These days, most public company mergers continue to attract one or more boilerplate complaints, usually filed by the same roster of plaintiffs’ law firms, asserting that the target company’s proxy statement contains materially false or misleading statements.  These complaints usually also assert that the stockholder meeting to approve the merger should be enjoined unless and until the company “corrects” the false or misleading statements by making supplemental disclosures.  While not too long ago cases like this tended to be filed in the Delaware Court of Chancery and other state courts asserting breaches of state-law fiduciary duties, including the duty of disclosure, after Trulia the vast majority of these cases today are filed in federal court under Section 14 of the Securities Exchange Act of 1934.[1] Continue Reading Rare Federal Court Decision Casts Doubt On Merger Disclosure Claims, But Will It Change Anything?

On June 1, 2020, the Criminal Division of the U.S. Department of Justice (the “Department”) released revisions to its guidance regarding the Evaluation of Corporate Compliance Programs, which the Department uses in assessing the “adequacy and effectiveness” of a company’s compliance program in connection with any decision to charge or resolve a criminal investigation, including whether to impose a monitor or other compliance program obligations. The revised Guidance, while largely consistent with the April 2019 update, highlights the Department’s focus on how companies are assessing and updating their compliance programs. The recent updates are more thematic rather than structural and continue the prior version’s emphasis on incorporating “lessons learned” into a compliance program, continuously assessing and improving it, and using data to track and enhance the program’s operations. The revised Guidance also highlights the continued importance of training employees and, in the M&A context, of integrating a target into the acquiring company’s compliance framework.

Please click here to read the full alert memorandum.

In an important decision for M&A professionals and other board advisors, the Delaware Court of Chancery addressed a stockholder plaintiff’s claims that the target board’s financial advisor and law firm, as well as the private equity buyer, aided and abetted a breach of fiduciary duty by the target board in connection with a take-private merger.  See Morrison v. Berry, C.A. No. 12808-VCG (Del. Ch. June 1, 2020).  While the claim against the financial advisor was allowed to proceed, the claims against the law firm and buyer were dismissed.  These diverging results provide early guidance as to when the Delaware courts will (and when they will not) dismiss aiding and abetting claims.  In many cases, the determining factor will be whether the complaint pleads facts raising a reasonably conceivable inference that the advisor, buyer, or other third party knew the board was engaging in a breach of its fiduciary duty.  This has important implications for the way board advisors and M&A buyers should approach a situation in which they become aware that the board of a target company is unaware of some material fact that could conceivably affect its ability to fulfill its fiduciary duties. Continue Reading Knowledge Is Key: Recent Decision Addresses Aiding and Abetting Claims Against Board Advisors And Buyer

Even before the COVID-19 pandemic, the German Federal Ministry of Economics and Energy (Bundesministerium für Wirtschaft und EnergieBMWi), led by federal minister Peter Altmaier, announced a major revision of Germany’s foreign direct investment control regime (FDI Regime) to come into force in 2020, in what would become the third amendment of the FDI Regime since 2017. This announcement was made as part of the introduction of the BMWi’s “National Industry Strategy 2030”. The aim of this new industrial policy is to “protect and regain Germany’s commercial and technical expertise, competitiveness and industrial leadership at national, European and global level”.

Continue Reading Changes to the German Foreign Direct Investment Control Regime Take Shape Amid the COVID-19 Crisis

Over the last few weeks, there has been a flurry of activity at the Committee on Foreign Investment in the United States (CFIUS).  In addition to imposing filing fees, which we wrote about here, and issuing proposed amendments to broaden the mandatory CFIUS notification requirements, which we wrote about here, CFIUS recently blocked a robotics joint venture in China with no U.S. assets and limited to operations outside the United States, released detailed information regarding the transactions reviewed by CFIUS during 2018 (as well as summary data for transactions reviewed in 2019), and announced a new electronic filing system. Continue Reading CFIUS Blocks Joint Venture Outside the United States, Releases 2018-2019 Data, and Goes Electronic

The COVID-19 pandemic is likely a watershed moment for the traditional structure of America’s business workforce.  Although there is much uncertainty and opaqueness about the future, it seems clear that in the short term “remote” work arrangements – remote from large commercial office complexes and from concentrated city centers – will become more common for a substantial part of the workforce.

In the medium and longer terms, the pandemic may also support trends toward a more gig-based workforce in sectors of the labor market that are not currently significantly gig-based, specifically for workers in white-collar, business service industries.  We lay out below a few of the reasons to anticipate that result and briefly explore the principal legal implications for business.  As virtually all companies are considering the impact of the pandemic on their businesses, and specifically the cost-saving potential tied to remote work where feasible, they should take the opportunity now to also consider the possibility that gig-based workforce trends will impact them and how the steps they take in the short term may influence any such impact.  For many public companies, the trends and issues discussed below fall under the umbrella of human capital management strategy, as to which the board of directors may be expected to exercise oversight.[1] Continue Reading The Gig is Up? COVID-19 & Remote Work Trend Toward Growth in Gig Labor*

On May 21, 2020, the SEC adopted extensive amendments to the rules governing financial disclosures by registrants about businesses they acquire or dispose of. They primarily relate to disclosures required by Rule 3-05 and Article 11 of Regulation S-X in registration statements and periodic reports, and, for the most part, they reduce the burden of preparing historical financial statements and pro forma financial information.

Please click here to read the full alert memorandum.

On May 21, 2020, the U.S. Department of the Treasury published a proposed rule (the “Proposed Rule”) that would significantly broaden the scope of mandatory filing requirements of the Committee on Foreign Investment in the United States (“CFIUS”) for foreign investments involving U.S. critical technology businesses.

The Proposed Rule abandons the current restriction to specified industries and focuses on whether the target develops, tests, or manufactures critical technologies that would require a license for export—whether or not the critical technologies are exported or sold to third parties at all (e.g., proprietary manufacturing technologies)—to the jurisdiction of the foreign investor and its parent entities, effectively creating different mandatory notification requirements for different countries.

The Proposed Rule would:

  • Expand the CFIUS mandatory critical technology notification requirement to cover foreign investments in all industries, if the target U.S. business develops, tests, or manufactures technology that would require a license or other authorization under any of the four main U.S. export control regimes to export or transfer to any foreign party in the ownership chain of the investors in the transaction.
  • Complicate the mandatory CFIUS notification analysis by requiring parties to identify the export control status of all products, software, and technology produced, designed, tested, manufactured, fabricated, or developed by the U.S. business (whether or not sold to third parties), all jurisdictions relevant to the investors, and the corresponding licensing requirements, potentially introducing significant delays.
  • Provide a significant exemption from the mandatory notification requirement for a wide range of dual-use goods, software, and technology eligible for export to a list of countries thought to pose a low risk of diversion, based on an existing license exception in the export control rules.

The Proposed Rule also clarifies the ownership rules used to determine when an investor linked to a foreign government is required to file with CFIUS for an investment in a sensitive U.S. technology, infrastructure, or data business.

Please click here to read the full alert memorandum.

On May 18, 2020, partners Michael Albano and Jennifer Kennedy Park participated in a webcast hosted by The Conference Board entitled “Reopen Ready: Managing Governance and Legal Risks in the New Normal.” Michael Ullmann, Executive Vice President, General Counsel of Johnson & Johnson, also participated on the panel. Continue Reading Cleary Partners Participate in Panel Discussion on Reopening Considerations