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LLCs and Corporations: A Fork in the Road in Delaware?

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Joshua P. Fershee:

The limited liability company (LLC) has evolved from a little used entity option to become the leading business entity of choice. The primary impetus for this change was an Internal Revenue Service (IRS) determination in 1988 that permitted pass-through tax status for a Wyoming LLC. Then, in 1997, the IRS passed its check-the-box regulations permitting LLCs (and other non-corporate entities) to simply opt-in to the benefits of partnership tax treatment. These two rulings have been viewed as having “had a profound, unprecedented, and perhaps unpredictable impact on the future development of unincorporated business organizations.” Since that time, some scholars argued that the LLC should be treated as a third, and separate, entity unto itself with its own developing body of law. Nonetheless, many courts have applied corporate law to LLCs with seemingly little appreciation of the differences between LLCs and corporations. That may be about to change.

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One Way That Dodd-Frank’s Liquidation Authority Could Achieve Parity With The Bankruptcy Code

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Harvey R. Miller and Maurice Horwitz

On October 19, 2010, the FDIC published a proposed rule governing the implementation of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”). Title II of Dodd-Frank creates an orderly liquidation authority for the resolution of systemically important financial institutions. According to the FDIC’s Notice of Proposed Rulemaking Implementing Certain Orderly Liquidation Authority Provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, “[t]he liquidation rules of Title II are designed to create parity in the treatment of creditors with the Bankruptcy Code and other normally applicable insolvency laws.”

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Is the “Tax Poison Pill” the Last Stand for Protecting NOLs After Health Care Reform?

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Michael R. Patrone

The Delaware Court of Chancery’s recent Selectica opinion garnered substantial attention, but the court’s decision upholding the tax poison pill may be of even greater importance with the passage of the Health Care and Education Reconciliation Act of 2010 (H.R. 4872)—less than a month after Vice-Chancellor Noble issued his opinion. During the global economic recession, many companies accrued substantial tax losses that can be carried forward for up to twenty years and used to offset future income for federal tax purposes, called net operating loss carryforwards (“NOLs”). These valuable tax assets will provide substantial financial benefits for companies down the road but are vulnerable to spoilage from significant changes in company ownership.

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Distilling the Debate on Proxy Access

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David Page

In August 2010, the SEC issued its final rule on proxy access, which gives shareholders the right to place director nominees directly on the company’s proxy card, thereby sparing shareholders a large part of the expense of waging a traditional proxy contest. This rulemaking, and the SEC’s subsequent decision in October to delay implementing the rule pending a challenge from the Business Roundtable, has fueled a vigorous debate on the merits of proxy access and the details of its implementation. Some of the arguments made by commentators and academics are particularly interesting and useful in framing the contours of the debate.

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