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CALIFORNIA CORPORATE & SECURITIES LAW

Who Votes As Proxy For Shares Standing In The Name Of Another Corporation?

The Proxy Season blog yesterday discussed the following question from the Q&A Forum of TheCorporateCounsel.net: Under Delaware law, can a Board of Directors authorize a person who is not an officer of the company to act as agent and vote shares of stock for the Company that it holds in another entity? John Jenkins responded…

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This Company Solicited Consents To Remove A Sitting Director

It’s not often that you see a company soliciting consents to remove one of its sitting directors.  However, that is what PICO Holdings, Inc. sought to do in this consent solicitation statement filed with the SEC on October 31, 2016.  According to PICO’s Form 8-K , John R. Hart’s employment as president and chief executive officer of the company “was terminated”…

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Court Rejects Challenge To Internal Affairs Doctrine

Marvell Technology Group, Ltd. is a publicly traded company that is incorporated in Bermuda.  Marvell’s U.S. operating subsidiary is based in California.  A year ago, an institutional stockholder filed a derivative suit against Marvell and several of its officers and directors.  The factual bases for the plaintiff’s suit were securities law violations but the plaintiff…

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Unregistered Sales Of Certificates Of Deposit

Last spring, the California Department of Business Oversight warned consumers that two related companies have been offering unlicensed online securities broker-dealer services and “unregistered sales of certificates of deposit (CDs)”.  The Department’s announcement raises the question of whether the offer and sale of CDs must be qualified under the Corporate Securities Law of 1968. Section 25019 of…

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Court Rules Fixed Income Annuity Is Not A Security Under The CSL

Because annuity contracts involve the payment of money in the expectation of future payments, one might conclude that they are securities within the meaning of the California Corporate Securities Law of 1968.  Evidently, that is what Mr. Abbit or at least his lawyer believed when they filed a class action lawsuit against an insurer alleging,…

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California’s Private Fund Adviser Exemption

Before the enactment of the Dodd-Frank Act in 2010, many advisers to alternative investment vehicles, such as hedge funds, private-equity funds, and venture capital funds relied on the Section 203(b)(3) exemption from registration under the federal Investment Advisers Act.  In California, investment advisers exempt under Section 203(b)(3) had a corollary temporary exemption from California investment…

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When A Director May Not Be Interested In Director Compensation

Suppose that a corporation has three directors, A, B & C, each of whom is compensated by the corporation.  Is director A financially interested in a resolution fixing the compensation of director B?  Corporations Section 310(a) provides the following answer: A director is not interested within the meaning of this subdivision in a resolution fixing the…

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Is The SEC’s Universal Proxy Proposal A Product Of Agency Capture?

More than six decades ago, the late Professor Marver H. Bernstein published his theory of regulatory capture in Regulating Business By Independent Commission (Greenwood Press 1955).  According to his theory, agencies follow a life cycle of birth, maturity and old age.  As an agency enters senescence, it inevitably becomes captive to the groups that it regulates.…

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Court Addresses “Fair Value” Determination In Statutory Buyout Proceeding

When when a shareholder sues for involuntary dissolution, the corporation, or the holders of 50% or more of the voting power of the corporation, may avoid the dissolution by purchasing for cash the plaintiff’s shares at their “fair value.”  Cal. Corp. Code § 2000.  The statute establishes several parameters for determining “fair value”.  Thus, “fair value” must…

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When Non-Voting Shares Have The Right To Vote

The California General Corporation Law authorizes a corporation to “issue one or more classes or series of shares or both, with full, limited or no voting rights”.  Cal. Corp. Code § 400(a).  Thus, it may be reasonable to assume that when a corporation issues shares with no voting rights, those shares would have no right to…

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