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CALIFORNIA CORPORATE & SECURITIES LAW

Rescission And The California Corporations Code

Yesterday, I wrote about an attempt, albeit unsuccessful, to avoid a forum selection clause by a claim of rescission.  The plaintiffs’ in that case, Hatteras Enterprises, Inc. v. Forsythe Cosmetic Group, Ltd., 2016 U.S. Dist. LEXIS 100352 (July 30, 2016), invoked California Civil Code Section 1691, which specifies how a party may rescind.  The grounds for…

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Which Comes First, Rescission Or Choice Of Forum?

A recent ruling by U.S. District Court Judge Arthur D. Spatt raises the interesting question of whether a choice of law provision can be vitiated by rescission.  The case, Hatteras Enterprises, Inc. v. Forsythe Cosmetic Group, Ltd., 2016 U.S. Dist. LEXIS 100352 (July 30, 2016), involved six separate agreements, each containing a New York choice of law…

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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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When A Share Rescission Is Not A Distribution

Section 166 of the California Corporations Code defines “distribution to its shareholders”.  Knowing what constitutes a distribution to shareholders is important because Chapter 5 of the General Corporation Law imposes various restrictions on such distributions.  Shareholders and directors may be liable when these restrictions are violated.  Cal. Corp. Code §§ 316 & 506.  Under Section…

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Section 25501.5 – I Ask Again What Do It Mean?

Corporations Code Section 25501.5 generally authorizes an action for rescission (or damages, if the security is no longer owned) by any person “who purchases a security from or sells a security to a broker-dealer that is required to be licensed and has not”.  A right of rescission makes sense when the unlicensed broker-dealer is acting…

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Section 25501.5 – What Do It Mean?

In 2004, the California Legislature added Section 25501.5 to the Corporate Securities Law of 1968.  Ever since then, I’ve been asked “What do it mean?” Corporations Code Section 25501.5 generally authorizes an action for rescission (or damages, if the security is no longer owned) by any person “who purchases a security from or sells a security to a broker-dealer…

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