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Journal Of Corporation Law
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Feature Articles

Series LLCs: The Asset Protection Dream Machines?

Written by Amanda J. Bahena, 2010

In uncertain economic times, bankruptcy and asset protection become hot topics. Businesses begin looking for new ways to avoid bankruptcy and new ways to shield their assets from creditors if bankruptcy is unavoidable. The series limited liability company (SLLC) represents the growing popularity and increasing sophistication of asset protection strategies. An SLLC has the potential to be the next evolutionary step in limited liability companies (LLCs). An SLLC partitions its "assets, debts, obligations, liabilities, and rights among" separate series, or "cells." Through this asset and liability segregation, the SLLC might provide the next business structure that helps businesses avoid bankruptcy and protect assets.

Throughout this Note, the hypothetical businesswoman, Julie, will highlight the potential benefits and unresolved legal issues of SLLCs. Julie wants to form a business to buy and sell Amazing, Boring, and Clunky widgets. However, she has two main concerns. First, given the state of the economy, demand for Boring widgets might be low for the next few years. Julie must sell both Amazing and Boring widgets, but she is afraid that low Boring sales will drive her business into bankruptcy. Julie is also worried that Clunky widgets might break and cause liability issues, driving her new company into bankruptcy. Julie&39s lawyer Lucy suggested forming an SLLC to decrease the risk of total bankruptcy. Julie is nervous. She knows that SLLCs are not yet widely used because of a number of unresolved legal issues regarding SLLCs.

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Default Swaps and Director Oversight: Lessons from AIG

Written by P.M. Vasudev, 2010

The recent events at American International Group, Inc. (AIG) are significant from the perspective of corporate governance. They raise important questions about the contemporary model of governance, which is based on management by the executives and oversight by the directors. To facilitate effective monitoring by the directors, the recent decades have seen an increased emphasis on directors' independence. In addition, there is the requirement of extensive disclosures under U.S. securities law. The theory is that these mechanisms would ensure transparency and accountability and, in turn, promote the good governance of public corporations.

Referring to AIG's statutory disclosures, media reports, and the statements of its senior executives, this Article traces the credit derivatives business of the company that led to its implosion. The experience with AIG and other financial corporations in the credit crisis offers valuable clues on shaping corporate governance policies for the future, particularly in fine-tuning the concept of monitoring boards. The AIG episode illustrates the limitations of the current "bare-bones" governance model that stops with placing the directors under a largely undefined duty to monitor. The concern of corporate theory is essentially with whom the directors will monitor, and very little about what they should monitor.

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In Print: VOL. 35