This post is the result of my research on the duties of a director of a Delaware corporation that is located, and doing much of its business, in California. Specifically, I wanted to confirm that California law governed those duties.
Corporations Code Section 2115 addresses non-California corporations for which (a) most voting shares are held by shareholders in California and (b) the average of the following three factors exceeds 50% (excepting many publicly-held corporations):
- The percentage of its property that is located in California
- The percentage of its payroll that is paid in California
- The percentage of its sales that take place in California
This post is based on an OnStartups.com question (edited here) that I answered a few minutes ago. Q. I am drafting a website-development agreement with a firm in India. I am in Australia. I prefer that the agreement be governed by Australian law, but the developer prefers Indian law. What is normally done in similar circumstances?
A. Several thoughts based on my experience in similar matters:
- While governing law is important, venue – i.e., where a lawsuit must be filed – is even more important tactically if a dispute arises.
- If there is a great disparity in negotiating power between the parties, the one with the greater power is likely to prevail on this issue (and many others).
- If a compromise is desired, choose a neutral country (with an appropriate legal system) for governing law and venue. In your part of the world, Singapore could be a good choice.
- An approach that will reduce the likelihood of a lawsuit being filed: If one party initiates a legal action, it must be filed in the other party’s country, and that country’s law will govern.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.
A longtime client was delighted to receive an acquisition offer from a large, publicly-held company (“Acquirer”). Once the acquisition closed, the client’s founder (“Founder”) would become a management-level employee of Acquirer.
Although Acquirer’s proposed employment agreement generally was acceptable, Founder was concerned about its non-compete provision. That provision stated that for one year following termination of his employment, Founder would not “engage in any business activities that are competitive with the business activities of [Acquirer] or those of its subsidiary or parent companies”. The problem was that the business of Acquirer and its affiliates was so vast, and Founder’s expertise was so industry-specific, that the provision would have limited Founder’s ability to be employed elsewhere.
Acquirer’s General Counsel stated that the non-compete provision was non-negotiable - if founder did not accept that provision, the acquisition would not take place. In addition, the GC said that even though Founder lived in California and would be working at Acquirer’s offices in California, the provision stating that the agreement would be “governed by and construed in accordance with the laws of the State of New York” also was non-negotiable.