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CALIFORNIA CORPORATE & SECURITIES LAW

Is Someone Else’s Purpose An Improper Purpose?

This post on the Harvard Law School Forum on Corporate Governance and Financial Regulation discusses Vice Chancellor J. Travis Laster’s recent decision in Wilkinson v. A. Schulman, Inc., 2017 Del. Ch. LEXIS 798.  The case involved a stockholder’s demand for inspection under Section 220 of the Delaware General Corporation Law.  Vice Chancellor Laster denied inspection…

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FTB Publishes Disinformation About Corporations

Recently, I happened across a summary of the “key features” of a corporation on the California Franchise Tax Board’s website.  Recognizing that it is always a challenge to summarize accurately complex legal matters, I do beg to differ with some of the FTB’s assertions. A corporation must register with the California Secretary of State before conducting…

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Nevada Now Requiring Director Names Upon Incorporation

Until this month, incorporators of Nevada corporations were required to file an initial list of its officers and directors on or before the last day of the first month after filing the initial articles of incorporation (unless the corporation selected an alternative due date (See NRS 78.150 & NAC 78.300 – .380)).  Reportedly, many incorporators failed to file…

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Delaware Special Litigation Committee Review “Could Stand A Good Tweaking”

UCLA Law School Professor Stephen Bainbridge recently critiqued the Nevada Supreme Court’s decision to follow Auerbach v. Bennett, 419 N.Y.S.2d 920 (1979) rather than Delaware’s Zapata Corp. v. Maldonado, 430 A.2d 779 (Del. 1981).  He concludes: To be sure, Delaware law in this area could stand a good tweaking. The Aronson/Zapata framework continues to rely unduly on…

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How To Win Custody Of A Corporation

In family law, the fights are often over who gets custody of the kids, the pets and the house.  Shareholders battle over many things, but you don’t often hear of custody fights in the corporate context.  Is it even possible to win custody of a corporation?  In Nevada, the answer is yes. NRS 78.347 allows any stockholder to apply to…

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Nevada Supreme Court Adopts Delaware’s Direct Harm Test For Derivative Claims

On the same day that the Nevada Supreme Court rejected Delaware’s approach to reviewing special litigation committee determinations, it adopted Delaware’s test for determining whether a shareholder suit is derivative or direct.  Parametric Sound Corp. v. Eighth Judicial District Court, 133 Nev. Adv. Op. 59 (2017).  When shareholders sue officers and directors, they may pursue direct…

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Review Of Special Litigation Committee Recommendations

Yesterday’s post limned the Nevada Supreme Court’s adoption of New York’s Auerbach standard of review for special litigation committee recommendations.  In re Dish Network Derivative Litigation, 133 Nev. Adv. Op. 61 (2017).  The Supreme Court unequivocally required that the trial court apply Auerbach at an evidentiary hearing : Pursuant to Auerbach, 393 N.E.2d at 996, and consistent with…

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Nevada Favors New York Over Delaware Precedent For SLC Review

Nevada law endows a board of directors “full control over the affairs of the corporation”.  NRS 78.120(1).  This control is subject only to such limitations as may be provided by NRS chapter 7, or the articles of incorporation of the corporation.  Id.  This means the board controls decisions about whether the corporation should bring suit.  The ability…

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Nevada Precedes Delaware In Blockchain Legislation

On July 21, 2017, Delaware’s 74th Governor, John Carney, signed SB 69 into law.  This legislation amended various provisions of Delaware’s General Corporation Law (Title 8, Delaware Code) ostensibly to establish express statutory authority for Delaware corporations to use networks of electronic databases for the creation and maintenance of corporate records, including the stock ledger.  These databases are…

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Suing The CEO For Social Activism Is Likely To Be Challenging Under Nevada Law

Yesterday’s post concerned asked the question whether shareholders can sue CEOs for social activism.  The answer is of course, yes.  The more interesting question is whether shareholders will win the suit.  To answer that question, one must first decide on what law applies.  Although many may assume that the law of the state of incorporation should govern,…

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