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California Corporate and Securities Law

Blogs 1 - 25 of 1000
californiacorporate&securities 1/18/2019
DBO Issues BDIA Report

The 2014 Budget Act requires the Department of Business Oversight to provide a report on its broker-dealer/investment adviser program to the the Legislature and the Department of Finance by January 10 of each year. While not exactly scintillating reading, the report provides a wealth of information about the DBO's licensing and examination of broker-dealers and investment advisers. The DBO's workload is summarized by the following table:

californiacorporate&securities 1/17/2019
When A Corporation Is A U.S. Government Agency

One doesn't normally think of corporations as being agencies of the United States government.  However, the California Corporations Code conclusively presumes that some corporations are agencies and instrumentalities of the United States.  To qualify for this presumption, the entity must:

californiacorporate&securities 1/16/2019
Is It Deceptive To Lie To A Machine?

John Jenkins at writes this morning about the Securities and Exchange Commission's announcement that it has filed a civil complaint against nine defendants for hacking the EDGAR system.  The SEC's complaint alleges that these defendants used information derived from trading to engage in advantageous trading.  When the hacking was discovered a year ago, I speculated on whether hacking could be "deceptive" for purposes of Rule 10b-5:

californiacorporate&securities 1/15/2019
Can You Name Our Neighbor To The North?

Brett Kissel's mic died when he began to sing the national anthem at a 2017 Ducks/Oilers game in Edmonton.  The local fans, however, pitched in and loudly finished the U.S. national anthem.  It seems that Canadians have concluded that their burning of our White House in 1814 settled the score for our burning of their Government House and Parliament the year before.

California Wireless Law Blog 1/15/2019
FCC Launches Its First 5G Auction by Alan Hearty

The U.S. continues its march towards implementing and refining 5G wireless technology. This technology enables faster internet speeds, Internet of Things (IoT) connectivity, and other promising applications. In its strategy to facilitate 5G implementation, the Federal Communications Commission (FCC) is taking several steps to push additional spectrum into the marketplace. This will be crucial for increasing competitiveness in the U.S. market and the global arena, as well as facilitating local wireless installations.

californiacorporate&securities 1/14/2019
Who May Adjourn A Shareholders' Meeting?

"Adjourn" is derived from the Latin words "ad" and "diurnus", meaning "to" and "daily" (a diurnal flower opens only during the day).  The word came into the English language through Old French "ajorner" ("soup du jour" is the soup of the day).  Based on etymology, an adjournment is a moving a meeting to another day.  This is the meaning given by William Shakespeare to Cardinal Campeius (Lorenzo Campeggio) when in Act II, Scene 4 of Henry VII Katherine of Aragon leaves her divorce proceedings:

californiacorporate&securities 1/11/2019
What Happens When Directors Elected By The Shareholders Are Not A Majority?

Section 305(a) of the California Corporations Code empowers a board of directors to fill vacancies with two important exceptions.  First, the articles of incorporation or bylaws may provide otherwise.  Second, the board may only fill a vacancy created by removal of a director if the articles of incorporation or bylaws so provide. 

californiacorporate&securities 1/10/2019
What Happens When the Incorporator Dies? - That Is The Question

Today I am revisiting a question that I posed more than six years ago: What happens when the incorporator dies?  More specifically, what happens when the incorporator dies and the corporation's initial directors are not named in the articles?

californiacorporate&securities 1/9/2019
California Corporations And Convertible Shares

Section 403 of the California Corporations Code provides authority for a California corporation to issue convertible shares when so provided in the articles of incorporation.  In general, conversion may be upon the "happening of one or more specified events and upon the terms and conditions that are stated in the articles".  The statute, however, allows conversion only upon three specified conditions.  

californiacorporate&securities 1/8/2019
California Legislature Mulls Cannabis Bank Charters

One of the first bills introduced in the current California legislative biennium proposes to enact a Cannabis Limited Charter Banking and Credit Union Law.  Authored by Senator Robert M. Hertzberg, SB 51 is an attempt to address the fact that cannabis businesses are unable to open and use checking accounts, make or receive electronic payments, or accept credit or debit cards because cannabis remains illegal under federal law.

californiacorporate&securities 1/7/2019
ISS Staffers Publish Questionable Conclusions Regarding California's New Gender Quota Law

Last week, three ISS staffers, Mikayla Kuhns, Rudy Kwack and Kosmas Papadopoulos, published their conclusions regarding the impact of California's new gender quota law.  Among other things, they found:

californiacorporate&securities 1/4/2019
Court Rules That Non-Innocent Agent Must Be Indemnified

Section 317 of the California Corporations Code authorizes a California corporation to indemnify its agents (as defined) under certain circumstances.  The statute deals separately with third party claims (Subdivision (b)) and claims brought by or in the right of the corporation (Subdivision (c)).  Subdivision (d) of the statute mandates indemnification in two circumstances.  The first is when the agent is successful on the merits in the defense of any proceeding.  The second is when the agent successful in defense of "any claim, issue or matter" in the proceeding.  

californiacorporate&securities 1/3/2019
Does California's Gender Quota Law Apply To All Foreign Corporations?

SB 826 (Jackson) is reputably the first state law requiring publicly held corporations to have a minimum number of female directors.  It is generally assumed that the law applies only to those publicly held domestic and foreign corporations having their principal executive offices in California.  But is that what the new law actually provides?

californiacorporate&securities 1/2/2019
Secretary Of State Makes Terminating LLCs More Convenient

In June 2017, the California Secretary of State announced the debut of Bizfile, an online portal to help businesses file, search, and order business records quickly and conveniently from one webpage.  Over the last year, the Secretary of State's office has expanded Bizfile's capabilities to include online trademarks and servicemarks filings and Limited Liability Company (LLC) formations.  Last week, the office announced that Bizfile may now be used to terminate LLCs.  

californiacorporate&securities 12/28/2018
Surprise! The SEC Coins A Nearly Novel Disclosure Requirement

Earlier this month, the Securities and Exchange Commission added a new paragraph (i) to Item 407 requiring a company to describe any practices or policies regarding hedging transactions.  The fact that the SEC took this action should have been no surprise because Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act required the SEC to do so.  I was surprised, however, to see that the final rule includes a novel disclosure standard.  I was especially surprised because this standard was not included in the text of the rule as proposed.  Thus, the public was denied any opportunity to comment on the standard.

californiacorporate&securities 12/28/2018
Just How Significant Is A Corporation's "Principal Executive Office"?

California's former corporations law required that the articles of incorporation include the county in California "where the principal office for the transaction of the business of the corporation is located".  The drafters of the current law jettisoned this as a required disclosure in the articles of incorporation.  The current law, however, does require that the statement of information filed with the Secretary of State pursuant to Section 1502 of the Corporations Code include the street address of the corporation's "principal executive office".  If the principal executive office is not in California, the statement must also include the street address of the corporation's "principal business office" in California.

californiacorporate&securities 12/26/2018
Court Of Appeal Finds No Right To Sue Directors In California

In July 2017, I wrote about Judge Brian C. Walsh's ruling that Delaware, not California, was the proper forum for suing the directors of a Delaware corporation based on the corporation's forum selection bylaw.  California Judge Honors Delaware Forum Selection Bylaw.  Just in time for Christmas, a California Court of Appeal affirmed Judge Walsh's ruling.   Drulias v. 1st Century Bancshares, 2018 Cal. App. LEXIS 1202.

californiacorporate&securities 12/21/2018
SEC Agrees No Permission Required

Earlier this week, the Securities and Exchange Commission adopted a new rule that will require a company to describe any practices or policies it has adopted regarding the ability of its employees (including officers) or directors to purchase financial instruments, or otherwise engage in transactions, that hedge or offset, or are designed to hedge or offset, any decrease in the market value of equity securities granted as compensation, or held directly or indirectly by the employee or director.  This new rule is intended to implement Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

californiacorporate&securities 12/20/2018
Delaware Court Declines To Apply California Labor Code Despite California Choice Of Law

Do California Labor Code provisions governing employees apply to persons performing work outside of California?  What if that work is performed pursuant to an agreement that includes the following provisions?

californiacorporate&securities 12/19/2018
Some California Implications Of Delaware's New LLC Division Statute

When I first heard about Delaware's new statute establishing a procedure for dividing a limited liability company, I immediately flashed back to High School Biology class and meiosis.  In meiosis 1, a single cell divides into two cells with each resulting cell having half the number of the number of chromosones as the original cell.  Delaware's new statute, Section 18-217, authorizes a Delaware LLC to divide into 2 or more Delaware LLCs.  For more information on on this new law, see this Q&A with Tarik J. Haskins, a partner at the Delaware Law firm of Morris, Nichols, Arsht & Tunnell LLP.  From a California perspective, several issues come to mind. 

californiacorporate&securities 12/18/2018
Does The Business Judgment Rule Extend To A Board Interpretations?

The California Supreme Court has adopted a rule of deference to most decisions made by community association boards:

californiacorporate&securities 12/17/2018
While In Nevada, It's Best Not To Impersonate A Corporation

I suppose that some unincorporated persons might be tempted to add "Inc." to give an impression of corporality to their activities.  Although Nevada is famously lenient to many vices, impersonating a corporation is not one of them.  NRS 78.047 imposes a fine of up to $10,000 on anyone that is:

californiacorporate&securities 12/14/2018
Why Does The SEC Insist That Some Defendants Lie?

In 1972, the Securities and Exchange Commission adopted what has become known as the "gag rule":

californiacorporate&securities 12/13/2018
N.C. Supreme Court Interprets California Demand Requirement, But Did The Statute Apply?

The North Carolina's Supreme Court's recently issued opinion in  Azure Dolphin, LLC v. Barton, 2018 N.C. LEXIS 1036 caught my eye because it involved an interpretation of California Corporations Code Section 15910.02 which establishes the pleading requirements for a derivative suit involving a California limited partnership:

californiacorporate&securities 12/12/2018
Court Rules Registration To Transact Intrastate Business Does Not Establish General Jurisdiction

A foreign corporation registering with the California Secretary of State to transact intrastate business must, among other things, designate an agent for service of process in California. Does this amenability to service confer personal jurisdiction?     

Blogs 1 - 25 of 1000