Articles

Quarterly State Compliance Review - October 2017

Quarterly State Compliance Review - July 2017

Originally published in the October 2017 issue of The Corporate Counselor, the Quarterly State Compliance Review surveyed legislation and case law affecting business entity law. The following is a summary of notable changes to business entity statutes, as well as several significant state court decisions.

Amendments to Business Entity Statutes

  • Delaware Senate Bill 69, effective August 1, amended the general corporation law to, among other things, authorize the use of blockchain to create and maintain corporate records, remove the requirement that written consents contain the signature date, and clarify and conform the merger provisions. 
  • Delaware Senate Bill 72, effective August 1, amended the LLC law to, among other things, clarify that mergers, consolidations, domestications, and conversions can be entered into with any kind of incorporated entity and to clarify the members and managers’ right to delegate their rights, powers and duties to manage and control the business. 
  • Texas House Bill 3488, effective September 1, authorized public benefit corporations.
  • Texas Senate Bill 1518, effective September 1, amended the corporation law provisions regarding the ratification of defective acts, issuance of shares, director voting, and the approval of mergers and conversions.
  • Also included are amendments from Arizona, Louisiana, Minnesota, New Hampshire, and North Dakota.

State Court Decisions

  • The Delaware Chancery Court, in EBP Lifestyle Brands Holdings v. Boulbain, ruled that it lacked personal jurisdiction over the defendant, a California resident. The court stated that the defendant was not transacting business in Delaware merely because he entered into a stockholders’ agreement with a Delaware company or because he was an executive in companies whose products reached Delaware. 
  • A California appellate court, in Curci Investments, LLC v. Baldwin, held that the doctrine of reverse piercing the veil is available in California.
  • The Minnesota Supreme Court, in In re Medtronic, Inc. Shareholder Litigation, ruled that the test for distinguishing between direct and derivative claims in Minnesota focuses on who suffered the injury and who is entitled to recovery.
  • The Nevada Supreme Court, in Wynn Resorts, Limited v. Eighth Judicial District Court, held that a corporation did not waive the attorney-client privilege by asserting the business judgment rule as a defense but did waive the privilege as to documents underlying an investigative report which it attached to its complaint and an SEC filing.

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