On March 15, 2019, the National People’s Congress of China (the “NPC”) approved the Foreign Investment Law of the People’s Republic of China (the “FIL”), which is set to become effective on January 1, 2020.  The FIL introduces sweeping changes to China’s current legal regime governing foreign investments and, if properly implemented, holds the promise of ushering in a new era for foreign investments in China.

The FIL, when effective, will supersede three laws separately governing foreign investments[1], namely the Foreign Invested Enterprise Law (the “FIE Law”), the Sino-Foreign Equity Joint Venture Law (the “EJV Law”) and the Sino-Foreign Cooperative Joint Venture Law (the “CJV Law”, and together with the FIE Law and EJV Law, the “Existing Laws”).  Under the current regime, which of the Existing Laws applies to a foreign investment depends entirely on the type of Chinese entity through which such investment is made (such entity being referred to as a foreign invested enterprise, or “FIE”).  An FIE that is a wholly owned Chinese subsidiary of the foreign investor is subject to the FIE Law, whereas investments in Chinese joint venture entities are governed by either the EJV Law or the CJV Law.  FIEs of one type typically have equity and governance structures that are different from those of other FIEs, as well as those of Chinese domestic companies.  Furthermore, the current regime is marked by its disparate treatment of FIEs and Chinese domestic companies.  For example, FIEs, especially joint ventures, are typically subject to governmental approval or filing requirements at every step of its life cycle and generally cannot be listed on a Chinese stock exchange.  By unifying the currently fragmented regime, the FIL will simplify the structuring of foreign investments and also, for the first time in the context of a national law, provide for equal treatment as between FIEs and Chinese domestic companies. Continue Reading The New Foreign Investment Law Ushers in New Regime for Foreign Investments in China

The Delaware Supreme Court issued a decision last week that further clarifies when MFW’s “dual protections” must be put in place in order to qualify the transaction for deferential business judgment review.  See Olenik v. Lodzinski, No. 392, 2018 (Del. April 5, 2019).

Under MFW, business judgment review applies to a merger proposed by a controlling stockholder conditioned “ab initio” on two procedural protections: (1) the approval of an independent, adequately-empowered special committee that fulfills its duty of care; and (2) the uncoerced, informed vote of a majority of the minority stockholders.  If the controlling stockholder does not commit to these dual protections ab initio, i.e., from the beginning of negotiations, then the traditional entire fairness standard applies instead.[1] Continue Reading Delaware Supreme Court Provides Further Guidance on Timing Requirement Under <i>MFW</i>

On March 25, 2019, partners Lev Dassin and Arthur Kohn participated in a webcast hosted by The Conference Board, entitled “Corporate Prosecutions: What Companies, Boards and Executives Need to Know.”  Daniel Gitner, a partner at Lankler Siffert & Wohl, also participated on the panel.

The panelists and moderator Doug Chia, executive director of The Conference Board, began by discussing corporate prosecutions generally, including the history of corporate prosecutions and how DOJ attitudes regarding corporate prosecutions have changed over time.  Dassin explained that the DOJ has more recently refocused its attention on prosecuting individuals engaged in corporate misconduct. Continue Reading Cleary Partners Participate in Panel Discussion on Corporate Prosecutions

On March 27, 2019, journalists affiliated with Reuters reported that the Kunlun Group (“Kunlun”), a China-based tech firm, was preparing to sell its wholly owned subsidiary, Grindr, after the Committee on Foreign Investment in the United States (“CFIUS”) informed the group that Kunlun’s continued ownership of Grindr constituted a national security risk.  This forced divestiture of Grindr is a pointed reminder that CFIUS remains focused on protecting the sensitive personal data of U.S. citizens, has the power to upend closed deals that have not been cleared by the committee, and is dedicating increased resources to the review of transactions that are not notified to CFIUS. Continue Reading CFIUS Forces Kunlun to Unwind 2016 Acquisition of Grindr Over Concerns About the Protection of Sensitive Personal Data

On March 20, 2019, the SEC adopted a collection of amendments to its rules and forms intended to modernize and simplify some of the disclosure requirements applicable to U.S. public companies. The amendments implement a statutory directive under the 2015 FAST Act. They span a number of topics, including MD&A, property, risk factors, confidential treatment requests and exhibits. Almost all of the changes remove or lighten previous requirements and many will be quite helpful for companies in practice. Therefore, a careful review of the revised form requirements in connection with upcoming filings is likely to prove worthwhile.

We discuss the more significant of the amendments in the linked memorandum and summarize other, more ministerial amendments in a list at the end. Underlying the more significant changes is a principles-based approach that allows a company to tailor disclosure to its own circumstances and to make judgments about materiality, exemplifying a regulatory trend that can benefit companies and investors alike if it reduces irrelevant and immaterial disclosure.

The amendments relating to the redaction of confidential information in certain exhibits became effective immediately upon publication of the final rule release in the Federal Register on April 2, 2019. The rest of the amendments will become effective on May 2, 2019, except that a few (related to data tagging and some investment company filings) have longer phase-in periods.

Please click here to read the full alert memorandum.

This month, the UK Takeover Panel published Response Statement 2018/1, which confirmed the amendments that will be made to the rules of the UK Takeover Code in relation to asset valuations published during the course of a takeover bid.

The changes will come into effect on 1 April 2019 and largely track the Panel’s proposals in its Public Consultation Paper 2018/1, with minor modifications.

Please click here to read the full alert memorandum.

In November 2018, the UK Takeover Panel published Panel Consultation Paper 2018/2 which set out proposed amendments to the UK Takeover Code as a result of the UK’s withdrawal from the EU.

This month, the Panel published its Response Statement in which it confirmed the changes that will come into effect after Brexit. The main change is that, following Brexit, the Panel will no longer regulate (in whole or part) offers for EEA-registered companies that previously fell under the shared jurisdiction regime.

Please click here to read the full alert memorandum.

On January 1, 2019, the “Act on Further Development of Part-Time Employment Law” (Gesetz zur Weiterentwicklung des Teilzeitrechts) entered into force in Germany.

The new legislation implements considerable changes to the German Part-Time and Fixed-Term Employment Act (Teilzeit- und Befristungsgesetz ) and introduces (i) an entitlement to work part-time on a temporary basis, coupled with (ii) an entitlement to return to full-time employment (so-called “Bridge Part-Time Work” (Brückenteilzeit)). Continue Reading “Bridge Part-Time Work” in Germany

German M&A market makes solid start to the new year. Pharma and chemicals specialist Merck announces cash offer to take over Versum Materials, a US semiconductor company, in a deal valued at approx. USD 5.9 billion. Merck’s aim is to forestall the agreed merger between Versum and Entegris. Merck had only recently entered into a multi-billion cooperation agreement with GlaxoSmithKline in the field of cancer immunotherapy. Symrise wants to take over nutritional products supplier ADF/IDF for around $900 million. Family company Kathrein divests its antenna business to Ericsson. Fashion label Tom Tailor sees major shareholder Fosun increase its shareholding by way of a capital increase, followed by a public tender offer. Continue Reading.

In recent years, in part in response to decisions like Corwin that have raised the pleading standard for stockholder plaintiffs, the Delaware courts have encouraged stockholders to seek books and records under Section 220 of the Delaware General Corporation Law (DGCL) before filing stockholder derivative or post-merger damages suits, and – in response – each year more stockholders have done so.  As a result of this trend, we have already seen several important decisions addressing books and records demands in 2019.  These decisions have (i) clarified the types of documents that may be obtained, including (in some limited circumstances) personal emails or text messages; (ii) explained when a stockholder’s demand will be denied as impermissibly lawyer-driven (and when it will not be); and (iii) described the threshold showing of suspected wrongdoing that stockholders must make.  As the plaintiffs’ bar makes more use of Section 220, these are important issues for boards of directors to consider. Continue Reading The Rise of Books and Records Demands Under Section 220 of the DGCL