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CALIFORNIA CORPORATE & SECURITIES LAW

Is It A Breach Of Fiduciary Duty To Fail Or Refuse To Conform To Delaware’s Judicial Decisions Or Practices?

The answer to this question in Nevada may soon be an unequivocal “no”.  Last week, the Nevada Legislature unanimously passed SB 203 and sent it to Governor Brian Sandoval for signature.  Among other things, Section 2 of SB 203 declares: The directors and officers of a domestic corporation, in exercising their duties under NRS 78.138 and 78.139,…

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Disclaiming Proper Appointment With The Secretary Of State – “All You Have To Do Is Ask”

A lot of things in life may upset you.  One these might be discovering that you have been improperly appointed as an agent for service of process, director or officer of a California corporation.  Corporations Code Section 1503(b) somewhat oddly provides: The resignation of an agent may be effective if, on a form prescribed by…

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Referring To Extraneous Agreements In The Articles of Incorporation

I didn’t take note of AB 1535 (Maienschein) when it was introduced earlier this year because I thought it was a “spot” bill.  See “See Spot Run“. As introduced, the bill simply added “which may include a reference to a separate shareholder agreement” to the introductory clause of Corporations Code Section 2000(a).  When I was later asked…

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State Controller Defeats Judgment Creditor’s Claim To Escheated Funds

Here is the question: Can a judgment creditor can enforce an assignment issued pursuant to the Enforcement of Judgments Law (CCP § 680.10 et seq.) for escheated property pursuant to the Unclaimed Property Law (CCP § 1500 et seq.) when the judgment debtor is a suspended corporation pursuant to the Revenue & Taxation Code §…

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Did This Corporation’s Law Firm Unwittingly Join The Criminal Prosecution Team?

In Brady v. Maryland, 373 U.S. 83 (1963), the Supreme Court held that the prosecution has a duty under the Fourteenth Amendment’s due process clause to disclose evidence to a criminal defendant.   The former Chief Executive Officer of IAR Systems Software, Inc. invoked this right after the San Mateo District Attorney charged him with felony…

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Want To “Bury” Your Response To SEC Comments? Here’s How

I have long assumed that when you search “CORRESP” by issuer name, you would see all correspondence filed on EDGAR with respect to that issuer.  I was therefore surprised when I recently searched for a letter responding to the staff’s comments but couldn’t find it either in the complete list of EDGAR filings or by searching…

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A Shareholder Consent In Its Dotage May Or May Not Be Valid

California Corporations Code Section 603(a) broadly authorizes shareholder action by written consent: Unless otherwise provided in the articles, any action that may be taken at any annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, as specified in [Corporations Code] Section 195, setting…

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New Rule 147A And Amendments To Rule 147 Are Now Effective

Last October the Securities and Exchange Commission adopted amendments to Rule 147 to modernize the safe harbor under Section 3(a)(11) and a new intrastate offering exemption, Rule 147A.  See Will New Rule 147A Lead To A Renaissance In California Permit Applications?  These changes took effect on just over a month ago – on April 20, 2017. …

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Financial Difficulties – A Bizarrely Vague Standard For Disclosure

Earlier this year, the Securities and Exchange Commission published for comment proposed amendments to the Municipal Securities Disclosure Rule (Rule 15c2-12).  The existing rule is complicated and I will not attempt to explain it here.   For purposes of this discussion, suffice it to say that the SEC is proposing to add an event notice for the occurrence of…

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Scienter Requirement May Be A Question Of Timing

On several occasions, I have written about whether scienter is required under Corporations Code Section 25401.  That question surfaced again last week in Judge Gonzolo P. Curiel’s ruling on the defendants’ motion to dismiss federal and state securities law claims in Mueller v. San Diego Entm’t Partners, LLC, 2017 U.S. Dist. LEXIS 77643 (S.D. Cal.…

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