The Opinions Committee of the Business Law Section of the California State Bar recently published a sample opinion for venture capital financing transactions.  In a sad testament to the lowly status of the California General Corporation Law, the committee chose the model of a Delaware, not California, corporation issuing preferred stock.   The sample opinion was published in The Business Lawyer, 70 Bus. Law. 177 (Winter 2014-15) and is available online here.

I do take issue with some of the committee’s assertions.  For example, the committee states:

While the Delaware Supreme Court has held that the application of [California Corporations Code] Section 2115 to a Delaware corporation is unconstitutional, see VantagePoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (Del. 2005), California has no definitive authority to the same effect.

No mention is made of the California Court of Appeal’s holding in Wilson v. Louisiana-Pacific Resources, Inc., 138 Cal.App.3d 216 (1982).  In that case, the court specifically considered, and rejected, arguments that Section 2115 violates the full faith and credit clause of the U.S. Constitution, the commerce clause of the U.S. Constitution, the “property and vested right protections” of the U.S. and California Constitutions, the contract clauses of the U.S. and California Constitutions, and the equal protection clause of the U.S. Constitution.  The Committee also makes no mention of either Havlicek v. Coast-To-Coast Analytical Services, 39 Cal. App. 4th 1844 (1995) (finding that application of Section 1602 to a Delaware corporation does not violate the commerce clause) or Valtz v. Penta Investment Corp., 139 Cal. App. 3d 803 (1983) (finding that application of Section 1600 to a Delaware corporation is constitutional).

The committee also makes the overly broad claim statement:

Of course, if the Company is incorporated in California, the California Corporations Code would apply in its entirety, and Section 2115 would not be relevant.

As I explained in this 2013 post, the General Corporation Law is only a part of the Corporations Code.  No corporation is subject to the General Corporation Law and the three nonprofit corporation laws in their entirety.