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26 J. Corp. L. 97 (2000-2001)
Venture Capital and Corporate Governance: Evolving the Limited Liability Company to Finance the Entrepreneurial Business

handle is hein.journals/jcorl26 and id is 107 raw text is: Venture Capital and Corporate Governance: Evolving the Limited Liability Company to Finance the Entrepreneurial Business J. William Callison* I. IN TRO DUCTION ........................................................................................................... 98 II. THE RISE OF THE LIMITED LIABILITY COMPANY FORM AND THE NEUTRALIZATION OF TAX AND LIABILITY DISTINCTIONS AMONG BUSINESS O RGAN IZATIONS ....................................................................................................... 102 III. GOVERNANCE ISSUES AND THE LACK OF ROLE DIFFERENTIATION IN LIMITED LIABILITY COM PANIES ............................................................................................. 104 A . Introduction ....................................................................................................... 104 B. Forms ofLLC M anagem ent ............................................................................... 106 C. Raising Equity Capital in Member-Managed LLCs-The Problem of a Failure to Separate Ownership and Control ...................................................... 108 D. Raising Equity Capital in Manager-Managed LLCs-The Problem of a Failure to Separate Decision Management from Decision Control .................. 111 IV. POSSIBLE ADVANTAGES TO THE LLC FORM ............................................................. 114 A. Broad Freedom of Contract ............................................................................... 114 B . D issenters 'R ights .............................................................................................. 115 C. Flexibility With Respect to Organizational Formalities ..................................... 115 D . F iduciary D uties ................................................................................................. 115 V. REPLICATING CORPORATE GOVERNANCE SYSTEMS IN LIMITED LIABILITY C OM PANY FORM ...................................................................................................... 116 A. Contracting for Corporate Governance Structures ........................................... 116 B. State LLC Statutes Providing for Board Monitoring ......................................... 116 C. Modifications to ULLCA and State LLC Statutes to Embrace a Board- D irected M anagement Structure ........................................................................ 118 1. Foreign Law Equivalents ............................................................................... 119 a. German Gesellschaft mit beschrdnkter Haftung ....................................... 119 b. French Socit6 i Responsabilit6 Limit6 ................................................... 120 c. Brazilian Lim itadas .................................................................................. 121 d. Sum m ary ................................................................................................... 122 * Partner, Faegre & Benson LLP; A.B. Oberlin College, 1977; J.D., University of Colorado, 1982; LL.M. Yale University, 2000. I would like to thank Deborah DeMott, Dennis Hynes, Bob Keatinge, Dan Kleinberger, Andrzej Rapaczynski, Maureen Sullivan, Allan Vestal, and the participants in the Yale Law School Graduate Seminar for their helpful thoughts and comments.