Advanced Corporate Law Study Notes

Meeting Schedule: Classes held in the same room, Tuesdays and Thursdays.
Exam Details:
- Date: April 1 (after spring break).
- Format: 2-hour exam likely consisting of two questions (one longer, one shorter).
- Extra Time: Although it appears to be an hour and fifteen minutes, students will have two hours to complete it.
- Materials Allowed: Students can bring computers, notes, and any materials they wish, but cannot have people assist during the exam.
Professor Availability:
- Office Hours: No physical office hours due to travel (New York and Delaware), but students can email to arrange meetings; must include "Tulane student" in the subject line to get a response.
- Preferred Meeting Format: In-person, although phone or virtual meetings can also be arranged.

Course Origin: Course developed at UVA and focuses on advanced corporate law, which includes mergers and acquisitions (M&A) and builds on foundational corporate law principles.
Course Focus:
- Relationships and interactions between corporate shareholders and directors.
- Significant emphasis on corporate law foundational cases selected for teaching based on 28 years of experience.
Topics Covered:
- Corporate Law definition and fundamental principles.
- Emphasis on hostile acquisitions as core subject matter, although M&A discussions will occur.
Important Legal Concepts:
- Corporate Law Definition: A set of rules governing the relationship between shareholders (owners) and directors (management) of corporate assets, highlighting the separation of ownership and control.
- Best Rules vs. Second Best Rules:
- Best Rules: Generally negotiated contracts (operating agreements, etc.).
- Second Best Rules: Statutory and common law governing corporate law when parties cannot negotiate specifics because of market dynamics of share trading.

Delaware's Role:
- Delaware as a common law state plays a central role in corporate governance (99% of discussions will be about Delaware law).
- Statutory law (e.g., DGCL) forms a backdrop and often parties can contract outside of it, reflecting flexibility in corporate law.
Fiduciary Duties:
- Fiduciary Duties: Directors hold duties of loyalty (disinterestedness and independence) and care.
- Duty of Loyalty: Directors must act without conflict or personal interest affecting their decisions and should not be controlled by outside interests.
- Duty of Care: Directors are expected to make informed decisions based on all material information reasonably available under the circumstances.
- Judicial Review Standards: Five main standards are used to review director responsibilities and actions in Delaware:
- Business Judgment Rule: Presumption that directors act in good faith and in the company’s best interest—courts generally do not question decisions under this standard unless rebutted by shareholders.
- Entire Fairness: Standards applied primarily in transactions where directors might have conflicts.
- Unocal and Revlon: Apply when considering defensive measures against takeover bids and during sale processes, respectively.

Definition: A presumption that directors are acting with loyalty and care when making decisions.
Key Components:
- Loyalty includes elements of disinterestedness (no material interest) and independence (not controlled by outsiders).
- Care requires that decisions be made with due diligence and informed basis; signifies that gross negligence breaches are actionable but mere negligence is not.
Rebuttal to the Rule:
- Shareholders need to allege that the majority of directors lacked independence, had conflicts, or failed to consider all relevant information.

Revlon Duty: When a company is to be sold, directors must seek the best price under the circumstances, not merely the highest price.
Unocal Defense: Protects against hostile takeovers by allowing for certain defensive actions.
Corporate Control: Definitions and implications for what constitutes control may vary, with key thresholds set at 50% or sometimes lower.

Smith v. Van Gorkum (1985): Landmark case establishing distinctions in business judgement, care, and the necessity of due process in board decisions.
- It emphasized that the process of decision-making is as critical as the outcome.
Business Practices Post-Van Gorkum:
- Directors must ensure minutes reflect thorough discussions, engage financial advisors when necessary, and cautiously evaluate proposals to avoid liability.
Duties of Disclosure and Good Faith: Directors required to disclose all material information to shareholders and to act in good faith amidst governance and oversight responsibilities.

Duty of Oversight: Directors must monitor operations and ensure appropriate mechanisms are in place.
Good Faith Violations: Occur when directors knowingly ignore problems or fail to act, transforming care violations into loyalty breaches.

The course will explore more in-depth topics such as entire fairness, oversight duties, and the importance of transparency in M&A dealings, emphasizing the practice of directors as stewards of corporate assets.
Future discussions will tackle the implications of these duties on corporate governance and director liability.