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California Corporate and Securities Law

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californiacorporate&securities 11/19/2018
Why Be Wary Of Section 11 Liability?

Last Friday's post discussed the possibility of avoiding potential liability under Section 11 of the Securities Act by relying on the Section 3(a)(10) exemption from registration.  Eliminating Section 11 liability does not eliminate liability under other anti-fraud statutes or rules, such as SEC Rule 10b-5 and California Corporations Code Section 25401.  So why be concerned about Section 11 liability?

californiacorporate&securities 11/16/2018
How To Avoid A Section 11 Liability In A Stock-For-Stock Merger

John Jenkins at recently wrote about Section 11 claims being filed in state court by purchasers in stock-for-stock mergers.  Section 11 of the Securities Act of 1933 authorizes a cause of action against specified persons "in case any part of the registration statement, when such part became effective, contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading . . . ".  

californiacorporate&securities 11/15/2018
How A Voting Shift Can Cut Short A Director's Term

Upon hearing that a "voting shift" has occurred, one might infer that there has been some change in the historical voting patterns.  The California General Corporation Law, however, defines the term very differently:

californiacorporate&securities 11/13/2018
You Might Be A Member Of The California Militia And Not Even Know It

Veterans Day falls on November 11 of each year because the First World War famously ended at the 11th hour of the 11th day of the 11th month.  California public offices, however, were closed yesterday on November 12.  Why?  The answer can be found in Government Code Section 6700(b) which provides that if November 11 falls on a Sunday, state offices will be closed on Monday.  The same statute provides that if November 11 falls on a Saturday, state offices will be closed on the preceding Friday.  The analogous provision in federal law is 5 U.S.C. ยง 6103.

californiacorporate&securities 11/12/2018
New California Labor Code Statute Results In Enforceable Covenant Not To Compete

In October 2016, I wrote about a newly enacted statute, Labor Code Section 925.  That statute prohibits an employer from requiring an employee who primarily resides and works in California, as a condition of employment, to agree to a provision that would do either of the following:

California Wireless Law Blog 11/9/2018
Lawsuit Challenges California Net Neutrality Law by Alan Hearty
californiacorporate&securities 11/9/2018
California Court Tackles Question Of When An Amendment Is A New Agreement

The parties to an agreement agree upon a change to the terms.  Should the change be labeled an "amendment" or a "new agreement".  Often this will simply be a question of nomenclature.  Sometimes, however, more the difference between an amendment and a new agreement can have substantive consequences.  Such was the case in Citizens for Amending Proposition L v. City of Pomona, Cal. Ct. Appeal Case No. B283740 (Nov. 7, 2018).  

californiacorporate&securities 11/8/2018
Exchange Reorganizations Versus Share Exchange Tender Offers

The last several posts have been devoted to exploring the differences between an "exchange reorganization" and a "share exchange tender offer" under the California General Corporation Law.  Below is a chart that summarizes the differences between these two types of transactions:

californiacorporate&securities 11/7/2018
Are Share Exchange Tender Offers Limited Only To Acquisitions Of California Corporations?

Recent posts have been discussing  California's regulation of "share exchange tender offers".  Corporations Code Section 183.5 defines a "share exchange tender offer" as:

californiacorporate&securities 11/6/2018
Shareholder Approval And Share Exchange Tender Offers

Yesterday's post delved into the difference between a "share exchange tender offer" (Section 183.5) and an "exchange reorganization" (Section 181(b)) under the California General Corporation Law.  Briefly, both involve the exchange of equity securities by one corporation for the equity securities of another corporation, but the former does not result in the acquisition of control while the latter does.  The legislature created the concept of a "share exchange tender offer" as a means of imposing a shareholder approval requirement on an acquiring corporation.  As noted, however, shareholder approval is not required in every "share exchange tender offer".

californiacorporate&securities 11/5/2018
California's Obscure Regulation of Share Exchange Tender Offers

In 1989, the California legislature decided to define "share exchange tender offer" in the General Corporation Law.  Section 183.5 defines the term to mean:

California Wireless Law Blog 11/5/2018
Pacific Grove Votes to Allow Wireless Installation by Alan Hearty
californiacorporate&securities 11/2/2018
Court Of Appeal Upholds Injunction Restraining Enforcement Of Non-Solicitation Agreement

California Business & Professions Code Section 16600 is particularly tough on covenants not to compete declaring, with certain exceptions, "every contract by which anyone is restrained from engaging in a lawful profession trade, or business of any kind is to that extent void".  Nonetheless, the statute does seem to leave some room for agreements not to solicit employees.  After all, such an agreement does not preclude a promisor from engaging in a business nor does it prohibit a promisor from hiring an employee.  

californiacorporate&securities 11/1/2018
The Case Of The Non-Existent Stock Options

After starting employment at eCommission Solutions, LLC in 2015, Mr. Aja Doshi was offered the position of Vice President, Product Engineering.  Among other things, the offer stated: "You will be granted one hundred fifty thousand (150,000) stock options pursuant to this Agreement".   The company, however, did not have a "stock" option plan and never implemented such a plan.  Mr. Doshi sued for, among other things, a violation of Section 25401 of the California Corporations Code, which in 2015 provided:

californiacorporate&securities 10/31/2018
A Nevada Day Literary Guide

If we were on Mt. Athos, today's date is October 18, 2013.  That is because the monks on that peninsula in the Aegean Sea still adhere to the Julian calendar.  While I hew to the old calendar, I do remain a traditionalist when it comes to Nevada Day.  October 31 is the original date on which Nevada Day was celebrated.  In 1999, however, the Nevada legislature made the unfortunate and historic decision to move the celebration to the last Friday of October.  NRS 236.015(1).

californiacorporate&securities 10/30/2018
Mandatory Retirement Policies And California Law

In yesterday's Mentor Blog, Liz Dunshee asked whether mandatory retirement policies are a thing of the past.  This led me to question whether age discrimination of this sort is even legal in California.  Asking about, I learned that California Government Code Section 12942(a) provides:

californiacorporate&securities 10/29/2018
With Respect To Scienter, The Ninth Circuit Walks By Its Wild Lone

Although the United States Supreme Court has never directly addressed the issue, many lower courts have inferred that a private right action exists under Section 14(e) of the Exchange Act.  That may not come of much a surprise since it was modeled on the anti-fraud provisions of Section 10(b) and Rule 10b-5 for which a private right of action exists.  Congress added Section 14(e) to the Exchange Act in 1968 as part of the Williams Act amendments to address fraudulent acts in tender offers.

californiacorporate&securities 10/26/2018
Must A Board Of Directors Authorize The Filing Of A Lawsuit On The Corporation's Behalf?

California Corporations Code Section 300(a) declares that "the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board."  Does this mean that the board of directors must authorize the filing of a lawsuit in the name of the corporation?  That question was recently addressed by a California Court of Appeal in an unpublished decision,  St. Mary's Holy Apostolic Church of the East v. Benjamin, 2018 Cal. App. Unpub. LEXIS 6030.

californiacorporate&securities 10/25/2018
What Does LAX Have To Do With Female Board Membership?

Tuesday's post took note of a recent study authored by Sunwoo Hwang and Professors Anil Shivdasani and Elena Simintzi at the University of North Carolina's Kenan-Flagler Business School.  They found that California's enactment of SB 826 imposing gender quotas on publicly traded corporations has "resulted in a significant decline in shareholder value for firms headquartered in California".

California Wireless Law Blog 10/25/2018
Huawei Continues Seeking U.S. Market Access by Alan Hearty

Along with the technological advancements of wireless infrastructures come various challenges, especially with regards to competition and consumer protection. In particular, access to American markets by foreign companies carries with it a number of issues and concerns.

californiacorporate&securities 10/24/2018
When To Worry About Blue Sky Laws

Recently, I came across a very helpful table on the SEC's website.  The table illustrates which offerings exempt from Section 5 of the Securities Act may be subject to state registration or qualification requirements:

californiacorporate&securities 10/23/2018
Did California's Enactment Of Board Gender Quota Law Cause A Significant Decline In Shareholder Value?

As noted by Professor Stephen Bainbridge yesterday, a recent study has concluded that California's enactment of SB 826 has "resulted in a significant decline in shareholder value for firms headquartered in California".  Sunwoo Hwang and Professors Anil Shivdasani and Elena Simintzi at the University of North Carolina's Kenan-Flagler Business School authored the study.  They found that following announcement of the signing of SB 826, companies headquartered or incorporated in California experienced a statistically significant abnormal return of -1.4%.

californiacorporate&securities 10/22/2018
Buyer Liability Under The California Corporate Securities Law

Last Friday's post concerned liability under Section 12(a) of the Securities Act of 1933.  As noted in the post, Section 12(a)(2), unlike Section 12(a)(1), is an antifraud statute.  It imposes liability on any person who:

californiacorporate&securities 10/19/2018
Court Finds Section 12(a) Claim Fails For Failure To Plead Scienter?

I recently covered liability under Sections 11 and 12 of the Securities Act of 1933 in the securities regulation course that I teaching at the University of California, Irvine School of Law.  Thus, I was interested to read a recent ruling by U.S. District Judge Morrison C. England, Jr. in  Wong v. Tomaszewski, 2018 U.S. Dist. LEXIS 166916.

californiacorporate&securities 10/18/2018
Report Issued On Two-For-One Executive Order, But What About The SEC?

The Office of Information and Regulatory Affairs recently published a report on the fiscal 2018 results of President Trump's Executive Order 13771 (Jan. 30, 2017) requiring federal agencies and departments to, among other things, eliminate two regulatory actions for each new regulatory action.  According to the OIRA, agencies issued 176 deregulatory actions and 14 significant regulatory actions.  The ratio of significant deregulatory  actions to significant regulatory actions was 4 to 1. 

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