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Tue July 1, 2014
Supreme Court Ruling Draws Attention To Business Lingo
Originally published on Tue July 1, 2014 12:24 pm
DAVID GREENE, HOST:
The U.S. Supreme court ruled yesterday that the owners of closely held for-profit corporations, like Hobby Lobby, the chain of stores that brought the case, do not have to cover FDA-approved contraceptives in their employee health insurance.
RENEE MONTAGNE, HOST:
In this decision, the words closely held stood out. What does closely held actually mean? While the IRS offers a long technical definition, we wanted a simpler one.
JOHN COFFEE: Closely held is a frequently used term in corporate law. And it essentially means that the company is something of an alter-ego for its shareholders.
GREENE: John Coffee is director of the Center on Corporate Governance at Columbia University Law School.
COFFEE: I would say there are three characteristics - one, a limited number of shareholders with no public trading in the shares. There will be no listing on a stock exchange. Two, there will be a large overlap between the managers and the shareholders. That is, you don't just have an investment in this company, you have a job and an investment. You're doing multiple things. And three, there's usually a high overlap between the shareholders and the directors. So we have a closely held company, meaning one in which there are multiple relationships and usually some interlinings among the shareholders.
MONTAGNE: A closely held company can be anything from the 16,000-employee Hobby Lobby chain, to your local corner grocery store. Transcript provided by NPR, Copyright NPR.