California Law Requiring Public Companies to Include Women on Board of Directors

Please find below an overview of California Senate Bill 826 (the “Bill”) which requires publicly held domestic and foreign corporation with principal executive offices located in California to include women on their boards of directors (the “Female Director Requirement”).

  1. The Female Director Requirement. No later than the close of the 2019 calendar year, a publicly held domestic or foreign corporation whose principal executive offices, as disclosed in its Annual Report on Form 10-K, are located in California (a “California Corporation”) shall have a minimum of one female director on its board. A corporation may increase the number of directors on its board to comply with the Female Director Requirement. No later than the close of the 2021 calendar year, a California Corporation shall comply with the following:
    • If its number of directors is six or more, the corporation shall have a minimum of three female directors.
    • If its number of directors is five, the corporation shall have a minimum of two female directors.
    • If its number of directors is four or fewer, the corporation shall have a minimum of one female director.
  2. Who Must Comply With the Female Director Requirement. The Bill defines a “publicly held corporation” as a corporation with outstanding shares on a major United States stock exchange. The law does not define what constitutes a “major United States stock exchange,” but the Senate Rules Committee Office of Senate Floor noted that the vast majority of the California public companies traded on NASDAQ, NYSE and NYSE American would be subject to the law.
  3. Possible Fines for Non-Compliance with the Female Requirement. The Bill permits the Secretary of State of the State of California (the “Secretary of State”) to adopt regulations to impose fines for violations of the Bill. Each director seat required to be held by a female, which is not held by a female during at least a portion of a calendar year, shall count as a violation of the Bill.

There is a fine of $100,000 for the first violation and $300,000 for a second or subsequent violation. A female director having held a seat for at least a portion of the year shall not be a violation of the Bill. The Bill also anticipates the Secretary of State’s adoption of regulations requiring California Corporations to file board member information with the Secretary of State. Failure to timely file such information may result in a fine of $100,000.

 

Marcelle Balcombe

Marcelle S. Balcombe is a member of the Corporate and Securities practice group of Sichenzia Ross Ference LLP. Ms. Balcombe focuses her practice in the areas of securities, corporate finance and mergers and acquisitions.
Marcelle Balcombe

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