Monday, August 22, 2016
We are now more than three months into the Title III crowdfunding experiment. I have been wanting to get back to posting on Title III crowdfunding since my "LIVE" post back in May, but so much other fun stuff has been going on! So, to make me feel a bit better on that point, I will share some current crowdfunding data with you all in this post based on publicly available information obtained from a Westlaw search performed yesterday (Sunday, August 21, 2016). [Note to the powers that be at the SEC: EDGAR makes it hard to find the aggregated set of Form C filings unless you are collecting data on an ongoing basis. I hope that changes as EDGAR continues to improve . . . .]
At the outset, I will note that others have offered their own reports on Title III crowdfunding since I last posted (including here, here, and here). These reports offer some nice summaries. This post offers a less comprehensive data dump focusing in on completed offerings and withdrawn offerings. At the end, I offer some limited observations from the information provided here about crowdfunding as a small-business capital-raising alternative, the need for EDGAR adjustments, inferences about the success of Title III crowdfunded offerings, and platform disclosure about withdrawn offerings.
First, however, the top-level Westlaw-based summary:
Total Form C filings: 85 (275 filings show on Westlaw, but only 85 are non-exhibit filings representing distinct offerings)
Total Form C/A filings (amendments, including exhibit filings): 153
Total Form C-U filings (updates): 4
Total Form C-W filings (withdrawals): 2
The remainder of this post takes a shallow dive into the updates and withdrawals. Filings in each case are presented in reverse chronological order by filing date. All referenced dates are in 2016. Issuer names are copied from filings and may not be the actual legal names of the entities.
Monday, August 15, 2016
As many of you know, I often like to post on issues relating to advising students (witness my cover letter posts, the most recent of which can be found here). I also like to post from time to time on issues relating to fashion and the law (e.g., this post). And sometimes, I fuse the two in a single post. This post is one of those fusion posts.
Many of us intuitively understand that clothing affects not only the perceptions others have of us but also the perceptions we have of ourselves. Some of us may even have done research to unearth evidence that these intuitions have some empirical traction. But can what you wear affect your performance? Research provides some evidence that it can.
Researchers at Northwestern University have identified a "systematic influence that clothes have on the wearer's psychological processes" that they term "unclothed cognition." Their research, published in the Journal of Experimental Social Psychology in 2012, found that the attentiveness of the subjects was higher when wearing a lab coat than it was when they were not wearing a lab coat or were wearing a lab coat described as a painter's coat. The research was fairly widely reported at the time. Although the study explored the effects of wearing a lab coat, one can see how the results may also hold for people wearing other performance-linked clothing, like athletic wear or other professional clothing, including business suits. (A subsequent study on the cognitive effects of business suits can be found here. More general commentary is available here and elsewhere.)
Admittedly, the results of these studies and others like them are qualified and the research in this field is at an early stage. Having said that, as our students start interviewing for jobs and engaging in clinical practice and other experiential learning in the new semester, the possible effect of clothing on performance may be a relevant footnote for them. I admit that I am not a fan of dress codes, as a general rule. However, I may mention these studies to my students so that they can use the information in their decision-making, if they so choose.
Tuesday, August 9, 2016
Today marked the end of the 2016 conference of the Southeastern Association of Law Schools (SEALS). My discussion session on small business finance capped off the Workshop on Business Law, a series of business law programs at the conference, and closed out the conference itself just after Noon. It was great to share programs, at various points in the conference, with co-bloggers Josh Fershee, Ann Lipton, Haskell Murray, and Marcia Narine.
Here is a list of the three business law programs in the Workshop on Business Law from this year's conference:
- Discussion Group: Sustainability & Sustainable Business
- Discussion Group: Perspectives on the Future of White-Collar Crime
- Discussion Group: The Legal Aspects of Small Business Finance in the Crowdfunding Era
Other business law programs included several of the new scholar paper panels, the annual "Supreme Court Update" on "Business, Administrative, Securities, Tax, and Employment Issues," a discussion group focusing on "Big Data: Big Opportunities in Business and Government, and Big Challenges in Law and Ethics," and a discussion group in the SEALS "Works-in-Progress Series" that featured papers by veteran scholars on topics ranging from international food labeling regulation, to self-interest in financial regulation, to developing a better understanding of informational intermediaries in financial transactions, to the domestic and international regulation of non-financial disclosures.
I admit to jubilant exhaustion. As an organizer of SEALS programming, the week is always a bit of a marathon for me. But the effort is worth it. When I first came to the SEALS conference back in 2002, there was no organized business law programming. I am glad that a number of us working together ensure each year that the conference features robust, timely programming for business law teachers and scholars.
And that reminds me to mention two more things.
First, SEALS also is a great place to pick up new teaching and curricular ideas. This year's conference was no exception. I participated in a discussion session on "Strategies for Designing and Integrating Transactional Simulation Capstone Courses into the Curriculum" that covered a variety of different approaches to synthesis courses in the curriculum. I also moderated an engaging session on "Law School Specialization and Certification Programs."
Second, if you have ideas for programs for the 2017 conference, please let me know. Better yet, submit the program yourself through the SEALS website submission platform. Make sure if it is a business law session that you designate it for inclusion in the Workshop on Business Law.
I head back to Knoxville tomorrow morning to prepare for the new semester, which begins next week. No doubt some of you already are in the classroom and others will not be there for a week or more yet. Regardless, I wish you all well. I am happy to be recharged with new ideas from the SEALS conference--ideas that are a great stimulus to a productive semester and year. I hope you also find something to motivate and inspire you.
Monday, August 1, 2016
I was recently invited to write a short piece on crowdfunding and investor protection for a special issue of one of the publications of the CESifo Group Munich, the CESifo DICE Report--"a quarterly, English-language journal featuring articles on institutional regulations and economic policy measures that offer country comparative analyses." The group of authors for this publication (present company excluded) was truly impressive, and I have enjoyed reading their submissions. My contribution is published here on the CESifo website and here on SSRN, for those who care to look it over.
I did not hesitate to accept the CESifo Group's invitation to publish this paper, even though it is not primary scholarship and the deadline was tight for me given other professional obligations. (The editors did allow me to negotiate a bit on the timing, however.) The purpose of my post today is to explain why I decided to take this opportunity. With the limited time that we all have to produce research papers, why would I invest in this kind of an "extra" publication--one that is not likely to get me full scholarly credit (whatever that may mean) in a critical assessment of my body of work? Here are four reasons why I value this kind of project (if I can fit it in with my primary professional obligations).
- A publication with an interdisciplinary international research group puts a scholar's name and pre-existing scholarship (some of which typically is cited in the piece) in front of a new audience.
- A short, summary research paper of this kind offers the opportunity to synthesize or re-synthesize ideas from prior research and writing--a skill that (in my experience) improves with practice and is useful in other writing as well as in teaching.
- The reductive, focused writing process may reveal fresh insights, and these may lead to new research, writing, or teaching.
- Leveraging prior research by using it for multiple, distinct projects is efficient--and smart.
You may or may not agree with these reasons. You may have other reasons for publishing this kind of work--or reasons for not doing so. I invite you to add them in the comments. And if you are untenured, not yet fully promoted, or otherwise subject to adverse employment action relating to scholarship activity, you'll likely want to check with your dean and trusted senior members of your faculty (including any associate dean for faculty development) before accepting a publication invitation of this kind. Each institution honors these "extra" publications differently . . . .
Monday, July 25, 2016
In a recent decision of the Tennessee Supreme Court, Keller v. Estate of Edward Stephen McRedmond, Tennessee adopted Delaware's direct-versus-derivative litigation analysis from Tooley v. Donaldson, Lufkin, & Jenrette, Inc., 845 A.2d 1031 (Del. 2004), displacing a previously applicable test (that from Hadden v. City of Gatlinburg, 746 S.W.2d 687 (Tenn. 1988)). Although this is certainly significant, I also find the case interesting as an example of the way that a court treats different types of claims that can arise in typical corporate governance controversies (especially in small family and other closely held businesses). This post covers both matters briefly.
The Keller case involves a family business eventually organized as a for-profit corporation under Tennessee law ("MBI"). As is so often the case, after the children take over the business, a schism develops in the family that results in a deadlock under a pre-existing shareholders' agreement. A court-ordered dissolution follows, and after a bidding process in which each warring side of the family bids, the trustee contracts to sell the assets of MBI to members of one of the two family factions as the higher bidder. These acquiring family members organize their own corporation to hold the transferred MBI assets ("New MBI") and assign their rights under the MBI asset purchase agreement to New MBI
Prior to the closing, the losing bidder family member, Louie, then an officer and director of MBI who ran part of its business (its grease business), solicited customers and employees, starved the MBI grease business, diverted business opportunities from MBI's grease business to a corporation he already had established (on the MBI property) to compete with MBI in that business sector, and engaged in other behavior disloyal to MBI. Louie's actions were alleged to have contravened a court order enforcing covenants in the MBI asset purchase agreement. They also were allegedly disloyal and constituted a breach of his fiduciary duty of loyalty to MBI. Finally, they constituted an alleged interference with New MBI's business relations.
Friday, July 22, 2016
Following on Joan's excellent post about networking letters, I wanted to share a few words about thank you letters.
- Level 1 — Email saying thanks for the time and insight.
- Level 2 — Level 1 + this is how your insight impacted my life.
- Level 3 — Handwritten thank you note.
- Level 4 — Level 3 + a small gift.
This seems right, and Kyle's entire post is well worth reading at the link above.
A mere thank you e-mail usually isn't worth much, but it is better than nothing (unless the thank you is typo-riddled, and then it might be worse than nothing). The e-mail is worth more if the author recounts meaningful specifics from your conversation or picks up on a way that he/she might be of assistance.
The handwritten note has made a comeback after interviews, but I don't think it has had the same resurgence after networking/advice meetings. This is a shame because generally the interviewer is just doing his or her job, while the person who is honoring your networking/advice request is usually the one bestowing a true gift. Due to the relative rarity, I think handwritten notes are even more appreciated after a networking/advice meeting than after an interview. For handwritten notes, I think it is worth investing in personalized stationery and trying to remember to send the notes right away so that the delay is not elongated.
As to small gifts, those obviously would not be appropriate after an interview, but might be a really nice touch after a networking/advice meeting. If any readers have good thoughts on appropriate small gifts, please share in the comments or over email. I have always had a hard time thinking of these kinds of gifts. Wine seems like a common choice, but it could be risky unless you know the person drinks alcohol.
Finally, this recent article in the Harvard Business Review entitled Stop Making Gratitude All About You struck a chord. The author suggests praising the recipient rather than just describing how the recipient benefited you or made you felt. Of course, praise should be sincere and can be overdone, but I think the author is onto something.
Tuesday, July 19, 2016
Registration is now open for the Central States Law Schools Association 2016 Scholarship Conference, which will be held on Friday, September 23 and Saturday, September 24 at the University of North Dakota School of Law in Grand Forks, ND. We invite law faculty from across the country to submit proposals to present papers or works in progress.
CSLSA is an organization of law schools dedicated to providing a forum for conversation and collaboration among law school academics. The CSLSA Annual Conference is an opportunity for legal scholars, especially more junior scholars, to present on any law-related topic in a relaxed and supportive setting where junior and senior scholars from various disciplines are available to comment. More mature scholars have an opportunity to test new ideas in a less formal setting than is generally available for their work. Scholars from member and nonmember schools are invited to attend.
Please click here to register. The deadline for registration is September 2, 2016.
Hotel rooms are now available for pre-booking. The conference hotel is the Hilton Garden Inn in Grand Forks. The hotel phone number is (701) 775-6000. When booking, identify yourself as part of the “UND School of Law” block to receive a daily rate of $89. Please note that conference participants are responsible for all of their own travel expenses including hotel accommodations.
For more information about CSLSA and the 2016 Annual Conference please subscribe to our blog.
We look forward to seeing you in Grand Forks!
The 2016 CSLSA Board
For more information about CSLSA, visit our website at http://cslsa.us/ or contact a board member.
Monday, July 18, 2016
As an adjunct to my posts (here and here) on law placement cover letters, I commend to you this blog post on networking letters, correspondence that seeks to establish a career or job-related connection--maybe even a longer-term relationship--rather than apply for a specific position. Truth be told, in some form or another, four of the five tips in the post also apply to job-seeking cover letters. The outlier? Tip #2: "Don't ask for an interview or a job."
My take on the relevance of the other four tips for job placement cover letters is as follows:
- Respect your reader's time. Always a good idea when you are asking for anything. Do not demand. Ask graciously. But also be careful not to fall over yourself in being respectful. It's just not attractive. It's usually sufficient to use a pair of sentences like these after making an "ask" to show your respect: "I know that you have a busy schedule. Accordingly, if this request is unduly burdensome, please just let me know."
- Sell your strengths. This is important and seems obvious. But folks still miss this prompt! Why would someone want to meet with a person they don't know well or at all unless the person was interesting to them in some respect? As readers may recall, I recommend using the PAR method in sharing professional and personal strengths--using a short, pointed narrative, rather than merely describing knowledge, experience, or skills with adjectives and adverbs.
- Consider the timing of your letter. I just had a request from a student on this very issue--when to get back in touch with folks he had positive connections with last year who asked him to "stay in touch" about his permanent job search. These questions (as to timing) are highly contextual and can be tough to navigate. I recommend consulting with multiple people to get their views about particularly sticky timing questions. For example, with respect to my student, the timing of/participation of the firms in on-campus interviews plays a role. So, I recommended that he also consult with folks in our Career Services office.
- Stick to it. The advice the blog post author (Miriam Salpeter) gives here is dead-on right. Key sentence: "You don't want to stalk the person, but it's okay to touch base a few times before you consider the door closed." Again, I advise using advisors from various "walks" to help determine what crosses the line. It's very important to those consultations that the letter writer keep accurate and complete records of contacts with the proposed letter recipient and others in the same workplace that can be shared with the consultants so that they can best advise.
As another interview season is on the horizon (although interviewing never seems to stop these days, does it?), some of this advice may come in handy for folks soon. I also recommend in this regard, btw, Haskell Murray's great post on resumes and interviews. I cite to it in my initial cover letter post, but I want to note its value again here.
Monday, July 11, 2016
OK. I know it's not yet quite time to panic about syllabi and such for the fall semester. But that first day of class does approach, and I know some of you out there have already given some thought to innovating your teaching for the fall. Maybe you're new to teaching or teaching a new (or new-to-you) course. Maybe you're trying to spice up or change the direction of a course you've taught for a while. Maybe this post will give you some new food for thought . . . .
For a number of years, my colleague George Kuney, the Director of the business law center at UT Law, has asked students to invest in a particular Chapter 11 bankruptcy case as a capstone experience in his Bankruptcy and Reorganizations course. The students, working in pairs or small groups, are required to review all of the documents in the case docket and provide summaries that integrate those filings with learning from the course and supplemental research. George makes the resulting case studies available to the public. The cumulation of case studies created by students in this course has gotten quite impressive over the years. And the case studies get significant readership.
I often have said that it's hard for a law student to identify gaps in knowledge unless the student undertakes to write or speak about the law. George's exercise offers students the opportunity to both write and speak about the law in a practical setting. The final work product is a joint writing, but along the way, the students engage verbally to discuss between or among themselves what to present and how to present it in the final case study.
The project also helps students to see the immediate relevance of the law they are learning to find and apply in the course. Someone out there is using that law right now in a context that requires issue and rule identification and legal analysis and judgment. The students review and assess the decisions and actions of legal counsel and their clients real-time--just as the news media is reporting on those decisions and actions, in some cases. Wow.
I see a lot of value in this method of teaching. I am playing around with changing my Securities Regulation course (which next will be offered in the spring) to incorporate a smaller-scale version of an exercise like this. It may take me a while to come up with something that works, but I am going to give it a go. Let me know if you've used a project like this in any of your classes. I would be curious to know what folks are doing in this regard.
Saturday, July 9, 2016
I am stealing Haskell's thunder on this one (at his suggestion) to promote this position at Marist College. Little known facts (other than for folks, like Haskell, who know my family well): my daughter is a Marist Red Fox (that's the school's mascot) having graduated from there with a degree in Media Studies. It's a lovely small liberal arts college in Poughkeepsie, NY. And its new President is David N. Yellen, the former Dean and Professor of Law (criminal law expert) at Loyola University Chicago School of Law. Here are key points from the position announcement (linked to from the first sentence below):
Duties and Responsibilities:
This tenure track position will involve teaching both undergraduate and graduate courses (including online courses) and maintaining a high level of professional activity through research and service in the candidate’s area of emphasis
Candidates must have a commitment to excellence in teaching and research and should have a JD degree and previous experience teaching legal related and business law courses in a School of Management and/or Business. Professional experience as a practitioner is also desirable.
Required Applicant Documents:
Resume, Cover Letter, References
Position Open Date:
Monday, July 4, 2016
Anne Tucker (who, together with Haskell Murray, me, and many others, attended the 8th Annual Berle Symposium in Seattle a week ago) penned an excellent post last week on the importance of shareholder value under Delaware law. Her post covers important outtakes from the symposium presentation given by former Delaware Chancellor William (Bill) Chandler and Elizabeth Hecker, both lawyers in the Wilmington, Delaware office of Wilson Sonsini Goodrich & Rosati. In the post, Anne accurately and succinctly summarizes a key take-away from the former Chancellor's remarks:
[A] Delaware court will invalidate a board of directors' other serving actions only if they are in conflict with shareholder value, but never when it is complimentary. And there is a expanding appreciation of when "other interests" are seen as complimentary to, and not in competition with, shareholder value maximization.
Specifically, as Anne's summary indicates, Chancellor Chandler stated his view that a Delaware corporate board must place shareholder financial wealth (whether in the short term or the long term) ahead of any other value in its decision making. This is hardly a surprise to anyone who follows Delaware corporate law judicial opinions (although the former Chancellor's statement of the law was among the clearest and most definite I have heard). After all, Chancellor Chandler's opinion in the eBay case is widely cited for this proposition.
The Berle symposium focused on benefit corporations this year, and my draft paper for the symposium highlights the central importance of a corporation's charter-based corporate purpose in that type of firm. So, I asked the former Chancellor for his personal view on how a Delaware court might handle a specific type of corporate purpose clause in a non-benefit-corporation Delaware corporate law context. The specific corporate purpose clause I had in mind is one that expresses a clear "second bottom line" (other than the promotion of shareholder value) and clearly indicates that neither bottom line is to be given constant or presumed precedence over the other in decisions made by the board of directors or the corporate officers.
As an expression of love for my country, I do try to wear red, white, and blue on Independence Day and, in fact, for the entire holiday weekend. This causes some wardrobe challenges for obvious reasons. And it's probably more than a bit hokey.
However, I did not plan on coordinating my food choices for the weekend with my sartorial selections! So, when I opened the lovely yogurt parfait that I made to take to Starbucks for breakfast on Saturday morning, I was delighted and surprised to note its appropriate color scheme (and promptly posted a picture memorializing the same to Facebook). I include the picture above.
Happy Fourth of July to one and all. Regardless of whether you are as crazy as I am about celebrating with the colors of the day, I wish you a safe and pleasant holiday. Happy Birthday, U.S.A.!
Thursday, June 30, 2016
Back in May, I posted about a legal action against Starbucks for too much ice in its drinks. I referenced in that post the earlier legal action taken against Starbucks for under-filling its latte drinks and against McDonald's for damage done by hot coffee. I can't resist adding another hot coffee case to the mix . . . .
Another suit has been brought against Starbucks--my daughter's employer (as I disclosed at the outset in my previous post). This time, the case involves damage caused by hot coffee resulting from a bad drive-through pass-off. The plaintiff requests up to $1 million "for medical expenses, loss of work, and for the mental and physical pain she claims the burning coffee caused her," according to the news report. The case involves second-degree burns--a serious matter in anyone's eyes. Depending on the facts elucidated at trial, this case may (like the McDonald's case from 20+ years ago) have some traction in court. (Apparently, there have been other Starbucks cases involving hot drinks.)
I do feel sorry for plaintiffs who are damaged by hot coffee or beverages. These cases undoubtedly have more gravitas than cases alleging damages based on the amount of ice or beverage served. Yet, the hot beverage cases still nag at me a bit--maybe because I have trouble conceptualizing suing a coffee service business for damage created by a hot beverage that I ordered. Today, reflecting on this new Starbucks case, I did some soul-searching to determine why I am unlikely to sue.
The bottom line is that I understand there is something inherently dangerous about ordering hot coffee in a paper cup with a plastic lid, especially for pick-up at a drive-through window. I know I am assuming a risk in those circumstances. I also know that I may share or bear blame for any spill that happens after I order--the lid on a cup properly sealed and handed to me loosens and sometimes pops right off if I grab the cup from the top under the lid area. Maybe you've noticed that in handling coffee at your favorite coffee shop . . . .
I am no tort lawyer, but I guess I see myself in many of these cases, which makes me wonder whether the plaintiffs and their lawyers place too much reliance on litigation for the achievement of their respective desired objectives . . . . I would hope that many controversies between businesses and consumers, as I indicated in my prior post, could be resolved outside the litigation process. Not every injury is or should be compensable through a legal action.
Moreover, in my work, I have been critical of many securities fraud (including insider trading) class actions as at best inefficient means of addressing certain plaintiffs' concerns. In my experience, I also have seen cases brought against high-profile or deep-pocket defendants more for their settlement value than to redress or prevent a wrong to the plaintiff or society. My gut tells me that I might be critical of some of the hot coffee cases on the same bases if I came to know more of the facts. But I cannot be sure.
Is my instinct off-base? Am I too quick to see fault in the claims of potential plaintiffs? Am I giving coffee service businesses too much cred? I am interested in any thoughts you may have. In any event, we can be confident that the hot beverage cases will continue for the foreseeable future.
Hat tip to Lou Sirico at Legal Skills Prof Blog for pointing out this case to me.
Monday, June 27, 2016
I am still at Berle VIII with Haskell Murray and Anne Tucker. One more day of my June Scholarship and Teaching Tour to go--and I have a final presentation to do. Then, back to Knoxville to stay until late in July. Whew!
As you may recall or know, my Berle appearance this week follows closely on the heels of a talk on the same work (on corporate purpose and litigation risk in publicly held U.S. benefit corporations) that I made at last week's 2016 National Business Law Scholars conference. While I am thinking about this conference, please join me in saving the date for the next one: the 2017 National Business Law Scholars conference. Next year's conference will be held June 8-9 at The University of Utah S. J. Quinney College of Law, with Jeff Schwartz hosting. I will post more information and the call for papers, etc. once I have it.
June 27, 2016 in Anne Tucker, Business Associations, Conferences, Corporate Finance, Corporate Governance, Corporate Personality, Corporations, CSR, Haskell Murray, Joan Heminway, Research/Scholarhip, Teaching | Permalink | Comments (0)
Monday, June 20, 2016
Having helped a few Tennessee bar applicants get straight on their knowledge of agency, unincorporated business associations, and personal property law last Friday at my BARBRI lecture (such a nice group present at the taping to keep me company!), it's now time for me to wrap up my June Scholarship and Teaching Tour with a twofer--a week of travel to two of my favorite U.S. cities: Chicago, for the National Business Law Scholars Conference and Seattle for Berle VIII. At both events, I will present my draft paper (still in process today, unfortunately) on publicly held benefit corporations, Corporate Purpose and Litigation Risk in Publicly Held U.S. Benefit Corporations. Here's the bird's-eye view from the introduction:
Benefit corporations—corporations organized for the express purpose of realizing both financial wealth for shareholders and articulated social or environmental benefits—have taken the United States by storm. With Maryland passing the first benefit corporation statute in 2010, legislative growth of the form has been rapid. Currently, 31 states have passed benefit corporation statutes.
The proliferation of benefit corporation statutes and B Corp certifications can largely be attributed to the active promotional work of B Lab Company, a nonprofit corporation organized in 2006 under Pennsylvania law that supports social enterprise (“B Lab”). B Lab works with individuals and interest groups to generate attention to social enterprise generally and awareness of and support for the benefit corporation form and B Corp certification (a social enterprise seal of approval, of sorts) specifically. B Lab also supplies model benefit corporation legislation, social enterprise standards that may meet the requirements of benefit corporation statutes in various states, and other services to social enterprises.
Benefit corporation statutes have not, by and large, been the entity law Field of Dreams. Despite the legislative popularity of the benefit corporation form, there have not been as many benefit corporation incorporations as one might expect. In the first four years of benefit corporation authority, for example, Maryland reported the existence of fewer than 40 benefit corporations in total. Tennessee’s benefit corporation statute came into effect in January 2016, and as of May 2, 2016, Secretary of State filings evidence the organization of 26 for-profit benefit corporations. However, a review of these filings suggests that well more than half were erroneously organized as benefit corporations. Colorado, another recent adopter of the benefit corporation, does appear to have a large number of filings (90 in total as of June 12, 2016 based on the list of Colorado benefit corporations on the B Lab website). However, as with Tennessee, a number of these listed corporations appear to be erroneously classified. These anecdotal offerings indicate that published lists of benefit corporations—even those constructed from state filings—over-count the number of benefit corporations significantly.
Research for this article identified no publicly held U.S. benefit corporations. For these purposes (and as referenced throughout this article), the term “publicly held” in reference to a corporation is defined to mean a corporation (a) with a class of equity securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (“1934 Act”), or (b) otherwise required to file periodic reports with the Securities and Exchange Commission under Section 13 of the 1934 Act. Yet, benefit corporations may be subsidiaries of publicly held corporations (as Ben & Jerry's Homemade Inc., New Chapter Inc., and Plum, PBC have demonstrated), and corporations certified as B Corps have begun to enter the ranks of publicly held corporations (perhaps Etsy, Inc. being the most well known to date). It likely is only a matter of time before we will see the advent of publicly held U.S. benefit corporations.
With the likely prospect of publicly held U.S. benefit corporations in mind, this article engages in a thought experiment. Specifically, this article views the publicly held U.S. benefit corporation from the perspective of litigation risk. It first situates, in Part I, the U.S. benefit corporation in its structural and governance context as an incorporated business association. Corporate purpose and the attendant managerial authority and fiduciary duties are the key points of reference. Then, in Part II, the article seeks to identify the unique litigation risks associated with publicly held corporations with the structural and governance attributes of a benefit corporation. These include both state and federal causes of action. The reflections in Part III draw conclusions from the synthesis of the observations made in Parts I and II. The closing thoughts in Part III are intended to be of use to policy makers, academic observers, and advisers of corporations, among others.
As Haskell mentioned in an earlier post, he and Anne and I will be together at the Berle VIII event. What a great way to end my June tour--with my friends and colleagues from the Business Law Prof Blog! I look forward to it.
Thursday, June 16, 2016
8th Annual Berle Symposium - Benefit Corporations and the Firm Commitment Universe - June 27-28, 2016 - Seattle, WA
Three Business Law Prof Blog editors (myself included) are presenting at the upcoming Berle Symposium on June 27-28 in Seattle.
Colin Mayer (Oxford) is the keynote speaker, and I look forward to hearing him present again. I blogged on his book Firm Commitment after I heard him speak at Vanderbilt a few of years ago. The presenters also include former Chancellor Bill Chandler of the Delaware Court of Chancery. Given that Chancellor Chandler's eBay v. Newmark decision is heavily cited in the benefit corporation debates, it will be quite valuable to have him among the contributors. The author of the Model Benefit Corporation Legislation, Bill Clark, will also be presenting; I have been at a number of conferences with Bill Clark and always appreciate his thoughts from the front lines. Finally, the list is packed with professors I know and admire, or have read their work and am looking forward to meeting.
More information about the conference is available here.
June 16, 2016 in Anne Tucker, Business Associations, Conferences, Corporate Governance, Corporations, CSR, Delaware, Financial Markets, Haskell Murray, Joan Heminway, Law School, Social Enterprise | Permalink | Comments (0)
Monday, June 13, 2016
This post welcomes Doug (Douglas K.) Moll to the Business Law Prof Blog. He'll be posting with us a few times over the next month or so.
Doug is the Beirne, Maynard & Parsons, L.L.P. Law Center Professor of Law at The University of Houston Law Center. He teaches a variety of transactional business law courses: Business Organizations, Doing Deals, Business Torts, Secured Financing, and Sales and Leasing. I have had the pleasure of working with him in other capacities (he is a fellow Tennessee BARBRI instructor and presented with me at the 2015 ABA LLC Institute, for example) and value his observations about transactional business law. I also know him to be a highly decorated teacher--having won (according to his website bio) six teaching awards since 1998. I look forward to his posts--and I am sure you will enjoy them!
This past week, I completed the second leg of my June Scholarship and Teaching Tour. My time at "Method in the Madness: The Art and Science of Teaching Transactional Law and Skills" at Emory University School of Law last week was two days well spent. I had a great time talking to attendees about my bylaw drafting module for our transaction simulation course, Representing Enterprises, and listening to others talk about their transactional law and skills teaching. Great stuff.
This week's portion of my academic tour begins with a teaching whistle-stop at the Nashville School of Law on Friday, continues with attendance (with my husband) at a former student's wedding in Nashville on Saturday evening, and ends (my husband and I hope) with Sunday brunch out with our son (and his girlfriend if she is available). Specifically, on Friday, I teach BARBRI for four hours in a live lecture. The topics? Well, I drew a short straw on that. I teach agency, unincorporated business associations (including a bit about both extant limited liability statutes in Tennessee), and personal property--all in four hours. Ugh. Although I am paid for the lecture and my expenses are covered, I would not have taken (and would not continue to take) this gig if I didn't believe that I could be of some help to students. These topics--especially agency and partnership law, but also personal property--often are tested on the bar exam. So, on I press.
I also am completing work this week on the draft article that I will present in Chicago and Seattle on the last two stops of my tour. I will say more about that article in next week's post. In the mean time, let me know if you have any suggestions (or good jokes) on the law of agency, partnerships, LLCs, or personal property (e.g., tenancies, gifts, bailments, adverse possession, replevin) for my lecture on Friday . . . . It's so hard to make these speed-lectures somewhat engaging for the students. [sigh]
Saturday, June 11, 2016
A colleague sent me a link to a White House blog post focusing on Title III of the Jumpstart Our Business Startups Act (JOBS Act), known as the Capital Raising Online While Deterring Fraud and Unethical Non-Disclosure Act (CROWDFUND Act). The main theme of the blog post, entitled The Promise of Crowdfunding and American Innovation, is stated in its summary: ''Crowdfunding' rule makes it possible for entrepreneurs across the country to raise small-dollar investments from ordinary Americans." This much is true. And the post accurately notes that "previous forms of crowdfunding" also already did this.
But the post goes on to extol the virtues of the CROWDFUND Act, which offers (among other things) a registration exemption for investment (or securities) crowdfunding--a very special type of crowdfunding involving the offer or sale of debt, equity, investment contracts, or other securities. Or at least the blog post tries to extol the virtues of the CROWDFUND Act. I am not buying it. In fact, the post doesn't come up with much of substance to praise . . . .
The coauthors focus a key paragraph on explaining why the CROWDFUND Act is heavy on investor protection provisions. But they do not talk about the costs of the legislation in relation to its potential benefits, except in the most superficial way--mentioning "risks" without classifying them and outlining the "multiple layers of investor protections." Although it was written before the final Securities and Exchange Commission rules were adopted under the CROWDFUND Act, my article for the Kentucky Law Journal offers a more detailed picture of benefits and costs and shares my view that the costs are likely to outweigh the benefits for many market participants.
Maybe sensing this (and the possible lack of success of the CROWDFUND Act that may result from this imbalance), the coauthors of the White House blog post offer the following:
One encouraging recent sign is not only the launch of many new regulated crowdfunding platforms, but also the growing ecosystem of “startups helping startups” to provide services for this new marketplace—making it easier for entrepreneurs to fulfill disclosure requirements, verify investor credentials, educate investors, and more. Over time, these new tools may increase transparency and provide strong accountability not only for “the crowd,” but also for the “family and friends” that have long served as entrepreneurs’ first source of seed capital.
This is a super effect of crowdfunding generally and of securities crowdfunding under the CROWDFUND Act specifically--the emergence of new services and market participants to support crowdfunding and small capital raising more generally. I predicted this in my first article on crowdfunding (co-authored with one of my former students) : "Because '[c]rowdfunding is a market of and for the participants,' some traditional financial intermediaries may be shut out of this sector of the capital formation process. No doubt, however, new support roles for crowdfunding will develop as the industry matures." [(p. 930, n.263) (citations omitted)] But these market innovations would be more pronounced, imv, if the CROWDFUND Act provided participants with a more balanced set of costs for the benefits provided. As the blog post notes, "it’s still a fact that not every entrepreneur has access to needed capital." More can be done to solve this problem with a registration exemption that allows for small capital raising--funding at well less than the $1 million level set under the CROWDFUND Act--at less cost.
The blog post concludes with more platitudes. ("America’s entrepreneurs are our engines of economic growth, innovation, and job creation . . . .") Really, this blog post is a bit of a puff piece--manifesting both good marketing (for those who read and believe it) and overoptimism.
But then again, what did I expect from a blog post put out by White House staff? I suppose, given the President's support for the CROWDFUND Act (and the JOBS Act overall--which the coauthors also praise more generally in a paragraph of the post), I should expect the White House to promote the use of the CROWDFUND Act through these kinds of public relations messages. OK. I get that. Nevertheless, I admit to being disappointed that more is not being done in the Executive Branch and elsewhere to point out the shortcomings of the CROWDFUND Act and fine tune the regulation of securities crowdfunding so that it can have its maximum positive impact on business and project innovators and investors alike. Instead, I fear that well intending proponents are over-promoting the CROWDFUND Act, which may ultimately sour folks on securities crowdfunding as a capital raising alternative if few are able to take advantage of the current regulatory exemptions. We'll see. I hope I am wrong in worrying about this. Time will tell.
Monday, June 6, 2016
The first part of my June scholarship and teaching tour is now done. Having just returned from the Law and Society Association conference in New Orleans (about which I will say more in later posts), I now am preparing for my presentation on Friday at "Method in the Madness: The Art and Science of Teaching Transactional Law and Skills," this year's conference hosted by Emory University School of Law's Center for Transactional Law and Practice. Emory Law convenes these conferences every other year. The conferences always focus on teaching transactional business law and skills.
Here's the abstract for my presentation:
Drafting Corporate Bylaws: From Alpha to Omega
The archetypal introductory law school course in business associations law characteristically introduces students to corporate bylaws. Typically, course references to corporate bylaws occur in the context of corporate formation and in cases construing corporate bylaws in the context of private ordering, fundamental corporate changes, and the like. Treatment of the subject is necessarily somewhat superficial and episodic. Although students may be exposed to bylaw provisions and even, in some cases, a sample set of corporate bylaws, little time exists in the standard basic Business Associations course to address the optimal drafting process for drafting organic documents (including corporate bylaws).
An advanced business associations offering or a business planning course, however, provides a wonderful opportunity to engage students in this type of activity and give them a deeper appreciation for the governance significance of corporate bylaws. For the past two years, I have taught a module in Representing Enterprises, a transaction simulation course offered to participants in The University of Tennessee College of Law’s Concentration in Business Transactions, that focuses on drafting bylaws for a closely held start-up corporation organized under Tennessee law. The module offers a sequenced approach to the construction of corporate bylaws, starting with an in-depth survey of applicable statutory and decisional law, progressing through the identification of forms and norms, and ending with individual and group drafting exercises. The five class meetings (ten classroom hours in total over a period of two-and-a-half weeks) in the module engage facilitated peer-to-peer teaching and focus on relevant drafting processes (incorporating and reflecting on the students’ approaches to the required course assignments) and resulting outtakes (more precisely, takeaways).
In this presentation, I will share in more detail the content of and pedagogy involved in this course offering. As support, I will supply all participants with the module syllabus and the staged series of assignments that I give to the students to execute on the embodied learning objectives. This presentation should be particularly useful to those offering, planning on offering, or considering offering a business entity planning and drafting opportunity for law students. But it also may be valuable for those teaching introductory doctrinal offerings in business associations law.
If you cannot be at the conference and are interested in the materials supporting or PowerPoint slides for this presentation, please just let me know.
Also, you may want to note that many (most) presentations at the conference will be memorialized in a forthcoming volume of our student-edited business law journal, Transactions: Tennessee Journal of Business Law. Transactions has been a partner of Emory Law in its biennial conferences from the start. The Transactions volumes from the Emory Law conferences typically are quite popular among business law instructors. I use my copies a fair amount. So, you may want to get one of these, too. Just fyi: the book usually comes out in the spring semester following the conference. Also note that some of the included works are produced from transcripts of the proceedings (very tough to do) and some are papers prepared by the presenters on the topic of their presentation.
Atlanta, here I come!