President Trump has repeatedly used his Twitter account to single out companies for criticism of their business practices, raising the question for a broad range of public companies of how to prepare for and potentially respond to such criticism. Of course, rhetorical attempts by politicians to influence the conduct of private enterprise – commonly referred to as “jawboning” – are an old political tactic. The nature and frequency of jawboning in the current environment makes this a serious issue for boards and management at a wide variety of public companies, in a way that it has not been in the recent past.

Crisis plans maintained by public companies for other circumstances may provide useful guidance for how to respond to a politician’s social media attack (an “SMA”). However, every type of crisis raises unique concerns and considerations. Many companies should carefully consider the appropriate response to an SMA in advance.

This note is intended to aid public companies for a discussion at the board level concerning SMAs. It covers three main areas that public companies should specially consider: (i) governance, (ii) executive compensation- and employment-related issues and (iii) communications, and provides senior legal advisors with an outline of relevant considerations. While the principal considerations relevant to responding to an SMA will not typically be legal concerns, corporate governance considerations constitute threshold legal issues and employment-related and communications considerations implicate important legal issues.

Please click here to read the full memo.

The review of financial regulation under the new administration has its first victim.  On February 3, the Senate passed a resolution under the Congressional Review Act that disapproves the SEC’s rule on resource extraction payments. The House of Representatives had already passed the resolution, so the SEC’s rule is no longer in effect.

The target of the joint resolution is a rule requiring each SEC reporting company engaged in commercial development of oil, natural gas or minerals to file annual disclosures on payments it makes to governments.  The rule has already had a tortured history, which left it vulnerable to action under the Congressional Review Act (CRA). Continue Reading Congress Rolls Back SEC Resource Extraction Payments Rule

M&A transaction documents often contain an exclusion or limitation of the seller’s liability for “consequential”, “indirect” or “special” losses suffered by the purchaser.   For instance, a purchase agreement will often provide that the liability of the seller under the warranties does not extend to these types of losses.

It appears that purchasers often agree to an exclusion or limitation of this type on the assumption that such exclusion has a well-established and relatively narrow meaning which excludes only losses which arise in a small minority of cases.  This assumption, although historically supported by decisions of the UK courts, has appeared over the past handful of years to be increasingly less tenable. A recent UK High Court decision in Star Polaris LLC v HHIC-Phil Inc. now casts further doubt on the appropriateness of making this assumption.

Please click here to read the full alert memorandum.

 

By the end of 2016, the world was facing a considerably greater level of global uncertainty than it had experienced in recent years. It is clear that while some old challenges will continue, new challenges will also be brought into the boardroom in 2017. The trends discussed in each of the sections below will increasingly be a focus of boards of directors and companies in the United States and across the globe, particularly as boards consider how best to assess and assist in mitigating associated risks. A strong understanding of the issues and challenges facing boards and companies over the next year and beyond will assist boards in addressing the issues and complexities that will undoubtedly arise in 2017.

Following the international record set in 2015, the M&A market in 2016 has proven to be robust. External influences such as the Brexit referendum in early summer and the U.S. presidential election in November did in fact have an impact, but the M&A market has held its own despite the apprehension on several fronts. In particular, the announced Bayer/Monsanto transaction caught the attention of market participants worldwide. Even though this was the largest foreign investment by a German company, it was just one deal in an eventful year for M&A in Germany. Continue Reading

 

In 2015, Section 115 of the Delaware General Corporation Law (“DGCL”) was added to clarify that Delaware corporations may adopt bylaws requiring that any litigation regarding internal corporate claims be filed in Delaware (commonly referred to as “forum-selection bylaws”).  At the same time, Section 109(b) of the DGCL was amended to make clear that Delaware corporations (other than non-stock corporations) may not adopt bylaws that would shift litigation expenses onto unsuccessful stockholder-plaintiffs in internal corporate litigation (commonly referred to as “fee-shifting bylaws”).  These simultaneous amendments left open the question of whether a limited fee-shifting bylaw, which would only be triggered if the stockholder filed an internal corporate claim outside of Delaware in violation of the corporation’s forum-selection bylaw, would be valid under Delaware law. Continue Reading Chancery Court Invalidates Bylaw Purporting to Shift Litigation Expenses onto Stockholders Who Violate a Valid Forum-Selection Bylaw

Playing a Zynga game often requires patience.  Patience, and persistence, were a winning combination for the plaintiff Thomas Sandys who brought a derivative suit against Zynga for alleged breaches of fiduciary duties after the Zynga Board approved a secondary sale of company stock by insiders, including Zynga’s controlling shareholder and then-CEO (“controlling shareholder/CEO”) during a blackout period.  Shortly after the sale, a disappointing earnings announcement resulted in a significant stock price drop. Continue Reading From the Game Room to the Board Room – Reconsidering the Independence of Independent Directors

On Tuesday, December 27, 2016, the United States Court of Appeals for the Tenth Circuit in Bandimere v. S.E.C., found that the Securities and Exchange Commission’s (“SEC”) use of administrative law judges (“ALJs”) violated the U.S. Constitution.  While the court’s opinion relies on a somewhat arcane question of administrative law—whether the hiring of SEC ALJs violated the Appointments Clause—its decision to set aside an SEC order imposing sanctions for securities laws violations raises significant questions about future SEC claims brought before ALJs rather than in federal courts, as well as prior adjudications.  With the D.C. Circuit currently considering whether to grant rehearing en banc on its recent holding that these same SEC proceedings were constitutional, the Tenth Circuit’s decision is sure to draw considerable scrutiny in the months ahead and may well give rise to Supreme Court review of the issue. Continue Reading Appellate Courts Split Over Constitutionality of SEC Administrative Proceedings

The Supreme Court’s unanimous decision this week in Salman v. United States, No. 15-268, 580 U.S. __ (Dec. 6, 2016), clarified what constitutes a “personal benefit” for purposes of insider trading liability.  In its first merits ruling in an insider trading case in two decades, the Court affirmed the Ninth Circuit’s holding that the personal benefit requirement may be met when an inside tipper simply gifts confidential information to a trading relative or friend.  In so holding, the Supreme Court significantly narrowed a key aspect of the Second Circuit’s landmark insider trading decision in United States v. Newman, which had required prosecutors to prove that the tipper received something “of a pecuniary or similarly valuable nature”—a more difficult standard to meet.

Before Newman was decided, the United States Attorney’s Office for the Southern District of New York had prioritized insider trading prosecutions, obtaining dozens of convictions and over a billion dollars in fines since 2009.  After Newman, however, prosecutors were forced to dismiss several indictments, and some commentators wondered what the future held for insider trading prosecutions.  The Supreme Court’s recent decision should reduce that uncertainty and may bring a renewed focus on insider trading investigations. Continue Reading Supreme Court Clarifies Insider Trading Liability for Confidential Tips

Several amendments were made to Section 251(h) of the Delaware General Corporation Law that became effective for merger agreements entered into on or after August 1, 2016.  Section 251(h) permits acquisitions of publicly listed Delaware corporations to be accomplished via a tender offer without the need to approve the second-step “squeeze-out” merger at a stockholder meeting if certain conditions are met, including that the acquiror of the tendered shares and its affiliates would be able to unilaterally approve the second-step merger if a meeting were to be held. Continue Reading Smoothing the Pathway to Use of Tender Offers in Private Equity Acquisitions