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CALIFORNIA CORPORATE & SECURITIES LAW

Nevada Legislature Ponders Rejection Of Unocal And Revlon Standards

Thirty years ago, the Delaware Supreme Court issued two seminal opinions concerning how courts ought to review director decisionmaking in merger and acquisition transactions.  In the first case, Unocal Corporation v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985), the Supreme Court imposed a heightened standard to board responses to hostile takeover attempts.  In the second case, Revlon, Inc. v.…

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Even In Nevada, “Get It In Writing” May Not Be Far From The Mark

A recent ruling by U.S. District Court Magistrate George Foley, Jr. serves as a reminder the “get it in writing” tends to be good advice.  The case involves a casino’s attempt to enforce a $3 million gaming debt incurred by one of its patrons.  This patron executed a credit agreement but the casino allowed him…

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Nevada Legislature Mulls Codification Of The Internal Affairs Doctrine

Delaware and Nevada are each in the business of marketing their corporate laws to businesses in other states.  Thus, it should surprise no one that these states don’t appreciate it when their legal offerings are undermined by other states.  One way to protect the franchise is by embracing the “internal affairs doctrine”. The internal affairs…

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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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The Right To Dissent And Fractional Shares

I’ve devoted several posts to how California’s General Corporation Law deals with fractional shares.  Nevada’s approach to fractional shares is somewhat different.  For example, Nevada permits rounding up to a full share in all cases.  NRS 78.205(2)(b).  However, if a Nevada corporation elects to cash out or issue scrip for fractional shares, the stockholders may…

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Why Nevada Is A More Reliable Alternative To Delaware

Directors and officers cannot always base their decisions on first-hand information.  As a practical matter, they must receive and act based on information and opinions of others. The question then becomes whether a director’s or officer’s decision will be protected when it was made in reliance upon others.  Section 141(e) of the Delaware General Corporation…

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Nevada Seizes Delaware’s Business Entity Formation Crown

Delaware has long dominated the market for incorporations.  Thus, I was surprised to see University of Nevada Law Professor Eric H. Franklin write that Nevada enjoys a 4 to 1 advantage over Delaware in corporate formations.  If this seems inexplicable, there is an explanation.  Delaware accounts for three times as many business formations as Nevada.…

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Officers: Got Business Judgment Rule? Nevada Says Yes, Delaware Maybe Not

Francis Pileggi writes about a recent ruling by U.S. District Judge Sue L. Robinson in which she refused to consider whether the business judgment rule applied to officers of a Delaware corporation: Defendants have cited to no cases where a Delaware court has held that the business judgment rule applies to corporate officers; therefore, the court…

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SEC Overlooks Nevada’s Transfer Agent Licensing Laws

Transfer agents provide a number of crucial services, primarily for publicly traded companies.  Among other responsibilities, they maintain ownership records, record security transfers, issue and cancel certificates and distribute dividends.  Since 1975, persons performing transfer agent services for public companies must be licensed by the “appropriate regulatory authority” (“ARA”) pursuant to Section 17A(c) of the…

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Court Rules Coequal Stockholders Owe Fiduciary Duties To Each Other

Stockholders in closely held corporations often operate their companies as if they were partnerships.  Does that mean that the stockholders, like partners, owe fiduciary duties to each other? In Jones v. H. F. Ahmanson & Co., 1 Cal. 3d 93 (1969), the California Supreme Court famously held: Majority shareholders may not use their power to…

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