Trending News
Dementia and the Forever Trustee: A Case for Age Limits?
Sanctions Considerations for Private Equity Firms – A Few Practical Tips
Federal Court Enters Consent Decree Against Rizo Lopez Foods Linked to Listeria Outbreak
Human Resources’ Role in Data Privacy and Cybersecurity, Part I: The Basics
Recent EEOC Activity and What to Watch For
OSH Law Primer, Part X: Voluntary Safety and Health Self-Audits
Credit Repair Company Fined $50M for Misleading Consumers
Private Market Talks: Conversations and Insights on the Private Markets with Private Capital’s Leading Figures.[Podcast]
HB Ad Slot
HB Mobile Ad Slot
California Says Corporations And LLCs Can't Be Directors; The Securities Exchange Act Apparently Believes Otherwise
by: Keith Paul Bishop of - California Corporate and Securities Law
Thursday, November 16, 2023
Related Practices & Jurisdictions
Print Mail Download />i
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).
© 2010-2024 Allen Matkins Leck Gamble Mallory & Natsis LLP
Current Public Notices
Published: 8 October, 2024
Published: 19 September, 2024
Published: 16 September, 2024
Published: 3 October, 2024
Published: 24 September, 2024
Published: 24 September, 2024
Published: 23 September, 2024
Published: 18 September, 2024
Published: 17 September, 2024
Published: 10 September, 2024
HB Ad Slot
HB Mobile Ad Slot
Current Legal Analysis
Human Resources’ Role in Data Privacy and Cybersecurity, Part II: Assessing Five Key Areas of Risk
by: Erin Schachter , Mercedes M. de la Rosa
USCIS Updates Guidance on EB-1 Extraordinary Ability Criteria
by: Miriam C. Thompson
USCIS Issues Updated Guidance on ‘Sought to Acquire’ Requirement of Child Status Protection Act
by: Nataliya Rymer , Natalie Gorelishvili
EPA Extends Enforcement Statement for Regulation of DecaBDE-Containing Wire and Cable Insulation in Nuclear Power Generation Facilities
by: Lynn L. Bergeson , Carla N. Hutton
EFSA Publishes Reports under NAMs4NANO Project
by: Lynn L. Bergeson , Carla N. Hutton
CFPB Supervisory Highlights Target Auto Finance Missteps
by: A.J. S. Dhaliwal , Mehul N. Madia
The BR International Trade Report: October 2024
by: Anthony Rapa , Joanne E. Osendarp
Hydro Newsletter - Volume 11, Issue 4
by: Tiffanie Ellis , Mealear Tauch
CFPB Permanently Bans Arbitration Company from Arbitrating Consumer Financial Disputes
by: A.J. S. Dhaliwal , Mehul N. Madia
California Passes Law Extending New Protections to Mortgage Borrowers
by: A.J. S. Dhaliwal , Mehul N. Madia
HB Ad Slot
HB Mobile Ad Slot
More from Allen Matkins Leck Gamble Mallory & Natsis LLP
Did The FBI Violate The Securities Laws By Directing The Creation Of A Crypto Asset That Was Offered And Sold To The Public?
by: Keith Paul Bishop
Commission Grants Burrowing Owls “Candidate” Species Protections Under the California Endangered Species Act
by: Jennifer Jeffers
Stockholders Fail to Approve Proposal to Reincorporate Nevada Corporation in Delaware
by: Keith Paul Bishop
Two Commissioners Fault Lack Of Transparency In SEC Whistleblower Awards
by: Keith Paul Bishop
Corporation Proposes Fixes To Defective Amendments Increasing The Authorized Number Of Shares And Changing Name
by: Keith Paul Bishop
Governor Newsom Approves Key Housing Bill: AB 2243
by: Caroline Guibert Chase
California Legislators Exempt Themselves From New Disclosure Mandate
by: Keith Paul Bishop
Governor Signs Bill Mandating Pro Bono Disclosures By Lawyers
by: Keith Paul Bishop
New California Law Forbids
by: Keith Paul Bishop
Can AI Act With Scienter?
by: Keith Paul Bishop
Upcoming Events
Oct 15 2024
Employment Law Institute 2024
Oct 16 2024
Oct 30 2024
Oct 31 2024
ANTICIPATED BANKRUPTCY COURT ORDERED SALE: Body Details, Florida
More Upcoming Events
HB Ad Slot
HB Mobile Ad Slot