October 27, 2021

Volume XI, Number 300

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October 26, 2021

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October 25, 2021

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When A Director Is Unfit For Duty

The California General Corporation Law includes two provisions providing relief when a director is incompetent and/or felonious.  Section 302 of the Corporations Code permits the board of directors to declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony.   Section 304 permits the shareholders holding at least 10% of the number of shares of any class to bring suit in the superior court of the  "proper county" to remove from office any director.  The grounds for removal are broader than those in Section 302 but are limited to the following:

  • Fraudulent or dishonest acts; or

  • Gross abuse of discretion or discretion with reference to the corporation.

If a director is removed pursuant to Section 304, the court may bar his or her reelection for a prescribed period.  Section 304 applies to pseudo-foreign corporations (i.e., those subject to Section 2115 of the Code) but Section 302 does not.

Why Is September The Seventh Month?

The last four months of the year all derive their names from Latin words for numbers.  "September" is derived from septem, meaning seven, "October" is derived from octo, meaning eight, and so on.  Etymologically, these months are off by two.  The reason for this discrepancy can be blamed on none other than Julius Caesar.   The Roman republic used a calendar that consisted of 10 months and 304 days.  The months were named Martius, Aprilis, Maius, Juniius, Quintilis, Sextilis, September, October, November, and December.  This calendar system, which was based on the lunar cycle, would become inconsistent with the seasons and the Romans would from time to time add a month, Mercedonius.  In 46 BCE, Julius Caesar instituted a new calendar system based on the solar cycle that consisted of 12 months and included the concept of a "leap year".  In the 16th century, Pope Gregory XIII addressed some of the problems with the Julian calendar and we now use what is known as the Gregorian Calendar, which continues many of the names of the ancient Roman republican calendar.

© 2010-2021 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume XI, Number 246
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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Bishop works with privately held and publicly traded companies on federal and state corporate and securities transactions, compliance, and governance matters. He is highly-regarded for his in-depth knowledge of the distinctive corporate and regulatory requirements faced by corporations in the state of California.

While many law firms have a great deal of expertise in federal or Delaware corporate law, Keith’s specific focus on California corporate and securities law is uncommon. A former California state regulator of securities and financial institutions, Keith has decades of...

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