Closely-Held Enterprises
Business Lawyers as Enterprise Architects
George W. Dent, Jr., 64(2): 279-328 (February 2009)
What do business lawyers do? To that seemingly simple question there has been no good answer. For twenty-five years the most widely accepted explanation was that offered by Professor Ronald Gilson in his article Value Creation by Business Lawyers: Legal Skills and Asset Pricing in the Yale Law Journal. Examining the work of lawyers in large mergers and acquisitions, Professor Gilson concluded that business lawyers are transaction cost engineers. On that basis, he proposed sweeping changes for the training of business lawyers in law schools.
However, mergers and acquisitions are but one of many tasks handled by business lawyers, and their role in other contexts is quite different. Moreover, the work of business lawyers has changed considerably since 1984. This Article offers a broader and more current analysis of what business lawyers do and concludes that they are more accurately characterized as enterprise architects. The Article then discusses what skills business lawyers need and how law schools can best prepare them for this work.
Death by Auction: Can We Do Better?
Peter B. Ladig; 73(1): 53-84 (Winter 2017/2018)
The purpose of a business divorce is to sever the business relationship between or among the owners of the business. The most common judicial means of achieving this goal is a state dissolution statute. Most state dissolution statutes empower courts to sever the business relationship through various means. Some states even permit the entity or the other equity interests to avoid dissolution by exercising a statutory right to buy out the plaintiff’s interests. Delaware has eschewed this approach, instead providing few statutory directions or options and trusting its Court of Chancery to exercise its equitable discretion appropriately. Delaware courts historically were reluctant to dissolve operating, profitable entities, but in recent years Delaware courts have come to recognize the fallacy of forcing people to continue a business relationship that has fallen apart, and judicial dissolution is no longer the rarity it once was. A continuing problem, however, is that there is little common law guidance on how dissolution should be accomplished in a manner that is consistent with principles of Delaware law and that also recognizes the unique nature of these kinds of business divorces. In the absence of such guidance, Delaware courts default to what they know: an auction or sale process designed to attract the most number of bidders to maximize the entity’s value. This article suggests that the Court of Chancery should not consider an auction or other public sale process to be the default solution, that general principles of equity permit the Court of Chancery to grant many of the statutory remedies available in other states, and that a forced public sale should be the remedy of last resort.
LLC Default Rules Are Hazardous to Member Liquidity
Donald J. Weidner, 76(1): 151-182 (Winter 2020-2021)
Simply by forming LLCs, entrepreneurs now unwittingly lock themselves in to perpetual entities that offer them no liquidity and present them with costly procedural obstacles to enforcing both their agreement among themselves and their statutory rights. Even in atwill LLCs that are member-managed, recent LLC acts deny members both a right to dissolve and a right to be bought out. While thus locking members in, these acts deny them standing to bring many if not most of their claims among themselves or against the firm.