German law corporate acquisition agreements and real estate purchase agreements often include broad exclusions of liability.  However, pursuant to Section 444 of the German Civil Code (Bürgerliches Gesetzbuch), a seller is subject to statutory (non-excludable) liability if and to the extent the seller fraudulently concealed a defect of the sold asset.  To that end, it is often decisive whether the seller was required to inform the buyer about the defect in question. Continue Reading German Federal Court of Justice on Seller Disclosure Obligations: Extensive Disclosure Required in Environmental Context

On August 1, 2018 the U.S. Senate joined the U.S. House of Representatives in agreeing to a conference report that sent the National Defense Authorization Act for Fiscal Year 2019 (“NDAA”), which incorporated a version of the Foreign Investment Risk Review Modernization Act of 2018 (“FIRRMA”), to the U.S. President for his signature. The President is expected to sign the NDAA.

FIRRMA updates the statute authorizing reviews of foreign investment by the Committee on Foreign Investment in the United States (“CFIUS”) to reflect changes in CFIUS’s practice over the ten years since the last significant reform, expands CFIUS’s jurisdiction, and makes significant procedural alterations to the CFIUS process. Introduced to “modernize and strengthen” review of foreign investment in the United States, FIRRMA cements a relatively aggressive approach to foreign investment review. However, ultimately, FIRRMA’s changes to current CFIUS practice are modest, and many of the changes merely codify practices in place since the later years of the Obama Administration.

Please click here to read the full alert memorandum.

One of the surprises of the 2018 proxy season was the use of Notices of Exempt Solicitation by shareholders that almost certainly did not meet the $5 million holding threshold that would require filing under Exchange Act Rule 14a-6(g).  Rule 14a-6(g) requires a person who owns more than $5 million of the company’s securities and engages in a solicitation without seeking to collect, or act as, a proxy to file solicitation materials with the SEC. Continue Reading SEC Staff Releases Two New C&DIs on the Use of Notices of Exempt Solicitation

Cleary Gottlieb and PwC’s Governance Insights Center have teamed up to create the Executive Compensation Series, which looks at the factors motivating boards to increasingly engage with shareholders about executive compensation.

The final installment in the series can be found here and a list of past editions can be accessed here.

Over the last few years, boards have come under mounting pressure to focus on board composition and refreshment, including length of tenure, individual and aggregate skills mix and diversity.  A few years ago, CalPERS’ revised its Global Governance Principles to call for companies to conduct rigorous evaluations of director independence after twelve years’ service, and ISS’ QualityScore metric rewards companies where the proportion of non-executive directors with fewer than six years tenure makes up more than one-third of the board, in addition to scrutinizing boards where average tenure exceeds 15 years.  Companies also face demands to justify the contributions of individual directors and to conduct rigorous evaluations to ensure that the board functions effectively and with the right mix of skills.  Correspondingly, refreshment is one of the top areas of continued governance focus from other investors and advocates.  This update is intended to provide boards with data that brings them up to date on developments in this area, since it is certain to be an area of continuing focus for various constituencies in the near future. Continue Reading Update on Board Diversity Developments

DOJ has expanded its efforts to give more concrete guidance to companies facing FCPA risk to M&A transactions and the question of successor liability.  In a speech on July 25, 2018, at the American Conference Institute’s 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, Deputy Assistant Attorney General Matthew S. Miner highlighted DOJ’s views on successor liability for FCPA violations by acquired companies.[1]  Miner sought to clarify DOJ’s policy regarding the voluntary disclosure of misconduct by successor companies and to highlight the benefits of such disclosure as spelled out in the joint DOJ and SEC FCPA Resource Guide (the “Resource Guide”).[2]  In general, as with other recent pronouncements and actions by DOJ, such as the FCPA Corporate Enforcement Policy,[3] Miner’s speech seemed intended to highlight ways in which firms can gain cooperation credit (up to and including a declination) in FCPA investigations. Continue Reading DOJ Remarks Provide Guidance on Addressing FCPA Risk in M&A Transactions

During the course of the last month, the Securities and Exchange Commission (“SEC”) brought two enforcement actions related to inadequate disclosure of perquisites.  In early July, the SEC issued an order finding that, from 2011 through 2015, an issuer failed to follow the SEC’s perquisite disclosure standard,[1] which resulted in a failure to disclose approximately $3 million in named executive officer perquisites.[2]   In addition to the imposition of a $1.75 million civil penalty, the SEC order mandated that the issuer retain an independent consultant (at its own expense) for a period of one year to conduct a review of its policies, procedures, controls and training related to the evaluation of whether payments and expense reimbursements should be disclosed as perquisites, and to adopt and implement all recommendations made by such consultant. Continue Reading Recent SEC Enforcement Actions on Inadequate Perquisite Disclosure

On 16 July 2018, the Financial Reporting Council (FRC) published the final, revised version of the UK Corporate Governance Code (UK CGC).[1] This will apply (on a “comply or explain” basis) to all companies with a premium listing in the UK for accounting periods beginning on or after 1 January 2019.

The new UK CGC is one of a range of corporate governance reforms currently being implemented in the UK in response to the UK Government’s wide-ranging Green Paper Consultation on UK corporate governance reform.[2] Its publication concludes a seven-month consultation by the FRC, following the publication of a draft revised UK CGC in December 2017.[3] The FRC received 275 responses to its consultation from a wide range of stakeholders and has made a number of changes to its original proposals to address the feedback received. We briefly explore the most significant of these changes below. Continue Reading New UK Corporate Governance Code Unveiled

On July 10, 2018, The Conference Board and Cleary Gottlieb Steen & Hamilton LLP hosted a panel discussion on the highlights of the 2018 proxy season and the key topics, including shareholder proposals trends, including with respect to environmental and social issues; the most surprising moments in the 2018 proxy season; the effect of the Staff’s release of Staff Legal Bulletin 14I; board composition, refreshment and diversity; shareholder engagement; and significant institutional investor developments. Participants in the panel discussion included Pamela Marcogliese, Partner, Cleary Gottlieb, Elizabeth Bieber, Associate, Cleary Gottlieb, Jason Alexander, Managing Director, Okapi Partners and Bill Ultan, Managing Director, Corporate Governance, Morrow Sodali. Continue Reading Cleary Gottlieb Participates in Panel Discussion on Highlights of the 2018 Proxy Season