Thursday, May 23, 2019

Time to Reconsider Electronic Corporate Actions?

For some companies, formal recordkeeping of corporate actions is a burdensome task. Decisions must be made quickly, and officers and directors are spread across the country or even the world.

So it’s no surprise that companies are increasingly relying on technology to communicate with officers and directors and document corporate actions. But, as a decision earlier this year by the Delaware Supreme Court illustrates, operating on such an informal basis may have unintended consequences for a company.

In its decision, the Delaware Supreme Court held that a corporation may be required to produce emails and other electronic documents to satisfy a shareholder’s legitimate request to inspect corporate books and records pursuant to §220 of the Delaware General Corporation Law. This article summarizing the case quotes the Court as holding: 

…if a company observes traditional formalities, such as documenting its actions through board minutes, resolutions, and official letters, it will likely be able to satisfy a §220 petitioner’s needs solely by producing those books and records. But if a company instead decides to conduct formal corporate business largely through informal electronic communications, it cannot use its own choice of medium to keep shareholders in the dark about the substantive information to which §220 entitles them.”

Under this ruling, the inspection rights granted under §220 are not dependent upon the existence of pending litigation but simply require that a shareholder present a proper purpose(s) and demonstrate how the requested information is “essential” to accomplishment of that purpose. 

Monday, May 20, 2019

J. D. Vance, Hillbilly Elegy: A Memoir of a Family and Culture in Crisis (Harper, 2016)

From where does the drive for excellence come? J. D. Vance’s Hillbilly Elegy — a coming-of-age memoir of a man raised in poverty — offers a perspective rooted in the culture of desperation endemic to the former coal fields of Appalachia.

This is not just a “poor boy makes good” story, though Vance manages to move gradually beyond the limited expectations of his upbringing and ultimately finds himself at an elite law school (something that the authors of this blog know a little about). This is, as one might expect, partly a paean to hard work and individualism, partly a criticism of well-intentioned government programs that actually undermine their purposes.

On the other hand, the book also makes it clear that success is not just a matter of personal effort and ability, but also a matter of personal support — which enables Vance to rise above limited horizons — and, to a greater extent, luck.

Why does one person succeed while another fails? Why does one follow a path of aspiration and another a path of desperation? Tough questions. 

Wednesday, May 8, 2019

Digital Art and Borderless Experiences

During a recent trip to Japan, I visited the Mori Building Digital Art Museum to see the teamLab Borderless gallery. teamLab is a Japanese digital art collective with temporary and permanent exhibitions in select cities throughout the world. 

The museum is unlike any art museum I’ve ever visited. It is very dark, calming electronic music fills its maze of hallways, and the art is truly borderless: it moves across the walls, ceilings, floors, and the visitors themselves. This constant immersion into the art was a truly unique experience. For instance, while you can view Van Gogh’s Sunflowers series at the Van Gogh Museum in Amsterdam, at Borderless, you are the canvas upon which digital sunflowers take root and grow.

There are multiple rooms with different interactive activities, including a space-bathed trampoline, a floating nest for visitors to view the art, and rooms of raining crystals, floating lanterns, and giant colorful balloons. Unlike most museums, visitors are encouraged to touch and interact with the artwork, and visitors can take photographs of the art and themselves in or as part of the exhibitions. Indeed, the permissibility of mobile phone photographs is one of the reasons the art gallery has exploded in popularity as its “Instagrammability” is a draw for many users who are keen to share their experiences with others. 

Thursday, April 25, 2019

Female Entrepreneurs: A Growing Trend?

Longtime entreVIEW readers — and I mean really long time readers — already know that, despite spending most of my days working with entrepreneurs, I'm a big fan of "Shark Tank".

I was recently watching an episode (which, admittedly, may not have been the most recent episode as I keep a stash of them on my DVR) with my oldest daughter. We both noticed that, for the first time, a majority of the sharks (three of five) were female. This is a long way from when the show premiered in 2009 and only one of the five sharks, Barbara Corcoran, was female. Since then, Lori Greiner (Queen of QVC) has become a regular and, more recently, Sara Blakely (founder of Spanx) and Bethenny Frankel have become frequent guest sharks.

Maybe the entrepreneurial world is finally closing the gender gap? I came across this article containing facts that may support this proposition. The article indicates that, while only one in four companies in the U.S. are run by women, the number of female-owned firms is growing twice as fast as all business. There’s also a lot of interesting analysis about other significant differences between the sexes in how and why women start and run enterprises.

Wednesday, April 17, 2019

What does the new EU Copyright Law have to do with my small business? Perhaps more than you think…

On April 15, 2019, the European Council approved the “Directive on Copyright in the Digital Single Market” — a major change to EU copyright law that was approved by the parliament of the European Union on March 26, 2019 with a vote of 348 yea, 274 nay, and 36 abstentions. The Directive’s next step will be publication in the Official Journal of the EU, after which member states will have two years to implement the Directive into their national laws.

What is the Directive and why might it matter for my small business?


The Directive is completely changing the copyright landscape in the EU – but given the global nature of the World Wide Web, it is likely to alter business practices around the world. 


The Directive’s greatest changes are to websites with user-generated content. Such websites include not only YouTube and Facebook, but also sites like Medium and blogs and commentary sites as well. If you have a website that contains user-generated content that touches the EU in any way, you may be responsible for making sure that content does not infringe copyright laws.


Over the last several months the Directive has been heavily criticized, particularly due to Articles 15 and 17 (formerly Articles 11 and 13), respectively the so-called “link tax” clause and “upload filter” clause. Prior to the vote by parliament, protestors took to the streets of Europe, cautioning that the Directive will “censor the internet.” Meanwhile, the author of the legislation and his supporters tout it as necessary to “protect and strengthen the rights of the creatives: authors, performers, singers, songwriters, journalists . . . all copyright-holders.”

Thursday, April 11, 2019

Lessons From Fyre Festival

Music. Supermodels. White sand beaches. Luxury villas. Gourmet dining. A VIP experience you will never forget.

No, I’m not talking about your typical legal experience at Gray Plant Mooty. This is everything Billy MacFarland and Ja Rule, the founders of Fyre Festival, promised and failed to deliver to festival-goers and investors in the Spring of 2017. 

For those who missed it, in 2016, Billy MacFarland, a young entrepreneur and the Chief Executive Officer of Fyre Media Inc., along with rapper Ja Rule, dreamt up the idea of a brand new musical festival on the Bahamian island of Great Exuma. The festival would be one of the most luxurious and exclusive musical festivals to ever exist — an “immersive music festival,” a party you certainly did not want to miss. MacFarland and the other organizers of the festival had a little more than four months to pull off an all-inclusive festival for thousands of people on a remote island in the Caribbean. Yes, four months. 

The organizers of the festival mainly relied on the powers of social media — a tactic specifically geared towards the millennial and Gen Z generations — to attract the attention of festival-goers and investors. They hired supermodels and other social media influencers to post about the festival on their social media accounts, despite the lack of evidence of actual development of the festival itself. That didn’t seem to matter for the targeted audience. Thousands of millennials and Gen Zs purchased tickets (allegedly some festival packages were as expensive as $250,000), booked flights, and packed their bags. 

Wednesday, April 3, 2019

SELF-REPORTING OF UNREGISTERED INITIAL COIN OFFERINGS: PERHAPS A FRAMEWORK FOR AVOIDING HEFTY CIVIL PENALTIES

Keeping with the theme of my prior post covering recent oversight and enforcement action by the Securities and Exchange Commission (SEC) of the cryptocurrency industry/exchanges, Gladius Network (an issuer of unregistered cryptocurrency tokens) recently reached a settlement with the SEC which avoided civil penalties entirely.

Gladius, a Washington D.C. firm dedicated to using the Ethereum Blockchain as a means of mitigating Distributed Denial of Serve attacks, raised over $12 million USD in an initial coin offering (ICO) in 2017 – the peak of the cryptocurrency investor craze. 


As SEC enforcement activity increased over the last several years, and the SEC maintained that most ICOs qualified as the sale of unregistered securities, Gladius decided to proceed with caution and self-reported its unregistered ICO to the SEC during the summer of 2018.  Gladius cooperated with the SEC’s investigation and agreed to take certain remedial actions, including registering its tokens as a security and repaying investors that requested their investments back.


Most significantly, however, is the SEC’s determination not to levy any civil penalties against Gladius. The SEC explained that “the SEC did not impose a penalty because the company [Gladius] self-reported the conduct, agreed to compensate investors and will register the tokens as a class of securities.” Robert Cohen, Chief of the SEC’s Cyber Unit, further commented that the case “shows the benefit of self-report and taking proactive steps to remediate unregistered offerings.”


The Gladius settlement follows similar enforcement actions initiated by the SEC in November 2018 against companies that conducted unregistered ICOs. In those instances, the companies did not self-report and were penalized by the SEC, sometimes to the tune of $250,000.


If nothing else, the Gladius case sends a clear and deliberate message that self-reporting to the SEC can result in meaningful cooperation credit – in particular the avoidance of hefty civil penalties. 


If you or your company are interested in learning more about the SEC’s guidance regarding cryptocurrency or ICOs and the recent regulatory activity, or have questions about how to make sure you are in compliance with securities law, the GPM team is here to help.