The Quirky Math of California Director Requirements
Understanding the number of corporate directors required seems like the kind of question that should be easy enough to answer by reference to California’s General Corporation Law (“GCL”).[1] But that is not necessarily the case. Chapter 3 of the GCL deals with “Directors and Management,” which would seem like the logical place to specify how many directors a California corporation must have. Instead, that information is set out in Chapter 2 of the GCL, which deals with “Organization and Bylaws.” Even then, California’s rule on the number of required directors is quirky.
The General Rules
Section 212 of Chapter 2 of the GCL provides that:
The bylaws shall set forth (unless such provision is contained in the articles, in which case it may only be changed by an amendment of the articles) the number of directors of the corporation; or that the number of directors shall be not less than a stated minimum nor more than a stated maximum (which in no case shall be greater than two times the stated minimum minus one), with the exact number of directors to be fixed, within the limits specified, by approval of the board or the shareholders (Section 153) in the manner provided in the bylaws[.][2]
Confused already? Basically, this provision requires that the corporation’s articles of incorporation or bylaws state either (1) the exact number of directors or (2) the minimum and maximum number of directors. If the number is stated in the articles of incorporation, that would require amending the articles to change the number of directors, so it is better to have it in the bylaws, which are easier to amend without having to file anything with the Secretary of State’s office.[3]
Section 212(a) then goes on state (again rather confusingly) how many directors a corporation must have. The upshot is that a corporation generally must have at least three directors, except that (1) a corporation with only one shareholder may have one or two directors, and (2) a corporation with only two shareholders may have two directors.[4] Whether the corporation has only one or two shareholders, the corporation can have more than the minimum number of directors if the principal(s) like.
Shares Held by Married Persons as Community Property
There is still some more complexity, however, if the corporation’s stock is held by married persons as community property. Under California law, property acquired by a spouse during marriage is presumptively community property.[5] The presumption applies to all property, real and personal, acquired during the marriage, including shares of stock.[6]
A certificate representing a share or shares of stock acquired during the marriage may be, and often is, issued to the spouses as, for example, “[Husband] and [Wife], as community property.”[7] But even if the share certificate is not so issued, it is reasonable to take the position that the stock is held as community property, given the community-property presumption in California, unless the share certificate is specifically issued to one spouse as separate property. And if the share certificate is specifically issued to the spouses as community property, or is presumptively treated as community property because it is not specifically issued to one spouse as separate property, then the share can only be voted as one share.[8]
If corporate stock is treated and must be voted as a single share, albeit one owned as community property by two people, then it is also reasonable to regard the corporation as having only one shareholder for purposes of determining how many directors the corporation must have, that is, a minimum of one or two directors, depending on what the principal(s) decide on, in accordance with section 212(a) of the GCL. That is the approach we have taken to the corporations we maintain.
Note that this issue concerning the minimum number of directors a corporation owned solely by spouses as community property must have does not appear to have been conclusively decided by a California court. There is, however, one case that at least suggests that this is an acceptable approach and one actually taken by married persons in practice.[9]
In that case, spouses George Zhang and Lucy Gao formed the corporation Uni-Glory Development, Inc. (“Uni-Glory”) to engage in the business of construction. Uni-Glory had a contractor’s license issued by the state. The license indicated that Chien-Kuo Liu was Uni-Glory’s responsible managing officer (“RMO”) for purposes of qualifying as a duly licensed contractor, as required under California law. Uni-Glory sued Fairview East, LLC (“Fairview”) to recover for unpaid work on a construction job. Among Fairview’s defenses was that Uni-Glory did not have a board of directors to determine that the corporation would have an RMO. However, Uni-Glory’s statement of information filed with the Secretary of State listed Zhang as the corporation’s only director.[10] And Zhang confirmed in his testimony given in the case that he was the company’s sole director.[11] Zhang also testified that he asked Liu to be RMO and Liu agreed. As such, the court noted that there was “testimony that Uni-Glory’s board—Zhang—determined to, and did, make Liu the RMO.”[12]
The court did not expressly rule that it was sufficient for Uni-Glory to have only one director such that Zhang’s action in appointing Liu as RMO was validly taken. But the court did address the issue as follows:
Though larger corporations must have more directors, a corporation with just one shareholder may have just one director. (Corp. Code, § 212.) The parties do not elaborate on how Zhang and Gao owned Uni-Glory shares. However, Gao testified at one point that she and her husband Zhang were “the shareholder” of Uni-Glory. (Italics added.) We accept this fact, which Fairview does not contest, in reviewing the issue Fairview frames as purely legal.[13]
The court at least suggested in this passage that where married persons own corporate shares as community property and are so treated as being only one shareholder, the corporation may have only one director in accordance with section 212 of the GCL if they so choose. This is a logical approach and the one we follow for the corporations we maintain.
[1]See Cal Corp Code §§ 100-2319.
[3]See Cal. Corp. Code §§ 211 (amendment of bylaws), 905 (filing of certificate of amendment to articles or incorporation).
[4]Cal. Corp. Code § 212(a).
[5]See Cal. Fam. Code § 760 (“Except as otherwise provided by statute, all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state is community property.”); Dye v. Taxe (In re Kellogg-Taxe), No. 2:12-bk-51208-RK, 2017 Bankr. LEXIS 644, at *24 (Bankr. C.D. Cal. Mar. 10, 2017), aff’d, No. CC-17-1092-FSKu, 2018 Bankr. LEXIS 2339 (B.A.P. 9th Cir. Aug. 6, 2018). The community-property presumption can be rebutted if the property’s acquisition is (1) traceable to a separate property source, (2) acquired by gift or bequest, or (3) earned or accumulated while the spouses are living separate and apart. In re Marriage of Valli, 58 Cal. 4th 1396, 1400, 324 P.3d 274, 276, 171 Cal. Rptr. 3d 454, 457 (2014).
[6]See Cal. Fam. Code § 760; In re Kellogg-Taxe, supra note 5, 2017 Bankr. LEXIS 644, at *25.
[7]See Cal. Corp. Code § 704(a) (describing how voting works with respect to shares “of record in the names of two or more persons,” including “spouses as community property”); see also id. § 420(c) (providing that neither a corporation nor its transfer agent or registrar is liable “[t]o any married person or to any transferee of such person for transferring shares or other securities on its books at the instance of the person in whose name they are registered, without the signature of such person’s spouse and regardless of whether the registration indicates that the shares or other securities are community property, in the same manner as if such person were unmarried”).
[8]See Cal. Corp. Code § 704(a) (described in note 7 above).
[9]See Uni-Glory Dev., Inc. v. Fairview East, LLC, No. B334626, 2025 LX 499999, 2025 WL 3022453 (Cal. Ct. App. Oct. 29, 2025). This case was not certified for publication in the official reports and so does not have precedential value in California. See Cal. R. Ct. 8.1115(a).
[10]Uni-Glory, 2025 LX 499999, at *2.
[11]Id. at *2, 7.
[12]Id. at *7.
[13]Id. at *7 n.3.