What Is A "Known Liability" And Why Does It Matter?

My last several posts have for the most part concerned the liability of shareholders when a corporation voluntarily or involuntarily dissolves. Directors may also face liability under Section 316(a)(2) of the Corporations Code. That statute makes...

Actions Against Shareholders Of Dissolved Corporations (Part III)

Today's post follows up on two prior posts addressing actions by creditors of dissolved corporations.  This post discusses the non-applicability of Chapter 5 of the California General Corporation Law to proceedings for winding up under Chapters 18 or...

Recovering Improper Distributions From Shareholders When Winding Up The Corporation

Yesterday's  post observed that Chapter 5 of the California General Corporation Law does not apply to proceedings for winding up and dissolution of a California corporation under either Chapter 18 (involuntary dissolutions) or Chapter 19 (voluntary...

Dissolution And Limitations On Distributions To Shareholders

Chapter 5 of the California General Corporation Law imposes specific limitations on distributions to shareholders, as defined in Section 166. When a corporation is wound up and dissolved, whether the dissolution is involuntary under Chapter 18 or...

Court Orders Discovery In Derivative Action Challenging Racial Diversity

Last year, the City of Pontiac General Employees' Retirement System filed a derivative suit against the Board of Directors and Chief Executive Officer of Cisco Systems, Inc. The gist of the complaint was that the "Defendants publicly misrepresented...

What Is So Special About A "Special Proceeding"?

Several provisions of the California General Corporation Law provide for "special proceedings" in the Superior Court. One such provision is Section 1800 which allows certain persons to bring an action for the involuntary dissolution of the...

Why California Requires Notice Of Rights That Shareholders May Not Have

Dissenters' rights under California's General Corporation Law do not exist unless there are "dissenting shares", a term defined in Section 1300(b) of the California Corporations Code. In order to qualify as "dissenting shares" under the statute, the...

When Half A Loaf May Not Suffice

Section 1900(a) is the only provision of the California General Corporation Law that authorizes action by an exactly 50% vote of shareholders. This action, moreover, may be taken without any action on the part of a corporation's board of directors....

Looking For Stiffer Loan Terms?  Nevada May Be Able To Help

Nevada's corporation law is quite protective of directors and officers.  Following the Delaware Supreme Court's decision in Smith v. Van Gorkum, 488 A.2d 858 (1985), the Nevada legislature amended the law to allow for exculpation of directors and...