| 1 | | - | Senate Bill No. 540 CHAPTER 250 An act to amend Section 5236 of the Corporations Code, relating to nonprofit corporations. [ Approved by Governor September 05, 2019. Filed with Secretary of State September 05, 2019. ] LEGISLATIVE COUNSEL'S DIGESTSB 540, Jones. Nonprofit public benefit corporations.Existing law prohibits a nonprofit public benefit corporation from lending money or property to a director or officer, or guaranteeing the obligation of a director or officer, without the approval of the Attorney General. However, a nonprofit public benefit corporation is authorized to pay life insurance premiums for insurance on the life of a director or officer if repayment is secured by the proceeds of the policy and its cash surrender value.This bill would revise the above-described exception to allow the nonprofit public benefit corporation to pay life insurance premiums if repayment is secured by either the policys death benefit proceeds or its cash surrender value, or both. The bill would provide that when repayment is secured only by a policys death benefit, the contract between the corporation and director or officer that secures the loan must include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. The bill would also provide that when repayment is secured only by the policys cash surrender value, the contract between the corporation and director or officer that secures the loan must include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO Bill TextThe people of the State of California do enact as follows:SECTION 1. Section 5236 of the Corporations Code is amended to read:5236. (a) A corporation shall not make any loan of money or property to or guarantee the obligation of any director or officer, unless approved by the Attorney General; provided, however, that a corporation may advance money to a director or officer of the corporation or of its parent or any subsidiary for expenses reasonably anticipated to be incurred in the performance of the duties of such officer or director, provided that in the absence of such advance, such director or officer would be entitled to be reimbursed for such expenses by such corporation, its parent, or any subsidiary.(b) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by either the policys death benefit proceeds or its cash surrender value, or both.(c) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys death benefit, the contract between the corporation and director or officer that secures the loan shall include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. (d) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys cash surrender value, the contract between the corporation and the director or officer that secures the loan shall include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.(e) The provisions of subdivision (a) do not apply to a loan of money to or for the benefit of an officer in circumstances where the loan is necessary, in the judgment of the board, to provide financing for the purchase of the principal residence of the officer in order to secure the services or continued services of the officer and the loan is secured by real property located in the state. |
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| 1 | + | Enrolled August 23, 2019 Passed IN Senate May 06, 2019 Passed IN Assembly August 22, 2019 Amended IN Senate April 30, 2019 Amended IN Senate April 11, 2019 CALIFORNIA LEGISLATURE 20192020 REGULAR SESSION Senate Bill No. 540Introduced by Senator JonesFebruary 21, 2019 An act to amend Section 5236 of the Corporations Code, relating to nonprofit corporations. LEGISLATIVE COUNSEL'S DIGESTSB 540, Jones. Nonprofit public benefit corporations.Existing law prohibits a nonprofit public benefit corporation from lending money or property to a director or officer, or guaranteeing the obligation of a director or officer, without the approval of the Attorney General. However, a nonprofit public benefit corporation is authorized to pay life insurance premiums for insurance on the life of a director or officer if repayment is secured by the proceeds of the policy and its cash surrender value.This bill would revise the above-described exception to allow the nonprofit public benefit corporation to pay life insurance premiums if repayment is secured by either the policys death benefit proceeds or its cash surrender value, or both. The bill would provide that when repayment is secured only by a policys death benefit, the contract between the corporation and director or officer that secures the loan must include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. The bill would also provide that when repayment is secured only by the policys cash surrender value, the contract between the corporation and director or officer that secures the loan must include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: NO Local Program: NO Bill TextThe people of the State of California do enact as follows:SECTION 1. Section 5236 of the Corporations Code is amended to read:5236. (a) A corporation shall not make any loan of money or property to or guarantee the obligation of any director or officer, unless approved by the Attorney General; provided, however, that a corporation may advance money to a director or officer of the corporation or of its parent or any subsidiary for expenses reasonably anticipated to be incurred in the performance of the duties of such officer or director, provided that in the absence of such advance, such director or officer would be entitled to be reimbursed for such expenses by such corporation, its parent, or any subsidiary.(b) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by either the policys death benefit proceeds or its cash surrender value, or both.(c) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys death benefit, the contract between the corporation and director or officer that secures the loan shall include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. (d) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys cash surrender value, the contract between the corporation and the director or officer that secures the loan shall include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.(e) The provisions of subdivision (a) do not apply to a loan of money to or for the benefit of an officer in circumstances where the loan is necessary, in the judgment of the board, to provide financing for the purchase of the principal residence of the officer in order to secure the services or continued services of the officer and the loan is secured by real property located in the state. |
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| 14 | 25 | | |
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| 15 | 26 | | LEGISLATIVE COUNSEL'S DIGEST |
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| 16 | 27 | | |
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| 17 | 28 | | ## LEGISLATIVE COUNSEL'S DIGEST |
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| 18 | 29 | | |
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| 19 | 30 | | SB 540, Jones. Nonprofit public benefit corporations. |
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| 20 | 31 | | |
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| 21 | 32 | | Existing law prohibits a nonprofit public benefit corporation from lending money or property to a director or officer, or guaranteeing the obligation of a director or officer, without the approval of the Attorney General. However, a nonprofit public benefit corporation is authorized to pay life insurance premiums for insurance on the life of a director or officer if repayment is secured by the proceeds of the policy and its cash surrender value.This bill would revise the above-described exception to allow the nonprofit public benefit corporation to pay life insurance premiums if repayment is secured by either the policys death benefit proceeds or its cash surrender value, or both. The bill would provide that when repayment is secured only by a policys death benefit, the contract between the corporation and director or officer that secures the loan must include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. The bill would also provide that when repayment is secured only by the policys cash surrender value, the contract between the corporation and director or officer that secures the loan must include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy. |
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| 22 | 33 | | |
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| 23 | 34 | | Existing law prohibits a nonprofit public benefit corporation from lending money or property to a director or officer, or guaranteeing the obligation of a director or officer, without the approval of the Attorney General. However, a nonprofit public benefit corporation is authorized to pay life insurance premiums for insurance on the life of a director or officer if repayment is secured by the proceeds of the policy and its cash surrender value. |
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| 24 | 35 | | |
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| 25 | 36 | | This bill would revise the above-described exception to allow the nonprofit public benefit corporation to pay life insurance premiums if repayment is secured by either the policys death benefit proceeds or its cash surrender value, or both. The bill would provide that when repayment is secured only by a policys death benefit, the contract between the corporation and director or officer that secures the loan must include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. The bill would also provide that when repayment is secured only by the policys cash surrender value, the contract between the corporation and director or officer that secures the loan must include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy. |
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| 26 | 37 | | |
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| 27 | 38 | | ## Digest Key |
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| 28 | 39 | | |
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| 29 | 40 | | ## Bill Text |
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| 30 | 41 | | |
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| 31 | 42 | | The people of the State of California do enact as follows:SECTION 1. Section 5236 of the Corporations Code is amended to read:5236. (a) A corporation shall not make any loan of money or property to or guarantee the obligation of any director or officer, unless approved by the Attorney General; provided, however, that a corporation may advance money to a director or officer of the corporation or of its parent or any subsidiary for expenses reasonably anticipated to be incurred in the performance of the duties of such officer or director, provided that in the absence of such advance, such director or officer would be entitled to be reimbursed for such expenses by such corporation, its parent, or any subsidiary.(b) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by either the policys death benefit proceeds or its cash surrender value, or both.(c) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys death benefit, the contract between the corporation and director or officer that secures the loan shall include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. (d) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys cash surrender value, the contract between the corporation and the director or officer that secures the loan shall include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.(e) The provisions of subdivision (a) do not apply to a loan of money to or for the benefit of an officer in circumstances where the loan is necessary, in the judgment of the board, to provide financing for the purchase of the principal residence of the officer in order to secure the services or continued services of the officer and the loan is secured by real property located in the state. |
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| 32 | 43 | | |
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| 33 | 44 | | The people of the State of California do enact as follows: |
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| 34 | 45 | | |
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| 35 | 46 | | ## The people of the State of California do enact as follows: |
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| 36 | 47 | | |
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| 37 | 48 | | SECTION 1. Section 5236 of the Corporations Code is amended to read:5236. (a) A corporation shall not make any loan of money or property to or guarantee the obligation of any director or officer, unless approved by the Attorney General; provided, however, that a corporation may advance money to a director or officer of the corporation or of its parent or any subsidiary for expenses reasonably anticipated to be incurred in the performance of the duties of such officer or director, provided that in the absence of such advance, such director or officer would be entitled to be reimbursed for such expenses by such corporation, its parent, or any subsidiary.(b) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by either the policys death benefit proceeds or its cash surrender value, or both.(c) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys death benefit, the contract between the corporation and director or officer that secures the loan shall include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. (d) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys cash surrender value, the contract between the corporation and the director or officer that secures the loan shall include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.(e) The provisions of subdivision (a) do not apply to a loan of money to or for the benefit of an officer in circumstances where the loan is necessary, in the judgment of the board, to provide financing for the purchase of the principal residence of the officer in order to secure the services or continued services of the officer and the loan is secured by real property located in the state. |
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| 38 | 49 | | |
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| 39 | 50 | | SECTION 1. Section 5236 of the Corporations Code is amended to read: |
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| 40 | 51 | | |
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| 41 | 52 | | ### SECTION 1. |
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| 42 | 53 | | |
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| 43 | 54 | | 5236. (a) A corporation shall not make any loan of money or property to or guarantee the obligation of any director or officer, unless approved by the Attorney General; provided, however, that a corporation may advance money to a director or officer of the corporation or of its parent or any subsidiary for expenses reasonably anticipated to be incurred in the performance of the duties of such officer or director, provided that in the absence of such advance, such director or officer would be entitled to be reimbursed for such expenses by such corporation, its parent, or any subsidiary.(b) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by either the policys death benefit proceeds or its cash surrender value, or both.(c) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys death benefit, the contract between the corporation and director or officer that secures the loan shall include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. (d) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys cash surrender value, the contract between the corporation and the director or officer that secures the loan shall include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.(e) The provisions of subdivision (a) do not apply to a loan of money to or for the benefit of an officer in circumstances where the loan is necessary, in the judgment of the board, to provide financing for the purchase of the principal residence of the officer in order to secure the services or continued services of the officer and the loan is secured by real property located in the state. |
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| 44 | 55 | | |
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| 45 | 56 | | 5236. (a) A corporation shall not make any loan of money or property to or guarantee the obligation of any director or officer, unless approved by the Attorney General; provided, however, that a corporation may advance money to a director or officer of the corporation or of its parent or any subsidiary for expenses reasonably anticipated to be incurred in the performance of the duties of such officer or director, provided that in the absence of such advance, such director or officer would be entitled to be reimbursed for such expenses by such corporation, its parent, or any subsidiary.(b) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by either the policys death benefit proceeds or its cash surrender value, or both.(c) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys death benefit, the contract between the corporation and director or officer that secures the loan shall include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. (d) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys cash surrender value, the contract between the corporation and the director or officer that secures the loan shall include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.(e) The provisions of subdivision (a) do not apply to a loan of money to or for the benefit of an officer in circumstances where the loan is necessary, in the judgment of the board, to provide financing for the purchase of the principal residence of the officer in order to secure the services or continued services of the officer and the loan is secured by real property located in the state. |
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| 46 | 57 | | |
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| 47 | 58 | | 5236. (a) A corporation shall not make any loan of money or property to or guarantee the obligation of any director or officer, unless approved by the Attorney General; provided, however, that a corporation may advance money to a director or officer of the corporation or of its parent or any subsidiary for expenses reasonably anticipated to be incurred in the performance of the duties of such officer or director, provided that in the absence of such advance, such director or officer would be entitled to be reimbursed for such expenses by such corporation, its parent, or any subsidiary.(b) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by either the policys death benefit proceeds or its cash surrender value, or both.(c) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys death benefit, the contract between the corporation and director or officer that secures the loan shall include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. (d) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys cash surrender value, the contract between the corporation and the director or officer that secures the loan shall include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy.(e) The provisions of subdivision (a) do not apply to a loan of money to or for the benefit of an officer in circumstances where the loan is necessary, in the judgment of the board, to provide financing for the purchase of the principal residence of the officer in order to secure the services or continued services of the officer and the loan is secured by real property located in the state. |
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| 48 | 59 | | |
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| 49 | 60 | | |
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| 50 | 61 | | |
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| 51 | 62 | | 5236. (a) A corporation shall not make any loan of money or property to or guarantee the obligation of any director or officer, unless approved by the Attorney General; provided, however, that a corporation may advance money to a director or officer of the corporation or of its parent or any subsidiary for expenses reasonably anticipated to be incurred in the performance of the duties of such officer or director, provided that in the absence of such advance, such director or officer would be entitled to be reimbursed for such expenses by such corporation, its parent, or any subsidiary. |
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| 52 | 63 | | |
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| 53 | 64 | | (b) The provisions of subdivision (a) do not apply to the payment of premiums in whole or in part by a corporation on a life insurance policy on the life of a director or officer so long as repayment to the corporation of the amount paid by it is secured by either the policys death benefit proceeds or its cash surrender value, or both. |
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| 54 | 65 | | |
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| 55 | 66 | | (c) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys death benefit, the contract between the corporation and director or officer that secures the loan shall include terms sufficient to ensure that any policy fees and charges, withdrawals of the cash value, or loans taken against it do not impair the value of the death benefit to repay the cost of the loan, for the life of the policy. |
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| 56 | 67 | | |
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| 57 | 68 | | (d) When repayment of a loan, entered into under subdivision (b), to a corporation is secured by only the policys cash surrender value, the contract between the corporation and the director or officer that secures the loan shall include terms sufficient to ensure that the cash surrender value is sufficient to repay the cost of the loan, for the life of the policy. |
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| 58 | 69 | | |
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| 59 | 70 | | (e) The provisions of subdivision (a) do not apply to a loan of money to or for the benefit of an officer in circumstances where the loan is necessary, in the judgment of the board, to provide financing for the purchase of the principal residence of the officer in order to secure the services or continued services of the officer and the loan is secured by real property located in the state. |
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