Legislature Imposes New Penalty On LLCs
As I discussed in this earlier post, “transacting intrastate business” is not the same as “doing business” in this state. Foreign corporations and limited liability companies must register with the Secretary of State if they transact intrastate business. Even though foreign corporations and LLCs are not transacting intrastate business in California, they may be considered to be doing business here. Read more...
Could The Product Of Two Debts Really Be A Fortune?
In 628 in the Gurjar capital city of Bhillamala (now, Bhinmal, India), the mathemetician Brahmagupta set out to explain how zero and negatives numbers work. In his book, Brahmasphutasiddhanta, he set forth the rule that the product of two negative numbers (debts) is a positive number (fortune). Translating this fundamental mathematical concept into the present century, I’m pondering (pondering, not opining) whether the same rule might Read more...
Are Charter Indemnification Provisions Contracts?
Public companies typically include provisions in their articles and bylaws that mandate indemnification of directors and officers. Often, these provisions include a statement to the effect that the rights to indemnification are a contract right. However, declaring that a contract exists does not necessarily establish a contract. Fortunately, the California Civil Code provides some rules for answering the question of whether Read more...
Achilles’ Shield And Judicial Review Of Arbitration Awards
This month, I revisited the Huntington Library in San Marino, California. Among other things, I wanted to have another look at the Shield of Achilles, John Flaxman’s magnificent re-imagining of the shield crafted by Hephaestus and brought to Achilles by his mother, Thetis. Homer describes the shield in the Iliad. The silver-gilt shield is a stunning work of art, but it also depicts Read more...
Is An Immoral Contract Unlawful?
Last week, I wrote about a proposal by the Nevada Secretary of State to ban the establishment of a corporation for an ”illicit purpose“. Currently, Nevada specifically authorizes the formation of corporations to transact any “lawful” business and for “legitimate” purposes, NRS 78.030(1), while California permits corporations to be formed for “lawful” purposes, Cal. Corp. Code § 202(b)(1). “The illegality of contracts Read more...
Court Of Appeal Sends Spot Trailer Bills To The Dog House
For some time, I’ve been critical of that bit of legislative legerdemain known as the “spot bill”. See See Spot Run. A spot bill is a bill that is essentially empty of any content, usually because the bill makes some minor, non-substantive change such as changing “a” to “the” in the text of a statute. I’ve been frustrated by the Read more...
Senator Seeks 24-Hour Advance Notice Of Corporate Political Contributions/Assemblymember Asks For Constitutional Convention
Yesterday, Broc Romanek noted the continuing interest in mandating disclosure of political spending by corporations. See Battle Lines Being Drawn: Political Spending Disclosures. We are also seeing activity here in California. Last week, Senator Noreen Evans introduced SB 121 to require any corporation that has shareholders located in California and that makes a contribution or expenditure (as defined): to issue a Read more...
A Corporate Governance Lesson From Pericles
Before shareholders may take action at a meeting, a quorum must be established. See When The Best Offensive Strategy May Simply Be To Stay Home. The existence of a quorum does not guaranty that action has been validly taken at a shareholders’ meeting because the meeting must also have been properly noticed. Cal. Corp. Code § 601(a). However, a quorum and proper Read more...
SEC Faces A Swarm Of Legal Issues In Considering The Investor Advisory Committee’s Recommendations Concerning General Solicitation
The SEC’s Investor Advisory Committee held another meeting last week with Elisse B. Walter making her first public appearance as SEC Chairman. She and Commissioner Luis A. Aguilar had many kind words for the Committee’s recommendations with respect to lifting the ban on general solicitations in Rule 506 offerings. The insouciance of their remarks, however, was in sharp contrast with Read more...
Does The Authorization Or Issuance Of A New Class Of Stock Require Qualification?
Corporations often amend their articles of incorporation to create one or more new classes of securities. These newly created classes often have priority over the previously issued and outstanding shares. Does the amendment or issuance of these shares require qualification under the Corporate Securities Law? The answer is “yes” – and “no”. Of course, any offer or sale of the Read more...
