Law Commons^™

Corporate Law In The Shanghai People's Courts, 1992-2008: Judicial Autonomy In A Contemporary Authoritarian State, Nicholas Howson

Nicholas Howson

In late 2005 China adopted a largely rewritten Company Law that radically increased the role of courts. This study, based on a review of more than 1000 Company Law-related disputes reported between 1992 and 2008 and extensive interactions with PRC officials and sitting judges, evaluates how the Shanghai People’s Court system has fared over 15 years in corporate law adjudication. Although the Shanghai People’s Courts show generally increasing technical competence and even intimations of political independence, their path toward institutional autonomy is inconsistent. Through 2006, the Shanghai Court system demonstrated significantly increased autonomy. After 2006 and enactment of the new …

Four Pillars To Build A New Corporate Law Federalism: Crowd Funding Exchanges, A Codified Internal Affairs Doctrine, City-Based Incorporation, And An Arbitrated Corporate Code, J.W. Verret

John W Verret

This article examines the event window opened by the pending creation of new crowdfunding platforms, a new means of creating publicly traded equity for smaller, early stage firms than have ever been permitted by the Securities and Exchange Commission to access the public securities markets. That event window could support a completely new paradigm for the development of corporation law and completely upend existing wisdom about interstate competition to develop corporate governance. This article considers the economics of crowdfunding precursors which share some of the attributes of equity crowdfunding, and also considers the expected attributes of equity crowdfunding, to demonstrate …

When Subchapter S Meets Subchapter C, Martin J. Mcmahon Jr., Daniel L. Simmons

Martin J. McMahon

It is often said that “an S corporation is a corporation that is taxed like a partnership.” This statement is incorrect. An S corporation resembles a partnership only in that it generally does not pay income taxes and its income and losses pass through to the shareholders and retain their character as they pass through. Also, like a partnership, basis adjustments to an S corporation shareholder's stock reflect allocations of income, expense, loss, and distributions. However, no other rules of subchapter K governing partnership taxation apply to S corporations. Most of the rules governing the relationship between an S corporation …

E-Commerce, Cyber, And Electronic Payment System Risks: Lessons From Paypal, Lawrence J. Trautman

Lawrence J. Trautman Sr.

By now, almost without exception, every business has an internet presence, and is likely engaged in e-commerce. What are the major risks perceived by those engaged in e-commerce and electronic payment systems? What potential risks, if they become reality, may cause substantial increases in operating costs or threaten the very survival of the enterprise? This article utilizes the relevant annual report disclosures from eBay (parent of PayPal), along with other eBay and PayPal documents, as a potentially powerful teaching device. Most of the descriptive language to follow is excerpted directly from eBay’s regulatory filings. My additions include weaving these materials …

A Rational Approach To Business Entity Choice, Eric Franklin

Eric H. Franklin

Choosing the correct legal entity for a business is a decision that should not be taken lightly. For an entrepreneur, the legal entity decision carries consequences that will affect vital aspects of the business, including how it will be managed, taxed, and viewed by the public. Unfortunately, entrepreneurs generally give this decision little attention and make the choice without legal or tax advice. Compounding the issue is the fact that many states offer a dizzying number of legal entity forms. Indeed, many states offer more than a dozen different legal entity forms, despite the fact that most of these forms …

Law And Finance: The Case Of Stock Market Development In China, Zhong Zhang Dr

Zhong Zhang Dr

Having grown to one of the largest in the world in just over two decades, the stock market of China is cited as a counterexample to the significance of law for financial market development. A thorough examination of the development of China’s stock market however finds that law is actually critical to sustaining market growth and law did play a role in the growth of the market. On the other hand, the trajectory of development in China is growth first followed by law, and the improvement of law is caused by market growth. The experience of China hence suggests that …

After Citizens United: Extending The Liberal Revolution To The Multinational Corporation, Daniel J.H. Greenwood

Daniel J.H. Greenwood

This Article proposes several routes to reverse Citizens United, the Supreme Court case holding that corporate campaign spending is “speech” protected by the First Amendment.

The core problem of Citizens United is that corporations are illegitimate participants in our politics. Corporate law requires corporate officers to pursue the corporate interest. They are thus disqualified from considering the central political questions of a democratic capitalist country: defining the rules of the market (which define corporate interests) and balancing profit against other, more important, values.

The high road to fixing Citizens United is a constitutional amendment to extend the fundamental insights …

Puzzles In Controlling Shareholder Regimes And China: Shareholder Primacy And (Quasi) Monopoly, Sang Yop Kang

Sang Yop Kang

Professor Mark Roe explained that the shareholder wealth maximization norm (“the norm”) is not fit for a country with a (quasi) monopoly, because the norm encourages managers to maximize monopoly rents, to the detriment of the national economy. This Article provides new findings and counter-intuitive arguments as to the tension created by the norm and (quasi) monopoly by exploring three key corporate governance concepts that Roe did not examine—(1) “controlling minority structure” (CMS), where dominant shareholders hold a fractional ownership in their controlled-corporations, (2) “tunneling” (i.e., illicit transfer of corporate wealth to controlling shareholders), and (3) Chinese state-owned enterprises (SOEs). …

Conflicted Counselors: Retaliation Protections For Attorney-Whistleblowers In An Inconsistent Regulatory Regime, Jennifer M. Pacella

Jennifer M. Pacella, Esq.

Attorneys, especially in-house counsel, are subject to retaliation by employers in much the same way as traditional whistleblowers, often experiencing retaliation and loss of livelihood for reporting instances of wrongdoing about their clients. Although attorney-whistleblowing undoubtedly invokes ethical concerns, attorneys who “appear and practice” before the Securities and Exchange Commission (“SEC”) are required by federal law to act as internal whistleblowers under the Sarbanes-Oxley Act (“SOX”) and report evidence of material violations of the law within the organizations that they represent. An attorney’s failure to comply with these obligations will result in SEC-imposed civil penalties and disciplinary action. Recent federal …

Limiting Leukophobia: Looking Beyond Lockup. Debunking The Strategy Of Turning White Collars Orange, Jared J. Hight

Jared J Hight

The legal and political landscape of the past 30 years has resulted in the abandonment of the utilitarian principle of parsimony as applied to white collar criminals. In response to preceding decades of minor punishments meted out for serious white collar crimes, the Federal Sentencing Commission abandoned the typical past practices of sentencing judges and instead formulated Guidelines that are wildly excessive and no longer balance the need for community safety with the need for that same community to remain economically efficient. The guiding principles of deterrence, rehabilitation, and incapacitation have been deemphasized in a new model that focuses primarily …

Mistakes, Airfares, And Consumers: Restoring The Department Of Transportation's Role In Regulating Unfair Trade Practices, Terence Lau

Terence Lau

This Article traces the problem of mistake airfares and the federal government’s response to airlines that cancel tickets for erroneous fares. Part I of the Article explores airline pricing generally, and argues that airline tickets are a unique form of commodity good, one where there is no consumer expectation of a reasonable price. The dynamic nature of airline yield management means that prices for the exact same seat on an airplane can range dramatically on a variety of circumstances and factors that are beyond the knowledge, control or comprehension of the ordinary consumer. The Article investigates several well-known examples of …

An Approach To The Regulation Of Spanish Banking Foundations, Miguel Martínez

Miguel Martínez

The purpose of this paper is to analyze the legal framework governing banking foundations as they have been regulated by Spanish Act 26/2013, of December 27th, on savings banks and banking foundations. Title 2 of this regulation addresses a construct that is groundbreaking for the Spanish legal system, still of paramount importance for the entire financial system insofar as these foundations become the leading players behind certain banking institutions given the high interest that foundations hold in the share capital of such institutions.

Bankruptcy Or Bailouts?, Kenneth Ayotte, David Skeel

Kenneth Ayotte

The usual reaction if one mentions bankruptcy as a mechanism for addressing a financial institution’s default is incredulity. Those who favor the rescue of troubled financial institutions, and even those who prefer that their assets be promptly sold to a healthier institution, treat bankruptcy as anathema. Everyone seems to agree that nothing good can come from bankruptcy. Indeed, the Chapter 11 filing by Lehman Brothers has been singled out by many the primary cause of the severe economic and financial contraction that followed, and proof that bankruptcy is disorderly and ineffective. As a result, ad-hoc rescue lending to avoid bankruptcy …

Legal Entities As Transferable Bundles Of Contracts, Kenneth Ayotte, Henry Hansmann

Kenneth Ayotte

The large, modern business corporation is frequently organized as a complex cluster of hundreds of corporate subsidiaries under the common control of a single corporate parent. Our Article provides new theory and supportive evidence to help explain this structure. We focus, in particular on the advantages of subsidiary entities in providing the option to transfer some or all of the firm's contractual rights and obligations in the future. The theory not only sheds light on corporate subsidiaries but also illuminates a basic function of all types of legal entities, from partnerships to nonprofit corporations. We show that when, as is …

Avenues To Foreign Investment In China’S Shipping Industry—Have Lease Financing Arrangements And The Free Trade Zones Opened Markets For Foreign Non-Bank Investment?, Rick Beaumont

Rick Beaumont

No abstract provided.

Jobsohio: Don’T Let Progress Stand In The Way Of Progress, Patrick Martin

Patrick Martin

In February of 2011, Governor of Ohio John Kasich signed legislation that created JobsOhio. This has been a controversial program based on the method that it was implemented and some of the rules that govern the program.it. In November of 2013, ProgressOhio, a citizens advocacy group, challenged the constitutionality of the program but the suit was dismissed by the Ohio Supreme Court for lack of standing by the plaintiffs. There has been no court decision that adjudicates the program on the merits, only on the jurisdictional standing of a party to a suit that challenged the legislation. To date, only …

Avenues To Foreign Investment In China’S Shipping Industry—Have Lease Financing Arrangements And The Free Trade Zones Opened Markets For Foreign Non-Bank Investment?, Rick Beaumont

Rick Beaumont

No abstract provided.

Proposed Amendments To Delaware’S Appraisal Statute Do Not Go Far Enough, William James Burton

William James Burton

Recently, Delaware courts have experienced rising numbers of appraisal suites. This is the result of numerous favorable judicial opinions and the state of the current economy making statutory interest a favorable investment strategy for plaintiffs. Practitioners have coined the term appraisal arbitrage to denote this rise in appraisal suites which has been led by institutional investors. Many of these practitioners point to significant problems that have developed causing an industry wide inquiry of the Delaware’s current appraisal statute. In addition, defending the rise of appraisal litigation and, in particular, the accrual of statutory interest, defendants have raised notable theories that …

The Moral Undercurrent Beneath The Regulatory Regime Of Investor Protection, Huhnkie Lee

Huhnkie Lee

No abstract provided.

Can Peltz Score?: What’S Behind The May 13 Dupont Vs. Trian Contest, Lawrence A. Hamermesh

Lawrence A. Hamermesh

No abstract provided.

Empirical Study Redux On Choice Of Law And Forum In M&A: The Data And Its Limits, Juliet P. Kostritsky, Wojbor Woyczynski, Harold Haller, Kyle Chen

Juliet P Kostritsky

No abstract provided.

The Associational Hoax: Corporate Personhood & Shareholder Rights After Hobby Lobby And Citizens United, Jaimie K. Mcfarlin

Jaimie K. McFarlin

No abstract provided.

Business Benefits Of Attorneys And Cpas Collaborating, Biana Borukhovich, Ariel Gamburg

Biana Borukhovich

No abstract provided.

Person, State Or Not: The Place Of Business Corporations In Our Constitutional Order, Daniel J.H. Greenwood

Daniel J.H. Greenwood

Business corporations are critical institutions in our democratic republican market-based economic order. The United States Constitution, however, is completely silent as to their status in our system. The Supreme Court has filled this silence by repeatedly granting corporations rights against the citizenry and its elected representatives.

Instead, we ought to view business corporations, like municipal corporations, as governance structures created by We the People to promote our general Welfare. On this social contract view, corporations should have the constitutional rights specified in the text: none. Instead, we should be debating which rights of citizens against governmental agencies should also apply …

Broad Shareholder Value And The Inevitable Role Of Conscience, Paul D. Weitzel, Zachariah J. Rodgers

Paul D. Weitzel

This article proposes an integrative solution to the modern debate on corporate purpose, the question of whether directors and officers must solely maximize profits or whether they may consider the effects on employees, the environment or the community. Many find pure profit maximization unseemly and suggest alternative theories, typically arguing that corporations owe a duty to a broader range of stakeholders. This position is inconsistent with the case law and unnecessary to allow conscience in the board room. We resolve the issue more simply by acknowledging that the purpose of a corporation is to promote the shareholders’ interests, which includes …

Venture Capital, Agency Costs, And The False Dichotomy Of The Corporation, Robert P. Bartlett

Robert Bartlett

An implicit dichotomy of the corporation exists in legal scholarship. On one side of the dichotomy rests the publicly held corporation suffering from a significant conflict of interest between its managers and dispersed shareholders; on the other side, the closely held corporation plagued by intershareholder conflict. This Article argues that understanding the agency problems that can exist within a firm demands a rejection of this traditional dichotomy and the theories of the firm built upon it. Using venture capital (VC) finance, this Article demonstrates how this dichotomy obscures how all firms -- public and private -- often face the same …

Democracy In The Private Sector: The Rights Of Shareholders And Union Members, Michael Goldberg

Michael J Goldberg

In the years since Enron, there has been a lively debate over the value of shareholder democracy as a means to improve corporate performance and reduce the likelihood of future Enrons or Lehman Brothers. That debate has been enriched by comparative scholarship looking at corporate governance abroad, and comparing corporate governance with public government. This Article explores a different comparison, between corporations and their sometime adversaries across bargaining tables and picket lines – labor unions. More specifically, this article compares the regulation of corporate governance and the regulation of the internal affairs of unions, and the rights of shareholders and …

Through The Lens Of Innovation, Mirit Eyal-Cohen

Mirit Eyal-Cohen

The legal system constantly follows the footsteps of innovation and attempts to discourage its migration overseas. Yet, present legal rules that inform and explain entrepreneurial circumstances lack a core understanding of the concept of innovation. By its nature, law imposes order. It provides rules, remedies, and classifications that direct behavior in a consistent manner. Innovation turns on the contrary. It entails making creative judgments about the unknown. It involves adapting to disarray. It thrives on deviations as opposed to traditional causation. This Article argues that these differences matter. It demonstrates that current laws lock entrepreneurs into inefficient legal routes. Using …

The Impact Of Hedge Fund Activism: Evidence And Implications, John C. Coffee, Jr., Darius Palia

John C Coffee, Jr.

Hedge Fund activism has increased almost hyperbolically. Some view this optimistically as a means for bridging the separation of ownership and control; others are more pessimistic, seeing mainly wealth transfers from bondholders or speculative expectations of a takeover as fueling the spike. Equivalent division exists over the impact of this increased activism, with optimists seeing real gains that do not erode over time and improvements in operating performance, and pessimists finding shortened investment horizons, increased leverage, and reduced investment in research and development.

Our perspective is analytic. We begin by surveying the regulatory and institutional developments that have reduced the …

Examining Success, Jonathan C. Lipson

Jonathan C. Lipson

Chapter 11 of the Bankruptcy Code presumes that managers will remain in possession and control of a corporate debtor. This presents an obvious agency problem: these same managers may have gotten the company into trouble in the first place. The Bankruptcy Code thus includes checks and balances in the reorganization process, one of which is supposed to be an “examiner,” a private individual appointed to investigate and report on the debtor’s collapse.

We study their use in practice. Extending prior research, we find that examiners are exceedingly rare, despite the fact that they should be “mandatory” in large cases ($5 …