MBE Rules · Business Associations
Close-Corporation Agreements
Cal. Corp. Code § 300(b)
The rule
In statutory close corporations, unanimous shareholder agreements may govern the business as if a partnership — overriding board governance without triggering piercing or invalidity.
In plain English
In a close corporation, shareholders can create unanimous agreements that dictate how the business operates, similar to a partnership. These agreements can bypass the usual corporate governance rules, allowing for more flexibility in decision-making without risking the corporation's legal status.
Worked example
In a close corporation with three shareholders, they all agree to manage the business collectively and make decisions without involving the board of directors. They draft a unanimous shareholder agreement that outlines their management structure. When a dispute arises, the court upholds their agreement, allowing them to operate as they intended without any corporate governance issues.
Memory hook
Close corporations can run like partnerships with unanimous agreements.
The trap
Exams may present scenarios where students overlook the significance of unanimous agreements in close corporations, mistakenly applying standard corporate governance rules instead.
How examiners test it
Questions often involve fact patterns where shareholders must navigate conflicts or decisions, testing their understanding of the flexibility provided by unanimous shareholder agreements.
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