The Business Lawyer - August 2008, Volume 63, Issue 4 "Breaking the Corporate Governance Logjam in Washington: Some Constructive Thoughts on a Responsible Path Forward " By Leo E. Strine, Jr. 63(4): 1079–1108 (August 2008) "Void or Voidable?—Curing Defects in Stock Issuances Under Delaware Law " By C. Stephen Bigler and Seth Barrett Tillman 63(4): 1109–1152 (August 2008) It is not unusual for a Delaware corporation's stock records to have omissions or procedural defects raising questions as to the valid authorization of some of the outstanding stock. Confronted with such irregularities, most corporate lawyers would likely attempt to cure the defect through board and, if necessary, stockholder ratification. However, in a number of leading cases, the Delaware Supreme Court has treated the statutory formalities for the issuance of stock as substantive prerequisites to the validity of the stock being issued, and the court has determined that failure to comply with such formalities renders the stock in question void, i.e., not curable by ratification. Unfortunately, the decisions issued by the Delaware courts have not afforded the necessary certainty to allow practitioners to decide whether a particular defect in stock issuance is a substantive defect that renders stock void or a mere technical defect that renders stock voidable. This Article analyzes the cases giving rise to this lack of clarity and proposes that the Delaware courts apply the policy underlying Article 8 of the Delaware Uniform Commercial Code to validate stock in the hands of innocent purchasers for value in determining whether stock is void or voidable. "Backdating" By Jeffrey L. Kwall and Stuart Duhl 63(4): 1153–1186 (August 2008) Backdating is a much misunderstood and largely unexplored subject. It involves a wide range of conduct, some of which is an integral part of everyday law practice. To the layperson, backdating connotes wrongdoing. The propriety of backdating, however, depends upon its purpose and effect. Every lawyer should be capable of distinguishing legitimate backdating from improper backdating. Unfortunately, the dividing line is often far from clear. Little guidance exists on backdating, notwithstanding its pervasiveness, the complexity of determining its propriety, and the serious consequences of a misjudgment. An in-depth examination of the day-to-day backdating issues that most business lawyers face cannot be found in the literature. This Article begins to fill that void. This Article explains the different meanings of backdating, explores the reasons why it is difficult to distinguish legitimate backdating from improper backdating, examines the impact of disclosure on the propriety of backdating, and develops an analytical approach to assist business lawyers in wrestling with the difficult situations most will confront in their daily practices. By illuminating the subject, it is hoped that this Article will begin a much-needed dialogue about backdating. "Cost-Benefit Analysis and Third-Party Opinion Practice" By Jonathan C. Lipson 63(4): 1187–1222 (August 2008) Practitioner literature and bar association reports frequently exhort lawyers and clients to use "cost-benefit analysis" ("CBA") to answer important questions about third-party closing opinion practice, including whether to have an opinion in a given transaction at all. Yet, this literature rarely considers seriously what is meant by "cost-benefit analysis" or whether it is in fact an appropriate decision tool in this context. This Article fills that gap by examining what CBA can—and cannot—do for third-party closing opinion practice. Among its benefits, CBA should help to orient discussions about whether to have a closing opinion around an opinion's economic and informational value rather than claims that an opinion is (or is not) "traditional" or "market" in a particular context. But CBA is an imperfect tool. Cost-benefit analyses can be manipulated to mask costs or to exaggerate benefits. More fundamentally, CBA may treat ethically questionable practices as cost-justified and may fail to account for certain important professionalizing benefits of closing opinion practice. The Article suggests ways that CBA can and cannot help to improve closing opinion practice. "The Unreasonable Burden of Proving the Reasonable Care Defense Under the Uniform Securities Act" By Mark B. Barnes and Matthew R. St. Louis 63(4): 1223–1242 (August 2008) Under the Uniform Securities Act (a version of which has been enacted by most states), an entity that sells securities in violation of the Act is potentially liable to investors under the Act's civil remedy provisions. Directors, officers, partners, controlling persons, and others associated" + with the entity at the time of the sale are also potentially liable, jointly and severally with each other and the entity, solely on account of their affiliation with the entity. While the Act entitles these "derivative liability" defendants to assert an affirmative defense of reasonable care," + the affirmative defense is narrowly drafted, and courts have interpreted the defense strictly. This Article examines the decisions in which courts have interpreted the "reasonable care" defense, in particular the November 2007 opinion of the Indiana Supreme Court in Lean v. Reed, and ends by recommending securities law compliance policies and procedures that entities selling securities in Uniform Securities Act states might consider adopting to assist their associated and affiliated persons in managing the risk of potential personal liability. "Under the FCPA, Who Is a Foreign Official Anyway?" By Joel M. Cohen, Michael P. Holland, and Adam P. Wolf 63(4): 1243–1274 (August 2008) Despite the marked increase in high-profile Foreign Corrupt Practices Act ("FCPA") enforcement activity, it remains unsettled whether the FCPA's definition of "foreign official" includes employees of foreign companies that are owned or controlled by those companies' governments. This is an issue that transnational companies face daily in determining how to proceed in foreign jurisdictions. The definition of "foreign official" does not explicitly include such employees, nor does it define what constitutes state ownership or control. The U.S. Department of Justice ("DOJ") and the U.S. Securities and Exchange Commission ("SEC") have interpreted the definition to include employees of foreign state-owned or controlled entities, but is this interpretation correct? This Article examines the origin of the FCPA's definition of "foreign official," considers the definition in light of other U.S. statutes involving foreign officials and the OECD Anti-Bribery Convention, and analyzes the impact the DOJ and SEC's interpretation has had on foreign business transactions. The Article recommends that the DOJ and SEC provide more guidance in this critical area and further harmonize the U.S. anti-corruption standards with those already used by many of the signatory countries to the OECD Anti-Bribery Convention. "Changes in the Model Business Corporation Act—Amendment to Section 6.24, Adoption of Section 8.26 ("Force the Vote") and Related Amendments to Chapters 9, 10, 11, 12, and 14" By Committee on Corporate Laws, ABA Section of Business Law 63(4): 1275–1276 (August 2008) "Statement on the Role of Customary Practice in the Preparation and Understanding of Third-Party Legal Opinions" 63(4): 1277–1280 (August 2008) "The Uniform Commercial Code Survey: Introduction" By Stephen L. Sepinuck, Robyn L. Meadows, and Russell A. Hakes 63(4): 1281–1284 (August 2008) "Uniform Commercial Code Survey—Sales" By Jennifer S. Martin and Robyn L. Meadows 63(4): 1285–1300 (August 2008) "Uniform Commercial Code Survey: Leases" By Barry A. Graynor, Teresa Davidson, Edwin E. Huddleson, III, and Stephen T. Whelan 63(4): 1301–1308 (August 2008) "Payments: 2007 Developments" By Stephen C. Veltri and Greg Cavanagh 63(4): 1309–1328 (August 2008) "Letters of Credit" By James G. Barnes and James E. Byrne 63(4): 1329–1338 (August 2008) "Article 7: Documents of Title—2007 Developments" By Anthony B. Schutz 63(4): 1339–1346 (August 2008) "Article 8—Investment Securities" By Howard Darmstadter 63(4): 1347–1352 (August 2008) "U.C.C. Article 9: Personal Property Secured Transactions" By Steven O. Weise 63(4): 1353–1374 (August 2008) "International Commercial Law: 2007 Developments" By Sandra M. Rocks and Kate A. Sawyer 63(4): 1375–1386 (August 2008)
