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Full-Text Articles in Law

Governance By Contract: The Implications For Corporate Bylaws, Jill E. Fisch Jan 2018

Governance By Contract: The Implications For Corporate Bylaws, Jill E. Fisch

Faculty Scholarship at Penn Law

Boards and shareholders are increasing using charter and bylaw provisions to customize their corporate governance. Recent examples include forum selection bylaws, majority voting bylaws and advance notice bylaws. Relying on the contractual conception of the corporation, Delaware courts have accorded substantial deference to board-adopted bylaw provisions, even those that limit shareholder rights.

This Article challenges the rationale for deference under the contractual approach. With respect to corporate bylaws, the Article demonstrates that shareholder power to adopt and amend the bylaws is, under Delaware law, more limited than the board’s power to do so. As a result, shareholders cannot effectively ...


Contracting Out Of The Fiduciary Duty Of Loyalty: An Empirical Analysis Of Corporate Opportunity Waivers, Gabriel Rauterberg, Eric Talley Jun 2017

Contracting Out Of The Fiduciary Duty Of Loyalty: An Empirical Analysis Of Corporate Opportunity Waivers, Gabriel Rauterberg, Eric Talley

Articles

For centuries, the duty of loyalty has been the hallowed centerpiece of fiduciary obligation, widely considered one of the few “mandatory” rules of corporate law. That view, however, is no longer true. Beginning in 2000, Delaware dramatically departed from tradition by granting incorporated entities a statutory right to waive a crucial part of the duty of loyalty: the corporate opportunities doctrine. Other states have since followed Delaware’s lead, similarly permitting firms to execute “corporate opportunity waivers.” Surprisingly, more than fifteen years into this reform experiment, no study has attempted to either systematically measure the corporate response to these reforms ...


Perfectly Frank: A Reflection On Quality Lawyering In Honor Of R. Franklin Balotti, Leo E. Strine Jr., James J. Hanks Jr., John F. Olson, A. Gilchrist Sparks, E. Norman Veasey, Gregory P. Williams Apr 2017

Perfectly Frank: A Reflection On Quality Lawyering In Honor Of R. Franklin Balotti, Leo E. Strine Jr., James J. Hanks Jr., John F. Olson, A. Gilchrist Sparks, E. Norman Veasey, Gregory P. Williams

Faculty Scholarship at Penn Law

This essay honoring the late R. Franklin Balotti focuses upon certain of the key attributes necessary to practice business law effectively and ethically. Among these attributes are a strong work ethic, the integrity to stand behind your own advice and candidly admit when things do not go according to plan, empathy for how others will view your client’s actions and the ability to communicate that perception to your client, the confidence to change the pace of a transaction when a slow down or time out is warranted, and the ability to have some fun and laugh (even at yourself ...


The Bylaw Puzzle In Delaware Corporate Law, David A. Skeel Jr. Jan 2017

The Bylaw Puzzle In Delaware Corporate Law, David A. Skeel Jr.

Faculty Scholarship at Penn Law

In less than a decade, Delaware’s legislature has overruled its courts and reshaped Delaware corporate law on two different occasions, with proxy access bylaws in 2009 and with shareholder litigation bylaws in 2015. Having two dramatic interventions in quick succession would be puzzling under any circumstances. The interventions are doubly puzzling because with proxy access, Delaware’s legislature authorized the use of bylaws or charter provisions that Delaware’s courts had banned; while with shareholder litigation, it banned bylaws or charter provisions that the courts had authorized. This Article attempts to unravel the puzzle.

I start with corporate law ...


Trending @ Rwu Law: Professor Tanya Monestier's Post: Is Corporate Registration A Proper Basis For General Jurisdiction?: 02-09-2016, Tanya Monestier Feb 2016

Trending @ Rwu Law: Professor Tanya Monestier's Post: Is Corporate Registration A Proper Basis For General Jurisdiction?: 02-09-2016, Tanya Monestier

Law School Blogs

No abstract provided.


Delaware's Familiarity, Brian J. Broughman, Darian M. Ibrahim Jun 2015

Delaware's Familiarity, Brian J. Broughman, Darian M. Ibrahim

Faculty Publications

No abstract provided.


Delaware’S Familiarity, Brian J. Broughman, Darian M. Ibrahim Nov 2014

Delaware’S Familiarity, Brian J. Broughman, Darian M. Ibrahim

Popular Media

No abstract provided.


Up Close And Personal With Delaware, Darian M. Ibrahim, Brian J. Broughman Oct 2014

Up Close And Personal With Delaware, Darian M. Ibrahim, Brian J. Broughman

Popular Media

No abstract provided.


Recent Developments Concerning Preferred Stockholder Rights Under Delaware Law, Marilyn Blumberg Cane, Joong-Sik Choi, Scott B. Gitterman Jan 2011

Recent Developments Concerning Preferred Stockholder Rights Under Delaware Law, Marilyn Blumberg Cane, Joong-Sik Choi, Scott B. Gitterman

Faculty Scholarship

This is a timely article focusing on the conflicting duties owed to preferred and common stockholders. Delaware is the leading corporate law jurisdiction in the United States. Preferred stock is a key component in angel and venture capital transactions. Historically the Delaware courts have accepted as a general principle the proposition that since the preferred rights are contractual in nature, they must be expressly defined in the preferred stock contract in order for the preferred to successfully assert those rights. Accordingly, the directors owe correlative duties to the preferred to the extent that the rights are articulated in the contract ...


Delaware's Non-Waivable Duties, Lyman P. Q. Johnson Jan 2011

Delaware's Non-Waivable Duties, Lyman P. Q. Johnson

Scholarly Articles

This Article disputes the view - seemingly settled among scholars, judges, and lawyers - that recently - enacted statutes in Delaware legally permit fiduciary duties to be waived in noncorporate business associations. The argument is a rarity in business law because it is a constitutional argument, not one initially based on policy considerations or statutory interpretation, and it seeks to harmonize judicial review of fiduciary duties in noncorporate businesses with that in Delaware corporations, where waivers are not permitted. Delaware’s Constitution vests the Delaware Court of Chancery with general equity jurisdiction and powers of a kind that cannot be curtailed by legislative ...


Good Faith In Revlon-Land, Christopher M. Bruner Jan 2011

Good Faith In Revlon-Land, Christopher M. Bruner

Scholarly Articles

The Delaware Supreme Court has set a very high hurdle for plaintiffs challenging directors' good faith in the sale of a company. In Lyondell Chemical Company v. Ryan, the court held that unconflicted directors could be found to have breached the good faith component of their duty of loyalty in the transactional context only if they "knowingly and completely failed to undertake," and "utterly failed to attempt" to discharge their duties.

In this essay I argue that the Lyondell standard effectively imports into the transactional context the exacting standard previously applied in the oversight context — a move clearly aimed at ...


Regulatory Competition, Choice Of Forum And Delaware’S Stake In Corporate Law, Faith Stevelman Jan 2009

Regulatory Competition, Choice Of Forum And Delaware’S Stake In Corporate Law, Faith Stevelman

Articles & Chapters

As Delaware corporate law confronts the twenty-first-century global economy, the state's legislators and jurists are becoming sensitive to increased threats to the law's sustained preeminence. The increased presence of federal laws and regulations in areas of corporate governance traditionally allocated to the states has been widely noted. The growth of federal corporate law standards may be undermining Delaware's confidence in the sustained prosperity of its chartering business - which has been a vital source of revenues and prestige for Delaware, its equity courts, and especially its corporate bar. The Delaware Court of Chancery appears to be concerned about ...


The Diverging Meaning Of Good Faith, Mark J. Loewenstein Jan 2009

The Diverging Meaning Of Good Faith, Mark J. Loewenstein

Articles

This article explores the meaning of "good faith" in the context of corporations and unincorporated entities. The courts, particularly in Delaware, have developed two different approaches. In the corporate arena, the courts are fashioning a notion of good faith that seems to require an examination of director motivations. In the unincorporated arena, good faith has a meaning grounded in contract law. These are two different concepts and reflect the fundamental differences between corporations and unincorporated entities, with the former based on fiduciary duties and the latter on contract. There are, however, indications that this "divergence" is starting to disappear, and ...


London As Delaware?, Adam C. Pritchard Jan 2009

London As Delaware?, Adam C. Pritchard

Articles

Jurisdictional competition in corporate law has long been a staple of academic-and sometimes, political-debate in the United States. State corporate law, by long-standing tradition in the United States, determines most questions of internal corporate governance-the role of boards of directors, the allocation of authority between directors, managers and shareholders, etc.-while federal law governs questions of disclosure to shareholders-annual reports, proxy statements, and periodic filings. Despite substantial incursions by Congress, most recently in the Sarbanes-Oxley Act of 2002, this dividing line between state and federal law persists, so state law arguably has the most immediate impact on corporate governance outcomes.


London As Delaware?, Adam C. Pritchard Jan 2009

London As Delaware?, Adam C. Pritchard

Articles

In the United States, state corporate law determines most questions of internal corporate governance - the role of directors; the allocation of authority between directors, managers, and shareholders; etc. - while federal law governs questions of disclosure to shareholders - annual reports, proxy statements, and periodic filings. Despite substantial incursions by Congress, most recently with the Sarbanes-Oxley Act, this dividing line between state and federal law persists, so state law arguably has the most immediate effect on corporate governance outcomes.


On Uncertainty, Ambiguity, And Contractual Conditions, Eric L. Talley Jan 2009

On Uncertainty, Ambiguity, And Contractual Conditions, Eric L. Talley

Faculty Scholarship

This article uses the recent Delaware Chancery Court case of Hexion v. Huntsman as a template for motivating thoughts about how contract law should interpret contractual conditions in general – and "material adverse event" provisions in particular – within environments of extreme ambiguity (as opposed to risk). Although ambiguity and aversion thereto bear some facial similarities to risk and risk aversion, an optimal contractual allocation of uncertainty does not always track the optimal allocation of risk. After establishing these intuitions as a conceptual proposition, I endeavor to test them empirically, using a unique data set of 528 actual material adverse event provisions ...


Managers’ Fiduciary Duties In Financially Distressed Corporations: Chaos In Delaware (And Elsewhere), Rutheford B. Campbell Jr., Christopher W. Frost Apr 2007

Managers’ Fiduciary Duties In Financially Distressed Corporations: Chaos In Delaware (And Elsewhere), Rutheford B. Campbell Jr., Christopher W. Frost

Law Faculty Scholarly Articles

The inherent conflict between creditors and shareholders has long occupied courts and commentators interested in corporate governance. Creditors holding fixed claims to the corporation's assets generally prefer corporate decision making that minimizes the risk of firm failure. Shareholders, in contrast, have a greater appetite for risk, because, as residual owners, they reap the rewards of firm success while sharing the risk of loss with creditors.

Traditionally, this conflict is mediated by a governance structure that imposes a fiduciary duty on the corporation's managers-its officers and directors-to maximize the value of the shareholders' interests in the firm. In this ...


The Expressive Function Of Directors’ Duties To Creditors, Jonathan C. Lipson Apr 2007

The Expressive Function Of Directors’ Duties To Creditors, Jonathan C. Lipson

Faculty Scholarship at Penn Law

This Article offers an explanation of the “doctrine” of directors’ duties to creditors. Courts frequently say—but rarely hold—that corporate directors owe duties to or for the benefit of corporate creditors when the corporation is in distress. These cases are puzzling for at least two reasons. First, they link fiduciary duty to priority in right of payment, effectively treating creditors as if they were shareholders, at least for certain purposes. But this ignores the fact that priority is a complex and volatile concept. Moreover, contract and other rights at law usually protect creditors, even (especially) when a firm is ...


A Prescription To Retire The Rhetoric Of "Principles-Based Systems" In Corporate Law, Securities Regulation And Accounting, Lawrence A. Cunningham Mar 2007

A Prescription To Retire The Rhetoric Of "Principles-Based Systems" In Corporate Law, Securities Regulation And Accounting, Lawrence A. Cunningham

Boston College Law School Faculty Papers

This Article corrects widespread misconception about whether complex regulatory systems can be fairly described as either “rules-based” or “principles-based” (also called “standards-based”). Promiscuous use of these labels has proliferated in the years since the implosion of Enron Corp. While the concepts of rules and principles (or standards) are useful to classify individual provisions, they are not scalable to the level of complex regulatory systems. The Article uses examples from corporate law, securities regulation and accounting to illustrate this problematic phenomenon before turning to a series of possible explanations for the widespread use of these misleading labels. The piece contributes to ...


Cost-Based And Rules-Based Regulatory Competition: Markets For Corporate Charters In The U.S. And The E.U., Marco Ventoruzzo Jan 2007

Cost-Based And Rules-Based Regulatory Competition: Markets For Corporate Charters In The U.S. And The E.U., Marco Ventoruzzo

Journal Articles

Regulatory competition in corporate law is increasing in Europe and, not differently from what happens in the US, a market for corporate charters is developing in Europe. This article examines the differences between the US corporate law market, and the European one - to the extent that one exists. The basic idea is that, in Europe, there is a stronger competition for the (first) incorporation of rather small, closely-held corporations; while in the US a small closely-held corporation usually incorporates locally, where its shareholders and directors are located, and reincorporates - often in Delaware - when it is growing and, usually, when it ...


Kentucky Corporate Fiduciary Duties, Rutheford B. Campbell Jr. Jan 2005

Kentucky Corporate Fiduciary Duties, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

In this article I offer an interpretation of Kentucky's corporate fiduciary law. The article is positive, in that it attempts to explain our law by reference to certain principles. The article is also normative, however, in that it offers constructive criticism regarding parts of Kentucky fiduciary law and suggests changes, refinements, and clarifications intended to promote fairness and economic efficiency in Kentucky corporations.

Both the positive and the normative aspects of this piece recognize the importance of the common law developments in Delaware (and other states) and the importance of the law and economics movement. I suggest, however, that ...


The Corporation As Insider Trader, Mark J. Loewenstein, William K.S. Wang Jan 2005

The Corporation As Insider Trader, Mark J. Loewenstein, William K.S. Wang

Articles

With regard to issuer purchases, some of the traditional policy rationales against insider trading do not apply or apply with less force. Nevertheless, courts, commentators, and the SEC have all stated or assumed that a public corporation violates rule 10b-5 by buying its own shares in the market based on material, nonpublic information. In rule 10b-5 cases involving face-to-face transactions, several circuit courts have ruled that the company may not purchase its own stock based on material information not known to the seller. No good reason exists not to apply these precedents to stock market trades by issuers, especially because ...


Democracy And The Dominance Of Delaware In Corporate Law, Kent Greenfield Nov 2004

Democracy And The Dominance Of Delaware In Corporate Law, Kent Greenfield

Boston College Law School Faculty Papers

Among the grandest debates within corporate law is whether the dominance of Delaware is the result of a “race to the bottom” -- toward a legal regime that benefits managers at the expense of the shareholders -- or a “race to the top” -- toward an efficient, shareholder-centric governance framework. This paper argues that this debate is largely beside the point. Even if Delaware’s dominance is the result of a competition resulting in law that efficiently serves the interests of shareholders, it is nevertheless illegitimate. This is because the internal affairs doctrine, on which Delaware’s preeminence depends, in effect allows corporations ...


Our Corporate Federalism And The Shape Of Corporate Law, Marcel Kahan, Edward B. Rock Jun 2004

Our Corporate Federalism And The Shape Of Corporate Law, Marcel Kahan, Edward B. Rock

Faculty Scholarship at Penn Law

In the public debate sparked by the corporate scandals of the last years, Delaware has been strikingly absent. In contrast to the high profile activity of Congress, the Securities and Exchange Commission, the stock exchanges, federal prosecutors, and even state law enforcement officials, Delaware has been largely mute: no legislation; no rule-making; no criminal investigations; few headlines. In this Article, we use Delaware's relative passivity during this latest episode of corporate law-making as a starting point in the analysis of the shape of American corporate federalism and Delaware's place within it. We argue that Delaware long ago opted ...


Tender Offers By Controlling Shareholders: The Specter Of Coercion And Fair Price, Adam C. Pritchard Jan 2004

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 Impact Of Modern Finance Theory In Acquisition Cases, Rutheford B. Campbell Jr. Jan 2003

The Impact Of Modern Finance Theory In Acquisition Cases, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

In February of 1983, the Supreme Court of Delaware decided Weinberger v. UOP, Inc. The case holds that, in determining the present value of a corporation involved in an acquisition, courts are free to use “any techniques or methods [of valuation] which are generally considered acceptable in the financial community…”

The rule in Delaware prior to Weinberger required courts to determine the present value of a corporation by use of the Delaware block method of valuation exclusively. The Delaware block method, however, is a poor way to determine the present value of a corporation. As a result, even before the ...


The Costs And Benefits Of Precommitment: An Appraisal Of Omnicare V. Ncs Healthcare, Sean J. Griffith Jan 2003

The Costs And Benefits Of Precommitment: An Appraisal Of Omnicare V. Ncs Healthcare, Sean J. Griffith

Faculty Scholarship

The Decision of the Delaware Supreme Court in Omnicare v. NCS Healthcare raises concerns regarding the efficiency of Delaware law from the perspective of shareholder welfare maximization and engages the emerging literature on corporate precommitments. The clash between the majority and dissenting opinions offers competing visions of the basic corporate law separation of powers issue--that is, board versus shareholder primacy. This Article engages in a close analysis of the Omnicare opinion, focusing on its doctrinal foundations as well as its policy implications. After this introduction, Part II provides a brief overview of the relevant factual and legal background. Part III ...


Bring On 'Da Noise: The Sec's Proposals Concerning Professional Conduct For Attorneys Under Sarbanes-Oxley, Marilyn Blumberg Cane, Sarah Smith Kelleher Jan 2003

Bring On 'Da Noise: The Sec's Proposals Concerning Professional Conduct For Attorneys Under Sarbanes-Oxley, Marilyn Blumberg Cane, Sarah Smith Kelleher

Faculty Scholarship

In the wake of Enron's and numerous other corporate scandals, Congress enacted the Sarbanes-Oxley Act, which empowered the Securities and Exchange Commission (the Commission) to establish rules of professional conduct for attorneys who appear before it. In November 2002, the Commission released a proposal where attorneys would be required to report perceived violations of corporate governance and Commission rules up-the-ladder. Additionally, if the company failed to make an appropriate response, the attorney would be required to make a noisy withdrawal. After an onslaught of comments against the proposal, the Commission issued an alternative proposal for comment.

Under the alternative ...


Deal Protection Provisions In The Last Period Of Play , Sean J. Griffith Jan 2002

Deal Protection Provisions In The Last Period Of Play , Sean J. Griffith

Faculty Scholarship

The ability to protect mergers is important to both targets and acquirors. A series of recent Chancery Court decisions, however, challenges the validity of deal protection provisions in merger agreements and threatens the stability of Delaware's established change of control paradigm. This article argues that last period concerns animate the Chancery Court's decisions and finds, in the last period problem, a theoretical principle capable of harmonizing these decisions with existing jurisprudence and providing a coherent approach to the practical problems raised by deal protection provisions.


What's In A Name: An Argument For A Small Business Limited Liability Entity Statute (With Three Subsets Of Default Rules), Dale A. Oesterle, Wayne M. Gazur Jan 1997

What's In A Name: An Argument For A Small Business Limited Liability Entity Statute (With Three Subsets Of Default Rules), Dale A. Oesterle, Wayne M. Gazur

Articles

The recent proliferation of small business entity forms is primarily a result of their tax characterization. With the recent adoption of the IRS "check-the-box" regulations and, as a consequence, the elimination of traditional tax distinctions, many of these forms have lost their appeal. This article proposes starting over with one form, the "limited liability entity." Part I discusses the history of small business forms. Part II analyzes the current forms in light of the recent check-the- box legislation. Part III discusses the necessity of and rationale behind a unified entity statute. Finally, Part IV outlines a unified limited liability entity ...