Corporations Law
Literature on corporate insolvency and restructuring are listed in the Insolvency section. Literature on corporate/business insurance is listed in the Insurance section. Abdolahian, Omid and Mohsen Najafikhah, ‘Study of Changes in Company Law in the Coronavirus Pandemic From the Perspective of Theoretical and Legal Basis’ (2022) Journal of Law Research (advance article, published online 5 July 2022) Abstract: The coronavirus pandemic experience showed that in pandemics and similar conditions, such as the spread of Infection, contamination or radiation which presents or could present significant harm to human health, it is difficult to enforce certain legal obligations governing companies. Agile legal systems quickly responded to these situations by changing their legal provisions and adapting to conditions. In this article, by comparative study of Iran and England laws and regulations, the theoretical foundations, legal basis and limits of state’s intervention in Company law in Coronavirus Pandemic are examined. This study shows that in coronavirus pandemic. In order to protect the public interest, UK government has adopted the approach of rapid and extensive intervention in the field of corporate law. Concession theory, more than other theoretical foundations of Corporate Law, justifies the theoretical basis of this vast and rapid state intervention and Public Health (Control of Disease) Act 1984 provided the legal basis for this intervention. Among the existing legal capacities, Iran’s legal system has used the capacity of Article 176 of the Constitution to respond quickly to public health threats in the Coronavirus Pandemic. But state intervention in Iran’s Corporate Law has been more limited.
Adury, Jyothirmayee and Avi Leuna, ‘A Structured Digital Database, a Shield to Corporate Governance Amidst COVID-19’ (SSRN Scholarly Paper ID 4119734, 25 May 2022) Abstract: The global pandemic brought about by SARS-CoV-2 commonly known as COVID-19 has emphatically pushed and transformed the world into a digital one, with companies working whether at large scale or small scale, to take hybrid decisions which the widespread pandemic posed. The adaptation of the unprecedented new normal compelled governments and companies all over the world to explore digital solutions benefiting both the company and its employees. Multilateralism is vital as the world faces critical developmental challenges. One such challenge faced by the Securities and Exchange Board of India owing to the prevailing crisis and its unpredictable existence was to regulate the flow of information, more specifically ‘unpublished price sensitive information’, in this enhanced level of digitalization.
Agrawal, Shreeya and Avani Maheshwari, ‘An Analysis the Impact of Covid-19 Amendments on the Corporate Sector in India’ (2021) 24 Supremo Amicus Journal (unpaginated) Abstract: The surge of the novel coronavirus pandemic led to a huge impact of every sector of life of billions of people. It affected lives, economies and everything alike. The spread of this virus was such that more than 160 countries found themselves affected by the same. Some sectors felt the repercussions of this virus’s impact on a small scale whereas some felt it almost to the ruins. This paper analyzes the impact of COVID-19 pandemic on corporate sectors, specifically the amendments made by the government to various acts with the objective of better accommodating the problems and difficulties faced by companies in these difficult times and for the promotion of ease of doing business. This paper also discusses mergers and acquisitions (M&A) and how its procedures were affected by the pandemic as well. Firstly, the amendment to ‘Insolvency and Bankruptcy Code 2016 (IBC)’ in March 2020 is discussed in line with the rights of homebuyers and it is analyzed in line with violations of the rights of homebuyers and lack of practical implementation with respect to this amendment. Secondly, the June 2020 Amendment to the code is discussed which suspends any proceedings to ever be initiated in the suspension period prescribed in the Act. This paper analyzes the implications and shortcomings of this amendment with respect to unnecessary results of this amendment. Thirdly, the impact of this pandemic on M&A transactions. There are various processes that need to be adhered to for the purpose of M&A transactions and the pandemic proves to be a challenge in validating the authenticity of these processes. Further, the impact of the pandemic on further consolidations is discussed. Lastly, the Companies Amendment Act 2020 is critically analyzed in light of its implications on the companies. There are various sections which were amended and others which were introduced by way of this amendment. All in all, this particular amendment act would be considered fruitful if proper guidelines for its implementation are further issued.
Ahmed, Shakoor and Larelle Chapple, ‘Corporate Response to Modern Slavery Risks Induced by COVID-19: Business as Usual?’ (2022) 37(3) Australian Journal of Corporate Law 203–229 Abstract: The inaugural round of Australia’s modern slavery reporting in December 2020 coincided with the COVID-19 global pandemic. COVID-19 has disrupted the usual reporting obligations by companies required to address the risk of modern slavery in their supply chains. This article focuses on Australian companies’ compliance with their disclosure obligation by specifically testing whether and how companies responded during the first year of the COVID-19 pandemic with the key aim to recommend improvement to future reporting. Using content analysis to examine the first modern slavery statements submitted by Australian companies, the research finds more than half of the modern slavery statements did not disclose COVID-19 issues related to modern slavery risk. The findings inform the public demand for improved accountability and transparency to ensure the human rights of vulnerable workers. This article provides an overview of modern slavery risk challenges due to COVID-19 and how companies can improve their resilience and reduce modern slavery risks related in modern slavery reporting.
Alon-Beck, Anat, ‘Times They Are A-Changin’: When Tech Employees Revolt!’ Maryland Law Review (forthcoming) Abstract: The COVID-19 epidemic sparked social distancing, economic crisis, mass layoffs, furloughs, inequality, civil unrest, including various private and public responses to these issues. These responses have profound effects on employees rights, their role in the corporations that they serve and overall economic activity in the United States. In the last few decades corporate governance scholarship neglected the role of employees - ‘human capital,’ and mainly focused on the relationship between directors, managers and shareholders. Employees outside the U.S. have a formal role in corporate governance. There are calls from the public for a revolution in corporate law in the US, mirroring the current social movements, to resist short-termism and achieve long-term value. Corporations are pressured to incorporate in their charters a deep obligation to act for the benefit of society at large, and to include employees formally (EESG), as stakeholders, in the governance of corporations. These calls are not new, and also surfaced following the 2008 financial crisis. The new development is that tech employees joined these efforts and are revolting by organizing, striking and publicly speaking out against their employers. This article will address the old debate in corporate governance theory, from the current dominant share-holder centric corporate governance to collaborative (stake-holder centric) corporate governance, and the new corporate personhood theory. It also makes a pragmatic suggestion that our corporate governance theory can be extended to include the protection of directors (or officers) if they take employee interests into account in decisionmaking by ‘expanding’ the scope of a director’s (or officer’s) fiduciary duties. The director (or officer) has an obligation to act according to ‘the best interests of the company.’ If the director takes employee interests (as stakeholders) into account for the benefit of the company, because human capital is a valuable intangible asset, which the success of the success of the company depends on, then, as long as the decision is an informed calculated business decision, the director is protected by the BJR rule.
Amm, Michael D and J Robert S Prichard, ‘The Post-Pandemic World: Key Considerations for Business Leaders’ (2020) 5 Emerging Areas of Practice Series - COVID-19 (Coronavirus), Westlaw Canada_ _Abstract: As companies emerge from a protracted crisis mode--evolving from their immediate response to the COVID-19 pandemic to managing through the crisis and preparing for resumption of on-site operations--business leaders have been stabilizing their organizations and are looking ahead to plan for a post-pandemic world. How they address the strategic challenges before them will determine the success of their organizations for years to come. Below we consider some key themes that business leaders are navigating.
Anidjar, Leon Yehuda, ‘Directors’ Duty of Care in Times of Financial Distress Following the Global Epidemic Crisis’ Brooklyn Journal of International Law (forthcoming) Abstract: The global Covid-19 pandemic is causing the large-scale end of life and severe human suffering globally. It is the most massive public health crisis in modern living memory, which created a significant economic crisis. This dramatic change is reflected in a significant recession of global production and the collapse of confidence in the functions of markets. Corporations and boards of directors around the world are required to design specific strategies to tackle the negative consequences of the crisis. This is especially true for small and medium-sized enterprises (SMEs) that suffered tremendous economic loss, and their continued existence as ongoing concern is questionable. Given these uncertain financial times, this Article is devoted to exploring directors’ duty of care from a global perspective. In particular, I argue that the current crisis will underline the importance of the advisory role of the board of directors rather than the monitoring function, and further regulatory reforms that strengthen such capacity are expected to emerge. Furthermore, I maintain that the civil law rather than the Anglo-American law on directors’ duty of care provides boards with a more expansive scope of discretion to confront the unusual challenges associated with the Covid-19 because these governance regimes are tailored to the unique features of companies and markets. I apply this novel argument in different types of SMEs, mainly in the family business and venture capital-backed firms.
Augenstein, Daniel, Stefania Baroncelli and Orsolya Farkas, ‘Between Private Governance and Public Regulation: COVID-19 and Workers’ Rights in Global Garment Supply Chains’ (2022) 24(1–2) International Community Law Review 79–99 [pre-published version of article available on SSRN] Abstract: The article traces the adverse human rights impacts of business responses to COVID-19 in the garment sector to long-standing systemic problems in global supply chain management. It scrutinizes attempts by States and business enterprises in Europe to address these adverse impacts in the light of the ongoing implementation of the UN Guiding Principles on Business and Human Rights. The article discerns a shift in the European legal and policy framework from early attempts to promote corporate social responsibility to more recent modalities of home state regulation of corporations. In response to concerns that the EU’s regulatory turn in business and human rights may exhaust itself in perpetuating economic imperialism and market hegemony, the article highlights the importance of ensuring access to judicial remedies for foreign victims of business-related human rights violations; and of grounding unilateral home state regulation in a multilateral international legal framework.
Baur, Dirk G and Allan Trench, ‘COVID-19 Infection of Australian Companies’ (SSRN Scholarly Paper ID 3609110, 1 June 2020) Abstract: This paper analyzes the impact of the coronavirus pandemic on Australian companies’ share prices. We use daily new infections as a risk factor and proxy for the severity of the pandemic. Based on the loading to this risk factor and abnormal returns during the crisis we categorize firms into (i) severely infected, (ii) infected and (iii) mildly or not infected. We find large differences across firms and sectors highlighting that the virus does not affect all firms and not in the same way contrasting evidence of financial contagion and excess co-movement from past crises. The increased cross-sectional dispersion of returns in the pandemic suggests a sophisticated response of investors resulting in significant diversification benefits.
Bailey, Diggory, ‘Judicial Anticipation of Legislation’ [2020] Statute Law Review Article hmaa014 (advance article, published 5 August 2020) Abstract: This note considers Re: A Company (Injunction to Restrain Presentation of Petition) [2020] EWHC 1406 (Ch) and Travelodge Ltd v. Prime Aesthetics Ltd [2020] EWHC 1217 (Ch) in the context of earlier case law and looks at the circumstances in which the courts have shown a willingness to have regard to the likelihood of future legislation. Note: the litigation concerns a press release by the Secretary of State for Business, Energy and Industrial Strategy on 23 April 2020 which announced certain proposals designed to mitigate the effects of the Covid-19 pandemic on businesses and the economy. The legislation in question is the Corporate Insolvency and Governance Bill (‘the Bill’) was introduced into the House of Commons on 20 May 2020.
Bebchuk, Lucian A, Kobi Kastiel and Roberto Tallarita, ‘Stakeholder Capitalism in the Time of COVID’ (3) 40(1) Yale Journal on Regulation 60-126
Abstract: This Article tests the claims of supporters of stakeholder capitalism (‘stakeholderism’) in the context of the COVID pandemic. Supporters of stakeholderism advocate encouraging and relying on corporate leaders to use their discretion to serve stakeholders such as employees, customers, suppliers, local communities, and the environment. The pandemic followed and was accompanied by peak support for, and broad expressions of commitment to, stakeholderism from corporate leaders. Nonetheless, and even though the pandemic heightened risks to stakeholders, we document that corporate leaders negotiating deal terms failed to look after stakeholder interests. We conduct a detailed examination of all the $1B+ acquisitions of public companies that were announced from April 2020 to March 2022, totaling 122 acquisitions with an aggregate consideration exceeding $800 billion. We find that deal terms provided large gains for the shareholders of target companies, as well as substantial private benefits for corporate leaders. However, although many transactions were viewed at the time of the deal as posing significant postdeal risks for employees, corporate leaders largely did not obtain any employee protections, including payments to employees who would be laid off post-deal. Similarly, we find that corporate leaders failed to negotiate for protections for customers, suppliers, communities, the environment, and other stakeholders. After conducting various tests to examine whether this pattern could have been driven by other factors, we conclude that it is likely to have been driven by corporate leaders’ incentives not to benefit stakeholders beyond what would serve shareholder interests. While we focus on decisions in the acquisition context, we explain why our findings also have implications for ongoing-concern decisions, and we discuss and respond to potential objections to our conclusions. Overall, our findings have significant implications for long-standing debates on the corporate treatment of stakeholders. In particular, our findings are inconsistent with the implicit-promises/team-production view that corporate leaders of an acquired company should and do look after stakeholder interests; on this view, fulfilling implicit promises to protect stakeholder interests serves shareholders’ ex-ante interest in inducing the stakeholder cooperation and investment that are essential to corporate success. Our work also supports the agency critique of stakeholder capitalism which suggests that, due to their incentives, corporate leaders cannot be relied upon to look after stakeholder interests and to live up to pro-stakeholder rhetoric.
Bernstein, Adam and Paul Taylor, ‘Coronavirus Update: Actions for Business to Consider’ (2020) 44(3) Company Secretary’s Review 3–16 Abstract: Examines COVID-19-related developments that businesses should consider: HMRC’s aim to recoup monies falsely and fraudulently claimed under the Coronavirus Job Retention Scheme; Government support for businesses facing eviction due to the impact of the coronavirus; the Government-supported Bounce Back loan; and the effect of the Corporate Insolvency and Governance Act 2020.
Bhandarkar, Abhijit, Altamash Kadir and Ritika Dhabaria, ‘Rejuvenating the Law through Technology in India with Special Reference to Corporate Governance, the Judicial System and Alternate Dispute Resolution’ (SSRN Scholarly Paper ID 3981361, 9 December 2021) Abstract: The law is meaningless, if it is not uniform in its application. This uniformity can only exist when the law is accessible. Technology has played a central role in helping people adapt to the new realities of physical restrictions brought about by the COVID-19 pandemic. The web of restrictions threatened accessibility to the Law and the uniformity of its application. However, entities soon adapted to the new normal by using technology. This paper examines these adaptations and assesses the positive impact that technology provides across diverse parameters and its desirability in the present COVID-19 circumstances and also in the future. In the world of COVID-19, most companies have adapted to comprehensive solutions involving technology for good corporate governance. This paper highlights the importance of incorporation of technology (like holding board meetings online) for increasing efficiency of the company and providing maximised benefits to itself and its stakeholders. The e-courts project has made significant advancements in the implementation of information and communication technology in the Judiciary. All Courts in India, except 14 technically not feasible sites are equipped with high-speed WAN connections. During the pandemic, some Courts in India have also adopted ad-hoc technological solutions to carry out a majority of all their functions digitally. This paper encourages the need to further build on these foundational blocks of progress towards a digital judicial system. A digital judicial system would increase access to all courts and tribunals reduce the administrative burden of courts, lead to a better legal education system, decrease costs to litigants/courts and have a positive impact on the environment. Similarly, online dispute resolution uses technology to facilitate the resolution of disputes between parties. It consists of negotiation, mediation or arbitration, or a combination of all three. This paper analyses the possibility of this furthering the purpose of Alternate Dispute Resolution, turning resolution into a truer creature of contracts. Additionally, the utility of blockchain arbitration is assessed in juxtaposition to enforceability of awards under Indian law. Furthermore, there are other possibilities that the advancement in technology brings to the legal field. This paper evaluates the indirect impact of technology in relation to the environment and the education system.
Bitė, Virginijus, Vilija Mogenytė and Salvija Mulevičienė, ‘Civil Liability of a Company Director in the Vicinity of Insolvency: The Lithuanian Approach’ (2022) 23(2) European Business Organization Law Review 455–479 Abstract: Little has been achieved at the EU level and internationally to harmonise the various approaches taken by national laws regarding the nature and extent of directors’ obligations in the vicinity of insolvency. The first steps towards harmonisation can be seen in the Restructuring Directive, which aims to provide initial guidance on the duties of directors where there is a likelihood of insolvency. Lithuania is one of the countries which has most recently implemented a comprehensive insolvency reform, trying to better conform to the modern realities of business and promote the corporate rescue paradigm through the national legal regime. The new Law on Insolvency of Legal Persons introduced a range of changes that directly and indirectly impact the director’s civil liability approach. The aim of this paper is to provide comprehensive insights from a comparative perspective on the Lithuanian approach to the regime of a director’s civil liability in the vicinity of insolvency through an analysis of the conditions and sources of such liability in the context of the new legal regime of insolvency. The paper discusses the general features and doctrine of the legal regime regarding a director’s civil liability in Lithuania. Secondly, it sets out the types of insolvency-related duties of directors, analyses the current state of harmonisation at the EU level in that regard, and then discusses the Lithuanian approach. Finally, it determines the main factors influencing the future of the legal regime of a director’s liability, including the reactions of the legislators to the COVID-19 outbreak.
Borselli, Angelo and Ignacio Farrando, ‘Corporate Law Rules in Emergency Times Across Europe’ (Bocconi Legal Studies Research Paper No 3759202, 23 September 2020) Abstract: This paper explores corporate law rules adopted in some European states amidst the COVID-19 pandemic, in order to track the major reform trends and consider how corporate law in Europe has adjusted to the emergency. The analysis focuses primarily on the U.K., Germany, France, Italy and Spain; occasionally, depending also on the relevant rules actually introduced by the states, other systems are considered as well. The paper groups the emergency measures into three main categories that include rules aimed at facilitating shareholders’ meetings and meetings of the board of directors, rules relaxing directors’ duties and liability and giving directors some leeway as companies face unprecedented challenges and uncertainties, and rules designed to support corporate liquidity. The analysis shows that while some points of similarity exist among the emergency rules considered, there are nevertheless numerous differences in their nature, scope, technicalities, and also timing. These differences emphasize a lack of coordination at the European level. The discussion also sheds light on the potential of some emergency measures to call traditional corporate law rules into question and last in what will be the new normal after the crisis.
Bullock, Susy and Georgina Peters, ‘Directors’ Duties in the Age of COVID-19: Where to from Here?’ (2020) 35(7) Butterworths Journal of International Banking & Financial Law 445–451 Abstract: Reviews changes to directors’ environmental, social and governance duties arising from the coronavirus pandemic. Examines key features of corporate governance prior to COVID-19, the growing focus on investors, the main reforms affecting the banking and financial sectors, and how they interact with the regime under the Companies Act 2006, including the duty under s.172 to promote the company’s success. Considers the duty to distressed companies.
Cassim, Rehana, ‘The Escalation of Corporate Corruption During The Covid-19 Pandemic: Is the Anti-Corruption Framework of the Companies Act 71 of 2008 Adequate?’ (2022) 33(3) Stellenbosch Law Review 349–375 Abstract: During the Covid-19 pandemic, corruption in South African companies, both state-owned and privately-owned, reached staggering proportions. This included bribery, procurement irregularities, overpricing and fraudulent deals between government officials and companies. This article identifies provisions of the Companies Act 71 of 2008 that may be used to address corporate corruption. This is done with a view to ascertaining whether the anti-corruption framework of the Companies Act is adequate to counteract corporate corruption. It concludes that the Act contains a fairly comprehensive framework to tackle corruption in companies registered under it. In spite of this framework the level of corporate corruption remains high, and increased substantially during the Covid-19 pandemic. The article makes recommendations to reduce these high levels of corporate corruption.
‘Chartered Governance Institute Issues New Guidance on Shareholder Meetings’ (2020) 41(10) Company Lawyer 317–318 Abstract: Highlights the Chartered Governance Institute’s July 2020 publication of ‘Shareholder Meetings Under the Corporate Insolvency and Governance Act 2020', updating its guidance on annual general meetings during the coronavirus pandemic. Details the organisations involved in producing the update, and summarises the issues it covers, including how shareholder meetings may be held under the 2020 Act, and companies’ rights to limit attendance.
Cheema-Fox, Alexander et al, ‘Corporate Resilience and Response During COVID-19’ (SSRN Scholarly Paper ID 3578167, 17 April 2020) Abstract: During a market collapse, it is strategically important for a company to be evaluated as resilient, thereby maintaining trust among investors. We study whether during the 2020 COVID-19 induced market crash, investors differentiate across companies based on a firm’s human capital, supply chain and operating crisis response. Using data derived from natural language processing of news around corporate responses to the coronavirus crisis, we find that companies with more positive sentiment exhibit higher institutional investor money flows and less negative returns than their competitors. This is especially true for companies with more salient responses.
Choi, Stephen J et al, ‘COVID-19 Risk Factors and Boilerplate Disclosure’ (SSRN Scholarly Paper No 4722858, 19 February 2024) Abstract: The SEC mandates that public companies assess new information that changes the risks that they face and disclose these if there has been a ‘material’ change. Does that theory work in practice? Or are companies copying and repeating the same generic disclosures? Using the shock of the COVID-19 pandemic, we explore these questions. Overall, we find considerable rote copying of boilerplate disclosures. Further, the factors that correlate with deviations from the boilerplate seem related more to the resources that companies have (large companies change updated disclosures more) and litigation risks (companies vulnerable to shareholder litigation update more) rather than general economic vulnerability to the pandemic. The exception is companies facing exposure to China.
Christensen, Sharon, ‘Corporate Signing Goes Digital’ (2020) 35(4) Australian Property Law Bulletin 72–74 Abstract: As part of the Federal government's response to COVID-19, temporary changes have been made to the Corporations Act 2001 to facilitate electronic signing of contracts by corporations. The 'Corporations (Coronavirus Economic Response) Determination (No. 1)' 2020 ("the Determination") is effective from 6 May 2020 until 6 November 2020 and extends the operation of section 127 of the 'Corporations Act' 2001 to where two directors or a director and company secretary sign: a copy or counterpart of a document in physical form, or use an electronic signing method to execute a copy or counterpart in electronic form provided the electronic signing method reliably identifies the person and indicates the person's intention about the contents of the document. The purpose of the modification is to overcome the requirement for both directors/secretary to sign the same static form of the document in order to comply with section 127(1) and to allow electronic signing.
‘COVID-19 and Damages for Negligent Advice’ [2020] Lawyer (Online Edition) 1 Abstract: The article informs on damages that companies and investors are entitled to who face losses face due to negligent advice in the advent of Covid-19 pandemic. It mentions that COVID-19 pandemic has caused historic losses across financial markets and business, exacerbated by the oil price war between OPEC and Russia. It also mentions about addressing claims related to disadvantageous transactions in the situation.
Crabb, John, ‘World on Pause’ [2020] (Summer) International Financial Law Review 8–11 Abstract: Reports on corporate finance developments during the coronavirus pandemic, including the suspension of share buybacks, due diligence in mergers and acquisitions, private investment in public equities deals, postponed annual general meetings, and material adverse change clauses.
Delev, Jordan and Milena Najdova, ‘Legal Aspects of the Manners of Holding Shareholders’ Assemblies in the Conditions of Covid 19 Pandemic’ (2021) 18 Balkan Social Science Review 49–67 Abstract: The functioning of the world social and economic order in the 21st century has faced many challenges, but the global Covid-19 pandemic has caused unpredictable tendencies that require immediate, effective and adequate reactions that will respond seriously to the new situation. No society, including Macedonia, has remained immune to the consequences caused by this pandemic, penetrating deeply into all segments of society. The Covid-19 pandemic directly raised the question of the readiness of national socio-economic orders to function in digital format. The functioning of the main carriers of economic fluctuation, i.e., business entities and their capacity for digitalization, is one of the main preoccupations imposed by the pandemic. These issues are current in global and Macedonian aspects. The main purpose of this paper is, through analysis of the practice of joint stock companies listed on the Macedonian Stock Exchange and those with special reporting obligations, to identify the degree of utilization of the opportunity provided in the Law on Trade Companies for organization at shareholders’ assemblies by electronic means during the conditions of the pandemic. At the same time, the paper concentrates on the effects that the pandemic causes in the realization of the shareholder rights under the newly created conditions. In addition to analyzing the current situation, the paper provides guidance for improving the provisions for the organization of shareholders’ assemblies by electronic means and the exercise of shareholders’ rights. Keywords: Joint stock companies, shareholders’ assemblies by electronic means, shareholders’ rights, COVID 19 pandemic.
Delfino, Rebecca A, ‘A New Prescription for the Opioid Epidemic: 360-Degree Accountability for Pharmaceutical Companies and Their Executives’ (2022) 73(2) Hastings Law Journal 301–369 Abstract: We can no longer ignore this--A national crisis resulting in more than half-a-million American deaths, costing hundreds of millions of dollars in losses to the economy, ravaging the health care system, and devastating state and local communities. This narrative describes the COVID-19 pandemic and something else: the epidemic of opioid addiction and abuse. In the last twenty years, the opioid epidemic claimed the lives of more than 700,000 people at the cost of more than 500 billion dollars to the economy. The COVID-19 pandemic has made the opioid epidemic worse, causing a staggering increase in opioid-related overdose deaths. Even now, on average, 140 people die every day from an opioid overdose, making it a leading cause of injury-related death in the United States. And 70 percent of those deaths involve a prescription opioid. There is a growing sense that those responsible for the opioid epidemic, specifically drug companies and their executives, have escaped responsibility for their dangerous and deceptive practices in manufacturing and marketing opioids. Although they have confronted civil lawsuits, the pharmaceutical industry has faced virtually no criminal scrutiny; only a couple of companies and executives have ever been criminally charged for the devastation that opioids have caused. This raises questions: Given the increasing number of opioid overdose deaths nationally, why are charges and convictions of drug companies and their executives so rare? And why haven’t existing legal mechanisms worked to punish the improper manufacturing and marketing practices and curb the epidemic? Their misconduct continues because no single federal law exists to prosecute pharmaceutical companies and their executives for causing the epidemic. And the laws that govern the industry are ineffective; they fail to criminalize the type of conduct that caused the epidemic, contain elements that are prohibitively difficult to prove, or impose minimal penalties that fail to deter bad actors. Thus, the drug industry has persisted in dubious practices unfettered by civil litigation, government enforcement actions, and fines. This article seeks to examine these issues and others. It is the first in legal scholarship to offer a concrete and omnibus solution grounded in federal law to address the pharmaceutical industry’s misconduct. The article also continues the conversation I began in my article, The Prescription Abuse Prevention Act: A New Federal Statute to Criminalize Overprescribing Opioids, 39 YALE L. & POL’Y REV. (forthcoming, 2021) which offered a proposal for federal criminalization of doctors who overprescribe opioids. The novel 360-degree solution proposed here—the ‘Controlled Substance Manufacturing and Marketing Accountability Act’--will deter and punish those pharmaceutical companies and their executives who provided misleading information to government regulators and used deceptive practices in marketing opioids to the public. It also recognizes that when properly prescribed, these drugs provide essential relief for pain and suffering. Thus, this proposal seeks to address prior misconduct and point the way forward to avoid the next drug epidemic.
Dowling, David, ‘The Role of the Company in the Time of Covid-19’ (2021) 32(1) King’s Law Journal 37–48 Introduction: The Covid-19 virus and the resulting pandemic have caused tragic loss of life and suffering. As countries have tried to lower the infection rate they have been forced to shut down large swathes of their economies. The necessary but self-imposed hardship has impacted everyone in society, albeit not equally. Much of the commentary on Covid-19 has focused on how the pandemic has accelerated existing underlying trends. This article will argue that a similar process is taking place in relation to attitudes towards the company and its role in society, focusing on the UK. These changes are not necessarily part of a single, consistent set of policy decisions. Instead, they reflect broader, pre-existing changes in society and our assumptions about the interaction between profit and purpose. The actions taken by the Government are based (whether consciously or not) on the principle that companies are not purely private assets but instead agents for positive change.
Du Plessis, Jean and Andrea Anastasi, ‘2020 Vision: Current Refletions and Stakeholder Governance in a Post-COVID-19 World’ (2020) 37(7) Company and Securities Law Journal 495–501 Abstract: COVID-19 is rapidly changing the world. How will it affect the unsolved simmering tensions between the interests of shareholders and the interests of other corporate stakeholders? This note explores how the COVID-19 "systemic shock" will cause a welcome corporate governance shift from short-term monetary gain towards a long-term corporate outlook.
Enriques, Luca, ‘Pandemic-Resistant Corporate Law: How to Help Companies Cope with Existential Threats and Extreme Uncertainty During the Covid-19 Crisis’ (European Corporate Governance Institute, Law Working Paper No No 530/23020, 2020) Abstract: This essay argues that, to address the Covid-19 crisis, in addition to creating a special temporary insolvency regime, relaxing provisions for companies in the
Flanagan, John, ‘The Golden Shares Dilemma’ [2022] (5) Illinois Law Review 1971–2002 Abstract: The COVID-19 pandemic brought unprecedented challenges to AThe COVID-19 pandemic brought unprecedented challenges to American businesses. For those businesses facing the most pressure, the American bankruptcy system promised relief and a means of emerging from the crisis. This system is driven by a historic policy of liberal access for debtors, with attempts by creditors to block bankruptcy filings under loan terms routinely nullified. Yet the promise of bankruptcy for some debtors may prove to be illusory, thanks to a device known as the ‘golden share.’ Instead of inserting bankruptcy blocking provisions in loan documents, creditors obtained equity and established their rights to block bankruptcy filings in corporate control documents. While the only appellate court to speak directly on the issue has suggested golden shares are valid, a post-COVID-19 case from the bankruptcy court in Delaware expressed its disapproval of this device. An emerging split of authority threatens to create only more uncertainty for corporate debtors already facing significant pressures. This Note tracks the dilemma of golden shares. It first reviews the history of golden shares, as well as the most important cases dealing with this device. It explores the theory behind the golden shares dilemma, including the role of fiduciary duties in the analysis. The Note then proceeds into a discussion of federal common law. The Note concludes with a proposal that implementing federal common law fiduciary duties through a burden-shifting framework provides the optimal means of resolving the golden shares dilemma.
Folarin, Akorede, ‘Evaluating the Legality of Virtual Meetings under the Companies and Allied Matters Act of Nigeria’ (SSRN Scholarly Paper No ID 3637095, Social Science Research Network, 20 May 2020) Abstract: The movement restrictions and social distancing directives issued in many jurisdictions across the world as a result of the COVID-19 pandemic has disrupted social and commercial interactions and necessitated emergency lifestyle adjustments globally. One of the prominent issues that have consequently arisen from this is the issue of the legality/propriety of companies holding their statutory and annual general meetings (AGMs) virtually in order to balance the imperatives of corporate governance and observance of the relevant company law and regulations on the one hand and compliance with the government’s COVID-19 directives on the other hand. To do this, however, Nigerian companies have been confronted with uncertainties with regard to the position of Nigerian corporate law on virtual company meetings. This article explores the uncertainties surrounding virtual meetings in the above context and also highlights the true position of Nigerian law on virtual meetings by private and public companies, whilst also proffering suggestions to ameliorate the uncertainty that exists and to bring Nigerian corporate law in tune with modern realities.
Freeburn, Lloyd and Ian Ramsay, ‘Capital Raising by Companies During the COVID-19 Crisis: An Analysis of Recent ASX Reforms’ (2020) 37(7) Company and Securities Law Journal 502–507 Introduction: The effects of the COVID-19 crisis have driven many listed Australian companies to raise emergency capital. These share issues have been facilitated by a relaxation of the rules applying to capital raising by the Australian Securities Exchange, a move supported by the Australian Securities and Investments Commission. The reforms to the rules draw on the experience of the financial crisis in 2008 - 2009. They are designed to assist companies adversely affected by the COVID-19 crisis to raise capital to survive the crisis. The nature of the reforms and the capital raisings to which they relate have been the subject of competing concerns. In particular, the enhanced disclosure requirements that have accompanied the relaxation of the capital raising rules have been criticised by some as unwarranted and by others as insufficient. In this research note, the authors provide information on the number of capital raisings since the beginning of COVID-19 and evaluate the competing arguments regarding the recent capital raising reforms.
Gadinis, Stavros and Amelia Miazad, ‘A Test of Stakeholder Governance’ (2021) 47(1) Journal of Corporation Law 47–103 [pre-print article available on SSRN] Abstract: Stakeholder capitalism dominates the public debate about the future of the corporation. Business leaders and policymakers are calling for companies to abandon their stern adherence to profit maximization and take into consideration a broader set of stakeholder interests, on issues ranging from workplace equity to to climate change. Critics worry that managers can easily manipulate such lofty rhetoric to promote their own agenda and weaken constraints on their conduct that are typically benchmarked exclusively against financial performance. We argue instead that companies turn to stakeholders in order to derive information about the implications of their choices over a wider array of social issues that are outside the regular scope of corporate monitoring systems. The arrival of COVID in early 2020 provides a unique setting that allows us to test in practice how companies understand and utilize stakeholder governance. Forced to adjust swiftly to a new reality, companies might choose to economize and redirect resources away from peripheral stakeholder programs, as critics predict. Alternatively, COVID could help underscore how closely companies depend on their stakeholders, such as their employees, their communities, and their governments, leading to greater efforts to address these broader needs. To explore how companies viewed stakeholders under mounting pressure brought about by COVID, we conducted interviews with CEOs, general counsel, and other top executives from large, well-known publicly traded companies with an established stakeholder governance presence. Our sample includes companies from various industries, including some that fared particularly well during COVID such as technology, and others whose businesses were hit hard, such as travel and hospitality. Our findings suggest that companies turned to stakeholders during the pandemic with increasing frequency and asked for input on issues that are central to their business. Companies relied on stakeholder communications with employees to negotiate the remote working environment and arrange for continuous operation and reopenings, and with suppliers under immense strain as global trade contracted. Through stakeholder governance, companies understood better the needs of consumers in financial difficulty and the concerns of local authorities about unnecessary population movements, springing into action to support them. But stakeholders were not always successful in persuading managers and directors to follow their suggestions, particularly when stakeholders were themselves divided or where managers faced other critical hardships concurrently. Stakeholder governance emerges from our interviews as a systematic framework that companies are developing in order to obtain information about the social impact of their practices. In the past, companies communicated with their stakeholders about specific issues as the need arose. Today, stakeholder governance seeks to proactively cover the company’s social profile as comprehensively as possible, collecting information in a regular and standardized manner. To achieve this goal, stakeholder governance has established an institutional footprint within many corporations, with specialized executive teams, direct oversight by the board, and external monitoring by investors and specialized professionals. This systematic framework, which has been overlooked by the corporate purpose debate, can help alleviate concerns about accountability, and offers a blueprint for dealing with future global challenges.
García, Lissangee Stefanía Mendoza and Rubén Méndez Reátegui, ‘The Exceptional Preventive Agreement: Legal Solution for Companies in Crisis Due to the COVID-19 Pandemic?’ (2021) 55 REVISTA CON-TEXTO 49-58 Abstract: In Ecuador has been enacted the Humanitarian Support Law to face the crisis generated by the COVID-19 pandemic. This law establishes an exceptional preventive agreement with procedures to combat the crisis that the commercial sector is going through. However, a series of questions arise that motivated the preparation of this contribution. Among these questions, are these procedures -really- implemented as the right solutions to business crises? Furthermore, can effective alternatives be considered for the permanence of the companies in the market? Therefore, based on multidisciplinary methodological considerations, finding a valid and timely response has made it essential to carry out a technical-normative analysis of the exceptional pre-bankruptcy and bankruptcy scenarios that this law establishes as we propose here.
Gelter, Martin, ‘Is Economic Nationalism in Corporate Governance Always a Threat?’ (Fordham Law Legal Studies Research Paper No 4020333, 28 January 2022) Abstract: During the past decades, corporate law and corporate governance debates have generally been skeptical of elements of economic ‘Nationalism’ or ‘protectionism.’ Arguably, globalization and convergence in corporate governance have resulted in a reduction of protectionist policies. However, recently COVID-19 has resulted in nationalist and protectionist conduct in economic policy across jurisdictions. Contrary to the predominant view, this paper argues that corporate governance policies intended to serve a particular country’s interest may at times be justified. First, globalization and convergence in corporate governance are likely to have beneficial effects only when outside investors pursue financial rather than political goals. Protectionist policies may protect domestic firms from external competition of this type, e.g., from being taken over by foreign firms controlled by or having heavy backing from their government. Second, some degree of protectionism may be necessary to sustain a country’s institutional arrangements and economic prosperity. Significant outside financial investors or multinational groups may not interact with domestic constituencies in the same way as the existing ones, thus disrupting the social compact. This may be necessary to preserve the balance of the political economy in a country that has allowed it to maintain productivity in the past. In addition, preserving a particular economic arrangement is often necessary to protect political stability, which is a precondition to productive efficiency. Third, COVID-19 has highlighted the need for resilient structures in corporate governance, which may include integration into a domestic economic network. Protectionist policy may serve the purpose of protecting the viability of industry in times of political crisis, e.g., by protecting supply chains. Moreover, being integrated into a national network often helps firms weather crises even if such embeddedness is not aligned with efficiency goals as usually understood in corporate governance debates.
Gelter, Martin and Julia M Puaschunder, ‘COVID-19 and Comparative Corporate Governance’ (2021) Journal of Corporation Law (forthcoming) Abstract: With the pandemic caused by the novel coronavirus SARS-CoV-2 raging around the world, many countries’ economies are at a crucial juncture. The COVID-19 external shock to the economy has the potential to affect corporate governance profoundly. This article explores its possible impact on comparative corporate governance. For an economy to operate successfully, a society must first find a politically sustainable social equilibrium. In many countries, historical crises – such as the Great Depression and World War II – have resulted in a reconfiguration of corporate governance institutions that set the course for generations. While it is not yet clear whether COVID-19 will have a similar effect, it is possible that it will change patterns of what kind of firms are – from an evolutionary perspective – likely to survive, and which ones are not. We argue that to some extent, it will accelerate ongoing trends, whereas in other areas it put corporations on an entirely new course. We observe three trends, namely the need for resilience, a growth of nationalist policies in corporate law, and an increasing orientation toward ‘stakeholder’ interests. First, firms will have to become resilient to the crisis, and consequently long-term oriented. Corporations that are not operating merely on an arm’s length capital market basis but are integrated into a network, generated by core shareholders, state ownership or bank lending may be more likely to survive. In addition, firms are beginning to interact with their workforce differently in their attempts to maintain what could be called ‘healthy human capital.’ Second, we are likely to see a resurgence of nationalism in corporate governance to ensure that foreign ownership and interconnected supply chains do not put national security at risk. Third, the existing critiques of inequality but also climate change awareness will accelerate the trend toward a broadening of corporate purpose toward ‘stakeholderism’ and public policy issues. As in the past years, institutional investors acting as ‘universal owners’ will play a role in shaping this trend.
Goding, Vincent, ‘Exceptionality, Neoliberalism and Corporations in COVID Times: JobKeeper and the Legal Shaping of Economic Order in Crisis’ (PhD Thesis, University of the Sunshine Coast, 2024)
Abstract: This thesis argues that the shaping of economic order in crisis is contingent upon both exceptional and normative forms of legal power and the interaction of these forms. It argues that extraordinary economic interventions are made possible by the partial suspension of normative politico-economic order during crisis, which enlivens an exceptional but fundamentally normalising state power. It shows how these exceptional interventions and their outcomes are influenced by their interaction with other elements of normative order which continue to function despite the crisis. Specifically, it demonstrates how extraordinary economic measures intended to stabilise and shape economic order during crisis depend upon and are influenced by an intimate relation between the institutions of the state, law and the corporation. This thesis makes these conclusions via a critical analysis of the Australian Commonwealth Government’s JobKeeper wage subsidy scheme, examining it through a theoretical lens which brings together Carl Schmitt’s theory of the state of exception and critical accounts of neoliberalism.
Goding, Vincent, ‘To Repay or Not to Repay”: Directors’ Duties and the Jobkeeper Wage Subsidy Scheme’ (2022) 96(12) Australian Law Journal 869-871 Abstract: The JobKeeper wage subsidy scheme (JobKeeper) was the federal government’s flagship economic policy response to the pandemic.1 Running initially from March to September 2020,2 it was designed to assist businesses affected by the pandemic to cover their wages by providing a subsidy of $1,500 per eligible employee per fortnight. Under the first iteration, an entity would qualify if it passed a basic decline in turnover test, calculated by comparing “projected” turnover for a relevant period in 2020 with the corresponding period in 2019.3 There was no requirement to reassess the projection during the first six months of the scheme. That the decline in turnover might not eventuate, or that an entity might remain profitable, or increase profits during the period of support, was irrelevant once the test was met. Widely supported and praised for contributing to the country’s economic recovery, JobKeeper and its perceived undeserving beneficiaries were also criticised when public funds ended up subsidising the wages bills of profitable – even booming – companies. Due to their transparency, publicly listed companies bore the brunt. JobKeeper “profiteers” were called upon to repay the unnecessary corporate welfare. Few did. It has been reported that at least $38 billion under the scheme went to companies whose turnover did not fall below applicable thresholds; while $2.6 billion went to companies whose turnovers doubled or tripled during quarters for which they claimed JobKeeper.4 While there is no reliable public record of the total amount repaid, based on disclosures to the ASX the amount repaid by listed entities as of July 2022 is just over $242 million.5 JobKeeper provides a contemporary case study to consider corporate responsibilities and the trajectory of the law regarding directors’ duties to act in companies’ best interests.
Guest, Lara, ‘How to Reduce Exposure Associated with Pandemic-Related Corporate Misconduct’ (2020) 2 Emerging Areas of Practice Series - COVID-19 (Coronavirus), Westlaw Canada Introduction: The economic and workplace upheaval associated with the COVID-19 pandemic has placed unique and intense pressures on businesses and market sectors. History has taught us that the more downward pressures there are on businesses, the more likely that bad employee and business partner behavior will occur. This kind of conduct can give rise to class action and regulatory liability. At the same time, work-from-home protocols, travel restrictions and shifting demands within workplaces can put a strain on investigative priorities. However, proactive, focused and remedial internal review and investigation at the first sign of questionable behavior should continue to be prioritized as a powerful tool to mitigate and neutralize the pernicious effects of misconduct. This article highlights issues that business leaders should be on the watch for, and how they should mobilize to address them in our changed and challenged workplaces.
Haar, Beryl Philine Ter, ‘Corporate Social Responsibility in Times of the COVID-19 Pandemic’ (2021) 2(19) Z Problematyki Prawa Pracy i Polityki Socjalnej 1–36 Abstract: The COVID-19 pandemic has caused various disruptions in the production chains of Multinational Enterprises (MNEs). Among other disruptions there is a drop of product sales, often due to lock-down measures, which resulted in last-minute order cancellations , non-payment of the already purchased resources and already made products, and hence terminations of employment contracts. International organisations and non-governmental organisations have called upon MNEs to take their corporate social responsibility (CSR) and honour the contracts. The aim of this article is to analyse to what extend this moral appeal is also a (quasi-)legal appeal following from international norms on CSR. After an assessment of the main labour law problems caused by the COVID-19 pandemic, an analysis follows on each of the identified problems. The conclusion of the analysis is that MNEs indeed are not only morally obliged to take their responsibility, but also based on the (quasi-)legal international CSR norms.
Hess, David, ‘The Management and Oversight of Human Rights Due Diligence’ (2021) 58(4) American Business Law Journal 751–798 [pre-published article available on SSRN] Abstract: The COVID-19 pandemic showed how vulnerable workers in global supply chains are to adverse human rights impacts. Protecting such workers must be a primary policy goal in the efforts to ‘build back better’ from the crisis, and businesses conducting human rights due diligence (HRDD) is a primary means to do so. In Europe, there is a fast-moving trend towards legislatively mandating HRDD and there is potential for similar movement in the United States. Whether HRDD will significantly improve human rights conditions, however, is an open question. Based on our experience with corporate compliance programs, it is clear that the management and oversight of HRDD is an essential factor in ensuring meaningful implementation, as opposed to corporations focusing on form over substance. This article identifies those key internal governance issues and provides advice on how best to ensure effective implementation. This article argues that for most corporations, the day-to-day management of HRDD best fits with the compliance function—not the legal function—and this new role could be part of the next step in the evolution of the compliance function. This article also discusses the role of the board of directors and how HRDD combined with recent developments in the law of fiduciary duties can push directors to engage in more rigorous oversight. In addition, this article discusses the types of information that are essential for supporting the management and oversight of HRDD.
Hijink, Steven, ‘Company Law in Uncertainty: The Coronavirus and Beyond’ (2020) 17(3) European Company Law 70–71 Extract: The coronavirus now affects – almost – all facets of company law. Listed companies announced postponing their general meetings and several Member States of the European Union issued emergency legislation allowing to postpone general meetings. Listed companies are reconsidering intended dividend payments and financial supervisors, like the European Central Bank (‘ECB’) and the European Insurance and Occupational Pensions Authority (‘EIOPA’), urge financial institutions to postpone dividend payments. Financial institutions suspend payment terms. The European Securities and Markets Authority (‘ESMA’) recommends national competent authorities ‘to apply forbearance powers towards issuers who need to delay publication of financial reports beyond the statutory deadline’. Furthermore, the ECB has announced an extensive additional buying-up program for government bonds. And the European Commission has already stated that when assessing national aid, the coronavirus is considered an ‘extraordinary event’.
Hill, Maud, ‘South African M&A: The COVID-19 Legacy’ (2020) 20(6) Without Prejudice 12–13 Abstract: The impact of COVID-19 on a social and human level has been significant. Connected to this is the added pressure on an already troubled South African economy. A knock-on effect is noted in the downswing in M&A activity in the region, with corporates facing tougher strategic and financial decisions. While it is anticipated that M&A activity will have an upswing in the medium to long term (connected potentially to an increased number of distressed companies on the market), it seems likely that there will be a lasting effect on M&A. The purpose of this article is to briefly consider certain of these potential lasting effects.
Horwich, Allan, ‘COVID-19 and Rule 10b-5’ (Northwestern University School of Law, Law and Economics Research Paper No 21–01, 19 February 2021)Jurisdiction: USA
Abstract: The COVID-19 pandemic presented wide-ranging challenges for businesses. Not the least of these is compliance with the federal securities laws, including the prohibition – most notably under SEC Rule 10b-5 – on materially deceptive statements made to the public. Both the SEC, in its role as enforcer of the law, and private parties, seeking to represented classes of aggrieved investors, have filed complaints asserting that corporations and others have engaged in deception of investors regarding matters pertaining to COVID-19. Some of these claims relate to disclosures regarding testing kits for the virus as well as development of vaccines. Other complaints allege faulty disclosure on the effect of the pandemic on the market for a company’s products and services that are not themselves related to the pandemic, such as claims against cruise lines that suspended operations.This article presents the legal framework for claims based on Rule 10b-5, SEC guidance on how COVID-19 affects compliance with disclosure requirements for public companies, and the issues that have emerged in the claims already filed This analysis demonstrates that almost any public reporting company faces the risk of inadequate disclosure and the temptation to withhold or misstate material facts in a time of financial stress.
Horwitz, Michael, ‘Coronavirus Economic Stabilization Act of 2020 (CESA) and Considerations for Private Equity Portfolio Companies’ (2020) 1 Emerging Areas of Practice Series - COVID-19 (Coronavirus)_ _Abstract: On March 27, 2020, the United States Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) to respond to the medical and economic impact of the COVID-19 pandemic. Included in the CARES Act is the Coronavirus Economic Stabilization Act of 2020 (CESA), which authorizes the making of emergency loans and guarantees to, and investments in, U.S. businesses in certain sectors that have experienced losses as a result of COVID-19 and authorizes financial support for the U.S. Federal Reserve’s efforts to provide liquidity to the financial system.
Hurley, Ciara, ‘Decision-Making during a Crisis’ (SSRN Scholarly Paper ID 4020322, 28 January 2022) Abstract: The COVID-19 crisis was a time of great uncertainty and inordinate stress. For the boards of public companies in the UK, a series of continuously emerging challenges required rapid decision-making on the basis of incomplete information. The early stages of the crisis provide an ideal setting in which to examine boardroom decision-making because such a high stress environment can bring to light the mechanisms and motivations that underlie this process, which we can use to discover features of decision-making that might not otherwise be apparent. This paper uses the regnant view in corporate governance scholarship - that directors will follow the shareholder value maximisation norm - to predict how we would expect companies to respond to the crisis. It then draws on a unique set of qualitative data that was gathered from interviews with directors in FTSE 350 companies and other actors in the corporate governance system during the early stages of the crisis (March-June 2020) to examine decision-making in UK company boardrooms. We will discuss the findings and pose three non-exclusive interpretations, as well as a fourth which is common to all interviews involving elite participants, and consider the implications of these for our understanding of boardroom decision-making.
Jebran, Khalil and Shihua Chen, ‘Can We Learn Lessons from the Past? COVID-19 Crisis and Corporate Governance Responses’ (SSRN Scholarly Paper ID 3753578, 22 October 2020) Abstract: The coronavirus (COVID-19) pandemic has seriously threatened the lives of the people. The pandemic has also threatened the survival of the firms, which has drawn the attention of policymakers and corporate governance practitioners around the world. In this study, we focus on how corporate governance practices can help firms to survive during COVID-19 crisis. For this purpose, we take insights from prior crises by reviewing leading business journals articles and identify key corporate governance mechanisms that could potentially be effective in the ongoing COVID-19 crisis. Our review of a large body of literature highlights several governance mechanisms that may help firms to cope with COVID-19 crisis. These governance attributes include risk management committees, board diversity, independent directors, foreign investors, institutional ownership, ownership concentration, CEO’s dual roles, block ownership, and family ownership. We provide several policy implications after reviewing the corporate governance literature. Our review illustrates that firms may be subject to at least one of the identified governance mechanisms and they may learn how these governance attributes can be effective in the COVID-19 crisis. Our review illustrates that independent risk management committees, institutional ownership, board independence, blockholders, and family ownership are some of the essential and effective governance mechanisms compared to other governance attributes during COVID-19 crisis.
Jerzmanowski, Jędrzej, ‘The Growing Popularity of Remotely Held Meetings of Management Boards, Supervisory Boards and General Meetings (Shareholder Meetings) as a Manifestation of a Digital Revolution in Company Law: The Case of Amendments to Polish Law in Response to the Covid-19 Pandemic’ (Proceedings of the Third EBOR Conference 2020, 2021) 337–350 Abstract: This paper aims at discussing one of the manifestations of the digital revolution in the corporate world – the increasingly widespread use of the remote ways of holding meetings of the management boards, supervisory boards, general meetings and shareholder meetings of companies. A crawling digital transformation in this area had been in progress across many states and for many years, but owing to the outbreak of the Covid-19 pandemic it gained strength and speed. One of the states where such an acceleration took place is Poland, which fast-tracked legislative amendments that revolutionized the remote handling of meetings and affairs of corporate authorities. In the case of supervisory boards and general meetings (shareholder meetings), the amendments reversed the rule previously in place: now, meetings may be held remotely at all times unless the by-laws (articles of association) provide to the contrary, while under the rules previously in force in-person meetings were required unless the articles of association explicitly permitted the use of remote forms of communication. As regards the management boards, no remote proceedings were previously allowed. The new law has given rise to a number of questions and doubts. They pertain both to the manner in which meetings are convened and held. In particular, it needs to be settled whether a meeting may be held in the cyberspace exclusively, without the chairman and the minute-taker being physically present at the corporate seat, or whether their presence is required after all. What is more, it is not entirely clear how open and secret ballot should be handled and if the secrecy may be waived if all members of the corporate body so decide. Doubts emerge especially as regards the contents of the rules applicable to the remote handling of meetings and the corporate bodies authorised to define and adopt them. To answer these and many other questions is the aim of this article. The discussed regulations came into force merely six months ago and are yet to be extensively discussed in legal literature. In this paper the author relied on the dogmatic law analysis supported with hands-on experiences related to the functioning of corporate authorities in the new legal reality.
Kamalnath, Akshaya, ‘A Post Pandemic Analysis of CSR in India’ (2021) Journal of Comparative Law (forthcoming) Abstract: Corporate Social Responsibility (CSR) has evaded effective definition thus far. India’s new CSR provision, embedded in the Companies Act, 2013 has attempted to define and measure the concept, and is in this respect something of a milestone. However, by thus providing a definition and measurability to CSR, the concept has lost some of its innate flexibility. Based on corporate responses before and during the COVID-19 crisis, this article seeks to analyse how effective the CSR provision has been in achieving its goals. The article finds that the rigidity in the provision has impeded corporate responses to the pandemic. Despite this, the article argues that the CSR provision in India has expressive value and, to address the lack of flexibility in the current provision, proposes an amendment to the list of categories that are to be considered CSR. Finally, the article also provides a theoretical basis for the CSR provision within the Indian Companies Act 2013. The model proposed in this article will also be relevant to recent international discussions on corporate purpose.
Keanly, Kendall and Belinda Scriba, ‘Decisions by Companies during COVID-19 Lockdown: Oppressive or Prejudicial?’ (2020) 20(6) Without Prejudice 6–7 Abstract: In Alert Level 3 lockdown there remain stringent parameters on how companies, even though now permitted to trade, may conduct their business operations.
Keanly, Kendall and Belinda Scriba, ‘Guidance on Responsible Leadership by Directors during COVID-19: Company Law - Covid-19’ (2020) 20(8) Without Prejudice 14-15 Abstract: In the July 2020 issue of without prejudice, we published an article titled “Decisions by companies during COVID-19 Lockdown: Oppressive or prejudicial?”. That article served to highlight the potential liability which may befall directors as a result of decisions made by them as a consequence of the COVID-19 pandemic and the ensuing lockdown in South Africa. Decisions taken by directors during the COVID-19 lockdown have also been highlighted by the Institute of Directors of South Africa, in a guidance paper co-published by them: “Responsible Leadership in Responding to COVID-19”. This guidance paper serves to draw attention to specific areas which, in the view of the Institute, should be the focal points of directors’ and managements’ attention in navigating the current environment. These focus areas range from corporate governance to human capital, and even include organisational performance. This article serves to highlight those areas which relate to the conduct of directors in their dayto-day management of an organisation.
Khuyen, HK, ‘Corporate Responsibilities in the Context Of Covid-19 Pandemic in Vietnam Currently: Legal Issues and Recommendations for Completion’ (2021) 31(1) Journal of Law and Political Sciences 31–53 Abstract: It can be said that an enterprise towards sustainable development not only focuses on business development but also must do business responsibly and pay attention to social responsibility. In which, enterprises give special priority to the lives of employees;towards preserving the surrounding environment with practical views and actions that are meaningful to the social community, especially in the context of the complicated ongoing Covid-19 pandemic. In addition, enterprises need to stand side by side with the state, employees and the social community to overcome difficulties, not take advantage of the pandemic context to speculate and cheat to appropriate property. From a legal perspective, the article gives the most general overview of a responsible enterprise. On that basis, the article points out the legal provisions on business responsibilities of enterprises, related to business responsibilities of Vietnamese enterprises, and makes recommendations for improvement to ensure the sustainable development of enterprises today and in the process of international integration.
Kishore, V Shyam, ‘Say What on Pay?: A Comparative Evaluation of the Impacts of the Regulatory Reforms and COVID-19 on Executive Compensation in the UK, US and India’ (2021) 1(May) NMIMS Law Review 12–39 Abstract: The financial crisis of 2008 was a significant milestone in the regulation of executive compensation in public companies. Many countries brought legislative and regulatory reforms in matters relating to executive compensation. Executive compensation was no longer seen to be merely a private matter between the executive and the company. The reforms in these countries required disclosures of the terms of compensation agreements and at times even shareholder approval of the same. The resolution seeking shareholder approval is popularly referred to as the ‘Say on Pay’. A decade since the financial crisis of 2008, this paper traces the Say on Pay reforms that were made in three countries – the United Kingdom, United States and India and makes an assessment as to what these reforms have been able to achieve so far and what could be done to make the reforms more effective. The paper also then seeks to analyse the impact that the COVID-19 pandemic has had on executive pay in these countries.
Kovvali, Aneil, ‘Countercyclical Corporate Governance’ (2022) North Carolina Law Review (forthcoming) Abstract: The American economy has lurched from crisis to crisis for over a decade, enduring long stretches of high unemployment, market dysfunction, and ineffective government policy. Despite the enormous scale of this suffering and disruption, the full implications of the experience have not been absorbed by the corporate governance literature. Corporate law’s focus on delivering financial returns to shareholders works reasonably well in a robust economy, when markets function effectively and align shareholder incentives with the goal of maximizing social wealth. But these tidy mechanisms fail in periods of macroeconomic stress, when markets send faulty signals and firms pursuing short-term shareholder profits can destroy social wealth. The layoffs or price increases often desired by shareholders can be useful in a healthy economic environment, as they cause resources to be allocated more efficiently to higher-value uses, and competitive markets prevent harm from falling on workers or consumers. But the same maneuvers can be destructive when the economy is afflicted by unemployment or inflation. Revising corporate governance arrangements so that companies focus less on maximizing short term shareholder profits during crises can thus be a useful tool for managing economic problems and improving outcomes. This Article begins the theoretical and practical work of adapting corporate governance to periods of economic crisis. After demonstrating that the assumptions that have driven corporate law debates depend on macroeconomic context, the Article shows that correcting those assumptions could make corporate governance a powerful tool for managing crises. These insights offer a useful framework for evaluating measures undertaken by businesses, investors, and the government in response to the COVID-19 crisis, while suggesting new avenues for action.
Kowalski, Dariusz and Adam Zając, ‘Public Support for Large Companies to Prevent the Effects of the Covid-19 Pandemic: Study Based on the Example of the Guarantee of the PLG FGP Guarantee Line – Legal and Economic Aspects’ (2023) 4(40) Finanse i Prawo Finansowe 7–22 Jurisdiction: Poland
Abstract: The purpose of the article is to determine whether, taking into account the current legal framework determining the state role in the economy, it is advisable to support large enterprises in relation to preventing the effects of the COVID-19 pandemic. The analysis will be conducted based on one of the types of guarantees - PLG FGP guarantee line.
Krishnan, Loganathan and Wai Meng Chan (eds), The Impact of COVID-19 on Corporations and Corporate Law in Malaysia (Springer, 2022)Link to book page on publisher website
Contents:
- Krishnan, Loganathan, ‘The Pandemic, Businesses and the Companies’) 1–19
- Chan, Wai Meng, ‘Directors’ Fiduciary Duties’ 21–41
- Balasingam, Usharani, ‘Directors’ Duty to Exercise Due Care, Skill and Diligence’ 43–67
- Krishnan, Loganathan, ‘Auditors’ Duties and Obligations in Light of COVID-19 Pandemic’ 69–85
- Wong, Wei Fong, ‘Board Meetings, General Meetings and Shareholder Activism’ 87–108
- Mah, Li Chen and Wai Meng Chan, ‘Compliance with Statutory Requirements During the COVID-19 Pandemic’ 109–130
- Isa, Yusramizza Md and Anis Shuhaiza Md Salleh, ‘State Intervention to Oblige Corporations’ Measures to Prevent COVID-19 Diffusion: A Truly Justified Matter?’ 131–149
- Geoffrey, Shanti, ‘The Effect of COVID-19 on the Capital Market’ 151–170
- Mohd Ali, Hasani, ‘Impact of COVID-19 on Corporations in Malaysia from a Corporate Restructuring and Insolvency Law Perspective’ 171–196
Jurisdiction: Indonesia
Abstract: Micro, Small and Medium Enterprises (MSMEs) are business units that significantly contribute to economic growth in Indonesia. The MSME sector has become a business unit that contributes to Gross Domestic Product (GDP), absorbs labor, and revives the community’s economy. Thus, MSMEs can be declared as one of the pillars of the nation’s economy, so it needs special attention from the government. However, in its running, MSMEs in Indonesia are facing an economic crisis due to the Covid-19 pandemic that has hitsince 2020. This has made MSME conditions worse due to declining people’s purchasing power, capital problems, and raw materials. Therefore, a comprehensive policy is needed to overcome this, one of which involves Law No. 11 of 2020 concerning Job Creation (UU Cipta Kerja). The purpose of this research is to present knowledge and understanding about the role of the Job Creation Act in creating MSME resistance to the impact of the Covid-19 pandemic.
Lalafaryan, Narine, ‘Material Adverse Change Uncertainty: Costing a Fortune If Not Corporate Lives’ [2020] Journal of Corporate Law Studies 1–46 Abstract: The Material Adverse Change/Effect doctrine (‘MAC’) has become an important, yet chaotic legal concept. With its vague definition and multi-functional objectives on the one hand, and the potential of dramatic consequences arising from the instability of global financial systems, terrorism, Brexit, and, quite possibly, pandemic (COVID-19) outbreaks on the other hand, the significance of MAC has evolved. The article analyses uncertainty surrounding the MAC doctrine under English law by critically evaluating the MAC and investigating its future under English law both in Debt Finance and M&A following Delaware’s ground-breaking decision in Akorn v Fresenius, followed by Boston Scientific. The article argues for a growing ex-ante, ex-interim, and ex-post practical importance of MAC in the light of destabilising market events. It also argues that Delaware MAC principles are relevant as a reference point for resolving English MAC uncertainties, provided one considers the specifics of MAC’s interpretation in both jurisdictions and its unique attributes in M&A and in Debt Finance. The article further argues that there is no overarching model for the correct application of MAC, be it in Debt Finance or in M&A.
Lalafaryan, Narine, ‘Orchestrating Finance with Material Adverse Changes?’ (2022) 42(1) Legal Studies 1–22 Abstract: From a legal and economic perspective, the global financial crisis, terrorist attacks, wars, natural catastrophes, and COVID-19 all have one thing in common: they are potentially ‘material adverse change’ events. Such events are unpredictable and have severe consequences for the global economy. To help manage the fallout from such negative events, businesses in economically valuable and complex deals, such as debt financing or mergers and acquisition (M&A) agreements, include special contractual risk allocation provisions, called Material Adverse Change/Effect (MAC) clauses. The COVID-19 crisis has had a drastic effect on M&A and debt financing deals, often leading to renegotiation and sometimes to litigation of these agreements based on MAC clauses. Termination of such transactions via MAC clauses poses serious risks, including those of causing a domino-effect in the market. The effects of MAC clauses in debt finance (as opposed to M&A deals), however, have been largely overlooked both in law and in finance. This paper is the first to investigate the pre-contractual (ex-ante) and contractual (ex-post) effects of MAC clauses in commercial debt financing agreements. It proposes a novel Multifunctional Effect Approach of MAC clauses in debt finance. This paper aims to explain why the commercial parties attach high importance to these vague and uncertain MAC clauses in debt financing agreements but hardly ever rely on them. First, the paper argues that apart from acceleration of the credit facilities, MAC clauses have various beneficial effects, such as screening. Secondly, MAC clauses should be regarded not only as mechanisms to solve information asymmetry but also have the following effects: improving governance, decoupling debt, providing restructuring impulses, countering uncertainty, signalling with acceleration. Potentially, MAC clauses also have the effect of a penalty default rule. The paper finds that despite these functions, the potential of MAC clauses in debt finance is not fully utilised, due to the unique characteristics of debt finance. This significantly undermines the efficiency of MAC clauses in debt finance, as lenders overprotect themselves by additionally relying on other contractual protection mechanisms and risk offsetting strategies for more efficiency.
Larcker, David F et al, ‘The Spread of Covid-19 Disclosure’ (Rock Center for Corporate Governance at Stanford University, Closer Look Series: Topics, Issues and Controversies in Corporate Governance No CGRP-84, 29 June 2020) Abstract: Investors rely on corporate disclosure to make informed decisions about the value of companies they invest in. The COVID-19 pandemic provides a unique opportunity to examine disclosure practices of companies relative to peers in real time about a somewhat unprecedented shock that impacted practically every publicly listed company in the U.S. We examine how companies respond to such a situation, the choices they make, and how disclosure varies across industries and companies. We ask: • What motivates some companies to be forthcoming about what they are experiencing, while others remain silent?• Do differences in disclosure reflect different degrees of certitude about how the virus would impact businesses, or differences in management perception of its obligations to shareholders?• What insights will companies learn to prepare for future outlier events?
Lee, Sangkyu, ‘Corporate Assistance Policies for the Post-Pandemic Era: Lessons from the Global Financial Crisis’ (2022) 27(3) KIET Industrial Economic Review 56–68 Abstract: In Korea, the COVID-19 pandemic has transitioned into a different phase. Even though infection numbers are higher than ever before, the government has relaxed its anti-disease measures, such as its Distancing in Daily Life policy.1 This change in policy direction was prompted by high national vaccination rates, with 86.8 percent of the population having received a second dose of a COVID-19 vaccine and 64.7 having gotten a booster shot, as of May 14, 2022. This follows the global trend of countries gradually relaxing disease control measures. From an economic perspective, the global economy is expected to recover, which means that the Korean economy should prepare for the global bounceback and subsequent changes to the economic environment. To this end, this paper suggests firm support policies by analyzing the firms’ management activities and evaluating three stages of policy in the recovery, stabilization, and growth periods following the global financial crisis (GFC). First, this paper critically describes the structural impact of the COVID-19 pandemic on Korean firms compared to the global financial crisis. Second, in order to explore the economic recovery and development that followed the global financial crisis, this paper specifies how the firms allocated management activities at the respective stages. At the same time, this paper describes how firms evaluated corporate management related government support policies in the three stages. Finally, this paper synthesizes the analytical results and suggests which support policies should be promoted for supporting firms’ management activities.
Levenstein, Eric, Roxanne Webster and Malachizodok Mpolokeng, ‘Business Rescue When Liquidation Proceedings Have Been “Initiated”’ (2020) 20(6) Without Prejudice 8–9 Abstract: The COVID-19 pandemic has had an unprecedented impact on the South African economy. Although necessary, the measures that have been employed to deal with the novel coronavirus, which include a nationwide lockdown, have resulted in several companies and businesses feeling the pinch. Despite government’s efforts to ameliorate these challenging conditions through various social relief and economic support packages, South African companies and businesses remain under enormous pressure, with many facing the harsh reality of financial distress. It comes as no surprise, therefore, that companies are increasingly turning to business rescue.
Li, Kai et al, ‘The Role of Corporate Culture in Bad Times: Evidence from the COVID-19 Pandemic’ (SSRN Scholarly Paper ID 3632395, Social Science Research Network, 21 June 2020) Abstract: After fitting a topic model to 79,597 COVID-19-related paragraphs in 11,183 conference calls over the period January to April 2020, we obtain measures of firm-level exposure and response to COVID-19 for 3,019 U.S. firms. We show that despite many different ways through which COVID-19 affects their operations, firms with a strong corporate culture do better in the midst of a pandemic than their peers without a strong culture. Moreover, firms with a strong culture are more likely to emphasize community engagement and adopt digital technology, and are no more likely to engage in cost cutting than their peers without a strong culture. To explore the channels through which culture makes firms resilient to the pandemic, we show that firms with a strong culture have higher sales per employee and lower cost of goods sold per employee during the first quarter of 2020. Our results provide support for the notion that corporate culture is an intangible asset designed to meet unforeseen contingencies as they arise (Kreps 1990).
Lidstone, Herrick K, ‘Corporate Annual Meetings of Shareholders in the COVID-19 World’ (SSRN Scholarly Paper ID 3570989, Social Science Research Network, 13 April 2020) Abstract: A number of states are reacting to the COVID-19 pandemic by adopting emergency legislation or executive orders to authorize shareholder meetings that are not held ‘at a place’ but only by telecommunication – referred to as ‘virtual-only’ meetings. As corporate practitioners know, Colorado corporations are required to hold annual meetings of shareholders (C.R.S. § 7 107-101(1)), and those meetings involve certain formalities (which can be made more restrictive in the articles of incorporation or bylaws) such as:1. Preparation of a shareholders’ list as of the record date that is available for review by shareholders; 2. Sending notice of the meeting place, date, and time to shareholders; and 3. Counting of votes from properly registered and voting shareholders entitled to vote. These requirements apply to Colorado corporations that are public companies subject to the rules of the Securities Exchange Act of 1934 as well as to private companies with one to one hundred or more shareholders. Of course, Colorado corporations which are subject to the 1934 Act’s proxy and reporting rules have a number of requirements to meet in addition to the requirements of Colorado law.Subject to contrary provisions in the articles of incorporation or bylaws of a Colorado corporation, the Colorado Business Corporation Act contemplates that Colorado corporations may hold hybrid shareholders’ meetings, but do not yet provide for virtual only shareholders’ meetings. In Colorado, as in other states, other statutes for corporate-like entities (such as nonprofit corporation statutes, statutes for cooperative organizations, and statutes for homeowners associations, should also be reviewed together with the governing documents for those organizations.
Lu, Lerong and Alice Lingsheng Zhang, ‘Regulating Fintech Corporations Amidst COVID-19 Pandemic: An Analysis of Ant Group (Alipay)’s Suspension of IPO and Business Restructuring’ (2021) 42 Company Lawyer 341–343 Abstract: The COVID-19 pandemic has accelerated the growth of digital economy and fintech companies, as more people tend to use online or APP-based financial services. This article discusses the regulation of fintech businesses during the pandemic, by using Ant Group as an example, when Chinese regulators aim to eliminate the regulatory arbitrage and prevent excessive financial risks.
Mack, Nicholas, ‘The COVID–19 Pandemic Highlighted the Need for Mandated ESG Disclosures: Now What?’ (2022) 30(2) University of Miami Business Law Review 188-224 Abstract: This is not simply your run–of–the–mill COVID–19 article. Instead, this article highlights a salient issue that has been right in front of our eyes this whole time and COVID–19 simply took our blinders off. ESG—short for environmental, social, and governance—is gaining significant momentum both at the firm level and in investment strategy, yet the SEC is trailing behind in ensuring the market is adequately informed of firms’ ESG information. It is important to note that the COVID–19 pandemic initially threw the market into an unanticipated downward spiral; however, many ESG funds still managed to outperform the market in the midst of this financial downturn. Why is that and where do we go from here?
Mađarac, Sandra Mrvica, Zvonimir Filipović and Marko Eljuga, ‘E-Commerce in Trade Companies During the Conditions of a Pandemic Crisis: Case Studies’ (2021) 5(EU 2021 – The Future of the EU in and After the Pandemic) EU and Comparative Law Issues and Challenges Series (ECLIC) 728–745 Abstract: E-commerce in trade companies during the course of the pandemic crisis has become more than a technology; it includes a whole range of activities such as business processes, business organization, communication, customer relationship management, the E-sales orientation and business progress through the Information and Communication technologies. The consequences of the pandemic COVID-19 are reflected on the various spheres of social life, including the businesses of the companies. New strategies and techniques in business have positively contributed to the survival of trading companies on the market in the new situation. Therefore, trading companies were forced to adjust their way of working, doing business and maintaining contacts with the customers and suppliers in the new situation. E-commerce in trading companies has become much more than the E-sales. Digitalising business leads to the implementation of E-commerce of the supply chain management that leads to speeding up and maintaining of the business processes. Due to rapid technological changes, E-commerce needs to follow new trends on the Information and Communication technologies market in order to remain effective. E-commerce can also help to organize communication processes. Online sales in the situation of the pandemic crisis have proven to be an effective sales method with which trading companies can maintain their sales in contactless customer relations. With the E-commerce can be improved all the company’s business relations by the introduction of opportunities that it provides in business, by building architecture of E-commerce and by implementation of applications for business enterprises taking into account the potential costs and benefits of introducing this kind of business. However, with the introduction of E-commerce, both of the marketing strategies and the market expansions can be improved. In the paper are listed and analysed changes in the trade operations of the two companies due to the pandemic crisis; one deals with the sale of agricultural machinery and the other with the sale of food products: at this point we examine and compares the differences in the business processes management with the customers and suppliers in the normal way of doing business also in the new occasions, that is the consequential business adjustment in the course of pandemic.
Mandal, Rudresh and Ashwin Murthy, ‘CSR in the Post Pandemic Era: The Dual Promise of ESG Investment and Investor Stewardship’ (2021) 5(2) Indian Law Review (24730580) 229–249 Abstract: This paper locates its relevance in the post-coronavirus era. The business and legal fraternities have been provided an opportunity to re-examine the role of companies in society, at a time when supply chains are being dismantled and distrust in capitalism has increased. We argue that for companies to build sustainability into business practices (for CSR cannot just be a ‘check the box’ solution to social ills), the investment community – with necessary support from the regulators – must pressurize businesses to do so. We observe that the manner in which CSR is understood and implemented in India is insufficient, due to a myriad of factors including vested political interests. Thereafter, we highlight how market-driven measures such as ESG investing, uniform ESG reporting and an effective investor stewardship model can be the next pieces of the ‘desirable’ CSR puzzle in India.
Mckeith, Sam, ‘Corporate Governance and COVID-19’ [2021] (82) LSJ: Law Society of NSW Journal 36–39 Abstract: The COVID-19 pandemic has had an unprecedented impact on how life and work is done across Australia. It’s also shaken up corporate governance.
Miles, Roger and Chris Stears, ‘Getting the Measure of “Good Business Culture”’ (2020) 41(10) Company Lawyer 320–323 Abstract: Discusses how the coronavirus pandemic has assisted regulatory efforts to require financial businesses to rate and report on their moral health. Notes the sense of community purpose demonstrated by some firms, their initiatives to foster psychological safety and promote true diversity, and efforts to establish revised reporting benchmarks for culture and conduct.
Miller, Robert T, ‘Material Adverse Effect Clauses and the COVID-19 Pandemic’ (University of Iowa Legal Studies Research Paper No 2020-21, 18 May 2020) Abstract: This paper considers whether the COVID-19 pandemic, the governmental responses thereto, and actions taken by companies in connection with both of these constitute a ‘Material Adverse Effect’ (MAE) under a typical MAE clause in a public company merger agreement. Although in any particular case everything will depend on the exact effects suffered by the company and the precise wording of the MAE clause, this paper concludes that, under a typical MAE clause, given the current tremendous contraction in economic activity, most companies will have suffered a material adverse effect as such term in used in the base definition of most MAE clauses. The question thus becomes whether the risks of a pandemic or of governmental responses thereto have been shifted to the acquirer under exceptions to the base definition. This paper considers some of the difficult causal questions that would arise in answering this question, including the relation of actions taken by the company to remain solvent while suffering the effects of COVID-19 and governmental lockdown orders, and concludes that, in some instances, a company will have suffered an MAE even if the MAE clause contains exceptions for pandemics, changes in law, or both.
Miller, Robert T, ‘Material Adverse Effect Clauses and the COVID-19 Pandemic: How Sophisticated Parties Allocate Risk Contractually’ (SSRN Scholarly Paper ID 3707282, 7 October 2020) Abstract: Currently pending in the Delaware Court of Chancery and other courts around the country are numerous cases in which the parties to a public-company merger agreement are disputing whether the target (the company being sold) has suffered a ‘material adverse effect’ (an MAE) because of the COVID-19 pandemic. Tremendous amounts of money are at stake in such cases. In the LVHM-Tiffany transaction, for example, if Tiffany has suffered an MAE, LVHM may terminate the agreement and walk away from the deal; otherwise, it will likely have to close and pay the full $16.6 billion purchase price for a company that, it says, is no longer worth anywhere near that amount. Sophisticated commercial parties allocate between them risks that may materialize during the pendency of the merger through MAE clauses, extremely elaborate contractual provisions that have given rise to more litigation than any other standard provision in public-company merger agreements. This short essay considers how courts will construe MAE clauses in connection with the COVID-19 pandemic and, in so doing, explains more generally how sophisticated parties allocate risks efficiently in order to create value in business combination transactions.
Minnes, Odelia and Dov Solomon, ‘Game of Thrones: Corporate Law and Bankruptcy Law in the Arena of Directors’ Liability’ (2021) 27(1) Columbia Journal of European Law 1–33 Abstract: A company in financial distress is bound to experience turbulence. In particular, the zone of insolvency is a crucial time in a company’s life in which conflicts of interest between shareholders, managers, and creditors are sharply enhanced. Directors’ liability during this period is a recurring topic of interest. The current COVID-19 pandemic and the global economic crisis generated by it bring this topic to the forefront once more. This Article points to two distinct approaches to this issue. The first is represented by the U.S. legal system, in which directors’ liabilities do not change in the zone of insolvency but, rather, conform to the same standards set by corporate law. We call this the ‘corporate law approach.’ The second method is represented by the U.K. legal system, which sets different standards for directors’ actions in the zone of insolvency, requiring them to minimize creditors’ losses. We refer to this as the ‘bankruptcy law approach.’ This Article shows that there are significant shortcomings to the latter approach. As a result, this Article concludes that the corporate law approach is comparatively more efficient. This Article further demonstrates the superiority of the corporate law approach by analyzing the shared theoretical, normative, and practical linkages between corporate and bankruptcy law. Finally, this Article discusses two possible policy implications of our discussion, one broader and one specifically tailored to minimize the negative consequences from the COVID-19 crisis.
Moreira, João Ilhão and Rebina Zibin Li, ‘Macau Gaming Operators and the Pandemic: Corporate Social Responsibility Is Changing’ (2022) 26(6) Gaming Law Review 335–340 Abstract: Traditionally, the concept of corporate social responsibility (CSR) has been understood as difficult to reconcile with the gaming industry. However, in recent years, there has been increasing pressure in Macau for gaming operators to take a more active role in assuring the full development of the Region. The COVID-19 outbreak exacerbated the importance of CSR in Macau and provided a window into understanding the extent to which current gaming operators can be expected to voluntarily assume a role in achieving social and economic goals. By evaluating the CSR activities of the Macanese gaming operators in the 2020–2021 period, this article argues that gaming operators had a prompt reaction to the COVID-19 outbreak, which hints at the strong potential for these operators to contribute to the achievement of public policies. However, the evaluation of their CSR approach during this period must consider the proximity to the retendering process of current concessions and the discussions taking place around a revision to the Macanese Gaming Law. These arguably gave operators strong incentives to be particularly proactive in their outreach initiatives during this time.
Niekerk, Bouwer van and Parveen Munga, ‘A Perspective on Directors’ Duties in the Time of COVID-19’ (2020) 20(5) Without Prejudice 16–18 Abstract: The standard of directors’ conduct is key to the success, or failure, of companies. The Companies Act of 2008 sets out the duties, standards of conduct and liabilities of directors. These duties include fiduciary duties, a duty to act in the best interests of the company and a duty of reasonable care. Directors may be held liable for any loss, damages or costs sustained by a company as a consequence of any breach by directors in the execution of these duties.
Nili, Yaron and Megan W Shaner, ‘Back to the Future? Reclaiming Shareholder Democracy Through Virtual Annual Meetings’ (University of Wisconsin Legal Studies Research Paper No 1606, 2020) Abstract: From demanding greater executive accountability to lobbying for social and environmental policies, shareholders today influence how managers run American corporations. In theory, shareholders exert that influence through the annual meeting: a forum where any shareholder, large or small, can speak their mind, engage with the corporation’s directors and managers, and influence each other. But today’s annual meetings, where a widely diffused group of owners often vote by proxy, are largely pro forma: only handful of shareholders attend the meeting and voting results are largely determined prior to the meeting. In many cases, this leaves Main Street investors’ voice unspoken for.But modern technology has the potential to resurrect the annual meeting as the deliberative convocation and touchstone of shareholder democracy it once was. COVID-19 has forced most American corporations to hold their annual meetings virtually. Virtual meetings allow shareholders to attend meetings at a low cost, holding the promise of re-engaging retail shareholders in corporate governance. If structured properly, virtual meetings can reinvigorate the annual meeting, reviving shareholder democracy while maintaining the efficiency benefits of proxy voting.The Article makes three key contributions to the existing literature. First, using a comprehensive hand collected dataset of state reactions to COVID-19 and of all annual meetings held between March 11 and June 30, 2020, it offers a detailed empirical account of the impact that COVID-19 and the move to virtual annual meetings had on shareholder voting. Second, it uses the context of COVID-19 to show how modern-day annual meetings have drifted away from its democratic function. Finally, the Article argues that technology can revive the shareholder democracy goals of annual meetings, and underscores how virtual meetings can meet that important goal.
Novikov, Maksim A, ‘Opportunities of Use of Option Agreements in the Post-COVID Economy: Comparative Legal Study from Russian Law and English and American Law Prospective’ in Vladimir S Osipov (ed), Post-COVID Economic Revival, Volume I: Sectors, Institutions, and Policy (Springer International Publishing, 2021) 343–360 Abstract: This chapter is devoted to different opportunities of use of option agreements in post-COVID economy and to the principal issues which may arise in connection with structuring share deals in joint-stock companies and limited liability companies, including merger and acquisitions (M&A), joint ventures (JV) deals and strategic partnership agreements as well as other transactions in relation to real property when entering into option agreements. The author analyzes the relevant legislation, jurisprudence and doctrinal materials on the relevant issues. Answers are consistently provided to the questions which, on the author’s opinion, are the most relevant when using options in the above transactions in view of current post - COVID economy in Russia and common law countries (in particular, in the United States of America and the United Kingdom).
Nweke, Emmanuel Onyekachi, Nwalelele Okezie and Clifford Kinika, ‘Law and Practice of E-Meetings during Covid-19 in Companies in Rivers State’ (2022) 8(1) African Journal of Management and Business Research 99–109 Jurisdiction: Nigeria
Abstract: The paper examined law and practice of e-meetings during Covid-19 in companies in Rivers State. The paper deployed desk-study approach in which academic materials were sourced from newspapers, internet, textbooks and other text to explain the need for e-meetings during Covid-19 pandemic in companies operating in Rivers State. The paper examined the concepts of e-meeting to mean electronic meeting carried out using audio-teleconference devices. The paper reviewed the pros and cons of virtual or e-meeting which intends to alert stake-holders on the need to step up facilities and resources required for e-meetings. It compared the face-to-meeting with that of e-meetings. The need to make adjoining facilities required for e-meetings, need for the training and retraining of staff were advocated. The paper outlined laws or rules allowed during e-meetings in the pandemic. The paper concluded that e-meeting otherwise put, electronic meeting is essential to keep business running during Covid-19 and suggested among others that management of companies operating in Rivers State, should provide electronic meeting facilities in order to avoid business obstructions during Covid-19 pandemic.
O’Malley, Megan, ‘Taking Care of Business: An Empirical Examination of the Top S&P 500 Companies and Their Role as Public Health Regulators During the COVID-19 Pandemic’ (2023) 31(2) University of Miami Business Law Review 1–45 Abstract: Data from the top 15 constituents by weight on the S&P 500 is assembled to identify trends among the policies these companies implemented in the United States during the COVID-19 pandemic. Some policies were fairly consistent across the board, especially in regard to remote work opportunities and health and safety measures for essential and/or in-person employees. Other policies, including vaccination requirements and vaccine incentives, varied across and within industries. Some companies that were examined went beyond the relevant federal, state, or local requirements in effect at the time, while other companies pushed back against public health guidance.
Omotuyi, Opeyemi Yetunde, ‘Responding to the Covid-19 Pandemic: Implications for Law and Development in Nigeria’ (2022) 2(3) Law and Social Justice Review 109–117 Abstract: The COVID-19 pandemic exposes like never before the ills and weaknesses of the Nigerian society. Several social challenges such as inequality, poor educational and health facilities, and inadequate social amenities, among others, were aggravated by the pandemic. This has necessitated an effective response to prepare for the mitigation of the impacts of any such emergencies in the future. According to the United Nations, such response calls for shared value partnerships and solidarity across the private and public sector, as well as other stakeholder groups. Adopting a desk-based research methodology, the author explores the potential roles of the public and private sectors in mitigating the impacts of such emergency situation in Nigeria. Such roles include the implementation of an effective corporate social responsibility (CSR) regime, promotion of social entrepreneurship, as well as implementation of relevant legal reforms on social protection. The author posits that these will help prepare for, and mitigate the adverse socio-economic impacts of any such future emergencies in the country. Hence, relevant recommendations are proffered to conclude the study.
Oranburg, Seth and Benjamin Kahn, ‘Online Onboarding: Corporate Governance Training in the COVID-19 Era’ (Duquesne University School of Law Research Paper No 2020-09, 2020) Abstract: Onboarding new directors is critical in the best of circumstances. What should organizations do when training new board members must be completed online? COVID-19 has forced both ordinary and extraordinary business functions to be conducted primarily online, and online onboarding may be necessary or preferred in a number of business contexts. This Article first reviews the best practices in director onboarding and explains the functional goals of those practices. It then explains how to leverage the power of virtual data rooms and virtual conference software to successfully onboard new corporate directors with virtual meetings. These strategies apply to both for-profit and non-profit boards and can be employed to enhance any online meeting or conference where the goals include informing and engaging participants while encouraging them to socialize.
Orihara, Masanori, ‘COVID-19: Firm Value and Pre-Existing Corporate Governance Regulations’ (SSRN Scholarly Paper ID 3827821, 15 April 2021) Abstract: We find that firms that barely met a voluntary regulatory minimum pre-COVID-19 (minimal compliers) lost more firm value than others due to COVID-19. We consider the Japanese corporate governance code introduced in 2015. It requires that firms have at least two outside directors on a comply-or-explain basis. Our finding hinges on pre-pandemic liquidity: the relative value of outside directors for companies that under- or over-complied with the code (non-minimal compliers) compared to minimal compliers increases with cash holdings accumulated pre-pandemic. There are no significant differences between non-minimal compliers. Director characteristics make no difference to firm value either. Adoption of a US-type board system, which is selectively available without comply-or-explain disclosure, also increases firm value. Our findings suggest that firms’ own optimization, not policy-induced board formation, is a key for shielding firm value against a sudden shock like the outbreak of COVID-19.
‘Overcoming COVID-19: Critical Legal Pathways’ [2020] NZ Business + Management (Sp)12-(Sp)13 Abstract: Watch for liquidity or production roadblocks, emerging insolvency risk, and rating downgrades
Trends to watch: • Willingness of overseas wholesale markets to fund NZ lenders • Difficulty of accessing overseas corporate bond markets • Continuing exchange rate hedging and counterparty risks • State liquidity measures focussing on domestic goals, rather than international liquidity and trade flows Disputes Insights: • Additional benefits (eg, flexibility, adaptability and enforceability) from international arbitration already in place in cross-border contracts • If commencing formal dispute, consider at outset whether final award or judgment will be enforceable against foreign assets Exporters & importers Cross Border Trade: Exporters & importers International goods + services contracts.
Pizzano, Dominick, Henrik Patel and Kenneth Barr, ‘Expansion of the Million Dollar Compensation Deduction Limitation on the Horizon for Publicly Held Corporations’ (2021) 34(4) Benefits Law Journal 94–103Trends to watch: • Willingness of overseas wholesale markets to fund NZ lenders • Difficulty of accessing overseas corporate bond markets • Continuing exchange rate hedging and counterparty risks • State liquidity measures focussing on domestic goals, rather than international liquidity and trade flows Disputes Insights: • Additional benefits (eg, flexibility, adaptability and enforceability) from international arbitration already in place in cross-border contracts • If commencing formal dispute, consider at outset whether final award or judgment will be enforceable against foreign assets Exporters & importers Cross Border Trade: Exporters & importers International goods + services contracts.
Abstract: The article focuses on stimulus package portions of the American Rescue Plan Act (ARPA) of 2021 provide COVID-19 relief, funding and tax legislation which President Joe Biden signed into law on March 11, 2021. It mentions the impact of the Tax Cuts and Jobs Act of 2017 (TCJA) on Section 162(m) and provided a summary of the history. It also mentions compensation was required to be reported to shareholders pursuant to the U.S. Securities and Exchange Commission’s (SEC) disclosure rules.
Polat, Ali Yavuz, ‘Rule of Law, International Trade, and Corporate Financing Decisions in Europe: Evidence From the COVID-19 Pandemic’ in The Transformation of Global Trade in a New World (IGI Global, 2023) 69–85 Abstract: This chapter investigates whether the institutional environment that the firms operate has an impact on their leverage choice. Namely, rule of law is used as an institutional variable. Considering that better implementation of rule of law impacts positively firms’ export performance, total exports in each country are also used as the other main explanatory variable. The findings show that both institutional variables and exports negatively and significantly affect the leverage level. This implies that firms in favorable institutional environment tend to borrow less, which results with lower leverage. Moreover, this study finds that the COVID-19 pandemic period as an unprecedented shock to economies pushed the leverage levels higher. Regarding the implications of the findings, firms’ capacity to access external finance especially during a significant crisis period depends on the institutional environment. Namely, the effective implementation of rule of law should be first priority for the policy makers.
Puaschunder, Julia M, Martin Gelter and Siegfried Sharma, ‘Alleviating an Unequal COVID-19 World: Globally Digital and Productively Healthy’ (Fordham Law Legal Studies Research Paper, 2020) Abstract: The novel Coronavirus-crisis raises attention to digitalization and healthcare prevention that opens opportunities to alleviate growing online and healthcare inequalities.In the wake of an already burgeoning digitalization revolution, the COVID-19 pandemic perpetuated digitalization. As affinity to information and communication technologies nowadays determines economic potential, technology-based inequality increases. Taxing digital analytics-driven economic growth could raise funds to offset technology disruption fallouts on a national level. On a global scale, equal access to internet connectivity around the world would help spread the benefits of digitalization equally and aid countries in catching up in international development endeavors. More than ever before in the history of modern workforce do employers and employees alike nowadays care about the overall well-being and physical interaction in a hygienic environment. The COVID-19 pandemic steered individuals to adopt technology to self-monitor healthy lifestyles, but also governments and employers to electronically track individuals for health safety purposes. With the overall immune system resiliency determining the severity of a COVID-19 infection, preventive healthcare implementation can be leveraged into a competitive advantage. Corporate Social Responsibility and corporate governance should incentivize preventive self-care as an innovative precautionary mean for lowering pandemic outbreak risks and boosting performance. Like in the Austrian Sozialpartnerschafts-model, stakeholder integration into corporate decision making could aid in reaching collective goals of a healthy workforce in an overall precautionary environment. Online healthcare technology offers most novel corporate governance and employer-employee interaction opportunities. Endogenous growth theory should include the workforce health status as a productive labor capital driver. Precaution should be factored in as a positive collective learning-by-preventing process, which includes group dynamics around hygiene but also monitoring of one’s own and other’s health status and care via health apps that also allow tracking human contact touchpoints for preventing COVID.
Puaschunder, Julia M, Martin Gelter and Siegfried Sharma, ‘COVID-19-Shock: Considerations on Socio-Technological, Legal, Corporate, Economic and Governance Changes and Trends’ (Research Association for Interdisciplinary Studies, RAIS Conference Proceedings, 17-18 August 2020) Abstract: This article tries to grasp our contemporary Zeitgeist to serve as historic landmark how pandemics can influence the individual decision making, the social compound, national order, economic structures and the larger-scale international compound. The ongoing COVID-19 crisis accounts for one of the most unpredicted economic disruptions in the history of humankind. Little would we all have expected how our lives have changed since the outbreak of the pandemic if we consider the deep impact the novel Coronavirus has on all our lives, the legal, economic and political spheres. Featuring national policy strategies to cope with the pandemic grants insights about precautionary and reactionary governance during health crises balancing between medical, economic and social well-being. Concurrent with an already ongoing digitalization trend, the COVID-19 pandemic implies widespread changes for individual decision makers in their adoption of technological assistance but also in giving up decision making to Artificial Intelligence (AI). Economic facets of collective learning processes during the crisis are outlined with a special emphasis on the currently ongoing digital disruption. As a widespread external shock to the world economy and legal order, COVID-19 affects corporate conduct profoundly. The legal implications and societal changes’ impetus on corporate conduct will be depicted in order to derive future corporate governance prospects. From an evolutionary dynamics market perspective, a trends prediction sheds light on what kind of firms are likely to fail, which ones may survive and which ones could thrive in the following years and decades to come. International differences in the handling of COVID-19 are highlighted in order to envision future global public healthcare. The recommendations address the importance of well-calibrated goals to cure our contemporary humankind and protect our future common world population.
Quaid, Jennifer, ‘Balancing Risk and Reward in the Time of COVID-19: Bridging the Gap Between Public Interest and the “Best Interests of the Corporation”’ in Colleen M Flood et al (eds), Vulnerable: The Law, Policy and Ethics of COVID-19 (University of Ottawa Press, 2020) 233 < > Abstract: The scale of the global COVID-19 pandemic has made plain that business organizations have a key role to play in supporting public health efforts to contain the virus and follow social distancing. Directors and officers have been called upon to make proactive decisions about risk reduction that may hurt the bottom line (or simply diverge from established practice) but are the right thing to do. However, corporate law is permissive and tends to avoid dictating what should be done, so long as it is in the ‘best interests of the corporation’. Uncontrolled outbreaks of the virus in certain sectors of the economy deemed essential raise the difficult question of whether this flexible standard promotes an appropriate balance between economic viability and the legal pursuit of profit on the one hand and fundamental values such as the protection of human life and security on the other. In this paper, I reflect on how the pandemic situation brings this tension into sharper relief and exposes an accountability gap. I suggest that bridging this gap may be possible if we are prepared to recognize more explicitly that sometimes what is best for the corporation to protect the public interest.
Raj, Aniket, ‘CSR in Times of COVID-19: Notifications Issued by the Ministry of Corporate Affairs With Regard to Schedule VII of the Companies Act, 2013’ (SSRN Scholarly Paper ID 3759989, 6 October 2020) Abstract: The global spread of the COVID-19 pandemic and the complete lockdown in India to prevent its spread has severely impacted both social and economic aspects of life and has also fueled the depression in India’s economy. Unemployment is highest in recent decades, and the worst hit are the underprivileged and the unorganized sector workers. During these testing times, the efforts and policies of the State are not enough to curb the plethora of problems, the assistance of corporate giants in the attempt to emancipate the situation is needed now more than ever. In its pursuit to restore social welfare and in the interests of magnum bonum, the Government of India through the Ministry of Corporate Affairs has released several notifications with respect to Schedule VII of the Companies Act, 2013 to facilitate the participation of corporations in improving the COVID-19 situation.
Sambu, Eric Kibet, ‘Annual General Meetings in the Era of COVID-19 Pandemic: Law and Practice in Tanzania’ (2022) 48(2) The Eastern African Law Review 116–148 Abstract: COVID-19 is a pandemic that is currently ravaging the world, with unprecedented disruptions being witnessed. Many governments have imposed restrictions on movement and several measures to contain its spread, including social and physical distancing. This has made it hard to hold conventional physical meetings. Companies are still expected to comply with the provisions of the law and company’s constitution, regarding holding company’s annual general meetings to transact business therein. This paper reviews the provisions of the Tanzania law regarding holding of such meetings and hence the practicable options amidst the pandemic. It finds that available options include postponing the accounting period and hence the date of AGM, resolutions by circulation, applying to the Registrar to alter mode of conducting AGM. This study establishes that the viable option is to hold virtual meetings and recommends that companies review articles to accommodate this. Tips on holding successful virtual meetings are given.
Šain, Marija, ‘Corporate Social Responsibility in Times of Crisis: COVID-19’ (2021) 5(EU 2021 – The Future of the EU in and After the Pandemic) EU and Comparative Law Issues and Challenges Series (ECLIC) 706–727 Abstract: Corporate social responsibility implies business with concern for ethics, human rights, community needs, and investment in environmental protection. It is especially evident in crisis situations when the expectations of the environment about the application of these principles of the company are higher. The Covid-19 pandemic, as a crisis situation in which companies found themselves, led to changes in business models that had an impact on their stakeholders as well. In this segment, corporate social responsibility can be a useful and effective way to mitigate the potential effects of a pandemic and make it easier to deal with the consequences of a crisis. The aim of this paper is to provide a theoretical framework for the study of corporate social responsibility in crisis situations with special reference to the situation related to Covid-19. For this purpose, the research methodology includes a review of the literature on corporate social responsibility in this situation by classification into external (community, customer, and environment) and internal (employees) dimensions of the application of corporate social responsibility. The paper highlights the problems and challenges associated with corporate social responsibility in the Covid-19 pandemic and suggests further research opportunities in this area.
Schwartz-Ziv, Miriam, ‘How Shifting from In-Person to Virtual Shareholder Meetings Affects Shareholders’ Voice’ (SSRN Scholarly Paper ID 3674998, 16 August 2020) Abstract: Shareholder meetings are one of the only opportunities for most investors to interact directly with management. Due to Covid-19, however, shareholder meetings have moved to a virtual format. Analysis of transcripts and recordings of in-person and virtual shareholder meetings in 2019–2020 shows that, relative to in-person meetings, the overall time of virtual meetings is 18% shorter, and 29% less time is spent by firms on answering each question. These findings indicate that communication between companies and shareholders is more limited at virtual meetings. To examine if shareholders face challenges in their attempts to increase such communication in virtual meetings, I construct a dataset on shareholders’ attempts to submit questions to virtual shareholder meetings and document several tactics firms use to avoid addressing them. For example, firms explicitly state that no (additional) questions were submitted, whereas I document that multiple questions were submitted by shareholders, but were ignored. Finally, a mechanism that imposes severe restrictions on shareholders’ ability to submit questions at virtual shareholder meetings is uncovered: the use of a non-Broadridge platform to broadcast the meeting. Overall, the paper documents that with regard to 55% of the firms to which shareholders attempted to submit questions, shareholders faced obstacles. The paper concludes with policy recommendations on how virtual shareholder meetings can be designed in ways that foster communication between management and companies.
Sherman, John, ‘The Contractual Balance Between ‘Can I?’ and “Should I?” Mapping the ABA’s Model Supply Chain Contract Clauses to the UN Guiding Principles on Business and Human Rights’ (Harvard Kennedy School, Corporate Social Responsibility Initiative Working Paper No 73, 2020) Abstract: This paper examines the efforts of the American Bar Association to draft proposed Model Contract Clauses for businesses that prohibit modern slavery and child labor in supply chain contracts. This involves a careful balancing of a buyer’s desire to avoid consuming goods manufactured with human rights abuse and its desire to protect itself legally, in order to ensure that the company is acting in alignment with its responsibility to respect universally recognized human rights under the UN Guiding Principles on Business and Human Rights. This subject is quite timely in light of the current efforts of many companies, in response to the COVID-19 pandemic, to exercise force majeure clauses in their contracts to dump suppliers without regard to the impacts of vulnerable workers in their supply chains.
Skauradszun, Dominik, ‘Restructuring Companies During and After the COVID-19 Pandemic: A Law & Economics Approach’ (2021) Nottingham Insolvency and Business Law eJournal (NIBLeJ) (forthcoming) Abstract: As a result of the COVID-19-pandemic, enterprises worldwide have suffered tremendously so that one of the common challenges is how to rescue companies. This paper argues that the approach of subsidising companies and, in particular, the approach of suspending legal obligations to file for insolvency which many European Member States have pursued does not rescue the companies sustainably and these mechanisms merely relieved the companies for a short period. This paper points out why it is important to put mechanisms of market shakeout back in place that have helped protect other market participants and keep the economy as a whole running for decades. Small, medium, and large enterprises that have built up a crushing burden of debt can no longer survive on their own. The paper proposes that in these cases a restructuring must go hand-in-hand with cutting debts. The thesis will explain why, however, only the restructuring of viable companies is justifiable. The main part of this paper is the argumentation that necessary restructuring measures, such as debt reliefs, can be justified by two principles: the no-party-worse-off-principle on the one hand and the market-conformity test on the other. But only the interplay of these two principles leads to a coherent solution that is applicable to all sizes of companies. Even if both principles are only mentioned vaguely in the EU Directive 2019/1023 of June 20, 2019, they can nevertheless be derived from the Directive and may serve as principles throughout Europe.
Society for Corporate Governance Nigeria, ‘An Insight to the Corporate Governance Implications of Changes to the Companies and Allied Matters Act 2020’ (SSRN Scholarly Paper ID 3673326, 13 August 2020) Abstract: The Companies and Allied Matters Act (CAMA) can be accurately described as the bible or grundnorm of corporate dealings and governance in Nigeria, which should account, in part, for the pomp and pageantry ensuing the August 7th, 2020 presidential assent of the CAMA 2020 Bill into law. As it signifies the first major overhaul of the CAMA 1990 (its predecessor) which was crafted in line with the English Companies Act of 1985 and although its English compadre has undergone numerous amendments since its inception, the CAMA 1990 continued its reign, which accounts for the overwhelming buzz following its repeal. The other reason can be cited from the innovations embedded in the Seven (7) Part, Eight Hundred and Seventy (870) sections of the CAMA 2020 , with about 167 new sections, some of which could not have come at a better time. This is so, seeing as boards and management alike have been thrown into unique perplexing positions as they continue to navigate their corporations through the unusual normal brought about by the COVID 19 pandemic and efforts to flatten the curve of infected cases. For instance, one of the unique perplexing positions for corporates was, could companies hold AGMs virtually in Nigeria? To which, the CAMA 1990 did not clearly prescribe the mode of conducting such meetings. Hence, leaving eager companies, at the time, to fall to the cardinal principle of law, that what is not expressly forbidden is permitted. CAMA 2020 remedies this as it provides for remote or virtual general meetings. This is just one of several innovations inserted into the new Act. This explains the thrill surrounding its presidential assent and reasons as to the expectations of these new sections as well as the amendments to our body of corporate law. This paper provides an insight and analysis of relevant introductions of the CAMA 2020 as it relates to governance and postulates how these provisions will affect corporate governance going forward
Stevelman, Faith and Sarah C Haan, ‘Boards in Information Governance’ University of Pennsylvania Journal of Business Law (forthcoming) Abstract: This Article charts the decline of the two leading twentieth-century paradigms of corporate governance: the agency-cost theory, which produced the limited ‘monitoring board,’ and the ‘separate realms’ theory, which deferred consideration of all matters other than profit to government regulation. Repeated stock market crashes and hedge fund activism have exposed the limits of the agency-cost theory. A global pandemic and financial crisis, investor demands for corporate social responsibility and stewardship, and corporations’ own participation in the political process have made separate realms thinking nearly irrelevant. We argue that, while much of corporate law theory remains constrained by these twin paradigms, the practice of board governance has largely moved beyond them. The economic shock of the COVID-19 pandemic, in particular, has sent public company boards into high gear, forcing them to look beyond stock prices, to engage the firm’s full capacity for information gathering and synthesis, and to actively command the firm’s systems of internal and external communication. Even before a global pandemic placed heightened demands on corporate boards, the trend toward information-based governance was well underway, catalyzed by new legal requirements, industry best practices, committee charters, fiduciary duties, and investor demands for more active board governance. It has been observable in audit committees’ increased participation in financial reporting, the expanding application of boards’ knowledge about the firm to strategic advising and to executive compensation decisions, and boards’ greater role in decision-making about risk management, legal compliance, and ESG matters. To capture the board’s investment in data gathering, deliberation, and reporting processes as constitutive of the firm’s status, and the board’s strategic management and authoritative deployment of knowledge and communication, we label this new board governance ‘informational governance.’ Informational governance includes a robust role for corporate boards in communicative action—the active creation and deployment of the firm’s self-knowledge—recognizing an important, value-creating role for boards that has long been discouraged by the ‘monitoring board’ conceit. Focusing on informational governance helps sharpen our understanding of the board’s role in corporate strategy, an overlooked subject in the corporate law literature, but one that has assumed new importance in the postpandemic era. We identify some areas in which the law is likely to evolve as this new, technologically-enhanced, information-rich paradigm continues to cohere.
Subramanian, Guhan and Caley Petrucci, ‘Deals in the Time of Pandemic’ (2021) 121(5) Columbia Law Review 1405–1480 Abstract: The COVID-19 pandemic has brought new attention to the period between signing and closing in mergers and acquisitions (M&A). Transactional planners heavily negotiate the provisions that govern the behavior of the parties during this window, not only to allocate risk between the buyer and seller, but also to manage moral hazard, opportunistic behavior, and other distortions in incentives. Prior literature, both academic and practitioner, has focused virtually exclusively on the material adverse effect (MAE) clause. COVID-19, however, has exposed an important connection between the MAE clause and the obligation for the seller to act ‘in the ordinary course of business’ between signing and closing. This Article is the first to examine the interaction between the MAE clause and the ordinary course covenant in M&A deals. We construct a new database of 1,300 M&A transactions along with their MAE and ordinary course covenants—by far the most comprehensive, accurate, and detailed database of such deal terms that currently exists. We document how these deal terms currently appear in M&A transactions, including the sharp rise in ‘pandemic’ carveouts from the MAE clause since the COVID-19 pandemic began. We then provide implications for corporate boards, the Delaware courts, and transactional planners. Our empirical findings and recommendations are relevant not just for the next pandemic or ‘Act of God’ event, but also the next (inevitable) downturn in the economy more generally.
Ugwu, Ikechukwu P, ‘An Examination of Multinational Corporations’ Accountability in the Light of Switzerland’s Failed Responsible Business Initiative in the COVID-19 Pandemic Era’ (2021) 13 Adam Mickiewicz University Law Review 117–154 Abstract: This article examines the efforts made so far in holding multinational corporations (MNCs) liable for human rights and environmental violations in the light of Switzerland’s failed referendum in November 2020, during the peak of the COVID-19 pandemic. It also looks at other international law instruments that have the potential to hold MNCs accountable. While these other laws have failed to achieve the desired result of holding MNCs accountable, the referendum, if it had succeeded, would have triggered a binding vote on a constitutional amendment to introduce compulsory human rights due diligence for companies incorporated in Switzerland, the first of its kind in Europe. The consequence would have been that victims of Swiss MNCs’ violations would have had the right to bring claims in Switzerland against a defaulting Swiss MNC. Unfortunately, the referendum failed, and to some extent, the COVID-19 pandemic negatively affected the referendum outcome, because it was greatly politicised. It became a lost opportunity on what would have been ‘one small step for [Switzerland], one giant leap for the [international community]’.
Vutt, Andres and Margit Vutt, ‘Adoption of Shareholder Resolutions in Post-COVID Era. Example of Estonian Law’ in New Legal Reality: Challenges and Perspectives. II (University of Latvia Press, 2022) 445–458 Abstract: In 2020, the COVID-19 pandemic forced the world to find the right balance between protecting health, minimizing economic and social disruption and retaining the rights of individuals. States imposed a number of restrictions in order to prevent the spread of the pandemic, including restrictions on the movement of persons and restrictions on gathering. Traditionally, shareholders’ meetings of companies have been taken place in the form of physical meetings. Company law also been based on the assumption that meetings are held physically. In the new situation, it was no longer possible to hold meetings in this way, at least for some time. This forced companies to use digital solutions. The legislator was also faced with the question of how to resolve this situation. Different countries reacted differently in order to find company law solutions. In Estonia, new rules were adopted in May 2020 that allowed legal persons to adopt decisions using digital solutions, among other things, it is allowed to make decisions in a full virtual meeting. The central question in the way companies make decisions is whether the use of virtual solutions is possible, but whether the law provides companies with sufficiently flexible options, which would enable decisions to be taken in the light of the specificities and needs of each company and whether such practices ensure the exercise of shareholders’ rights. This article analyses whether and how these objectives have been achieved in Estonian law. There are three ways to adopt company’s resolutions in Estonia: a meeting, a written resolution or a vote by letter. Meetings can take place physically, virtually or in a hybrid form. It is not possible to infringe the rights of the shareholder in making a written resolution, since if such a method is used, the resolution decision is adopted only if all shareholders agree. In the case of voting by letter, the law does not take into account the fact that in a shareholder of a public limited company has the right to receive information from directors only at the general meeting. Therefore, the future case-law must lay down the principles of communication between the shareholder and the public limited company in the situation when the resolution has been adopted by using such option. The law stipulates that if digital means are used to hold a meeting, shareholders must be guaranteed all the same rights as they have in the event of a physical meeting. Since these rules have been in force only for a short period of time, there are no court cases based on them. Although the legal literature has been expressed some views on the use of digital solutions, it is not yet known how the courts will resolve these issues if disputes arise.
Wilson, Kerri and Natalie Harten, ‘Be Careful What You Wish For’ (2020) 20(4) Without Prejudice 39–41 Abstract: The scale of the COVID-19 pandemic has led to many businesses facing severe financial difficulties, with boards and shareholders finding themselves in the unfortunate position of having to decide whether to place their companies into liquidation. It goes without saying that this decision is not something to be taken lightly, nor one to be taken in haste.
Winkler, Matteo and Nicola Malta, ‘COVID-19 as a Deal-Killer in Mergers and Acquisitions: A Case Study’ (2020) 34 Diritto del Commercio Internazionale - The Law of International Trade 857–870 Abstract: This article offers an original case study of the failed sale of Victoria’s Secret’s business to examine the deep consequences of the COVID-19 pandemic in the context of M&A transactions. After presenting the case, it draws two lessons from it by: (1) proposing a multi-layered analysis of the effects of covid-19 depending on the type of event considered and on the contract language, and (2) exploring the possible reshaping of the termination right in connection with the dramatic variations of the target’s value during the interim period caused by COVID-19.
Wright, Cornell, ‘Governance Considerations for Boards of Directors during the COVID-19 Crisis’ (2020) Emerging Areas of Practice Series - COVID-19 (Coronavirus), Westlaw Canada Abstract: We are now weeks into the unfolding COVID-19 crisis and all indications are that it will persist for many more weeks. Companies have activated their business continuity plans and organized themselves to cope with the restrictions issued by governments and public health authorities. Depending on the organization, this will mean everything from shutting down operations to continuing operations with some or all employees working remotely.
Wu, Xi, ‘When Crisis Hits: The Role of Regulations’ (SSRN Scholarly Paper ID 3624592, 15 May 2020) Abstract: This paper shows that regulations act as a stabilizer for firms during crises. During the COVID-19 pandemic, firms with more regulations ex ante, experience a less decline by four to five percent in both stock and corporate bond prices than less regulated firms. Prior to the crisis, more regulated firms held more cash, had lower leverage, and were less likely to pay dividends, making them more resilient to extreme market conditions. Moreover, these more regulated firms have less systematic risk exposures during the crisis. I also find similar effects of regulations during the 2008 Financial Crisis.
Yusro, Mochammad Abizar, ‘Shareholders Lawsuit: Fraud on Minority Law Enforcement to Invent Corrective Justice During the Covid-19’ (2022) 8(1) Law Research Review Quarterly [pagination unavailable] Abstract: The purpose of this study is to analyse and provide recommendations for national law, related to law enforcement in violations against minorities (fraud on minorities) shareholders to create corrective justice during the covid-19 period. Minority Shareholders are a group that is classified as vulnerable to actions that can result in losses. For this reason, law enforcement efforts against Minority Shareholder fraud are needed, to provide legal protection and recovery of losses in order to create corrective justice. This research method is descriptive by using the type of juridical-normative research. The type of approach used is a statutory approach and a conceptual approach. The results of this study describe the rights of shareholders given by laws and regulations, which can be used to carry out legal remedies based on corrective justice when fraud is on a minority. The legal effort began with a shareholder lawsuit consisting of two mechanisms, namely derivative action and direct action from shareholders which has been accommodated in Law Number 40 of 2007 concerning Limited Liability Companies. However, this effort is commonly used and has several weaknesses, one of which is the absence of specification rules related to the procedures for implementing it.
Zetzsche, Dirk A et al, ‘The COVID-19-Crisis and Company Law: Towards Virtual Shareholder Meetings’ (University of Luxembourg Faculty of Law, Economics & Finance No WPS 2020-007, 15 April 2020) Abstract: Legislation responding to COVID-19 allows us to examine how, and to what effect, the corporate governance framework can be amended in times of crisis. Almost all leading industrialized nations have already enacted crisis legislation in the field of company law. Here, given the difficulties or indeed the impossibility of conducting in-person meetings currently, the overall trajectory of company law reforms has been to allow for digitalization.We note five fields in which legislators have been particularly active. First, the extension of filing periods for annual and quarterly reports to reflect the practical difficulties regarding the collection of numbers and the auditing of financial statements. Second, company law requires shareholders to take decisions in meetings – and these meetings were for the most part in-person gatherings. However, since the gathering of individuals in one location is now at odds with the measures being implemented to contain the virus, legislators have generally allowed for virtualonly meetings, online-only proxy voting and voting-by-mail, and granted relief to various formalities aimed at protecting shareholders (including fixed meeting and notice periods). Third, provisions requiring physical attendance of board members, including provisions on signing corporate documents, have been temporarily lifted for board matters. Fourth, parliaments have enacted changes to allow for more flexible and speedy capital measures, including the disbursement of dividends and the recapitalization of firms, having accepted that the crisis impairs a company’s equity. Fifth and finally, some countries have implemented temporary changes to insolvency law to delay companies’ petitioning for insolvency as a result of the liquidity shock prompted by the imposition of overnight lockdowns.This working paper seeks to (1) document the respective crisis legislation; (2) assist countries looking for solutions to respond rapidly and efficiently to the crisis; (3) exchange experiences of crisis measures; and (4) spur academic discussion on the extent to which the crisis legislation can function as a blueprint for general corporate governance reform. Countries considered in full or in part include Australia, Austria, Belgium, Canada, China, France, Germany, Hong Kong, India, Italy, Luxembourg, the Netherlands, Norway, Portugal, Singapore, South Korea, Spain, Switzerland, Thailand, the United Kingdom, and the United States. Readers are encouraged to highlight any inaccuracies on the part of the authors in their presentation of the respective laws, and to bring further crisis-related legislation not considered in this working draft to the attention of the authors. Moreover, readers are invited to indicate where there is room for improvement therein, and/or to signal the need for policy reform.
Zhou, Haiyan, ‘Optimising Business Environment during the COVID-19 Epidemic: China’s Experience’ (2020) 41(10) Company Lawyer 332–334 Abstract: Reviews the measures implemented by China during the coronavirus pandemic to promote a business-friendly environment that follows the rule of law. Examines key features of initiatives to improve the administrative efficiency of the approval process needed to establish a business, strengthen information disclosure to protect the interests of minority shareholders, facilitate online litigation, and optimise the conduct of bankruptcy proceedings.
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