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CALIFORNIA CORPORATE & SECURITIES LAW

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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Partnership Dissolution And A Chief Judge’s Lament

Decisions by U.S. District Court judges typically begin with an identification of the parties, an explanation of the procedural posture of the case, or a description of the dispute.  Chief Judge Lawrence J. O’Neill, however, chose to begin a recent opinion with an invitation to the parties and their attorneys to write their Senators: Judges in the…

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Suspended And Dissolved Corporation Still Defaulted

The story is straightforward; the legal ramifications are not: The plaintiff sued a corporation.  Before the lawsuit was filed, the Secretary of State had suspended the corporation and then the corporation was voluntarily dissolved.  The plaintiff effected service on the designated agent who happened to be an attorney.  The attorney didn’t notify either his erstwhile client…

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CARULLCA Amendment Purporting To Eliminate Surprise May Do The Opposite

Readers will know that I’m no fan of California’s Revised Uniform Limited Liability Company Act (aka CARULLCA).  As originally enacted, the law was rife with technical errors.  As the legislature continues to tinker with the CARULLCA, it creates even more problems for existing California LLCs.  The legislature’s recent enactment of AB 1722 (Wagner) is yet another dispiriting legislative “fix” that is likely to increase, rather than…

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Does A Dissolved Corporation Have Officers And Directors?

It might be reasonable to assume that a dissolved corporation no longer has any officer and directors.  However, the California General Corporation Law seems to assume that dissolved corporations continue to have directors and officers.  California Corporations Code Section 2011(b) provides that summons and other process against a dissolved corporation “may be served by delivering…

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Court Rules Attorney-Client Privilege Ceases To Exist When Corporation Ceases To Exist Without Successor

The LLC May Well Be The Platypus Of Business Organizations What happens to the attorney-client privilege when a corporation dissolves?  Magistrate Judge Sallie Kim recently answered that question in Virtue Global Holdings Ltd. v. Rearden LLC, 2016 U.S. Dist. LEXIS 53076 (N.D. Cal. April 5, 2016): When a corporation ceases to exist, “the corporate powers, rights and…

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Court Rules Shareholders May Be Sued In De Facto Dissolution

California Corporations Code Section 2011 provides that causes of action against a dissolved corporation, whether arising before or after dissolution, may be enforced against its shareholders if any of the assets of the corporation have been distributed to the shareholders. Enforcement is limited to the extent of the shareholders’ pro rata share of the claim or to…

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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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Dismissal Of Involuntary Dissolution Action Pulls The Plug On Corporate Buy Out

Sometimes, shareholders are divided on whether a corporation should live or die.  In these cases, the California Corporations Code provides an option that allows for the continued existence of a corporation.  In any action for involuntary dissolution, or in any proceeding for voluntary dissolution initiated by the vote of shareholders representing only 50% of the voting…

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Court Of Appeal Embraces De Facto LLC Dissolution

Under the former Beverly-Killea Limited Liability Company Act, a limited liability company was dissolved upon the first to occur of any of the following three events: The occurrence of an event specified in its governing documents; A majority vote of the members to dissolve; or A judicial decree of dissolution. Cal. Corp. Code § 17350…

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