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The Commissioners of the SEC voted 3-2 on September 18, 2013 to propose regulations (the “Proposed Rules”)[1] implementing the mandate of Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) [2] to require disclosure by a reporting company of the median annual total compensation of all its employees (excluding the company’s principal executive officer (“PEO”)) and the ratio of that median to the annual total compensation of the PEO.  This memorandum summarizes the requirements of the Proposed Rules.
Continue Reading SEC Proposes Pay Ratio Disclosure Rule

In its first Regulation FD enforcement action in almost two years, the SEC on Friday filed a cease-and-desist order instituting a settled administrative proceeding against Lawrence D. Polizzotto, the former Vice President of Investor Relations of First Solar Inc.  Without admitting or denying the findings, Polizzotto paid $50,000 to settle the charges and agreed to cease and desist from further violations of Section 13(a) of the Securities Exchange Act of 1934 and Regulation FD. 
Continue Reading SEC Charges Investor Relations Officer with FD Violation

At its open meeting on August 13, 2013, the Public Company Accounting Oversight Board (“PCAOB”) proposed two new auditing standards that would significantly affect the role auditors play in providing information about public companies to investors and other users of financial statements.  The two new proposed auditing standards are:
Continue Reading PCAOB Proposes Significant Changes to Auditor’s Reports and Related Auditor Responsibilities

The multiplicity of cases brought on behalf of the same stockholder group (or as derivative actions) against the same defendants based on the same conduct and asserting the same fiduciary duty claims is now well documented. The benefits of consolidating such litigation in a single forum have also been well established.
Continue Reading Enhancing the Promise of Exclusive Forum Clauses by Having Stockholders Consent to the Jurisdiction of the Selected Forum

In a much anticipated decision, the Delaware Chancery Court upheld on June 25, 2013 the validity of the forum selection bylaws adopted by the boards of directors of FedEx Corporation (“FedEx”) and Chevron Corporation (“Chevron”). Such bylaws provide that stockholders bringing derivative claims or claims alleging breaches of fiduciary duties, arising from the Delaware General Corporate Law (the “DGCL”) or otherwise implicating the internal affairs of the corporation be brought exclusively in Delaware state or federal courts.
Continue Reading Should Your Company Adopt A Forum Selection Bylaw?

Chancellor Leo Strine’s opinion in In re MFW Shareholders Litigation (Del Ch. May 29, 2013) marks the culmination of an effort by the Chancellor, going back to his lengthy dicta in In re Cox Communications Shareholders Litigation (Del Ch. 2005), to arrive at a more unified standard for review of buy-outs of a company’s public float by a controlling stockholder.  The headline conclusion is that, assuming this decision is not reversed by the Delaware Supreme Court on appeal, controlling stockholder buyouts structured as negotiated mergers may now join controlling stockholder buyouts that take the form of unilateral tender offers in having available a theoretical path that permits challenges to be dismissed on pre-trial motions.
Continue Reading Controlling Stockholder “Going Private” Transactions after In Re MFW: Reasons to Be Wary of the Path to the Business Judgment Rule

Amendments to the Delaware General Corporation Law are now formally before the legislature. Two provisions – one relating to defective corporate authorizations and the other to mergers – will be of particular interest, as will the potential traps that may arise in connection with the merger statute amendment.
Continue Reading Traps to Consider: Delaware’s Merger Statute and Ratification Amendments

  • A degree of Certainty Restored to Assignment by Operation of Law: Meso Scale v. Roche Redux (Benet J. O’Reilly and Casey Davison)
  • “Don’t Ask, Don’t Waive” Standstills: Some Practice Notes (Glenn P. McGrory and Zheng Zhou)
  • Sun Capital and its Implications for Private Equity Funds in the M&A Context (Kathleen M. Emberger and Laura Bagarella)

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On March 27, 2013, China’s Ministry of Commerce (“MOFCOM”) published for public comment “Rules on Attaching Restrictive Conditions to Concentrations between Undertakings (Draft for Comment)” (the “Draft Rules”). As the first comprehensive guidance on merger remedies under the Chinese Anti-Monopoly Law (the “AML”), the Draft Rules address a wide range of issues, including the design, implementation, monitoring, modification and waiver of merger remedies, as well as liability for breach.
Continue Reading MOFCOM Solicits Comments on Draft Merger Remedies Rules

The SEC staff’s issuance last year of a “Wells Notice” to Netflix and its CEO alleging a violation of Regulation FD based on a personal Facebook posting by the CEO caused significant concern.  SEC interpretative guidance in 2008 had focused on the application of Regulation FD to company web site disclosures, but not social media, which were then only starting to gain in popularity.[1]  The Netflix Wells Notice called into question the kinds of judgments practitioners had nonetheless become accustomed to making in the intervening years.
Continue Reading Regulation FD in the Social Media Age