On March 20, 2020, news outlets reported that four U.S. Senators sold millions of dollars in stock following classified briefings to the Senate on the threat of a COVID-19 outbreak.  Three days later, the Co-Directors of the Securities and Exchange Commission’s (“SEC”) Division of Enforcement, Stephanie Avakian and Steven Peikin, issued a statement reminding market participants of their obligations with respect to material non-public information (“MNPI”) and of the SEC’s commitment to protecting investors from fraud and ensuring market integrity.[1] Continue Reading Insider Trading Risk During the COVID-19 Outbreak

Glass Lewis recently announced an update of its guidelines, which temporarily relaxes its standard policy against virtual meetings in light of COVID-19. The update provides that “[f]or companies opting to hold a virtual-only shareholder meeting during the 2020 proxy season (March 1, 2020 through June 30, 2020), [Glass Lewis] will generally refrain from recommending to vote against members of the governance committee on this basis, provided that the company discloses, at a minimum, its rationale for doing so, including citing COVID-19.”[1]  This formal update of Glass-Lewis’s guidelines comes on the heels of statements by both Glass-Lewis and ISS indicating openness to relax their positions on virtual meetings, which we discussed here. Continue Reading Glass Lewis Revised Guideline Regarding Virtual Meetings for 2020 Proxy Season

This is an updated version of our prior post to address a new guideline issued by Glass Lewis.

With rising concerns around the spread of COVID-19 (“coronavirus”) in the United States and globally, in order to mitigate health risks, many public companies may consider adding a virtual component to the format of their annual shareholder meetings.  In the United States, state law generally governs the availability of a virtual meeting format.  At the federal level, the SEC regulates the filing and mailing of proxy solicitation materials.  While we have not seen direct guidance from state legislatures on virtual or hybrid meetings in the context of the coronavirus pandemic, on March 13, 2020, the SEC released guidance (“SEC Coronavirus Guidance”) addressing annual shareholder meetings[1] in light of recommendations by the Centers for Disease Control and Prevention (“CDC”) and other public health officials to cancel, or explicitly state policies that prohibit, large, in-person gatherings[2] in an effort to prevent the spread of coronavirus.[3]  Set forth below are various considerations that a company should take into account when determining whether to move from an in-person to a virtual or hybrid[4] annual meeting Continue Reading UPDATE: Coronavirus & Virtual Annual Meetings

Although the main focus of Governor Cuomo’s executive orders over the past few days has been to cease operation of all non-essential businesses in New York state, the March 20th executive order provided temporary relief in a few additional respects, including with respect to shareholder meetings of New York corporations.  This relief is an example of the kind of flexibility various state governments and courts are adopting in an effort to address the needs of companies in this challenging environment.[1] Continue Reading Cuomo Executive Order Gives New York Corporations Relief on Physical Annual Meetings

Amidst a market-wide sell-off of public equities in the face of coronavirus uncertainty, companies across nearly every industry have witnessed significant declines in stock prices. As the market turbulence shows no signs of abating in the near term, public companies should consider turning to shareholder rights plans (or “poison pills”) to protect against hostile attacks. This memo provides a brief overview of the key considerations in adopting a poison pill – or putting a poison pill on the shelf – in the current environment.

Please click here to read the full alert memorandum.

On March 18, 2020, the Delaware Supreme Court issued an opinion in the closely watched appeal in Sciabacucchi v. Salzberg, a case involving a challenge to charter provisions of three Delaware corporations requiring stockholder plaintiffs to litigate claims under the Securities Act of 1933 (the “1933 Act”) in federal court. The en banc Supreme Court unanimously upheld such provisions against the plaintiffs’ facial challenge, reversing the Delaware Court of Chancery’s prior decision in this case.

Please click here to read the full alert memorandum.

In light of the growing concern about COVID-19 (“coronavirus”) in the United States and globally, the U.S. Centers for Disease Control and Prevention (“CDC”) and other public health officials have recommended cancelling large, in-person gatherings for the next several weeks.[1] As a result, some companies may be considering, or may in the coming weeks need to consider, postponing the date of their shareholder meeting.  While moving to a virtual or hybrid meeting, as discussed in our blog post, “Coronavirus & Virtual Annual Meetings,” may be a good solution for certain companies, other companies may determine (or due to a lack of vendor capacity may be forced to determine) that the better course of action for them is to postpone or adjourn their annual meetings. Continue Reading Coronavirus & Postponing/Adjourning Annual Meetings

On March 9, 2020, the U.S. Department of the Treasury published a proposed rule implementing the filing fee provisions of the Foreign Investment Risk Review Modernization Act. The Proposed Rule would assess tiered filing fees for all voluntary notifications to the Committee on Foreign Investment in the United States and is open for public comment until April 8, 2020.  No proposed effective date is included in the Proposed Rule, and so presumably filing fees will not apply to any filing accepted prior to an effective date to be specified in a future rule.

Under the Proposed Rule, CFIUS would:

  • assess fees for full notifications based on the value of the transaction, ranging from no fees for transactions valued at less than $500,000 to a fee of $300,000 for transactions valued at greater than $750 million;
  • base the fee on the value of the U.S. business rather than the total transaction value in the case of mergers or joint ventures (but not other transactions);
  • cap the fee at $750 where the value of the U.S. business is less than $5 million; and
  • expand the required content of voluntary notices to include a certification as to the transaction value and an explanation of the valuation methodology.

CFIUS has not imposed (and lacks statutory authority to impose) filing fees for short-form declarations.

Please click here to read the full alert memorandum.

With a draft bill to amend the Foreign Trade and Payments Act (AußenwirtschaftsgesetzAWG) issued on January 30, 2020, the German Federal Ministry of Economics and Energy (Bundesministerium für Wirtschaft und EnergieBMWi) has started a legislative process to change the German foreign direct investment control regime (FDI Regime). This will be the third amendment to the FDI Regime since 2017. While the German Government continues to emphasize that Germany maintains an investment-friendly environment, these changes will further strengthen the Government’s ability to scrutinize foreign direct investments in Germany. As with earlier amendments to the FDI Regime, which all aimed to protect German and European security interests, these new changes will have a significant impact on M&A transactions in Germany. Continue Reading Upcoming Changes to the German Foreign Direct Investment Control Regime

Cleary Gottlieb’s “2019 Developments in Securities and M&A Litigation” discusses major developments from 2019 and highlights significant decisions and trends ahead.

In Lorenzo, the most significant securities decision of 2019, the Supreme Court clarified the scope of “scheme liability” under Rule 10b-5(a) and (c). The Court also declined to rule on several significant issues arising from the Ninth Circuit, including whether plaintiffs must show that the defendant acted with scienter when bringing claims under Section 14(e), whether Morrison extends to unsponsored American Depositary Receipts, and the standard for establishing loss causation. The Court also denied certiorari in SEC v. Scoville, in which the Tenth Circuit held that the Dodd-Frank Act permits the SEC to bring fraud claims or claims under Section 17 of the Securities Act based on sales of securities that do not constitute domestic transactions within the meaning of Morrison. With respect to M&A litigation, the Delaware Supreme Court continued to clarify its jurisprudence with respect to appraisal methodology as well as the protection MFW affords to controlled transactions. The Court also released important opinions pertaining to oversight duties for boards of directors and the fiduciary duties of activist investors.

Please click here a PDF version of 2019 Developments in Securities and M&A Litigation.