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californiacorporate&securities 6/24/2016
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 performs her duties in accordance with Corporations Code Section 7231(a) and (b) has no liability based on any failure

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californiacorporate&securities 6/23/2016
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 failure to act in his or her capacity as a director or officer unless it is proven that: The director’s or officer’s

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californiacorporate&securities 6/22/2016
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 should sue must therefore make a demand on the board.  If the board decides against suing, then the

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californiacorporate&securities 6/21/2016
Genealogy And The Corporate Lawyer

Who is family and how close are they?  These aren’t questions that typically occupy the mind of a corporate lawyer.  Occasionally, however, consanguinity matters even to a corporate lawyer.  Thus, Section 308 of the California Corporations Code authorized the Superior Court to appoint a provisional director (or directors) when there is either a deadlock on the

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californiacorporate&securities 6/20/2016
The Legal William Shakespeare

This past April marked the 400th anniversary of the death of William Shakespeare.  See Happy Birthday William Shakespeare!  In 37 plays, Shakespeare wrote of kings, generals, lovers, and fools. He also made frequent mention of law.  He uses the word “law” approximately 200 times in 176 speeches in 36 different works. But what about lawyers?   By my count, Shakespeare

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californiacorporate&securities 6/17/2016
Court Holds Inspection Statute Does Not Require That Records Be Brought To California

In “The Scope Of Stockholder Inspection In California And Delaware“, I wrote about what a shareholder is entitled to inspect under California’s shareholder inspection statute – Corporations Code Section 1601.  I did not discuss where that inspection must occur, a question addressed yesterday by the California Court of Appeal in Innes v. Diablo Controls, Inc.

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californiacorporate&securities 6/16/2016
Drafting Bylaws – Four Things To Consider

Four points to consider when drafting these often crucially important, but tiresome, documents: Distinguish among Shall/Will/Must. I often cite Bylaws as an example of how “shall” may sometimes mean “must” while other times may mean “may”.  See When Shall/Will/Must/May We Meet Again? Remember the Articles!  Occasionally, I come across bylaw provisions that are inconsistent with the articles of incorporation. 

The post Drafting Bylaws – Four Things To Consider appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 6/15/2016
Clock Winds Down On Resource Extraction Disclosure Rule

Congress told the SEC to adopt a resource extraction disclosure rule by no later than April 17, 2011.  The SEC missed that statutory deadline by over a year.  After the SEC belatedly adopted a rule in 2012, the U.S. District Court for the District of Columbia vacated it and sent it back to the SEC. 

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californiacorporate&securities 6/14/2016
As Delaware Goes, So Goes Washington?

In a posting yesterday, Professor Stephen Bainbridge poses the question “When an acquirer spots red flags: Should Microsoft’s board beware?” He points out: Numerous Delaware cases (mostly arising in the oversight context, of course) hold that independent directors will be liable for acting in bad faith only when they ignore alleged “red flags” that are “either waved

The post As Delaware Goes, So Goes Washington? appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 6/13/2016
Did Ethiopian Electric Power Violate California’s Corporate Securities Law?

Last week, the Securities and Exchange Commission announced a $6.5 million settlement with Ethiopian Electric Power, which was described in the SEC’s order as “a government-owned power utility headquartered in Addis Ababa, Ethiopia”.  According to the order, Ethiopian Electric Power offered and sold bonds to U.S. residents of Ethiopian origin in Washington D.C. and other

The post Did Ethiopian Electric Power Violate California’s Corporate Securities Law? appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 6/10/2016
Solon And The California Constitution

Article IV, Section 8 of the California Constitution requires that to be passed, a bill must first be read: No bill may be passed unless it is read by title on 3 days in each house except that the house may dispense with this requirement by rollcall vote entered in the journal, two thirds of

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californiacorporate&securities 6/9/2016
Contractors Do It, PIs Do It; Why Not Real Estate Brokers?

Individuals and corporations, but not limited liability companies, may be licensed as real estate brokers under the California Real Estate Law.  This is a result of a bargain reached when California’s enacted its first limited liability company law – the Beverly-Killea Act.  In order to overcome the objection of the California Trial Lawyers Association, the act proscribed

The post Contractors Do It, PIs Do It; Why Not Real Estate Brokers? appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 6/8/2016
California DBO Proposes Finders Exemption Regulations

Last fall, California enacted a finders exemption to the broker-dealer registration requirement under the Corporate Securities Law of 1968.  See Governor Signs Finders Exemption Bill.  This new exemption took effect on January 1, 2016 isn’t exactly taken the state by storm.  See California Finders Exemption Has Yet To Catch On.  Last month, the Commissioner of Business

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californiacorporate&securities 6/7/2016
He Had A Vice President’s Title And The Company Identified Him As “Management”, But He Was No Officer

Delaware attorney Francis Pileggi recently wrote about a ruling in the Court of Chancery concerning Nevada’s private corporation law.  The case, Eric Pulier v. Computer Sciences Corp., et al., C.A. No. 12005-CB, hearing (Del. Ch. May 12, 2016), arose from Computer Science Corporation’s acquisition in 2013 of Agility Platform, Inc., which was formerly known as ServiceMesh, Inc. After

The post He Had A Vice President’s Title And The Company Identified Him As “Management”, But He Was No Officer appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 6/6/2016
Non-Disparagement, The Magna Carta And Yelp

Disparagement isn’t what it used to be.  In the good old days, disparagement meant a marriage to a social inferior.  The word itself is derived from the Old French word, desparagier, meaning to degrade.  The French, of course, borrowed the word from the Latin prefix dis, meaning away from, and pars, meaning equal.  The English word “peer” is derived from

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californiacorporate&securities 6/3/2016
Over 1,000 Nevada Business Entities To Lose Their Registered Agent

In 2007, Nevada adopted the Model Registered Agents Act.  It is currently one of 10 states to have done so (plus the District of Columbia). Nevada’s enactment of the model act may have been predestined by the fact that the chair of the committee appointed by the National Conference of Commissioners on Uniform State Laws

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californiacorporate&securities 6/2/2016
Does The SEC’s New Form 10-K Rule Create A New Disclosure Standard?

Yesterday, the Securities and Exchange Commission announced that it has adopted an interim final rule that allows Form 10-K filers to provide a summary of business and financial information contained in their annual reports.  The SEC adopted the rule pursuant to Section 72001 of the Fixing America’s Surface Transportation (FAST) Act.  The rule adds a new Item 16 to

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californiacorporate&securities 6/1/2016
The Scope Of Stockholder Inspection In California And Delaware

Don’t peek at the statute, and answer the following question: A stockholder of a Delaware corporation has a statutory right to inspect a corporation’s (a) books of account; (b) accounting books and records; or (c) other books and records. If you answered “a”, you would be correct under former Section 3003 of California’s former General

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californiacorporate&securities 5/31/2016
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 are I, we are of one mind)”.  T. Maccius Plautus, Stichus Act V, sc. 4:49. Under the California General Corporation Law, directors

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californiacorporate&securities 5/27/2016
Will The Rise Of Tweener Corporations Increase Focus On California’s Annual Report Statute?

Earlier this week, The Wall Street Journal published two articles by Rolfe Winkler concerning shareholder access to financial information in companies not subject to the reporting requirements of the Securities Exchange Act of 1934.  In one of these pieces, Mr. Winkler describes California’s annual report requirement found in Corporations Code Section 1501. In general, Section 1501

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californiacorporate&securities 5/26/2016
Do State Courts Lack Subject Matter Jurisdiction Over Covered Class Actions That Allege Only ’33 Act Claims?

In Luther v. Countrywide Financial Corp., 195 Cal. App. 4th 789 (2011), the trial court ruled that state courts do not enjoy concurrent jurisdiction when a class action meeting the definition of a “covered class action” under the Securities Litigation Uniform Standards Act of 1998 (aka “SLUSA”) did not involve a “covered security” as also defined by SLUSA

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californiacorporate&securities 5/25/2016
Ninth Circuit Finds That Purpose Of Stock Rights Plan Matters

Most equity award plans that I come across include a statement of the plan’s purposes.  I haven’t tended to give these provisions a whole lot of thought, but an opinion issued yesterday by the Ninth Circuit Court of Appeal makes it clear that a plan’s purpose clause can be very important indeed.  The case arose from the retirement

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californiacorporate&securities 5/24/2016
Who Decides Whether A Shareholder Has Complied With An Advance Notice Bylaw?

UCLA Professor Stephen Bainbridge asked the following question concerning advance notice bylaw provisions in “The Professor is Stumped: Today’s Corporate Law Question“: When an incumbent board of directors claims that a potential proxy insurgent has failed to comply with an advance notice bylaw, who decides whether the bylaw has been satisfied? The board (subject to

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californiacorporate&securities 5/23/2016
How The Defend Trade Secrets Act Of 2016 Opens The Door To Disclosure Of Trade Secrets

François-Marie Arouet, better known as Voltaire, once famously wrote “Ce corps qui s’appelait et qui s’appelle encore le saint empire romain n’était en aucune manière ni saint, ni romain, ni empire (This body, which was, and is, titled the Holy Roman Empire was in no way holy, Roman, or an empire)”.  Essai Sur Les Moeurs, Ch. LXX.  A similar

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californiacorporate&securities 5/20/2016
Did The SEC Staff Bypass The APA In Issuing New And Revised Non-GAAP Financial Measure C&DIs?

Earlier this week, the staff of the SEC’s Division of Corporation Finance issued several new, and rewrote several existing, Compliance and Disclosure Interpretations (“C&DIs”) relating to Non-GAAP Financial Measures.  Recently, the SEC has been signaling that it intends to crack down on company disclosures of Non-GAAP Financial Measures.  While some are likely to welcome additional guidance

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Blogs 1 - 25 of 200