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CALIFORNIA CORPORATE & SECURITIES LAW

Should Corporate Law Preserve The Honor Of Salmon Or Fairness To Meinhard?

Should corporate law be concerned with the sinner or the sinned against?  In the venerable case of Meinhard v. Salmon, 249 N.Y. 458, 464 (1928), Benjamin Cardozo penned these now famous lines: A trustee is held to something stricter than the morals of the market place.  Not honesty alone, but the punctilio of an honor the…

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When A Director May Not Be Interested In Director Compensation

Suppose that a corporation has three directors, A, B & C, each of whom is compensated by the corporation.  Is director A financially interested in a resolution fixing the compensation of director B?  Corporations Section 310(a) provides the following answer: A director is not interested within the meaning of this subdivision in a resolution fixing the…

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When A Majority Vote Of The Required Quorum Isn’t Sufficient

Corporations Code Section 307(a)(8) sets forth the general voting rule applicable to actions by directors.  It provides that the decision made by a majority of directors present at a duly held meeting at which a quorum is present is the act of the Board of Directors.  Assume, for example, that a corporation has 7 authorized…

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Louis D. Brandeis Takes On Section 310

Before being named to the U.S. Supreme Court, Justice Louis D. Brandeis wrote an influential series of articles for Harpers Weekly magazine.  Eventually, these articles were collected and published under the title “Other People’s Money–and How the Bankers Use It”.   In Chapter III, Brandeis attacked the practice of interlocking directorates with the claim that it “offends…

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Bill Aims To Add Bite To Federal Conflict Minerals Disclosure Requirement

Section 1502 of the Dodd-Frank Act added a new Section 13(p) to the Securities Exchange Act of 1934.  Section 13(p) requires the SEC to promulgate disclosure and reporting regulations regarding the use of conflict minerals from the Democratic Republic of the Congo and adjoining countries. In compliance with this Congressional mandate, the SEC issued these…

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Section 307 – No More Sunset

Some readers may have noticed that there are currently two Section 307s in the Corporations Code.  One version of Section 307 provides in subdivision (d) that it remains in effect only until January 1, 2011.  This is commonly referred to as a “sunset provision”.   Subdivision (d) of the other Section 307 provides that it…

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