Failure to Keep Books and Records

The neglect, failure, or refusal by a corporation to keep and maintain books of account and the records of shareholders as required subjects it to penalties for each day that its failure or refusal continues. In addition to the possible imposition of penalties for failing to keep proper corporate records, the efficient operation of a corporation can suffer from the absence of proper records, and good corporate practice dictates the maintenance of adequate corporate records.

Failure to Enter Share Transfer or Issue Certificate

Any officer of a corporation charged with the duty of entering a transfer of shares on the corporate books and issuing a share certificate or, with respect to uncertificated securities, an initial transaction statement or written statements, who unreasonably neglects, fails, or refuses to do so after written request by any person entitled to it, is subject to penalties.

Directors and other officers not specifically responsible for transferring shares who cause the neglect, failure, or refusal to make the entries on the books of the corporation or to issue a certificate, or with respect to uncertificated securities, an initial transaction statement or written statements, for shares to a person entitled to it are subject to a like penalty.

False Statements or Entries

The law imposes joint and several liabilities for all damages suffered by the corporation or others who relied thereon, on any officer, director, employee, or agent of a corporation who:

(1) Makes, issues, delivers or publishes any prospectus, report, circular, certificate, financial statement, balance sheet, public notice, or document respecting the corporation or its shares, assets, liabilities, capital, dividends, business, earnings, or accounts, which is knowingly false in any material respect, or who participates therein;

(2) Knowingly makes, or causes to be made, any materially false entry in the corporation’s books, minutes, records, or accounts; or

(3) Alters any entry in the corporation’s books or records with intent to deceive.

Foreign Corporations

The directors of a foreign corporation ”transacting intrastate business” in California are liable to the corporation, its shareholders, creditors, receiver, liquidator, or trustee in bankruptcy for the making of false certificates, reports, or public notices according to any applicable laws of the state of incorporation, whether committed in California or elsewhere, and that liability may be enforced in the courts of California.

Action by Attorney General

The Attorney General can institute an action for such relief by way of injunction, dissolution of the corporation, the appointment of the receiver, or other remedies as may be appropriate to protect the rights of shareholders or to undo the consequences of the failure to comply with the statutory requirements.

THE FOREGOING IS ONLY A GENERAL SUMMARY OF CALIFORNIA CORPORATIONS LAW OR A PORTION THEREOF AND DOES NOT PURPORT TO BE AN ACCURATE OR COMPLETE STATEMENT OF THE LAW APPLICABLE TO CORPORATIONS IN CALIFORNIA. IT DOES NOT CONSTITUTE A LEGAL OPINION. INDIVIDUAL SITUATIONS MAY VARY. FOR AN ACCURATE LEGAL OPINION, ALWAYS CONSULT AN ATTORNEY.