June 18, 2007

A California Conflict: Trouble for E-Proxy?

Following up on last week’s 2-hour webcast on the new e-proxy rules (audio archive available now), you should consider a potential state law conflict that may exist for a large number of companies. Keith Bishop explains: “California Corporations Code Section 1501(a) requires that the board send an annual report to shareholders not later than 120 days after the close of the fiscal year.

There is an exception in the case of corporations with less than 100 shareholders of record that have expressly waived the requirement in the bylaws. Section 1501(a) applies not only to California corporations but also foreign corporations that either have their principal executive offices in California or customarily hold meetings of the board in California. The statute was amended in 2004 to permit sending of the report by “electronic transmission by the corporation.”

Although this would seem to have solved any problem, the term “electronic transmission by the corporation” is defined quite specifically in Corp. Code Sec. 20. One requirement of that section is that the recipient must provide an unrevoked consent. Moreover, if the communication is to an individual, the transmission must satisfy the requirements applicable to consumer consent under the federal E-SIGN Act.

Of course, California’s extension of the requirement to foreign corporations may raise questions about constitutionality ala Vantagepoint v. Examen. Note that the adopting release for the e-proxy rules states that the rules are not intended any applicable state law requirement for the delivery of a document related to a shareholder meeting or proxy solicitation.”

Learn more about California’s regulation of electronic communications by – and to – companies in Keith Bishop’s article posted in our “E-Proxy” Practice Area.

The Battle over the US Supreme Court’s Stoneridge (aka Charter) Case

Leading up to the Supreme Court’s “scheme” (aiding & abetting) Stoneridge (aka Charter Communications) case – which will be heard next term in the Fall – there have been a number of interesting developments, one of which is that the SEC apparently has “split” with the Republicans and voted to recommend filing an amicus brief in favor of investors. Although the SEC recommended that the Solicitor General file the brief – see this Bloomberg article – it appears that the recommendation was not been acted on by the Solicitor General.

In response, President Bush (and others in the government, like the Treasury Secretary) have interceded with the Department of Justice to prevent the filing of the SEC’s amicus brief. Remember that the SEC is an independent agency, whose primary mission is the protection of investors. The President’s move has been criticized by Rep. Frank and others, including the AFL-CIO.

In our “Securities Litigation” Practice Area, we have been posting a number of amicus curiae briefs and other filings from this important case. [Side note: Why does it bother me that our President wears “crocs”?]

The Nasdaq Speaks: Latest Developments and Interpretations

We have posted the transcript from the popular webcast: “The Nasdaq Speaks: Latest Developments and Interpretations.”

Early Bird Discount: Upcoming 3rd Edition of Romeo & Dye Section 16 Treatise

Peter Romeo and Alan Dye are hard at work updating their two-volume Section 16 Treatise. Order your set by July 15th to receive a pre-publication discount now – you can order online or by fax/mail with this order form. The Treatise will be completed and delivered to you in the Fall.

– Broc Romanek