The California General Corporation Law unequivocally authorizes the giving of notice of stockholder meetings by electronic transmission.  Section 601(b) provides “Notice of a shareholders’ meeting or any report shall be given personally, by electronic transmission by the corporation . . .”.  The statute further provides that notice is deemed to have been given when sent by electronic transmission by the corporation.  Nonetheless, sending notice by email may not be valid because the statute provides that notice by electronic transmission is valid only if it complies with Section 20 of the Corporations Code.

Section 20 imposes two general conditions and one specific condition to the giving of notice by electronic transmission.  First, the recipient must have provided an unrevoked consent to the use of those means of transmission for communications under or pursuant to the Corporations Code.  Since the term “electronic transmission by the corporation” includes several different means of transmission, the consent must be to the form of transmission (e.g., facsimile or email).  Second, the electronic transmission must create “a record that is capable of retention, retrieval, and review, and that may thereafter be rendered into clearly legible tangible form”.  Finally, if the recipient is an individual shareholder who is a natural person, the consent to the transmission must be preceded by, or include, a clear written statement to the recipient as to:

• any right of the recipient to have the record provided or made available on paper or in non-electronic form,

• whether the consent applies only to that transmission, to specified categories of communications, or to all communications from the corporation, and

• the procedures the recipient must use to withdraw consent.

Nearly two decades ago, I wrote about the Corporations Code move into Cyberspace, The California Corporations Code Enters Cyberspace: 1995 Legislation Tackles New On-Line Technologies, 18 CEB California Business Law Reporter 5 (1996).

More On The SEC’s Backwards Rule Proposal

In this February post, I argued that the SEC got it backwards when it proposed new rules requiring disclosure of whether hedging transactions by directors, officers and others are permitted.  My point was that directors and officers don’t need the company’s permission to engage in these transactions.  The relevant disclosure is whether the company prohibits hedging transactions that would otherwise be permitted.  The SEC’s proposed rules misleadingly imply that permission is required.

Recently, I was reading an account of the interactions between the first American consul to Japan, Townsend Harris, and Governor Okada of Shimoda, Japan.  The Japanese government was concerned that the Americans would survey the coast of Japan and pressed Harris to prohibit any surveying by American vessels.  The following record illustrates how the want of permission might be argued into a prohibition:

The Japanese: There is not article in the treaty which prohibits surveying.

Harris: There is no article which prohibits it.

Moriyama [a member of the Governor's staff]:  Not to permit it means that we refuse it.

Dai Nihon Komonjo, Bakumatsu Gaikoku Kankei Monjo, XV, 63.

If this seems a bit of obscure history, John Wayne actually played Townsend Harris in the 1958 film, The Barbarian and the Geisha, directed by John Huston.