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CALIFORNIA CORPORATE & SECURITIES LAW

California’s Blue Sky Law May Cast A Shadow On Some Foreign Issuer Equity Plans

Foreign issuers whose securities are not listed on either the NASDAQ or New York stock exchange may overlook the need to comply with California’s Corporate Securities Law of 1968 when making equity plan awards to their California employees.  Without the benefit of preemption pursuant to Section 18 of the Securities Act of 1933, these issuers…

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Why The SEC’s Pre-Existing Relationship Test Is The Mirror Image of California’s

One significant condition to California’s limited offering exemption is that all purchasers have a “pre-existing relationship”: All purchasers either have a preexisting personal or business relationship with the offeror or any of its partners, officers, directors or controlling persons, or managers (as appointed or elected by the members) if the offeror is a limited liability…

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Investors Claim Failure To Qualify Justifies Issuer’s Return Of Investment

The remedy for failure to qualify the sale of a security is either rescission or damages.  Cal. Corp. Code § 25503.  Thus, one typically expects to see investors alleging a failure to qualify as grounds for returning their investments.  In a recent case, however, investors argued that a failure to qualify justified not returning their investments…

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More Questions About California’s Section 25102(f) Exemption

Earlier this week, I addressed some common queries regarding California’s limited offering exemption, which is often referred to as the “F” exemption because it is found in Corporations Code Section 25102(f).  Today’s post will address a few more questions. Is the Commissioner’s consent required to transfer shares originally sold in reliance on Section 25102(f)? No.…

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Recurrent Rogations Regarding California’s Section 25102(f) Exemption

Section 25102(f) is perhaps the most commonly used exemption from qualification under the California Corporate Securities Law of 1968.  Here are just a few of the questions that the Department of Business Oversight receives concerning the exemption: Is the exemption available for the offer and sale of limited partnership interests? Yes.  Some exemptions, such as…

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When “All” Doesn’t Necessarily Mean “All”

In Who Can’t Raise Capital?: The Scylla and Charybdis of Capital Formation, 102 Ky. L.J. 1 (2013-2014), Duke University Professor James D. Cox tackles the widespread criticism of state blue sky laws as barriers to capital formation.  Along the way, he critique’s California’s limited offering exemption (Corp. Code § 25102(f)) as follows: It is ironic, if…

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The Case of Partners Who Aren’t Partners And Chicken Guts

The California Uniform Limited Partnership Act of 2008 defines the term “partner” to mean a limited partner or a general partner.  Cal. Corp. Code § 15901.02(w).  California’s limited offering exemption requires, among other things, that “[a]ll purchasers have a preexisting personal or business relationship with the offeror or any of its partners . . . “. …

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All The World’s A Stage, But The SEC Isn’t Allowing All Actors To Play Upon It

Every Rule Must Play It’s Part, But This Part Is A Sad One There is much to dislike in the SEC’s recent “bad actor” rule amendments.  While Congress conceived the idea of disqualifying bad actors (Section 926 of the Dodd-Frank Act), the SEC was more than a midwife.  Here are a few reasons why I believe that the SEC’s naughty…

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Why No “F” Notice May Be Required When Forming A Subsidiary

Corporations form subsidiaries for a variety of purposes.  For example, a corporation may form a subsidiary to acquire or hold specific assets or to engage in a merger or other transaction.  The sale of shares to the parent is a sale of securities that is subject to qualification under the Corporate Securities Law of 1968.  In…

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“Public Offering” Defined!

Earlier this week, I wrote about the exemption in Corporations Code Section 25102(e) for offers and sales of evidences of indebtedness in transactions not involving a “public offering”.  This, of course, begs the question of what constitutes a “public offering”.   The Commissioner has in fact adopted a safe-harbor rule.  To put into the safe harbor,…

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