January 22, 2015

    Inside Business Law (Jan. 2015)

    The ABCs of the UCC Article 3

    The ABC’s of UCC Article 3: Negotiable Instruments and Article 4: Bank Deposits and Collections and Other Modern Payment Systems, Third Edition, was published in December by the Business Law Section. The publication was authored by Stephan C. Veltri. 

    Become acquainted with the background, terminology, and general outline of the law of negotiable instruments, check collections, credit cards, consumer electronic funds transfers, prepaid value cards, and other emerging payment systems. The book covers recent developments such as the mortgage crisis, the transition of check collections from paper to digital images, the growth in the use of debit cards and stored value cards as payment devices, payments made over the Internet through non-bank intermediaries, and mobile payments. 

    The Third Edition covers all significant developments in the twenty-first century relating to Articles 3 and 4 of the UCC. It’s a valuable resource that will benefit both lawyers and law students. The price to Section members is only $34.95 and can be ordered here. 

    The Mergers and Acquisition Committee’s Deal Points Studies 

    It's a new year and with it comes some exciting news from the Business Law Section Mergers and Acquisitions Committee. The 2014 M&A Deal Points Studies have been released, and we wanted to give you a chance to check them out. As you may know, the Deal Points Studies contain analyses of frequently-used contract clauses, and are available exclusively to Mergers and Acquisitions Committee members. Included in these documents are recently-published 2013 studies on private targets, strategic buyer/public targets, Canadian public-company targets, and European private targets. Access the Deal Points Studies by joining the Mergers and Acquisitions Committee for free. You can join at the Committee page, located here. 

    Business Law Section Member Receives One of Canada's Highest Civilian Honors 

    Richard Pound was named a Companion of the Order of Canada when Governor General David Johnson announced 95 Canadians as companions, officers, or members of the Order on December 26. 

    The Order of Canada is considered one of Canada's highest civilian honors which recognizes outstanding achievement, dedication to the community, and service to the country. Mr. Pound was made an Officer of the Order of Canada in 1992 and has now been promoted to the highest tier of Companion “for his contributions as a champion of fairness in sport and of the Olympic spirit, as well as for his engagement in civic, legal and educational causes.” 

    Richard Pound is a Counsel in the Montréal office of Stikeman Elliott and member of the firm's Tax Group. His main areas of practice include tax litigation and negotiations with tax authorities on behalf of clients, in addition to general tax advisory work and commercial arbitration. 

    Please join us in congratulating Richard on this wonderful and well deserved honor. 

    The Winter Edition of The Business Lawyer is Now Available 

    The Winter Edition of The Business Lawyer is now available and can be found here. Articles include: 

    Corporate Law After Hobby Lobby, by Lyman Johnson and David Millon. The authors evaluate the U.S. Supreme Court’s controversial decision in the Hobby Lobby case from the perspective of state corporate law, and argue that the Court is correct in holding that corporate law does not mandate that business corporations limit themselves to pursuit of profit. Rather, state law allows incorporation for any lawful purpose. The authors elaborate on this important point and also explain what it means for a corporation to “exercise religion.” In addition, the article addresses the larger implications of the Court’s analysis for an accurate understanding both of state law’s essentially agnostic stance on the question of corporate purpose and also of the broad scope of managerial discretion. 

    The Rights and Duties of Blockholder Directors, by J. Travis Laster and John Mark Zeberkiewicz. Delaware corporate law embraces a “board-centric” model of governance contemplating that, as a general matter, all directors will participate in a collective and deliberative decision-making process. Rather than serving as a justification for a board majority to disempower directors elected or appointed by or at the direction of a particular class or series of stock or an insurgent group – which we refer to as “blockholder” directors – this system recognizes the need for a balancing of both majority and minority rights. In this article, the authors review the rights and duties of all directors and highlight cases where both board majorities and blockholder directors have overstepped their bounds. The authors caution that board majorities should deliberate carefully before taking action that limits a blockholder director’s rights or excludes the blockholder director from participation in fundamental corporate matters. At the same time, the authors caution that blockholder directors should take care when exercising their rights, given that their affiliation with investors may make them vulnerable to duty of loyalty claims. The authors urge both sides to proceed with a sense of empathy toward the other and seek to make reasonable accommodations, and we emphasize the role that experienced corporate counsel can play in mediating disputes, resolving tensions, and striking the appropriate balance in the boardroom.

    The Effect of Deferred and Non-Prosecution Agreements on Corporate Governance: Evidence from 1993−2013, by Wulf A. Kaal and Timothy A. Lacine. Non- and deferred-prosecution agreements (N/DPAs) are controversial because prosecutors, not judges or the legislature, are changing the governance of leading public corporations and entire industries. To analyze N/DPAs’ corporate governance implications and provide policy makers with guidance, the authors code all publicly available N/DPAs (N=271) from 1993 to 2013, identifying 215 governance categories and subcategories. The authors find evidence that the execution of N/DPAs is associated with significant corporate governance changes. The study categorizes mandated corporate governance changes for entities that executed an N/DPA as follows: (1) Business Changes, (2) Board Changes, (3) Senior Management, (4) Monitoring, (5) Cooperation, (6) Compliance Program, and (7) Waiver of Rights. The authors supplement the analysis of governance changes in these categories with a more in depth evaluation of the respective subcategories of governance changes. The authors also code and analyze preemptive remedial measures, designed by corporations to preempt the execution of an N/DPA or corporate criminal indictment. The article evaluates the implications of the empirical evidence for boards, management, and legal practitioners. 

    Common Qualifications to a Remedies Opinion in U.S. Commercial Loan Transactions, by Gail Merel (Reporter), A. Mark Adcock, Robert W. Barron, Willis R. Buck, Jr., Jerome A. Grossman, Louis G. Hering, Timothy G. Hoxie, Andrew M. Kaufman, Reade H. Ryan, Jr., Philip B. Schwartz, and Stephen C. Tarry. As a condition to the closing of many types of business transactions, one or more of the parties may be required to provide written opinion letters of counsel for the benefit of other parties to the transaction. These opinions are often referred to as “third-party” opinions because the opinion giver renders them to a party or parties other than the opinion giver’s own client. These opinions may cover a range of issues, including, among others, the entity status and power of, the due authorization, execution, and delivery of the transaction documents by, and the enforceability of those documents against, the opinion giver’s own client in the transaction. Oftentimes, the discussions regarding the scope of these opinions and the extent to which they will be qualified are time-consuming, and the resulting costs, borne by the client whose counsel is asked to render the opinions, increase substantially as negotiations proceed. This article, focusing on third-party opinions rendered in the context of U.S. commercial loan transactions, considers a number of qualifications that for various reasons, in the experience of the authors, opinion givers commonly include and opinion recipients and their counsel commonly accept. The authors believe that the identification of commonly used and accepted qualifications in the U.S. commercial loan market can help to streamline the opinion process in many transactions. 

    Essays include Consent in Corporate Law, by Lawrence A. Hamermesh. Recent Delaware case law explores and extends what the author describes as the “doctrine of corporate consent,” under which a stockholder is deemed to consent to changes in the corporate relationship that are adopted pursuant to statutory authority (such as by directors adopting bylaws). This essay examines whether and to what extent there may be limits on the application of the doctrine of corporate consent and whether fee-shifting bylaws exceed those limits. 

    Reports include:

    A Survey by the Committee on Cyberspace Law includes: