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CALIFORNIA CORPORATE & SECURITIES LAW

When Someone Is Missing, Is Consent Unanimous?

The word “unanimous” is derived from two Latin words, unus (meaning one) and animus (mind).  Thus in Plautus’ play, the servant, Stichus, tells his friend, Sagarinus: “ego tu sum, tu es ego, unianimi sumus (I am you and you are I, we are of one mind)”.  T. Maccius Plautus, Stichus Act V, sc. 4:49.

Under the California General Corporation Law, directors must act collectively as a group but not necessarily as “one mind”.  Thus, Section 307(a)(8) provides: “An act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the board, subject to the provisions of Section 310 and subdivision (e) of Section 317.”  Unanimity, however, is required when action is taken informally (i.e., without a meeting).  Thus, Section 307(b) specifies that an “action required or permitted to be taken by the board may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to that action”.

Suppose, however, that a vacancy exists on the board.  For example, a corporation might have seven authorized directors but only six in office.  It is clear that the six remaining directors can take action at a meeting provided that a quorum is present (subject to Sections 310 and 317(e)).  But is the requirement that “all members of the board” consent in writing mean all authorized or all directors then in office?  Fortunately, Section 308(b) answers this question by providing that action by written consent may be taken if “the number of members of the board serving at the time constitutes a quorum”.  This proviso is important because it prevents a rump group of directors from taking action by written consent when the quorum requirement would preclude action at a meeting.  Interestingly, the analogous Delaware statute, Section 141(f), does not include a similar proviso.

It must be noted, however, that California, unlike Delaware, makes an exception in the statute for the consent(s) of interested director(s).  The California General Corporation Law also has an exception to the quorum proviso that allows the remaining directors then in office, or the sole remaining director, to fill vacancies on the board (unless otherwise provided in the articles or bylaws and except for a vacancy created by the removal of a director).  Cal. Corp. Code § 305(a).

Don’t Be Flat-Footed And Miss Mostellaria

The comedic Roman poet, Plautus, lived more than two millenia ago and yet his plays are still produced today.  This September, the Getty Villa will be offering Plautus’ Mostellaria (the “Ghost”).  You will not find a better venue than the Getty Villa’s outdoor theater overlooking the Pacific on a warm September evening.

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