Are REITS Investment Advisers?
A REIT is an acronym for Real Estate Investment Trust, although the term more properly refers to tax status than a specific entity type. For a variety of reasons, a REIT may involve several different types of entities. The raison d’être of REITS is to provide a tax-preferred mechanism for investment in a professionally managed portfolio of real estate assets. Read more...
When Signing As Agent Can Lead To Personal Liability
In the transactional setting, lawyers are often concerned with confirming the authority of corporate officers and other agents to bind the corporation. Thus, we often see representations and warranties of due authorization and execution and legal opinions to that effect as well. The focus of these efforts is, of course, to ensure that the principal is bound. But can the Read more...
Sale-Leaseback Transactions And The Finance Lenders Law
The California Finance Lenders Law generally requires that persons ”engaged in the business of making consumer loans or making commercial loans” be licensed, unless exempt. Cal. Fin. Code §§ 22100(a) and 22009. The business of making consumer loans or commercial loans may include lending money and taking, in the name of the lender, or in any other name, in whole or in part, as security Read more...
Court of Appeals Finds SEC’s Analysis “was not just superficial, it was nonexistent.”
Yesterday, I wrote about a strategy of not showing up to prevent a quorum from being established at an annual meeting of stockholders. What happens when the Securities and Exchange Commission initiates administrative proceedings against you and you don’t respond? The likely result is the SEC will take your default. That is indeed what happened in Rapoport v. Securities and Exchange Read more...
When The Best Offensive Strategy May Simply Be To Stay Home
While I enjoy studying and thinking about game theory problems, I find that it is often difficult (at least for me) to apply it to “real world” corporate situations. Defining the game, the rules and strategies just seems so much more complicated than the usual games discussed in basic game theory texts. However, I’ve always thought that corporate voting should Read more...
Introducing the ARR Ratio
On Wednesday, the Securities and Exchange Commission adopted a rule requiring the national securities exchanges and national securities associations to prohibit the listing of any equity security of an issuer that is not in compliance with the compensation committee and compensation adviser requirements in Section 10C of the Securities Exchange Act of 1934. Recently, I commented on the extreme laconism of Read more...
District Court Refuses To Apply Business Judgment Rule To Claims Against Officers
Since 2008, a total of 38 banks have failed in California (See this list of failed banks). When this happens, the Federal Deposit Insurance Corporation acts as receiver for the bank. Since the FDIC is also an insurer of the failed bank’s deposits, it has an interest in pursuing directors, officers and professionals who were involved in the failure. As of June Read more...
Commissioner Issues Proposed Revisions To Proposed Private Fund Adviser Exemption
Earlier this week, the Commissioner of Corporations issued additional proposed changes to Rule 260.204.9. As explained in this post, the Commissioner extended the current version of that rule until July 12 of this year. According to the Commissioner’s notice, the principal changes are intended to: Require that any financial audits be performed by a Certified Public Accountant that is registered with, and subject to Read more...
Ex Parte Communications And SEC Rulemaking
In this recent post, I discussed a petition submitted by Professor Lucian Bebchuk and nine other academics asking that the Securities and Exchange Commission adopt rules requiring public companies to disclose to shareholders the use of corporate resources for political activities. The Commission has received over a quarter of a million comments in response to this petition. In the last three months, Read more...
Delaware Court of Chancery “Overrules” Federal Court
I’ve often heard the claim that one reason to incorporate in Delaware is that the courts won’t surprise you. When I hear this, I recall the surprise, and even outrage, in the aftermath of Smith v. Van Gorkom, 488 A.2d 858 (Del. 1985) . See, e.g., Fischel, The Business Judgment Rule and the Trans Union Case, 40 Bus. Law. 1437, 1455 (1985) Read more...
