 It's a pleasure to be here this morning. I just want to tell you a bit about the US Corporate Law course. I believe it's an optional module, isn't it? Yes. They do four from six. Four modules out of six. They choose four out of six. So this is a bit of a beauty contest and I'm trying to sell the module to you, so I'll do my best. Now first of all, why am I qualified to teach this topic? Because you probably noticed I'm not from the United States. I'm actually from Scotland. So why should you learn US corporate law from me? As Brian said, for a number of years I've taught Anglo-American corporate law and governance at a couple of institutions in this country. I've also taught corporate law at JD level in the United States and I've written extensively in US corporate law. So even though I'm based in the UK, my interests are as much if not more on the other side of the Atlantic, hence the fact to teach this topic. More to the point, why should you study US corporate law? You opted to go to Cambridge, not Columbia. So why should you study US corporate law in England? A number of reasons, even though you're doing your graduate studies in England, some of you may go into practice law in the US. Very good reasons, not least financial reasons for doing so. Therefore corporate law, US corporate law can equip you well for doing that. Even if you don't opt to practice law in the United States, if you are going into a corporate specialism, undoubtedly, or at least there's a very good chance that you will be required to engage with US corporate law at some point in your professional life. Particularly when it comes to issues like shareholders' rights or remedies, where US law, particularly US federal law, can have a quite profound international effect. Not least because certain aspects of US federal law have extra territorial effect, so can apply overseas. Also, US corporate law is highly influential, as you're probably aware, as an international point of reference. Whatever country you ultimately practice law in, many countries opt for good reasons or less good reasons to mimic aspects of both US and indeed UK law for their own legal systems. So knowing about US law is important from that point of view, from a legal evolution or law reform point of view. And also a company, wherever it's situated in the world in terms of its operations, can choose to become a US corporation. You don't have to conduct your business in the US to become a US corporation. You can opt to basically adopt the elements of US corporate law wherever you choose to conduct business. And finally, a more general point, we live in a largely, for better or worse, we live in a largely US dominated global political economy. The US corporation exercises a profound influence over our lives on a daily basis, whether we know it or not. So knowing a bit about US corporations, how they're regulated, how they're structured, how they're operated is interesting, I think, for all of us on that level. Now US corporate law is a highly interesting system of law, not just because it's high profile, but because of the way it's actually constructed. And it's also a highly unique system of law as well, not least because there is no such thing as US corporate law, really, even though we use that term. The US corporate law system is actually 51 different systems of law, or if we include the federal level, 52 systems of law, all rolled into one. So you have 50 systems of law for each of the states of the United States. You have another system of law for the Districts of Columbia, where Washington is situated, and then you have a federal level of laws overlaying all the state laws. And principally US corporate law is actually state based, rather than federal based. Now there's a very important principle of US corporate law that's important to understand from a very early stage, and we will be emphasising it at an early stage in the course, which is called the internal affairs doctrine. It's basically as best described as a kind of quasi constitutional principle to the effect that aspects of internal corporate law, and incidentally in the US we tend to use the word corporate rather than company law. Both terms mean the same thing really, but we use the word corporate more than the English term company. But the internal affairs doctrine basically dictates that matters of corporate law, in other words rules, principles governing the internal structure and operation of the firm, things like directors duties, shareholders rights, these issues should be governed at state level, not at federal level. Issues external to corporate law, such as securities law for example, can legitimately be governed at federal level, and are governed at federal level, and most securities laws come from Washington DC and apply to the country as a whole. But corporate law, internal corporate or company law, should come from individual states, and there's a lot of very valid economic and political reasons for that which we'll explain in the course. So that's an important thing to know. So the US is a federal system of corporate law, and this throws up a number of very interesting features, because it means a US corporation can incorporate in any of the 50 plus one states. And what this also means, another curious feature of US corporate law, is this means that all of the, I'm going to say 51 states, because DC is included as a state, all of the 51 states therefore compete with each other to offer companies and their investors the most seemingly attractive system of corporate law. And companies can choose, as I've said earlier, they can choose to incorporate and adopt the corporate law system of any one of those 51 states, regardless of where their operations are. So take a typical corporation in the US, its head office might be in New York City, most of its upstream manufacturing operations might be in the Midwest, in somewhere like Ohio or Illinois, and many of its downstream manufacturing activities might be spread throughout other parts of the world, for instance across parts of Asia. Doesn't matter. Its corporate law system is determined by its state of incorporation, regardless of whether or not it operates in that state on a physical level. And this makes US corporate law quite different from company law in the European Union, because even though we sometimes erroneously think of the EU as being a bit like the United States of Europe, it's not really, it's not a very good analogy. But nonetheless in the EU, we still largely stick to something called a real seek doctrine, which means that if you incorporate in a particular state in the EU, for example in Germany, then you should have your main place of operations in that country to try and keep the physical reality of the company locked in with its legal identity. So if we're going to study US corporate law, we have to rid ourselves of this notion that the physical company should be in the same place as the company's place of incorporation. A company can be governed by a particular state's corporate law system. I adopt that state's law that operates elsewhere, and that's an important thing to grasp. And there's one particular state which has become dominant in the competition for incorporations. I should state, there are very good reasons as to why individual states want companies to incorporate within their domain and adopt their corporate law system. It doesn't necessarily mean you get more business and jobs within that state, but what it does mean is you can make more money in the form of incorporation fees and franchise taxes, which companies pay to their state of incorporation. Does anybody know what the dominant state in America is? It's probably not one of the obvious ones you might think of. What is the dominant corporate law state in America? Delaware. Most people who don't know a lot about corporate law would probably say somewhere like New York or even Chicago, or I should say Illinois, but it's Delaware. A little known state, but a state which has become highly specialised in offering corporate law. In a way corporate law is a product and different states operate as corporate law shops. You can buy your laws from each of those states, and Delaware happens to be a very attractive shop that companies and their investors and managers like to shop at when they buy their laws, and that's a good way of thinking about it. So the key sources that we will be looking at in this course in terms of legal authorities, the main source that we'll be looking at on a statutory level is the Delaware General Corporation Law. A majority of publicly traded US corporations are incorporated in Delaware. Now the main focus of this course will be public corporations rather than closely held or private companies. So Delaware will be far and away our main focus of attention. It won't be an exclusive focus of attention, there are other important sources as well. There's something called the Model Business Corporation Act, which is the piece of company legislation that applies to most of the other states. The other states in the United States, well basically the Model Business Corporation Act is something that's promulgated and updated by the American Bar Association. And it's basically a kind of cocktail of laws from all the other non Delaware states put together in quite an authoritative way. And then what tends to happen is other non Delaware states tend to evolve their own systems in line with the Model Business Corporation Act. And the Model Business Corporation Act is quite different from the Delaware statute, but not that different. There are quite strong similarities between the two. So in terms of state corporate law in America, Delaware General Corporation Law and the Model Business Corporation Act are the two main statutes that we tend to look at, and we will be looking at them in the course. We'll also be looking at a bit of federal law as well. Federal securities law has quite a big impact on US corporate law, particularly when it comes to disclosure obligations. What information do companies have to give out to their investors when they trade on a public market like the New York Stock Exchange or NASDAQ? And the main two acts that are applicable on a federal level are the Securities Act of 1933 and the Securities Exchange Act of 1934, which were the big statutes which were enacted by President Franklin D. Roosevelt's Government during the Great Depression as part of the New Deal reforms. And they're still very much alive today. And the modern federal statutes that we've probably heard about in the US, like Sarbanes Oxley from 2002 and Dodd Frank from 2010, actually reform the 1933 and 34 acts. So all these reforms largely get incorporated in together in the early act. We'll also be looking at case law. The vast majority of the case law we'll look at is Delaware case law. The Delaware courts are, I would say, without a doubt, the most highly specialised and expert corporate law courts in the world. They are corporate law courts by and large. That's what they specialise at. They are wonderful at deciding cases in real time. They can knock up, as far as I'm aware, some Delaware judges can write up an enormous, maybe 70-page judgment over the space of a weekend, it seems, in some cases, dealing with very, very highly complex points of mergers and acquisitions law. And they are very much attuned to the practical needs of publicly traded companies. So it's a fascinating body of case law to look at. We'll also look at some federal cases and a limited amount of case law from other states. But Delaware will be our main focus of attention. We'll also look at a number of academic articles. What you find in US corporate law much more so than in English company law. Delaware courts are very keen to adopt academic opinion within their judgments. English courts are fine and aren't so keen to adopt the views of people like Brian in their judgments. Arguably they should be. But there's much more of a link between academic opinion and judicial opinion, I think, in the United States. And another important feature of US law that's very crucial to get your head round is, to a large extent, US corporate law operates as what's sometimes called enabling law. What that means is the law isn't there to command people to tell them what to do, like we conventionally understand regulation. The law in the corporate law in the United States is there to facilitate people's business activities. You can adopt laws or you can opt out of laws that don't suit you. Now that's something that's a bit alien to us even in the UK. In the UK our company law system has got certain aspects of soft enabling law. But by and large the companies act in England is regulatory and mandatory. It doesn't leave you that much room for manoeuvre I don't think. US law does offer you much more flexibility and room for manoeuvre for better or worse. Other important issues we'll look at, one of the big important themes in the early seminars will be the management of the corporation and how the board of directors operate. And those of you studying UK company law will be familiar with that already. But in US company law, corporate law I should say, particularly in Delaware, a very very important principle that lies right at the heart of the Delaware corporate law is something that you may have heard of called the business judgement rule. The business judgement rule is basically a judicial presumption to the effect that a board of a company, when they approve the decision of the company's management, they are presumed to have acted honestly for the benefit of the company, loyally for the company and also on an informed basis equipped with the requisite information. Unless that presumption can be rebutted by strong evidence to the contrary, which is almost never the case, the court will protect the board's decision and for that reason the business judgement rule operates as an almost virtually water type protection for the decisions of Delaware company boards of directors. So Mark, we were actually just looking at the Disney case. Right, the classic one. So business judgement rule protection, we've done Sholenski and Wright as well, Sholenski and Wrigley. So at least the students who've done comparative corporate governance are now a little bit about it. I'll preach into the converted then. Well, I will be talking about that in more detail for those of you that want to hear more about it. But the business judgement rule is absolutely central to US corporate law and many people think of US corporate law as being a very shareholder orientated system because we think of the US system of financial capitalism as being about maximising value for shareholders. On a practical market level, maybe that's the case. But in terms of corporate law, corporate law isn't really shareholder orientated. It's much more managerially orientated in comparative terms. Managers get a lot more discretion and power over their decisions in the US than they would in other countries. That's one of the reasons as to why US corporate law, from a managerial or director perspective, is quite an attractive system of law to adopt, particularly Delaware law. One of the most interesting areas where the business judgement rule is applied, Sholenski and Wrigley is one of the classic cases, obviously. But one of the most interesting context in recent decades where the business judgement rule is operated has been in the context of hostile takeover bids. In the US, unlike the UK, the board of a target company can defend a bid. They can defend a hostile bid. So a hostile takeover bid, as you're probably aware, is a bid for the company, for control of the company, for the bidder or the offeror wants to acquire voting control of the company. And the board of the target or offeree company do not want the transaction to go ahead. In the US, unlike the UK, the board can coercively defend the bid through a range of weapons, structural weapons, the most well known of which is something called a poison pill, which we can explain more about in the course. And the Delaware courts have been involved in very, very complicated, difficult judgments about the legitimacy of boards using poison pills. In the 80s they invented something called the unical doctrine, which has been very helpful in enabling courts to decide these cases. There's also something called the Revlon doctrine, which is an exception to the unical doctrine, which is very important in this context as well. I will discuss both these principles. We'll also go on later in the course to look at the governance role of shareholders within the US corporation. And I do stress it is, by comparative standards, a very limited governance role that shareholders enjoy. Shareholders don't get the chance to do much, at least on a proactive level within US corporate law. One issue where shareholders are very influential and powerful is an area that Brian's written a lot about, which is ex post factor. Shareholder rights to use litigation against management, which we'll talk about in a minute. But when it comes to shareholders rights to actually get involved in management decisions as they're being made, shareholders have their hands tied to quite a significant extent in the US, much more so I should stress than they do in the UK. A fundamental legal principle of US corporate law alongside the business judgment rule is the board primacy rule, which basically means the board of directors have got decision making primacy or supremacy, and shareholders should not get involved in management decisions. We have this rule to a large extent in the UK company law as well, but it's not anywhere near as firmly entrenched I don't think as it is in the US. The main way that shareholders in the US can have an influence over corporate decisions is through something called the proxy process, which is a federally regulated procedure regulated by the securities regulator, the Securities and Exchange Commission of SEC. Under the SEC regulated proxy process, shareholders are given a formal opportunity to make proposals which can then be voted on by shareholders in the company's annual meeting. These proposals are a way in which shareholders can try to convince boards of US corporations to adopt certain policies or to do certain things that the shareholders think is desirable. The problem is the shareholders' ability to do this is heavily constrained because shareholders cannot make proxy proposals in the US relating to ordinary business matters. They cannot try to tell the board how to manage the company because that is not the proper remit. It's usually structural things that shareholders tend to make proxy proposals on. For example, reforming the structure of the board of directors to make them more capable of being removed by shareholders is one classic example, that's called de-staggerisation or declassification of the board. Or removal of poison pills or other coercive impediments to hostile takeover bids would be another thing that shareholders are often very keen to try and propose in meetings. Increasingly so in recent years now that active shareholders have become much more involved in corporate governance challenging boards of directors. But nevertheless the process is very heavily weighted in favour of the board and indirectly the managers who work under the board and vice versa very heavily against the shareholders. The shareholders on the way in the US are always fighting against the wind because the laws that there are are quite heavily weighted against them. Now some people say there's very good reasons for that because it's not shareholders' proper role to be getting involved, to be getting their hands dirty and getting involved in managing companies. Shareholders are investors, they entrust the board and the managers to run the company and if they're not happy they can always resale their shares and that's the traditional approach towards corporate governance in the US. Whereas in the UK we're much more willing I think or at least comparatively more willing in the UK to allow shareholders to have more of a say in the running of the company. So a final point we'll look at, one other thing we'll look at in the course incidentally is something called proxy contests which is where active shareholders try to drum up support for ousting the board of the company without actually buying controlling shareholding in the company. The best analogy is to think of it as a military coup of a dictator in a country. That's rather how proxy contests operate in the US and we just don't see these sorts of things in the UK for reasons that we'll maybe explain if we have time in the course. And the final topic we'll look at is the one I've already mentioned, the extensive role of litigation in the US corporate law system shareholder litigation. Shareholders can and frequently do bring direct suits against the board of the company or against the management of the company under securities law largely in the grounds of misstatements that have been made in company disclosures and often get very very large settlements as well in the process. Also derivative action, actions brought by shareholders on behalf of the company against directors are much much more common, much much more common in US companies particularly US public companies than they are in the UK. I would say in the UK public companies derivative actions or derivative claims are virtually irrelevant, they happen so infrequently, not the case in the US. And arguably the main reason as to why there's a big difference between the US and the UK when it comes to litigation is in the UK litigation is principally led by shareholders and shareholders don't tend to want to raise litigation for a variety of reasons. In the US shareholder litigation somewhat ironically is not led by shareholders, it's led by another group of important actors namely attorneys. Civil procedure rules in the US give attorneys, give legal professionals the power to actually instigate class actions against boards and managers of companies, something that isn't really possible in the UK at least as of yet and that's a big difference. And in this topic another very interesting issue that we'll pick up on is something again that's completely alien really in the UK but very common in the US which is called exculpation procedures. A board of a Delaware company, a director of a Delaware company can in effect get themselves opted out of money damages liability for breach of duty of care. So if a Delaware director is held to have acted negligently by a court which in itself is very very uncommon, the chances are they will not be liable for money damages because under the company's chapter of incorporation which is the American equivalent of the articles of association, the chances are the directors of the company will have contracted out of liability. Why does the law allow this? There are some arguably valid reasons as to why which we'll discuss in the course. So I've just given you a kind of scattering of insights from US corporate law really just to try and whet your appetite but the important point to drive home from all of this is some people think of Anglo-American corporate law or Anglo-American corporate governance as being a valid descriptor because the US and the UK are so similar to each other legally, politically, economically. That's just not the case. The Anglo and the American are very separate from one another and very different from one another. US and UK corporate law and corporate governance are very different animals. Therefore even if you are studying UK or English company law there's very good reason to learn US corporate law as well. Finally some housekeeping matters. As an outsider, not usually based in Cambridge, I'm not altogether familiar with the practicalities of the administration of courses but what I will say, I don't intend to have a textbook or casebook for this course so you don't need to buy any particular book. Materials will be provided to you in advance of class and it will make electronic reading lists available containing articles, possibly also US cases as well because US cases I find are very, very difficult to access in Westlaw so it might be easier if possible if somehow supply them but I worry about that in due course. The course is not being set in stone yet but my provisional intention is to run the course over four days on a fortnightly basis so every two weeks. What that means is there will be two seminars per teaching day. Now I know you probably bulk at that suggestion but there's upsides and downsides. The downside is it is quite a tough day. There will be a break between the two seminars I promise. It will be quite a tough day, it will be quite a slog but the advantage is you get two weeks of seminars out of the way in one fell swoop and depending on how you like to run your timetable that might operate to your advantage. Assessment is by way of an unseen essay. My provisional intention is that you'll be required to answer three questions from at least four. They'll mainly but not exclusively be in the form of essay questions because that tends to be more in line with how I run. The seminars, that style of answering. Finally, as this is a US related course, I will be employing what I call a semi-socratic teaching method. Anyone who's roughly familiar with the US educational system will know that the semi-socratic teaching method is very common whereby students are picked upon by name to answer questions. I'm probably not going to pick people by name to answer questions because you're all graduate students. You're at a sufficient level where you're more than capable of speaking up for yourselves. But I will, however, be putting my faith in you as a class and expecting you to have an active discussion with me during class and to develop debatable issues and to answer questions in class. So I'm rather flexible about how the classes proceed. I'm quite happy to go off in certain tangents in different directions as long as by the end of the two hours we've covered everything we need to cover. So do be prepared to speak out. If you'd rather put your head down and take notes for two hours, probably not the right course to choose. And even though I'm based in London, I'll usually be in hand to answer any queries by email and I'll supply my email address in due course with seminar materials. So sorry for taking up so much of your time. I'm happy to deal with any questions just now.