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Failure To Return Shares Subject To Repurchase Right Supports Conversion Claim

Closely held issuers often include a repurchase right in their equity award agreements. I expect that in most cases, shareholders will comply with these provisions. When a shareholder doesn’t, the company’s most obvious...more

Nevada Legislature Ponders Rejection Of Unocal And Revlon Standards

Thirty years ago, the Delaware Supreme Court issued two seminal opinions concerning how courts ought to review director decisionmaking in merger and acquisition transactions. In the first case, Unocal Corporation v. Mesa...more

Professor Bainbridge On My “Beef” With Gantler v. Stephens

Professor Stephen Bainbridge yesterday provided a well considered assessment of my “beef” with the Delaware Supreme Court’s holding in Gantler v. Stephens, 965 A.2d 695, 709 (Del. 2009) that “the fiduciary duties of officers...more

Why An Understanding Of Officers As Agents May Be Important

In several recent posts, I have noted that officers, unlike directors, are agents of the corporation. Recognizing the agency status of officers can affect the legal analysis in a number of significant ways, including...more

Can The Board Remove A Director?

Can a board of directors remove one of its own? In the case of a California corporation, the answer is no. The power to remove directors is vested in the shareholders and the superior court pursuant to Corporations Code...more

What The Delaware Supreme Court Overlooked In Gantler v. Stephens

I have never been reconciled to the Delaware Supreme Court’s pronouncement in Gantler v. Stephens, 965 A.2d 695, 709 (Del. 2009) that “the fiduciary duties of officers are the same as those of directors”. Officers are, as...more

Is A Corporate Director An Employee Subject To Workers’ Compensation?

Corporate lawyers tend to believe that directors and officers are not ineluctably employees. Thus, it may come as a surprise that California’s workers’ compensation law has for some time defined an “employee” to include...more

When A Majority Won’t Suffice

For California corporations, the general rule is that an act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the board. Cal. Corp. Code §...more

Who Votes As Proxy For Shares Standing In The Name Of Another Corporation?

The Proxy Season blog yesterday discussed the following question from the Q&A Forum of TheCorporateCounsel.net...more

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...more

Does The Foolish Director Abide Whilst The Wise Director Flees?

Never fear? Smith Is No Longer Here - Yesterday’s post highlighted Section 316 of the California Corporations Code, a statute that imposes joint and several liability on directors who approve specified transactions such...more

Why Nevada Is A More Reliable Alternative To Delaware

Directors and officers cannot always base their decisions on first-hand information. As a practical matter, they must receive and act based on information and opinions of others. The question then becomes whether a...more

Hiring & Firing Officers In California

John Jenkins at The Mentor Blog addresses the question of who has authority to hire and fire officers? He notes...more

Why You Should Have Read Last Week’s Posts On California’s D&O Loan Ban

I spent the better part of last week writing about California Corporations Code Section 315. The statute general prohibits a corporation (Section 162) from making a loan of money or property to, or guaranteeing the...more

Court Rules Board Of Directors Is Incapable Of Being Sued

Plaintiffs sue corporations and they sue individual members of the boards of directors, but can a plaintiff sue a board of directors as a body? That was the question in Theta Chi Fraternity, Inc. v. Leland Stanford Junior...more

Are Alternate Committee Members “Then Serving”?

A number of amendments to Delaware’s General Corporation Law took effect at the beginning of this month. One of these changes was to establish a default quorum requirement for meetings of committees of corporate boards of...more

California, Delaware And Nevada Differ On Committee Composition

In a prior post, I compared the differing limitations on committee authority under California and Delaware law. Today’s post focuses on differences in committee composition among California, Delaware and Nevada. These are...more

California And Delaware Corporate Law Differ In Many Respects, Including The Authority Of Committees

Both California and Delaware allow the formations of committees of the Board of Directors. Both states also allow these committees to exercise the authority of the board, but with certain exceptions. California, however,...more

Are A Breach Of Fiduciary Duty And A Breach Of Governing Documents “Non Bis In Idem”?

Last week, I discussed the Court of Appeal’s consideration of whether the business judgment rule protects a director from claims based on breach of the corporation’s governing documents. See Does The Business Judgment Rule...more

Does The Business Judgment Rule Protect Directors Who Violate Governing Documents?

Under the business judgment rule, a director will not be liable for a mistake in business judgment provided that certain conditions are met. In the case of a California nonprofit mutual benefit corporation, a director who...more

What Is A Knowing Violation Of Law?

Nevada’s private corporation law automatically exculpates directors and officers from individual liability from individual liable to the corporation or its stockholders or creditors for any damages as a result of any act or...more

10th Circuit Highlights Difference Between Delaware And Nevada Exculpatory Statutes

Because the power to manage a corporation’s affairs rests with the board of directors, it is normally up to the board to decide whether the corporation will pursue a claim. A shareholder who believes that the corporation...more

When Someone Is Missing, Is Consent Unanimous?

The word “unanimous” is derived from two Latin words, unus (meaning one) and animus (mind). Thus in Plautus’ play, the servant, Stichus, tells his friend, Sagarinus: “ego tu sum, tu es ego, unianimi sumus (I am you and you...more

Does A Dissolved Corporation Have Officers And Directors?

It might be reasonable to assume that a dissolved corporation no longer has any officer and directors. However, the California General Corporation Law seems to assume that dissolved corporations continue to have directors...more

Is Section 141(d) Truly Oxymoronic?

Section 141(d) of the Delaware General Corporation Law provides that the directors of any corporation may “be divided into 1, 2, or 3 classes”. It’s hard to make sense of this statement. First, I don’t believe that Delaware...more

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