The following is a guest post by Itai Fiegenbaum, Visiting Assistant Professor of Law at Willamette University College of Law:

Minority expropriation by a controlling shareholder manifests in a variety of forms. Controllers can cause the corporation to sell them an asset at a steep discount. Or purchase from them an asset for an inflated price. These self-dealing transactions share a common thread: Unfair pricing transfers value away from the corporation, and, by extension, from its minority shareholders, to the controller. An additional complication arises when the corporation’s stock is issued to the controller. In this case, a sweetheart deal dilutes the value of their relative voting and dividend rights.  

Shareholder litigation is designed to keep transaction planners honest. Not all manner of minority expropriation, however, is subject to the same enforcement procedure. Long-standing corporate law principles distinguish between transactions that harm shareholders directly and transactions that harm them derivatively, through a reduction in their share price. Challenges against the former can proceed directly; challenges against the latter, by contrast, must overcome several procedural hurdles before a court will adjudicate a claim on its merits.

An unmodified application of the bifurcation framework would filter most self-dealing transactions between…

Western State College of Law (WSCL) at Westcliff University invites applications from entry-level and lateral candidates for up to two tenure-track faculty positions beginning August 1, 2022. We have particular interest in persons interested in teaching Business Organizations, Contracts, Sales, Evidence, Professional Responsibility, and Remedies. Candidates should have strong academic backgrounds, commitment to teaching excellence, and demonstrated potential for productive scholarship. 

WSCL is located in the city of Irvine, California – close to miles of famous beaches, parks, recreation facilities and outdoor activities as well as the many museums, music venues, and diverse cultural and social experiences of greater Los Angeles.

Founded in 1966, WSCL is the oldest law school in Orange County, California, and is a fully ABA approved for-profit, private law school. Noted for small classes and personal attention from an accessible faculty focused on student success, WSCL is proud that our student body is among the most diverse in the nation. Our 11,000+ alumni are well represented across public and private sector legal practice areas, including 150 California judges and about 15% of Orange County’s Deputy Public Defenders and District Attorneys.

WSCL is committed to providing workplaces and learning environments free from discrimination on the basis of…

A while back, I posted about how there’s been some institutional investor support for the proposal that the SEC require not only public companies, but private companies, disclose climate change information.

Usually, of course, private companies aren’t required to disclose things – especially to institutional investors – on the theory that institutional investors can themselves bargain for the information that they need.  (Yes, yes, there are kind of exceptions, like Securities Act Section 4(a)(7), etc).  But the SEC and Congress have been gradually expanding which companies count as private, raising concerns that not only that they have assumed too much sophistication on the part of institutions (for example, institutional investors themselves have complained about opacity among the PE funds in which they invest), but also that the SEC and Congress have ignored the benefits of creating a body of public information across a wide swath of companies.

Which is why this article grabbed me: 

The California Public Employees’ Retirement System and Carlyle Group Inc. helped rally a group of more than a dozen investors to share and privately aggregate information related to emissions, diversity and the treatment of employees across closely held companies. More firms and

…

Through today and tomorrow, UNLV Law is cohosting a Corporate Governance Summit with Greenberg Traurig.  Many thanks to Robert Jackson for giving our keynote talk over lunch today.  His talk covered the waterfront, touching on ESG, corporate governance, broker misconduct, and SPACs.

Featured panel discussions include:

• All about the green: Developments of environmental, social, and governance (ESG) issues in the boardroom
• Buy, sell, or hold: What’s a board to do in today’s M&A environment?
• Diversity, inclusion, and refreshment: The hidden ingredients of successful boardroom governance 
• Carrots and sticks: Unlocking the power of effective incentive structures in executive and board compensation
• If you don’t know, now you know: A guide to a board’s role in managing (unexpected) risk in the aftermath of the COVID-19 pandemic
• Let’s talk!: Maximizing the shareholder relationship and the benefits of shareholder engagement

It’s been great to get together and talk about these issues in person.  Hopefully we’ll be in an even better position next year.

Sometimes, there’s not a whole lot new to blog about – and other times you get the Slack decision, the Brookfield decision, an SEC investigation of Activision, and Aronson’s demise all in a single week.  So in this post, I am going to tackle the first three and save United Food and Commercial Workers Union v. Zuckerberg for maybe another time, but if you really want to know my immediate reaction to the Zuckerberg case, I tweeted a thread here.  Professor Bainbridge also has a long blog post on the Zuckerberg decision here.

Slack!

I previously blogged about this case here, and the short version is that Slack went public via direct listing, and filed a Securities Act registration statement for slightly fewer than half of the shares that became available to trade on the opening day, because the rest of the shares did not need to be registered in order to trade under Rule 144.  Stock purchasers claimed that the registration statement contained false statements in violation of Section 11 of the Securities Act; the question was whether they’d need to establish that theirs were the registered shares before they’d be able to bring a…

There’s been so much interest in SPACs recently, I figured everyone should be aware of this new paper by Usha R. Rodrigues and Michael Stegemoller, SPACs: Insider IPOs.  One of the main points the authors make is that de-SPAC transactions represent a kind of “empty voting” scenario, where you can both vote in favor of the deal and redeem your shares for $10 – which is in fact what overwhelmingly occurs; the actual funds for the merger typically come from the simultaneous PIPEs.  As the authors point out, the regulations and practice governing SPACs did not always allow this; when SPACs first began to list on the NYSE, only shareholders who voted against the deal could redeem, and if redemptions exceeded a certain threshold, the deal would not close.  Shortly thereafter, however, regulations and practice evolved to allow all shareholders to redeem and to eliminate the conversion threshold.  The authors argue that the new practices are damaging to markets by allowing companies to go public on major exchanges before they are ready to do so.

Anyhoo, here is the abstract:

Proponents have hailed special purpose acquisition companies (SPACs) as the democratization of capitalism. In a SPAC, a publicly

…

Earlier, I posted a copy of the abstract to my new law review article, Supreme Risk here.  Since that time, I’ve spun out two different summaries of it elsewhere.  The first, you can find at the CLS Blue Sky Blog here.  The other, you can find at the Duke FinReg Blog here.  The two summaries are different, but they’re both great introductions to the article, which has now been placed with the Florida Law Review.

Fortunately, Florida has given me until early October to continue refining the piece.  I’d be grateful for any comments or thoughts on the draft if you’re able to send them my way.