Business investment relies on trust, and the protection of minority interests and creditors is a prominent aspect of developing such trust. Alternatives to corporations – including limited liability companies, limited partnerships, limited liability partnerships, and traditional partnerships – provide opportunities to shape business governance in a more customized way than general corporation statutes allow, and they have thus become increasingly popular platforms for aggregating capital and conducting business. This course examines alternative business entities and the mix of statutory and common law that governs them. Since state law seeks to facilitate the private ordering of governance in alternative entities, we will spend some time on the theory behind private ordering or contracting and in comparing the flexibility provided by it with more traditional features of corporate governance. We will also examine the tension such flexibility can create with the need for predictability and adherence to basic principles of fairness that generally characterize the common law tradition. Among other things, we will look at the formation and dissolution of alternative entities, the importance of operating agreements and freedom of contract, and the duties of managers and how those duties may be modified by contract, and the role of judicial review. In lieu of an exam, student evaluation will be based on a negotiation and drafting exercise in which teams with opposing interests will be required to negotiate and agree upon an operating agreement for a limited liability company governed by Delaware law. Pass/Fail. Enrollment Limited.
Note: While not required, completion of Corporations or Corporations & Business Entities is highly recommended.