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CALIFORNIA CORPORATE & SECURITIES LAW

New Law Attempts To Clarify Legal Status Of LLC Employee Membership Purchase And Option Plans

California Labor Code Section 407 may be a bit of a surprise to many lawyers both in and outside of the state.  It provides:

Investments and the sale of stock or an interest in a business in connection with the securing of a position are illegal as against the public policy of the State and shall not be advertised or held out in any way as a part of the consideration for any employment.

This statute raises obvious problems for a business (whether or not incorporated or formed under California law) that wants to adopt a stock option or purchase plan.  The General Corporation Law addresses the problem with respect to foreign and domestic corporations by providing:

Sections 406 and 407 of the Labor Code shall not apply to shares issued by any foreign or domestic corporation to the following persons:

(1) Any employee of the corporation or of any parent or subsidiary thereof, pursuant to a stock purchase plan or agreement or stock option plan or agreement provided for in subdivision (a).

(2) In any transaction in connection with securing employment, to a person who is or is about to become an officer of the corporation or of any parent or subsidiary thereof.

Cal. Corp. Code § 408(c).  As I pointed out in this post, the legislature neglected to include a similar provision in the California Revised Uniform Limited Liability Company Act even though it had done so in the former Beverly-Killea Limited Liability Company Act (former Cal. Corp. Code § 17100(d).

The legislature will soon fill this lacuna by amending Corporations Code Section 17704.01 to add a new subdivision (e):

(e) Sections 406 and 407 of the Labor Code shall not apply to membership interests issued by any limited liability company or foreign limited liability company to the following persons:

(1) Any employee of the limited liability company or foreign limited liability company or of any parent or subsidiary of either, pursuant to a membership interest purchase plan or agreement, or a membership interest option plan or agreement.

(2) In any transaction in connection with securing employment, a person who is or is about to become an officer or a manager of the limited liability company or the foreign limited liability company or of any parent or subsidiary of either.

This change does not become effective until January 1, 2016.

Not All Epics Are Epic

The following sentence in the Roundup caught my eye:

And speaking of water, Will Parrish has an epic (we’re talking Gilgamesh length) look at the California Water Project and the impending battle over new dams in the state.

I doubt that the author was intending irony, but the Epic of Gilgamesh isn’t all that long.  Written in a dialect of Akkadian, the epic was written on twelve clay tablets and consists of approximately 3,500 lines.  In comparison, Homer’s Iliad consists of about 15,700 lines.

Amazingly, the Epic of Gilgamesh recently got longer, with the recent announcement of the discovery of a tablet containing 20 heretofore lost lines.  This link allows you to listen to the epic in the original Akkadian.

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