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CALIFORNIA CORPORATE & SECURITIES LAW

What The Delaware Supreme Court Overlooked In Gantler v. Stephens

I have never been reconciled to the Delaware Supreme Court’s pronouncement in Gantler v. Stephens, 965 A.2d 695, 709 (Del. 2009) that “the fiduciary duties of officers are the same as those of directors”.  Officers are, as I’ve previously noted, agents of the corporation while directors are not.  This means that an officer’s duties are…

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Should Corporate Law Preserve The Honor Of Salmon Or Fairness To Meinhard?

Should corporate law be concerned with the sinner or the sinned against?  In the venerable case of Meinhard v. Salmon, 249 N.Y. 458, 464 (1928), Benjamin Cardozo penned these now famous lines: A trustee is held to something stricter than the morals of the market place.  Not honesty alone, but the punctilio of an honor the…

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Why Some Delaware Corporations May Be Concerned With California’s Supermajority Vote Requirements

Section 710(b) of the California Corporations Code defines a “supermajority vote” as a requirement set forth in a corporation’s articles of incorporation (or certificate of determination) that specified actions be approved by a larger proportion of the outstanding shares than a majority, or by a larger proportion of the outstanding shares of a class or series than…

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Officers And The Business Judgment Rule

Last weekend, I attended a symposium at the UCLA School of Law entitled “Can Delaware Be Dethroned? Evaluating Delaware’s Dominance of Corporate Law”.  The event, organized by ever erudite Professor Stephen Bainbridge, featured presentations by leading scholars and practitioners from around the country.  I was therefore surprised when the discussion turned to whether Delaware applies the business…

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Is California “The Biggest Loser”?

I am very excited to be moderating a panel discussion this weekend at a symposium entitled Can Delaware Be Dethroned? Evaluating Delaware’s Dominance Of Corporate Law.  The symposium is being presented by the Lowell Milken Institute for Business Law and Policy at UCLA’s School of Law.  My panel consists of distinguished legal scholars from around the country: Michal Barzuza…

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Getting To The Point On Director Elections

Last week in The Mentor Blog, Broc Romanek mentioned a blog posting of mine from September 2015: Was This Director Duly Elected Or Appointed?  My post was concerned Intelligent Digital Systems, LLC v. Beazley Ins. Co., Inc., 2015 U.S. Dist. LEXIS 82742 (June 23, 2015).  Briefly, an insurer claimed that the director had been duly elected or appointed and this triggered a…

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Court Rules Plaintiff Is Not Required To Advance Defendant’s Legal Expenses

Imagine how frustrated you would be if you sued someone and the defendant responded by demanding that you advance his legal expenses in defending your lawsuit.  The plaintiff in Allergia, Inc. v. Bouboulis, 2017 U.S. Dist. LEXIS 7759 (S.D. Cal. Jan. 19, 2017) found itself in just that situation.  U.S. District Judge Janis L. Sammartino, however, spared the…

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Fractions And Squeeze Outs

The last two posts have discussed what a corporation may do with fractions of shares.  I entitled the first of these posts “Breaking Up Is Not Hard To Do – Fractions, Scrip And Scrippage” in partial reference to the song by Neil Sedaka and Howard Greenfield.  The title was also a reference to the etymological…

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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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