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CALIFORNIA CORPORATE & SECURITIES LAW

Breaking Up Is Not Hard To Do – Fractions, Scrip And Scrippage

The California General Corporation Law explicitly authorizes a corporation to issue fractional shares.  Cal. Corp. Code § 407.  A corporation, however, is not required to do so.  Id.  In lieu of issuing fractions, a corporation may in connection with the original issuance: arrange for the disposition of fractional interests by those entitled to receive them;…

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Calling All Stock Certificates

Last week, Broc Romanek’s Mentor Blog addressed the question of what to do about outstanding stock certificates following a reverse stock split.  Today, I’ll weigh in with a California perspective. Section 422 of the California Corporations Code invests a corporation’s board of directors the authority to order any holders of outstanding share certificates to surrender and exchange them for…

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O Frabjous Day! Court Holds Passive Member Is Not “Doing Business”

The State of California imposes its franchise tax on every corporation (other than a bank, financial corporation or exempt corporation) that is “doing business” in California.  Cal. Rev. & Tax Code § 23151.  This tax is imposed without regard to whether the corporation is incorporated in California.  This makes the name of the tax somewhat misleading…

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Do Outsiders Have Standing?

One of the essential elements of a contract is the consent of the parties.  Cal. Civ. Code § 1550(2).  When a party is a corporation, there is always a question of whether the person or persons signing the contract have the authority to do so on behalf the entity.  There is also the question of who can…

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Should California Employers Be Insecure About California’s State-Run Retirement Savings Program?

Last September, California Governor Jerry Brown signed into law SB 1234 (De León) which implements the California Secure Choice Retirement Savings Program.  2016 Cal. Stat. ch. 804. If you haven’t heard of the program, California State Treasurer John Chiang describes it as the “most ambitious push to expand retirement security since the passage of Social Security in the…

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Five Gnostic Exemptions From The Qualification Requirements Of The Corporate Securities Law

When looking for exemptions from the qualification requirements of the California Corporate Securities Law of 1968, a good place to start is Chapter 1, Part 2, Division 1 of Title 4 of the Corporations Code.  Cal. Corp. Code § 25100 et seq.  If you don’t find an usable exemption there, another promising place to look is the rules of the Commissioner…

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Is This SEC Claim False And Misleading?

Last week, the Securities and Exchange Commission announced yet another whistleblower award.  According to the SEC, the award totals more than $5.5 million dollars.  Tellingly, we don’t, and won’t, know the exact amount.  The headline to the SEC’s press release pegs the number at $5.5 million while the order itself reads: Claimant shall receive an award of [Redacted] percent [Redacted]…

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Must A Security Be Written?

In yesterday’s post, I covered some of the differences between the laundry lists of securities found in the California Corporate Securities Law of 1968 and the Securities Act of 1933.  Both lists seem to contemplate instruments that are written.  But what does it mean to be “written”?  Before the advent of computers, email and electronics,…

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Making A List Of Securities And Checking It Twice

California Corporations Code Section 25019 defines “security” not by saying what a security is but by providing examples of numerous types of securities.  In this respect, Section 25019 is reminiscent of Section 2(a)(1) of the Securities Act of 1933.  The two statutory lists, however, are not identical.  Below is a brief summary of some of the differences: Securities listed…

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