Water Companies

Title 1, Division 3, Part 7, Chapter 1 deals with water companies under the California Corporations Law.

Section 14300 provides that any corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for irrigation purposes may provide, and any corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for domestic use shall provide, in its articles or bylaws that water must be sold, distributed, supplied, or delivered only to owners of its shares and that the shares are to be appurtenant to certain lands when the same are described in the certificate issued therefor. These corporations are to be known as a mutual water company.

Section 14300.5 defines the term “public water system.”

Section 14301 provides that a corporation, including a nonprofit corporation organized for or engaged in the business of developing, distributing, supplying, or delivering water for irrigation or domestic use, or both, may provide in its articles, or may amend its articles to provide, that its only purpose is to be to develop, distribute, supply, or deliver water for irrigation or domestic use, or both, to its members or shareholders, at actual cost plus necessary expenses.

The amendment of the articles may be accomplished by specified information.

Section 14301.2 provides that each board member of a mutual water company that operates a public water system is required to comply with the training requirements set out in the Health and Safety Code.

Section 14301.3 specifies that all construction on public water systems operated by a mutual water company are to be designed and constructed to comply with the applicable California Waterworks standards.

Section 14302 explains that, whenever the owner of real property to which water stock by the terms of the certificate thereof is appurtenant at the time of conveyance, by properly executed conveyance, transfers to another the real property with the appurtenances belonging to the property, or whenever title to the property passes by execution sale, or by foreclosure or probate proceedings, the secretary of the water company that issued the stock is required, upon exhibition to him or her of a deed of the land duly recorded, or the necessary court order duly recorded, issue to the grantee named in the conveyance a new certificate of stock for the number of shares appurtenant to the land as shown by the books and records of the company.

Section 14303 states that a corporation organized for or engaged in the business of selling, distributing, supplying, or delivering water for irrigation purposes or domestic use, and not as a public utility, may levy assessments upon its shares, whether or not fully paid, unless otherwise provided in its articles or bylaws.

Section 14304 provides that, if a shareholder of a mutual water company has not timely paid any rate, charge, or assessment arising from, or related to, water service provided by the mutual water company to the shareholder’s property, the board of directors of the mutual water company may authorize the recording of a notice of lien against that shareholder’s property to secure the collection of the rates, charges, and assessments owed to the mutual water company by the shareholder.

Section 14305 names this section as the Mutual Water Company Open Meeting Act. This section only applies to a mutual water company that operates a public water system. A board of directors of a mutual water company allows an eligible person to personally attend a meeting of the board, if the eligible person gave the board at least 24 hours advance written notice of his or her intent to personally attend the meeting. Details rules are set forth in this section.

The following terms are defined: “eligible person,” “item of business,” “meeting,” and “mutual water company.”

Section 14306 requires the board of a mutual water company that operates a public water system to adopt, in an open meeting, an annual budget on or before the start of each fiscal year of the mutual water company. The board of a mutual water company that operates a public water system is required to contract with a certified public accountant or public accountant to conduct an annual review of the financial records and reports of the mutual water company. The review is subject to generally accepted accounting standards.

Section 14307 provides that, unless its governing documents impose more stringent standards, a mutual water company that operates a public water system is required to make the specified records promptly available upon written request to an eligible person upon payment of fees covering direct costs of duplication. The term “eligible person” is defined in four specified instances.