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CALIFORNIA CORPORATE & SECURITIES LAW

Why Some Delaware Corporations Will Want To Waive This California Statute

In yesterday’s post, I commented on a recent ruling by former Vice Chancellor John W. Noble to the effect that “Delaware disclosure law which generally does not require disclosures to shareholders unless shareholder action is sought”.  The Ravenswood Investment Company, L.P. v. Winmill & Co. Inc., C.A. No. 7048-VCN (Transcript) (Del. Ch. Feb. 25, 2016).  I pointed out that California’s annual report requirement applies to a foreign corporation if it:

  • Has its principal executive offices in California;
  • Customarily holds meetings of its Board of Directors in California; or
  • Is subject to California’s “pseudo-foreign corporation” statute.

The annual report requirement, however, does not apply if a corporation has fewer than 100 holders of records (as determined under Section 605 of the California Corporations Code) and expressly waives the annual report requirement in its bylaws.  As a result, many California practitioners include such a waiver in their standard form of bylaws.  However, I find that the option of waiving the annual report requirement is often overlooked in the case of foreign corporations.  Although the title of this post refers to Delaware corporations, the statute can apply to any foreign corporation, as defined in Section 171 of the California Corporations Code.

“Please come to Boston for the springtime”

As a reminder, I will be speaking to the Boston Bar Association’s Business Law Section later this month on California Business Law for Out-of-State CorporationsBaldwin Lee, an employment law partner, will be joining me.  Some of the topics that we plan to cover include:

  • Enforceability of covenants not to compete
  • California corporate/LLC law statutes that can apply to out-of-state corporations and LLCs
  • Securities law issues faced by out-of-state issuers
  • Licensing issues

Please join us April 21, 2016!

 

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