Business Organizations Law Commons^™

Unanimous Shareholder Agreements, Nicolas William Juzda

PhD Dissertations

The unanimous shareholder agreement is a feature of most Canadian corporate statutes that allows the shareholders to, by creating an agreement meeting the necessary criteria, restrict the powers of the directors to manage the business and affairs of the corporation. One possible justification for this is the "nexus of contracts" theory that all corporations are notionally reducible to voluntary agreements. Three key areas of ambiguity surrounding unanimous shareholder agreements are examined in this dissertation, with specific reference to existing judgments. The requirements for their formation are reviewed, including the exact meaning and strictness of the unanimity criterion and the necessity …

The Business Of Business: Comparing Corporate Social Responsibility Initiatives In China And The United States, Jessica M. Conrad

Georgia Journal of International & Comparative Law

No abstract provided.

No Power To Be Disloyal (Or, How Not To Write A Loyalty Opinion) , Val Ricks

The Journal of Business, Entrepreneurship & the Law

It is the thesis of this paper that no privilege to act disloyally exists: that a power to act never trumps the duty of loyalty. My method is to discuss three cases in which the privilege or power to act appears to receive judicial support. The paper shows why this strategy does not work. Such assertions have no support in logic (and usually not in law), provide a slippery slope at the bottom of which the duty of loyalty ceases to exist, often result in a decision being internally inconsistent, and fail to stand the test of time. I will …

When Does Sleaze Become A Crime? Redefining Honest Services Fraud After Skilling V. United States, Teresa M. Becvar

Chicago-Kent Law Review

Honest services fraud, which is defined as a scheme or artifice to deprive another of the intangible right of “honest services,” is just one tool in the federal government’s extensive arsenal used to prosecute public corruption and private corporate fraud. The Supreme Court curtailed the expansion of this versatile theory twice in the past three decades, most recently in June 2010 in Skilling v. United States. In Skilling, the Court held, inter alia, that the federal honest services statute covers only bribery and kickback schemes and not undisclosed self-dealing. Months later, members of Congress proposed the Honest Services …

Employee Stock Ownership Plans And Corporate Takeovers: Restraints On The Use Of Esops By Corporate Officers And Directors To Avert Hostile Takeovers, Margaret E. Mclean

Pepperdine Law Review

In 1974, Congress enacted the Employee Retirement and Income Security Act (ERISA), which was designed to promote employee benefit plans and provide safeguards for the assets of the plans. An employee stock ownership plan is a device used by corporations which holds corporate stock as the primary asset of the employee benefit plan. Recently, corporate executives have seized the opportunity to use ESOPs as a defensive tactic for averting takeovers considered to be adverse to the corporation. However, provisions of ERISA, particularly relating to fiduciary duty, exclusive benefit, and prudence, seriously impede the use of an ESOP by incumbent management …

The Tort Foundation Of Duty Of Care And Business Judgment, Robert J. Rhee

Faculty Scholarship

This Article corrects a misconception in corporation law – the belief that principles of tort law do not apply to the liability scheme of fiduciary duty. A board’s duty of care implies exposure to liability, but the business judgment rule precludes it. Tort law finds fault; corporation law excuses it. The conventional wisdom says that the tort analogy fails. This dismissal of tort prinicples is wrong. Although shareholder derivative suits and ordinary tort cases properly yield systemically antipodal outcomes, they are bound by a common analytical framework. The principles of board liability are rooted in tort doctrines governing duty, customs, …

Federalizing Fiduciary Duty: The Altered Scope Of Officer Fiduciary Duty Following Orderly Liquidation Under Dodd-Frank, Dorothy S. Lund

Faculty Scholarship

The financial crisis of 2008 ushered in a new era of regulatory reform in the United States. The failure of several large banks prompted Congressional scrutiny ofthe U.S. bank regulatory system. Many critics highlighted the government's failure to intervene to prevent Lehman Brothers' insolvency, which resulted in economic turmoil not yet resolved. Against this backdrop, Congress enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") in July 2010.

Dodd-Frank mandates institutional changes to minimize economic instability and establishes regulatory processes to guide the government's response to future bank failures. At the heart of the regulation is the Orderly …

Corporate Governance And Executive Compensation In Financial Firms: The Case For Convertible Equity-Based Pay, Jeffrey N. Gordon

Faculty Scholarship

Unlike the failure of a nonfinancial firm, the failure of a systemically important financial firm will reduce the value of a diversified shareholder portfolio because of economy-wide reductions in expected returns and a consequent increase in systematic risk. Thus, diversified shareholders of a financial firm generally internalize systemic risk, whereas managerial shareholders and blockholders do not. This means that the governance model drawn from nonfinancial firms will not fit financial firms. Regulations that limit risk-taking by financial firms can thus provide a benefit, rather than necessarily impose a cost, for the typical diversified public shareholder. Managerial shareholding also gives rise …

Can An Old Dog Learn New Tricks? Applying Traditional Corporate Law Principles To New Social Enterprise Legislation, Alicia E. Plerhoples

Georgetown Law Faculty Publications and Other Works

Seven U.S. states have recently adopted the benefit corporation or the flexible purpose corporation—two novel corporate forms intended to house social enterprises, i.e., those ventures that pursue social and environmental missions along with profits. And yet, these corporate forms are not viable or sustainable if they do not attract social entrepreneurs or social investors due to the lack of understanding and inquiry into how traditional corporate law principles will be applied to them. This article begins this necessary examination. As a first approach, this article assesses shareholder primacy and the shareholder wealth maximization norm in the context of the sale …

Equity Swaps And Implications In Company Law: An Examination Of Singapore Law, Chao-Hung Christopher Chen

Research Collection Yong Pung How School Of Law

This article explores issues from the use of equity swaps by corporate stakeholders under Singapore law. The article accepts that non-disclosure of economic interests might have an impact on market efficiency and corporate governance. To address potential problems, Singapore should consider revising the Takeover Code, while it requires further regulatory impact analysis to decide whether amendments to the Securities and Futures Act and the Companies Act are needed. As an alternative, companies can use their articles of association to impose a duty of disclosure before statutory intervention. In addition, the trading of equity swaps by directors raises issues about fiduciary …

Corporate And Business Law, Laurence V. Parker

University of Richmond Law Review

In the 2011 session, the Virginia General Assembly passed House Bill 2358, Benefit Corporations, to be codified as article 22 (the "Benefit Corporations Article") of the Virginia Stock Corporation Act ("VSCA"). The Benefit Corporations Article is largely based on legislation prepared in other states and allows a Virginia corporation to elect in its articles of incorporation to be treated as a "benefit corporation." These for-profit corporations are required to pursue not only profitability but also a general public benefit and, if one so elects, one or more specific public benefits. In Section II of this article, the author discusses the …

Good Faith In Revlon-Land, Christopher M. Bruner

Scholarly Works

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 …

Donahue's Fils Aîné: Reflections On Wilkes And The Legitimate Rights Of Selfish Ownership, Daniel S. Kleinberger

Faculty Scholarship

This Article asserts that Wilkes v. Springside Nursing Home, Inc. should be at least as memorable as Donahue v. Rodd Electrotype Co., and is, in a practical sense, substantially more important. The assertion rests on two propositions: first, that Donahue announces admirable sentiments but provides little practical guidance; second, that Wilkes provides the best practical rule for adjudicating “oppression” claims when the alleged victim is also a miscreant or for some other reason the dispute is grey rather than black and white. In particular, this Article asserts that Wilkes’s multistep, burden-shifting rule is a nuanced and effective method for accommodating …

Normative Justifications For Lax (Or No) Corporate Fiduciary Duties: A Tale Of Problematic Principles, Imagined Facts And Inefficient Outcomes, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Corporate fiduciary duty standards are at an all-time low in this country. Ironically, the deterioration in standards has come to full maturity during the last two decades, a period of significant and notorious corporate managerial failures.

The deterioration in the standards by which we measure the appropriateness of the actions of corporate managers has been fueled by influential judges' and scholars' ("Advocates"'), who vigorously-and seemingly quite effectively-argue in favor of a lax fiduciary duty regime for corporate managers.

Normative justifications for lax corporate fiduciary duty standards, however, are weak. The justifications fail to provide a persuasive reason to abandon the …

Meaningful Good Faith: Managerial Motives And The Duty To Obey The Law, Peter C. Kostant

NYLS Law Review

No abstract provided.

The Short, But Interesting Life Of Good Faith As An Independent Liability Rule, Robert B. Thompson

NYLS Law Review

No abstract provided.

Fiduciary Duty And The Public Interest, Cheryl L. Wade

Faculty Publications

(Excerpt)

Professor Tamar Frankel’s excellent book, Fiduciary Law, is a thorough and comprehensive look at the fiduciary-law forest. My contribution to the Symposium on The Role of Fiduciary Law and Trust in the Twenty-First Century is one leaf on one branch of one tree in the forest that Professor Frankel so expertly navigates. In this Essay, I explore the fiduciary relationship between corporate directors and officers and the shareholders they serve. I examine how the breach of fiduciary duties owed to shareholders has the power to dramatically impact non-shareholder groups.

Professor Frankel accurately observes that “[f]iduciary duties are anchored …

Insider Trading, Congressional Officials, And Duties Of Entrustment, Donna M. Nagy

Articles by Maurer Faculty

This article refutes what has become the conventional wisdom that insider trading by members of Congress and legislative staffers is “totally legal” because such congressional officials are immune from federal insider trading law. It argues that this well-worn claim is rooted in twin misconceptions based on: (1) a lack of regard for the broad and sweeping duties of entrustment which attach to public office and (2) an unduly restrictive view of Supreme Court precedents, which have interpreted Rule 10b-5 of the Securities Exchange Act to impose liability whenever a person trades securities on the basis of material nonpublic information in …

Normative Justifications For Lax (Or No) Corporate Fiduciary Duties: A Tale Of Problematic Principles, Imagined Facts And Inefficient Outcomes, Rutheford B. Campbell Jr.

Kentucky Law Journal

No abstract provided.

Corporate Control And The Need For Meaningful Board Accountability, Michelle M. Harner

Faculty Scholarship

Corporations are vulnerable to the greed, self-dealing and conflicts of those in control of the corporation. Courts historically have regulated this potential abuse by designating the board of directors and senior management as fiduciaries. In some instances, however, shareholders, creditors or others outside of corporate management may influence corporate decisions and, in the process, extract corporate value. Courts generally address this type of corporate damage in one of two ways: they designate controlling shareholders as corporate fiduciaries and they characterize creditors, customers and others as contract parties with no fiduciary duties. The traditional roles of corporate shareholders and creditors may …

The Duty Of Care And The Data Control Systems In The Wake Of Sarbanes-Oxley, Michael R. Siebecker

Chicago-Kent Law Review

The essay examines the wisdom of exempting small public companies from Section 404 of the Sarbanes-Oxley Act of 2002 (SOX), which requires companies to provide management assessment and external auditing of a company's internal control systems over financial data. In particular, the essay questions whether a fiduciary duty of care might require officers and directors to adopt internal control systems, perhaps substantially similar to those envisioned by SOX, even if small public companies were exempt from the ambit of the statute.

The “New” Fiduciary Standards Under The Revised Uniform Liability Company Act: More Bottom Bumping From Nccusl, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Between 1995 and 2001, the influential National Conference of Commissioners on Uniform State Laws (NCCUSL) promulgated iterations of uniform laws pertaining to partnerships, limited partnerships and limited liability companies. One or more of those acts have been widely adopted by state legislatures.

Each of the three acts—the Uniform Partnership Act (1997) (RUPA), the Uniform Limited Partnership Act (2001) (ULPA (2001)), and the Uniform Limited Liability Company Act (1996) (ULLCA)—contains identical fiduciary duty provisions. The acts all adopt the same standards for the duty of care and the duty of loyalty, and offer parties the same limited rights to opt out …

Finessing Well-Plead Derivative Lawsuits: The Implications Of The Minnesota Supreme Court's Selection Of Auerbach Over Zapata, James F. Hogg

Faculty Scholarship

This article begins with the factual background and subsequent procedural history of the UnitedHealth Group Inc. shareholder derivitve litigation, as an instance where Minnesota courts effectively disposed of the factual allegations in a well-pleaded derivative action, directed at the behavior and actions of members of a board of directors, without reviewing finding of facts or reasoning behind the SLC's report or conclusions. The purpose of this article is to understand how a board-appointed committee can convince a court to dismiss and settle a derivative suit without showing detailed justification, and this is achieved by reviewing the statutes, case law, and …

Eat Your Vegetables (Or At Least Understand Why You Should): Can Better Warning And Education Of Prospective Minority Owners Reduce Oppression In Closely Held Businesses?, Michael K. Molitor

Fordham Journal of Corporate & Financial Law

No abstract provided.

The Diverging Meaning Of Good Faith, Mark J. Loewenstein

Publications

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 …

Approaching Comparative Company Law , David C. Donald

Fordham Journal of Corporate & Financial Law

No abstract provided.

Bumping Along The Bottom: Abandoned Principles And Failed Fiduciary Standards In Uniform Partnership And Llc Statutes, Rutheford B. Campbell Jr.

Law Faculty Scholarly Articles

Over the last decade or so, the National Conference of Commissioners on Uniform State Laws (NCCUSL) has promulgated a series of uniform laws dealing with unincorporated business entitites. The Uniform Partnership Act (1997) (RUPA), the Uniform Limited Partnership Act (2001) (ULPA (2001)), and the Uniform Limited Liability Company Act (1996) (ULLCA) are recent and important iterations of these uniform laws. One or more of these Acts have been adopted in many states and are certain to garner additional adoptions in the coming years.

Each of the Acts contains provisions that prescribe the fiduciary duties of the entity's managers. The managers' …

Class Action Criminality, Lisa L. Casey

Journal Articles

This paper examines the criminal prosecution of Milberg Weiss, formerly the most successful plaintiffs’ securities class action firm in the country, for allegedly making undisclosed incentive payments to class representatives. In particular, the article examines the government’s primary charge - that the firm’s practice violated the “honest services” theory of mail and wire fraud. The government’s application of this theory presumes a fiduciary relationship between the class representatives and the class which has never been clearly delineated and, indeed, is against the weight of case law and the realities of class action litigation.

The Article proceeds on two different levels. …

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 traditional view, …

Twilight In The Zone Of Insolvency: Fiduciary Duty And Creditors In Troubled Companies, Royce De R. Barondes, Lisa M. Fairfax, Lawrence A. Hamermesh, Robert Lawless, Jonathan C. Lipson, Russell C. Silberglied

Faculty Scholarship

No abstract provided.