Symposium, JOBS Act: The Terrible Twos – General Solicitation & Crowdfunding, the Next Frontier of Securities RegulationOn March 24th, 2014, The Fordham Corporate Law Center and the Fordham Journal of Corporate & Financial Law will hold its 19th Annual Symposium focusing... Read More
On Friday, September 19, people from Beijing to New York could be seen celebrating the success of the Alibaba IPO. For months leading up to the offering, analysts and commentators had cautioned U.S. investors to be wary of the Chinese e-commerce giant. The skepticism was largely due to questions concerning the company’s corporate governance structure, known as a variable interest entity or “VIE”. The initial numbers and the subsequent celebrations, however, suggest that investors are not concerned. The stock (ticker symbol “BABA”) finished the trading day at $93.89, 38% above the initial set price of $68 and well above the average 26% IPO jump for U.S. listed technology and internet deals this year. This puts the company’s market value at $231 billion and, depending on whether underwriters exercise their stock options over the next couple of weeks, could make Alibaba the largest ever IPO in U.S. history. Despite the seemingly successful offering, however, the jury is still out on the soundness of individuals investing in VIEs, as it is yet to be seen whether the resurfaced questions surrounding the structure will spark any action by regulators.
Commissioner Daniel M. Gallagher: The Securities and Exchange Commission – The Next 80 Years: The 15th Annual A.A. Sommer Jr. Lecture
Tonight, I’d like to discuss a topic that I believe would have been of critical interest to Al Sommer: the future – the next 80 years – at the SEC. Over the next eight decades, the SEC’s fate will be intertwined, as it always has been, with that of our capital markets. Despite robust market activity over the last few years, the U.S. capital markets, the manner in which they are regulated, and the SEC itself collectively face an existential threat: the encroaching imposition of so-called prudential regulation on markets wholly unsuited to that regulatory paradigm. To put it simply, the manner in which the Commission responds to this encroachment, as well as to the unprecedented, decade-long burden placed upon us by a hundred Dodd-Frank Act mandates, will determine whether the SEC remains as relevant in the 21st century as it was in the 20th – and more importantly, whether our capital markets, still the best in the world despite an onslaught of self-inflicted frictions, can continue to be the drivers of economic growth and prosperity that they have been for so long.
In this chapter we analyze ancient Rome’s law of business entities from the perspective of asset partitioning, by which we mean the delimiting of creditor collection rights based on the distinction between business assets and personal assets. Asset partitioning, which is an essential legal attribute of modern business forms such as the partnership and the business corporation, reduces borrowing costs by simplifying credit-risk assessment and expediting insolvency proceedings. We find that ancient Roman business arrangements, such as the societas (very loosely, “partnership”) and the slave-run business endowed by the slaveowner with a peculium (a sum of capital), did not give business creditors the first claim to business assets, making these forms of organization non-entities according to the criterion of asset partitioning. It appears that the only true legal entity used to form profit-seeking firms was the societas publicanorum, which roughly resembled the modern limited …
Why is this decision significant? Without credit-bidding, vulture funds may have a difficult time profiting from their investments in situations where they hope to use credit-bidding to acquire a debtor’s assets in a Section 363(b) sale. Section 363(b) of the bankruptcy code permits a debtor to sell some or all of its assets outside the normal course of business during a Chapter 11 reorganization. Section 363(k) allows secured creditors to use the value of their claim as credit in purchasing a debtor’s assets during a 363(b) sale. While credit-bidding was originally intended to protect secured creditors, it has been used as an offensive weapon by vulture funds aiming to profit off of secured debt acquired at discounted rates. Section 363(k)(b), however, allows bankruptcy courts to limit or eliminate the right to credit bid for cause. In Fisker, the bankruptcy court saw an uncompetitive auction as being enough cause to limit the amount Hybrid could credit-bid.Now is an interesting time to home in on bankruptcy cases where credit-bidding is a focal point, as it is likely that a big decision will soon resolve many of the questions the Fisker court left open.
When negotiating to settle tort suits, defendants and their liability insurers often face a collective-action problem. The problem arises when the trial outcome is uncertain and the potential damages exceed the insurance policy limit. Settling such a lawsuit replaces an uncertain potential damages award with a smaller, certain settlement payment. As a result, settlement causes a larger proportion of the overall liability to fall within the policy limit and hence be the insurer’s responsibility. To prevent this liability shift, the insurer might reject some settlement demands that an uninsured defendant would have accepted, forcing unnecessary trials. To solve this problem, courts (and some insurance policies) place settlement duties on insurers. But lawsuits to enforce these duties generate litigation costs, and judicial errors can encourage settlements that overcompensate plaintiffs. An alternative solution would be to change the settlement approach. Currently, parties negotiate …
New: Correcting Corporate Benefit: How to Fix Shareholder Litigation by Shifting the Doctrine on Fees
The current controversy in corporate law concerns whether firms can discourage litigation by shifting its cost to shareholders. But corporate law courts have long engaged in fee-shifting — from shareholder plaintiffs to the corporation — under the “corporate benefit” doctrine. This Article examines fee-shifting in shareholder litigation, arguing that current practices are unsound from the perspective of both doctrine and public policy. Unfortunately, the fee-shifting bylaws recently enacted in response to the problem of excessive shareholder litigation fare no better. The Article therefore offers a different approach to fee shifting, articulating three specific reforms of the corporate benefit doctrine to quell the current crisis in shareholder litigation.
Two seemingly unrelated crises implicating the law of war and the responsibility to protect civilians have arisen in recent years. In 2013, the United States considered military intervention without United Nations (“U.N.”) Security Council preapproval in Syria after discovering that the government had exterminated its own people with chemical agents. In 2014, Russia sent troops into Crimea, a part of Ukraine, to protect ethnic Russians that Russia claimed were in danger after a political coup in the country. In both cases, the military acts contemplated or undertaken were of dubious legality, albeit under different rubrics. This Article aims to show how analysis of the lawfulness of military intervention in Syria and Crimea is illuminated by recognizing that both are subspecies of the same problem and are thus controlled by one customary doctrine of international law governing the grounds for war. By custom, a sovereign state may use force in another unconsenting sovereign state …