Is It Necessary To Check With The Shareholders Before Hocking The Corporate Crown Jewels?

Allen Matkins
Contact

Corporations Code Section 1001(a) authorizes a corporation to “sell, lease, convey, exchange, transfer, or otherwise dispose of all or substantially all of its assets” if the principal terms are approved by the board, and, unless the transaction is in the usual and regular course of its business, approved by the outstanding shares.  While this suggests that a mortgage of all of a corporation’s assets outside the regular course of business would require approval of the outstanding shares, Section 1000 provides that the board of directors may approve any “mortgage, deed of trust, pledge or other hypothecation of all or any part of a corporation’s property, real or personal, for the purpose of securing the payment or performance of any contract or obligation”.

However, shareholder approval or approval of the outstanding shares may be required by the articles of incorporation.  Therefore, unless one checks the articles of incorporation, one can’t be sure that board approval alone is sufficient authorization when a mortgage involves all or substantially all of the corporate assets outside the ordinary course.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Allen Matkins | Attorney Advertising

Written by:

Allen Matkins
Contact
more
less

PUBLISH YOUR CONTENT ON JD SUPRA NOW

  • Increased visibility
  • Actionable analytics
  • Ongoing guidance

Allen Matkins on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide