Category Archives: Business Law

Will the Loss of the Electric Vehicle Tax Credit Lead to the Demise of Tesla?

In a blog post written for the Delaware Journal of Corporate Law, DJCL Staff Member, Ryan Messina, discusses Tesla’s business challenges that result from a combination of the loss of the $7,500 electric vehicle tax credit, a civil investigation by the Securities and Exchange Commission, a shareholder derivative action alleging breach of the fiduciary duty of loyalty, and its mountain of long-term debt.  Time will tell how these challenges will impact Tesla as one of the world’s most innovative companies, in executing its goals and remaining viable.

Read Ryan’s post on the DJCL Blog.

The Tax Cut and Jobs Act: What It Means for Business

In a blog post written for the Delaware Journal of Corporate Law, DJCL Copy Editor and Schmutz Fellow, Joseph Farris, discusses the Congressional tax legislation, H.R. 1, also known as the Tax Cut and Jobs Act (“TCJA”), signed into law by President Trump in December 2017, and how it affects various businesses—regardless of whether they are a nonprofit, partnership, corporation, or LLC.

Read Joseph’s post on the DJCL Blog.








Post-Close Disclosure Claims in Nguyen v. Barrett

In a blog post written for the Delaware Journal of Corporate Law, DJCL Staff Member, John Brady, discusses the Delaware Court of Chancery’s decision in Nguyen v. Barrett which deals with post-close claims of breach of fiduciary duty and improper/partial disclosure arising out of a merger agreement, and how the Court’s discussion provides a useful summary of the pleading requirements for both pre- and post-claim disclosure violations.

Read John’s post on the DJCL Blog.








Genuine Parts Requires Genuine Jurisdiction: Protecting Our Economy Through Constitutional Principles

In a blog post written for the Delaware Journal of Corporate Law, DJCL Staff Member, Brittany Giusini, discusses the Delaware Supreme Court’s recent opinion in Genuine Parts Co. v. Cepec and how the decision gives clarity to long-standing personal jurisdiction principles by acknowledging that an unfettered exercise of judicial power over businesses creates constitutional and economic concerns.

Read Brittany’s post on the DJCL Blog.








Considerations in Implementing Country-by-Country Reporting

The OECD’s final BEPS report proposes country-by-country reporting to increase transparency with transfer pricing.  In a blog post for the Delaware Journal of Corporate Law, DJCL Staff Member John Brady explains that country-by-country reporting leaves some unanswered questions about how these reports will be exchanged with foreign jurisdictions while maintaining adequate protections to safeguard this information.  He argues that the U.S. should implement an objective privacy standard with specific safeguards prior to implementing information exchanges.

Read more at http://www.djcl.org/blog.








Evidence Relating to the Effect of Prescribing Majority Voting in the Election of Directors as the Default Voting Standard

Prof. Lawrence A. Hamermesh
Ruby R. Vale Professor of Corporate and Business Law
Widener University School of Law, Wilmington, Delaware

[Professor Hamermesh is a member of the Delaware State Bar Association’s Council of the Corporation Law Section (the “Delaware Council”). Nevertheless, nothing stated here represents the views of that group.]

On August 11, 2011, the Council of Institutional Investors (“CII”) requested that the Delaware Council promote the revision of the Delaware General Corporation Law (“DGCL”) to alter the default rule governing the required vote in the election of directors. Specifically, CII asks that the default rule – currently that a plurality vote is sufficient to elect directors – be amended to require some form of majority vote, at least in the absence of a contested election. (CII’s letter was published on its web site more or less concurrently with its submission to the Delaware Council, and is available here).

In its letter, CII asserts that “many corporations incorporated in Delaware adopt the plurality voting standard by default.” This is an empirically testable assertion: to “adopt the plurality voting standard by default,” a company’s bylaws would have to be silent on the question of the required vote to elect directors. If the bylaws prescribed a voting standard (either the plurality standard or some form of majority vote standard), the default rule under Section 216 of the DGCL would be displaced and would not control. The bylaws, and not the statutory default provision, would prescribe the voting standard.

It therefore seemed appropriate to evaluate whether and to what extent Delaware public company bylaws actually do or do not prescribe a voting standard for electing directors. Because of CII’s focus on smaller public companies that have not adopted majority voting bylaws, I (with the assistance of George Codding, Widener Law ‘2012) examined a sample of 150 Delaware companies in the Russell 2000 small cap index. 142 of the 150 companies in that sample (95%) have bylaws prescribing a voting standard.

This result comes with one caveat. 21 of the 150 sampled companies (14%) have a bylaw provision to the effect that a majority in interest of the combined voting power of the issued and outstanding shares of stock entitled to vote represented at the meeting shall decide any question or matter brought before such meeting. Because of their typical comprehensiveness (governing votes on “all matters” or “all actions” subject to stockholder vote), I would be inclined to interpret such a provision as defining a general voting standard applicable in all voting situations, including the election of directors, absent some specific provision requiring a different standard for the election of directors. There are arguments to the contrary, however, which, if successful, would leave the statutory default standard to govern director elections, and would result in an amendment to that standard having a somewhat greater formal impact.

On balance, the information generated from our review indicates that, contrary to CII’s assertion, very few Delaware public companies – and certainly not “many” – “adopt the plurality voting standard by default.” Thus, in the large majority of Delaware companies, a change in the default rule governing the required vote to elect directors would have no formal effect at all. Barring a statutory amendment mandating some form of majority vote standard (rather than merely prescribing that standard as a default), any change in the voting standard in most of the sampled companies would have to arise through amendments to the governing bylaw provisions. Such amendments can be accomplished by unilateral stockholder vote under the DGCL, and adoption of a bylaw prescribing a majority vote standard precludes subsequent amendment by the directors (DGCL Section 216).