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Abstract:
Angel investors fund start-ups in their earliest stages, which creates a contracting environment rife with uncertainty, information asymmetry, and agency costs in the form of potential opportunism by entrepreneurs. Venture capitalists also encounter these problems in slightly later-stage funding, and use a combination of staged financing, preferred stock, board seats, negative covenants, and specific exit rights to respond to them. Curiously, however, traditional angel investment contracts employ none of these measures, which appears inconsistent with what financial contracting theory would predict. This article explains this (not so) puzzling behavior on the part of angel investors, and also explains the recent move toward venture capital-like contracts as angel investing becomes more of a professional endeavor.

Angel Investor, Venture Capital, Financial Contracting, Incomplete Contracting, Entrepreneurship, Entrepreneurial Finance, Start-up, Agency Costs, Information Asymmetry

Abstract:
Fiduciary duty is one of the most litigated areas in corporate law, and the subject of much academic attention, yet one important question has been ignored. Should fiduciary liability be assessed individually, where directors are examined one-by-one for compliance, or collectively, where the board's compliance as a whole is all that matters? The choice between individual and collective assessment can be the difference between a director's liability and her exoneration, affects how boards function, and informs the broader fiduciary duty literature in important ways. This article is the first to explore the individual/collective question and suggest a systematic way of approaching it. The article is both descriptive, in examining how some courts have answered this question (often implicitly), and normative, in asking whether the courts' tentative answer makes for good corporate governance policy.

Corporate, Board, Director, Disney, Fiduciary Duty, Duty of Loyalty, Duty of Care, Good Faith

Abstract:
Many corporate acquisitions are never consummated due to disagreements over transaction structure, which can have significant after-tax effects on buyer and seller. But the parties may have overlooked a key item during due diligence - an item that, due to its potential tax treatment, could be the key to facilitating the acquisition. That item is the selling shareholder's "personal goodwill."

Personal goodwill exists when the shareholder's reputation, expertise, or contacts gives the corporation its intrinsic value. It is most likely to be found in closely held businesses, especially those that are technical, specialized, or professional in nature or that have few customers and suppliers. Because it can often be sold ancillary to the sale of the corporation's assets or stock, personal goodwill produces a more favorable after-tax result for both buyer and seller. An effective transfer of personal goodwill is also necessary to give buyer the benefit of its bargain.

I adopt the view that personal goodwill, like business goodwill, is marketable property. Under this view, buyers receive a step-up in basis in the goodwill and can amortize it for tax purposes. C corporation sellers can sell the goodwill ancillary to the sale of their corporations and avoid double taxation. All sellers may receive favorable capital gains treatment on the sale.

goodwill, acquisition, taxation, due diligence, closely held, corporation

Abstract:
Venture debt, or loans to rapid-growth start-ups, is a puzzle. How are start-ups with no track records, positive cash flows, tangible collateral, or personal guarantees from entrepreneurs able to attract billions of dollars in loans each year? And why do start-ups take on debt rather than rely exclusively on equity investments from angel investors and venture capitalists (VCs), as well-known capital structure theories from corporate finance would seem to predict in this context? Using hand-collected interview data and theoretical contributions from finance, economics, and law, this Article solves the puzzle of venture debt by revealing that a start-up’s VC backing and intellectual property substitute for traditional loan repayment criteria and make venture debt attractive to a specialized set of lenders. On the firm side, venture debt helps entrepreneurs, angels, and VCs avoid dilution, improves VC internal rate of return, assists VCs in monitoring entrepreneurs, and follows from capital structure theories after the first round of VC funding.

venture debt, venture capital, capital structure, agency costs, monitoring, entrepreneurship, start-up

Abstract:
Silicon Valley's success has led other regions to attempt their own high-tech transformations, yet most imitators have failed. Entrepreneurs may be in short supply in these "non-tech" regions, but some non-tech regions are home to high-quality entrepreneurs who relocate to Silicon Valley due to a lack of local financing for their start-ups. Non-tech regions must provide local finance to prevent entrepreneurial relocation and reap spillover benefits for their communities. This Article compares three possible sources of entrepreneurial finance - private venture capital, state-sponsored venture capital, and angel investor groups - and finds that angel groups have distinct advantages when it comes to funding innovation in non-tech regions. This entrepreneurial finance story is then supplemented by a "law and entrepreneurship" story - specifically, a look at securities laws that might impede optimal levels of angel group financing.

Silicon Valley, Entrepreneurship, Economic Development, Angel Investor, Venture Capital

Abstract:
The Three R's seek to reduce, refine, and replace the use of animals in experiments. The Three R's have been accepted by researchers who use animals in experiments and by animal welfare advocates who argue in favor of regulating animal use rather than abolishing it. The Three R's are incorporated into the federal Animal Welfare Act, and over the past twenty years have to a considerable degree become the primary legal and non-legal mechanism for regulating animal experimentation.

This article takes a systematic and critical look at the Three R's and concludes that they are ineffective in preventing unnecessary animal suffering even if animal experimentation is generally regarded as legitimate. The Three R's fail for three main reasons. First, they do not allow for challenges to a researcher's purpose in conducting experiments that will use animals, even if that purpose is questionable. Second, loopholes in the Animal Welfare Act have allowed researchers to avoid application of the Three R's in practice. Finally, the Three R's have no application to new and emerging areas of biomedical research that have the potential to greatly escalate the use of animals in experiments, including stem cell research, cloning, xenotransplantation, genetic modification, and bioterrorism defense.

bioethics, animal, experiment, Three R's, animal rights, animal welfare, Animal Welfare Act, regulation, stem cell, cloning, xenotransplantation, genetic modification, bioterrorism

Abstract:
Animal welfare advocates claim that animal exploitation and humane treatment can coexist with respect to the use of animals for food, experimentation, hunting, and other human benefits. These advocates recognize that existing anticruelty statutes, which embody the idea that animals should not subjected to unnecessary suffering, have many deficiencies - most notably, as Professor Gary Francione has pointed out, they include wholesale exemptions for institutional uses of animals. However, these advocates nevertheless claim that anticruelty statutes can be reformed, either legislatively or judicially, to narrow these exemptions and ascribe more weight to an exploited animal's interest in not suffering.

This article reveals that, although legislatures could certainly require better treatment of exploited animals, a law that does not challenge the underlying exploitation itself can at best prevent suffering that is in excess of what is required to carry out the exploitation. As the very nature of animal exploitation requires the infliction of tremendous suffering, the amount of excess suffering that a reformed anticruelty statute could prevent is minimal. This article also reveals that courts do not have the discretion to interpret anticruelty statutes more broadly for a variety of reasons, including the constitutional requirement of fair warning. This article concludes that anticruelty statutes, while noble in theory, are ineffective in practice precisely because they do not challenge the underlying exploitation of animals, but instead focus on humane treatment.

This article provides greater support for the argument that animal advocates should adopt Professor Francione's rights-based strategy that eschews unworkable ideas of humane treatment and instead focuses on abolition.

Animal, animal rights, animal welfare, cruelty, anticruelty, fair warning, void-for-vagueness

Abstract:
Law and entrepreneurship is an emerging field of study. Skeptics might wonder whether law and entrepreneurship is a variant of that old canard, The Law of the Horse. In this essay, we defend law and entrepreneurship against that charge and urge legal scholars to become more engaged in the wide-ranging scholarly discourse regarding entrepreneurship. In making our case, we argue that research at the intersection of entrepreneurship and law is distinctive. In some instances, legal rules and practices are tailored to the entrepreneurial context, and in other instances, general rules of law find novel expression in the entrepreneurial context. As a result, the study of law and entrepreneurship yields unique insights about both law and entrepreneurship.

Entrepreneurship, Law and Entrepreneurship, Law of the Horse

Abstract:
This article examines the shifting landscape of animal agriculture - from family farms a half century ago to factory farms today. Factory farms differ significantly from family farms in their treatment of animals, and are characterized by indoor confinement, overcrowding, disease, darkness, forced mutilations, and the lack of human contact. The seventeenth-century philosopher Rene Descartes claimed that animals could not think nor feel - that they were simply machines like ticking clocks. Although there is now near-universal rejection of Descartes' views, factory farms are only possible by treating animals according to Cartesian principles. So how did factory farms become the norm? This article attempts to answer this question by exploring the economics of animal agriculture, and critically examines the move by some corporations to apply principles of corporate social responsibility to animals.

Corporation, Animal, Factory Farm, Profit Maximization, Corporate Social Responsibility, Organic

Abstract:
Lawyers often overlook or trivialize the subtle distinction between representing a closely held business and its owners. But because the duties owed by a lawyer generally extend only to individuals and entities that are classified as clients, this distinction is of great importance.

This article rejects the two predominant theories of client identity in this context. The entity theory, which provides that the lawyer represents only the entity, fails to guide the lawyer on matters involving the entity's owners. The aggregate theory, which provides that the lawyer represents the entity and all of its owners, often creates irreconcilable conflicts of interest between the owners.

The alternative solution proposed by this article divides the lawyer's world into internal and external matters. Internal matters involve the inner workings of the entity and the relationships among its owners; external matters involve the entity's dealings with third parties. The lawyer has both an internal client - an owner - and an external client - the entity. The gap left by the entity theory is filled, and the conflicts of interest among owners produced by the aggregate theory are eliminated.

Corporation, closely held, ethics, professional responsibility, representation