Mutual Assent in the Corporate Contract: Forum Selection Bylaws

In recent years, frivolous and inefficient multijurisdictional stockholder litigation has become a costly burden on corporations in the United States. A popular solution among boards of directors has been to adopt bylaws with forum selection provisions (which require certain disputes to be litigated before one forum). Those who oppose this solution have challenged these provisions on the grounds that they were passed as bylaws—which are unilaterally adopted by boards without stockholder consent. These challengers argue that bylaws are like contracts, and, therefore, require the mutual assent of both stockholders and the corporation to be enforceable. This argument implicates a classic theory of corporate law—the contractarian theory—but vastly oversimplifies the relationship between a stockholder, her corporation and the board of directors. When the contractarian theory of corporate law is applied to the full legal and practical reality of that relationship, the mutual assent argument falls apart and the contractarian theory is shown to support the enforceability of bylaws

Equity culture and the distribution of wealth

Wider participation in stockholding is often presumed to reduce wealth inequality. We measure and decompose changes in US wealth inequality between 1989 and 2001, a period of considerable spread of equity culture. Inequality in equity wealth is found to be important for net wealth inequality, despite equity's limited share. Our findings show that reduced wealth inequality is not a necessary outcome of the spread of equity culture. We estimate contributions of stockholder characteristics to levels and inequality in equity holdings, and we distinguish changes in configuration of the stockholder pool from changes in the influence of given characteristics. Our estimates imply that both the 1989 and the 2001 stockholder pools would have produced higher equity holdings in 1998 than were actually observed for 1998 stockholders. This arises from differences both in optimal holdings and in financial attitudes and practices, suggesting a dilution effect of the boom followed by a cleansing effect of the downturn. Cumulative gains and losses in stockholding are shown to be significantly influenced by length of household investment horizon and portfolio breadth but, controlling for those, use of professional advice is either insignificant or counterproductive. JEL Classification: E21, G1

Equity Culture and the Distribution of Wealth

Wider participation in stockholding is often presumed to reduce wealth inequality. We measure and decompose changes in US wealth inequality between 1989 and 2001, a period of considerable spread of equity culture. Inequality in equity wealth is found to be important for net wealth inequality, despite equity's limited share. Our findings show that reduced wealth inequality is not a necessary outcome of the spread of equity culture. We estimate contributions of stockholder characteristics to levels and inequality in equity holdings, and we distinguish changes in configuration of the stockholder pool from changes in the influence of given characteristics. Our estimates imply that both the 1989 and the 2001 stockholder pools would have produced higher equity holdings in 1998 than were actually observed for 1998 stockholders. This arises from differences both in optimal holdings and in financial attitudes and practices, suggesting a dilution effect of the boom followed by a cleansing effect of the downturn. Cumulative gains and losses in stockholding are shown to be significantly influenced by length of household investment horizon and portfolio breadth but, controlling for those, use of professional advice is either insignificant or counterproductive.Wealth distribution, inequality, stockholding, equity culture

Could Distributed Ledger Shares Lead to an Increase in Stockholder-Approved Mergers and Subsequently an Increase in Exercise of Appraisal Rights?

Blockchain, the distributed ledger technology underlying cryptocurrencies like Bitcoin, is poised to revolutionize industries and processes across disciplines. In particular, government agencies and companies are looking for ways to leverage blockchain’s efficiencies to facilitate safe record-keeping. Municipalities are employing blockchain-issued deeds to accurately record property ownership. Progressive legal professionals are employing blockchainissued “smart-contracts” to more accurately record contract terms. Intellectual property attorneys and related government agencies are researching blockchain-issued copyrights and patents. This Note examines how utilizing blockchain technology in securities trading to maintain accurate stockholder ledgers will allow for current market forces to be reflected in stockholder voting. Further, this Note seeks to address how blockchain-issued shares of stock could affect stockholder approved mergers and the exercise of appraisal rights. This Note posits that accurate stockholder ledgers will lead to an increase in stockholder approved mergers, but will not have an effect on the exercise of appraisal rights

Realigning Stockholder Inspection Rights

Access to corporate infom1ation plays a pivotal role in stockholder litigation. One key to that access is stockholders' statutory right to inspect a corporation's books and records prior to filing litigation, enshrined in the Delaware General Corporation Law's Section 220. In the context of derivative actions brought by a stockholder on behalf of a company, Section 220 takes on an even greater importance. For years, Delaware courts have urged stockholder plaintiffs to use all the "tools at hand" to gather information before filing a derivative complaint to strengthen their allegations. One of those tools, Section 220's inspection rights, has become all but a requirement for most successful derivative actions. Yet two recent shifts in the case law present unique challenges for both corporate defendants and stockholder plaintiffs involving statutory inspection rights

CORPORATIONS-SHAREHOLDERS-RIGHT TO BRING PERSONAL ACTION AFTER DISSOLUTION OF CORPORATION

Plaintiff stockholder brought a personal action against the president and majority stockholder for fraudulent conversion of money and property of a corporation dissolved prior to the start of plaintiff\u27s suit. A statute provided that a dissolved corporation could sue to recover on a corporate right of action. Defendant\u27s demurrer was sustained. On appeal, held, affirmed. An action to enforce corporate injuries cannot be maintained by a stockholder in his own name, even though the corporation has been dissolved. Ruplinger v. Ruplinger, (Neb. 1951) 48 N.W. (2d) 73

CORPORATIONS - STOCKHOLDERS\u27 SUITS - FEDERAL COURTS -REQUIREMENT OF STOCK OWNERSHIP AT THE TIME OF THE INJURY COMPLAINED OF

When necessary to protect the interest of a stockholder, a court of equity will entertain an action by the stockholder to enforce a right belonging to the corporation. The suit is a derivative one, the corporation being the party primarily injured and the immediate beneficiary of the proceeds of any judgment. The basis for the suit has been explained in a number of ways. It has been held that in a proper case equity will disregard the corporate fiction and allow the derivative suit in order to protect the right which beneficially belongs to the stockholder although nominally to the corporation. An analogy has been drawn to the duty of a trustee to a cestui que trust. The stockholder is allowed to sue on the right of the corporation, as a cestui que trust may sue to enforce a right which the trustee refuses to enforce. One case compares the position of the stockholder, in enforcing rights which the board of directors refused to enforce, to a guardian ad litem appearing for a minor or incompetent. The right is sometimes expressly given by statute

TAXING DISTRIBUTIONS PURSUANT TO CORPORATE REORGANIZATIONS

Distributions implies that we are concerned with the tax problems of the stockholder rather than those of the corporation. And while one corporation may be the stockholder of another, my emphasis will be primarily upon stockholders who are individuals, including, of course, trusts and estates who are taxed as individuals