The work of Columbia Law School Professor Kate Judge appears in the list of twelve best corporate and securities law articles in 2015, based on a poll conducted by the Corporate Practice Commentator. Teachers in corporate and securities law were asked to select the best corporate and securities articles from a list of articles published and indexed in legal journals during 2015. More than 540 articles were on the list. Professor Judge was selected for her article Intermediary Influence appearing in the University of Chicago Law Review.… Read more
Intra-corporate dispute (ICD) arbitration may cover a wide range of disputes between shareholders, between shareholders and the company, and between shareholders and third parties such as the company directors. ICD arbitration has been practiced in the US for many years for resolving disputes both in non-listed and listed companies. It has also been used for shareholder claims for breach of fiduciary duty against the company’s directors in a takeover bid (tender offer). In my paper, I argue for the UK to facilitate ICD arbitration more widely and, in particular, for UK listed companies. However, I also discuss that although the … Read more
A corporate inversion involves the relocation of a corporation’s legal domicile to a lower-tax nation (host country) while retaining its material operations in its higher-tax country of origin (home country). Corporations have been engaging in inversions for over three decades. The first inversion in 1982 occurred when Louisiana-based construction firm McDermott International converted one of its cash-rich Panama-based subsidiaries into the new parent firm, thereby paying much lower income taxes.
Corporate inversions have become headline news again in the US. Last year, US-based pharmaceutical company Pfizer announced a merger with Ireland-based Allergan. Pfizer expected to reduce its effective tax rate … Read more
Global business puts pressure on geographically limited courts. U.S. courts, for instance, can reach only defendants with contacts with the forum territory, usually the specific U.S. state in which the court is located. But litigation may be brought against part of a multinational business that has separately organized entities in different countries. Often the local subsidiary has direct contacts, but the plaintiffs want to sue the absent parent as well. Can they? The somewhat unsatisfactory answer is that it depends. Often it depends on whether the local subsidiary’s contacts with the forum territory “count” as those of the parent company. … Read more
Corporate governance scholarship has long considered the problems that arise in public companies with dispersed ownership. But the automaker Volkswagen does not suffer from a dispersed ownership structure. In fact, it has several strong and highly active owners. The Porsche and Piëch families have been involved with the company for many years and own 31.5% of Volkswagen’s equity. The German state where the company is headquartered, Lower Saxony, holds 12.4%, and an outside investor, Qatar Holding, owns 15.4%. With such powerful economic incentives in not one but three actors, management should have been subject to the kind of exacting oversight … Read more
The ‘Twin Peaks’ method of financial system regulation is widely regarded as the leading model for the regulation of a country’s financial system. Australia was the first to adopt the model in 1997, has been using it the longest, and fared the best among the G20 during the global financial crisis. As a result, Australia’s Twin Peaks model is being exported around the globe.
The model was first proposed by an Englishman, Dr Michael Taylor, in 1994. So-called because it proposes two, specialist, mega-regulators: one charged with the maintenance of financial system stability (ensuring banks don’t end-up bankrupt), and … Read more
Columbia Law School is looking for an Editor-at-Large to oversee and administer the Columbia Law School Blue Sky Blog. The Blog, now completing its third year, has grown rapidly and become one of the most read sources of current information and opinion on corporate law, securities law, and financial regulatory issues, including white collar crime, enforcement, antitrust, restructuring and kindred topics. The Blog’s content presents legal developments and insights from a range of sources, including practitioners, academics and regulatory bodies. A new post is generally published at least once every weekday and the Blog also highlights important news developments in … Read more
Herd behavior is a widely used notion met in different contexts and disciplines, from neurology and zoology to sociology, psychology, economics and finance. In economics and finance the term herd behavior usually suggests the process where agents tend to imitate each other’s actions and/or base their decisions upon the actions of others. This behavior may not always indicate irrational agents. For instance, market participants may infer information from actions of previous participants, investors may react to the arrival of fundamental information or analysts and institutional investors may herd in order to protect their reputation. For example, Bikhchandani and Sharma (2001) … Read more
In § 1502 of Dodd-Frank, Congress instructed the SEC to draft rules requiring public companies to disclose their use of “conflict minerals” originating in and around the Democratic Republic of the Congo (DRC). Coined the Conflict Minerals Rule, the statute is based on the notion that investor accountability paves the way for socially conscious corporate behavior. The suspicion was that money from U.S. companies was flowing to warlord-controlled mines in the region and thereby fueling human rights abuses by such groups. The hope was that improved transparency ushered in by the Rule would cause companies to turn off the spigot.… Read more
A core focus of the activities of the International Organization of Securities Commissions (IOSCO) is to develop and work towards implementing consistent standards of securities regulation throughout the world. Another of its important goals is to enhance the enforcement capabilities of its members. To this end in 2002 IOSCO formulated its Multilateral Memorandum of Understanding Concerning Consultation and Cooperation and the Exchange of Information (MMoU). This MMoU simplifies the process by which securities regulators can obtain information from each other for enforcement purposes. IOSCO has 124 members comprising the securities regulators from countries representing almost all of the world’s capital … Read more
Many large firms – Google, Alibaba and Fitbit to name a few — have multiple voting share structures (MVS) in which the firm issues two or more classes of shares, one to the public and the other to insiders (typically founders, promoters, management, private investors or board members). The shares that are issued publicly have limited voting rights while the class issued to insiders carries more voting rights, allowing them to control the company. The one-to-one ratio of votes per share prevalent in non-MVS firms does not exist.
MVS undermine corporate governance standards because outside shareholders carry a disproportionate share … Read more
The Committee on Foreign Investment in the United States (CFIUS) is an interagency organization charged with identifying potential national security risks posed by foreign acquisitions of U.S. businesses and mitigating those risks as necessary. If CFIUS determines that the national security risks cannot be mitigated adequately, it recommends that the U.S. president block the transaction. CFIUS’s authority extends both to proposed transactions and to transactions that have already been completed.
On February 19, 2016, CFIUS issued the unclassified version of its annual report to Congress. The report, which focuses on CFIUS activity during calendar year 2014, identifies key developments relating … Read more
In the aftermath of the financial crisis of 2008-09 there was a widespread perception that the opacity of derivatives exposures held by major financial institutions contributed to the build-up of systemic risk. As a result, the G-20 leaders convened in 2009 in Pittsburgh and decided to reform derivatives markets, with a key ingredient of these reforms being the improvement of pre-trade transparency in these markets. The essence of this particular reform was that whoever wished to trade a derivative contract should be able to more easily observe and trade at the best available price. The United States implemented this reform … Read more
The recent market turmoil has forced VC firms and other private company investors to examine closely the real possibility of seeking financing at a lower valuation – what is often referred to as a “down round.” More recently, the New York Times observed in January, “The unicorn1 wars are coming, as the downturn in the market will force these onetime highfliers to seek money at valuations below their earlier billion-dollar-plus levels[.]”
While down-round financings impact all private company stakeholders, one demographic that can become particularly disaffected are employees – often, the one group of stakeholders that start-ups cannot afford … Read more
One of the most remarkable features of US corporate law–at least, from the perspective of a foreign scholar–is the power given to the board of directors. Under current US corporate law (especially, in Delaware), the authority of the board of directors is not in significant question. Several arguments have been given to explain this reality; and various policy justifications may even support the lack of substantive checks on board discretion.
From the shareholders’ perspective, this authority of the board of directors means that they will virtually have no powers to intervene in the business affairs of the corporation, even with … Read more
It has been three years since the first wave of registrants applied to be swap dealers (SDs) with the Commodity Futures Trading Commission (CFTC). Since then, SDs have focused on modifying their operations and building compliance programs that accommodate the flurry of new rules issued by the agency. Despite these efforts, SDs continue to struggle with a lack of clarity in the rules and with a multitude of no-action letters that delay compliance with certain requirements (e.g., related to reporting and inter-affiliate clearing).
Further complicating matters for SDs, global coordination has been a challenge. Pulling back somewhat from previous … Read more
Last year, the Securities and Exchange Commission (SEC) made major progress in completing its rulemaking mandates under the Jumpstart Our Business Startups Act (JOBS Act) and the Dodd-Frank Act. Additionally, Congress enacted the Fixing America’s Surface Transportation Act (FAST Act), which made a number of key changes to federal securities laws, including creating new accommodations for initial public offerings (IPOs) by emerging growth companies (EGCs), private resales of securities and reduced or streamlined disclosures for public companies.
Many of these changes became effective in 2015 or are expected to become effective in 2016, leading to the prospect of both new … Read more
A perennial concern of policy makers around the world is the construction of a framework of financial regulation that is effective, efficient, and—most importantly—conducive to the emergence of deep and liquid financial market. While the channels through which financial development influences economic growth are not yet fully understood, there is broad agreement that developed financial markets are instrumental in fostering economic growth. Thus, the importance of regulatory design for the prosperity of nations can hardly be overestimated.
Essential ingredients of any regulatory regime governing the capital markets are rules mandating the disclosure of financial information, both transaction-specific and ongoing, … Read more
In 2003 Carnival merged with Princess Cruises to form the largest cruise ship company in the world, now known as Carnival Corp. & PLC. Prior to the merger, Carnival was listed on the New York Stock Exchange and Princess was listed on the London Stock Exchange. In order for shareholders of the merging companies to avoid divestiture, the merger was accomplished through a dual-listing agreement. Unlike with a traditional merger, in which either one company absorbs the other company or both companies are absorbed into a newly-created third company, with a dual-listing merger the merging companies remain separate legal entities.… Read more