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The Business Lawyer - August 2008, vol. 63, no 4; Void or Voidable?--Curing Defects in Stock Issuances Under Delaware Law
63(4): 1153 - 1186 (August 2008)
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 assisting 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 being a much needed dialogue about backdating.
63(4): 1187 - 1221 (August 2008)
Practitioner literature and bar association reports frequently exhorts 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 with 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 analysis 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.
63(4): 1223 - 1241 (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 remedies provisions. Directors, officers, partners, controlling persons, and others associated with the entity at the time of the sale are also potentially liable, jointly and severely 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 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 adoption to assist their associated and affiliated persons in managing the risk of potential personal liability.
63(4): 1243 - 1274 (August 2008)
Despite the marked increase in high-profile 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. DOJ and the U.S. 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. statues involving foreign officials and the OECD Anti-Bribery Convention, and analyzes the impact of 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 of the OECD Anti-Bribery Convention.