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California’s RULLCA Impossible Pleading Requirement For Derivative Suits

California’s Revised Uniform Limited Liability Company Act requires a member of a domestic or foreign LLC to include two specific allegations in any complaint brought in the right of the company. Failure to include these two...more

4/7/2014 - Derivative Suit LLC Pleadings RULLCA Shareholder Litigation Shareholder Rights Shareholders

Should Corporations Conserve Water Because A Shareholder Believes It’s The Right Thing To Do?

Last month, the California Public Employees Retirement System (CalPERS) sent a letter to its California real estate and private equity managers asking that they take a number of steps to conserve water. I found CalPERS’...more

3/6/2014 - CalPERS Conservation Corporate Social Responsibility Shareholders Water

Investor Voice May Rue Adoption Of Single Voting Standard

In yesterday’s post, I discussed why the Council of Institutional Investor’s blanket policy eschewing the counting of abstentions may be neither good nor legal. CII, however, isn’t the only proponent of not counting...more

2/4/2014 - Proxy Season Proxy Voting Guidelines Shareholder Votes Shareholders

On Closer Inspection, This CII “Best Practice” May Be Neither Good Nor Legal

The Council of Institutional Investors has adopted what it describes as ”a comprehensive body of corporate governance best practices”, including Policies on Corporate Governance. I question, however, whether some of these...more

2/3/2014 - Corporate Governance Investors NYSE Shareholder Rights Shareholder Votes Shareholders

This Plaintiff Dreamed Of Shares That Never Were

It’s hard for me to imagine being the owner of something that doesn’t exist. It’s even harder to imagine being the owner of something that doesn’t exist. Hardest of all is imagining being the equitable owner of something...more

1/31/2014 - Derivative Suit Securities Securities Litigation Shareholders

A Modest Proposal For Preventing M&A Deals From Being A Burden to Shareholders or Corporations, and For Making Them Beneficial to...

According to Cornerstone Research, shareholders in 2012 “challenged 93 percent of merger and acquisition (M&A) deals valued over $100 million and 96 percent of transactions valued over $500 million”. Most of those cases...more

1/15/2014 - Acquisitions Mergers Shareholders

40% Is Less Than A Majority But Can It Be “Control”?

Yesterday’s post concerned the Court of Appeal’s opinion in Busse v. United Panam Financial Corp., 2014 Cal. App. LEXIS 11 (Cal. App. 4th Dist. Jan. 8, 2014) holding that shareholders may not pursue monetary damages under...more

1/14/2014 - Corporate Governance Majority Voting Policies Minority Shareholders Shareholder Votes Shareholders

Numera Senatum! Broker Non-Votes And The Quorum Problem

In ancient Rome, the Senate could not conduct business unless a quorum was present. A senator wishing to delay action by the Senate could demand a quorum count by demanding “numera senatum!,” meaning count the house. The...more

12/19/2013 - Corporate Governance Corporate Governance Policy Shareholder Votes Shareholders

The Arcana Of Dating Stockholder Consents

Long ago, I had the temerity to write about Delaware’s statutes concerning stockholder consents, Delaware’s Inadequate Protection of Shareholders When Action Is Taken by Consent, 11 Bus. Law. Update 4 (1991). The law of...more

12/13/2013 - Consent Contract Drafting Corporate Records Shareholders

An Unexpected Impasse

If a corporation has four directors and two shareholders, one owning 60 shares and the other owning 40 shares, it seems obvious that the majority shareholder should be able to elect a majority of the board of directors. ...more

11/13/2013 - Board of Directors Directors Shareholder Votes Shareholders

Just Who Is A Promoter And Why You May Want To Know

The California General Corporation Law uses, but does not define, the term “promoter”. For example, a promoter can be criminally prosecuted. Corporations Code Section 2251 provides that any promoter “who knowingly and...more

11/11/2013 - Fraud Securities Exchange Act Shareholders Stock Promoters

Where Exactly Is It Written That Shareholders Aren’t Liable For Corporate Debts?

Recently, UCLA Law School Professor Stephen Bainbridge took notice of Section 6.22(b) of the Model Business Corporation Act and asked what might lead a corporation to waive the limited liability of shareholders in its...more

11/8/2013 - Articles of Incorporation Debt Personal Liability Shareholders

Court Of Appeal Holds Breach Of Fiduciary And Conflict Of Interest May Be Grounds For Summary Election Challenge

Section 709 of the California Corporations Code creates a summary procedure that allows any shareholder or any person who claims to have been denied the right to vote to petition the Superior Court for a determination of the...more

10/11/2013 - Board of Directors Conflicts of Interest Corporate Governance Fiduciary Duty Shareholder Votes Shareholders

Is A Popularity Contest The Best Way To Pick An Advisor?

Koheleth wrote that “there is nothing new under the sun”, but there are a many ideas that are new to me. Such is the case with the shareholder proposal recently submitted by James McRitchie ( to Cisco Systems,...more

8/22/2013 - Cisco Proxy Advisors Shareholders

I Don’t Want To Express A Preference, But I Want My Vote To Count

I’ve always considered majority voting to be a profoundly illogical concept that evidences a fundamental misunderstanding of the mechanics of shareholder voting....more

8/5/2013 - Shareholder Votes Shareholders Voting Rights

Must Designated Directors Keep A Secret?

Yesterday’s post concerned the attorney-client privileged issues in Vice Chancellor J. Travis Laster’s recent decision in Kalisman v. Friedman, 2013 Del. Ch. LEXIS 100 (April 17, 2013). I found another statement in the...more

7/11/2013 - Board of Directors Confidentiality Controlling Stockholders Directors Disclosure Personal Representatives Shareholder Rights Shareholders

But Wait, California May Require Even More In Annual Reports To Shareholders

Yesterday’s blog discussed California’s requirement that many domestic and foreign corporations send financial statements to their shareholders. If a corporation has 100 or more holders of record (determined in accordance...more

5/14/2013 - Annual Reports Financial Statements Foreign Corporations Shareholders

California Requires Many Foreign Corporations To Send Annual Financial Statements To Shareholders

California is a net exporter of corporate charters, but it remains home to many corporations. As a result, the California Corporations Code has a preternatural concern with foreign corporations. ...more

5/13/2013 - Financial Statements Foreign Corporations Publicly-Traded Companies Securities Exchange Act Shareholders

What Doth The Alter Ego Doctrine Require Of Thee, But To “Do Justice”?

Yesterday’s post briefly discussed the internal affairs doctrine and alter ego claims. Professor Stephen Bainbridge responded with this post which discusses the approaches of courts in New York and Delaware. Professor...more

3/22/2013 - Alter Ego Corporate Veil Creditors firs Free Exercise Internal Affairs Doctrine Shareholders

Without An “Intelligible Principle” Can The SEC Adopt Political Spending Rules?

In August 2011, Professor Lucian Bebchuk and nine other law professors submitted this petition asking that the Securities and Exchange Commission adopt rules requiring public companies to disclose to shareholders the use of...more

3/19/2013 - Intelligible Principle Notice Requirements Political Campaigns Political Contributions SEC Shareholders

Senator Seeks 24-Hour Advance Notice Of Corporate Political Contributions/Assemblymember Asks For Constitutional Convention

Yesterday, Broc Romanek noted the continuing interest in mandating disclosure of political spending by corporations. See Battle Lines Being Drawn: Political Spending Disclosures. We are also seeing activity here in...more

1/23/2013 - Disclosure Requirements Notice Requirements Political Contributions Shareholders

A Corporate Governance Lesson From Pericles

Before shareholders may take action at a meeting, a quorum must be established. See When The Best Offensive Strategy May Simply Be To Stay Home. The existence of a quorum does not guaranty that action has been validly taken...more

1/22/2013 - Corporate Governance Notice Requirements Quorum Shareholders

Does Every 10% Owner Owe A Fiduciary Duty To The Corporation?

If I told you that all 10% owners owe a fiduciary duty to the corporation, I’d be surprised if you weren’t surprised. However, that was, in fact, the holding of the Second Circuit Court of Appeals last October in Donoghue v....more

1/8/2013 - Actual Injuries Fiduciary Duty Shareholders Short-Swing Trading Standing

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