hen a company needs to raise capital, people often look to others in their network to connect them with potential investors. These mediating friends are called finders. Finders introduce a private company to potential investors and are often paid a fixed fee (typically 5%- 6%) for each successful investment his or her connection makes in the company. Many finders are licensed with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), yet others are unregistered. Unregistered finders run a number of risks for themselves and for the issuing company under state and federal law. Because the Securities Exchange Act of 1934 (the “Exchange Act”) gives very loose definitions, there is a broad range of interpretations.
oday, many business transactions are conducted on the Internet—from online retailers to contracts sent back and forth via email. Federal law and California state law lay out regulations for electronic and digital signatures.
fiduciary duty is the loyalty between two parties, typically between a director or officer and his or her corporation. A fiduciary is anyone who is bounded by this ethical obligation. The corporate opportunity doctrine is one application of the duty of loyalty. It says that directors, officers, and controlling shareholders of a corporation must not seize for themselves a business opportunity that could benefit the corporation. Because there may be many exceptions, every incident must be examined case by case.
orporate governance is the use of policies, institutions, laws, and customs to mediate or prevent any conflicts of interest between shareholders and managers. Typically this structure is decided and enforced by a board of directors. There is a vast array of laws and policies which regulate corporate governance for public companies. If you run a public company or if your vision is to take your company public, it is vital to understand and follow the many corporate governance policies and to maintain the advice of counsel as these policies continue to be shaped.
lthough much legislation has been passed requiring strong corporate governance policies specifically for public companies
, it is extremely beneficial for private companies and non-profit organizations to have corporate governance policies as well. Implementing corporate governance policies is encouraged in order to enhance financial transparency, managerial accountability, and shareholder value.