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CALIFORNIA CORPORATE & SECURITIES LAW

Bylaws And Supermajority Board Voting Requirements

Yesterday’s post concerned various provisions that, although not required to be included in the articles of incorporation, must be included if they are to be effective.  One of these provisions relates to supermajority voting requirements: A provision requiring, for any or all corporate actions (except as provided in Section 303 [removal of directors without cause],…

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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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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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California, Delaware And Nevada Differ On Committee Composition

In this prior post, I compared the differing limitations on committee authority under California and Delaware law.  Today’s post focuses on differences in committee composition among California, Delaware and Nevada.  These are summarized in the chart below.  In this post, I’m referring to committees of the board of directors; these are committees that have the power to…

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When Someone Is Missing, Is Consent Unanimous?

The word “unanimous” is derived from two Latin words, unus (meaning one) and animus (mind).  Thus in Plautus’ play, the servant, Stichus, tells his friend, Sagarinus: “ego tu sum, tu es ego, unianimi sumus (I am you and you are I, we are of one mind)”.  T. Maccius Plautus, Stichus Act V, sc. 4:49. Under the California General Corporation Law, directors…

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More Maladroit Drafting From The SEC

Last December, the Securities and Exchange Commission proposed a new exemptive rule under the Investment Company Act of 1940.  The proposed rule would allow mutual funds, exchange-traded funds (“ETFs”), closed-end funds, and companies that have elected to be treated as business development companies (“BDCs”) under the ICA to enter into derivatives transactions and financial commitment transactions notwithstanding…

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Court Poised To Decide Whether Directors Are Agents

Not quite four years ago, I wrote about whether directors are agents.  The post was prompted by then Chancellor William B. Chandler III’s assertion: This is because the board’s power – which is that of an agent’s with regard to its principal – derives from the shareholders, who are the ultimate holders of power under…

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Is It Necessary To Check With The Shareholders Before Hocking The Corporate Crown Jewels?

Corporations Code Section 1001(a) authorizes a corporation to “sell, lease, convey, exchange, transfer, or otherwise dispose of all or substantially all of its assets” if the principal terms are approved by the board, and, unless the transaction is in the usual and regular course of its business, approved by the outstanding shares.  While this suggests…

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Directors’ Alleged Breach Of Fiduciary Duty Not Subject To Anti-SLAPP Statute

A SLAPP is a strategic lawsuit against public participation.  California enacted Code of Civil Procedure Section 425.16 as an antidote to SLAPP suits.  In general, a SLAPP is subject to a special motion to strike unless the court finds that the plaintiff has established that there is a probability that the plaintiff will prevail on the…

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Proxy Access and Director Qualification Requirements

Last week, the Securities and Exchange Commission adopted its final changes to the federal proxy rules.  These new rules will require public companies, under specified circumstances, to include in their proxy materials information about, and the ability to vote for, a shareholder’s (or shareholder group’s) nominee(s) for director.  In adopting these rule changes, the SEC expressly…

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