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Full-Text Articles in Law
Expanding Mfw: Delaware Law Should Offer A Business Judgment Rule Safe Harbor For All Conflicted Controller Transactions, Alex Lindsey
Expanding Mfw: Delaware Law Should Offer A Business Judgment Rule Safe Harbor For All Conflicted Controller Transactions, Alex Lindsey
Fordham Journal of Corporate & Financial Law
While courts usually defer to a board’s business decisions under the business judgment rule, courts will apply a much less deferential standard of review due to loyalty concerns if a conflicted controller is involved in a business decision such as a merger. However, in Kahn v. M & F Worldwide (“MFW”) when a squeeze out merger was challenged by a minority stockholder, the Delaware Supreme Court reviewed the transaction under the deferential business judgment rule standard because the Court found that the structure of the transaction neutralized the controller loyalty concerns. Building on this reasoning, the Court developed a checklist …
Disciplining Corporate Boards And Debtholders Through Targeted Proxy Access, Michelle M. Harner
Disciplining Corporate Boards And Debtholders Through Targeted Proxy Access, Michelle M. Harner
Indiana Law Journal
Corporate directors committed to a failed business strategy or unduly influenced by the company’s debtholders need a dissenting voice—they need shareholder nominees on the board. This Article examines the biases, conflicts, and external factors that impact board decisions, particularly when a company faces financial distress. It challenges the conventional wisdom that debt disciplines management, and it sug-gests that, in certain circumstances, the company would benefit from having the shareholders’ perspective more actively represented on the board. To that end, the Article proposes a bylaw that would give shareholders the ability to nominate direc-tors upon the occurrence of predefined events. Such …
On The Nature Of Corporations, Lynn A. Stout
On The Nature Of Corporations, Lynn A. Stout
Lynn A. Stout
Legal experts traditionally distinguish corporations from unincorporated business forms by focusing on corporate characteristics like limited shareholder liability, centralized management, perpetual life, and free transferability of shares. While such approaches have value, this essay argues that the nature of the corporation can be better understood by focusing on a fifth, often-overlooked, characteristic of corporations: their capacity to "lock in" equity investors' initial capital contributions by making it far more difficult for those investors to subsequently withdraw assets from the firm. Like a tar pit, a corporation is much easier for equity investors to get into, than to get out of. …
Managing Expectations: Does The Directors' Duty To Monitor Promise More Than It Can Deliver?, Lisa Fairfax
Managing Expectations: Does The Directors' Duty To Monitor Promise More Than It Can Deliver?, Lisa Fairfax
All Faculty Scholarship
This article grapples with whether we are expecting too much from the duty of oversight. The directors’ oversight duty refers to directors’ responsibility to actively monitor corporate officers, employees, and corporate affairs. Directors breach their oversight duty when officers and employees engage in wrongdoing that causes harm to the corporation and that wrongdoing can be attributed to directors’ failure to monitor. In other words, oversight liability holds directors liable for their failure to act under circumstances where it can be proven that directors should have acted and their actions could have prevented corporate harm.
The significance of directors’ oversight duty …
On The Nature Of Corporations, Lynn A. Stout
On The Nature Of Corporations, Lynn A. Stout
Cornell Law Faculty Publications
Legal experts traditionally distinguish corporations from unincorporated business forms by focusing on corporate characteristics like limited shareholder liability, centralized management, perpetual life, and free transferability of shares. While such approaches have value, this essay argues that the nature of the corporation can be better understood by focusing on a fifth, often-overlooked, characteristic of corporations: their capacity to "lock in" equity investors' initial capital contributions by making it far more difficult for those investors to subsequently withdraw assets from the firm. Like a tar pit, a corporation is much easier for equity investors to get into, than to get out of. …