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californiacorporate&securities 9/2/2015
Officers And The Internal Affairs Doctrine

My guess is that most attorneys would say that the duty of an officer to the corporation are governed by the law of the state of incorporation under the “internal affairs doctrine”.  As explained by the U.S. Supreme Court, the “internal affairs doctrine” is a conflict of laws principle that “recognizes that only one State should

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californiacorporate&securities 9/1/2015
Overcoming A Securities Overissue

I like to remind my colleagues that California has two securities laws. Neither of these laws applies exclusively to corporations or other entities organized under California law.  The Corporate Securities Law of 1968, Cal. Corp. Code § 25000 et seq., is generally concerned with the offer and sale of securities in California.  The Uniform Commercial Code –

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californiacorporate&securities 8/31/2015
In California, A Snail Is Sometimes A Fish And A Goldfish Isn’t

With statutes, it can be dangerous to rely on plain meaning.  Most people, for example, would not consider an amphibian, such as a frog, or a mollusk, such as a snail, to be fish.  However, the California Fish & Game Code considers these and crustaceans (including crabs, lobsters, and barnacles) to be fish.  Oddly, however, the

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californiacorporate&securities 8/28/2015
Grammatical Gender And The General Corporation Law

Many, but not all languages, employ grammatical gender.  Anyone who has studied Spanish or German will know that grammatical gender is essential and can be unrelated to biological sex.  For example, el vestido is a masculine noun even though it denotes an article of clothing historically worn by women.  I still recall my High School Latin teacher explaining that even though a Roman legion was comprised of thousands of

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californiacorporate&securities 8/27/2015
Did You Ever Wonder Whether “Within” Might Be A Superfluous Pleonasm?

Suppose that you hold an option that must be exercised “within 30 days prior to the expiration of the option”.  Does this mean that you must exercise the option no later than thirty days before the expiration date or that you may exercise the option at any time within the 30 days before the expiration

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californiacorporate&securities 8/26/2015
California Enacts Change-in-Control Benefits For Grocery Workers

Last week, Governor Jerry Brown signed AB 359 (Gonzalez) that will impose a worker retention requirement when there has been a change in ownership or control of grocery establishments.  In general, the bill will require the successor grocery employer to retain eligible grocery workers for a 90-day period.  After that period expires, the successor grocery employer will

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californiacorporate&securities 8/25/2015
Nevada Enacts Provisions Permitting Ratification Of Corporate Acts

Etymologically, one might view the meaning of “ratify” as to make as one had thought.  It is derived from two Latin words – ratus (the past participle of the verb meaning to think) and facere (the infinitive of the verb meaning to make).  Two years ago, Delaware added two statutes intended to facilitate ratification of corporate

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californiacorporate&securities 8/24/2015
California Amends Code To Authorize Worker Cooperatives

I’ve written in the past about various efforts to create a workers cooperative law here in California.  See Are Worker Cooperatives A “Sea Water Fish In A Freshwater Pond”? and In The Year 2525, If Man Is Still Alive, If Woman Can Survive, They May Find Limited Liability Worker Cooperatives.  This summer, the California legislature enacted legislation, AB

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californiacorporate&securities 8/21/2015
Court Poised To Decide Whether Directors Are Agents

Not quite four years ago, I wrote about whether directors are agents.  The post was prompted by then Chancellor William B. Chandler III’s assertion: This is because the board’s power – which is that of an agent’s with regard to its principal – derives from the shareholders, who are the ultimate holders of power under

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californiacorporate&securities 8/20/2015
California, Nevada and 38 Other States Have These, But Delaware Doesn’t

According to the National Center for State Courts, forty states, including California and Nevada, have established intermediate courts of appeal.  California’s Court of Appeal was established by a constitutional amendment adopted by the voters in November 1904.  Originally, the Court of Appeal was comprised of three districts, with the First District sitting in San Francisco,

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californiacorporate&securities 8/19/2015
California Reverts To Former Securities Anti-Fraud Statute

Readers of this blog will recall my chariness of a 2013 amendment to California’s basic securities anti-fraud statute.  See California Creates Complete Chaos By Rewriting Anti-Fraud Statute, But “We Are Against Fraud Aren’t We?”  Although I identified a host of issues, my fundamental concern was that by rewriting California Corporations Code Section 25401, the legislature

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californiacorporate&securities 8/18/2015
Section 10(b) Claim Receives a Do-Wacko-Do

So many Section 10(b) claims involve claims of misrepresentation that it easy to forget that the rule also makes it unlawful to use manipulative devices in connection with the purchase or sale of securities.  However, a recent ruling by Judge Margaret M. Morrow considered whether a plaintiff had adequately pled a claim of manipulative conduct in

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californiacorporate&securities 8/17/2015
Conduct Unbecoming Of An Officer And An Employee?

In proposing executive compensation recoupment rules, the Securities and Exchange Commission either overlooked or failed to recognize an important legal distinction.  The proposed rules would require national securities exchanges and national securities associations to establish listing standards requiring each issuer to develop and implement a policy providing for the recovery, under certain circumstances, of incentive-based compensation based on financial

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californiacorporate&securities 8/14/2015
Nevada Corporate Law: What’s Wrong With Expedition?

As someone who has been writing about Nevada corporate law for over two decades, I’ve been somewhat amused by the recent “discovery” of the Silver State as an alternative to Delaware.  Writing for The Wall Street Journal, Liz Hoffman observed that Nevada is the second most popular state after Delaware for public company incorporations.  This prompted

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californiacorporate&securities 8/13/2015
SEC Staff Declares Performance History Is Not Factual

The Securities and Exchange Commission staff recently issued a series of additional Compliance and Disclosure Interpretations with respect to what might constitute a “general solicitation” under Regulation D.  These interpretations illustrate the logical contortions that must be endured when trying to regulate speech.  After admitting that an issuer may disseminate factual information about itself, the

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californiacorporate&securities 8/11/2015
Why The SEC’s Pre-Existing Relationship Test Is The Mirror Image of California’s

One significant condition to California’s limited offering exemption is that all purchasers have a “pre-existing relationship”: All purchasers either have a preexisting personal or business relationship with the offeror or any of its partners, officers, directors or controlling persons, or managers (as appointed or elected by the members) if the offeror is a limited liability

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8/9/2015
Does The Power To Choose Not Include The Power To Remove?

Last week I wrote about Vice Chancellor John W. Noble’s ruling in Gorman v. Salamone, C.A. No. 10183-VCN (Del. Ch. July 31, 2015) that a stockholder adopted bylaw empowering stockholders to remove officers is invalid.  The stockholder grounded his argument on Section 142(b) of the Delaware General Corporation Law, which provides: Officers shall be chosen in such

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californiacorporate&securities 8/7/2015
Did You Ever Wonder What You Might Do In California But Not Delaware?

A recent decision by the Delaware Court of Chancery tackles the question of whether a stockholder may adopt a bylaw granting stockholders the right to remove officers.  In Gorman v. Salamone, C.A. No. 10183-VCN (Del. Ch. July 31, 2015), Vice Chancellor John W. Noble ruled that such a bylaw was invalid under Delaware law. The stockholder

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californiacorporate&securities 8/6/2015
50% Shareholder Denied Say In Defense Of Corporation

If two shareholders each own one half of the outstanding shares of a corporation, one might expect that they would have an equal say in just about everything.  It turns out that in some circumstances they won’t. In Coldren v. Hart, King & Coldren, Inc., Cal. Corp. Appeal No. G050202 (July 13, 2015), a shareholder sued the

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californiacorporate&securities 8/5/2015
Do De Facto Officers Owe Fiduciary Duties?

A recent ruling by Magistrate Judge Jacqueline Scott Corley addressed the interesting question of whether a consultant might owe a fiduciary duty as a de facto officer.  Music Grp. Macao Commer. Offshore, Ltd. v. Foote, 2015 U.S. Dist. LEXIS 81415 (N.D. Cal. June 22, 2015).  The ruling came in a lawsuit by a corporation against a

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californiacorporate&securities 8/4/2015
Will You Be Gulled By This Notice?

Some Nevada corporations have been receiving the above notice and paying a $150 fee to the Division of Corporate Services.  According to the Nevada Secretary of State: This is not an official notice from the Secretary of State’s office.  Nevada entities are not required to regularly provide to the Secretary of State shareholder information or

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Social Media & Employment Law Blog for California Employers 8/3/2015
Montana Is 20th State To Restrict Employer Access To Personal Social Media Accounts

Recently, Montana became the 20th state to enact legislation restricting an employer’s access to employees’ and job applicants’ personal social media accounts. The new statute prohibits an employer from requiring or requesting an employee or applicant: to disclose to the employer user names and passwords for their personal social media accounts for the purpose of

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californiacorporate&securities 8/3/2015
CalPERS And Pay For Performance

A few weeks ago, CalPERS’ Director of Corporate Governance, Anne Simpson, sent a letter to the Securities and Exchange Commission in support of the SEC’s proposed pay for performance disclosure rule.  Her letter notes CalPERS’ belief that “Compensation of executives in publicly listed companies should be driven predominantly by performance.”  CalPERS Global Governance Principles, California Public

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californiacorporate&securities 7/31/2015
CalPERS And Pay Equity

The Securities and Exchange Commission has given notice of its intent to adopt final pay ratio disclosure rules at its meeting next week.  In applauding the SEC’s proposed rules, the California Public Employees’ Retirement System observed: Finally, we believe the ratio will be a number which prompts commentary and discussion, providing an important data point

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californiacorporate&securities 7/30/2015
Senate Appropriations Committee Is Next Stop For California Finders Bill

AB 667 (Wagner) continues to wend its way through the California legislature.  The bill, which was sponsored by the Corporations Committee of the Business Law Section of the California State Bar, defines a finder as a natural person who, for direct or indirect compensation, introduces or refers one or more accredited investors, as that term

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Blogs 1 - 25 of 957