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Author: Alissa Allen

How Proposition 22 Affects Independent Contractors in California

independent contractor

On November 4, 2020, California voters passed Proposition 22 (“Prop 22”), which CNN describes as a “costly and controversial ballot measure to exempt firms like Uber and Lyft from having to classify their gig workers in the state as employees rather than as independent contractors.” Numerous businesses that will benefit from Prop 22 supported the measure, including Uber, Lyft, DoorDash, Instacart, and Postmates. In total, those companies put $200 million into the ballot measure, according to CNN, making it the “costliest ballot measure in California’s history.”

What do California business owners need to know about Prop 22 and how it will affect independent contractors in California?

What is Prop 22?

Prop 22 was known more formally as the App-Based Drivers as Contractors and Labor Policies Initiative, and it was designed to allow companies operating in the gig economy to avoid the “ABC test” in California. The ABC test, also known as Assembly Bill 5 (AB-5), took effect on January 1, 2020. That recent law, as you may know, makes it more difficult for a gig economy company to classify a worker as an independent contractor as opposed to an employee.

According to the California Labor & Workforce Development Agency, an employer must treat a worker as an employee (and not as an independent contractor) unless the employer can satisfy prongs A, B, and C of the test. The ABC test meant that many Uber and Lyft drivers, for example, would need to be treated as employees as opposed to independent contractors.

With the passage of Prop 22, both ride-hail (i.e., Uber. Lyft) and delivery drivers can be exempt from the ABC test requirements in order to be classified as independent contractors. Prop 22 does provide some employee-like protections to gig economy drivers who will be classified as independent contractors, such as a minimum wage guarantee., overtime pay, access to workers’ compensation, union rights, family and sick leave, or employer related benefits.

Can My Independent Contractors Remain in this Classification?

Businesses that have independent contractors and that operate through an app platform should consult with an attorney about whether their independent contractors can remain independent contractors in light of the new law. Many businesses still have independent contractors and do not currently comply with AB-5. Under AB-5, most of those independent contractors should be classified as employees.

Prop 22, voted in by Californians, shows hope for the gig economy. Many people like to operate businesses for themselves and to use independent contractors to provide services in California. Gig economy business owners, as well as other business owners in California, will need to wait and see if the legislature makes changes to AB-5 in light of Prop 22.

Contact a California Business Law Attorney

Do you have questions about how Prop 22 will affect the classification of your business’s employees or independent contractors? An experienced California business law attorney can speak with you today. Attorney Lynnette Ariathurai has been serving the Northern California business community for years and can provide you with the information you need. Our firm serves clients in Fremont, Hayward, Union City, Milpitas, and Newark.

gig workers, independent contractors, prop 22

Avoiding Wrongful Termination Lawsuits

business lawyer

In the course of running a business, an employer can face many kinds of complaints from employees. As stressful and frustrating as this can be, you can go a long way towards reducing your liability risk with proper preparation. Among other things, you should be prepared for employee complaints and the possibility of wrongful termination allegations. Here, our California employer defense attorney highlights four steps that businesses and organizations can take to help avoid wrongful termination lawsuits, thereby saving the time, stress, and money associated with litigation.

  • Create Clear Grounds for Discipline and a Termination Policy

Your business or organization should have a clear policy in place regarding discipline and removal of employees. The termination policy should be clearly communicated to workers. Simply defined, a termination policy should set grounds for “discipline up to and including termination”. You should also get the termination policy down in writing. Although even a well-crafted termination policy cannot prevent every claim, an effective policy will help you avoid facing legal liability.

  • Set Expectations for Employees and Conduct Annual Performance Reviews

Every employee should understand what is expected from them in the workplace. Beyond ensuring that workers know what they need to do, it is imperative that your company conducts regular performance reviews. For most companies, an annual performance review is sufficient. To be clear, California law does not require annual performance appraisals.

Nonetheless, reviews are an excellent tool for employers because they can help the employee understand the workplace expectations and what they need to do to improve. Further, a performance review can serve as a form of documentary proof of an employee’s lacking performance and disciplinary issues should termination be necessary.

Caveat: Employers should beware of the fact that a performance review could potentially be used against them in a wrongful termination claim. If an employee has a history of glowing, positive reviews and is suddenly terminated, there may be a dispute.

  • Follow California’s Supervisor Training Requirements

Under California law, employers with 5 or more employees must provide 1 hour of sexual harassment and abusive conduct prevention training to nonsupervisory employees and 2 hours of sexual harassment and abusive conduct prevention training to supervisors and managers once every two years.  The California Department of Fair Employment and Housing provides the required training free on their website. As a business owner, it is crucial that you make sure that all supervisors and all employees meet the state’s training requirements.

  • Follow State and Federal Employment Laws

Finally, employers should have a strong understanding of the federal and state laws designed to protect workers. This includes everything from the laws barring discrimination to laws protecting employees from unfair wage and hour law practices. Most federal and state employment laws also prohibit retaliation from an employer when the employee exercises their rights under the law.

Contact a Fremont, CA Business Law Attorney for Immediate Help

Attorney Lynette Ariathurai is a skilled, experienced advocate for clients. Our law firm will help you develop effective methods for responding to wrongful termination claims and defending against these claims in court.

If you have any questions about avoiding wrongful termination lawsuits, we are more than ready to help. Contact us today for a strictly confidential initial consultation. We represent employers in Fremont, CA and near Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara.

disputes, employees, running a business

Steps to Purchase a Business in California

business formation

Are you thinking about buying a business in California? While purchasing an existing business can be exciting, it can also come with complications. If you already own a business and are looking for a new acquisition, you might have a clear idea of the type of business you want to buy. However, if you are just starting out, you should seek advice about choosing the best business in which to invest. You will also want to consider due diligence, and all the steps you will need to take to ensure that you do not end up buying a business that will cause significant problems in the long run. By working with an experienced business law attorney throughout the process, you can feel secure in knowing that you have legal representation to help minimize the risks and to guide you through the business buying process.

When you are considering a business purchase or acquisition, you should consider the following steps.

1. Decide on a Business You Want to Buy

Once you know you want to invest in a new business, the process of identifying the best company can be complicated. For anyone who is seeking to acquire a second (or third, or fourth) company, the process might be a bit easier—you already know your own strengths as a business owner, and you know the industries in which you feel comfortable doing business. If you are new to the business world, you should work with a lawyer who can help you to determine the types of industries that meet your needs, and the specific businesses that you may be interested in purchasing given your previous experience and industry knowledge.

2. Consider Your Financing Options

Most business purchasers need to secure financing to buy a business. Whether you have been involved in a specific industry for years or you are just starting out, your business law attorney can help you to determine the type and amount of financing you might be able to access.

3. Draft an Agreement to Buy the Business

Once you know the business you want to purchase and have a good sense of your financing options, you will work with your lawyer to draft a purchase agreement. The purchase agreement does not bind you to the purchase if there are significant legal issues—uncovering any financial or legal problems with the business can result in the purchase agreement being voided. How will you determine whether there are any major issues that need to be resolved? That is what the next step is for: due diligence.

4. Do Your Due Diligence

According to Score.org and the U.S. Small Business Administration (SBA), doing due diligence is how you will learn about any potential legal or financial problems with the business you want to buy. In performing due diligence, you can ask for a wide variety of materials related to the business, including financial documents, contracts, business equipment, assets, trade secrets, and other intellectual property. This step is also when you will make difficult inquiries about current legal obligations, and any potential legal obligations in the future. Before you buy a business, you need to have clarity about liens, judgments, licenses, permits, zoning issues, debts, and any pending lawsuits.

Your business lawyer will play an important role in the due diligence process and can help you to assess the types of risks you are facing in buying the business. Attorney Lynnette Ariathurai can determine whether the risks and liabilities linked to the business are acceptable and can clarify your options for minimizing future risks if you move forward with the purchase.

5. Closing

If you decide to move forward with the business purchase, you will work with your business lawyer to take all necessary legal steps prior to the closing, at which point you will review and sign the purchase agreement, along with any financial documents.

Contact a Business Lawyer When Buying a Business

Do you have questions about buying a business, or do you need representation for a specific business purchase? Our law firm can assist you from start to finish when it comes to purchasing a business in California. Contact attorney Lynnette Ariathurai today to get started.  We support businesses legal needs in the East Bay area including Fremont, Newark, Hayward, Milpitas, and Union City.

business attorney, business law attorney, buying a business, California business law, purchase a California business, purchasing a business

Attorney for Buying a Business

Lynnette Ariathurai, Bay Area Business Attorney

If you are considering a purchase of an existing business, it is important to work with an attorney for buying a business. Purchasing a business can be a complex process, and many legal issues can arise in the process of looking for a business to buy, securing financing for the purchase, and getting the business running again. If you are in the market for a business, you should know that an experienced Fremont business lawyer can provide you with the services you need. As you consider your options for buying a business, the following are issues and concerns that you should consider.

Looking for a Business to Buy: Selection and Marketplace

Seeking out a business to buy can be a complicated process in and of itself. How do you select the type of business to buy? Generally speaking, you should seek out businesses that have ties to your own professional work and expertise. If you do not have experience in a particular industry, buying a business in that field can be much more difficult than buying a business in a field with which you have some familiarity.

Once you decide on the type of business you should be selecting, it will be time to locate the business that you want to purchase. You should work with a lawyer to understand the marketplace and your options for selecting an appropriate business.

Due Diligence Prior to Purchasing a Business

Prior to buying, you should develop a due diligence checklist that includes a variety of tasks you will need to complete with assistance from an experienced business law attorney.

You will also need to secure financing for the purchase. In order to secure financing, you will need to provide a significant amount of information to the lender about the business, which you will gather in the process of conducting due diligence. An article in Reuters discusses key elements of due diligence. Generally speaking, due diligence should include the following for most types of business purchases:

  • Researching the business’s financial information, including any existing liens, debts, tax returns, expenses, profit margins, and inventory;
  • Gather information about the structure of the business and the business formation of the company, which will provide you with information about the business’s bylaws or articles of incorporation, shareholders or investors, and compliance filings;
  • Determine the business’s assets, including commercial real estate, equipment, furniture, and products;
  • Learn about existing employee and customer data, including any existing disputes or litigation;
  • Review existing business contracts, including employment contracts, restrictive covenants, mortgages, leases, stock purchase agreements, and existing agreements with suppliers or vendors;
  • Determine whether there are any existing legal issues or disputes involving the business; and
  • Investigate existing intellectual property, such as existing trademarks or service marks.

Guidance on Liability and Minimization of Risk

If you or your company is considering purchasing a business, it is imperative that you carefully assess all of the potential risks. The absolute last thing you want to deal with is an unanticipated issue that could expose you to legal liability. Among other things, these debts could include employee wages, contractual obligations, loans, state or federal taxes, commercial leases, and other financial responsibilities.

Hiring a Knowledgeable Business Attorney is Important

Given extensive experience practicing business law, your attorney will review all relevant purchase documents, offer guidance on liability, and help you minimize the risks. It may be important to send a bulk sale notice to all affected creditors, including state and federal tax authorities. By doing so, you will notify creditors that assets are being transferred and impose a time limit for them to bring any claim. A well-drafted asset purchase agreement will help to ensure that your company is not subject to unknown liabilities.

With a full understanding of the risks as presented by your business attorney, you and your business partners can better protect your financial interests. In some cases, it may be advisable to buy the company’s individual assets instead of the entire business. In other cases, purchasing an ownership stake in the company may be the best path forward. There are additional ways to obtain protection in a purchase, such as temporarily holding back a portion of the purchase price, including comprehensive indemnification provisions, and obtaining insurance.

Business Law Matters After Your Purchase

Depending upon the type of business you bought, it may be necessary to change the business structure, and you may need legal assistance with business formation questions. New businesses, and new business owners, will also need to draft enforceable contracts for employees, vendors, suppliers, and other parties. Business contracts can be complex, and you should always work with an experienced business lawyer who can ensure that your contracts are likely to be enforceable in the event of a dispute.

The attorney you hire for buying a business can also assist with other outstanding legal items that are likely to arise in the early stages of buying a business.

Contact a Business Lawyer in Fremont

Buying a business can be a complex endeavor, but an experienced California business and corporate attorney can assist you. At The Law Office of Lynnette Ariathurai, we serve clients in Fremont, Hayward, Union City, Milpitas, and Newark, California. Contact attorney Lynnette Ariathurai today for assistance with buying a business.

business attorney, business law attorney, buying a business, purchase a business, purchasing a business

Ways to Resolve Disputes Between Businesses

Business lawyer

When you are facing a business dispute, it is important to consider your options for a cost-effective and timely resolution. When businesses are engaged in disputes with one another—particularly when those businesses are located in different areas of the country—forms of alternative dispute resolution (ADR) can be particularly useful. By using ADR, you can avoid costly litigation, and you may be able to avoid multiple trips to another region of the country for court hearings. To be sure, you do not want to spend money on multiple trips for court hearings when you could resolve your business dispute quickly and efficiently. At the same time, employing methods of alternative dispute resolution can allow businesses to avoid complications concerning jurisdiction and choice of law matters.

Mediation and arbitration are two commonly used forms of alternative dispute resolution under California law. Our experienced business attorney can help you understand the benefits and limitations of each type of ADR.

Mediation to Resolve a Business Dispute

Mediation is a form of ADR that requires the disputing parties to engage in communication with one another, with the aim of reaching a resolution to their dispute. In mediation, you meet with the other party and a neutral third party (the mediator). Your attorney, as well as the other party’s attorney, can also be present.

Mediation cannot be compelled, both sides must consent to mediation.  Mediation is much different from a court hearing in which a judge hears both sides of a dispute and makes a ruling or decision. In mediation, the mediator’s job is to facilitate communication between the parties. The mediator does not issue a decision about the dispute. If you cannot reach an agreement with the other party, then your case can move onto arbitration or litigation. If you can reach a decision, then you can enter into a formal agreement with the other party to officially resolve the dispute.

There are both benefits and limitations to mediation. An obvious benefit is that the process is much faster and less expensive than litigation. You may need to attend mediation only once before reaching an agreement. Another benefit is that the discussions during mediation are confidential. As such, any confidential matters pertaining to your business will not become public record. Nor can the statements made and documents presented through mediation be used in a subsequent arbitration or litigation. Finally, mediation can allow you to play a key role in resolving your own dispute, and it may improve communication between you and the business with which you had a dispute. The major limitation of mediation is that you cannot compel the other side to produce evidence you may need to prove your claim.  Also, if you cannot reach an agreement, the mediation may not be a good use of your time or money.

Using Arbitration for Disputes Between Businesses

Many businesses rely on arbitration to resolve disputes with customers, employees, and vendors, but arbitration can also allow you to resolve a dispute with another business.

Like mediation, the key benefits of arbitration are that it is quicker than litigation and more cost-effective. Unlike mediation, an arbitrator—a neutral third party (arbitrator(s))—hears the dispute and can issue a binding decision. Unlike mediation, arbitration can be compelled if there is a signed written agreement between the parties to arbitration.  One of the key limitations of arbitration. If you don’t like the outcome, your options for appeal are much more limited than they might be if you had chosen litigation.

Seek Advice from our Fremont Business Lawyer

If you need assistance resolving a business dispute, our Fremont business law attorney can help. We serve businesses in Fremont, Hayward, Union City, Milpitas, and Newark, CA. Contact the Law Firm of Lynnette Ariathurai online today or call us at 510-794-9290 for more information.

arbitration, business dispute, business law attorney, mandatory arbitration agreements, mediation

Can California Employers Still Have Mandatory Arbitration Agreements with Employees?

Business lawyer

Business owners and employers in Fremont and throughout Northern California should know that they may not be permitted to require employees to agree to arbitration clauses or agreement under particular circumstances, according to a new law in the state. The new law, Assembly Bill 51, limits the ways an employer can use an arbitration clause. In brief, you may not be able to require new employees to sign employment contracts that contain arbitration clauses. We want to provide you with more information about the new law, which was supposed to take effect in early 2020, and to explain what its implications might be for California businesses.

Understanding California Assembly Bill 51

California Governor Newsom signed Assembly Bill 51 into law in October 2019, to commence in January 2020. The law is designed to prohibit employment discrimination, and one aspect of the bill is that it prohibits employers from requiring job applicants or current employees, as a condition of their employment, to enter into arbitration agreements. The legislative reasoning behind this part of the bill was that arbitration agreements can unnecessarily silence employees and can prevent them from making concerns about sexual harassment at work, public.

Under the new law, it is unlawful (and actually criminal) for an employer to require a job applicant or an employee to agree to an arbitration under the California Fair Employment and Housing Act (FEHA) or the California Labor Code, as a condition of that person’s employment. The law does not invalidate currently existing arbitration agreements. Yet business advocates have filed a lawsuit to prevent the new law from taking effect, arguing that the Federal Arbitration Act (FAA) preempts AB 51. The U.S. District Court for the Eastern District of California recently issued a preliminary injunction that prevents California from enforcing the terms of AB 51. Until the case is ultimately decided, what should your business do?

Impact of AB 51 on Businesses in California

For many businesses in California, arbitration—including mandatory arbitration—can help to keep business costs down and can prevent costly business litigation in the event of an employment or other contract dispute. As such, it is in the interest of many small businesses in Northern California that the law be preempted by the FAA.

In the meantime, what should you, as a business owner in the Fremont area, do to ensure that you are in compliance with existing law? Most importantly, you should know that any arbitration agreement that existed prior to January 1, 2020—when AB 51 was supposed to take effect—does not fall under the new law at all. Even if it were to take effect, arbitration agreements in force prior to this date will remain lawful. Next, you should keep in mind that AB 51 only applies to claims under the FEHA or the California Labor Code. Accordingly, it is certainly lawful to require employees to agree to arbitration for disputes that would not arise under either of these laws.

If you want to require an employee or prospective employee to agree to arbitration for claims that could potentially be covered by AB 51, it is important to recognize that you are taking a risk as a business. If AB 51 is ultimately determined to be lawful and not preempted by the FAA, then any arbitration agreements you make after January 1, 2020 could result in both civil and criminal penalties. However, if AB 51 ultimately cannot take effect, an arbitration agreement that would otherwise be prohibited by AB 51 could be enforceable in California. If you have questions about your business’ situation, you should speak with a business lawyer as soon as possible. 

Contact a Fremont, CA Business Law Attorney

If you have questions or concerns about how the new limits on arbitration could impact your business, it is important to speak with an experienced Fremont business law attorney as soon as possible. The law will have significant practical considerations for many small business owners, tech companies, and other businesses in the region.

 Contact the Law Office of Lynnette Ariathurai online today or call us at 510-794-9290 to learn more about whether California employers can still have mandatory arbitration agreements with employees. We represent business owners across Northern California in Fremont, Hayward, Union City, Milpitas, and Newark.

arbitration clause, assembly bill 51, business law attorney, employment contracts, mandatory arbitration agreements

Hiring Employees vs. Independent Contractors

Business lawyer

When you are hiring new people to work for your business, it is essential to have clarification about whether you are hiring employees or independent contractors. The distinction between employees and independent contractors is important for your own business purposes, as well as for the worker. As you may know, employees have certain rights that independent contractors do not have, and accordingly, Bay Area employers have certain obligations to employees that they do not have to independent contractors.

There is a new law in California that clarifies the test an employer should use for determining whether a worker is an employee or independent contractor. You should seek advice from our Fremont area business law attorney to determine what you must do to comply with the law concerning employees and independent contractors.

California’s ABC Test

Assembly Bill 5 (AB 5) took effect on January 1, 2020. The new law replaces the common law test for determining whether a worker is an independent contractor or an employee. Under the new law, you must classify workers as employees—and not as independent contractors—unless your worker meets all the following conditions of the ABC test:

  • A: The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • B: The person performs the work that is outside the usual course of the hiring entity’s business; and
  • C: The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

To be clear, your workers will be considered employees unless you can prove, based on the elements of the ABC test above, that they should be classified as independent contractors.

Business Exemptions for the ABC Test

Some businesses are exempt and do not need to take the test. In total, there are seven categories of exemptions. Determining whether your business meets the exemption requirements can be complicated. One important note is that if your business is determined exempt from this ABC test, it would then fall under the previous case law for determining whether a person is an employee or independent contractor. Our firm can help you to determine whether you fall under one of the exemptions and, either way, we may be able to provide advice on restructuring your business if it is possible.

Contact a Fremont Business Law Attorney

When you are hiring new workers for your business, you must have clarification about each worker’s classification. The new “ABC test” in California for determining a worker’s classification as an independent contractor or employee can be confusing, but an experienced business law attorney can help you. Contact the law office of Lynnette Ariathurai online or call our firm at 510-794-9290. We serve businesses throughout Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, and Santa Clara, CA.

ABC test, business law attorney, California worker classification, hiring contractors, hiring employees

Two Things to Consider When Starting a Software Company

business lawyer

Starting a software company is an exciting enterprise. Tech folklore is full of stories of people building billion-dollar companies from ideas that were generated in their parents’ garage. The stakes are high. Successful ideas have made some people very rich. Poorly executed ideas have left other people in debt with unsurmountable financial losses.

corporate entity, employee compensation, independent contractors, software start-up, start a business

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New Wildfire Smoke Employment Requirements for California Businesses

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On July 29, 2019 California’s Occupational Safety and Health Standards Board issued emergency regulations to protect outdoor workers from the harmful effects of wildfire smoke. The emergency regulations are in response to the wildfires that have plagued the state in the last several years. Employers are now required to monitor levels of smoke at workplaces or worksites and take protective action in response to changed conditions that put worker safety in jeopardy. The new emergency regulations are effective through January 28, 2020, with two potential 90-day extensions, until the permanent rule is effective sometime in 2020.

Affected Employers

For the most part, workplaces at which the air quality index reaches a certain level are required to comply with these emergency regulations. Employers must monitor air quality, and when it reaches or is expected to reach a dangerous level, reduce their employee’s exposure to smoke. Affected industries include agriculture and construction; occupations like delivery, maintenance, and landscaping workers; and even retail locations, like restaurants and banks, where outside doors are opened throughout the day by patrons. There are exempt employees, such as firefighters fighting a wildfire and workers inside buildings or vehicles with mechanical ventilation, for example.

Communication and Training Requirements

Employers are required to update, communicate, and train employees about wildfire smoke and these health and safety regulations. Employers should consult with an employment lawyer to update workplace policies and employment handbooks to reflect these new regulations.

Next Steps

California businesses must comply with these new health and safety regulations. The first step, however, is to investigate if your business is required to comply with these rules. To learn if your business is exempt from the new regulations, contact an employment law attorney. Secondly, employers will need to create policies and procedures to satisfy the planning, education, and training components of the regulations.

Wildfires are disruptive to employers and employees alike. Like other natural disasters, you must anticipate your wildfire response to maximize employee safety while minimizing disruption or intervention into the work of your organization.

Employers should meet with an employment lawyer at least once a year regarding new laws or changes to regulations that might impact their business. Employment handbooks should be reviewed annually, and updated at a minimum every three years. It is important to keep current and comply with federal, state, and local labor and employment laws to protect your company and employees. If you are a business in Fremont, Newark, Hayward, East Bay, Milpitas, Union City, San Leandro, Gilroy, San Jose, or Santa Clara, California, consult legal counsel today to learn how to bring your business in compliance with the new emergency regulations to protect employees from wildfire smoke.

california air quality, employee training, employer safety regulations, wildfire smoke employment law

Why Might a Business Incorporate in Delaware Instead of California?

Classified Board of Directors

business formation

Many of the largest public companies in the world are incorporated in Delaware. California business owners ask me whether they should incorporate in Delaware when choosing a state of incorporation for a business about to go public. This post will examine some of the key differences between incorporation and corporate governance laws in California and Delaware.

Under Delaware law, corporations are permitted to have a classified board of directors, with each class having a term of longer than one year. Whereas, a non-public California corporation requires annual election of its board of directors.

Cumulative Voting for Directors

Delaware law permits cumulative voting for directors, so long as this provision is included in the company’s certificate of incorporation and/or its bylaws. California law is more expansive with respect to cumulative voting. By default, cumulative voting is available to shareholder elections of directors and it need not be specified in the articles of incorporation or bylaws. Cumulative voting is considered a statutory right for shareholders of non-publicly traded corporations, unless specifically excluded in the company’s articles of incorporation and/or its bylaws.

The Right of Stockholders to Call Special Meetings of Stockholders

Stockholders are only permitted to call special meetings if the company’s certificate of incorporation or bylaws authorizes it under Delaware law. In California, on the other hand, not only may a special meeting of shareholders be called by the holders of 10% or more of the voting stock of the corporation, but this right may not be waived by the shareholders in the company’s certificate of incorporation or bylaws.

Insulation of Directors

California permits unlimited monetary liability for directors upon a finding of breach of fiduciary duty. Delaware law provides a complete shield to directors from monetary liability for breach of fiduciary duty except in circumstances in which a stockholder can demonstrate a breach of the duty of loyalty, a failure to act in good faith, intentional misconduct, or a knowing violation of law, among other violations.

Predictability Surrounding Corporate Outcomes

In Delaware, both the legislature and the courts work in concert to act quickly and effectively to meet changing business needs. Corporation law in Delaware is one of the most extensive and well-defined bodies of corporate law in the United States. The Delaware Court of Chancery is renowned for its sole focus on business and corporate law, no backlog, and a knowledgeable bench in resolving complex corporate issues. 

If you are starting a business in California, or own an existing business in the East Bay Area including Fremont, Newark, Hayward, East Bay Milpitas, Union City, San Leandro, Gilroy, San Jose, or Santa Clara and you are seeking to explore incorporating in California or Delaware, you will need to ensure that the right steps are taken for incorporation. Seek legal advice and counsel from a knowledgeable California business lawyer today, call us at 510-794-9290.

board of directors, business entity, business incorporation, startups, stockholders