The Chancery Court’s opinion in Policemen’s Annuity and Benefit Fund of Chicago v. DV Realty Advisors LLC, C.A. No. 7204-VCN, 2012 WL 3548206 (Del. Ch. Aug. 16, 2012) is thought provoking for at least two reasons. The first is somewhat technical and concerns the relationship between a partnership agreement’s reference to “good faith” and the implied covenant of good faith. The second concerns what appears to be yet another Delaware permutation on the meaning of “good faith.”Due to the opinion’s treatment of the covenant, it seems possible (though hardly desirable) for two different standards of good faith to apply to the exercise of discretion under an operating agreement or partnership agreement – good faith as intended by the parties when they expressly subject discretion (or other conduct) to “good faith” and good faith as irrevocably present in any limited partnership or operating agreement per the LLC and LP statutes.Even more thought provoking is the opinion’s emphasis on the objective aspect of good faith. The court quotes the UCC definition of the concept and then uses that definition to make its determination on the merits. The opinion does not actually hold the UCC definition applicable but rather uses the definition for an a fortiori analysis. Nonetheless, the favorable reference to the UCC definition should give transactional lawyers pause. The objective notion of contractual good faith can occasion judicial second-guessing of the most important aspects of deals.
{"title":"Is the Delaware Court of Chancery Going 'Objective' on Us? Or Policemen’s Annuity and Benefit Fund of Chicago v. DV Realty Advisors LLC: More Delaware Permutations on Good Faith","authors":"Daniel S. Kleinberger","doi":"10.2139/SSRN.2143400","DOIUrl":"https://doi.org/10.2139/SSRN.2143400","url":null,"abstract":"The Chancery Court’s opinion in Policemen’s Annuity and Benefit Fund of Chicago v. DV Realty Advisors LLC, C.A. No. 7204-VCN, 2012 WL 3548206 (Del. Ch. Aug. 16, 2012) is thought provoking for at least two reasons. The first is somewhat technical and concerns the relationship between a partnership agreement’s reference to “good faith” and the implied covenant of good faith. The second concerns what appears to be yet another Delaware permutation on the meaning of “good faith.”Due to the opinion’s treatment of the covenant, it seems possible (though hardly desirable) for two different standards of good faith to apply to the exercise of discretion under an operating agreement or partnership agreement – good faith as intended by the parties when they expressly subject discretion (or other conduct) to “good faith” and good faith as irrevocably present in any limited partnership or operating agreement per the LLC and LP statutes.Even more thought provoking is the opinion’s emphasis on the objective aspect of good faith. The court quotes the UCC definition of the concept and then uses that definition to make its determination on the merits. The opinion does not actually hold the UCC definition applicable but rather uses the definition for an a fortiori analysis. Nonetheless, the favorable reference to the UCC definition should give transactional lawyers pause. The objective notion of contractual good faith can occasion judicial second-guessing of the most important aspects of deals.","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132213344","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}
Breuer Christoph, H. Dietl, Christian Weingaertner, Wicker Pamela
Choosing the legal structure of a sports institution is one of the key decisions that sports managers must make, in part because the legal structure influences the revenue composition of sports institutions. Based on platform theory and property rights theory, this paper suggests that membersO associations receive higher sponsorship revenues than private firms. This study empirically confirms this assumption for amateur sports with data from a survey of equestrian sports institutions in Germany.
{"title":"The Effect of a Sports Institution's Legal Structure on Sponsorship Income: The Case of Amateur Equestrian Sports in Germany","authors":"Breuer Christoph, H. Dietl, Christian Weingaertner, Wicker Pamela","doi":"10.2139/ssrn.2493702","DOIUrl":"https://doi.org/10.2139/ssrn.2493702","url":null,"abstract":"Choosing the legal structure of a sports institution is one of the key decisions that sports managers must make, in part because the legal structure influences the revenue composition of sports institutions. Based on platform theory and property rights theory, this paper suggests that membersO associations receive higher sponsorship revenues than private firms. This study empirically confirms this assumption for amateur sports with data from a survey of equestrian sports institutions in Germany.","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133692998","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}
Courts have historically denied claims that artist and their respective record label are fiduciaries to one another. The music business has changed since many of those early cases were decided. The 360 deal and its prevalent use in today’s music industry confirm this change. As the 360 deal quickly becomes the music industry standard in regards to artist-label contract agreements, courts and practitioners should use this backdrop to revisit the issue of finding a fiduciary duty within the artist-label relationship. 360 deals can invoke a fiduciary duty among artist and label because they have the potential to transform the relationship into a partnership. A partnership is defined as an association of two or more persons to carry on as co-owners of a business. Partnerships carry with them fiduciary obligations. If artist and label are found to be partners under a 360 deal, then, as a matter of law, they become fiduciaries. There are two primary elements in a partnership determination: profit sharing and joint control. The crux of a 360 deal is a profit sharing arrangement where both artist and label contribute time, capital, skills and effort to maximize the profitability of an artist’s brand. Under a 360 deal, artist and label arrange for the split of proceeds garnered from the artist's entire brand (not just the sale of physical recordings), as well as make provisions that affect the overall management of the brand. The prevailing notion is that a fiduciary duty will render the artist-label relationship inoperable. However, the fiduciary obligation of a partner will not only fit in today's music industry context, but help cure some of the industries perpetual grieveances as well. A fiduciary duty can bring balance to the artist-label relationship. It can also act as a deterrent to faulty royalty accounting practices.
{"title":"A Full 360: How the 360 Deal Challenges the Historical Resistance to Establishing a Fiduciary Duty Between Artist and Label","authors":"Douglas Okorocha, Esq","doi":"10.2139/ssrn.1707679","DOIUrl":"https://doi.org/10.2139/ssrn.1707679","url":null,"abstract":"Courts have historically denied claims that artist and their respective record label are fiduciaries to one another. The music business has changed since many of those early cases were decided. The 360 deal and its prevalent use in today’s music industry confirm this change. As the 360 deal quickly becomes the music industry standard in regards to artist-label contract agreements, courts and practitioners should use this backdrop to revisit the issue of finding a fiduciary duty within the artist-label relationship. 360 deals can invoke a fiduciary duty among artist and label because they have the potential to transform the relationship into a partnership. A partnership is defined as an association of two or more persons to carry on as co-owners of a business. Partnerships carry with them fiduciary obligations. If artist and label are found to be partners under a 360 deal, then, as a matter of law, they become fiduciaries. There are two primary elements in a partnership determination: profit sharing and joint control. The crux of a 360 deal is a profit sharing arrangement where both artist and label contribute time, capital, skills and effort to maximize the profitability of an artist’s brand. Under a 360 deal, artist and label arrange for the split of proceeds garnered from the artist's entire brand (not just the sale of physical recordings), as well as make provisions that affect the overall management of the brand. The prevailing notion is that a fiduciary duty will render the artist-label relationship inoperable. However, the fiduciary obligation of a partner will not only fit in today's music industry context, but help cure some of the industries perpetual grieveances as well. A fiduciary duty can bring balance to the artist-label relationship. It can also act as a deterrent to faulty royalty accounting practices.","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126741242","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}
In 2006, the Texas Legislature passed the first version of its successor to the Texas franchise tax, commonly referred to as the margin tax. Becoming effective on January 1, 2008, the margin tax will come as a surprise to many entities which previously avoided taxation under the franchise tax regime. Although touted as simpler version of its predecessor, the margin tax contains several traps for real estate clients that may not be apparent from a casual reading of the statute.
{"title":"Changing the Way Your Dirt is Taxed: Texas Margin Tax Pitfalls for Real Estate Practitioners","authors":"Benjamin F. Miller","doi":"10.2139/SSRN.1666290","DOIUrl":"https://doi.org/10.2139/SSRN.1666290","url":null,"abstract":"In 2006, the Texas Legislature passed the first version of its successor to the Texas franchise tax, commonly referred to as the margin tax. Becoming effective on January 1, 2008, the margin tax will come as a surprise to many entities which previously avoided taxation under the franchise tax regime. Although touted as simpler version of its predecessor, the margin tax contains several traps for real estate clients that may not be apparent from a casual reading of the statute.","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"92 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133683290","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 power and complexity of the single member limited liability company (“SMLLC”) comes from a conceptual contradiction: the conflation of owner and organization for tax purposes and the separation of owner and entity for non-tax, state law purposes. The contraction has significant practical consequences, which this article explores and illustrates, considering: • The SMLLC in federal court (single member not permitted to represent the LLC) • The IRS’s tortuous path to determining whether an SMLLC’s sole member is liable for the SMLLC’s unpaid employment taxes (yes; yes vindicated by the courts; then no, as a matter of policy) • Transfer taxes on a single member’s contribution of land to the member’s solely-owned LLC (maybe taxable, maybe not) • Whether the membership transfer restrictions built into LLC statutes in order to prevent the separate creditors of an LLC member from intruding into the business of a multi-member LLC ought to be applied to allow a sole member to shelter assets from the claims of the sole member’s legitimate creditors (under advisement by one state supreme court for more than a year) The article concludes that “practitioners must exercise great caution when working with an SMLLC, because, depending on which legal regime applies, the SMLLC may be as visible and substantial as a stone wall, or as diaphanous and subject to disappearance as the Cheshire Cat.”
{"title":"The Single Member Limited Liability Company as Disregarded Entity: Now You See it, Now You Don’t","authors":"Daniel S. Kleinberger, C. Bishop","doi":"10.2139/SSRN.1559401","DOIUrl":"https://doi.org/10.2139/SSRN.1559401","url":null,"abstract":"The power and complexity of the single member limited liability company (“SMLLC”) comes from a conceptual contradiction: the conflation of owner and organization for tax purposes and the separation of owner and entity for non-tax, state law purposes. The contraction has significant practical consequences, which this article explores and illustrates, considering: • The SMLLC in federal court (single member not permitted to represent the LLC) • The IRS’s tortuous path to determining whether an SMLLC’s sole member is liable for the SMLLC’s unpaid employment taxes (yes; yes vindicated by the courts; then no, as a matter of policy) • Transfer taxes on a single member’s contribution of land to the member’s solely-owned LLC (maybe taxable, maybe not) • Whether the membership transfer restrictions built into LLC statutes in order to prevent the separate creditors of an LLC member from intruding into the business of a multi-member LLC ought to be applied to allow a sole member to shelter assets from the claims of the sole member’s legitimate creditors (under advisement by one state supreme court for more than a year) The article concludes that “practitioners must exercise great caution when working with an SMLLC, because, depending on which legal regime applies, the SMLLC may be as visible and substantial as a stone wall, or as diaphanous and subject to disappearance as the Cheshire Cat.”","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"324 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124580738","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}
When a company’s business is not limited to satisfying only the local needs in the Member State, it is necessary to create a statute which is able to plan and carry out the reorganization of its business on a larger level. The completion and the improvement of the internal market throughout the Community means that barriers to trade should be removed, and that the structures of production must be adapted to the Community dimension also. This presupposes that companies from different Member States have the possibility of combining their potential by means of mergers. However, restructuring and cooperation operations involving companies give rise to many difficulties for example concerning legal barriers or tax problems. The approximation of Member States' company law by means of Directives based on Article 44 of the Treaty can deal with some of those difficulties, but does not, however, permit to companies from different legal systems to choose a form of company governed by a particular national law. The legal framework within which business must be carried on in the Community is still based largely on national laws and therefore no longer corresponds to the economic framework within which it must develop if the objectives set out in Article 18 of the Treaty are to be achieved. That situation forms a considerable obstacle to the creation of groups of companies from different Member States.
Since October 8th 2004, it became possible to establish a new and uniform company at EC level. Designed under its Latin name “Societas Europaea” and based on a unique constitution instead of being subject to different national systems, the SE company is in a unique legal position as it can move its seat, it maintains its full legal constitution without having to be dissolved and re-established. The SE Statute is described as a hybrid: half EU, half national. The Regulation creates a new business organization, which is regulated by the EC law, but refers in many situations to the domestic law of the Members States. The SE Regulation and the Directive on employees’ involvement are distinct but complementary to each other.
This is a study about the European Company SE, which is a supranational public limited company, the study aims at analysing the Structure and functioning of the SE as a new legal entity, as well as the different problems that may occur during the running of the company such as the impact of national laws on the SE Statute and tax obstacles. The study describes also employees’ involvement in the decision-making at board level.
{"title":"Societas Europaea","authors":"Sanaa Kadi","doi":"10.2139/ssrn.3799120","DOIUrl":"https://doi.org/10.2139/ssrn.3799120","url":null,"abstract":"When a company’s business is not limited to satisfying only the local needs in the Member State, it is necessary to create a statute which is able to plan and carry out the reorganization of its business on a larger level. The completion and the improvement of the internal market throughout the Community means that barriers to trade should be removed, and that the structures of production must be adapted to the Community dimension also. This presupposes that companies from different Member States have the possibility of combining their potential by means of mergers. However, restructuring and cooperation operations involving companies give rise to many difficulties for example concerning legal barriers or tax problems. The approximation of Member States' company law by means of Directives based on Article 44 of the Treaty can deal with some of those difficulties, but does not, however, permit to companies from different legal systems to choose a form of company governed by a particular national law. The legal framework within which business must be carried on in the Community is still based largely on national laws and therefore no longer corresponds to the economic framework within which it must develop if the objectives set out in Article 18 of the Treaty are to be achieved. That situation forms a considerable obstacle to the creation of groups of companies from different Member States.<br><br>Since October 8th 2004, it became possible to establish a new and uniform company at EC level. Designed under its Latin name “Societas Europaea” and based on a unique constitution instead of being subject to different national systems, the SE company is in a unique legal position as it can move its seat, it maintains its full legal constitution without having to be dissolved and re-established. The SE Statute is described as a hybrid: half EU, half national. The Regulation creates a new business organization, which is regulated by the EC law, but refers in many situations to the domestic law of the Members States. The SE Regulation and the Directive on employees’ involvement are distinct but complementary to each other.<br><br>This is a study about the European Company SE, which is a supranational public limited company, the study aims at analysing the Structure and functioning of the SE as a new legal entity, as well as the different problems that may occur during the running of the company such as the impact of national laws on the SE Statute and tax obstacles. The study describes also employees’ involvement in the decision-making at board level.","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"99 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121777248","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}
Adolf Berle and Gardiner Means famously declared in 1932 that a separation of ownership and control was a hallmark of large U.S. corporations, and their characterization of matters quickly became received wisdom. A series of recent papers has called the Berle-Means orthodoxy into question. This survey of the relevant historical literature acknowledges that the pattern of ownership and control in U.S. public companies is not monolithic. Nevertheless, a separation between ownership and control remains an appropriate reference point for analysis of U.S. corporate governance.
{"title":"Is Berle and Means Really a Myth?","authors":"B. Cheffins, Steven A. Bank","doi":"10.2139/ssrn.1352605","DOIUrl":"https://doi.org/10.2139/ssrn.1352605","url":null,"abstract":"Adolf Berle and Gardiner Means famously declared in 1932 that a separation of ownership and control was a hallmark of large U.S. corporations, and their characterization of matters quickly became received wisdom. A series of recent papers has called the Berle-Means orthodoxy into question. This survey of the relevant historical literature acknowledges that the pattern of ownership and control in U.S. public companies is not monolithic. Nevertheless, a separation between ownership and control remains an appropriate reference point for analysis of U.S. corporate governance.","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-03-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115801594","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 essay examines the capital accounting of Kovacik v. Reed, leading authority addressing allocation of losses between a partner who contributed only property and another who contributed only services. Kovacik posits that such parties having agreed to share profits equally have implicitly agreed their contributions were of equal value. This essay shows that such an agreement would not produce the result Kovacik reaches. The Kovacik result is instead produced by the following implausible implicit agreement between the parties: The value of the services provided by the services partner to be treated as a capital contribution equals the amount the partnership loses on a cash basis. The more the firm ultimately loses, the more those services are agreed to be worth. Prior work by Bainbridge identifies a manifestation of a problem in this context referenced as overinvestment in the financial economics literature. This essay further demonstrates the Kovacik result can create a complementary underinvestment problem.
{"title":"Services as Capital Contributions: Understanding Kovacik v. Reed","authors":"R. R. Barondes","doi":"10.2139/SSRN.1056921","DOIUrl":"https://doi.org/10.2139/SSRN.1056921","url":null,"abstract":"This essay examines the capital accounting of Kovacik v. Reed, leading authority addressing allocation of losses between a partner who contributed only property and another who contributed only services. Kovacik posits that such parties having agreed to share profits equally have implicitly agreed their contributions were of equal value. This essay shows that such an agreement would not produce the result Kovacik reaches. The Kovacik result is instead produced by the following implausible implicit agreement between the parties: The value of the services provided by the services partner to be treated as a capital contribution equals the amount the partnership loses on a cash basis. The more the firm ultimately loses, the more those services are agreed to be worth. Prior work by Bainbridge identifies a manifestation of a problem in this context referenced as overinvestment in the financial economics literature. This essay further demonstrates the Kovacik result can create a complementary underinvestment problem.","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"105 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-12-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123673372","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}
Between 1995 and 2001, the influential National Conference of Commissioners on Uniform State Laws (NCCUSL) promulgated the Uniform Partnership Act (1997) (RUPA), the Uniform Limited Partnership Act (2001) (ULPA (2001)) and the Uniform Limited Liability Company Act (1996) (ULLCA). Those uniform acts, which have been adopted by numerous state legislatures, contain essentially identical fiduciary duty provisions, and those provisions are badly flawed. Fiduciary duties in the three acts reflect a pro-management bias that facilitates managers' pecuniary interest in constructing inefficient transactions with the entity's investors. The default standards themselves, which are likely to govern most situations, are inefficiently lax and limited, and the opt out provisions, which permit the parties within broad limits to re-make the default standards of care and loyalty, fail to facilitate fully informed bargaining between managers and investors respecting the nature of fiduciary duties, making it likely that parties will misperceive and misprice the fiduciary duties. See Rutheford B Campbell, Bumping Along the Bottom: Abandoned Principles and Failed Fiduciary Standards in Uniform Partnership and LLC Statutes (Apr. 6, 2007), available at SSRN: http://ssrn.com/abstract=978935. The recently promulgated Revised Uniform Limited Liability Company Act (RULLCA) offered NCCUSL the opportunity to begin to correct its past mistakes regarding the fiduciary duties applicable to managers of unincorporated business entities. Unfortunately, the Commissioners squandered this opportunity and, once again in RULLCA, enacted duties that are poorly designed and bound to lead to inefficient and unfair outcomes. Like the prior uniform acts, RULLCA's fiduciary provisions will facilitate managers' (or managing members') exploitation of information asymmetries and their desire and ability to construct and profit from inefficient, unfair management arrangements with the owners of LLCs. RULLCA contains many of the same misdirected fiduciary duty notions that plague its predecessor uniform acts, although the Commissioners in RULLCA did make a sensible adjustment to the duty of loyalty standards. Any progress in that regard, however, is more than offset by the adoption of the business judgment rule as a part of an awkward, statutory framework for RULLCA's duty of care. Incorporating the business judgment rule into RULLCA's standard of care will be confusing to LLC parties and to courts, which in turn will increase transaction costs and the probability of unexpected and unintended outcomes. Even more importantly, the adoption of a business judgment standard will reduce managers' (or managing members') standard of care to a level that is even more lax and inefficient than the present gross negligence standard that one finds in RUPA, ULPA (2001) and ULLCA. This situation will be made substantially worse if - as seems highly likely - courts interpreting RULLCA's business judgment standard
1995年至2001年间，颇具影响力的全国统一州法委员会议(NCCUSL)颁布了《统一合伙法》(1997年)、《统一有限合伙法》(2001年)和《统一有限责任公司法》(1996年)。许多州立法机关通过了这些统一的法案，其中包含了基本相同的受托责任条款，而这些条款存在严重缺陷。这三个法案中的受托责任反映了一种有利于管理层的偏见，这种偏见促进了管理者在与实体投资者进行低效交易时的金钱利益。可能适用于大多数情况的默认标准本身是无效的松散和有限的，而允许各方在广泛限制范围内重新制定谨慎和忠诚的默认标准的选择退出条款，未能促进管理人员和投资者之间充分知情的谈判，尊重信托义务的性质，使各方有可能误解和错误定价信托义务。参见Rutheford B Campbell，《沿着底部颠簸:统一合伙和有限责任公司法规中被抛弃的原则和失败的信托标准》(2007年4月6日)，可在SSRN: http://ssrn.com/abstract=978935。最近颁布的修订统一有限责任公司法(RULLCA)为NCCUSL提供了一个机会，开始纠正其过去在适用于非法人企业实体经理的信托义务方面的错误。不幸的是，委员们浪费了这个机会，并再次在RULLCA中制定了设计不良的关税，必然会导致效率低下和不公平的结果。与之前的统一法案一样，RULLCA的受托条款将促进管理者(或管理成员)利用信息不对称，以及他们与有限责任公司所有者建立低效、不公平管理安排并从中获利的愿望和能力。RULLCA包含了许多同样的误导信义义务概念，这些概念困扰着它的前身统一法案，尽管RULLCA的专员确实对忠诚义务标准做出了明智的调整。然而，在这方面取得的任何进展，都被采用商业判断规则作为RULLCA注意义务的尴尬法定框架的一部分所抵消。将商业判断规则纳入RULLCA的注意标准将使有限责任公司当事人和法院感到困惑，这反过来将增加交易成本和意外和非预期结果的可能性。更重要的是，商业判断标准的采用将把管理者(或管理成员)的谨慎标准降低到一个比目前在RUPA、ULPA(2001)和ULLCA中发现的严重疏忽标准更为宽松和低效的水平。如果法院解释RULLCA的商业判断标准转向特拉华州普通法的指导，这种情况将会变得更糟——这似乎是很有可能的。特拉华州在公司信义义务问题上的判例，特别是在注意义务问题上，不仅极其混乱和不必要的复杂，而且过于宽松，过于有利于管理层，效率低下。在这种环境下，在RULLCA下运营的有限责任公司的经理(或管理成员)可以享受默认规则，基本上使他们免于任何注意义务，并选择退出特权，这将进一步使他们能够与投资于其有限责任公司的人进行更低效和不公平的交易。这是一个具有一定经济重要性的问题。以前的统一法案的历史表明，许多州立法机构将考虑采用RULLCA，并将随着时间的推移为成千上万的非法人商业实体提供法律框架，这些实体是我们国民经济的重要组成部分。州立法机构在考虑《美国法律与环境保护法》时——希望在对法律改革感兴趣的律师和法律学者的协助和指导下——应该拒绝《美国法律与环境保护法》的信义义务标准，而采用一种促进公平和有效结果的信义义务制度。这反过来又要求各州采用充分知情的各方——有限责任公司所有者及其经理或管理成员——在大多数情况下会同意的注意义务和忠诚义务条款。各国还应调整《RULLCA》的选择退出条款，以促进各方在同意重新制定法定信义义务时充分了解情况。
{"title":"The 'New' Fiduciary Standards under the Revised Uniform Limited Liability Company Act: More Bottom Bumping from NCCUSL","authors":"Rutheford B. Campbell","doi":"10.2139/ssrn.1023976","DOIUrl":"https://doi.org/10.2139/ssrn.1023976","url":null,"abstract":"Between 1995 and 2001, the influential National Conference of Commissioners on Uniform State Laws (NCCUSL) promulgated the Uniform Partnership Act (1997) (RUPA), the Uniform Limited Partnership Act (2001) (ULPA (2001)) and the Uniform Limited Liability Company Act (1996) (ULLCA). Those uniform acts, which have been adopted by numerous state legislatures, contain essentially identical fiduciary duty provisions, and those provisions are badly flawed. Fiduciary duties in the three acts reflect a pro-management bias that facilitates managers' pecuniary interest in constructing inefficient transactions with the entity's investors. The default standards themselves, which are likely to govern most situations, are inefficiently lax and limited, and the opt out provisions, which permit the parties within broad limits to re-make the default standards of care and loyalty, fail to facilitate fully informed bargaining between managers and investors respecting the nature of fiduciary duties, making it likely that parties will misperceive and misprice the fiduciary duties. See Rutheford B Campbell, Bumping Along the Bottom: Abandoned Principles and Failed Fiduciary Standards in Uniform Partnership and LLC Statutes (Apr. 6, 2007), available at SSRN: http://ssrn.com/abstract=978935. The recently promulgated Revised Uniform Limited Liability Company Act (RULLCA) offered NCCUSL the opportunity to begin to correct its past mistakes regarding the fiduciary duties applicable to managers of unincorporated business entities. Unfortunately, the Commissioners squandered this opportunity and, once again in RULLCA, enacted duties that are poorly designed and bound to lead to inefficient and unfair outcomes. Like the prior uniform acts, RULLCA's fiduciary provisions will facilitate managers' (or managing members') exploitation of information asymmetries and their desire and ability to construct and profit from inefficient, unfair management arrangements with the owners of LLCs. RULLCA contains many of the same misdirected fiduciary duty notions that plague its predecessor uniform acts, although the Commissioners in RULLCA did make a sensible adjustment to the duty of loyalty standards. Any progress in that regard, however, is more than offset by the adoption of the business judgment rule as a part of an awkward, statutory framework for RULLCA's duty of care. Incorporating the business judgment rule into RULLCA's standard of care will be confusing to LLC parties and to courts, which in turn will increase transaction costs and the probability of unexpected and unintended outcomes. Even more importantly, the adoption of a business judgment standard will reduce managers' (or managing members') standard of care to a level that is even more lax and inefficient than the present gross negligence standard that one finds in RUPA, ULPA (2001) and ULLCA. This situation will be made substantially worse if - as seems highly likely - courts interpreting RULLCA's business judgment standard ","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130168950","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}
D. Aldrighi, Alessandro Vinícius Marques de Oliveira
This paper aims at evaluating the influence of ownership and control concentration as well as of characteristics of the controlling shareholders on the performance of limited liability companies. To tackle this objective, a panel analysis is carried out relying on data over the period 1997-2002, compiled from financial and ownership structure reports firms in Brazil are required to file to the stock market regulator. The main findings are the following: (1) high voting rights by the largest ultimate shareholder are negatively associated with firms' returns on assets, vindicating the thesis of minority shareholders' expropriation by controlling shareholders; (2) the presence of either pyramids or non-voting right shares has a significant negative impact on the largest firms' performance; and (3) among the largest corporations, those whose largest ultimate shareholder is a foreign investor tend to yield higher returns on assets than those controlled by families while pyramid ownership structures render them systematically under-performing. These results are in accordance with the literature that associates large voting power, pyramidal schemes, non-voting right shares, and weak disclosure with expropriation of outsider investors.
{"title":"The Influence of Ownership and Control Structures on the Firm Performance: Evidence from Brazil","authors":"D. Aldrighi, Alessandro Vinícius Marques de Oliveira","doi":"10.2139/ssrn.972615","DOIUrl":"https://doi.org/10.2139/ssrn.972615","url":null,"abstract":"This paper aims at evaluating the influence of ownership and control concentration as well as of characteristics of the controlling shareholders on the performance of limited liability companies. To tackle this objective, a panel analysis is carried out relying on data over the period 1997-2002, compiled from financial and ownership structure reports firms in Brazil are required to file to the stock market regulator. The main findings are the following: (1) high voting rights by the largest ultimate shareholder are negatively associated with firms' returns on assets, vindicating the thesis of minority shareholders' expropriation by controlling shareholders; (2) the presence of either pyramids or non-voting right shares has a significant negative impact on the largest firms' performance; and (3) among the largest corporations, those whose largest ultimate shareholder is a foreign investor tend to yield higher returns on assets than those controlled by families while pyramid ownership structures render them systematically under-performing. These results are in accordance with the literature that associates large voting power, pyramidal schemes, non-voting right shares, and weak disclosure with expropriation of outsider investors.","PeriodicalId":431428,"journal":{"name":"Corporate Law: LLCs","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121098221","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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