Last week, the Delaware Court of Chancery issued its first significant appraisal decision applying the Delaware Supreme Court’s recent Dell and DFC opinions, which we’ve previously discussed here and here. See Verition Partners Master Fund Ltd. v. Aruba Networks, Inc., C.A. No. 11448-VCL (“Aruba”). Although Dell and DFC both emphasized that deal price will often be the best evidence of fair value in appraisal actions involving open, competitive, and arm’s-length mergers of publicly traded targets, neither case involved a merger where the transaction resulted in significant synergies, which are excluded statutorily from the determination of fair value. Picking up where those cases left off, the court in Aruba, despite finding that the deal price was the product of an uncompetitive and flawed process, nonetheless found fair value to be significantly below deal price because the merger resulted in significant synergies. The court instead found fair value to be equal to the pre-announcement market trading price of the public shares, which was 30% below the deal price. Subject to any appeal from this decision, Aruba continues, and in the context of strategic mergers expands upon, the trend of substantially reducing appraisal risk for buyers of public companies. Continue Reading Delaware Court of Chancery Finds Fair Value in Appraisal Case To Be Unaffected Market Price
Disclosure of Ultimate Beneficial Ownership in German Companies
- Germany recently introduced new rules on the disclosure of the ultimate beneficial owner(s) of German companies. The rules are based on the 4th EU-Money-Laundering Directive (EU) 2015/849).
- The rules are not only relevant for German entities and German shareholders, but also for foreign groups or organizations (including private equity groups) that have or intend to acquire holdings in German entities.
- Recent experience indicates that not all foreign players eying German M&A targets or holding significant interests in German targets are aware of these rules.
- If your group or organization
- has or intends to acquire a direct or indirect holding of more than 25% of the capital or the voting rights of a German entity or otherwise controls such entity, and
- is beneficially owned or controlled by one or more natural persons,
disclosure obligations with respect to the ultimate beneficial owners may apply and should be assessed. Continue Reading The German Transparency Register
Forbes has published an interesting article that opens as follows:
Every CEO and every board member of every publicly traded company (and every thinking-about-being-publicly traded company) should drop whatever they are doing and read two short things right now:
- This week’s annual letter to CEOs from BlackRock chief executive Larry Fink; and
- The January 8 client bulletin from Cleary Gottlieb, “The Schizophrenic Investor Landscape: The Significance for Boards and Management of the JANA/CalSTRS Letter to Apple.”
BlackRock is the largest investor in the world, managing $6 trillion in assets. Cleary is one of the largest and most prestigious international law firms in the world. These are two of the most influential institutions that drive the behavior of the corporations that shape our society and our lives. . . . Let’s hope . . . that investors are beginning to see—and will begin to act—more “Cleary”-eyed.
In recent months, sexual harassment allegations against well-known figures across a growing number of industries have become a common feature in news headlines. In the wake of these allegations, many companies have concluded that their current policies and procedures related to sexual harassment and discrimination are inadequate. Against the backdrop of this rapidly evolving landscape, companies are considering how to improve their policies and procedures not only to appropriately and effectively respond to allegations of sexual harassment, but also to deter inappropriate behavior going forward and foster an environment of openness, diversity and inclusion in their workplaces. To that end, we address 8 key questions that companies should be asking themselves in developing policies and procedures to confront sexual harassment and other forms of misconduct in today’s workplace.
Click here, to read the full memo.
Cleary Gottlieb’s “2017 Developments in Securities and M&A Litigation” discusses major developments from 2017 and highlights significant decisions and trends ahead.
The trend of increased securities class action filings in federal courts continued from 2016 to 2017. The Supreme Court was particularly active in the securities field, ruling in CalPERS that the Securities Act’s repose period is not subject to class action tolling, holding in Kokesh that disgorgement in SEC proceedings is subject to the five-year statute of limitations for penalties, and granting three additional cert petitions to address important issues in the securities laws, with decisions expected in 2018. With respect to M&A litigation, the Delaware Supreme Court issued key rulings on appraisal issues in DFC Global and Dell, and is expected to provide further guidance in the coming months.
Please click here for a PDF version of 2017 Developments in Securities and M&A Litigation.
In recent years, shareholder plaintiffs have brought a series of claims before the Delaware Court of Chancery alleging that directors of Delaware companies have abused their discretion in granting themselves excessive equity compensation for their board service. These cases raised the threshold question of whether the plaintiffs’ challenges should be reviewed under the “entire fairness” standard, which requires the company to bear the burden of proving that the director awards were fair, or the more deferential “business judgment” standard, which grants considerable discretion to directors’ decisions, often resulting in dismissal of claims that fail to plead particularized facts indicating fiduciary lapses by the directors. Continue Reading New Year’s Resolutions For Director Compensation From <i>Investors Bancorp</i>
Our 4th annual “M&A, Antitrust and the Board Room: Challenges and Conundrums for the West Coast” conference will occur in San Francisco on February 15. For a listing of confirmed topics, participants and speakers, click here. If you are interested in attending or would like additional information, contact RSVP@cgsh.com.
Following the enactment of the Tax Cuts and Jobs Act (the “TCJA”) in late December 2017, which introduced significant reforms to the U.S. tax system, the Internal Revenue Service (“IRS”) issued new withholding guidance in January 2018. Recently, two Democratic legislators have openly questioned whether the IRS’ 2018 withholding tables may result in systematic under-withholding of W-2 earnings. Companies will need to comply with the IRS withholding guidance, through administrative procedures that are typically the responsibility of payroll departments and outside payroll service providers. Companies may also be concerned about the consequences of under-withholding from an employee-relations perspective. Continue Reading Withholding Judgment
2017 began with a heightened level of uncertainty as the beginning of the year brought significant change in the legal environment, including a change in administration that promised to significantly alter the tenor of regulation. While certain changes did occur in 2017, in many respects, 2018 is setting itself up as the year to watch for continuing developments in areas that are likely to fundamentally transform how companies operate and interact with an increasingly larger number of vocal stakeholders. The trends discussed in each of the sections of this memorandum 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. The role that the board and its oversight plays in guiding companies in these times will be critical and 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 2018.
We invite you to review these topics by clicking on the links below.
For a PDF of the full memorandum, please click here.
- Board Refreshment and the New York City Comptroller
- Tone at the Top
- Environmental, Social and Governance Focus
- Guidance on Board Effectiveness for Large Financial Institutions
On December 5, 2017, the Financial Reporting Council launched a consultation on its proposal to significantly revise the UK Corporate Governance Code.
The amendments seek to encourage continued improvement in the quality of corporate governance in the UK and are centered around the themes of company culture and diversity, employee and other stakeholder representation, responding to significant shareholder opposition, independence of the chairman and other non-executive directors and executive remuneration. In this memorandum, we briefly explore the main proposed reforms.
Click here, to continue reading.