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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.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs
A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
Blockchain Domains: New Developments for Brand Owners
Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.
A Lawyer's System for Active Reading
Active reading comprises many daily tasks lawyers engage in, including highlighting, annotating, note taking, comparing and searching texts. It demands more than flipping or turning pages.