Last Friday, this space addressed itself to Vice Chancellor J. Travis Laster's ruling in Stream TV Networks v. SeeCubic, C.A. No. 2020-0310-JTL (Dec. 8, 2020). He concluded that stockholder approval was not required when an insolvent corporation transfers all of its assets to its secured creditors notwithstanding Section 271 of the Delaware General Corporation Law. California has a similar statutory scheme and a California court may well agree with the Vice Chancellor.
Purchasers of assets from California corporations, however, will not be able to rely on Section 1002 which provides that a secretary's or assistant secretary's certificate may be affixed to any deed or instrument conveying or otherwise transferring any assets of a corporation. Under the statute the certificate may set forth that the transaction has been validly approved by the board and:
The statute, however, makes no allowance for the situation in which a corporation transfers all or substantially all of its assets but no shareholder approval. The reference to no approval being required by Chapter 12 is not apposite because that chapter concerns sale of asset reorganizations. To those readers not familiar with the difference between a sale of assets under Chapter 10 and a sale-of-assets reorganization under Chapter 12 of the General Corporation Law, I commend this post from 2010: When a Sale of Assets is not a “Sale-of-Assets Reorganization”.
(a) stating that the property described in said deed or instrument is less than substantially all of the assets of the corporation or that the transfer is in the usual and regular course of the business of the corporation, if such be the case, or
(b) if such property constitutes all or substantially all of the assets of the corporation and the transfer is not in the usual and regular course of the business of the corporation, stating the fact of approval thereof by the outstanding shares (Section 152) pursuant to this chapter [i.e., Chapter 10] or Chapter 12, as the case may be, or that such approval is not required by Chapter 12.