Nine years ago, I posed the question of whether the California General Corporation Law permits corporations to serve as directors. My answer at the time was "no" because Section 164 of the Corporations Code defines "director" to mean a natural persons. Courts applying Section 16(b) of the Securities Exchange Act have a different view, as illustrated by the Ninth Circuit Court of Appeals' holding in Roth V. Foris Ventures, LLC, 2023 WL 7482641. Securities lawyers will know that Section 16(b) imposes "short-swing" profits liability on greater than 10% beneficial owners, directors and officers. The Roth case involved the applicability Rule 16b-3, which exempts “[t]ransactions between an issuer and its officers or directors,” that are “approved by the board of directors of the issuer".
The Ninth Circuit found:
"Foris is only eligible for the [Rule 16b-3] exemption if it can show that it is a “director by deputization.” “[A] corporation may be a virtual director, and thus an insider for purposes of § 16(b) liability, by deputizing a natural person to perform its duties on the board." Because companies may incur Section 16(b) liability as directors by deputization, our court has recognized that they may also invoke the Rule 16b-3(d) exemption where the board is aware of the deputization.
quoting Dreiling v. Am. Express Co., 458 F.3d 942, 952 (9th Cir. 2006) (citation omitted).
The Court of Appeals declined to decide whether Foris was a director by deputization, and instead remanded the case to the District Court to make that determination. Of course, even should the District Court find that Foris was a director by deputization, this would not mean that Foris was an actual director as a matter of state corporate law.
Amyris, the issuer, in the case is a Delaware corporation. In case reader is wondering, Delaware also requires that directors be natural persons. 8 Del. Code § 141(b).