Be Mindful of Overlapping Officers and Directors
As organizations create joint ventures, the creation of a board of directors of the joint venture requires careful consideration. Section 8 of the Clayton Antitrust Act of 1914 (“the Clayton Act”) prohibits an individual from serving simultaneously as an officer or a director of two competing corporations engaged in commerce. Corporations are said to be competing if “by virtue of their business and location of operation” they can be deemed to be “competitors, so that the elimination of competition by agreement between them would constitute a violation of any of the antitrust laws.” The prohibition against overlapping directorates does not apply to circumstances in which the “capital, surplus, and undivided profits” of each corporation is no more than $38,204,000 in the aggregate – or unless the competitive sales are less than $3,820,400 (or less than a small percentage, statutorily defined, of the organization’s competitive sales). Some states place similar restrictions or overlapping directorates, so organizations should keep both federal and state laws in mind when creating the joint venture board.