Now Corporations Can Be Like the Boy Scouts

Thanks to the efforts of the Corporations Committee of the Business Law Section of the California State Bar, the legislature last week enacted and the Governor has signed legislation intended to help corporations react to emergency situations, Chapter 255, Statutes of 2013 (AB 491 (Torres)). The bill addresses two distinct issues – the power to take certain actions in an emergency and include bylaw provisions that are effective in an emergency. According to the legislative analysis:

This bill is based off the Model Business Corporation Act (MBCA) which contains both a provision on emergency bylaws and emergency powers. . . . This bill closely mirrors both provisions of the MBCA section 2.07, emergency bylaws, and section 3.03, emergency powers. This bill does differ from the MBCA in terms of the emergency definition but the definition in the bill combines elements from California Emergencies Services Act, Government Code Section 8558 and federal National Emergencies Act, 50 United States Code 1601.

Thirty-eight of 52 U.S. jurisdictions have adopted emergency powers provisions for for-profit corporations. Twenty-eight jurisdictions have adopted both an emergency powers provision and emergency bylaws provision.

Assembly Floor Analysis (Aug. 8, 2013).

Perhaps the USDA Could Learn About Disaster Planning From the SEC

Justice William W. Bedsworth’s syndicated monthly column, A Criminal Waste of Space, is always entertaining, and today it is on point. In “USDA 43-C-0269“, he tells the true story of how the U.S. Department of Agriculture required a childrens’ magician, Marty the Magician, to prepare an emergency preparedness plan for his rabbit. Apparently, Marty was no scofflaw and he duly filed a 28-page plan and paid a $40 fee. His home is now subject to inspection by the USDA.

The SEC also thinks emergency planning is important. For example, the SEC’s Office of Compliance Inspections and Examinations issued a Risk Alert last month on business continuity and disaster recovery planning for investment advisers. However, the adopting release for SEC’s final rule acknowledged that an adviser’s contingency planning process should be appropriately scaled, and reasonable in light of the facts and circumstances surrounding the adviser’s business operations and the commitments it has made to its clients.