One might reasonably expect that California law will apply to matters involving the transfer of securities issued by corporations and other issuers organized under California law. These California issuers, however, are free to choose to have the law of another jurisdiction apply pursuant to Section 8110(d) of the California Uniform Commercial Code. Under this statute, a California issuer can elect to have non-California law govern:
- The rights and duties of the issuer with respect to the registration of transfer;
- The effectiveness of registration of transfer by the issuer;
- Whether the issuer owes any duties to an adverse claimant to a security; and
- Whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.
No election, however, is permitted with respect to the fundamental question of the validity of the security itself.
In a quick search of filings with the SEC, I did not find an example of a California issuer selecting a jurisdiction pursuant to Section 8110(d). I did find an example of a Delaware limited liability company that included the following it is LLC Agreement: "The law of the State of New York is hereby designated as the issuer's jurisdiction within the meaning of Section 8-110(d) of the UCC for purposes of the matters specified therein." While this may seem unremarkable on its face, Delaware's version of Section 8110(d) (6 Del. Code § 8110(d)) does not include the language found in the California statute authorizing an issuer to specify the law of another jurisdiction. The Delaware statute does allow issuers organized in other states to choose Delaware.
Section 8110(d) does not specify how an issuer is to specify the law of another jurisdiction. Presumably, such an election could be included in the issuer's articles of incorporation, limited partnership agreement, or operating agreement. However, must the specification appear in the issuer's charter documents or will some other specification (e.g., an agreement with the transfer agent) suffice?