Contact us with your California corporate & securities law questions (949) 353-6347 or Contact us here

A House Divided Without Provision For A Provisional Director?

This week, I have been writing about Section 308 of the California Corporations Code.  Subdivision (b) of the statute authorizes the Superior Court to appoint one or more provisional directors when "the shareholders of a corporation are deadlocked so that they cannot elect the directors to be elected at an annual meeting of shareholders".  Typically this will occur when there are two shareholders holding an equal number of shares or two factions of shareholders, each holding one-half of the shares.  It is possible, however, that one shareholder faction will hold significantly more shares than the opposing faction and yet the shareholders will be unable to elect directors at the corporation's annual meeting.  I explained how this can happen in An Unexpected Impasse.  Section 308(b), however, does not appear to be available to remedy the problem because the statute requires that the petition for a provisional director must be made by "a shareholder or shareholders holding 50 percent of the voting power".  Relief may be available under Section 308(a) if there is a deadlock on board such that either (i) the corporation's business can no longer be conducted to advantage; or (ii) there is danger that its property and business will be impaired or lost.  As noted in Monday's post, relief under Subdivision (a) may be obtained by a director or by the holders of not less than 33 1/3 percent of the "voting power" as defined in Section 194.5.  

Share on:

California Corporations Code

ANY QUESTIONS REGARDING CALIFORNIA CORPORATE AND SECURITIES LAW? CONTACT US DIRECTLY

We offer expert advice with the intricacies of California law.

Our years of experience and expertise allow us to help clients navigate the business laws in California.

CONTACT US

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!

We respect your email privacy

ABOUT OUR AUTHOR

30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
Partner at Allen Matkins
(949) 353-6328
 Contact me
Learn More About Keith

RECOGNITION

NationalLawReview

badge-author-large

nominee-badge

Get the latest news and analysis about California Corporate & Securities law. Subscribe to our newsletter today!

We respect your email privacy

CATEGORIES

see all

YOUTUBE

FACEBOOK