Law Commons^™

Exchanges Of Multiple Stocks And Securities In Corporate Divisions Or Acquisitive Reorganizations, Douglas A. Kahn, Jeffrey S. Lehman

Articles

If specified conditions are satisfied, the Internal Revenue Code provides nonrecognition for gain or loss realized when stocks and securities of one corporation are exchanged for stocks and securities of another corporation. When the exchange is made as part of a corporate division (a split-off or a split-up), the principal nonrecognition provision is section 355; and when the exchange is made as part of an acquisitive reorganization, the principal nonrecognition provision is section 354. Complete nonrecognition is provided only when stock is exchanged solely for stock and securities are exchanged solely for securities of no greater principal amount. If, in …

Tender Offers By Controlling Shareholders: The Specter Of Coercion And Fair Price, Adam C. Pritchard

Articles

Taking your company private has never been so appealing. The collapse of the tech bubble has left many companies whose stock prices bordered on the stratospheric now trading at small fractions of their historical highs. The spate of accounting scandals that followed the bursting of the bubble has taken some of the shine off the aura of being a public company-the glare of the spotlight from stock analysts and the business press looks much less inviting, notwithstanding the monitoring benefits that the spotlight purports to confer. Moreover, the regulatory backlash against those accounting scandals has made the costs of being …

The Poison Pill In Japan: The Missing Infrastructure, Ronald J. Gilson

Faculty Scholarship

The coming of hostile takeovers to Japan has been anticipated, and anticipated, and anticipated. Each report of a reduction in the size of crossholdings among Japanese companies and in the size of Japanese bank stockholdings in their clients has given rise to an expectation that now, at last, hostile offers would emerge. It is not surprising that commentators looked forward, optimistically, to the arrival of a potentially disruptive takeover technique. The extended Japanese recession, together with management resistance to internally implemented restructurings and the barriers to externally imposed restructurings, has created the potential for substantial private and social gain from …

Prescribing The Pill In Japan?, Curtis J. Milhaupt

Faculty Scholarship

Contrary to popular belief, corporate Japan is changing incrementally, to be sure, but changing nonetheless. One of the areas of greatest potential change is the legal and business environment for mergers and acquisitions ("M&A"), including hostile M&A. Recent amendments to Japan's Commercial Code in the areas of stock swaps and divestitures are helping to facilitate M&A transactions.¹ At the same time, the constellation of shareholders in Japanese firms is changing as cross-shareholding declines and foreign investment increases. M&A activity in Japan has increased significantly in recent years.²

Partnoy's Complaint: A Response, John C. Coffee Jr.

Faculty Scholarship

My article attempts to strike a balance and find a middle ground between the polar positions of those who favor strict liability (of whom Professor Partnoy is probably the most notable) and recent critics who believe it would produce market failure. Necessarily, those who take a middle position are exposed to fire from both sides. Although I admire Professor Partnoy's originality and incisive style, I do not believe that the market could easily survive his reforms and suspect that he has undervalued the hidden costs of strict liability. Deterrence is needed – but there can be too much of a …

What Caused Enron? A Capsule Social And Economic History Of The 1990s, John C. Coffee Jr.

Faculty Scholarship

The sudden explosion of corporate accounting scandals and related financial irregularities that burst over the financial markets between late 2001 and the first half of 2002 – Enron, WorldCom, Tyco, Adelphia and others – raises an obvious question: Why now? What explains the concentration of financial scandals at this moment in time? Much commentary has rounded up the usual suspects and placed the blame on a decline in business morality, an increase in "infectious greed," or other similarly subjective trends that cannot be reliably measured. Although none of these possibilities can be dismissed out of hand, approaches that simply reason …

Gatekeeper Failure And Reform: The Challenge Of Fashioning Relevant Reforms, John C. Coffee Jr.

Faculty Scholarship

Securities markets have long employed "gatekeepers" – independent professionals who pledge their reputational capital – to protect the interests of dispersed investors who cannot easily take collective action. The clearest examples of such reputational intermediaries are auditors and securities analysts, who verify or assess corporate disclosures in order to advise investors in different ways. But during the late 1990s, these protections seemingly failed, and a unique concentration of financial scandals followed, all involving the common denominator .of accounting irregularities. What caused this sudden outburst of scandals, involving an apparent epidemic of accounting and related financial irregularities, that broke over the …

Gatekeeping, Peter B. Oh

Articles

Gatekeeping is a metaphor ubiquitous across disciplines and within fields of law. Generally, gatekeeping comprises an actor monitoring the quality of information, products, or services. Specific conceptions of gatekeeping functions have arisen independently within corporate and evidentiary law. Corporate gatekeeping entails deciding whether to grant or withhold support necessary for financial disclosure; evidentiary gatekeeping entails assessing whether expert knowledge is relevant and reliable for admissibility. This article is the first to identify substantive parallels between gatekeeping in these two contexts and to suggest their cross-treatment. Public corporate gatekeepers, like their judicial evidentiary analogues, should bear a duty of reliable monitoring.

Globalizing Corporate Governance: Convergence Of Form Or Function, Ronald J. Gilson

Faculty Scholarship

Globalization has led to a remarkable resurgence in the study of comparative corporate governance. This area of scholarship had been largely the domain of taxonomists, intent on cataloguing the central characteristics of national corporate governance systems, and then classifying different systems based on the specified attributes. The result was an interesting, if perhaps somewhat dry, enterprise. We learned that national corporate governance systems differed dramatically along a number of seemingly important dimensions. Some corporate governance systems, notably those of the United States and other Anglo-Saxon countries, are built on the foundation of a stock market-centered capital market. Other systems, like …

The Non-Merger Virtual Merger: Is Corporate Law Ready For Virtual Reality?, Stuart R. Cohn

UF Law Faculty Publications

The term virtual mergers describes the relatively recent phenomenon of companies entering into contractual arrangements that are functionally, but not legally, equivalent to mergers prescribed by corporate statutes. Virtual mergers usually involve the shared use of assets contributed by each of the companies. A central element of the transaction is that the two companies remain legally independent, each with its own directors, officers, and shareholders. The arrangements can usually be terminated by either party, allowing each company to return to the status quo ante or exercise buyout rights if contractually provided.

Although virtual mergers have occurred among public companies in …

Some Thoughts On Proposed Revisions To The Organizational Guidelines, Julie R. O'Sullivan

Georgetown Law Faculty Publications and Other Works

In this article, Professor O'Sullivan, who served as the reporter for the U.S. Sentencing Commission's Ad Hoc Advisory Group for Organizational Sentencing Guidelines, reflects on that Group's work. She concludes that the potential impact of many of the policy fixes within the power of the Sentencing Commission is dwarfed by decisions that lie solely within the power of the Department of Justice or Congress. Specifically, Department of Justice decisions regarding what constitutes organizational "cooperation" may have a determinative impact on organizational incentives regarding compliance efforts and decisions to investigate, self-report, and cooperate in the remediation of organizational wrongdoing. Professor O'Sullivan …

Rules, Principles, And The Accounting Crisis In The United States, William W. Bratton

Georgetown Law Faculty Publications and Other Works

The Sarbanes-Oxley Act and the Securities Exchange Commission move too quickly when they prod the Financial Accounting Standards Board, the standard setter for US GAAP, to move immediately to a principles-based system. Priorities respecting reform of corporate reporting in the US need to be ordered more carefully. Incentive problems impairing audit performance should be solved first through institutional reform insulating the audit from the negative impact of rent-seeking and solving adverse selection problems otherwise affecting audit practice. So long as auditor independence and management incentives respecting accounting treatments remain suspect, the US reporting system holds out no actor plausibly positioned …

Technological Evolution And The Devolution Of Corporate Financial Reporting, Donald C. Langevoort

Georgetown Law Faculty Publications and Other Works

My claim is that the technology link to the recent disclosure scandals is no coincidence. To be sure, cheating tempts all who seek wealth, in whatever line of business they find themselves. I want to show, however, how the rapid pace of innovation at a number of levels offered motive, opportunity, and rationalization for a downshift in financial reporting norms, which in turn made outright fraud more probable.