In this paper, we exploit the specificity of going-private transactions that are initiated by the historic controlling shareholders (i.e. voluntary delistings). In Continental Europe, the majority of firms that become private do so following a buyout offer with squeeze-out (BOSO); using this mechanism, the controlling shareholder can cash out minorities and take the firm private. We argue that the decision to go private results from a cost–benefit analysis. Moreover, we pay particular attention to the consequences and the related costs of compliance resulting from the passage of the French Financial Security Law (FSL) in 2003. A quantitative study was performed using a unique dataset spanning 1997–2006. This data set consists of 140 French firms, of which 70 were voluntarily delisted via BOSO and 70 were industry-matched control firms. Univariate analysis and logistic regressions support the cost–benefit analysis: when listing benefits decrease because of weak liquidity and/or weak analyst coverage, it seems better for the firm to go private. Furthermore, the inherent characteristics of delisted firms (i.e. performance, leverage, and risk as measured by the beta factor) appear to be important driving factors of delisting. The passage of the FSL has strengthened the impact of these characteristics on the decision to go private. Mature firms that have weak performance and low specific risk and that are not financially constrained by debt will decide to go private because they cannot afford the listing status anymore. Finally, we show that the driving factors of delisting differ according to the identity of the controlling shareholder; specifically, the level of risk appears to be the strongest determinant for family firms, while non-family firms also consider their own financial structure.
{"title":"The Delisting Decision: The Case of Buyout Offers with Squeeze-Out (BOSO)","authors":"S. Serve, Isabelle Martinez","doi":"10.2139/ssrn.1717018","DOIUrl":"https://doi.org/10.2139/ssrn.1717018","url":null,"abstract":"In this paper, we exploit the specificity of going-private transactions that are initiated by the historic controlling shareholders (i.e. voluntary delistings). In Continental Europe, the majority of firms that become private do so following a buyout offer with squeeze-out (BOSO); using this mechanism, the controlling shareholder can cash out minorities and take the firm private. We argue that the decision to go private results from a cost–benefit analysis. Moreover, we pay particular attention to the consequences and the related costs of compliance resulting from the passage of the French Financial Security Law (FSL) in 2003. A quantitative study was performed using a unique dataset spanning 1997–2006. This data set consists of 140 French firms, of which 70 were voluntarily delisted via BOSO and 70 were industry-matched control firms. Univariate analysis and logistic regressions support the cost–benefit analysis: when listing benefits decrease because of weak liquidity and/or weak analyst coverage, it seems better for the firm to go private. Furthermore, the inherent characteristics of delisted firms (i.e. performance, leverage, and risk as measured by the beta factor) appear to be important driving factors of delisting. The passage of the FSL has strengthened the impact of these characteristics on the decision to go private. Mature firms that have weak performance and low specific risk and that are not financially constrained by debt will decide to go private because they cannot afford the listing status anymore. Finally, we show that the driving factors of delisting differ according to the identity of the controlling shareholder; specifically, the level of risk appears to be the strongest determinant for family firms, while non-family firms also consider their own financial structure.","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130758353","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
By identifying and protecting the "reasonable expectations" of close corporation stockholders, the doctrine of shareholder oppression attempts to safeguard the close corporation minority investor from the improper exercise of majority control. The leading formulation of the reasonable expectations inquiry focuses on the shareholder's expectations at the time he decided to invest in the business. For the disputes that characterize most of the published oppression decisions, this "time of investment" focus is suitable, as the aggrieved shareholder is usually complaining about expectations that were established around the time of the shareholder's actual commitment of capital to the business. In certain significant contexts, however, a time of investment focus is problematic. First, a strict time of investment standard seems to ignore the possibility that post-investment expectations may arise. Focusing on one point in time - the time of investment - to measure the shareholder's expectations fails to capture potentially valid and reasonable expectations that may develop well after a shareholder commits capital to the venture. Second, a strict time of investment framework fails to account for close corporation shareholders who have made no investment at all in the company. This group of "non-investing shareholders" includes, among others, stockholders who receive their shares as gifts or inheritances. Because these shareholders have committed no capital themselves, there is, literally-speaking, no "time of investment" peculiar to them. For this group, therefore, an assessment of reasonable expectations at the time of investment may lead to a conclusion that no specific reasonable expectations exist at all. This Article analyzes whether and how the reasonable expectations inquiry could be applied to these changing expectations and non-investing shareholder cases. By conceiving of oppression as a doctrine that protects the fair value of the shareholder's investment, this Article provides a context for thinking about the purpose of the shareholder oppression doctrine and its accompanying reasonable expectations inquiry. Using this "investment model" of oppression as a guide, the Article argues that the law should view a reasonable expectation as a bargain struck between majority and minority shareholders over a specific entitlement the minority is to receive in return for its investment in the company. Because majority and minority shareholders may strike these "investment bargains" throughout their participation in a close corporation, the Article contends that the oppression doctrine should look for evidence of such bargains during the entirety of the shareholders' relationship, rather than merely at the narrower time of investment. The reasonable expectations inquiry, therefore, should reflect this broader perspective. Moreover, although non-investing stockholders do not, by definition, commit any of their own capital to the company, they too may rea
{"title":"Shareholder Oppression and Reasonable Expectations: Of Change, Gifts, and Inheritances in Close Corporation Disputes","authors":"Douglas K. Moll","doi":"10.2139/ssrn.297503","DOIUrl":"https://doi.org/10.2139/ssrn.297503","url":null,"abstract":"By identifying and protecting the \"reasonable expectations\" of close corporation stockholders, the doctrine of shareholder oppression attempts to safeguard the close corporation minority investor from the improper exercise of majority control. The leading formulation of the reasonable expectations inquiry focuses on the shareholder's expectations at the time he decided to invest in the business. For the disputes that characterize most of the published oppression decisions, this \"time of investment\" focus is suitable, as the aggrieved shareholder is usually complaining about expectations that were established around the time of the shareholder's actual commitment of capital to the business. In certain significant contexts, however, a time of investment focus is problematic. First, a strict time of investment standard seems to ignore the possibility that post-investment expectations may arise. Focusing on one point in time - the time of investment - to measure the shareholder's expectations fails to capture potentially valid and reasonable expectations that may develop well after a shareholder commits capital to the venture. Second, a strict time of investment framework fails to account for close corporation shareholders who have made no investment at all in the company. This group of \"non-investing shareholders\" includes, among others, stockholders who receive their shares as gifts or inheritances. Because these shareholders have committed no capital themselves, there is, literally-speaking, no \"time of investment\" peculiar to them. For this group, therefore, an assessment of reasonable expectations at the time of investment may lead to a conclusion that no specific reasonable expectations exist at all. This Article analyzes whether and how the reasonable expectations inquiry could be applied to these changing expectations and non-investing shareholder cases. By conceiving of oppression as a doctrine that protects the fair value of the shareholder's investment, this Article provides a context for thinking about the purpose of the shareholder oppression doctrine and its accompanying reasonable expectations inquiry. Using this \"investment model\" of oppression as a guide, the Article argues that the law should view a reasonable expectation as a bargain struck between majority and minority shareholders over a specific entitlement the minority is to receive in return for its investment in the company. Because majority and minority shareholders may strike these \"investment bargains\" throughout their participation in a close corporation, the Article contends that the oppression doctrine should look for evidence of such bargains during the entirety of the shareholders' relationship, rather than merely at the narrower time of investment. The reasonable expectations inquiry, therefore, should reflect this broader perspective. Moreover, although non-investing stockholders do not, by definition, commit any of their own capital to the company, they too may rea","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128399545","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Over time all close cooperative relationships will experience conflicts. Shareholders in small and medium-sized enterprises (SMEs) are no exception. The vast majority of such conflicts are solved through continuing dialogue and negotiations between the shareholders. However, in some cases a conflict can be so severe that an amicable solution is not possible. In such cases the only alternative to dissolution of the company will typically be one or more of the shareholders leaving the company by selling their shares – but the question is at what price? The paper discusses shareholder conflicts and valuation of shares in exit situations in a company law context. Emphasis is on the regulation in the Danish Companies Act, but also the regulations contained in the company law statutes of the other Scandinavian countries are discussed. The paper covers regulation, general legal issues involved in the valuation of shares, regulation laid down in contract (shareholders’ agreement) or articles of association, and valuation methods. The paper argues that there should be some form of statutory regulation regarding the basic legal assumptions involved in valuing shares.
{"title":"Valuation of Shares in Small and Medium-Sized Enterprises - A Legal Perspective on Valuation with a Special Emphasis on Shareholder Conflicts","authors":"Martin Christian Kruhl","doi":"10.2139/ssrn.1709952","DOIUrl":"https://doi.org/10.2139/ssrn.1709952","url":null,"abstract":"Over time all close cooperative relationships will experience conflicts. Shareholders in small and medium-sized enterprises (SMEs) are no exception. The vast majority of such conflicts are solved through continuing dialogue and negotiations between the shareholders. However, in some cases a conflict can be so severe that an amicable solution is not possible. In such cases the only alternative to dissolution of the company will typically be one or more of the shareholders leaving the company by selling their shares – but the question is at what price? The paper discusses shareholder conflicts and valuation of shares in exit situations in a company law context. Emphasis is on the regulation in the Danish Companies Act, but also the regulations contained in the company law statutes of the other Scandinavian countries are discussed. The paper covers regulation, general legal issues involved in the valuation of shares, regulation laid down in contract (shareholders’ agreement) or articles of association, and valuation methods. The paper argues that there should be some form of statutory regulation regarding the basic legal assumptions involved in valuing shares.","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134149496","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the prevalence of informed trading in corporate bonds prior to takeover announcements. We find significant pre-announcement trading activities and price movements in target bonds, in directions consistent with the nature of pending information. Improved transparency in the bond markets achieved by the implementation of the Trade Reporting and Compliance Engine (TRACE) system reduces the incidence of informed trading. Further, there is some weak evidence that dealers affiliated with merger and acquisition advisors sell in anticipation of negative news, pointing to a possible channel of information leakage. Such negative news seems to be incorporated into bond prices no slower than into the target stocks.
{"title":"Informed Trading around Acquisitions: Evidence from Corporate Bonds","authors":"Simi Kedia, Xing (Alex) Zhou","doi":"10.2139/ssrn.1337803","DOIUrl":"https://doi.org/10.2139/ssrn.1337803","url":null,"abstract":"This paper examines the prevalence of informed trading in corporate bonds prior to takeover announcements. We find significant pre-announcement trading activities and price movements in target bonds, in directions consistent with the nature of pending information. Improved transparency in the bond markets achieved by the implementation of the Trade Reporting and Compliance Engine (TRACE) system reduces the incidence of informed trading. Further, there is some weak evidence that dealers affiliated with merger and acquisition advisors sell in anticipation of negative news, pointing to a possible channel of information leakage. Such negative news seems to be incorporated into bond prices no slower than into the target stocks.","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"112 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-02-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117278004","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The first part explains how the symbiotic relationship between subprime mortgages and the derivatives market, together with regulatory acquiescence caused the current credit crisis. The second part explains the Treasury's proposal to prevent another credit crisis by adopting an objectives-based regulatory structure. Finally, the third part offers a critique of the Treasury's proposed objectives-based regulatory structure and instead advocates in favor of a single consolidated regulator structure.
{"title":"Primetime for Subprime: Evaluation of the Treasury's Proposal to Prevent Another Credit Crisis","authors":"David Schneider","doi":"10.2139/ssrn.1313694","DOIUrl":"https://doi.org/10.2139/ssrn.1313694","url":null,"abstract":"The first part explains how the symbiotic relationship between subprime mortgages and the derivatives market, together with regulatory acquiescence caused the current credit crisis. The second part explains the Treasury's proposal to prevent another credit crisis by adopting an objectives-based regulatory structure. Finally, the third part offers a critique of the Treasury's proposed objectives-based regulatory structure and instead advocates in favor of a single consolidated regulator structure.","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"151 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133677213","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Agency problems in firms are prevalent because of a scarcity of wealthy principals with corporate governance ability, whom we call “restructuring specialists.” We investigate how this scarce resource, “agency cost-free capital,” is allocated. We show that the restructuring specialists may acquire blocks only in those states of the worls in which they can increase firm value the most, which corresponds to a takeover. Firms with dispersed ownership and firms with a financial intermediary as a blockholder can coexist, although they are otherwise identical. The moderl can explain differences in corporate ownership structures and restructuring mechanisms across economies.
{"title":"Blockholder Scarcity, Takeovers, and Ownership Structures","authors":"Matthias Kahl, Gary B. Gorton","doi":"10.2139/ssrn.796784","DOIUrl":"https://doi.org/10.2139/ssrn.796784","url":null,"abstract":"Agency problems in firms are prevalent because of a scarcity of wealthy principals with corporate governance ability, whom we call “restructuring specialists.” We investigate how this scarce resource, “agency cost-free capital,” is allocated. We show that the restructuring specialists may acquire blocks only in those states of the worls in which they can increase firm value the most, which corresponds to a takeover. Firms with dispersed ownership and firms with a financial intermediary as a blockholder can coexist, although they are otherwise identical. The moderl can explain differences in corporate ownership structures and restructuring mechanisms across economies.","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121891796","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The law has tended to deal with conscience at points of direct conflict between the individual and the state, but rights of conscience have also been invoked in a recent series of high-profile disputes between the individual and non-state associations. This trend is driven by a generally laudable commitment to minimize external interference with an individual's moral autonomy, but we must remember that the vibrancy of conscience depends in part on the vitality of the associations against which the right of conscience is currently being invoked. Missing from our conversation about conscience is a robust articulation of its relational dimension - i.e., the notion that the dictates of conscience are defined, articulated, and lived out in relationship with others. Conscience is shaped externally; our moral convictions have sources, and our sense of self comes into relief through interaction with others. Conscience, by its very nature, directs our gaze outward, to sources of formation, to communities of discernment, and to venues for expression. When the state closes down avenues by which persons live out their core beliefs - and admittedly, some avenues must be closed if peaceful co-existence is to be possible - there is a cost to the continued vitality of conscience. It is not just a vague allegiance to moral pluralism that should underlie our legal system's reluctance to restrict the independence of the myriad associations that make up the vast space between person and state; it is a commitment to freedom of conscience. Put simply, if our society is to facilitate an authentic and robust liberty of conscience, we cannot reflexively favor individual autonomy against group authority; we must also work to cultivate the spaces in which individuals come together to live out the shared dictates of conscience. This article is part of a bigger project outlining how the law can better support this relational dimension of conscience in a variety of areas. Here I explore the broad implications that conscience's relational dimension has for our understanding of corporations and their role in society. The exploration has three components: first, connecting liberty of conscience with the common good, explaining why institutional autonomy is an essential component of both; second, examining whether for-profit corporations may properly be considered venues for the communal expression and implementation of conscience, looking specifically at the capacity of corporations such as Wal-Mart to carve out moral identities as marketplace actors that diverge from the norms embraced by the broader society; and third, analyzing the tension between a corporation's moral identity and the exercise of conscience by dissenting community members, particularly employees.
{"title":"The Morally Distinct Corporation: Reclaiming the Relational Dimension of Conscience","authors":"Robert K. Vischer","doi":"10.2139/SSRN.1028881","DOIUrl":"https://doi.org/10.2139/SSRN.1028881","url":null,"abstract":"The law has tended to deal with conscience at points of direct conflict between the individual and the state, but rights of conscience have also been invoked in a recent series of high-profile disputes between the individual and non-state associations. This trend is driven by a generally laudable commitment to minimize external interference with an individual's moral autonomy, but we must remember that the vibrancy of conscience depends in part on the vitality of the associations against which the right of conscience is currently being invoked. Missing from our conversation about conscience is a robust articulation of its relational dimension - i.e., the notion that the dictates of conscience are defined, articulated, and lived out in relationship with others. Conscience is shaped externally; our moral convictions have sources, and our sense of self comes into relief through interaction with others. Conscience, by its very nature, directs our gaze outward, to sources of formation, to communities of discernment, and to venues for expression. When the state closes down avenues by which persons live out their core beliefs - and admittedly, some avenues must be closed if peaceful co-existence is to be possible - there is a cost to the continued vitality of conscience. It is not just a vague allegiance to moral pluralism that should underlie our legal system's reluctance to restrict the independence of the myriad associations that make up the vast space between person and state; it is a commitment to freedom of conscience. Put simply, if our society is to facilitate an authentic and robust liberty of conscience, we cannot reflexively favor individual autonomy against group authority; we must also work to cultivate the spaces in which individuals come together to live out the shared dictates of conscience. This article is part of a bigger project outlining how the law can better support this relational dimension of conscience in a variety of areas. Here I explore the broad implications that conscience's relational dimension has for our understanding of corporations and their role in society. The exploration has three components: first, connecting liberty of conscience with the common good, explaining why institutional autonomy is an essential component of both; second, examining whether for-profit corporations may properly be considered venues for the communal expression and implementation of conscience, looking specifically at the capacity of corporations such as Wal-Mart to carve out moral identities as marketplace actors that diverge from the norms embraced by the broader society; and third, analyzing the tension between a corporation's moral identity and the exercise of conscience by dissenting community members, particularly employees.","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123655394","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
China's entry into the world economy will affect not just how we act but how we think. It will affect especially what "business," "business law," and "business corporation" come to mean both in a transnational setting and in American law. The nature of American business law today still stands in the way of a wholly profit-maximizing approach to law or the world in general. But there is strong pressure, consistent with a general tendency in Western thought, to make business and corporate decision-making entirely manipulative and calculating and to eliminate the force of human value from it. This Youde Lecture traces the development of the business entity and the conception of its purpose in American business law - including late-twentieth century discussion in the American Law Institute - and describes contemporary efforts to change the legal statement of corporate purpose. It observes that the twentieth century struggle between "socialism" and "capitalism" did not end in utter elimination of the influence of the ideals that might be expressed in "socialism," including its Chinese form. The development of China's economic institutions and China's participation in world trade may have the surprising effect of blunting contemporary pressure to change American business law, and ultimately making the way we think fifty years hence more humane than it might otherwise have been.
{"title":"China, Business Law, and Finance - Accession to the World Trade Organization","authors":"Joseph Vining","doi":"10.2139/SSRN.1276348","DOIUrl":"https://doi.org/10.2139/SSRN.1276348","url":null,"abstract":"China's entry into the world economy will affect not just how we act but how we think. It will affect especially what \"business,\" \"business law,\" and \"business corporation\" come to mean both in a transnational setting and in American law. The nature of American business law today still stands in the way of a wholly profit-maximizing approach to law or the world in general. But there is strong pressure, consistent with a general tendency in Western thought, to make business and corporate decision-making entirely manipulative and calculating and to eliminate the force of human value from it. This Youde Lecture traces the development of the business entity and the conception of its purpose in American business law - including late-twentieth century discussion in the American Law Institute - and describes contemporary efforts to change the legal statement of corporate purpose. It observes that the twentieth century struggle between \"socialism\" and \"capitalism\" did not end in utter elimination of the influence of the ideals that might be expressed in \"socialism,\" including its Chinese form. The development of China's economic institutions and China's participation in world trade may have the surprising effect of blunting contemporary pressure to change American business law, and ultimately making the way we think fifty years hence more humane than it might otherwise have been.","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"368 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125696585","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The defining issue of corporate law is the intensity of judicial review of director actions. Over the last four decades, Delaware has developed an elaborate array of judicial standards and defined (and then rearranged) the process by which such litigation plays out. This piece explores that development using the framework set out in Sinclair Oil v. Levien, a classic of Delaware corporate jurisprudence. The first part tells the story of this case, the parties and their lawyers, in a way that seeks to provide a context for the discussion of fiduciary duty within a parent/subsidiary corporate group. Subsequent parts develop, with a graphic aid, the judicial space defined by the Sinclair court and filled in by judges over the ensuing decades and then analyzes the fiduciary duty of controlling shareholders Sinclair provides room for "selfish" ownership for a majority shareholder, so long as the minority shareholders receive a proportional benefit, a standard that at the time seemed to expand the discretion for majority shareholders. Viewed from a point decades later, this part of Sinclair has not proved to be a template for broader applications and other doctrines have developed to constrain the actions of majority shareholders. The intensity of judicial review of corporate decisions is the central issue of corporate law. Sinclair Oil Corp. v. Levien, a foundational decision in Delaware corporate jurisprudence from 1971, defines the space within which judicial review occurs with a format that still guides courts today. Along one boundary is deference by judges to decisions of business managers that is reflected in the business judgment rule. Along the other boundary is an intrusive judicial involvement by which the court asks the corporation or other defendant to prove the intrinsic fairness of the transaction. Since Sinclair the Delaware courts have filled in the space defined within those boundaries with a host of other decision points and varying degrees of judicial review, but it was Sinclair that provided the landscape. The case remains in wide use today in classrooms (and courtrooms) because it presents an attractive pedagogical package. Three challenged actions were before the court; for two of those actions the court adopted deference and for the other, intrinsic fairness. Hence, the outcome provides a structure that directs students to address the differences between the two standards. At the same time, the case raises the difficult policy question of how far a parent corporation can go in directing the actions of the subsidiary for the parent's own purposes. The Sinclair court takes a rather narrow definition of self-dealing, requiring that the parent get something at the expense of the subsidiary before a court will interfere with the directors' decision. This story unfolds in three parts. Section I introduces the parties and frames the issues presented in the case. Section II develops, with a graphic aid, the judicial space defined by the
公司法的决定性问题是对董事行为的司法审查力度。在过去的四十年里，特拉华州制定了一系列详尽的司法标准，并定义(然后重新安排)了此类诉讼的程序。本文利用辛克莱石油诉利维恩案(Delaware corporate jurisprudence的经典案例)的框架探讨了这一发展。第一部分讲述了这个案例的故事，当事人和他们的律师，试图为母公司/子公司企业集团内部的信义义务的讨论提供一个背景。随后的部分以图表的形式展开了辛克莱法院定义的司法空间，并在随后的几十年里由法官填补，然后分析了控股股东的信托义务。辛克莱为大股东的“自私”所有权提供了空间，只要小股东获得一定比例的利益，这一标准在当时似乎扩大了大股东的自由裁量权。从几十年后的一个角度来看，辛克莱的这一部分并没有被证明是一个更广泛应用的模板，其他理论已经发展到限制大股东的行为。公司决定的司法审查力度是公司法的核心问题。辛克莱石油公司诉利维恩案(Sinclair Oil Corp. v. Levien)是特拉华州1971年公司法理的一项基础性裁决，它定义了司法审查的空间，其格式至今仍指导着法院。沿一个边界是法官对业务经理决策的服从，这反映在业务判断规则中。另一个边界是一种侵入性司法介入，法院要求公司或其他被告证明交易的内在公平性。自辛克莱以来，特拉华州的法院填补了在这些边界内定义的空间，用了许多其他的决定点和不同程度的司法审查，但辛克莱提供了景观。这个案例至今仍在课堂上(和法庭上)广泛使用，因为它提供了一个有吸引力的教学方案。法院审理了三项有争议的诉讼;对于其中两个行为，法院采用了尊重，而对于另一个行为，法院采用了内在的公平。因此，结果提供了一个结构，指导学生解决两个标准之间的差异。与此同时，该案件提出了一个棘手的政策问题，即母公司在指导子公司为自己的目的采取行动方面能走多远。辛克莱法院对自利交易的定义相当狭隘，要求母公司以牺牲子公司的利益为代价获得某些东西，然后法院才会干预董事的决定。这个故事分三部分展开。第一部分介绍了当事人，并阐述了案件中提出的问题。第二部分以图形的形式发展了辛克莱法庭所定义的司法空间，并在随后的几十年里由法官填充。第三部分分析了控股股东的信义义务(相对于非控股董事和经理的信义义务)。辛克莱为大股东提供了“自私”所有权的空间，只要小股东获得相应的利益，这一标准在当时似乎扩大了大股东的自由裁量权。从几十年后的一个角度来看，辛克莱的这一部分并没有被证明是一个更广泛应用的模板，其他理论已经发展到限制大股东的行为。
{"title":"Mapping Judicial Review: Sinclair Oil v. Levien","authors":"R. Thompson","doi":"10.2139/SSRN.1161299","DOIUrl":"https://doi.org/10.2139/SSRN.1161299","url":null,"abstract":"The defining issue of corporate law is the intensity of judicial review of director actions. Over the last four decades, Delaware has developed an elaborate array of judicial standards and defined (and then rearranged) the process by which such litigation plays out. This piece explores that development using the framework set out in Sinclair Oil v. Levien, a classic of Delaware corporate jurisprudence. The first part tells the story of this case, the parties and their lawyers, in a way that seeks to provide a context for the discussion of fiduciary duty within a parent/subsidiary corporate group. Subsequent parts develop, with a graphic aid, the judicial space defined by the Sinclair court and filled in by judges over the ensuing decades and then analyzes the fiduciary duty of controlling shareholders Sinclair provides room for \"selfish\" ownership for a majority shareholder, so long as the minority shareholders receive a proportional benefit, a standard that at the time seemed to expand the discretion for majority shareholders. Viewed from a point decades later, this part of Sinclair has not proved to be a template for broader applications and other doctrines have developed to constrain the actions of majority shareholders. The intensity of judicial review of corporate decisions is the central issue of corporate law. Sinclair Oil Corp. v. Levien, a foundational decision in Delaware corporate jurisprudence from 1971, defines the space within which judicial review occurs with a format that still guides courts today. Along one boundary is deference by judges to decisions of business managers that is reflected in the business judgment rule. Along the other boundary is an intrusive judicial involvement by which the court asks the corporation or other defendant to prove the intrinsic fairness of the transaction. Since Sinclair the Delaware courts have filled in the space defined within those boundaries with a host of other decision points and varying degrees of judicial review, but it was Sinclair that provided the landscape. The case remains in wide use today in classrooms (and courtrooms) because it presents an attractive pedagogical package. Three challenged actions were before the court; for two of those actions the court adopted deference and for the other, intrinsic fairness. Hence, the outcome provides a structure that directs students to address the differences between the two standards. At the same time, the case raises the difficult policy question of how far a parent corporation can go in directing the actions of the subsidiary for the parent's own purposes. The Sinclair court takes a rather narrow definition of self-dealing, requiring that the parent get something at the expense of the subsidiary before a court will interfere with the directors' decision. This story unfolds in three parts. Section I introduces the parties and frames the issues presented in the case. Section II develops, with a graphic aid, the judicial space defined by the ","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-07-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123340297","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
WTO panels have not been called upon to resolve overly complex corporate law issues to date. However, the range of legal and economic relationships among corporate entities, and the varied situations in which such relationships may be relevant to the rights and obligations of Members under the WTO Agreements, suggest that such issues may one day arise squarely for consideration in WTO dispute settlement. This paper consists of a survey of selected WTO Agreements and jurisprudence examining the extent to which WTO law (i) gives effect to the existence of a corporate entity as a legal person that is separate from its owners; and (ii) takes into account the economic links that may exist between corporate entities which are "related" through various forms of ownership or control. We begin with a consideration of disputes involving Members' obligations under the GATT 1994, before turning to disputes involving obligations under the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and the Agreement on Subsidies and Countervailing Measures. Although these Agreements are generally not concerned with the legal identity of the "producer" of goods or the form of business organization or corporate structure of private parties involved in trade in goods, panels and the Appellate Body appear to have interpreted these Agreements in a manner that is sensitive to the economic realities of links of ownership and control among corporate entities, particularly where this is seen as necessary to prevent circumvention of Members' obligations. The final part of the paper considers the nature of Members' rights and obligations under the GATS as they apply to service suppliers that are corporate entities. In particular, we examine the rules for allocating service suppliers that are corporate entities to particular Members for purposes of the GATS.
{"title":"Corporate Entities and WTO Law","authors":"M. Healy","doi":"10.2139/ssrn.1151810","DOIUrl":"https://doi.org/10.2139/ssrn.1151810","url":null,"abstract":"WTO panels have not been called upon to resolve overly complex corporate law issues to date. However, the range of legal and economic relationships among corporate entities, and the varied situations in which such relationships may be relevant to the rights and obligations of Members under the WTO Agreements, suggest that such issues may one day arise squarely for consideration in WTO dispute settlement. This paper consists of a survey of selected WTO Agreements and jurisprudence examining the extent to which WTO law (i) gives effect to the existence of a corporate entity as a legal person that is separate from its owners; and (ii) takes into account the economic links that may exist between corporate entities which are \"related\" through various forms of ownership or control. We begin with a consideration of disputes involving Members' obligations under the GATT 1994, before turning to disputes involving obligations under the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and the Agreement on Subsidies and Countervailing Measures. Although these Agreements are generally not concerned with the legal identity of the \"producer\" of goods or the form of business organization or corporate structure of private parties involved in trade in goods, panels and the Appellate Body appear to have interpreted these Agreements in a manner that is sensitive to the economic realities of links of ownership and control among corporate entities, particularly where this is seen as necessary to prevent circumvention of Members' obligations. The final part of the paper considers the nature of Members' rights and obligations under the GATS as they apply to service suppliers that are corporate entities. In particular, we examine the rules for allocating service suppliers that are corporate entities to particular Members for purposes of the GATS.","PeriodicalId":106641,"journal":{"name":"Corporate Law: Corporate & Takeover Law","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-06-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131007270","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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