges over the credits in the
(c) If a partner fails to contribute the full amount that the
partner is obligated to contribute under subdivision (b), all of the
other partners shall contribute, in the proportions in which those
partners share partnership losses, the additional amount necessary to
satisfy the partnership obligations for which they are liable under
Section 16306. A partner or partner's legal representative may
recover from the other partners any contributions the partner makes
to the extent the amount contributed exceeds that partner's share of
the partnership obligations for which the partner is personally
liable under Section 16306.
(d) After the settlement of accounts, each partner shall
contribute, in the proportion in which the partner shares partnership
losses, the amount necessary to satisfy partnership obligations that
were not known at the time of the settlement and for which the
partner is personally liable under Section 16306.
(e) The estate of a deceased partner is liable for the partner's
obligation to contribute to the partnership.
(f) An assignee for the benefit of creditors of a partnership or a
partner, or a person appointed by a court to represent creditors of
a partnership or a partner, may enforce a partner's obligation to
contribute to the partnership.