Another Possible Exception To Exclusive Forum Bylaws

Yesterday, I discussed several vulnerabilities of exclusive forum bylaws should they be challenged in California. The California General Corporation Law includes many provisions that expressly subject foreign corporations to the jurisdiction of California’s superior court.  Section 709 is one such statute.

In general, Section 709 requires the Superior Court to try and determine the validity of any election or appointment of any director of any domestic corporation, or of any foreign corporation if the election was held or the appointment was made in California.  An action under Section 709 may be brought by any shareholder or any person who claims to have been denied the right to vote.  The procedure is highly expedited.  The court is required to fix a hearing date within five days, unless for good cause shown a later date is fixed.  The court is authorized to determine several fundamental questions:

  • The person entitled to the office of director or may order a new election to be held or appointment to be made,
  • The validity, effectiveness and construction of voting agreements and voting trusts, and
  • The validity of the issuance of shares and the right of persons to vote.
The court is also authorized to direct such other relief as may be just and proper.