Corporations Code

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What Do You Know? Bill Proposes To Eliminate Scienter

Corporations Code Section 25401 is California’s basic securities antifraud statute...more

Must A False Statement To A Franchisee Be Made “In this state”?

The list of instruments and interests included within the definition of a “security” in California Corporations Code Section 25019 is long. A franchise, however, is not to be found amongst the named. In fact, the statute...more

Court Rules Plaintiff Is Not Required To Advance Defendant’s Legal Expenses

Imagine how frustrated you would be if you sued someone and the defendant responded by demanding that you advance his legal expenses in defending your lawsuit. The plaintiff in Allergia, Inc. v. Bouboulis, 2017 U.S. Dist....more

The Right To Dissent And Fractional Shares

I’ve devoted several posts to how California’s General Corporation Law deals with fractional shares. Nevada’s approach to fractional shares is somewhat different. For example, Nevada permits rounding up to a full share in...more

The DBO As Religious Regulator

In December last, the Department of Business Oversight published the 2016 Commissioner’s Report on the Offer or Sale of Securities by Permit under Corporations Code Section 25113. This report, which is required by California...more

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...more

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...more

Calling All Stock Certificates

Last week, Broc Romanek’s Mentor Blog addressed the question of what to do about outstanding stock certificates following a reverse stock split. Today, I’ll weigh in with a California perspective....more

Five Gnostic Exemptions From The Qualification Requirements Of The Corporate Securities Law

When looking for exemptions from the qualification requirements of the California Corporate Securities Law of 1968, a good place to start is Chapter 1, Part 2, Division 1 of Title 4 of the Corporations Code. Cal. Corp. Code...more

Must A Security Be Written?

In yesterday’s post, I covered some of the differences between the laundry lists of securities found in the California Corporate Securities Law of 1968 and the Securities Act of 1933. Both lists seem to contemplate...more

Making A List Of Securities And Checking It Twice

California Corporations Code Section 25019 defines “security” not by saying what a security is but by providing examples of numerous types of securities. In this respect, Section 25019 is reminiscent of Section 2(a)(1) of...more

California Secretary Of State Upgrades Business Searches

For some time, the California Secretary of State’s office has offered a business search application on its website. Although the function provided only limited information, the application received more than 5 million views...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

Court Rejects Challenge To Internal Affairs Doctrine

Marvell Technology Group, Ltd. is a publicly traded company that is incorporated in Bermuda. Marvell’s U.S. operating subsidiary is based in California. A year ago, an institutional stockholder filed a derivative suit...more

Court Rules Fixed Income Annuity Is Not A Security Under The CSL

Because annuity contracts involve the payment of money in the expectation of future payments, one might conclude that they are securities within the meaning of the California Corporate Securities Law of 1968. Evidently, that...more

Incorporating In Delaware May Not Eliminate Director Liability Under This California Statute

Some readers may have skipped this week’s posts discussing director liability under California Corporations Code Section 316 on the theory that the statute applies only to directors of corporations incorporated under the...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

In California, Directors Who Abstain May Still Face Liability

Section 316(a) of the California Corporations Code imposes joint and several liability on directors who approve any of the following actions...more

More Silliness In California’s Revised Uniform Limited Liability Company Act

Readers will know that I have been a frequent critic of California’s Revised Uniform Limited Liability Company Act, Cal. Corp. Code § 17701.01 et seq. In many cases, it is simply hard to believe that the legislature really...more

Establishing Authority By Acknowledgment

Last Friday, I discussed the ramifications of affixing a secretary’s certificate to a deed or instrument conveying or otherwise transferring any assets of a corporation. Today’s post covers the legal effect of obtaining a...more

Why Affixing A Secretary’s Certificate Might Protect The Innocent

Transactional lawyers are used to obtaining officers’ certificates to back up their opinions or to deliver to the other party pursuant to a purchase or sale agreement. I wonder, however, how many buyers or secured lenders...more

These Loans Can Be Problematical Even When The Borrower Isn’t An Officer or Director

I spent most of last week discussing California Corporations Code Section 315. As a reminder, that statute prohibits a corporation (Section 162) from making a loan of money or property to, or guaranteeing the obligation of,...more

D&O Loans: California Section 315 Versus Sarbanes-Oxley Section 402

Although both Section 315 of the California Corporations Code and Section 402 of the Sarbanes-Oxley Act purport to ban loans to directors and officers, there are significant differences between these statutes.  Below is a...more

California’s D&O Loan Ban And Advancement Of Expenses

Yesterday’s post outlined the general scope of the ban on loans to directors and officers found in Section 315 of the California Corporations Code. Because Section 315 doesn’t define “loan”, it may not always be clear...more

California’s Ban On Loans To Directors And Officers

California banned loans to directors and officers decades before Congress thought of doing so as part of the Sarbanes-Oxley Act of 2002.  Current Corporations Code Section 315 prohibits corporations from making loans of money...more

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