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CALIFORNIA CORPORATE & SECURITIES LAW

Is Rule 10b-5 The “Mother Of All Litotes”?

Yesterday’s post addressed the use of litotes in California’s broker-dealer suitability rule.  Litotes can be an effective rhetorical device, but as Judge Frank H. Easterbrook observed, it is also ambiguous.  Associated Randall Bank v. Griffin, Kubik, Stephens & Thompson, Inc. 3 F.3d 208 (7th Cir. 1993) (“‘Not unlike’ can mean almost anything; although the listener may cancel…

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Genealogy And The Corporate Lawyer

Who is family and how close are they?  These aren’t questions that typically occupy the mind of a corporate lawyer.  Occasionally, however, consanguinity matters even to a corporate lawyer.  Thus, Section 308 of the California Corporations Code authorized the Superior Court to appoint a provisional director (or directors) when there is either a deadlock on the…

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Court Decides Successor In Merger May Enforce Arbitration Clause

Can a party to written agreement that does not include an arbitration clause enforce an arbitration provision in another agreement to which it is not a party?  Boiled down to the essentials, this is the question decided yesterday by the Court of Appeal in Jenks v. DLA Piper Rudnick Gray Cary US LLP, Cal. Ct. of Appeal Case No.…

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New Law Attempts To Clarify Legal Status Of LLC Employee Membership Purchase And Option Plans

California Labor Code Section 407 may be a bit of a surprise to many lawyers both in and outside of the state.  It provides: Investments and the sale of stock or an interest in a business in connection with the securing of a position are illegal as against the public policy of the State and…

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Court Sorts Out California RULLCA Transition Muddle

Yesterday, I wrote about Kennedy v. Kennedy, 2015 Cal. App. LEXIS 329 (Apr. 20, 2015).  That post discussed the Court of Appeal’s holding that under the General Corporation Law the dismissal of a cause of action for involuntary dissolution with prejudice vitiates any right to buy out the shareholder seeking dissolution.  The plaintiff, however, also…

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Does “Valid Issuance” Require A Stock Certificate?

As I mentioned yesterday, every holder of shares is entitled to a signed certificate pursuant to California Corporations Code Section 416(a) (unless the corporation a system for issuing, recording and transfering uncertificated shares pursuant to Section 416(b)).  Does that mean that shares are not validly issued until a stock certificate has been properly executed and delivered? …

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A New Fine Question – What Date Should Be Placed On A Stock Certificate?

One fine morning in the middle of the Precession of the Equinoxes, a reader asked me a new fine question that he had never asked before. He asked, “What date should be placed on a stock certificate?” A preliminary question might be why date a stock certificate at all? Corporations Code Section 416(a) entitles every…

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Indemnification And The Circle Of Litigation

An employee sues his employer for, among other things, violations of the California Labor Code.  The quondam employer responds with a counterclaim against its erstwhile employee claiming that to the extent it is liable, the employee is partially liable for creating that liability.  The employee responds with a reply counterclaim seeking indemnification based on Section…

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Does Brewing Beer Positively Impact Society And The Environment?

California, like many other states, has enacted legislation allowing for the formation of benefit corporations.  Cal. Corp. Code § 16400 et seq.  Technically, a benefit corporation is a corporation formed under the General Corporation Law that has elected to be governed by the Benefit Corporation Law.  One requirement of the Benefit Corporation Law is that the corporation…

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What Exactly Was The Legislature Trying To Say?

Section 17703.04(a) is one of many bizarre provisions in California’s new Revised Uniform Limited Liability Company Act: (a) All of the following apply to debts, obligations, or other liabilities of a limited liability company, whether arising in contract, tort, or otherwise: (1) They are solely the debts, obligations, or other liabilities of the limited liability company to…

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