Corporations Law
Literature on corporate insolvency and restructuring are listed in the Insolvency section. Literature on corporate/business insurance is listed in the Insurance section. Alon-Beck, Anat, 'Times They Are A-Changin': When Tech Employees Revolt!' Maryland Law Review (forthcoming) Abstract: The COVID-19 epidemic sparked social distancing, economic crisis, mass layoffs, furloughs, inequality, civil unrest, including various private and public responses to these issues. These responses have profound effects on employees rights, their role in the corporations that they serve and overall economic activity in the United States. In the last few decades corporate governance scholarship neglected the role of employees - 'human capital,' and mainly focused on the relationship between directors, managers and shareholders. Employees outside the U.S. have a formal role in corporate governance. There are calls from the public for a revolution in corporate law in the US, mirroring the current social movements, to resist short-termism and achieve long-term value. Corporations are pressured to incorporate in their charters a deep obligation to act for the benefit of society at large, and to include employees formally (EESG), as stakeholders, in the governance of corporations. These calls are not new, and also surfaced following the 2008 financial crisis. The new development is that tech employees joined these efforts and are revolting by organizing, striking and publicly speaking out against their employers. This article will address the old debate in corporate governance theory, from the current dominant share-holder centric corporate governance to collaborative (stake-holder centric) corporate governance, and the new corporate personhood theory. It also makes a pragmatic suggestion that our corporate governance theory can be extended to include the protection of directors (or officers) if they take employee interests into account in decisionmaking by 'expanding' the scope of a director's (or officer's) fiduciary duties. The director (or officer) has an obligation to act according to 'the best interests of the company.' If the director takes employee interests (as stakeholders) into account for the benefit of the company, because human capital is a valuable intangible asset, which the success of the success of the company depends on, then, as long as the decision is an informed calculated business decision, the director is protected by the BJR rule.
Amm, Michael D and J Robert S Prichard, 'The Post-Pandemic World: Key Considerations for Business Leaders' (2020) 5 Emerging Areas of Practice Series - COVID-19 (Coronavirus), Westlaw Canada_ _Abstract: As companies emerge from a protracted crisis mode--evolving from their immediate response to the COVID-19 pandemic to managing through the crisis and preparing for resumption of on-site operations--business leaders have been stabilizing their organizations and are looking ahead to plan for a post-pandemic world. How they address the strategic challenges before them will determine the success of their organizations for years to come. Below we consider some key themes that business leaders are navigating.
Anidjar, Leon Yehuda, 'Directors' Duty of Care in Times of Financial Distress Following the Global Epidemic Crisis' Brooklyn Journal of International Law (forthcoming) Abstract: The global Covid-19 pandemic is causing the large-scale end of life and severe human suffering globally. It is the most massive public health crisis in modern living memory, which created a significant economic crisis. This dramatic change is reflected in a significant recession of global production and the collapse of confidence in the functions of markets. Corporations and boards of directors around the world are required to design specific strategies to tackle the negative consequences of the crisis. This is especially true for small and medium-sized enterprises (SMEs) that suffered tremendous economic loss, and their continued existence as ongoing concern is questionable. Given these uncertain financial times, this Article is devoted to exploring directors' duty of care from a global perspective. In particular, I argue that the current crisis will underline the importance of the advisory role of the board of directors rather than the monitoring function, and further regulatory reforms that strengthen such capacity are expected to emerge. Furthermore, I maintain that the civil law rather than the Anglo-American law on directors' duty of care provides boards with a more expansive scope of discretion to confront the unusual challenges associated with the Covid-19 because these governance regimes are tailored to the unique features of companies and markets. I apply this novel argument in different types of SMEs, mainly in the family business and venture capital-backed firms.
Baur, Dirk G and Allan Trench, 'COVID-19 Infection of Australian Companies' (SSRN Scholarly Paper ID 3609110, 1 June 2020) Abstract: This paper analyzes the impact of the coronavirus pandemic on Australian companies' share prices. We use daily new infections as a risk factor and proxy for the severity of the pandemic. Based on the loading to this risk factor and abnormal returns during the crisis we categorize firms into (i) severely infected, (ii) infected and (iii) mildly or not infected. We find large differences across firms and sectors highlighting that the virus does not affect all firms and not in the same way contrasting evidence of financial contagion and excess co-movement from past crises. The increased cross-sectional dispersion of returns in the pandemic suggests a sophisticated response of investors resulting in significant diversification benefits.
Bernstein, Adam and Paul Taylor, 'Coronavirus Update: Actions for Business to Consider' (2020) 44(3) Company Secretary's Review 3-16 Abstract: Examines COVID-19-related developments that businesses should consider: HMRC's aim to recoup monies falsely and fraudulently claimed under the Coronavirus Job Retention Scheme; Government support for businesses facing eviction due to the impact of the coronavirus; the Government-supported Bounce Back loan; and the effect of the Corporate Insolvency and Governance Act 2020.
Borselli, Angelo and Ignacio Farrando, 'Corporate Law Rules in Emergency Times Across Europe' (Bocconi Legal Studies Research Paper No 3759202, 23 September 2020) Abstract: This paper explores corporate law rules adopted in some European states amidst the COVID-19 pandemic, in order to track the major reform trends and consider how corporate law in Europe has adjusted to the emergency. The analysis focuses primarily on the U.K., Germany, France, Italy and Spain; occasionally, depending also on the relevant rules actually introduced by the states, other systems are considered as well. The paper groups the emergency measures into three main categories that include rules aimed at facilitating shareholders' meetings and meetings of the board of directors, rules relaxing directors' duties and liability and giving directors some leeway as companies face unprecedented challenges and uncertainties, and rules designed to support corporate liquidity. The analysis shows that while some points of similarity exist among the emergency rules considered, there are nevertheless numerous differences in their nature, scope, technicalities, and also timing. These differences emphasize a lack of coordination at the European level. The discussion also sheds light on the potential of some emergency measures to call traditional corporate law rules into question and last in what will be the new normal after the crisis.
Bullock, Susy and Georgina Peters, 'Directors' Duties in the Age of COVID-19: Where to from Here?' (2020) 35(7) Butterworths Journal of International Banking & Financial Law 445-451 Abstract: Reviews changes to directors' environmental, social and governance duties arising from the coronavirus pandemic. Examines key features of corporate governance prior to COVID-19, the growing focus on investors, the main reforms affecting the banking and financial sectors, and how they interact with the regime under the Companies Act 2006, including the duty under s.172 to promote the company's success. Considers the duty to distressed companies.
'Chartered Governance Institute Issues New Guidance on Shareholder Meetings' (2020) 41(10) Company Lawyer 317-318 Abstract: Highlights the Chartered Governance Institute's July 2020 publication of 'Shareholder Meetings Under the Corporate Insolvency and Governance Act 2020', updating its guidance on annual general meetings during the coronavirus pandemic. Details the organisations involved in producing the update, and summarises the issues it covers, including how shareholder meetings may be held under the 2020 Act, and companies' rights to limit attendance.
Cheema-Fox, Alexander et al, 'Corporate Resilience and Response During COVID-19' (SSRN Scholarly Paper ID 3578167, 17 April 2020) Abstract: During a market collapse, it is strategically important for a company to be evaluated as resilient, thereby maintaining trust among investors. We study whether during the 2020 COVID-19 induced market crash, investors differentiate across companies based on a firm's human capital, supply chain and operating crisis response. Using data derived from natural language processing of news around corporate responses to the coronavirus crisis, we find that companies with more positive sentiment exhibit higher institutional investor money flows and less negative returns than their competitors. This is especially true for companies with more salient responses.
Christensen, Sharon, 'Corporate Signing Goes Digital' (2020) 35(4) Australian Property Law Bulletin 72-74 Abstract: As part of the Federal government's response to COVID-19, temporary changes have been made to the Corporations Act 2001 to facilitate electronic signing of contracts by corporations. The 'Corporations (Coronavirus Economic Response) Determination (No. 1)' 2020 ("the Determination") is effective from 6 May 2020 until 6 November 2020 and extends the operation of section 127 of the 'Corporations Act' 2001 to where two directors or a director and company secretary sign: a copy or counterpart of a document in physical form, or use an electronic signing method to execute a copy or counterpart in electronic form provided the electronic signing method reliably identifies the person and indicates the person's intention about the contents of the document. The purpose of the modification is to overcome the requirement for both directors/secretary to sign the same static form of the document in order to comply with section 127(1) and to allow electronic signing.
'COVID-19 and Damages for Negligent Advice' [2020] Lawyer (Online Edition) 1 Abstract: The article informs on damages that companies and investors are entitled to who face losses face due to negligent advice in the advent of Covid-19 pandemic. It mentions that COVID-19 pandemic has caused historic losses across financial markets and business, exacerbated by the oil price war between OPEC and Russia. It also mentions about addressing claims related to disadvantageous transactions in the situation.
Crabb, John, 'World on Pause' [2020] (Summer) International Financial Law Review 8-11 Abstract: Reports on corporate finance developments during the coronavirus pandemic, including the suspension of share buybacks, due diligence in mergers and acquisitions, private investment in public equities deals, postponed annual general meetings, and material adverse change clauses.
Du Plessis, Jean and Andrea Anastasi, '2020 Vision: Current Refletions and Stakeholder Governance in a Post-COVID-19 World' (2020) 37(7) Company and Securities Law Journal 495-501 Abstract: COVID-19 is rapidly changing the world. How will it affect the unsolved simmering tensions between the interests of shareholders and the interests of other corporate stakeholders? This note explores how the COVID-19 "systemic shock" will cause a welcome corporate governance shift from short-term monetary gain towards a long-term corporate outlook.
Enriques, Luca, 'Pandemic-Resistant Corporate Law: How to Help Companies Cope with Existential Threats and Extreme Uncertainty During the Covid-19 Crisis' (European Corporate Governance Institute, Law Working Paper No No 530/23020, 2020) Abstract: This essay argues that, to address the Covid-19 crisis, in addition to creating a special temporary insolvency regime, relaxing provisions for companies in the
Folarin, Akorede, 'Evaluating the Legality of Virtual Meetings under the Companies and Allied Matters Act of Nigeria' (SSRN Scholarly Paper No ID 3637095, Social Science Research Network, 20 May 2020) Abstract: The movement restrictions and social distancing directives issued in many jurisdictions across the world as a result of the COVID-19 pandemic has disrupted social and commercial interactions and necessitated emergency lifestyle adjustments globally. One of the prominent issues that have consequently arisen from this is the issue of the legality/propriety of companies holding their statutory and annual general meetings (AGMs) virtually in order to balance the imperatives of corporate governance and observance of the relevant company law and regulations on the one hand and compliance with the government's COVID-19 directives on the other hand. To do this, however, Nigerian companies have been confronted with uncertainties with regard to the position of Nigerian corporate law on virtual company meetings. This article explores the uncertainties surrounding virtual meetings in the above context and also highlights the true position of Nigerian law on virtual meetings by private and public companies, whilst also proffering suggestions to ameliorate the uncertainty that exists and to bring Nigerian corporate law in tune with modern realities.
Freeburn, Lloyd and Ian Ramsay, 'Capital Raising by Companies During the COVID-19 Crisis: An Analysis of Recent ASX Reforms' (2020) 37(7) Company and Securities Law Journal 502-507 Introduction: The effects of the COVID-19 crisis have driven many listed Australian companies to raise emergency capital. These share issues have been facilitated by a relaxation of the rules applying to capital raising by the Australian Securities Exchange, a move supported by the Australian Securities and Investments Commission. The reforms to the rules draw on the experience of the financial crisis in 2008 - 2009. They are designed to assist companies adversely affected by the COVID-19 crisis to raise capital to survive the crisis. The nature of the reforms and the capital raisings to which they relate have been the subject of competing concerns. In particular, the enhanced disclosure requirements that have accompanied the relaxation of the capital raising rules have been criticised by some as unwarranted and by others as insufficient. In this research note, the authors provide information on the number of capital raisings since the beginning of COVID-19 and evaluate the competing arguments regarding the recent capital raising reforms.
Gelter, Martin and Julia M Puaschunder, 'COVID-19 and Comparative Corporate Governance' (2021) Journal of Corporation Law (forthcoming) Abstract: With the pandemic caused by the novel coronavirus SARS-CoV-2 raging around the world, many countries' economies are at a crucial juncture. The COVID-19 external shock to the economy has the potential to affect corporate governance profoundly. This article explores its possible impact on comparative corporate governance. For an economy to operate successfully, a society must first find a politically sustainable social equilibrium. In many countries, historical crises - such as the Great Depression and World War II - have resulted in a reconfiguration of corporate governance institutions that set the course for generations. While it is not yet clear whether COVID-19 will have a similar effect, it is possible that it will change patterns of what kind of firms are - from an evolutionary perspective - likely to survive, and which ones are not. We argue that to some extent, it will accelerate ongoing trends, whereas in other areas it put corporations on an entirely new course. We observe three trends, namely the need for resilience, a growth of nationalist policies in corporate law, and an increasing orientation toward 'stakeholder' interests. First, firms will have to become resilient to the crisis, and consequently long-term oriented. Corporations that are not operating merely on an arm's length capital market basis but are integrated into a network, generated by core shareholders, state ownership or bank lending may be more likely to survive. In addition, firms are beginning to interact with their workforce differently in their attempts to maintain what could be called 'healthy human capital.' Second, we are likely to see a resurgence of nationalism in corporate governance to ensure that foreign ownership and interconnected supply chains do not put national security at risk. Third, the existing critiques of inequality but also climate change awareness will accelerate the trend toward a broadening of corporate purpose toward 'stakeholderism' and public policy issues. As in the past years, institutional investors acting as 'universal owners' will play a role in shaping this trend.
Guest, Lara, 'How to Reduce Exposure Associated with Pandemic-Related Corporate Misconduct' (2020) 2 Emerging Areas of Practice Series - COVID-19 (Coronavirus), Westlaw Canada Introduction: The economic and workplace upheaval associated with the COVID-19 pandemic has placed unique and intense pressures on businesses and market sectors. History has taught us that the more downward pressures there are on businesses, the more likely that bad employee and business partner behavior will occur. This kind of conduct can give rise to class action and regulatory liability. At the same time, work-from-home protocols, travel restrictions and shifting demands within workplaces can put a strain on investigative priorities. However, proactive, focused and remedial internal review and investigation at the first sign of questionable behavior should continue to be prioritized as a powerful tool to mitigate and neutralize the pernicious effects of misconduct. This article highlights issues that business leaders should be on the watch for, and how they should mobilize to address them in our changed and challenged workplaces.
Hijink, Steven, 'Company Law in Uncertainty: The Coronavirus and Beyond' (2020) 17(3) European Company Law 70-71 Extract: The coronavirus now affects - almost - all facets of company law. Listed companies announced postponing their general meetings and several Member States of the European Union issued emergency legislation allowing to postpone general meetings. Listed companies are reconsidering intended dividend payments and financial supervisors, like the European Central Bank ('ECB') and the European Insurance and Occupational Pensions Authority ('EIOPA'), urge financial institutions to postpone dividend payments. Financial institutions suspend payment terms. The European Securities and Markets Authority ('ESMA') recommends national competent authorities 'to apply forbearance powers towards issuers who need to delay publication of financial reports beyond the statutory deadline'. Furthermore, the ECB has announced an extensive additional buying-up program for government bonds. And the European Commission has already stated that when assessing national aid, the coronavirus is considered an 'extraordinary event'.
Hill, Maud, 'South African M&A: The COVID-19 Legacy' (2020) 20(6) Without Prejudice 12-13 Abstract: The impact of COVID-19 on a social and human level has been significant. Connected to this is the added pressure on an already troubled South African economy. A knock-on effect is noted in the downswing in M&A activity in the region, with corporates facing tougher strategic and financial decisions. While it is anticipated that M&A activity will have an upswing in the medium to long term (connected potentially to an increased number of distressed companies on the market), it seems likely that there will be a lasting effect on M&A. The purpose of this article is to briefly consider certain of these potential lasting effects.
Horwitz, Michael, 'Coronavirus Economic Stabilization Act of 2020 (CESA) and Considerations for Private Equity Portfolio Companies' (2020) 1 Emerging Areas of Practice Series - COVID-19 (Coronavirus)_ _Abstract: On March 27, 2020, the United States Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) to respond to the medical and economic impact of the COVID-19 pandemic. Included in the CARES Act is the Coronavirus Economic Stabilization Act of 2020 (CESA), which authorizes the making of emergency loans and guarantees to, and investments in, U.S. businesses in certain sectors that have experienced losses as a result of COVID-19 and authorizes financial support for the U.S. Federal Reserve's efforts to provide liquidity to the financial system.
Jebran, Khalil and Shihua Chen, 'Can We Learn Lessons from the Past? COVID-19 Crisis and Corporate Governance Responses' (SSRN Scholarly Paper ID 3753578, 22 October 2020) Abstract: The coronavirus (COVID-19) pandemic has seriously threatened the lives of the people. The pandemic has also threatened the survival of the firms, which has drawn the attention of policymakers and corporate governance practitioners around the world. In this study, we focus on how corporate governance practices can help firms to survive during COVID-19 crisis. For this purpose, we take insights from prior crises by reviewing leading business journals articles and identify key corporate governance mechanisms that could potentially be effective in the ongoing COVID-19 crisis. Our review of a large body of literature highlights several governance mechanisms that may help firms to cope with COVID-19 crisis. These governance attributes include risk management committees, board diversity, independent directors, foreign investors, institutional ownership, ownership concentration, CEO's dual roles, block ownership, and family ownership. We provide several policy implications after reviewing the corporate governance literature. Our review illustrates that firms may be subject to at least one of the identified governance mechanisms and they may learn how these governance attributes can be effective in the COVID-19 crisis. Our review illustrates that independent risk management committees, institutional ownership, board independence, blockholders, and family ownership are some of the essential and effective governance mechanisms compared to other governance attributes during COVID-19 crisis.
Jerzmanowski, Jedrzej, 'The Growing Popularity of Remotely Held Meetings of Management Boards, Supervisory Boards and General Meetings (Shareholder Meetings) as a Manifestation of a Digital Revolution in Company Law: The Case of Amendments to Polish Law in Response to the Covid-19 Pandemic' (Proceedings of the Third EBOR Conference 2020, 2021) 337-350 Abstract: This paper aims at discussing one of the manifestations of the digital revolution in the corporate world - the increasingly widespread use of the remote ways of holding meetings of the management boards, supervisory boards, general meetings and shareholder meetings of companies. A crawling digital transformation in this area had been in progress across many states and for many years, but owing to the outbreak of the Covid-19 pandemic it gained strength and speed. One of the states where such an acceleration took place is Poland, which fast-tracked legislative amendments that revolutionized the remote handling of meetings and affairs of corporate authorities. In the case of supervisory boards and general meetings (shareholder meetings), the amendments reversed the rule previously in place: now, meetings may be held remotely at all times unless the by-laws (articles of association) provide to the contrary, while under the rules previously in force in-person meetings were required unless the articles of association explicitly permitted the use of remote forms of communication. As regards the management boards, no remote proceedings were previously allowed. The new law has given rise to a number of questions and doubts. They pertain both to the manner in which meetings are convened and held. In particular, it needs to be settled whether a meeting may be held in the cyberspace exclusively, without the chairman and the minute-taker being physically present at the corporate seat, or whether their presence is required after all. What is more, it is not entirely clear how open and secret ballot should be handled and if the secrecy may be waived if all members of the corporate body so decide. Doubts emerge especially as regards the contents of the rules applicable to the remote handling of meetings and the corporate bodies authorised to define and adopt them. To answer these and many other questions is the aim of this article. The discussed regulations came into force merely six months ago and are yet to be extensively discussed in legal literature. In this paper the author relied on the dogmatic law analysis supported with hands-on experiences related to the functioning of corporate authorities in the new legal reality.
Keanly, Kendall and Belinda Scriba, 'Decisions by Companies during COVID-19 Lockdown: Oppressive or Prejudicial?' (2020) 20(6) Without Prejudice 6-7 Abstract: In Alert Level 3 lockdown there remain stringent parameters on how companies, even though now permitted to trade, may conduct their business operations.
Keanly, Kendall and Belinda Scriba, 'Guidance on Responsible Leadership by Directors during COVID-19: Company Law - Covid-19' (2020) 20(8) Without Prejudice 14-15 Abstract: In the July 2020 issue of without prejudice, we published an article titled "Decisions by companies during COVID-19 Lockdown: Oppressive or prejudicial?". That article served to highlight the potential liability which may befall directors as a result of decisions made by them as a consequence of the COVID-19 pandemic and the ensuing lockdown in South Africa. Decisions taken by directors during the COVID-19 lockdown have also been highlighted by the Institute of Directors of South Africa, in a guidance paper co-published by them: "Responsible Leadership in Responding to COVID-19". This guidance paper serves to draw attention to specific areas which, in the view of the Institute, should be the focal points of directors' and managements' attention in navigating the current environment. These focus areas range from corporate governance to human capital, and even include organisational performance. This article serves to highlight those areas which relate to the conduct of directors in their dayto-day management of an organisation.
Lalafaryan, Narine, 'Material Adverse Change Uncertainty: Costing a Fortune If Not Corporate Lives' [2020] Journal of Corporate Law Studies 1-46 Abstract: The Material Adverse Change/Effect doctrine ('MAC') has become an important, yet chaotic legal concept. With its vague definition and multi-functional objectives on the one hand, and the potential of dramatic consequences arising from the instability of global financial systems, terrorism, Brexit, and, quite possibly, pandemic (COVID-19) outbreaks on the other hand, the significance of MAC has evolved. The article analyses uncertainty surrounding the MAC doctrine under English law by critically evaluating the MAC and investigating its future under English law both in Debt Finance and M&A following Delaware's ground-breaking decision in Akorn v Fresenius, followed by Boston Scientific. The article argues for a growing ex-ante, ex-interim, and ex-post practical importance of MAC in the light of destabilising market events. It also argues that Delaware MAC principles are relevant as a reference point for resolving English MAC uncertainties, provided one considers the specifics of MAC's interpretation in both jurisdictions and its unique attributes in M&A and in Debt Finance. The article further argues that there is no overarching model for the correct application of MAC, be it in Debt Finance or in M&A.
Larcker, David F et al, 'The Spread of Covid-19 Disclosure' (Rock Center for Corporate Governance at Stanford University, Closer Look Series: Topics, Issues and Controversies in Corporate Governance No CGRP-84, 29 June 2020) Abstract: Investors rely on corporate disclosure to make informed decisions about the value of companies they invest in. The COVID-19 pandemic provides a unique opportunity to examine disclosure practices of companies relative to peers in real time about a somewhat unprecedented shock that impacted practically every publicly listed company in the U.S. We examine how companies respond to such a situation, the choices they make, and how disclosure varies across industries and companies. We ask: * What motivates some companies to be forthcoming about what they are experiencing, while others remain silent?* Do differences in disclosure reflect different degrees of certitude about how the virus would impact businesses, or differences in management perception of its obligations to shareholders?* What insights will companies learn to prepare for future outlier events?
Levenstein, Eric, Roxanne Webster and Malachizodok Mpolokeng, 'Business Rescue When Liquidation Proceedings Have Been "Initiated"' (2020) 20(6) Without Prejudice 8-9 Abstract: The COVID-19 pandemic has had an unprecedented impact on the South African economy. Although necessary, the measures that have been employed to deal with the novel coronavirus, which include a nationwide lockdown, have resulted in several companies and businesses feeling the pinch. Despite government's efforts to ameliorate these challenging conditions through various social relief and economic support packages, South African companies and businesses remain under enormous pressure, with many facing the harsh reality of financial distress. It comes as no surprise, therefore, that companies are increasingly turning to business rescue.
Li, Kai et al, 'The Role of Corporate Culture in Bad Times: Evidence from the COVID-19 Pandemic' (SSRN Scholarly Paper ID 3632395, Social Science Research Network, 21 June 2020) Abstract: After fitting a topic model to 79,597 COVID-19-related paragraphs in 11,183 conference calls over the period January to April 2020, we obtain measures of firm-level exposure and response to COVID-19 for 3,019 U.S. firms. We show that despite many different ways through which COVID-19 affects their operations, firms with a strong corporate culture do better in the midst of a pandemic than their peers without a strong culture. Moreover, firms with a strong culture are more likely to emphasize community engagement and adopt digital technology, and are no more likely to engage in cost cutting than their peers without a strong culture. To explore the channels through which culture makes firms resilient to the pandemic, we show that firms with a strong culture have higher sales per employee and lower cost of goods sold per employee during the first quarter of 2020. Our results provide support for the notion that corporate culture is an intangible asset designed to meet unforeseen contingencies as they arise (Kreps 1990).
Lidstone, Herrick K, 'Corporate Annual Meetings of Shareholders in the COVID-19 World' (SSRN Scholarly Paper ID 3570989, Social Science Research Network, 13 April 2020) Abstract: A number of states are reacting to the COVID-19 pandemic by adopting emergency legislation or executive orders to authorize shareholder meetings that are not held 'at a place' but only by telecommunication - referred to as 'virtual-only' meetings. As corporate practitioners know, Colorado corporations are required to hold annual meetings of shareholders (C.R.S. SS 7 107-101(1)), and those meetings involve certain formalities (which can be made more restrictive in the articles of incorporation or bylaws) such as:1. Preparation of a shareholders' list as of the record date that is available for review by shareholders; 2. Sending notice of the meeting place, date, and time to shareholders; and 3. Counting of votes from properly registered and voting shareholders entitled to vote. These requirements apply to Colorado corporations that are public companies subject to the rules of the Securities Exchange Act of 1934 as well as to private companies with one to one hundred or more shareholders. Of course, Colorado corporations which are subject to the 1934 Act's proxy and reporting rules have a number of requirements to meet in addition to the requirements of Colorado law.Subject to contrary provisions in the articles of incorporation or bylaws of a Colorado corporation, the Colorado Business Corporation Act contemplates that Colorado corporations may hold hybrid shareholders' meetings, but do not yet provide for virtual only shareholders' meetings. In Colorado, as in other states, other statutes for corporate-like entities (such as nonprofit corporation statutes, statutes for cooperative organizations, and statutes for homeowners associations, should also be reviewed together with the governing documents for those organizations.
Miles, Roger and Chris Stears, 'Getting the Measure of "Good Business Culture"' (2020) 41(10) Company Lawyer 320-323 Abstract: Discusses how the coronavirus pandemic has assisted regulatory efforts to require financial businesses to rate and report on their moral health. Notes the sense of community purpose demonstrated by some firms, their initiatives to foster psychological safety and promote true diversity, and efforts to establish revised reporting benchmarks for culture and conduct.
Miller, Robert T, 'Material Adverse Effect Clauses and the COVID-19 Pandemic' (University of Iowa Legal Studies Research Paper No 2020-21, 18 May 2020) Abstract: This paper considers whether the COVID-19 pandemic, the governmental responses thereto, and actions taken by companies in connection with both of these constitute a 'Material Adverse Effect' (MAE) under a typical MAE clause in a public company merger agreement. Although in any particular case everything will depend on the exact effects suffered by the company and the precise wording of the MAE clause, this paper concludes that, under a typical MAE clause, given the current tremendous contraction in economic activity, most companies will have suffered a material adverse effect as such term in used in the base definition of most MAE clauses. The question thus becomes whether the risks of a pandemic or of governmental responses thereto have been shifted to the acquirer under exceptions to the base definition. This paper considers some of the difficult causal questions that would arise in answering this question, including the relation of actions taken by the company to remain solvent while suffering the effects of COVID-19 and governmental lockdown orders, and concludes that, in some instances, a company will have suffered an MAE even if the MAE clause contains exceptions for pandemics, changes in law, or both.
Miller, Robert T, 'Material Adverse Effect Clauses and the COVID-19 Pandemic: How Sophisticated Parties Allocate Risk Contractually' (SSRN Scholarly Paper ID 3707282, 7 October 2020) Abstract: Currently pending in the Delaware Court of Chancery and other courts around the country are numerous cases in which the parties to a public-company merger agreement are disputing whether the target (the company being sold) has suffered a 'material adverse effect' (an MAE) because of the COVID-19 pandemic. Tremendous amounts of money are at stake in such cases. In the LVHM-Tiffany transaction, for example, if Tiffany has suffered an MAE, LVHM may terminate the agreement and walk away from the deal; otherwise, it will likely have to close and pay the full $16.6 billion purchase price for a company that, it says, is no longer worth anywhere near that amount. Sophisticated commercial parties allocate between them risks that may materialize during the pendency of the merger through MAE clauses, extremely elaborate contractual provisions that have given rise to more litigation than any other standard provision in public-company merger agreements. This short essay considers how courts will construe MAE clauses in connection with the COVID-19 pandemic and, in so doing, explains more generally how sophisticated parties allocate risks efficiently in order to create value in business combination transactions.
Niekerk, Bouwer van and Parveen Munga, 'A Perspective on Directors' Duties in the Time of COVID-19' (2020) 20(5) Without Prejudice 16-18 Abstract: The standard of directors' conduct is key to the success, or failure, of companies. The Companies Act of 2008 sets out the duties, standards of conduct and liabilities of directors. These duties include fiduciary duties, a duty to act in the best interests of the company and a duty of reasonable care. Directors may be held liable for any loss, damages or costs sustained by a company as a consequence of any breach by directors in the execution of these duties.
Nili, Yaron and Megan W Shaner, 'Back to the Future? Reclaiming Shareholder Democracy Through Virtual Annual Meetings' (University of Wisconsin Legal Studies Research Paper No 1606, 2020) Abstract: From demanding greater executive accountability to lobbying for social and environmental policies, shareholders today influence how managers run American corporations. In theory, shareholders exert that influence through the annual meeting: a forum where any shareholder, large or small, can speak their mind, engage with the corporation's directors and managers, and influence each other. But today's annual meetings, where a widely diffused group of owners often vote by proxy, are largely pro forma: only handful of shareholders attend the meeting and voting results are largely determined prior to the meeting. In many cases, this leaves Main Street investors' voice unspoken for.But modern technology has the potential to resurrect the annual meeting as the deliberative convocation and touchstone of shareholder democracy it once was. COVID-19 has forced most American corporations to hold their annual meetings virtually. Virtual meetings allow shareholders to attend meetings at a low cost, holding the promise of re-engaging retail shareholders in corporate governance. If structured properly, virtual meetings can reinvigorate the annual meeting, reviving shareholder democracy while maintaining the efficiency benefits of proxy voting.The Article makes three key contributions to the existing literature. First, using a comprehensive hand collected dataset of state reactions to COVID-19 and of all annual meetings held between March 11 and June 30, 2020, it offers a detailed empirical account of the impact that COVID-19 and the move to virtual annual meetings had on shareholder voting. Second, it uses the context of COVID-19 to show how modern-day annual meetings have drifted away from its democratic function. Finally, the Article argues that technology can revive the shareholder democracy goals of annual meetings, and underscores how virtual meetings can meet that important goal.
Oranburg, Seth and Benjamin Kahn, 'Online Onboarding: Corporate Governance Training in the COVID-19 Era' (Duquesne University School of Law Research Paper No 2020-09, 2020) Abstract: Onboarding new directors is critical in the best of circumstances. What should organizations do when training new board members must be completed online? COVID-19 has forced both ordinary and extraordinary business functions to be conducted primarily online, and online onboarding may be necessary or preferred in a number of business contexts. This Article first reviews the best practices in director onboarding and explains the functional goals of those practices. It then explains how to leverage the power of virtual data rooms and virtual conference software to successfully onboard new corporate directors with virtual meetings. These strategies apply to both for-profit and non-profit boards and can be employed to enhance any online meeting or conference where the goals include informing and engaging participants while encouraging them to socialize.
'Overcoming COVID-19: Critical Legal Pathways' [2020] NZ Business + Management (Sp)12-(Sp)13 Abstract: Watch for liquidity or production roadblocks, emerging insolvency risk, and rating downgrades
Trends to watch: * Willingness of overseas wholesale markets to fund NZ lenders * Difficulty of accessing overseas corporate bond markets * Continuing exchange rate hedging and counterparty risks * State liquidity measures focussing on domestic goals, rather than international liquidity and trade flows Disputes Insights: * Additional benefits (eg, flexibility, adaptability and enforceability) from international arbitration already in place in cross-border contracts * If commencing formal dispute, consider at outset whether final award or judgment will be enforceable against foreign assets Exporters & importers Cross Border Trade: Exporters & importers International goods + services contracts.
Puaschunder, Julia M, Martin Gelter and Siegfried Sharma, 'Alleviating an Unequal COVID-19 World: Globally Digital and Productively Healthy' (Fordham Law Legal Studies Research Paper, 2020)Trends to watch: * Willingness of overseas wholesale markets to fund NZ lenders * Difficulty of accessing overseas corporate bond markets * Continuing exchange rate hedging and counterparty risks * State liquidity measures focussing on domestic goals, rather than international liquidity and trade flows Disputes Insights: * Additional benefits (eg, flexibility, adaptability and enforceability) from international arbitration already in place in cross-border contracts * If commencing formal dispute, consider at outset whether final award or judgment will be enforceable against foreign assets Exporters & importers Cross Border Trade: Exporters & importers International goods + services contracts.
Abstract: The novel Coronavirus-crisis raises attention to digitalization and healthcare prevention that opens opportunities to alleviate growing online and healthcare inequalities.In the wake of an already burgeoning digitalization revolution, the COVID-19 pandemic perpetuated digitalization. As affinity to information and communication technologies nowadays determines economic potential, technology-based inequality increases. Taxing digital analytics-driven economic growth could raise funds to offset technology disruption fallouts on a national level. On a global scale, equal access to internet connectivity around the world would help spread the benefits of digitalization equally and aid countries in catching up in international development endeavors. More than ever before in the history of modern workforce do employers and employees alike nowadays care about the overall well-being and physical interaction in a hygienic environment. The COVID-19 pandemic steered individuals to adopt technology to self-monitor healthy lifestyles, but also governments and employers to electronically track individuals for health safety purposes. With the overall immune system resiliency determining the severity of a COVID-19 infection, preventive healthcare implementation can be leveraged into a competitive advantage. Corporate Social Responsibility and corporate governance should incentivize preventive self-care as an innovative precautionary mean for lowering pandemic outbreak risks and boosting performance. Like in the Austrian Sozialpartnerschafts-model, stakeholder integration into corporate decision making could aid in reaching collective goals of a healthy workforce in an overall precautionary environment. Online healthcare technology offers most novel corporate governance and employer-employee interaction opportunities. Endogenous growth theory should include the workforce health status as a productive labor capital driver. Precaution should be factored in as a positive collective learning-by-preventing process, which includes group dynamics around hygiene but also monitoring of one's own and other's health status and care via health apps that also allow tracking human contact touchpoints for preventing COVID.
Puaschunder, Julia M, Martin Gelter and Siegfried Sharma, 'COVID-19-Shock: Considerations on Socio-Technological, Legal, Corporate, Economic and Governance Changes and Trends' (Research Association for Interdisciplinary Studies, RAIS Conference Proceedings, 17-18 August 2020) Abstract: This article tries to grasp our contemporary Zeitgeist to serve as historic landmark how pandemics can influence the individual decision making, the social compound, national order, economic structures and the larger-scale international compound. The ongoing COVID-19 crisis accounts for one of the most unpredicted economic disruptions in the history of humankind. Little would we all have expected how our lives have changed since the outbreak of the pandemic if we consider the deep impact the novel Coronavirus has on all our lives, the legal, economic and political spheres. Featuring national policy strategies to cope with the pandemic grants insights about precautionary and reactionary governance during health crises balancing between medical, economic and social well-being. Concurrent with an already ongoing digitalization trend, the COVID-19 pandemic implies widespread changes for individual decision makers in their adoption of technological assistance but also in giving up decision making to Artificial Intelligence (AI). Economic facets of collective learning processes during the crisis are outlined with a special emphasis on the currently ongoing digital disruption. As a widespread external shock to the world economy and legal order, COVID-19 affects corporate conduct profoundly. The legal implications and societal changes' impetus on corporate conduct will be depicted in order to derive future corporate governance prospects. From an evolutionary dynamics market perspective, a trends prediction sheds light on what kind of firms are likely to fail, which ones may survive and which ones could thrive in the following years and decades to come. International differences in the handling of COVID-19 are highlighted in order to envision future global public healthcare. The recommendations address the importance of well-calibrated goals to cure our contemporary humankind and protect our future common world population.
Quaid, Jennifer, 'Balancing Risk and Reward in the Time of COVID-19: Bridging the Gap Between Public Interest and the "Best Interests of the Corporation"' in Colleen M Flood et al (eds), Vulnerable: The Law, Policy and Ethics of COVID-19 (University of Ottawa Press, 2020) 233 < > Abstract: The scale of the global COVID-19 pandemic has made plain that business organizations have a key role to play in supporting public health efforts to contain the virus and follow social distancing. Directors and officers have been called upon to make proactive decisions about risk reduction that may hurt the bottom line (or simply diverge from established practice) but are the right thing to do. However, corporate law is permissive and tends to avoid dictating what should be done, so long as it is in the 'best interests of the corporation'. Uncontrolled outbreaks of the virus in certain sectors of the economy deemed essential raise the difficult question of whether this flexible standard promotes an appropriate balance between economic viability and the legal pursuit of profit on the one hand and fundamental values such as the protection of human life and security on the other. In this paper, I reflect on how the pandemic situation brings this tension into sharper relief and exposes an accountability gap. I suggest that bridging this gap may be possible if we are prepared to recognize more explicitly that sometimes what is best for the corporation to protect the public interest.
Raj, Aniket, 'CSR in Times of COVID-19: Notifications Issued by the Ministry of Corporate Affairs With Regard to Schedule VII of the Companies Act, 2013' (SSRN Scholarly Paper ID 3759989, 6 October 2020) Abstract: The global spread of the COVID-19 pandemic and the complete lockdown in India to prevent its spread has severely impacted both social and economic aspects of life and has also fueled the depression in India's economy. Unemployment is highest in recent decades, and the worst hit are the underprivileged and the unorganized sector workers. During these testing times, the efforts and policies of the State are not enough to curb the plethora of problems, the assistance of corporate giants in the attempt to emancipate the situation is needed now more than ever. In its pursuit to restore social welfare and in the interests of magnum bonum, the Government of India through the Ministry of Corporate Affairs has released several notifications with respect to Schedule VII of the Companies Act, 2013 to facilitate the participation of corporations in improving the COVID-19 situation.
Schwartz-Ziv, Miriam, 'How Shifting from In-Person to Virtual Shareholder Meetings Affects Shareholders' Voice' (SSRN Scholarly Paper ID 3674998, 16 August 2020) Abstract: Shareholder meetings are one of the only opportunities for most investors to interact directly with management. Due to Covid-19, however, shareholder meetings have moved to a virtual format. Analysis of transcripts and recordings of in-person and virtual shareholder meetings in 2019-2020 shows that, relative to in-person meetings, the overall time of virtual meetings is 18% shorter, and 29% less time is spent by firms on answering each question. These findings indicate that communication between companies and shareholders is more limited at virtual meetings. To examine if shareholders face challenges in their attempts to increase such communication in virtual meetings, I construct a dataset on shareholders' attempts to submit questions to virtual shareholder meetings and document several tactics firms use to avoid addressing them. For example, firms explicitly state that no (additional) questions were submitted, whereas I document that multiple questions were submitted by shareholders, but were ignored. Finally, a mechanism that imposes severe restrictions on shareholders' ability to submit questions at virtual shareholder meetings is uncovered: the use of a non-Broadridge platform to broadcast the meeting. Overall, the paper documents that with regard to 55% of the firms to which shareholders attempted to submit questions, shareholders faced obstacles. The paper concludes with policy recommendations on how virtual shareholder meetings can be designed in ways that foster communication between management and companies.
Sherman, John, 'The Contractual Balance Between 'Can I?' and "Should I?" Mapping the ABA's Model Supply Chain Contract Clauses to the UN Guiding Principles on Business and Human Rights' (Harvard Kennedy School, Corporate Social Responsibility Initiative Working Paper No 73, 2020) Abstract: This paper examines the efforts of the American Bar Association to draft proposed Model Contract Clauses for businesses that prohibit modern slavery and child labor in supply chain contracts. This involves a careful balancing of a buyer's desire to avoid consuming goods manufactured with human rights abuse and its desire to protect itself legally, in order to ensure that the company is acting in alignment with its responsibility to respect universally recognized human rights under the UN Guiding Principles on Business and Human Rights. This subject is quite timely in light of the current efforts of many companies, in response to the COVID-19 pandemic, to exercise force majeure clauses in their contracts to dump suppliers without regard to the impacts of vulnerable workers in their supply chains.
Society for Corporate Governance Nigeria, 'An Insight to the Corporate Governance Implications of Changes to the Companies and Allied Matters Act 2020' (SSRN Scholarly Paper ID 3673326, 13 August 2020) Abstract: The Companies and Allied Matters Act (CAMA) can be accurately described as the bible or grundnorm of corporate dealings and governance in Nigeria, which should account, in part, for the pomp and pageantry ensuing the August 7th, 2020 presidential assent of the CAMA 2020 Bill into law. As it signifies the first major overhaul of the CAMA 1990 (its predecessor) which was crafted in line with the English Companies Act of 1985 and although its English compadre has undergone numerous amendments since its inception, the CAMA 1990 continued its reign, which accounts for the overwhelming buzz following its repeal. The other reason can be cited from the innovations embedded in the Seven (7) Part, Eight Hundred and Seventy (870) sections of the CAMA 2020 , with about 167 new sections, some of which could not have come at a better time. This is so, seeing as boards and management alike have been thrown into unique perplexing positions as they continue to navigate their corporations through the unusual normal brought about by the COVID 19 pandemic and efforts to flatten the curve of infected cases. For instance, one of the unique perplexing positions for corporates was, could companies hold AGMs virtually in Nigeria? To which, the CAMA 1990 did not clearly prescribe the mode of conducting such meetings. Hence, leaving eager companies, at the time, to fall to the cardinal principle of law, that what is not expressly forbidden is permitted. CAMA 2020 remedies this as it provides for remote or virtual general meetings. This is just one of several innovations inserted into the new Act. This explains the thrill surrounding its presidential assent and reasons as to the expectations of these new sections as well as the amendments to our body of corporate law. This paper provides an insight and analysis of relevant introductions of the CAMA 2020 as it relates to governance and postulates how these provisions will affect corporate governance going forward
Stevelman, Faith and Sarah C Haan, 'Boards in Information Governance' University of Pennsylvania Journal of Business Law (forthcoming) Abstract: This Article charts the decline of the two leading twentieth-century paradigms of corporate governance: the agency-cost theory, which produced the limited 'monitoring board,' and the 'separate realms' theory, which deferred consideration of all matters other than profit to government regulation. Repeated stock market crashes and hedge fund activism have exposed the limits of the agency-cost theory. A global pandemic and financial crisis, investor demands for corporate social responsibility and stewardship, and corporations' own participation in the political process have made separate realms thinking nearly irrelevant. We argue that, while much of corporate law theory remains constrained by these twin paradigms, the practice of board governance has largely moved beyond them. The economic shock of the COVID-19 pandemic, in particular, has sent public company boards into high gear, forcing them to look beyond stock prices, to engage the firm's full capacity for information gathering and synthesis, and to actively command the firm's systems of internal and external communication. Even before a global pandemic placed heightened demands on corporate boards, the trend toward information-based governance was well underway, catalyzed by new legal requirements, industry best practices, committee charters, fiduciary duties, and investor demands for more active board governance. It has been observable in audit committees' increased participation in financial reporting, the expanding application of boards' knowledge about the firm to strategic advising and to executive compensation decisions, and boards' greater role in decision-making about risk management, legal compliance, and ESG matters. To capture the board's investment in data gathering, deliberation, and reporting processes as constitutive of the firm's status, and the board's strategic management and authoritative deployment of knowledge and communication, we label this new board governance 'informational governance.' Informational governance includes a robust role for corporate boards in communicative action--the active creation and deployment of the firm's self-knowledge--recognizing an important, value-creating role for boards that has long been discouraged by the 'monitoring board' conceit. Focusing on informational governance helps sharpen our understanding of the board's role in corporate strategy, an overlooked subject in the corporate law literature, but one that has assumed new importance in the postpandemic era. We identify some areas in which the law is likely to evolve as this new, technologically-enhanced, information-rich paradigm continues to cohere.
Wilson, Kerri and Natalie Harten, 'Be Careful What You Wish For' (2020) 20(4) Without Prejudice 39-41 Abstract: The scale of the COVID-19 pandemic has led to many businesses facing severe financial difficulties, with boards and shareholders finding themselves in the unfortunate position of having to decide whether to place their companies into liquidation. It goes without saying that this decision is not something to be taken lightly, nor one to be taken in haste.
Winkler, Matteo and Nicola Malta, 'COVID-19 as a Deal-Killer in Mergers and Acquisitions: A Case Study' (2020) 34 Diritto del Commercio Internazionale - The Law of International Trade 857-870 Abstract: This article offers an original case study of the failed sale of Victoria's Secret's business to examine the deep consequences of the COVID-19 pandemic in the context of M&A transactions. After presenting the case, it draws two lessons from it by: (1) proposing a multi-layered analysis of the effects of covid-19 depending on the type of event considered and on the contract language, and (2) exploring the possible reshaping of the termination right in connection with the dramatic variations of the target's value during the interim period caused by COVID-19.
Wright, Cornell, 'Governance Considerations for Boards of Directors during the COVID-19 Crisis' (2020) Emerging Areas of Practice Series - COVID-19 (Coronavirus), Westlaw Canada Abstract: We are now weeks into the unfolding COVID-19 crisis and all indications are that it will persist for many more weeks. Companies have activated their business continuity plans and organized themselves to cope with the restrictions issued by governments and public health authorities. Depending on the organization, this will mean everything from shutting down operations to continuing operations with some or all employees working remotely.
Wu, Xi, 'When Crisis Hits: The Role of Regulations' (SSRN Scholarly Paper ID 3624592, 15 May 2020) Abstract: This paper shows that regulations act as a stabilizer for firms during crises. During the COVID-19 pandemic, firms with more regulations ex ante, experience a less decline by four to five percent in both stock and corporate bond prices than less regulated firms. Prior to the crisis, more regulated firms held more cash, had lower leverage, and were less likely to pay dividends, making them more resilient to extreme market conditions. Moreover, these more regulated firms have less systematic risk exposures during the crisis. I also find similar effects of regulations during the 2008 Financial Crisis.
Zetzsche, Dirk A et al, 'The COVID-19-Crisis and Company Law: Towards Virtual Shareholder Meetings' (University of Luxembourg Faculty of Law, Economics & Finance No WPS 2020-007, 15 April 2020) Abstract: Legislation responding to COVID-19 allows us to examine how, and to what effect, the corporate governance framework can be amended in times of crisis. Almost all leading industrialized nations have already enacted crisis legislation in the field of company law. Here, given the difficulties or indeed the impossibility of conducting in-person meetings currently, the overall trajectory of company law reforms has been to allow for digitalization.We note five fields in which legislators have been particularly active. First, the extension of filing periods for annual and quarterly reports to reflect the practical difficulties regarding the collection of numbers and the auditing of financial statements. Second, company law requires shareholders to take decisions in meetings - and these meetings were for the most part in-person gatherings. However, since the gathering of individuals in one location is now at odds with the measures being implemented to contain the virus, legislators have generally allowed for virtualonly meetings, online-only proxy voting and voting-by-mail, and granted relief to various formalities aimed at protecting shareholders (including fixed meeting and notice periods). Third, provisions requiring physical attendance of board members, including provisions on signing corporate documents, have been temporarily lifted for board matters. Fourth, parliaments have enacted changes to allow for more flexible and speedy capital measures, including the disbursement of dividends and the recapitalization of firms, having accepted that the crisis impairs a company's equity. Fifth and finally, some countries have implemented temporary changes to insolvency law to delay companies' petitioning for insolvency as a result of the liquidity shock prompted by the imposition of overnight lockdowns.This working paper seeks to (1) document the respective crisis legislation; (2) assist countries looking for solutions to respond rapidly and efficiently to the crisis; (3) exchange experiences of crisis measures; and (4) spur academic discussion on the extent to which the crisis legislation can function as a blueprint for general corporate governance reform. Countries considered in full or in part include Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, India, Italy, Luxembourg, the Netherlands, Norway, Portugal, Singapore, South Korea, Spain, Switzerland, Thailand, the United Kingdom, and the United States. Readers are encouraged to highlight any inaccuracies on the part of the authors in their presentation of the respective laws, and to bring further crisis-related legislation not considered in this working draft to the attention of the authors. Moreover, readers are invited to indicate where there is room for improvement therein, and/or to signal the need for policy reform.
Zhou, Haiyan, 'Optimising Business Environment during the COVID-19 Epidemic: China's Experience' (2020) 41(10) Company Lawyer 332-334 Abstract: Reviews the measures implemented by China during the coronavirus pandemic to promote a business-friendly environment that follows the rule of law. Examines key features of initiatives to improve the administrative efficiency of the approval process needed to establish a business, strengthen information disclosure to protect the interests of minority shareholders, facilitate online litigation, and optimise the conduct of bankruptcy proceedings.
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