June 2015

It looks like fee-shifting bylaws are going to have a very short life, at least in Delaware.
About a year ago, the Delaware Supreme Court upheld a loser-pays bylaw that required the unsuccessful party in any intracorporate litigation to pay the costs and attorneys’ fees of the prevailing party. The case, ATP Tour, Inc. v. Deutscher Tennis Bund, involved a non-stock corporation, but nothing in the case indicates the result would not apply to ordinary corporations, and the relevant statutory rules make no distinction between non-stock and stock corporations.

However, the Delaware General Assembly has passed, and the Governor is almost certain to sign, a bill that rejects loser-pay provisions in either the bylaws or the certificate of incorporation.

The bill, SB 75, amends Del. § 102 to provide:

(f) The certificate of incorporation may not contain any provision that would impose liability on a stockholder for the attorneys’ fees or expenses of the corporation or any other party in connection with an internal corporate claim, as defined in § 115 of this title.

It adds the following language to Del. § 109(b):

The bylaws may not contain any provision that would impose liability on a stockholder for the attorneys&rsquo…

On June 11, 2015, the Delaware House of Representatives joined the Delaware Senate in passing a bill that would prohibit fee-shifting bylaws by Delaware stock corporations. The bill awaits signature by Delaware Governor Jack Markell. Nonetheless, the panel provides a nice debate, between practicing attorneys, and is available here. The information from the Chancery Daily is below. 

Fordham Law School hosted a panel on Fee Shifting in Shareholder Litigation, featuring three members of the corporate law council of the Delaware State Bar Association, which submitted proposed amendments to the Delaware General Corporation Law that would preclude the adoption of fee-shifting provisions in corporate instruments, on Thursday, March 26, 2015.  A webcast video of the panel is now available online here.
 
Moderated by:

Professor Sean J. Griffith – Fordham Law School

Panelists:

Frederick Alexander – Morris Nichols Arsht & Tunnell
Chris Cernich – Institutional Shareholder Services
Kurt Heyman – Proctor Heyman Enerio
Mark Lebovitch – Bernstein Litowitz Berger & Grossman
Norman Monhait – Rosenthal Monhait & Goddess
Andrew Pincus – Mayer Brown

Apparently, there is a split of opinion on what some people believe God wants the world to do about the climate. On one side, Senator Jim Inhofe does not believe the man is responsible for climate change. He has publicly stated that, “[T]he Genesis 8:22 that I use in there is that ‘as long as the earth remains there will be seed time and harvest, cold and heat, winter and summer, day and night.’ My point is, God’s still up there. The arrogance of people to think that we, human beings, would be able to change what He is doing in the climate is to me outrageous.” When I mentioned this quote to a European audience at a conference on climate change and business in 2013, there was an audible gasp. He also wrote a 2012 book, The Greatest Hoax: How the Global Warming Conspiracy Threatens Your Future. His position did not change after the 2013 Intergovernmental Commission on Climate Change Report definitively declared that climate change was largely man made. This would all be irrelevant if Senator Inhofe wasn’t the Chair of the Senate committee that oversees the environment. Inhofe was the keynote speaker last week at the…

Proxymosaiclogo

 

Mosaic Dialogue Series
13D Filing Requirements: Time is of the Essence

There has been significant controversy surrounding the required disclosures by investors acquiring a 5% stake in public companies. Under current law, investors must disclose ownership of 5% or more within 10 days. Many issuers are in favor of shortening this disclosure window, with some favoring reporting as soon as one business day after the 5% threshold is crossed. They argue that the 10 day reporting lag deprives the market of material information and can facilitate market manipulation. Shareholders argue that shortening the disclosure window effectively allows issuers to set a ceiling on the number of shares an activist may acquire. Furthermore, at some companies, a poison pill can be triggered if the 5% threshold is crossed, preventing additional accumulation of shares by an activist investor.

Should the current 13D filing requirements be amended? Does the 10 day lag result in activists obscuring their actions? Would shortening the window assist issuers in preventing accumulation of shares by investors seeking change? Join us as we answer these questions and others on this important and timely topic.

Speakers:

Andrew M. Freedman, Partner, Olshan Frome Wolosky, LLP
Kai Haakon E. Liekefett…

Oregon has done those interested in social enterprise a great service by posting a list of their benefit companies online. Oregon also has a nice page about becoming an Oregon benefit company.

By my count, the version updated 6/3/15, lists the following number of entities (for a total of 500 benefit companies):

  • 1 professional benefit corporation 
  • 74 benefit corporations 
  • 425 benefit LLCs

Oregon is one of a very few states that provides for the formation of benefit LLCs, in addition to benefit corporations. As you can see, the benefit LLCs are a good bit more popular than the benefit corporations, likely because most social enterprises are small, closely-held entities that should probably be LLCs instead of corporations.  

LLC law is generally flexible enough to allow a social purpose and Oregon’s corporation law expressly allows corporations to be formed for a social purpose, so the main draw seems to be branding/signaling based rather than law based.

These are still relatively small numbers in the grand scheme, but it was a fairly short time ago that there were fewer than 500 total benefit companies nationwide.    

Cuba has been in the news a lot lately. I’ve just returned from ten days in Havana so I could see it first hand both as a person who writes on business and human rights and as an attorney who consults occasionally on corporate issues. The first part of the trip was with the International Law Section of the Florida Bar. The second was with a group of art lovers. I plan to write two or three blog posts about the prospects of doing business in Cuba if and when the embargo is lifted. Because I do some consulting work, I want to make clear that these views are my own as an academic and should not be attributed to anyone else.

In this post I will just briefly list some basic facts about Cuba and foreign investment. Next week I will talk a bit more about investment, introduce the Cuban legal system, and talk about some of the business and compliance challenges. That’s the subject of my research this summer. The following week I will address human rights in Cuba and how various governments and businesses are addressing those issues, the subject of another article I am…

Last week, I attended the National Business Law Scholars Conference at Seton Hall University School of Law in Newark, NJ.  It was a great conference, featuring (among others) BLPB co-blogger Josh Fershee (who presented a paper on the business judgment rule and moderated a panel on business entity design) and BLPB guest blogger Todd Haugh (who presented a paper on Sarbanes-Oxley and over criminalization).  I presented a paper on curation in crowdfunding intermediation and moderated a panel on insider trading.  It was a full two days of business law immersion.

The keynote lunch speaker the second day of the conference was Kent Greenfield.  He compellingly argued for the promotion of corporate personhood, following up on comments he has made elsewhere (including here and here) in recent years.  In his remarks, he causally mentioned B corporations and social enterprise more generally.  I want to pick up on that thread to make a limited point here that follows up somewhat on my post on shareholder primacy and wealth maximization from last week.

Courtesy of AALS Section on Securities Regulation Chair Christine Hurt:

Call for Papers

AALS Section on Securities Regulation – 2016 AALS Annual Meeting

January 6-10, 2016 New York, NY

The AALS Section on Securities Regulation invites papers for its program on “The Future of Securities Regulation: Innovation, Regulation and Enforcement.”

TOPIC DESCRIPTION: This panel discussion will explore the current trends and future implications in the securities regulation field including transactional and financial innovation, the regulation of investment funds, the intersection of the First Amendment and securities law, the debate over fee-shifting bylaws, the ever-expanding transactional exemptions including under Regulation D, and judicial interpretations of insider trading laws. The Executive Committee welcomes papers (theoretical, doctrinal, policy-oriented, empirical) on both the transactional and litigation sides of securities law and practice.

ELIGIBILITY: Full-time faculty members of AALS member law schools are eligible to submit papers. Pursuant to AALS rules, faculty at fee-paid law schools, foreign faculty, adjunct and visiting faculty (without a full-time position at an AALS member law school), graduate students, fellows, and non-law school faculty are not eligible to submit. Please note that all faculty members presenting at the program are responsible for paying their own annual meeting registration fee and…

Recently, I received notice of the following call for papers from the French association of Law Professors in Business Schools – the Association des Professeurs de Droit des Grandes Ecoles (“APDGE”).  The theme of the conference is “Governance and Compliance in Companies: Constraints or Opportunities.” Additional information is available below and at the conference website:

——————-

TBS PDD

 3rd Conference of the Association of Law Professors of Les Grandes Ecoles/Business Schools, organized by Toulouse Business School

 

CALL FOR PAPERS

“Governance and Compliance in Companies: Constraints or Opportunities?”

December 3-4, 2015 – Toulouse Business School

Toulouse, France

Conference Website: http://www.tbs-education.fr/en/apdge-conference/

The taking into account of new legal rules (whether in Company Law, Banking Law, Tax Law, Environmental Law, Employment Law, Consumer Law, Digital Law, or in other fields of Law), involves increased attention to Governance and Compliance by companies, as well as by research professors.   The position of Chief Compliance Officer has become widespread within major companies, as have charters, codes of good conduct and codes of good governance.  Consequently, it is appropriate to look at Governance and Compliance in companies and to investigate whether or not they form constraints or opportunities for companies.    To what extent does the appearance of new legal and regulatory provisions represent new constraints for companies? On the contrary, may opportunities be detected in these practices in order to deal with upheavals in the Law?  What skills are necessary for lawyers in this new environment?  What are the roles of soft law and of Corporate Social Responsibility (CSR) in this context?

These two research days propose to focus discussion on constraints and opportunities for companies in the development of the new rules and practices of Governance and Compliance.

This Call for Papers seeks to explore the following questions (as illustrations, not limitations):

  • The links between Governance and Compliance, on the one hand, and Corporate Social Responsibility (CSR), on the other hand;
  • Programs to be put in place for a better compliance;
  • The role of lawyers  in Governance and Compliance;
  • Opportunities for good Governance and proper Compliance  for companies;
  • The impact of foreign laws on Governance (for example, the Sarbanes-Oxley Act);
  • The legal risks in a breach of compliance;
  • Legal monitoring and anticipation of new legal and regulatory constraints;
  • Government procurement and a company’s history of Compliance ;
  • The interface between internal control (internal auditing, reporting, etc.) and the Law;
  • The legal challenges of whistleblowing;
  • The strategic role of Compliance;
  • The interface between company lawyers, external advisors and operational staff in Governance and Compliance;
  • The theory of groups of parent companies or subsidiaries and Compliance;
  • Control of the chain of sub-contractors and subsidiaries and Compliance;
    • Analysis of the effectiveness of soft law in Compliance;
    • Investors and Governance;
    • The comparative study of Governance. 

A publication of the best papers is foreseen.

Key Dates

Proposals: June 30, 2015

Full Text: September 1, 2015

Author Notification by the Scientific Committee: October 12, 2015

[More information after the break]