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CALIFORNIA CORPORATE & SECURITIES LAW

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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More On Suing The CEO For Social Activism

The last few days, I’ve been writing about the legal issues raised by Jon L. Pritchett and Ed Tiryakian in a recent opinion piece published by The Wall Street Journal.  To sum up the discussion so far, Professor Stephen Bainbridge responded to Messrs. Pritchett and Tiryakian by arguing that the business judgment rule should bar…

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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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Does Assertion Of Business Judgment Rule Waive Attorney-Client Privilege?

Nevada, like California, has codified the attorney-client privilege: A client has a privilege to refuse to disclose, and to prevent any other person from disclosing, confidential communications: Between the client or the client’s representative and the client’s lawyer or the representative of the client’s lawyer Between the client’s lawyer and the lawyer’s representative. Made for…

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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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Why An Understanding Of Officers As Agents May Be Important

In several recent posts, I have noted that officers, unlike directors, are agents of the corporation.  Recognizing the agency status of officers can affect the legal analysis in a number of significant ways, including: Choice of law.  California Corporations Code Section 2116 explicitly provides that the law of the jurisdiction of incorporation applies to the…

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Officers And The Business Judgment Rule

Last weekend, I attended a symposium at the UCLA School of Law entitled “Can Delaware Be Dethroned? Evaluating Delaware’s Dominance of Corporate Law”.  The event, organized by ever erudite Professor Stephen Bainbridge, featured presentations by leading scholars and practitioners from around the country.  I was therefore surprised when the discussion turned to whether Delaware applies the business…

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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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Does The Business Judgment Rule Protect Directors Who Violate Governing Documents?

Under the business judgment rule, a director will not be liable for a mistake in business judgment provided that certain conditions are met.  In the case of a California nonprofit mutual benefit corporation, a director who performs her duties in accordance with Corporations Code Section 7231(a) and (b) has no liability based on any failure…

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Who Decides Whether A Shareholder Has Complied With An Advance Notice Bylaw?

UCLA Professor Stephen Bainbridge asked the following question concerning advance notice bylaw provisions in “The Professor is Stumped: Today’s Corporate Law Question“: When an incumbent board of directors claims that a potential proxy insurgent has failed to comply with an advance notice bylaw, who decides whether the bylaw has been satisfied? The board (subject to…

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