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CALIFORNIA CORPORATE & SECURITIES LAW

Fractions And Squeeze Outs

The last two posts have discussed what a corporation may do with fractions of shares.  I entitled the first of these posts “Breaking Up Is Not Hard To Do – Fractions, Scrip And Scrippage” in partial reference to the song by Neil Sedaka and Howard Greenfield.  The title was also a reference to the etymological…

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I Deliver Some Round Observations About California’s Rounding Rule

Yesterday’s post concerned various actions that a California corporation may pursue in lieu of issuing fractional shares.  I left for today the subject of rounding.  Section 407 of the Corporations Code expressly permits rounding to the nearest whole share if the fraction of a share that any person would otherwise be entitled to receive is less than .005…

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Breaking Up Is Not Hard To Do – Fractions, Scrip And Scrippage

The California General Corporation Law explicitly authorizes a corporation to issue fractional shares.  Cal. Corp. Code § 407.  A corporation, however, is not required to do so.  Id.  In lieu of issuing fractions, a corporation may in connection with the original issuance: arrange for the disposition of fractional interests by those entitled to receive them;…

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New Law Attempts To Clarify Legal Status Of LLC Employee Membership Purchase And Option Plans

California Labor Code Section 407 may be a bit of a surprise to many lawyers both in and outside of the state.  It provides: Investments and the sale of stock or an interest in a business in connection with the securing of a position are illegal as against the public policy of the State and…

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Seeing Red And More Than 50% Ownership May Mean A 90% Vote

California broadly authorizes a corporation to sell, lease, convey, exchange, transfer or otherwise dispose of all or substantially all of its assets when the principal terms have been approved by the board.  If the sale is not in the usual and regular course of business, the principal terms must also be approved by the outstanding shares. …

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California’s 50/90 Rule – When Being In Control May Mean That You’re Not

Many out-of-state practitioners are surprised to learn that California has special statutory provisions governing a merger when a constituent corporation (Section 161) or its parent (Section 175) owns, directly or indirectly, more than 50%  of the voting power (Section 194.5) of the other constituent corporation prior to the merger.  This is the so-called “50/90 Rule”.   It can be  found in the last…

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“Most” Does Not Mean All

Because the Dodd-Frank Act requires the adoption of so many new regulations, I like to say that the other shoe (or more likely a whole closet full of shoes) remains to be dropped.   One large shoe that is yet to be dropped is how the Securities and Exchange Commission will define “venture capital fund” for purposes of…

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Defining “Venture Capital Fund” Is “No Small Task”

Today, the Securities and Exchange Commission proposed a definition of “venture capital fund” for purposes of the new exemption from investment adviser registration under the Investment Advisers Act of 1940.  This new exemption was created by Section 407 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Congress gave the SEC one year to issue…

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