This blog, written by Thomas E. Rutledge, focuses primarily on business entity law in Kentucky. Postings on contract law, contractual and statutory construction, and the entity law of other jurisdictions appear as well. There may as well be some random discussions of classical, medieval and renaissance history.
Wednesday, March 18, 2015
It's Not Just Delaware For Which You Need To Watch Out
For various historical
be questioned, most business
entities formed outside their home jurisdiction are organized in Delaware. This
Delaware is based upon the assumption that the Delaware statute
are in some manner both unique and favorable.
needs to be appreciated that, however, nearly every state has a business entity statute that is in some manner unique (or near unique) and, depending upon the objectives of particular constituents to a venture, favorable. At the same time, if a provision is favorable to some constituent, it may not be favorable to others.
is currently pending in Delaware a dispute as to whether or not the Delaware General Corporation
Law should be amended to preclude provisions in either the certificate of incorporation or the bylaws which, beyond the provisions already set forth in statute, would provide for the shifting of liability for expenses in
derivative actions. HERE IS A HERE IS A LINKto a prior posting
on this topic.
in Delaware should not be interpreted
as an indication that
have not taken place in other states or that they have not already adopted
laws on the topic. Specifically, the Oklahoma legislature, in 2014, amended its Business Corporation
Act to provide for mandatory fee
actions. In effect, Oklahoma has already mandated the treatment that, even in an optional format, is right now being debated in Delaware. Specifically, Oklahoma law now provides
·If the derivative action “confers a substantial benefit
on the corporation,”, the court mayorder the corporation to
paythe legal fees incurred by the plaintiff shareholders in
·in any derivative
action, the court shallrequire the non-prevailing
party to pay the expenses, including attorneys’
fees, incurred by the prevailing
party. 18 Okla. Stat.
such, by statute, Oklahoma has already adopted an interim provision
that will, undoubtedly, limit the willingness
Oklahoma corporation to challenge actions taken by the Board of Directors and
duties to the corporation. HERE IS A LINK to that Oklahoma statute.