Our approach to teaching the basic Business Organization survey at Washington and Lee splits the course into two parts, a three-credit course called Close Business Arrangements (CBA) and a second three-credit course called Publicly Held Businesses (PHB). Our basic assumption is that the legal issues confronting the organization and management of privately owned, typically small businesses are different enough from those of large, publicly held firms to warrant separate courses. As a result, we have six hours to cover material that is typically taught in a four- (or even three-) credit survey. Needless to say, that is a much-appreciated luxury.
The CBA course begins with a thorough study of agency law, with an emphasis on authority issues. (We don't do much with vicarious liability for torts in this class.) We think this is important because questions of actual and apparent authority can be complicated, come up frequently in practice, and are nowadays not given the attention they deserve at most law schools. We then do an extended look at partnership law, followed by several weeks on corporate law as it relates to privately owned firms. So we don't do much with complex m&a or federal securities regulation (other than the law governing exemptions from registration). Once the students understand partnerships and corporations, the LLC is easy to grasp as a hybrid organizational form.
Having three hours to cover this material makes broader, deeper coverage of the cases and statutes possible. Importantly, it also allows more time for attention to business considerations – concepts like leverage and problems like conflict of interest or minority shareholder oppression, for example. In our experience, introducing students to basic business concepts and vocabulary is at least as important as teaching them the law; most are almost entirely ignorant about such things. We also take advantage of the extra time to introduce basic accounting concepts and terminology, with the goal of getting the students to understand the purposes of and differences between the income statement and the balance sheet.
The follow-on PHB course focuses on the legal problems related to publicly owned corporations. This is essentially a detailed study of Delaware law. (For the corporate law part of the CBA course we use the MBCA.) In addition, we cover the federal proxy rules and offer a brief overview of the mandatory disclosure system. Having three hours for this subject allows us to cover material that is more typically dealt with in a corporate finance course. So, we can devote significant attention to preferred stock and debt as well as to m&a. We cover the leading Delaware cases dealing with defenses to hostile takeovers in detail. Again, in this course a great deal of time is spent on non-legal issues – valuation, for example – because students know so little about the world of business. In our experience, students who end up in a sophisticated, big-firm corporate practice believe that they are very well prepared.
At W&L, most students take CBA, usually in their second year. Enrollment in the PHB course varies from around 40 to 60 or so percent of the class. CBA is a prerequisite for PHB, though we allow students to take both concurrently if they need to.
Because our two-course sequence is unusual, available teaching materials are limited. Most casebooks attempt to cover both the CBA and PHB material in a single volume, with varying emphases and degrees of thoroughness. For CBA we use the only casebook devoted to privately owned businesses, the Ragazzo and Moll book. For PHB, Klein, Ramseyer, and Bainbridge works well because it covers debt securities and includes the most important Delaware takeover cases. For both courses, though, it's necessary to supplement the casebooks with additional cases and materials.
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