Management > Management > The Law of Corporate Finance and Financial Markets

The Law of Corporate Finance and Financial Markets posted by duggu on 1/1/2008

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Courseware/Lectures

Test/Tutorials

Course Highlights

Students complete two take-home exercises, which are available on the assignments page. Summaries of the lecture discussions have also been posted.

Course Description

Much of 15.617 focuses on mergers and acquisitions (M&A), and the law-sensitive aspects of financial services and financial markets. The course is designed to be an introduction to business law that covers the fundamentals, including contracts, liability, regulation, employment, and corporations. This class also provides an in-depth treatment of the law of finance.

Syllabus

Topics

15.617 is an introduction to business law which covers the fundamentals, including contracts, liability, regulation, employment, and corporations, with an in-depth treatment of the law of finance, including law-sensitive aspects of M&A transactions, national and international financial and securities markets, venture capital and private equity, the financial structure of the corporation and other business entities, antitrust, bankruptcy and reorganization, the regulation of financial service providers, and the regulatory and liability risks associated with innovative financial products and services.

Some Advice from John Akula on Picking a Law Course

I offer the following three law courses at Sloan:

15.615/15.647, Law for the Entrepreneur and Manager (fall and spring) (615 is the full-semester course; 647 is the first half)
15.616, Innovative Businesses and Breakthrough Technologies - The Legal Issues (fall only)
15.617, The Law of Corporate Finance and Financial Markets (spring only)

Based on my experience as a practicing lawyer, I recommend that students at Sloan take a law course. Managers face many law-sensitive issues that are crucial to the welfare of their companies and their own careers. These issues often arise suddenly and outside the normal course of business. Each of my courses is designed to give you the understanding you will need to exercise good judgement and leadership in those situations. Each course will also provide you with the foundation in law that you will need to make effective use of legal advisors, and to develop later in your careers a more sophisticated understanding of any legal issues that are central to your particular responsibilities.

However, I do not expect students to take more than one law course. Thus my courses are designed as an array of choices, not a sequence, and there is substantial overlap with respect to legal fundamentals. You should pick the one that interests you most.

Requirements

Class Attendance

Students should attend class, since material is covered that is not in the readings. Attendance is taken. Absences for good cause (such as job hunting or family obligations) are excused. You should e-mail the TA before or shortly after the class in question, with a "cc" to the instructor, to request an excused absence. You do not need to include any personal details with the request.

Class Participation and "On-deck" Preparation

All students are expected to participate in class discussion. In addition, for each class, some students will be assigned in advance to be "on-deck." "On-deck" students should make certain that they prepare with special care and are ready to respond to questions about the readings. Guest lecturers are invited to call on the on-deck students. Each student will be "on-deck" approximately three times.

Take-home Exercises

There are two take-home exercises. Students have three hours for an exercise, and some choice as to the particular three-hour period. The exercises have been scheduled to be available during the periods shown on the assignments page. For each exercise, each student will make arrangements with the TA to receive the exam by e-mail at a mutually determined time during the availability period, and will e-mail back the completed exam within three hours of receiving it. The second exercise will cover only material not covered by the first.

During the period the exercises are available, students may not consult any other person about the content of the course.

The exercises heavily emphasize the required readings. The questions and format will be similar to previous years (although the exercises from some past years were of different lengths.) Past exercises and a sample answer will be made available to students.

It is not expected that students will need the full three hours to complete the exercise. I use this format so that a student does not have to write fast to do well. This may be of special importance to students for whom English is a second language.

Students Who Take More Than One of My Courses

If you take more than one of my courses, an additional research paper will be required in the second course, on a topic to be determined in discussions with the instructor.

Grading

Grading is not tied to a formula, but will be based approximately as shown below:

ACTIVITIES	PERCENTAGES
First Take-home Exercise	30%
Second Take-home Exercise	40%
Class Attendance/Participation	30%

Textbook and Course Readers

Students should purchase: Bagley, Constance E., and Craig E. Dauchy. The Entrepreneur's Guide to Business Law. 2nd ed. South-Western College Publishing, 2002. ISBN: 0324042914. We will read most of this book. There will also be a course-reader available at the MIT copy center later in the semester.

Changes from Last Year

This is the first year this course is offered. It is replacing a half semester course (15.649) given in past years on the law of M&A.

Calendar

LEC #	TOPICS	KEY DATES
Module I - Basic Building Blocks
1	Introduction The Law of Duties
2	The Law of Duties (cont.)
3	The Hard Edge of Regulation
4	Contracts
5	Contracts (cont.)
6	Module I Wrap-up
Module II - M&A
7	Key Players, Stages and Deal Structures Guest: Terry Mahoney, Partner, LeBoeuf, Lamb, Greene & McRae
8	Tax Considerations in Structuring a Deal Guest: Martin Allen, Partner, Kirkpatrick & Lockhart
9	The Basic Terms of a Purchase Agreement Guest: Terry Mahoney, Partner, Leboeuf Lamb Greene & McRae
10	Buying a Publicly-held Company I Guests: Stu Cable and Jim Matarese, Partners, Goodwin Procter
11	Buying a Publicly-held Company II Guests: Stu Cable and Jim Matarese, Partners, Goodwin Procter
12	International M&A and Joint Ventures Guest: David Walek, Ropes & Gray
Module III - Forms of Business Entities
13	Forms of Doing Business - An Introduction	First exercise available one day after lecture 13 at noon
14	The Publicly-held Corporation I - Insider Trading and Disclosure Guest: Jocelyn Arel, Partner, Testa Hurwitz & Thibeault	First exercise due two days before lecture 14 at 5 p.m. (two days after it was made available)
15	The Publicly-held Corporation II - Governance and Accountability Guest: Lisa Wood, Partner, Foley Hoag
Module IV - Raising and Investing Money
16	Venture Capital Guest: Edward Freedman, Corporate Counsel, Flagship Ventures
17	Other Private Equity Guest: John LeClaire and David Watson, Partners, Goodwin Procter
18	Public Offerings and Investment Banking Guest: James Hackett, Partner, Choate Hall & Stewart
19	Commercial Lending and Securitization Guest: Matthew Furlong, Partner, Bingham McCutchen
20	Building a Hedge Fund Portfolio Guest: Tim Diggins, Partner, Ropes & Gray
Module V - Competition, Mobility and Insolvency
21	Antitrust	Second exercise available one day after lecture 21 at noon
22	Bankruptcy and Reorganization I Guest: John Whitlock, Partner, Palmer & Dodge	Second exercise due one day after lecture 22 at 9 p.m. (two days after it was made available)
23	Bankruptcy and Reorganization II Guest: John Whitlock, Partner, Palmer & Dodge
24	Wrap-up

Further Reading:

The textbook for this course (referred to below as "Bagley") is: Bagley, Constance, E., and Craig E. Dauchy. The Entrepreneur's Guide to Business Law. 2nd ed. South-Western College Publishing, 2002. ISBN: 0324042914.

LEC #	TOPICS	READINGS
Module I - Basic Building Blocks
1	Introduction The Law of Duties	Akula, John. "Tort Law in a Peanut." ( PDF)
2	The Law of Duties (cont.)	Mills Acquisition Co. v. Macmillan, Inc ., 559 A.2d 1261, 1287-88 (Del. 1989). (Conflicts of interest in a management buy-out) Wickline v. State of California, 192 Cal. App. 3d 1630, 239 Cal. Rptr. 810 (Ct. App. 1986). (Early case on liability of an HMO for poor medical care; raises issues of accountability for professional judgments in the context of an innovative business model)
3	The Hard Edge of Regulation	Akula, John. "Business Crime: What To Do When the Law Pursues You." In the matter of John Gutfreund. (SEC release on action against Solomon executives) Article on Ernst & Young and PeopleSoft. (Auditor independence issues) (not required for exercise because not discussed in class)
4	Contracts	Bagley. Chapter 8 ("Contracts and Leases"), pp. 176-191 (then skip "Electronic Contracts") and 193-210 (stop before "Promissory Estoppel"). Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133, 1154 (2d Cir. 1986). (Formation of contract to purchase a company)
5	Contracts (cont.)	IBP, Inc. v. Tyson Foods, Inc., 789 A.2d 14 (Del. Ch. Ct 2001). (Interpretation of material adverse effect clause in merger agreement) Filanto, SPA v. Chilewich Int'l Corp., 984 F.2d 58, 60 (2d Cir. 1993). (Dispute over inclusion of arbitration term) Transatlantic Financing Corp. v. United States , 363 F.2d 312 (D.C. Cir. 1966). (Allocating risk) Delchi Carrier SpA v. Rotorex Corp., 71 F.3d 1024, 1027-28 (2d Cir. 1995). (Damages)
6	Module I Wrap-up	Akula, John. "Contracts in a Peanut." ———. "Business Disputes Outline." (Not required for exercise)
Module II - M&A
7	Key Players, Stages and Deal Structures Guest: Terry Mahoney, Partner, LeBoeuf, Lamb, Greene & McRae	The general background for this module is Bagley. Chapter 16 ("Buying and Selling a Business") except skip the sections on "Securities Law Requirements" (pp. 611-617), "Putting it into practice" (pp. 640-645), and the "Sample Term Sheet" (pp. 646-648). For some of the classes below, sections of Bagley that are especially relevant are noted. Bagley. pp. 585-604 (stop at "Tax Treatment"), and pp. 618-628. ———. "Letter of Intent." (Does not need to be read closely) ———. "Acquisition Review Checklist." (Due diligence)
8	Tax Considerations in Structuring a Deal Guest: Martin Allen, Partner, Kirkpatrick & Lockhart	Bagley. "Tax Treatment." pp. 604-610. Martin Allen's outline on acquisitions and dispositions of businesses. Martin Allen's "Fact Patterns." Note: For the exercise, you are required to be familiar only with the sections of Allen's written materials that he discussed in class. So my advice is review your class notes and refer to Allen's materials to the extent necessary to understand any of the points he made in class.
9	The Basic Terms of a Purchase Agreement Guest: Terry Mahoney, Partner, Leboeuf Lamb Greene & McRae	Bagley. pp. 628-639. Stock purchase agreement (marked-up copy to reflect negotiations). Terry will provide guidance on which sections you should focus on. Assumed Liabilities excerpt from a model agreement, with comments.
10	Buying a Publicly-held Company I Guests: Stu Cable and Jim Matarese, Partners, Goodwin Procter	Ball, Corinne. "Advising the Board of Directors in Mergers and Acquisitions." Review of Securities and Commodities Regulation 31, no. 7. Sections I, II, and III.
11	Buying a Publicly-held Company II Guests: Stu Cable and Jim Matarese, Partners, Goodwin Procter	Ball, Corinne. "Advising the Board of Directors in Mergers and Acquisitions." Review of Securities and Commodities Regulation 31, no. 7. Sections IV and V. Note: Sections VI, VII, and VIII of the Ball article are not assigned.
12	International M&A and Joint Ventures Guest: David Walek, Ropes & Gray	Libby, Gerold. "Joint Ventures: Definitions and Legal Issues." In Joint Ventures in the International Arena. Edited by Darell Prescott, and Salli Swartz. American Bar Association, 2002. Barrett, John. "Joint Venture Governance." In Joint Ventures in the International Arena. Edited by Darell Prescott, and Salli Swartz. American Bar Association, 2002.
Module III - Forms of Business Entities
13	Forms of Doing Business - An Introduction	Bagley. "Deciding Whether to Incorporate." Chapter 4, pp. 49-70.
14	The Publicly-held Corporation I - Insider Trading and Disclosure Guest: Jocelyn Arel, Partner, Testa Hurwitz & Thibeault	Bagley. "Going Public." Chapter 17, pp. 685-698. (Starting with "Responsibilities of a Public Company and its Board of Directors")
15	The Publicly-held Corporation II - Governance and Accountability Guest: Lisa Wood, Partner, Foley Hoag	Foley Hoag Securities Law Updates (Each article is available at the Web site of Foley Hoag LLP ): "The Sarbanes-Oxley Act of 2002." 1 August 2002. "SEC Issues Final Rules on Code of Ethics." 28 February 2003. "SEC Adopts Rules to Prohibit Improper Influence of Auditors." 13 June 2003. "New SEC Rules Oblige Attorneys to Report Material Violations 'Up the Ladder'." 30 June 2003. "Sarbanes-Oxley Compliance Update - What to Focus on in the Upcoming Reporting Season." 31 December 2003.
Module IV - Raising and Investing Money
16	Venture Capital Guest: Edward Freedman, Corporate Counsel, Flagship Ventures	Bagley. "Venture Capital." Chapter 13.
17	Other Private Equity Guest: John LeClaire and David Watson, Partners, Goodwin Procter	Excerpts from: Fenn, George W., Nellie Liang, and Stephen Prowse. "Economics of the Private Equity Market." Federal Reserve Board, December 1995. The full report is available ( PDF) as well as a summary ( PDF).
18	Public Offerings and Investment Banking Guest: James Hackett, Partner, Choate Hall & Stewart	Bagley. "Going Public." Chapter 17, pp. 649-685.
19	Commercial Lending and Securitization Guest: Matthew Furlong, Partner, Bingham McCutchen	Bagley. "Creditors' Rights and Bankruptcy." Chapter 12, pp. 384-398. Roever, W. A. "The Joys of Securitization: Understanding Securitization and Its Appeal." In Issuer Perspectives on Securitization. Edited by F. Fabozzi. Newhope, PA: Fabozzi and Associates, 1998, pp. 1-16.
20	Building a Hedge Fund Portfolio Guest: Tim Diggins, Partner, Ropes & Gray	Vujovich, Dian. "Hedge Funds." Dian's Fund Freebies, 7 January 2001 Available at Dian's Fund Freebies . Borla, Simone, and Denis Masetti. "Hedge Funds and Alternative Investments in Europe." Chapter 1 in Hedge Funds. Wiley, 2003, pp. 1-17. ISBN: 0470850957. (Note: This chapter title is misleading - some later parts of the book focus on Europe, but this introductory chapter is an overview of the hedge fund industry generally.)
Module V - Competition, Mobility and Insolvency
21	Antitrust	Akula, John. "Antitrust Law in a Peanut." (For general background) Varta Bosch. (EU ruling on a proposed merger) Summary of Appeals Court ruling on Microsoft. GemStar - TV Guide (the "gun-jumping" problem in mergers). Department of Justice Press Release ( PDF). Oesterle, Dale A. "Antitrust Legislation on Acquisitions." Chapter 13 in Mergers and Acquisitions in a Nutshell. West Publishing, 2001, pp. 273-9. ISBN: 0314253157. Newspaper clippings on airlines settling suit by government on fares.
22	Bankruptcy and Reorganization I Guest: John Whitlock, Partner, Palmer & Dodge	Bagley. "Creditors' Rights and Bankruptcy." Chapter 12, pp. 398-428.
23	Bankruptcy and Reorganization II Guest: John Whitlock, Partner, Palmer & Dodge
24	Wrap-up