Rule 10b-5, the federal antifraud catch-all, applies to both public and private company securities. Yet the voluminous case law, and the related scholarly literature, has focused primarily on public corporations and markets.
This state of the world sufficed for a time. Most corporations of significant size had publicly-traded stock and faced the threat of securities class actions. By contrast, private corporations generally issued stock through private placements to sophisticated investors, and there was little secondary trading in their stock. Startups typically were acquired or went public within a few years, and valuations did not surpass, or even approach, the … Read more
Regulatory arbitrage refers to structuring activity to take advantage of gaps or differences in regulations or laws. Examples include everything from tax shelters and shadow banking to the cross-border mobility of corporations. Scholarly discussion of regulatory arbitrage has tended to focus on possible solutions: harmonization, conflicts-of-law rules, and anti-avoidance regimes.
In a new paper, forthcoming in the European Business Organization Law Review, I focus instead on developing a better understanding of the limits to regulatory arbitrage. Given the benefits to companies that engage in it, why don’t we see more regulatory arbitrage? What constrains it? The most notable past … Read more
Corporate law and governance are complex and continually changing. Yet, broadly speaking, throughout the 20th century corporate law developed with a focus on the allocation of power between shareholders and boards of directors. And, notwithstanding significant ambiguity and dissent, the dominant view that has emerged and remained relatively stable sees corporate law in predominantly economic terms and, specifically, as focused on shareholder value.
At the beginning of the 21st century, legal developments at the federal and state level have arisen that diverge from a narrow view of corporate law as serving primarily or only to order private financial interests. … Read more
A few years ago, signs of change started to appear in the startup world. Media headlines began reporting battles between regulators and Uber and Airbnb. Sharing economy companies faced worker classification issues, and fintech companies bumped up against securities regulation, lending laws, and licensing requirements. Former politicians and government aides joined startup boards. A top-tier venture capital firm created the first policy and regulatory affairs group to help its portfolio companies navigate laws affecting their businesses and foster contacts with policy makers, regulators, and investors.
In a forthcoming book chapter, available here, I describe the increasing importance of regulatory … Read more
In our new article, available here, we examine what we term “regulatory entrepreneurship”: companies pursuing a line of business in which changing the law is a significant part of the business plan. Regulatory entrepreneurship is not a new phenomenon, but it has become increasingly salient in recent years, as a host of high-profile companies – from startups such as Airbnb, DraftKings, and Uber to public companies such as Tesla and Alphabet (formerly Google) – have adopted this strategy. These companies, and other regulatory entrepreneurs, have spent enormous amounts of resources pursuing lines of business that reside in legal gray … Read more
The role of money and business interests in politics continues to stir controversy. As the nation begins another presidential cycle that is expected to break spending records, we will likely hear analysts argue that the Supreme Court’s decision five years ago in Citizens United v. FEC opened the floodgates by allowing unlimited independent political expenditures from corporate treasuries. A series of calls for reform has followed the decision, including the recent open letter published by former SEC officials asking the agency to require disclosure of corporate political spending. These important issues of our time are rooted in a much … Read more
The following post comes to us from Elizabeth Pollman, Associate Professor, Loyola Law School, Los Angeles, and is based on her forthcoming article in the Minnesota Law Review entitled “A Corporate Right to Privacy.” The full paper is available here.
The debate over the scope of constitutional protections for corporations has heated up with law scholars from a variety of fields weighing in on Citizens United and Hobby Lobby. Despite the volume of commentary and analysis on these important cases and the issues they raise, other areas concerning the nature and scope of corporate rights have been left … Read more