In a significant minority of public corporations, a single person or entity has the power to choose the directors of the corporation and determine the outcome of stockholder votes. Many private corporations operate with this governance profile. Corporations fitting this profile are described as “controlled.”
In the standard model of the corporation, the power to direct and oversee the business and affairs of the entity rests with the board of directors, who are obligated as fiduciaries to act in the best interests of the company and its stockholders. When a party other than the board of directors has the ability to control the corporation, it upsets the standard model, with knock-on effects for a variety of corporate doctrines.
This course examines the nature of control and its implications. In addition to covering these issues in the context of public companies, the course will examine their implications for privately held companies and touch on their application to alternative entities.
Course enrollment is limited to 50. Students are expected to possess a basic understanding of the law applicable to alternative entities and corporations. An introductory course in corporations or business associations is a prerequisite.
After taking this course, students will understand the following topics:
- What constitutes control? What are the different types of control and what factors contribute to its existence?
- What fiduciary duties do controllers owe? When and why do they arise?
- How does the presence of a controller affect corporate doctrines such as the standard of review, demand futility, and ratification?
- What devices can be used to mitigate the effects of control, such as special committees, majority-of-the-minority votes, and enhanced-independence directors?
- What are the implications of particular methods of maintaining control, with particularly emphasis on the currently trending device of dual class stock?