Business Law Articles
Written By: Roger J. Brothers, Esq.
Buchman Provine Brothers Smith LLP
Walnut Creek, California
All California corporations should be aware that new laws affecting their businesses took effect at the outset of 2013. Businesses should review the recent changes and adjust their operations accordingly.
Revisions to the Filing Requirements for Certain Exempt Offerings Involving Real Estate
Senate Bill No. 978 addresses perceived abuses in private securities issuances by hard money lenders by imposing new filing and suitability requirements on issuers. Issuers are those who are engaged in the business of purchasing, selling, financing or brokering real estate and selling securities to non-accredited investors. The bill requires issuers to file a notice of transaction with the Department of Corporations if the issuer relies on an exemption to securities qualification requirements.
According to the bill, all issuers will be required "to make reasonable efforts to ensure that the investment is suitable for the investor, as specified, to provide the basis upon which the issuer shall make that determination, and to maintain the information used to make the determination for 4 years."
These changes apply to any issuer "engaged in the business of real estate or involving any indebtedness secured in whole or in part by real property." Anyone included in this definition should take care to meet all of the filing and suitability requirements prescribed by the new law.
Changes to Laws Governing the Rights of Dissenting Shareholders
Assembly Bill No. 1680 changed the laws governing the dissenters' rights of shareholders, as stated in California Corporations Code sections 1300 through 1312. Effective January 1, 2013, the test for establishing the fair market value of stock that is subject to dissenters' rights has been modified. Additionally, the previous law allowed only holders of publicly-traded shares to be eligible for dissenters' rights if five percent (5%) or more of the shares were dissenting shares. The five percent (5%) limitation was eliminated at the start of the New Year.
Amendments to the Victims of Corporate Fraud Compensation Fund
When Senate Bill No. 1058 took effect on January 1, 2013, it modified the Victims of Corporate Fraud Compensation Fund law. The Victims of Corporate Fraud Compensation Fund is codified as California law in sections 2280 through 2296 of the California Corporations Code. Changes to the law include:
· The Secretary of State is instructed to follow a revised set of procedures when deciding if a claim is to be paid.
· There are new notice requirements that the Secretary of State must follow in determining if a claim is to going to be paid: written notice is to be sent to the claimant and to the corporation.
· If a claim is denied, claimants now have access to an established procedure for judicial review of the denied claim.
· The compensation limit for victims of corporate fraud was raised from $20,000 to $50,000.