Corporate Crimes and Penalties

Title 1, Division 1, Chapter 22 of the Corporations Code deals with crimes and penalties under the general corporation law in California.

Section 2200 provides every corporation that neglects, fails, or refuses to keep or cause to be kept or maintained the record of shareholders or books of account required, to prepare or cause to be prepared or submitted the financial statements, or to give any shareholder of record the advice required, is subject to penalty as provided in this section.

Section 2201 says that any officer of a corporation charged with the duty of entering a transfer of shares upon the books of the corporation 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 perform such duty after written request by any person entitled thereto is subject to a penalty of $100.

Section 2202 requires any penalty to be in addition to any remedy by injunction or action for damages or by writ of mandate for the nonperformance of acts and duties enjoined by law upon the corporation or its directors or officers.

Section 2203 provides that any foreign corporation which transacts intrastate business and which does not hold a valid certificate from the Secretary of State may be subject to a penalty of $20 for each day that unauthorized intrastate business is transacted.

Section 2204 says that, upon the failure of a corporation to file the statement required, the Secretary of State provides a notice of that delinquency to the corporation. The notice also contains information concerning the application of this section.

Section 2205 explains that a corporation that fails to file a statement for an applicable filing period, has not filed a statement during the preceding 24 months, and was certified for penalty for the same filing period, is subject to suspension pursuant to this section rather than to penalty.

Section 2205.5 states that a domestic corporation may be subject to administrative dissolution pursuant to this section if the corporation’s corporate powers, rights, and privileges are, and have been, suspended by the Franchise Tax Board for a period of not less than 60 continuous months.

Section 2206 provides that specified laws apply to foreign corporations with respect to the statements required to be filed. For this purpose, the suspension of the corporate powers, rights, and privileges of a domestic corporation means the forfeiture of the exercise of the corporate powers, rights, and privileges of a foreign corporation in this state.

Section 2207 states that a corporation is liable for a civil penalty in an amount not exceeding $1,000,000 if the corporation does both of the specified items.

Section 2251 provides that any promoter, director or officer of a corporation who knowingly and willfully issues or consents to the issuance of certificates for certificated securities, or initial transaction statements or written statements for uncertificated securities, in violation of this division with intent to defraud present or future shareholders, subscribers, purchasers of shares or creditors is guilty of a misdemeanor punishable by a fine of not more than $1,000 or imprisonment for not more than one year or both.

Section 2252 states that every person who signs the name of a fictitious person to any subscription for or agreement to take stock in any domestic or foreign corporation, existing or proposed, or who signs to any subscription or agreement the name of any person, knowing that the person has no means or does not intend in good faith to comply with all the terms thereof or that there is any understanding or agreement that the terms of the subscription or agreement are not to be complied with or enforced, is guilty of a misdemeanor.

Section 2253 provides that any director of a stock corporation, domestic or foreign, who concurs in any vote or act of the directors of the corporation or any of them, knowingly and with dishonest or fraudulent purpose, to make any dividend or distribution of assets.

Section 2254 specifies that every director, officer or agent of any corporation, domestic or foreign, is guilty of a felony who knowingly concurs in making, publishing or posting either generally or privately to the shareholders or other persons.

Section 2255 provides that every director, officer or agent of any corporation, domestic or foreign, who knowingly receives or acquires possession of any property of the corporation, otherwise than in payment of a just demand, and, with intent to defraud, omits to make, or to cause or direct to be made, a full and true entry thereof in the books or accounts of the corporation is guilty of a public offense.

Section 2256 sets forth that every officer, agent or clerk of any corporation, domestic or foreign, or any person proposing to organize a corporation or to increase the capital stock of any corporation, who knowingly exhibits any false, forged or altered book, paper, voucher, security or other instrument of evidence to any public officer or board authorized by law to examine the organization.

AB 2257 states that every person who, without being authorized so to do, subscribes the name of another to or inserts the name of another in any prospectus, circular or other advertisement or announcement of any corporation, domestic or foreign, whether existing or intended to be formed, with intent to permit the document to be published.

Section 2258 says that any foreign corporation which transacts intrastate business without complying therewith is guilty of a misdemeanor, punishable by a fine.

Section 2259 provides that any person who transacts intrastate business on behalf of a foreign corporation which is not authorized to transact such business in this state, knowing that it is not so authorized, is guilty of a misdemeanor punishable by fine of not less than $50 nor more than $600.

Section 2260 provides that the fact that the corporation was a foreign corporation is not a defense, if it was carrying on business or keeping an office therefor within this state.