Business Organizations Law Commons^™

Standing On The Shoulders Of Llcs: Tax Entity Status And Decentralized Autonomous Organizations, Samuel D. Brunson

Georgia Law Review

Since the formation of the first decentralized autonomous organization in 2016, their use has exploded. Thousands of DAOs now try to take advantage of smart contracts to solve a problem that plagues business entities: the gulf between ownership and management. Armed with smart contracts and requiring token-holders to vote on any change in strategy, DAOs dispense with the management layer so necessary in traditional business entities.

DAOs owe their existence to technology. Without blockchain, without cryptocurrency, and without smart contracts, there would be no DAOs. But they owe their explosive to something much more unexpected: Treasury regulations.

In the wake …

Delaware’S Dominance And The Future Of Organizational Law, Peter Molk

Georgia Law Review

Delaware dominates the market for business formations.
Two main theoretical explanations have been offered to justify
Delaware’s continued success. One focuses on the state’s
credible commitment to producing responsive organizational
law in the future. The other looks to the network effects that
continue to encourage new formations once Delaware already
dominates. Yet, other than continued observation of Delaware’s
dominance, little empirical support exists for either theory.
This Article empirically tests entrepreneurs’, investors’, and
lawyers’ appetite for Delaware’s credible commitment. I use the
recent Delaware Supreme Court decision of Gatz Properties v.
Auriga Capital Corp., which was a negative shock to …

Overlapping Legal Rules In Financial Regulation And The Administrative State, Matthew C. Turk

Georgia Law Review

Reforms which seek to overhaul the Dodd-Frank Act
have begun to gain support within the Trump
Administration and Congress. The leading proposals go
beyond technical matters and reflect a wholesale
critique: financial regulation has become too
burdensome, too complex, and grants too much
discretion to regulators. This Article argues that what is
really at stake in these debates is the distinct issue of
“regulatory overlap”—the joint use of multiple legal
rules to address a common market failure. It begins by
developing a general framework for analyzing
overlapping legal rules of all kinds. That framework is
then applied in case studies …

What The Hack?! Reexamining The Duty Of Oversight In An Age Of Data Breaches, Amanda M. Payne

Georgia Law Review

Due to the proliferation of electronic data and
advancements in technology, data breaches have become
commonplace. Data breaches are a threat to
corporations of all sizes and can have devastating
impacts. Focusing solely on Delaware law, this Note
explores how doctrines such as the business judgment
rule, exculpation provisions, and heightened pleading
standards have left shareholders with limited recourse
in holding directors liable for the catastrophic
consequences of data breaches. Recognizing that
shareholders have been unsuccessful alleging
Caremark-type claims arising out of a data breach, this
Note argues that the expansion of bad faith in Walt
Disney provides alternative ground …

Enhanced Scrutiny On The Buy-Side, Afra Afsharipour, J. T. Laster

Georgia Law Review

Empirical studies of acquisitions consistently find
that public company bidders often overpay for targets,
imposing significant losses on bidder shareholders.
Numerous studies have connected bidder overpayment
with managerial agency costs and behavioral biases that
reflect management self-interest. For purposes of
corporate law, these concerns implicate the behavior of
fiduciaries—the officers and directors of the acquiring
entity—and raise questions about whether those
fiduciaries are fulfilling their duty of loyalty. To address
comparable sell-side concerns, the Delaware courts
developed an intermediate standard of review known as
enhanced scrutiny. There has been little exploration,
however, of whether the rationales for applying
enhanced scrutiny …

The Cost Of Appraisal Rights: How To Restore Certainty In Delaware Mergers, Matthew E. Miehl

Georgia Law Review

Delaware's legislature created appraisal rights to
ensure that minority shareholders received fair
compensation for shares that were involuntarily sold in
a merger. Modern securities practices blur the line
between a share's equity interest and its voting interest,
which enables appraisal arbitrage-individuals,
particularly hedge funds, petitioning for appraisal
rights over shares that another person has the voting
rights to. Instances of appraisalarbitragein Delaware
mergers are soaring and causing corporate buyers to be
uncertain about a merger's ultimate price. This Note
contends that Delaware's legislature can ameliorate
this problem by establishing a contemporaneous
ownership requirement and by initiating efforts to
centralize share …

The Power Few Of Corporate Compliance, Todd Haugh

Georgia Law Review

Corporate compliance in most companies is carried out under the assumption that unethical and illegal conduct occurs in a more or less predictable fashion. That is, although corporate leaders may not know precisely when, where, or how compliance failures will occur, they assume that unethical employee conduct will be sprinkled throughout the company in a roughly normal distribution, exposing the firm to compliance risk but in a controllable manner. This assumption underlies many of the common tools of compliance — standardized codes of conduct, firm-wide compliance trainings, and uniform audit and monitoring practices. Because regulators also operate under this assumption, …

Crowdfunding Signals, Darian M. Ibrahim

Georgia Law Review

Entrepreneurs can now “crowdfund,” or sell securities to unaccredited investors over the Internet, to raise capital. But will these companies be able to attract the follow-on investors (angels and venture capitalists) that are necessary for long-term success? Angels and VCs face extreme levels of information asymmetry when deciding whether to fund a company. Signals can reduce this asymmetry. Early commentary argues a company only crowdfunds as a last resort for fear of sending a negative signal about the company’s quality to follow-on investors. This Article argues the inverse. This Article argues a successful crowdfunding campaign can send a positive signal …

Publicly Funded Private Security: A Critical Examination Of Georgia Law Pertaining To The Private Employment Of Off-Duty Police Officers, Ryan L. Giles

Georgia Law Review

Generally, employers of private security guards are
vicariously liable for the actions of their employees. This
incentivizes employers to protect against unnecessary risks
to the public and to internalize the social costs of their
business activities. In Georgia, however, this centuries-old

doctrine of respondeat superior does not apply when a
private business hires an off-duty police officer.
Several consequences arise from the current state of the
law: inconsistency in application, unfairness to victims
and imprudent taxpayer subsidization of private
businesses. This Note illustrates that the current law is
both unjust and unwise by contrasting business liability
for police torts with …

Restoring The Promise Of The Shareholder Derivative Suit, John Matheson

Georgia Law Review

The most fundamental and perplexing question in all of corporate law is how to ensure that the board of directors and corporate officers faithfully serve the interests of the corporation and its owners, the shareholders. A primary means of answering that challenge has been the implication and enforcement of directors' and officers' fiduciary duties to the corporation by means of the shareholder derivative action. Almost from its inception, however, the derivative suit has been subject to jaundiced treatment by companies, legislatures, and courts. The result is a costly, tortured derivative suit process unrelated to the merits of the underlying claims …

The Enduring Legacy Of Modern Efficient Market Theory After Halliburton V. John, Mark Klock

Georgia Law Review

In 1988 the U.S. Supreme Court approved the fraud on the market theory for securities trading in an efficient market thus enabling securities class action plaintiffs to establish their required reliance element of the case through a rebuttable presumption. Basic v. Levinson held that efficient markets incorporate publicly disseminated information and investors who purchased or sold securities in an efficient market therefore relied on any publicly disseminated misinformation. For more than a quarter century since Basic, the efficient market theory has sustained a barrage of assaults from commentators who object to the use of economic theory in legal decision making …

Cyber Risks: Emerging Risk Management Concerns For Financial Institutions, Kristin N. Johnson

Georgia Law Review

Rumors posit that, within the last two years, hackers caused outages, disrupting service for the two largest securities exchanges in the world-the NASDAQ and the New York Stock Exchange.

Disappointingly, regulatory reform is often backward-looking. While regulators toil to implement rules to prevent the last crisis from reocurring, new and more perilous threats evade detection. With increasing frequency, cyberattacks threaten critical infrastructure resources such as nuclear centrifuges, electrical grids, and air defense systems. Cyberattacks pose a burgeoning and underexplored universe of emerging concerns impacting areas as diverse as big-box retail stores, casual-dining chains, online retail auctions, and national security. Even …

Where Do We Go Now? The Uncertain Future For 29 U.S.C. § 1301(B)(1), Private Equity Funds, And Multiemployer Pension Plans After Sun Capita, Crighton T. Allen

Georgia Law Review

The United States faces a growing problem concerning corporate indebtedness to pension plans, specifically, multi-employer pension plans (MEPPs). MEPPs are group pension plans in which a number of employers join together to contribute to a fund benefitting all employees of the participating companies. If an employer seeks to withdraw from a MEPP by ceasing to contribute into it, the company faces a withdrawal penalty-its proportionate share of the plan's vested but unfunded benefits. The recent decision by the First Circuit in Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund has the potential to greatly …