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californiacorporate&securities 12/7/2016
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: Under Delaware law, can a Board of Directors authorize a person who is not an officer of the company to act as agent and vote shares of stock for the Company that it holds in another entity? John Jenkins responded…

The post Who Votes As Proxy For Shares Standing In The Name Of Another Corporation? appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 12/6/2016
This Company Solicited Consents To Remove A Sitting Director

It’s not often that you see a company soliciting consents to remove one of its sitting directors.  However, that is what PICO Holdings, Inc. sought to do in this consent solicitation statement filed with the SEC on October 31, 2016.  According to PICO’s Form 8-K , John R. Hart’s employment as president and chief executive officer of the company “was terminated”…

The post This Company Solicited Consents To Remove A Sitting Director appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 12/5/2016
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 against Marvell and several of its officers and directors.  The factual bases for the plaintiff’s suit were securities law violations but the plaintiff…

The post Court Rejects Challenge To Internal Affairs Doctrine appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 12/2/2016
Unregistered Sales Of Certificates Of Deposit

Last spring, the California Department of Business Oversight warned consumers that two related companies have been offering unlicensed online securities broker-dealer services and “unregistered sales of certificates of deposit (CDs)”.  The Department’s announcement raises the question of whether the offer and sale of CDs must be qualified under the Corporate Securities Law of 1968. Section 25019 of…

The post Unregistered Sales Of Certificates Of Deposit appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 12/1/2016
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 is what Mr. Abbit or at least his lawyer believed when they filed a class action lawsuit against an insurer alleging,…

The post Court Rules Fixed Income Annuity Is Not A Security Under The CSL appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/30/2016
California’s Private Fund Adviser Exemption

Before the enactment of the Dodd-Frank Act in 2010, many advisers to alternative investment vehicles, such as hedge funds, private-equity funds, and venture capital funds relied on the Section 203(b)(3) exemption from registration under the federal Investment Advisers Act.  In California, investment advisers exempt under Section 203(b)(3) had a corollary temporary exemption from California investment…

The post California’s Private Fund Adviser Exemption appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/29/2016
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 310(a) provides the following answer: A director is not interested within the meaning of this subdivision in a resolution fixing the…

The post When A Director May Not Be Interested In Director Compensation appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/28/2016
Is The SEC’s Universal Proxy Proposal A Product Of Agency Capture?

More than six decades ago, the late Professor Marver H. Bernstein published his theory of regulatory capture in Regulating Business By Independent Commission (Greenwood Press 1955).  According to his theory, agencies follow a life cycle of birth, maturity and old age.  As an agency enters senescence, it inevitably becomes captive to the groups that it regulates.…

The post Is The SEC’s Universal Proxy Proposal A Product Of Agency Capture? appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/25/2016
Court Addresses “Fair Value” Determination In Statutory Buyout Proceeding

When when a shareholder sues for involuntary dissolution, the corporation, or the holders of 50% or more of the voting power of the corporation, may avoid the dissolution by purchasing for cash the plaintiff’s shares at their “fair value.”  Cal. Corp. Code § 2000.  The statute establishes several parameters for determining “fair value”.  Thus, “fair value” must…

The post Court Addresses “Fair Value” Determination In Statutory Buyout Proceeding appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/22/2016
When Non-Voting Shares Have The Right To Vote

The California General Corporation Law authorizes a corporation to “issue one or more classes or series of shares or both, with full, limited or no voting rights”.  Cal. Corp. Code § 400(a).  Thus, it may be reasonable to assume that when a corporation issues shares with no voting rights, those shares would have no right to…

The post When Non-Voting Shares Have The Right To Vote appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/21/2016
SEC Hands Out Millions While Leaving The Public In The Dark

Last week, the Securities and Exchange Commission issued a press release announcing its decision to award $20 million “to a whistleblower who promptly came forward with valuable information that enabled the SEC to move quickly and initiate an enforcement action against wrongdoers before they could squander the money.”  That is about all the public will…

The post SEC Hands Out Millions While Leaving The Public In The Dark appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/18/2016
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 General Corporation Law.  That could be a big mistake.  California’s pseudo foreign corporation statute, Corporations Code Section 2115, applies Section 316 to foreign…

The post Incorporating In Delaware May Not Eliminate Director Liability Under This California Statute appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/17/2016
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 as a loan to an officer contrary to Section 315.  Now consider the following scenario: Dr. Zachary Smith, a director, attends a meeting of the…

The post Does The Foolish Director Abide Whilst The Wise Director Flees? appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/16/2016
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: The making of any distribution to shareholders to the extent contrary Sections 500 – 503; The distribution of assets to shareholders after institution of dissolution proceedings of the corporation, without paying or adequately providing…

The post In California, Directors Who Abstain May Still Face Liability appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/15/2016
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 intended what it enacted. See, e.g., How Confused Is This? California Defines LLCs Subject To New Law To Include…

The post More Silliness In California’s Revised Uniform Limited Liability Company Act appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/14/2016
All Power To The People: Initiatives And Referenda In California

A year ago, I addressed the effective date of California legislative bills in this post.  In California, the people can also exercise legislative power through two different mechanisms – the initiative and the referendum.  In fact, the California Constitution proclaims: All political power is inherent in the people.  Government is instituted for their protection, security,…

The post All Power To The People: Initiatives And Referenda In California appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/11/2016
California Voters Reject 11th Hour Gutting And Amending Of Bills

Not quite a year ago, I wrote: A reader of the California Constitution would be lead to believe that the course of legislation is orderly and predictable.  Under Article IV, Section 8(b), the legislature may make no law except by statute and no statute except by bill.  Every bill, moreover, must have a single subject…

The post California Voters Reject 11th Hour Gutting And Amending Of Bills appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/10/2016
A New Regulatory Paradigm For The SEC?

Many are speculating on the future of federal securities regulation as a result of the election of Donald J. Trump and the concomitant Republican control of both houses of Congress. Broc Romanek, for example, asks whether Michael S. Piwowar will become the SEC’s next Chairman.  Broc notes that Commissioner Piwowar is an economist, not a lawyer. …

The post A New Regulatory Paradigm For The SEC? appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/9/2016
Why Lincoln Was Wrong About A House Divided (At Least In The UK)

On Wednesday, June 16, 1858, delegates of the Republican State Convention of Illinois gathered in Representatives’ Hall in Springfield.  At about 5:00 p.m., delegate Charles L. Wilson submitted the following resolution: Resolved, that Abraham Lincoln is the first and only choice of the Republicans of Illinois for the United States Senate, as the successor of Stephen A.…

The post Why Lincoln Was Wrong About A House Divided (At Least In The UK) appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/8/2016
Hairsplitting The Polls

In recognition of today’s election, today’s post is about polls, poles and Poles. The General Corporation Law uses the word “poll” exactly once – in describing the duties of the inspectors of election at meetings of shareholders. Section 707(b) of the Corporations Code provides that the inspector(s) must determine, among other things, “when the polls shall close”.  Oddly, the…

The post Hairsplitting The Polls appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/7/2016
Why The SEC Isn’t Vegas

Last week, I wrote that the Securities and Exchange Commission is sending letters to registrants requesting information about compliance with Regulation G and Item 10(e) of Regulation S-K.  These letters request issuers to voluntarily provide information concerning their disclosures of non-GAAP financial measures.  I cautioned that registrants should read the accompanying SEC Form 1662 carefully before…

The post Why The SEC Isn’t Vegas appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/4/2016
What Law Governs Real Property Conveyances By Foreign Corporations?

Consider the following fact pattern: Joe is the Chief Executive Officer of Transient, Inc., a Delaware corporation that is headquartered in Dallas, Texas.  Transient’s sole asset is 100 acres of undeveloped land in California.  Without consulting, much less obtaining the authorization of Transient’s board of directors or stockholders, Joe enters into a land sales contract…

The post What Law Governs Real Property Conveyances By Foreign Corporations? appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/3/2016
When CEOs Read This, They May Become Less Enamored Of Delaware

In a forthcoming paper, Professors Murali Jagannathan (Binghamton University School of Management) and A.C. Pritchard (University of Michigan Law School) evaluate whether there might be  relationship between incorporation in Delaware and Chief Executive Officer turnover.  The two professors conclude that Delaware firms terminate their CEOs significantly more frequently than the average firm in their study.  They found that decisions by Delaware boards to force out…

The post When CEOs Read This, They May Become Less Enamored Of Delaware appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/2/2016
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 director’s or officer’s decision will be protected when it was made in reliance upon others.  Section 141(e) of the Delaware General Corporation…

The post Why Nevada Is A More Reliable Alternative To Delaware appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
californiacorporate&securities 11/1/2016
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 certificate of acknowledgment of an instrument of transfer. Preliminarily, it is useful to recall a few basic concepts.  An acknowledgment generally…

The post Establishing Authority By Acknowledgment appeared first on CALIFORNIA CORPORATE & SECURITIES LAW.

 
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