Business Organizations Law Commons^™

Numerus Clausus No More: A Fundamental Shift In Delaware Corporate Law, Usha Rodrigues

Scholarly Works

This Essay applies Thomas Merrill and Henry Smith’s theory of numerus clausus—the idea that a limited menu of legal forms reduces transaction costs—to the world of business entities. Historically, investors had a straightforward choice: the decentralized general partnership or the centralized corporation, each with predictable governance and liability rules. Even innovations like the LLC, benefit corporation, and L3C merely expanded the list of standard options, preserving a clear, finite set of organizational forms.

But recent changes in Delaware corporate law have shattered this standardization norm. The addition of Section 122(18) to the Delaware General Corporation Law, combined with increasing reliance …

Business Risk, Capital Markets, And Sustainable Companies, Christopher Bruner

Scholarly Works

Corporate sustainability is inherently bound up with corporate risk, and particularly with risk-taking incentives of various corporate actors – including directors and officers who manage the business, and shareholders who can exert pressure upon corporate governance in various ways. This article sets out a framework for thinking about corporate risk-taking incentives and how they might be reformed to curb excessive risk and externalization of costs, thereby improving corporate sustainability.

Corporate Personhood, Corporate Rights, And The Contingency Of Corporate Law, Christopher Bruner

Scholarly Works

Corporate personhood and corporate rights are co-constitutive in nature, meaning that they are mutually constructed – there is no singular, one-way causal path between a conception of corporate personhood and a conception of corporate rights. Consequently, modes of reasoning that purport to deduce the substance and extent of corporate rights from the mere fact of corporate personhood are logically circular. Although the relationship between corporate personhood and corporate rights is real and significant, this relationship cannot, in and of itself, comprehensively specify the content of corporate rights; their substance can only be specified by reference to external normative criteria. The …

Green Dividends: A Case Study In Green Dividends And The Conditions For Private Ordering Solutions, Anne M. Tucker

Scholarly Works

This Essay introduces a novel private ordering solution to facilitate corporate investments in pro-social and environmental initiatives: Green dividends. Green dividends are an optional increase in shareholder dividends that are returned to the company to be reinvested in environmental initiatives or kept by a shareholder. Green dividends pose an alternative to the current gridlocked debate that corporations can’t, won’t, shouldn’t, and shouldn’t even try to act in pro-social or environmental ways. Turning the common refrains on their head converts each narrative into an element for a successful private ordering solution: authority, accountability, shareholder buy-in, and government-backed enforcement. With Green dividends, …

Charting New Frontiers: A Legal Literature Review Of Social Entrepreneurship And Impact Investing 2018–2023, Anne M. Tucker, Deborah Burand

Scholarly Works

This Article surveys 177 articles published in U.S. law reviews and journals between 2018–2023 that contribute to the fields of social enterprise, social finance and impact investing. The Article extends our earlier legal literature review of the same fields from 2007-2017.Our collective 17-year review of this span of legal literature documents the legal issues examined by scholars with respect to the development of sophisticated alternative business forms, like the Delaware Public Benefit Corporation; the growth in impact investing; the enduring academic interest in corporate purpose; and the effects that developments related to ESG and corporate sustainability are having on the …

Settlement As Construct: Defining And Counting Party Resolution In Federal District Court, Charlotte S. Alexander, Nathan Dahlberg, Anne M. Tucker

Scholarly Works

Most civil cases settle. Yet generating a definitive settlement rate presents complex definitional and empirical problems, both in what should count as a settlement and how to count it. This Essay makes three contributions to better understanding and defining settlement. First, we propose a flexible, empirically informed, operationalizable definition of settlement as party resolution. Second, we exploit a new federal litigation data source to count party resolutions using machine learning models trained on 11 million docket sheet entries. Third, we offer new findings on party resolution frequency and distribution in the federal courts. Settlement is more widely and differently deployed …

Intermediaries And Differentiated Voting, Usha Rodrigues

Scholarly Works

This article explores the implications of differentiated voting—precatory, volitional, veto, and vetting—for institutional intermediaries such as mutual funds and pension funds. Building on the work of Jill Fisch and Jeff Schwartz, the piece argues that fund managers should exercise informed fiduciary judgment rather than rely on pass-through voting, which often proves impractical for retail investors. While precatory proposals on broad governance or ESG issues may allow meaningful shareholder input, director elections, bylaw amendments, mergers, and conflicted transactions require the expertise and discretion of intermediaries. Using Tesla as a case study, the article illustrates how different voting categories operate in …

The Spac Market, Usha Rodrigues, Michael Stegemoller

Scholarly Works

Special purpose acquisition companies (SPACs) exploded in popularity in the past few years, to such a degree that they made up 60% of IPOs in 2020, 66.3% in 2021, and 69.4% in 2022. Celebrities from Colin Kaepernick to Jay-Z have launched SPACs, but perhaps the most feverish attention came in October 2021, when a SPAC called Digital World Acquisition Corp (DWAC) announced plans to acquire Trump Media & Technology Group (TMTG), a social media company headed by former president Donald Trump.

The SPAC frenzy has now abated, a casualty of some combination of higher interest rates, regulatory crackdown, and oversupply. …

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 …

Business Associations, Scott Lowry

Scholarly Works

This Article surveys a selection of noteworthy cases involving business associations that Georgia courts decided between June 1, 2022 and May 31, 2023. This Article also briefly highlights the 2023 update to the Georgia Nonprofit Corporation Code, sections 14-3-101–1703 of the Official Code of Georgia Annotated, which was signed by Governor Kemp on May 2, 2023, and took effect on July 1, 2023.

Promise & Peril Of Plain English: Mutual Fund Disclosure Readability, Anne M. Tucker, Yusen Xia

Scholarly Works

The SEC requires mutual funds to write disclosures for the average investor using plain English. These requirements make funds’ investment strategies and associated risks transparent and accessible to investors. Improved investor understanding furthers the SEC’s regulation-through-disclosure regime. But our examination of funds’ summary prospectuses—an abbreviated discussion of a fund’s strategies and risks—suggests that funds often fail to meet the plain English standard. Our analysis of all summary prospectuses filed between 2010 and 2020 reveals that mutual funds write long, hard-to-read, and complex disclosures. Importantly, we find that failure to draft disclosures in plain English is more than a technical error. …

Esg And The Sec, Christopher Bruner

Popular Media

This piece is a review of an article by Virginia Harper Ho titled Modernizing ESG Disclosures, 2022 U. Ill. L. Rev. 277. Bruner is a contributing editor to JOTWELL’s Corporate Law section.

Corporate Governance Reform And The Sustainability Imperative, Christopher Bruner

Scholarly Works

Recent years have witnessed a significant upsurge of interest in alternatives to shareholder-centric corporate governance, driven by a growing sustainability imperative—widespread recognition that business as usual, despite the short-term returns generated, could undermine social and economic stability and even threaten our long-term survival if we fail to grapple with associated costs. We remain poorly positioned to assess corporate governance reform options, however, because prevailing theoretical lenses effectively cabin the terms of the debate in ways that obscure many of the most consequential possibilities. According to prevailing frameworks, our options essentially amount to board-versus-shareholder power, and shareholder-versus stakeholder purpose. This narrow …

Artificially Intelligent Boards And The Future Of Delaware Corporate Law, Christopher Bruner

Scholarly Works

The prospects for Artificial Intelligence (AI) to impact the development of Delaware corporate law are at once over- and under-stated. As a general matter, claims to the effect that AI systems might ultimately displace human directors not only exaggerate the foreseeable technological potential of these systems, but also tend to ignore doctrinal and institutional impediments intrinsic to Delaware's competitive model – notably, heavy reliance on nuanced and context-specific applications of the fiduciary duty of loyalty by a true court of equity. At the same time, however, there are specific applications of AI systems that might not merely be accommodated by …

Regulating Dynamic Risk In Changing Market Conditions, Susan Navarro Smelcer, Anne M. Tucker, Yusen Xia

Scholarly Works

How successful are the SEC's attempts to regulate dynamic risk in financial markets? Using mutual fund disclosure data from two financial shocks-the Puerto Rican debt crisis and COVID- 19-this Article finds evidence that SEC open-ended regulations, like the obligation to disclose changing market conditions, are largely successful in capturing dynamic, future risk. Funds engage in wide- spread and, often, detailed disclosures for new risks-although these disclosures vary widely in specificity. But not all funds dis- close new risks. This creates perverse incentives for funds to opt out of disclosure or downplay threats with boilerplate language when new risks are emerging. …

Panel Three: How Should Spacs Be Treated Going Forward (Ipos, Mergers, Or Distinctly Different?), Usha Rodrigues, Gregg A. Noel, Rick Flemming, Michael Stegemoller

Scholarly Works

From the Symposium: Here to Stay: Wrestling with the Future of the Quickly Maturing SPAC Market

Panel addressing and examining the policy concerns around special purpose acquisition companies (SPACs).

Artificially Intelligent Boards And The Future Of Delaware Corporate Law, Christopher Bruner

Scholarly Works

This article argues that the prospects for Artificial Intelligence (AI) to impact corporate law are at once over- and under-stated, focusing on the law of Delaware – the predominant jurisdiction of incorporation for US public companies. Claims that AI systems might displace human directors not only exaggerate AI’s foreseeable technological potential, but ignore doctrinal and institutional impediments intrinsic to Delaware’s competitive model – notably, heavy reliance on nuanced applications of the fiduciary duty of loyalty by a true court of equity. At the same time, however, there are discrete AI applications that might not merely be accommodated by Delaware corporate …

Shadow Contracts, Jessica S. Jeffers, Anne M. Tucker

Scholarly Works

This project explores side letters in private market funds. Side letters, separate agreements between a fund and an investor, act as an invisible amendment to the main contract. This article introduces a new use case for side letters: impact invest- ments, where funds target social, as well as financial returns. Using a hand-col- lected data set, we examine the scope and role of side letters in this growing space. Side letters as "shadow contracts" demonstrate the Easterbrook/Fischel theories in action, namely that parties "write their own tickets," tailoring agreement terms to their specific needs within the framework of corporate governance …

From Property Rights To Liberty Rights: We The Corporations, A Review Essay, Laura Phillips-Sawyer

Scholarly Works

A long-standing, and deeply controversial, question in constitutional law is whether or not the Constitution's protections for “persons” and “people” extend to corporations. Law professor Adam Winkler's We the Corporations chronicles the most important legal battles launched by corporations to “win their constitutional rights,” by which he means both civil rights against discriminatory state action and civil liberties enshrined in the Bill of Rights and the Constitution (p. xvii). Today, we think of the former as the right to be free from unequal treatment, often protected by statutory laws, and the latter as liberties that affect the ability to live …

Does Tax Matter? Evidence On Executive Compensation After 162(M)'S Repeal, Gregg Polsky, Brian Galle, Andrew Lund

Scholarly Works

As part of the most sweeping federal tax reform in a generation, the Tax Cuts and Jobs Act (“TCJA”) radically altered the tax treatment of compensation paid to senior executives of public companies. Prior to the TCJA, payment of such compensation in excess of one million dollars was non-deductible except to the extent the compensation was performance-based. The TCJA eliminated the exception so that all senior executive compensation above one million dollars is now non-deductible regardless of whether it is performance-based or not.

This reform provides a natural experiment to study the role of tax law in influencing managerial pay …

Debt’S Emotional Encumbrances, Pamela Foohey

Scholarly Works

This chapter focuses on the role of emotions in the theory and practice of commercial and consumer credit laws, including bankruptcy, in the United States. It assesses knowledge about people’s emotions regarding personal and business financial problems, and evaluates how “money law” systems account for these emotions. This assessment finds that emotions surrounding taking on and being able to pay back debt differ between business leaders and people who shoulder household debt. These differences are traceable in large part to historical understandings of the respectability of incurring debt. This history has shaped the development of bankruptcy, commercial, and consumer credit …

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 …

The Ip Of Ipas, Stephen Wolfson, Brian Roth, Chase Scott, Dustin Watts, Charles Hicks, Shivani Patel

Other Colloquium, Conferences, and Symposia

Hosted by the Journal of Intellectual Property Law, this panel brought Brian Roth (Southern Brewing Co.), Chase Scott (Taylor, Feil, Harper & Lumsden, P.C.), and Dustin Watts (Terrapin Beer Co.) together with Stephen Wolfson (Research & Copyright Services Librarian, UGA Law School) and students from the Journal of Intellectual Property Law to discuss how breweries are navigating intellectual property issues. Free koozies to commemorate the event were distributed.

Dual Class Stock In Comparative Context, Christopher Bruner

Scholarly Works

Review of the article by Marc T. Moore, Designing Dual Class Sunsets: The Case for a Transfer-Centered Approach, University College London Faculty of Laws Working Paper No. 9/2019, available at SSRN.

Buyer Beware: Variation And Opacity In Esg And Esg Index Funds, Dana Brakman Reiser, Anne M. Tucker

Scholarly Works

Evidence of the tremendous rise in the significance of environmental, social, and governance (ESG) investing is coming from all quarters. Fund flows into ESG investment vehicles are growing at a sustained and sometimes exponential pace. Fund complexes are rushing to design products, creating and rebranding scores of mutual funds and exchange traded funds (ETFs), including lower-cost indexed options. Industry leaders, critics, and commentators are all heralding the sea change as a shift in investing-and corporate governance-to more broadly consider environmental and social factors. This Article provides vital context for this conversation. Its descriptive account of the ESG investment landscape drawn …

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 …

Legal Literature Review Of Social Entrepreneurship And Impact Investing (2007-2017): Doing Good By Doing Business, Deborah Burand, Anne M. Tucker

Scholarly Works

Although the ambition to do good by doing business is not new, the burgeoning realization of this ambition is. As the fields of social entrepreneurship and impact investing advance in size, scope and complexity, questions about the roles of corporations and capital markets in society intensify. What is legal scholarship contributing to this discussion? This Article reviews the scholarly contributions of 260 articles written by over 150 authors about the fields of social enterprise, social finance, and impact investing. The Article maps the contri- butions of legal scholarship over the last decade-from 2007 (when the term "impact investing" was first …

Explaining Choice-Of-Entity Decisions By Silicon Valley Start-Ups, Gregg Polsky

Scholarly Works

Perhaps the most fundamental role of a business tax advisor is to recommend the optimal entity choice for nascent business enterprises. Nevertheless, even in 2018, the choice-of-entity analysis remains highly muddled. Most tax practitioners across the United States consistently recommend flow-through entities, such as LLCs and S corporations, to their clients. In contrast, a discrete group of highly sophisticated tax professionals, those who advise start-ups in Silicon Valley and other hotbeds of start-up activity, prefer C corporations.

Prior commentary has described and tried to explain this paradox without finding an adequate explanation. These commentators have noted a host of superficially …

Book Review: Global Lawmakers: International Organizations In The Crafting Of World Markets By Susan Block-Lieb And Terence C. Halliday, Melissa J. Durkee

Scholarly Works

Susan Block-Lieb and Terence Halliday gradually build up an empirically grounded, meticulously realized argument that individual lawmakers matter. When one allows facts to inform theory rather than the other way around, the authors show, what becomes clear is that individual lawmakers are not just governmental delegates, but a whole variety of professionals, industry association representatives, and others with some stake in the lawmaking process. These actors work not just through formal processes, but also through an array of informal ones. Most importantly, their presence matters to the content of the legal norms that take hold around the world. The book …

Corporations And Sustainability, Beate Sjåfjell, Christopher Bruner

Scholarly Works

This chapter introduces the Handbook, providing an overview of its aims and structure, as well as the core research questions that the contributions to it collectively address. It discusses sustainability-related problems associated with the legal form of the corporation, and provides background on state-of-the-art research in natural sciences and other relevant fields that inform our understanding of sustainability. It concludes with specific research questions and a presentation of the Handbook’s structure.