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CALIFORNIA CORPORATE & SECURITIES LAW

California’s 50/90 Rule – When Being In Control May Mean That You’re Not

Many out-of-state practitioners are surprised to learn that California has special statutory provisions governing a merger when a constituent corporation (Section 161) or its parent (Section 175) owns, directly or indirectly, more than 50%  of the voting power (Section 194.5) of the other constituent corporation prior to the merger.  This is the so-called “50/90 Rule”.   It can be  found in the last…

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Staff Assents To Exclusion Of Shareholder Proposal Requiring California Company To Hire Investment Banker

I’ve been highlighting some Rule 14a-8 no action letters concerning California Corporate law.  This March 14 post discussed an unsuccessful request to exclude a proposal relating to cumulative voting and this March 18 post covered a successful request to exclude a proposal from John Chevedden.  (In this post last Tuesday, Broc Romanek wrote about KBR’s…

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Non-Competition Contract Doesn’t Vitiate Agents’ Duty Of Loyalty

California has codified various legal and equitable maxims in its Civil Code. However, a quick read of some of these maxims leaves one wondering whether the legislature has simply codified the sayings of Yoda. For example, Civil Code Section 3536 cryptically provides “The greater contains the less” while Section 3538 helpfully adds some certainty by…

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Court Of Appeal Rejects Omnicare In Favor Of Jewel Companies

Yesterday, the California Court of Appeal issued a brief, yet interesting, opinion that addressed several questions of California corporate law, Monty v. Leis, Cal. Ct. of Appeal (Div. 6) 2d Civil No. B225646 (March 30, 2011). The Facts The case initially involved a suit by two shareholders of a bank to stop an infusion of…

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True Or False? Golden Parachutes Benefit Shareholders

Golden parachute arrangements are often included in discussions of anti-takeover devices.  For example, the late Harold Marsh, Jr. in his magnum opus, Marsh’s California Corporation Law, discusses golden parachutes in a section entitled “Defenses of Control”.  Can it be that golden parachutes actually have the opposite effect?  A recent study by Professor Eliezer Fich, Ahn Tran, and Ralph Walkling…

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Fairness Hearings: Not Just For Reorganizations

California attorneys are fortunate to have a wealth of resources at their disposal.  One of these treasures is the Continuing Education of the Bar – California (CEB).  The University of California and the State Bar of California founded CEB more than 60 years ago.  CEB is, however, self-supporting.  Among numerous other publications, the CEB publishes…

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Want A Fairness Hearing But Paying In Cash – No Problem?

In yesterday’s post, I mentioned California Corporations Code Section 1001(d).  That statute imposes a super-majority shareholder approval requirement for sale of assets transactions covered by Section 1001(a) when the acquiring entity is in “control” of or under common control with the corporation disposing of the assets.  The vote required is 90% of the voting power of the disposing corporation.  “Control”…

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When a Sale of Assets is not a “Sale-of-Assets Reorganization”

The California General Corporation Law (CGCL) contemplates three different types of reorganizations – a merger reorganization, an exchange reorganization, and a sale-of-assets reorganization.  Cal. Corp. Code § 181.  Chapter 12 of the CGCL prescribes both board and shareholder approval requirements for reorganizations, including sale-of-asset reorganizations. Readers of the CGCL, however, will note that Corporations Code…

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