The tenth issue of the Michigan Business & Entrepreneurial Law Review has been published! Our subscribers will find the following works inside.
6 Mich. Bus. & Entrepreneurial L. Rev. ___ (2016)
Published: Fall 2016
Abstract: Recent cases – Burwell v Hobby Lobby Stores and Citizens United chief among them – evince a new understanding of the nature of the corporation and its place in society. Whether a corporation has rights – such as those of religious exercise – is not, however, just a question of legal interpretation. To answer this question requires a theory of group or cultural identity, that is, a theory of how a group may have “culture” separate and apart from those of the individuals that comprise it. And such a theory must address how to understand the meaning of culture when the beliefs of people within the group diverge. However, the Supreme Court’s analysis has fallen short by glossing over this step in the analysis. In Hobby Lobby, the Supreme Court indicated that the question of the religious identity of the corporation might easily be resolved by the semi-democracy of state corporate law: those shareholders and managers controlling the corporation, that is, decide the identity of the corporation. As Justice Ginsburg noted in her dissent, however, in the case of religious belief, things can get fairly gnarly. This Article critiques the Supreme Court’s oversimplified view of how group identity is formed using anthropology as its guide. This anthropological approach argues that the question of corporate “culture” is far more complex than the Court’s jurisprudence acknowledges. This approach requires rethinking the corporate rights doctrine and its assumptions about shareholder democracy. One or the other must fall – either the notion that corporations have cultural rights such as those of a “religion,” or the processes of majority shareholder voting that do not track an ingrained cultural identity.
Abstract: Commercial law in the United States is designed to facilitate private transactions, and thus to enforce the presumed intent of the parties, who generally are free to negotiate the terms they choose. But these contracts inevitably have gaps, both because the parties cannot anticipate every situation that might arise from their relationship, and because negotiation is not costless. When courts are faced with these gaps in a litigation context, they supply default terms to fill them. These defaults usually are set to reflect what courts believe similar parties would have agreed to if they had addressed the issue. These “majoritarian” defaults are justified as being most likely to carry out the presumed intentions of the parties. Despite the frequent assertion that the defaults used by courts reflect the views of most contracting parties, there is remarkably little empirical evidence that they do. Neither the legal scholars who study contract law nor the business scholars who study business transactions seem to have examined whether important default terms really are those that parties actually prefer. Statements by judges and scholars that these defaults are those the parties would presumably have chosen do not appear to rest on anything except the personal opinions of the writers. This article attempts to remedy that situation by focusing on one very important situation in which default rules are generally relied upon—and then asking which rule the parties actually prefer.
Abstract: Theatrical financing has been conducted in much the same way for the better part of a century. This method, however, has consistently provided only the shows with access to the deepest of pockets a path to Broadway. The advent of Internet-based crowdfunding provides producers access to a potential source of capital that was previously unavailable. Prior to the promulgation of the SEC regulations regarding Title IV of the JOBS Act, this capital could only be accessed through donation or reward based financing campaigns, but with the introduction of Regulation A+, there is finally a practical method for the widespread solicitation of investors for theatrical productions. This comment explores the realities of theatrical financing as well as the associated regulations regarding the sale of these sorts of securities. Part I will describe the background of theatrical financing and the governing regulations, and will highlight the restrictions faced by theatrical producers under the current framework. Part II will set forth the specifics of Regulation A+ and asserts that this framework for equity crowdfunding is particularly well suited to the unique aspects of theatrical financing. Part III will address potential shortcomings and objections to this assertion.
Abstract: Technological developments in securities markets, most notably high frequency trading, have fundamentally changed the structure and nature of trading over the past 50 years. Policymakers both domestically and abroad now face many new challenges impacting the secondary market’s effectiveness as a generator of economic growth and stability. Faced with these rapid structural changes, many are quick to denounce high frequency trading as opportunistic and parasitic. This article, however, instead argues that while high frequency trading presents certain general risks to secondary market efficiency, liquidity, stability, and integrity, the practice encompasses a wide variety of strategies, many of which can enhance, not inhibit, the secondary trading market’s core goals. This article proposes a regulatory model aimed at maximizing high frequency trading’s beneficial effects on secondary market functions. The model’s foundation, however, requires information. By analyzing more data on how high frequency traders interact with markets, regulators can assess the viability and scope of other potentially worthwhile measures targeting more general market threats. Likewise, regulators can determine who is in the best position to bear supervisory responsibility for particular trading activities: agencies, exchanges, traders, or some combination thereof. Crucially, the model also calls on regulators to share information on a global scale: trading no longer only affects a single exchange, a single asset class, or even a single country. By sharing information, global regulations become more informed, secondary market stability is enhanced, and regulatory arbitrage is minimized. In short, high frequency trading can be a force for good, but a principled and coordinated effort is required to ensure it fulfills that potential.
Abstract: This Note seeks to analyze the new requirements in the Basel III banking regulatory framework and explore their impact on commercial banks’ project finance portfolio. The Note begins with a general introduction of the Basel Accords, followed by an analysis of the changes in the Basel III requirements and their potential impact on project finance, in particular the effects of the liquidity coverage ratio (LCR) and the net stable funding ratio (NSFR). The Note ends with a discussion of alternative sources of project finance funding that emerged as a result of the new regulatory regime.
Abstract: This Note examines the trend toward the international convergence of accounting standards and then identifies the factors contributing to the process of this trend as well as the obstacles standard setters face in moving to one high quality, unified set of standards. The Note next identifies the possible outcomes for the future of convergence, including the mandatory adoption of International Financial Reporting Standards (IFRS) by the United States, the Securities & Exchange Commission’s (SEC) encouragement of the voluntary of adoption of IFRS by the United States, requiring public companies to comply with both U.S. Generally Accepted Accounting Principles (U.S. GAAP) and IFRS, the Financial Accounting Standards Board (FASB) and International Accounting Standards Board’s (the IASB) joint creation of a new set of combined standards, and the harmonization of existing standards. The Note then endorses the mandatory adoption of IFRS in the United States as the most efficient approach for the worldwide capital market as a whole but concludes that the most likely outcome will be a slow process of harmonization.