Can a Corporation Enter into a Business Transaction with One of its Directors?
From time to time, a client corporation wants to enter into a business transaction with one of its directors. An astute CEO, recognizing the potential for a conflict of interest, will ask whether and how such a transaction can take place without violating any laws or any fiduciary obligations to the corporation.
California Corporations Code Section 310 provides that, generally, a transaction between a corporation and one of its directors is permitted if, following disclosure of all material facts and the director’s interest in the transaction, it is approved either by a disinterested majority of the board of directors (usually the easier approach) or by the shareholders. (more…)
How detailed should a legal document be?
This topic was suggested by Tim Greene at FizzTalk based on a comment posted at the LinkedIn Legal Blogging group.
In my experience, a document’s level of detail should be driven by the nature of the business transaction and the parties’ relationship. I will give some examples both from in-house work and from my private practice that pertain to agreements with independent contractors.
Long and Detailed
When I was VP and Legal Counsel at Visa, I negotiated hundreds of contracts. Given that most were for IT products or services, a lot of money often was at stake, especially if a relationship was to continue for a period of years.
Accordingly, I prepared a series of detailed standard-form agreements – typically 15-20 pages – that served as a starting point. To minimize the amount of negotiation that would be required, the agreements were reasonably balanced, yet they, nevertheless, protected my client’s essential business and legal interests.
The agreements were long, but the length was justified by (a) the size of the deals and (b) the fact that each standard-form agreement would be used many times in the future, with minor revisions as required.