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Is Rescission Ever Legal?

Yesterday’s post concerned when a corporation’s rescission of the issuance of shares does not constitute a “distribution to its shareholders” as defined in Section 166 of the California Corporations Code.  I noted that one of the three conditions is that “it is reasonably likely that the holder or holders of the shares in question could…

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Soon It Will Be Easier For California Corporations To Make Distributions To Shareholders

Chapter 5 of the Corporations Code establishes various limitations on distributions by California corporations.  The term “distributions to its shareholders” is itself defined in Section 166.  The question of appropriate limitations on dividends and other corporate distributions is not new.  Even Samuel Clemens (aka Mark Twain) wrote about “cooked dividends” and got into a great…

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“Cooked Dividends” Leads to Bloody Massacre

Cooking dividends is the practice of declaring a false or “cooked” dividend for the purpose of raising the value of a company’s shares.   Apparently, this was a serious problem in the early days of both California and Nevada.  The practice is still illegal under the California General Corporation Law.  Section 2254, among other things, makes…

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