Business Associations

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This week I received the notice below from Professor Jason Gordon. Professor Gordon is a legal studies and management professor at Georgia Gwinnett College, School of Business. As explained below, he is offering copies of two entrepreneurship books that he thought might be useful to BLPB readers.  

Dear Colleagues,

I recently published two texts entitled Business Plans for Growth-Based Ventures and Understanding Business Entities for Entrepreneurs and Managers. These books are designed for use by clinical law professors and as a supplement in entrepreneurship courses. The second text concerns entity selection considerations, but includes entity funding and conversion considerations and specific considerations for startup ventures.

The texts also contain supplemental electronic material available for free at TheBusinessProfessor.com.

If any of you would like a free copy of either text in Amazon e-book format, please send me your email address at jgordon10 [at] ggc [dot] edu.

A preview of the Business Plans E-Book is available here.

A preview of the Business Entities E-Book is available here. 

Effective as of January 1. 2015, Tennessee will allow Tennessee corporations to engage in intrastate offerings of securities to Tennessee residents over the internet without registration.  The new law, adopted earlier this year, is the direct result of a law-student-led movement.  The key student leader was one of my students, and he kept me informed about the effort as it moved along.  (I was called upon for advice and commentary from time to time, but the bill is all their work.)

In my experience, this kind of effort–a student-initiated, non-credit, extracurricular engagement in business law reform–is almost unheard of.  I was intrigued by the enterprise and impressed by its success.  As a result, I asked the student leader, Brandon Whiteley, now an alumnus, to send me some of his perceptions about drafting and proposing the bill and getting it passed.  

This is the first in a series of three posts that feature Brandon’s observations on the legislative process, the key influences on the bill, and the importance of communication.  This post highlights his commentary on the legislative process (which I have edited minimally with his consent).  I think you’ll agree that his wisdom and humor both shine through in this first installment (as well as the others).  His organizational capabilities also are evident throughout.

This week I had nice conversations with Brad Edmondson (Author of Ice Cream Social: The Struggle for the Soul of Ben & Jerry’s) and Michael Pirron (CEO of ImpactMakers, a certified benefit corporation).*

Both conversations turned to a topic that has been on my mind recently – that of social businesses that are acquired by large conglomerates that do not seem to have a similar mission.

A few of the parent/sub relationships that spring to mind (or that were discussed) include:

  • Campbell Soup / Plum Organics
  • Coca-Cola / Honest Tea
  • Colgate-Palmolive / Tom’s of Maine
  • Clorox / Burt’s Bees
  • Group Danone / Stonyfield Farm   
  • Unilever / Ben & Jerry’s

I may update this list from time to time, so feel free to suggest additions in the comments. 

At The Guardian, Kyle Westaway argues that Burt Bees worked from within Clorox to make the entire company more sustainable. Similarly, some argue that Unilever has become more sustainable after (and maybe because of) their acquisition of Ben & Jerry’s.

I have heard others argue that social businesses like Burt’s Bees and Ben & Jerry’s “sold out,” and that the acquiring large conglomerates tend to cut many socially beneficial…

In each of the classes I have taught I have offered extra credit for a reflection paper on how the media portrays the particular subject because most Americans, including law students, form their opinions about legal issues from television and the movies. Sometimes the media does a great job. I’m told by my friends who teach and practice criminal law that The Wire gets it right. Although I have never practiced criminal law, I assume that ABC’s How to Get Away With Murder, in which first-year students skip their other classes to both solve and commit murders, is probably less accurate. I do have some students who now watch CNBC because I show relevant clips in class. After a particularly heated on-air debate, one student called the network “the ESPN for business people.”

I’m looking for new fiction movies or TV shows to suggest to my students next semester. In addition to the standard business movies and documentaries, what makes your list of high-quality business-related shows? Friends, colleagues, and students have suggested the following traditional and nontraditional must-sees: 

1)   Game of Thrones (one student wrote about it in the partnership context)

2)   House of Cards (not purely business, but…

 . . . here‘s a relatively new Dodge Challenger commercial (part of a series) that you may find amusing.  I saw it during Saturday Night Live the other night and just had to go find it on YouTube.  It, together with the other commercials in the series, commemorate the Dodge brand’s 100-year anniversary.  “They believed in more than the assembly line . . . .”  Indeed!

You also may enjoy (but may already have read) this engaging and useful essay written by Todd Henderson on the case.  The essay provides significant background information about and commentary on the court’s opinion.  It is a great example of how an informed observer can use the facts of and underlying a transactional business case to help others better understand the law of the case and see broader connections to transactional business law generally.  Great stuff.

On December 10, the press reported the Second Circuit’s decision in the insider trading prosecution of Todd Newman and Anthony Chiasson (two of multiple defendants in the original case).  In its opinion, the court reaffirms that tippee liability for insider trading is predicated on a breach of fiduciary duty based on the receipt of a personal benefit by the tipper and clarifies that insider trading liability will not result unless the tippee has knowledge of the facts constituting the breach (i.e., “knew that the insider disclosed confidential information in exchange for a personal benefit”).  The court summarized its opinion, which addresses these matters in the context of the Newman case, a criminal case, as follows:

[W]e conclude that, in order to sustain a conviction for insider trading, the Government must prove beyond a reasonable doubt that the tippee knew that an insider disclosed confidential information and that he did so in exchange for a personal benefit. Moreover, we hold that the evidence was insufficient to sustain a guilty verdict against Newman and Chiasson for two reasons. First, the Government’s evidence of any personal benefit received by the alleged insiders was insufficient to establish the tipper liability from which defendants’ purported tippee liability would derive. Second, even assuming that the scant evidence offered on the issue of personal benefit was sufficient, which we conclude it was not, the Government presented no evidence that Newman and Chiasson knew that they were trading on information obtained from insiders in violation of those insiders’ fiduciary duties.

The Delaware Court of Chancery recently denied a motion to dismiss in In re Comverge, Inc. Shareholders Litigation. In this case, the plaintiff claimed bad faith by the board of directors that approved an allegedly unreasonable termination fee in a merger agreement. Transactional attorneys and professors who teach M&A will want to read this case.  

I am deep into grading my business associations exams, so I will outsource to a nice client alert on the case by Steven Haas at Hunton & Williams. A bit of the alert is below, and you can access the entire alert here.

The court then found that the termination fees of 5.55% of equity value (or 5.2% of enterprise value) during the go-shop period and 7% of equity value (or 6.6% enterprise value) after the go-shop period “test the limits of what this Court has found to be within a reasonable range for termination fees.” The court also analyzed the termination fee in connection with the convertible note held by the buyer in connection with the bridge financing. The plaintiff alleged that the conversion feature in the note, which allowed the buyer to purchase common stock at a price below the merger consideration, would

…

In many companies, executives and employees alike will give a blank stare if you discuss “human rights.”  They understand the terms “supply chain” and “labor” but don’t always make the leap to the potentially loaded term “human rights.” But business and human rights is all encompassing and leads to a number of uncomfortable questions for firms. When an extractive company wants to get to the coal, the minerals, or the oil, what rights do the indigenous peoples have to their land? If there is a human right to “water” or “food,” do Kellogg’s, Coca Cola, and General Mills have a special duty to protect the environment and safeguard the rights of women, children and human rights defenders? Oxfam’s Behind the Brands Campaign says yes, and provides a scorecard. How should companies operating in dangerous lands provide security for their property and personnel? Are they responsible if the host country’s security forces commit massacres while protecting their corporate property? What actions make companies complicit with state abuses and not merely bystanders? What about the digital domain and state surveillance? What rights should companies protect and how do they balance those with government requests for information?

The disconnect between “business” and “human…

The New York Times reports that LLCs have the ability to do things in New York politics that corporations cannot do: 

For powerful politicians and the big businesses they court, getting around New York’s campaign donation limits is easy.

. . .

Corporations like Glenwood are permitted to make a total of no more than $5,000 a year in political donations. But New York’s “LLC loophole” treats limited-liability companies as people, not corporations, allowing them to donate up to $60,800 to a statewide candidate per election cycle. So when Mr. Cuomo’s campaign wanted to nail down what became a $1 million multiyear commitment — and suggested “breaking it down into biannual installments” — the company complied by dividing each payment into permissible amounts and contributing those through some of the many opaquely named limited-liability companies it controlled, like Tribeca North End LLC.

It may appear unseemly to allow LLCs to do things corporations cannot do, but (as usual) I bristle at the implication that LLCs should be treated like corporations just because they are limited-liability entities. Perhaps LLCs and corporations should be treated the same for campaign purposes (and I am inclined to think they should be), but there are…

Many of you may have seen this already, but this past week’s news brought with it an update to JPMorgan Chase CEO Jamie Dimon’s health situation–positive news on his cancer treatment results, for which we all can be grateful. I posted here about Dimon’s earlier public disclosure that he was undergoing treatment for this cancer.  Based on publicly available information, I give Dimon my (very unofficial) “Power T for Transparency” cheer for 2014.  (The “Power T” is The University of Tennessee’s key–and now almost exclusive–branding symbol.  See my earlier posts on UT’s related branding decisions regarding the Lady Volunteers here and here.) 

As many of you know, I have written about  securities  law and corporate law disclosure issues relating to private facts about key executives (which include questions relating to the physical health of these important corporate officers).  I do not plan to rehash all that here. But I will note that I think friend and Glom blogger David Zaring gets it just right in his brief report on the recent Dimon announcement (with one small typo corrected and a hyperlink omitted):

Not to pile on, but there’s the slightly unsettling trend of CEOs talking, or not…