Volume 15, Issue 3

THE OVERLOOKED REALITY OF SHAREHOLDER ACTIVISM IN CHINA: DEFYING WESTERN EXPECTATIONS

Zhou Chun, Zhang Wei, & Dan W. Puchniak1

Shareholder activism in China remains largely unexplored, despite the country having the world’s second largest economy. Using unique hand-collected data, we reveal that shareholder activism in China is thriving, with 156 major campaigns identified from 2007 to 2023, over two-thirds occurring in the last five years. Contrary to Western assumptions, our empirical analysis finds no statistically significant difference in activist campaign success rates between state-owned enterprises (SOEs) and privately-owned enterprises (POEs). Private shareholders have successfully conducted activist campaigns against powerful state-owned “national champions” in over half of the cases. Conversely, over half of the campaigns by state-owned activists failed when targeting POEs.

FIXING MFW: FAIRNESS AND VISION IN CONTROLLER SELF-DEALING

Zohar Goshen2, Assaf Hamdani3, & Dorothy Lund4

The legal regime governing controlling shareholders relies on the ability of Delaware courts to police conflicted transactions under the stringent “entire fairness” standard of review. This review involves both implicit valuation— evaluating the transaction process, and explicit valuation—assessing the fairness of the transaction’s financial terms. This Article reveals a critical flaw in this regime: courts cannot reliably engage in valuation when the transaction involves an entrepreneur’s idiosyncratic vision for the company. As a result, there is a gaping hole in Delaware’s framework for policing the fairness of controller transactions.

THE CONTRACTUAL LIMITS OF CONTROL

Caley Petrucci5

For centuries, the law has allowed a separation of ownership and voting power. When founders take a private company public—and benefit from access to more capital as a result—they can preserve control despite selling a majority of the company. How does this work? The primary mechanism involves a curious model of governance: multiple classes of common stock with the founder’s class having far more voting power per share. These governance structures are fraught with concerns of increased agency costs, managerial entrenchment, and economic inefficiency. As a result, they have generated a robust debate among scholars and practitioners alike. Prior commentators have examined a handful of mechanisms to limit control in isolation. But doing so necessarily creates an incomplete picture, failing to consider many other limits and overlooking a deceptively simple principle in contract law: that corporate “contracts” must be considered in their entirety.

PRIVATE EQUITY AND NET ASSET VALUE LOANS – TICKING TIME BOMB OR TICKING ALL THE RIGHT BOXES?

Bobby V. Reddy6

The private equity leveraged buyout (“LBO”) industry has been on the ropes in recent years, with high interest rates making acquisitions more costly, severely depressing exit values, and hampering fundraisings. Accordingly, the industry has sought to adapt, and net asset value loans (“NAV Debt”) have come to the fore extolled in some quarters as being the savior of the industry. NAV Debt is borrowing by a fund backed up by the net asset value of all the portfolio companies that it owns. NAV Debt cuts against the grain of conventional LBO mechanics by creating liabilities at the fund level rather than at the level of individual portfolio companies. In this article, the traditional LBO model and the governance advantages that emerge therefrom are described, before discussing the way in which NAV Debt challenges the foundational principles of private equity. The article argues that although NAV Debt is versatile in its uses and conceptually can provide benefits for a private equity fund, it also has a darker side that undermines the carefully curated dynamics of the LBO archetype and could, in certain circumstances, be detrimental to LBO investors. This Article provides a comprehensive analysis of private equity governance, LBO risk compartmentalization, private benefits of control, and performance metrics in the midst of NAV Debt. Lenders and fund sponsors may claim that NAV Debt ticks all the right boxes, especially during a period of economic turmoil, but, in fact, its use bakes in significant risks that undermine investor rights and could pummel final returns. Although NAV Debt is perhaps not quite a ticking time bomb, it could represent a gamble that tarnishes a generation of funds.

SMALL BANKS, SMALLER SAFETY NETS

Raj Ashar7

The Federal Deposit Insurance Corporation (FDIC) plays a critical role in maintaining trust and stability in the banking system, yet its disparate treatment of uninsured depositors at small versus large banks raises significant questions. This essay examines the implications of the FDIC’s policies, illustrated by the failures of the First National Bank of Lindsay and Silicon Valley Bank (SVB). While uninsured depositors at SVB were fully protected under the systemic risk exception, uninsured depositors at the smaller Lindsay bank faced losses. This discrepancy could lead to market consolidation, increased moral hazard risk, and public distrust in the traditional banking system. The essay then explores potential reforms, including expanded deposit insurance, changes to assessment fees, and stricter enforcement of moral hazard to ensure a more equitable approach to bank resolution.

THE MAJORITY V. THE MINORITY: SERTA, MITEL, AND PRO RATA SHARING PROVISIONS

Adrian Brown8

In the mid-2010s, a new field of financial restructuring, known as liability management, began to emerge. This field, characterized by transactions known as liability management exercises (LMEs), saw the adoption of an exclusionary stance by distressed debtors towards creditors. Rather than working with all holders of a given loan to devise solutions to financial distress, debtors began to work with only a subset of these holders to de-lever their businesses, obtain additional capital, and extend their businesses’ runway.

IMPLIED LICENSES IN THE AGE OF AI: CAN SILENCE SPEAK?

Esther Pomerantz9

As generative artificial intelligence (AI) technology advances, the legality of using publicly available online content for AI training has been the subject of much legal debate. While existing scholarship focuses on the applicability of the fair use defense, this Column explores an alternative defense: implied licenses. By examining the implied license copyright doctrine and drawing parallels to existing jurisprudence in the online context, this Column elucidates how, in the near future, failure to deploy opt-out mechanisms might be construed as the grant of an implied license for AI training. Embracing this framework could hold substantial implications for both AI companies and online content businesses, redefining how training permissions and liability are construed in an increasingly AI-driven society.

WILL MARKET DEMAND TIP OVER FEDERAL DEBT SUSTAINABILITY?

Muhui Shi10

The thirty-six trillion-dollar question is hovering: what will be the tipping point for federal debt. Current scholarship has predominantly focused on the supply side of federal debt in measuring its sustainability: how much more can the U.S. borrow with its economic strength. But what if the real threat is not just how much the U.S. owes, but who is willing to keep lending? This paper flips the script to expose a hidden vulnerability: demand for U.S. debt is quietly eroding. When creditors lose appetite, even America’s “safe haven” status cannot stop the soaring interest rates. This paper points to the foreign official holding of federal debt as a metric for indexing mid- to long-term market demand for federal debt and digs into the deteriorating Trumpism Concussion to the federal debt.

REGULATING AI POWER: HOW LAW CAN SAVE—OR SINK—U.S. DOMINANCE

Dennis Ronel11

As China’s DeepSeek challenges U.S. AI dominance with low-cost, openaccess models that rival GPT-4-turbo, the future of AI is becoming less about who builds the best technology—and more about who controls the rules of the game. This column argues that the United States is falling behind not just in innovation, but in regulation. With the repeal of key AI safety mandates and outdated intellectual property laws, the U.S. is losing its ability to shape global norms and defend its technological edge. To stay competitive, America must treat AI law as a strategic lever—tightening export controls, modernizing IP protections, and streamlining M&A oversight—to protect innovation, contain foreign rivals, and reclaim leadership in the AI age.

  1. Zhou Chun, Associate Professor, Guanghua School of Law, Zhejiang University, China; Zhang Wei, Associate Professor, Yong Pung How School of Law (YPHSL), Singapore Management University (SMU); Dan W. Puchniak, Yong Pung How Professor, Director of the Centre for Commercial Law in Asia, YPHSL, SMU and ECGI Research Member. The authors would like to thank Brian Cheffins, Chi Shunyu, Joon Hyug Chung, George Dallas, Gen Goto, Jill Fisch, Jennifer Hill, Virginia Harper Ho, Geneviève Helleringer, Hong Yanrong, Jedidiah Kroncke, Guo Li, Mariana Pargendler, Elizabeth Pollman, Javier Paz Valbuena, and Wentong Zheng for providing valuable feedback which have benefited this article. We would also like to thank participants at the Inaugural Asian Corporate Law Forum (ACLF) at SMU, the Oxford Business Law Workshop Series at University of Oxford, Faculty of Law, the 2025 Global Corporate Governance Colloquium (GCGC) at Imperial, London and research seminars at East China University of Political Science and Law, Guanghua School of Law, Zhejiang University, and Peking University Law School for providing valuable opportunities to present and develop this research. We are grateful to the SMU Centre for Commercial Law in Asia (CCLA) for providing support and funding for this research. We are also grateful to Ruan Xiao, Chi Yimeng, Cai Chenxin, Wu Xiaowei and Lu Jing at the Guanghua School of Law Zhejiang University and Darren Ang, Nichelle Chua Jia Yu, Bernice Ng, Ruge Wang and Christine Liu at SMU YPHSL for their excellent research assistance. Any errors remain our own. ↩︎
  2. Jerome L. Greene Professor of Transactional Law, Columbia Law School; ECGI. ↩︎
  3. Professor of Law, Tel Aviv University; ECGI. ↩︎
  4. 1982 Alumna Professor of Law, Columbia Law School; Co-Director of the Millstein Center for Global Markets and Corporate Ownership; ECGI. The authors have benefitted from insightful comments and discussions with Lucian Bebchuk, Ryan Bubb, Jill Fisch, Stephen Fraidin, Ronald Gilson, Lauren Hunt, Robert Jackson, Kobi Kastiel, Michael Klausner, Ann Lipton, Ted Mirvis, Alessio Pacces, John Reed, Edward Rock, Udi Sol, Reilly Steel, Eric Talley, Andrew Tuch and the participants in the Columbia Law School Faculty Workshop, the Millstein Center Advisory Board Meeting, the Tel Aviv University’s Law and Economics Workshop, and the BYU Winter Deals Conference. Thanks to Claire Addinquy, Ilay Atias, Kyle Mary Oefelein, and Ashley Pennington for superb research assistance. ↩︎
  5. Associate Professor, University of San Diego School of Law. Comments welcome at cpetrucci@sandiego.edu. For thoughtful comments and discussion, I thank Brian Broughman, Stephen Ferruolo, Jill Fisch, Chris Havasy, Aneil Kovvali, Elizabeth Pollman, Morgan Ricks, Gladriel Shobe, Guhan Subramanian, Andrew Verstein, Andrew Winden, and participants from the American Law and Economics Association (ALEA) Annual Meeting, National Business Law Scholars Conference, Junior Business Law Scholars Conference, UCLA Law School Corporate Law Seminar, University of San Diego School of Law Faculty Workshop, Santa Clara University School of Law Faculty Workshop, and Vanderbilt Law & Business Workshop. I also thank Deanna Xu, Haldan Asaad, Liz Parker, and the USD Legal Research Center for providing valuable research assistance. ↩︎
  6. Professor of Corporate Law and Governance, University of Cambridge; Global Distinguished Professor of Law, University of Notre Dame; J M Keynes Senior Fellow in Financial Economics; Former partner, Latham & Watkins LLP. I would like to thank the organizers of both The Law and Finance of Private Equity and Venture Capital Conference held at Penn Carey Law, University of Pennsylvania, and The Law and Economics of Organizations Conference held at the University of Lucerne, at which this paper was presented. I am grateful for the helpful comments from Anat Alon-Beck, Vince Buccola, William Clayton, Jesse Fried, Suren Gomtsian, Oleg Gredil, Assaf Hamdani, Chris Hale, Marc Moore, Elizabeth Pollman, Hiroyuki Watanabe and Simon Witney. I also thank all the incredibly helpful law firm partners, industry bodies, regulators, limited partners, and private equity practitioners who assisted with my research on this paper on a non-attributable basis. A blog of this paper was published in the Harvard Law School Forum on Corporate Governance (July 15, 2024). ↩︎
  7. J.D. 2025, Harvard Law School; B.S., Economics, University of Michigan. Thank you to the editors of the Harvard Business Law Review for their edits and feedback. All errors are my own. All views are my own and do not reflect the position of any employer or affiliate. ↩︎
  8. J.D., Harvard Law School, 2025. B.S. in Economics (Finance & Strategic Management), The Wharton School of Business at the University of Pennsylvania, 2022. B.A. (History), The College of Arts and Sciences at the University of Pennsylvania, 2022. ↩︎
  9. J.D. cum laude, Harvard Law School, 2025. Thank you to the Harvard Business Law Review editors for their edits and feedback. ↩︎
  10. Muhui Shi, Visiting Research, Harvard Law School, S.J.D candidate at University of Michigan. This note is deeply inspired by Professor Howell Jackson and fellow members of the Federal Budget Policy course. My gratitude to Professor John Pottow, Professor Jeffery Zhang, and Professor Ted Becker for their invaluable comments and insights. The author also wants to thank Ms. Laura Tikanvaara, Ms. Bettina Maxion, and rest of members at the Unidroit for their warm encouragements. ↩︎
  11. Third year student at Harvard Law School; Senior Editor, Columnist for the Harvard Business Law Review. Thanks to Christopher Kies, Louis Noirault, and Magnus Habighorst for their guidance and support in shaping the ideas for this paper. ↩︎
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