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California Corporate and Securities Law

Blogs 1 - 25 of 1000
californiacorporate&securities 1/28/2019
Academic Study Finds Fault With Older Independent Directors

Old and In the Way?

californiacorporate&securities 1/25/2019
Nevada Secretary Of State Unveils Proposed Broker-Dealer Fiduciary Rules

NRS 628A.020 imposes a fiduciary duty on financial planners.  In 2017, the Nevada legislature enacted legislation prohibiting broker-dealers and sales representatives from violating the fiduciary duty imposed by NRS 628A.020.  NRS 90.575(1).  This same legislation authorized the Administrator of the Nevada Securities Division, Office of the Secretary of State to adopt regulations relating to this fiduciary duty.   Earlier this week, the Administrator issued proposed rules for public comment.

californiacorporate&securities 1/24/2019
Court Allows Whistleblower Case To Proceed Even Without Access To Tax Returns

Several prior posts have discussed California's whistleblower protection statute - Labor Code Section 1102.5.  See Court Extends California Whistleblower Protection To Third Party ViolationsCan A Whistleblower Disclose What Has Already Been Reported? and Does Whistleblower Protection Extend To Disclosures To Your Mom Or The Press?  The statute prohibits retaliation against an employee for disclosing information to the government or other specified persons if "the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation of or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the employee’s job duties". 

californiacorporate&securities 1/23/2019
SEC Enforcement Action Demonstrates That Timing Is Everything

Rule 506 is a non-exclusive safe harbor from the registration requirements of the Securities Act of 1933.  If an offering meets the conditions of either Rule 506(b) or 506(c), it is deemed to not involve a public offering within the meaning of Section 4(a)(2) of the Securities Act.  It is somewhat paradoxical, therefore, that an offering under Rule 506(c) may involve a general solicitation and still not be considered to be a public offering.  Nonetheless this is what Congress mandated in Section 201 of the Jumpstart Our Business Startups (JOBS) Act.

californiacorporate&securities 1/22/2019
Does Voluntary Disclosure Reduce Or Increase Litigation Risk?

When disclosure is not mandated, companies must confront the question whether to disclose or not disclose.  Some may hold that issuers minimize the risk of securities litigation by making early and voluntary disclosures.  By doing so, they cabin a potential class period and start the clock on a statute of limitations defense.  Others may say that the physic of voluntary is iatrogenic as it exposes the company to lawsuits based on alleged misstatements in the disclosure itself.  How do companies react to changes in litigation risk?  If litigation risks declines, do the disclose more or less?  A recent study provides an answer.

California Wireless Law Blog 1/22/2019
New Bill Focuses On Government Spectrum Valuation by Alan Hearty

In the race to 5G, access to and management of the spectrum will be a critical factor. Next generation 5G networks will require the broad use of the spectrum in order to support U.S. competitiveness in the wireless sector. Recently, the “Government Spectrum Valuation Act of 2018” was introduced, which may provide additional avenues for the efficient management of the spectrum.

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?

Blogs 1 - 25 of 1000