Business persons and lawyers have long debated whether a business corporation does or should have a purpose other than advancing shareholder interests. In a democratic, pluralist society, the issue of corporate purpose remains important and will not (and should not) go away. However adamantly divergent descriptive and prescriptive positions are held, it is healthy that, periodically at least, the debate is revisited and disagreements aired. Neither corporate law nor business practice demands an unequivocal or uniform resolution. Different businesses will continue to answer the corporate purpose question differently.
Early American business corporations were expected to advance a public-serving purpose. … Read more
Delaware corporate law differs from other areas where fiduciary obligations apply – such as agency, LLCs, partnerships, and trusts. Three distinct actors owe fiduciary duties – executive officers, directors, and controlling shareholders – and numerous aspects of their duties greatly differ. But Delaware corporate law is not unique in the way many believe. Conventional wisdom holds that, uniquely, corporate law’s standards of conduct (fiduciary duties) diverge from judicial standards of review, the latter being more deferential. Yet, the two sets of standards often converge and are identical. The supposed distinction is not uniformly accurate, and unenforceable standards of conduct may … Read more
Delaware has reigned as the preeminent corporate law jurisdiction in the United States for over a century, weathering the rivalry of eager state competitors (such as Maryland and Nevada) and the looming presence of – and occasional intervention by – the federal government. Various explanations have been provided as to why Delaware continues to dominate. And various assessments have been offered as to whether, overall, Delaware’s corporate law jurisprudence is beneficial or detrimental for investors. These explanations and assessments typically focus on what Delaware has done well over the years to retain its supremacy, not on what, deliberately or fortuitously, … Read more
In this blog post, I trace why my co-author Rob Ricca and I have concluded that the landmark 1986 Revlon ruling is, today, an insipid and remedially insignificant doctrine. Its overly exalted place in M&A law endures because it is wrongly regarded in narrow, silo-like doctrinal isolation, even though it can only be understood as one part of a legal landscape that has dramatically changed since the mid-1980s.
The iconic Revlon doctrine has been an assumed, accepted, and integral part of M&A law for almost three decades. In Revlon, the Delaware Supreme Court ruled that, in a corporate break-up sale, … Read more
Lyman Johnson is the Robert O. Bentley Professor of Law at Washington & Lee University School of Law.
A few weeks ago Chancellor Leo Strine, in a widely-heralded ruling, held that the business judgment rule standard of review applied to controlling shareholders in a self-dealing transaction if two conditions were met. From the outset, the transaction must be subject to the approval of both (i) an independent special committee complying with its fiduciary duties, and (ii) a majority of the minority shareholders in a fully-informed and non-coerced vote.
I argue that Chancellor Strine should not have used a business judgment … Read more