The Study Group on Corporate Boards recently released “Bridging Board Gaps,” a report intended to identify the most critical board gaps and propose practical solutions to improve board government.

As reported in the Wall Street Journal, the panel asserts that an overhaul is necessary to address the “heavy criticism of boards for being asleep at the switch as the massive risks that led to the financial crisis built up.”

The group was co-sponsored by the Columbia Business School and the John L. Weinberg Center for Corporate Governance at the University of Delaware and comprised of 20 current and former chief executives, investors, academics, legal advisors, and others.

Overall, the group’s recommendations are broken down into seven discreet areas for improvement: Purpose, Culture, Leadership, Information, Advice, Debate and Self-Renewal.

As noted by the WSJ, the report calls for “wider use of dissenting votes when directors cannot reach consensus. Historically, there have been few split votes in U.S. boardrooms. Directors face heavy pressure to seek unanimous final votes to head off possible lawsuits or other challenges to their decisions.”

Additionally, the report encourages directors to “explore term limits for themselves” and to “rely more on outside expertise in dealing with critical, complex issues.”

Rutledge & Yaghmai is a full service litigation firm that offers more than fifty-seven years of diverse legal experience. The attorneys of Rutledge & Yaghmai leverage that experience to assist large and small businesses throughout Alabama in achieving their business goals while minimizing their risks.

In addition to offering transactional business services such as Alabama business formation and planning, Rutledge & Yaghmai prides itself on the diversity of Alabama business litigation cases it has handled successfully.

To learn more about the wide range of transactional and business litigation services we offer Alabama businesses, please contact the attorneys of Rutledge & Yaghmai today.

In a recent trend, many Alabama corporations have adopted bylaws that require shareholder derivative actions be filed in a certain forum. However, the enforceability of such provisions is very much up in the air after a recent federal court decision.

The Advantages of Forum Selection Bylaws

Forum selection clauses serve several purposes. First, they allow an Alabama corporation to prevent having to expend resources to defend actions in multiple jurisdictions. Second, they allow an Alabama corporation to choose the jurisdiction most favorable to its interests. For example, many corporations choose for disputes to be resolved by the Delaware Chancery Court due to the Court’s expertise in handling intra-company disputes and Delaware’s well-developed body of corporate law.

The Enforceability of Forum Selection Bylaws

The increase in forum selection clauses in corporate bylaws can be attributed to dicta in the case In re Revlon, Inc. Shareholders Litigation that suggested that the Delaware courts would support the inclusion of a forum selection clause in corporate charters or bylaws.

However, earlier this year, in a matter of first impression, the Federal District Court for the Northern District of California held that a forum selection clause in Oracle Corporation’s bylaws was unenforceable against its shareholders in the case Galaviz v. Berg. Oracle’s Bylaws had designated the Court of Chancery in the State of Delaware as the exclusive forum for bringing shareholder derivative actions.

In reaching its decision, the court noted that federal procedure permits the enforcement of forum selection clauses in contracts, but noted significant differences between contracts and bylaws—namely, the ability for bylaws to be unilaterally amended by a company’s directors at any time. The court also placed great weight on the fact that the forum selection bylaw at issue was adopted after the majority of the alleged unlawful conduct by the board had occurred and after the plaintiffs had purchased their shares.

What Does this Mean for Alabama Corporations?

Forum selections bylaws are a relatively new phenomenon, and it remains to be seen how the courts will address them in the future. Therefore, Alabama companies should consult with an experienced Alabama business attorney before amending their bylaws.

Rutledge & Yaghmai is a full service litigation firm that offers more than fifty-seven years of diverse legal experience. The attorneys of Rutledge & Yaghmai leverage that experience to assist large and small businesses throughout Alabama in achieving their business goals while minimizing their risks.

To learn more about the wide range of transactional and litigation services we offer Alabama businesses, please contact the attorneys of Rutledge & Yaghmai today.

There are a lot of one member corporations and L.L.C.s.  The purpose of these business organizations, other than tax benefits, is to protect the owners from personal liability.

A litigator who has obtained a judgment against an L.L.C. or a corporation and wants to get to the owner for personal liability must usually “pierce the corporate veil” to do so.  The first thing to look for is a lack of documentation of required corporate meetings and  corporate elections. Some clients find it humorous to keep minutes of “meetings with themselves.”  They may not find it humorous when the lack of those minutes illustrate a lack of corporate governance and their resulting personal liability.

Second, look for the cross-use of corporate and personal money, such as corporate loans used as personal funds by the owners or loans without written corporate authorization.  Yet another indication of lack of corporate separateness from the owners is the personal use of funds from corporate accounts by the owners.

In short, if you are the sole shareholder of a corporation or L.L.C. you need to make sure you are following the proper procedures to avoid having the corporate veil pierced.  Hiring a business attorney on the front end will aid you in avoiding having your personal assets attacked.

Call Rutledge & Yaghmai to help with your legal business needs.

New business owners wonder what legal form should their business undertake; Inc., LLC, LLP, or GP.  There is no simple answer to that question.  It depends on the goal of the new business.  Is there more than one location?  How many people are entering the business together?  What are the tax implications for each structure?

The main reason a new business owner seeks advice on the corporate structure is personal protection.  That is, they want to protect their personal assets.  It is IMPERATIVE to remember regardless of what type of structure is chosen the corporate requirements must be followed.

Contact Rutledge & Yaghmai for an initial evaluation on what type of legal structure is best for you.