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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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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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Bill Would Ease Corporate Distributions Test

Last week, Assembly Member Curt Hagman introduced AB 571 on behalf of the Business Law Section of the California State Bar.  The bill would ease the restrictions on distributions to shareholders, as defined in Corporations Code § 166.  These limitations apply to California corporations and foreign corporations subject to Corporations Code Section 2115. California’s current statute…

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