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Shadow Directors and Controlling Shareholders: Duties and Liability
The meltdown and the consequent disappointments have produced a wave (actual and threatened) of litigation, alleging the VCs, through the board seats of their appointees, were in “control” of failed companies (dot-coms and others), and therefore obligated to exercise “fiduciary” care over the fortunes of minority shareholders. And, the deep-pocketed VCs have, of course, been taking evasive action. Their time-honored gambits are, first, to eschew a board seat and substitute instead “observer” or “visitation” rights – the right to sit in attendance at all board meetings and speak one's piece ' but not vote. Given the muscle the VCs enjoy, by keeping their hand on the money spigot, this usually amounts to the same thing as a board seat. This is a practice known in the UK as “shadow directors.” I am informed by my UK compadres that liability can attach as if the individual VC was, de jure as well as de facto, sitting on the board.
One step further removed is the assertion of rights through negative covenants. This takes advantage of the well-recognized doctrine in US law that a shareholder may behave in any way he or she sees fit in exercising shareholders rights, in contrast to one's obligation as a director to respect and further the interests of all the shareholders.
New York's Latest Cybersecurity Commitment
On Aug. 9, 2023, Gov. Kathy Hochul introduced New York's inaugural comprehensive cybersecurity strategy. In sum, the plan aims to update government networks, bolster county-level digital defenses, and regulate critical infrastructure.
Law Firms are Reducing Redundant Real Estate by Bringing Support Services Back to the Office
A trend analysis of the benefits and challenges of bringing back administrative, word processing and billing services to law offices.
Bit Parts
Summary Judgment Denied Defendant in Declaratory Action by Producer of To Kill a Mockingbird Broadway Play Seeking Amateur Theatrical Rights
How AI Has Affected PR
When we consider how the use of AI affects legal PR and communications, we have to look at it as an industrywide global phenomenon. A recent online conference provided an overview of the latest AI trends in public relations, and specifically, the impact of AI on communications. Here are some of the key points and takeaways from several of the speakers, who provided current best practices, tips, concerns and case studies.