Disney Vote and California Bill May Affect SEC Shareowner Director Nomination Rule

[manning]

This statute would apply to any company doing business in California.

This proposed state law may trump SEC regulation of director nominations.

http://www.leginfo.ca.gov/pub/bill/asm/ab_2751-2800/ab_2752_bill_20040220_introduced.html

"AB 1752 wouldn't require triggers, nor would it impose a one year delay," . The triggering event clause of the proposed SEC rule effectively creates at least a one-year lag between the triggering event of one proxy season and shareowner access to the proxy the next proxy season.

The proposed California bill also would allow shareowners or groups of shareowners that hold more than two percent of company stock for more than two years to nominate director candidates, much lower than the SEC's five percent ownership threshold.

[Chuck S]

I have a question...

If a state can impose rules on a corporation "doing business in California"...what if those rules are in conflict with the rules imposed by the state in which the corporation is actually "incorporated"? Many, many California companies have incorporated in Delaware because the laws are more favorable and they are less regulated.

I mean, its a little different than saying, for example, in order to get a State contract, the corporation must offer health insurance or other benefits...because the corporation wouldn't neccesarily HAVE to "do business with the State. These rules would actually impose rules relating to the corporate structure that may be in conflict with the rules governing the corporation under their charter issued by another State.

[manning]

That is a good question. I suppose any state can pass any law they think is appropriate. However it probably would be up to the courts to decide if it stands or be knocked down.

Any corporate lawyers out there ?????


edit: forgot an s