On May 8, 2018, partners Benet O’Reilly and Adam Fleisher participated in a panel co-hosted by The Conference Board and Cleary Gottlieb to discuss Private Investment in Public Equity (PIPE) transactions, both for capital formation and strategic purposes.

Moderator Doug Chia, executive director of The Conference Board, Benet and Adam outlined the framework for a PIPE transaction, including the topics a company should consider when contemplating a PIPE. They covered the different structures and types of securities frequently used in the PIPE market, as well as typical types of PIPE investors.

The session also focused on related governance considerations and regulatory approvals. Additionally, they addressed how to manage the confidential nature of the PIPE and when disclosure may be necessary. They also explained what securities filings may be triggered for investors.

A replay of the webcast is available here (please note that your browser may require you to run an Adobe plugin to access this content).

On April 24, 2018, Altaba, formerly known as Yahoo, entered into a settlement with the Securities and Exchange Commission (the “SEC”), pursuant to which Altaba agreed to pay $35 million to resolve allegations that Yahoo violated federal securities laws in connection with the disclosure of the 2014 data breach of its user database.  The case represents the first time a public company has been charged by the SEC for failing to adequately disclose a cyber breach, an area that is expected to face continued heightened scrutiny as enforcement authorities and the public are increasingly focused on the actions taken by companies in response to such incidents.  Altaba’s settlement with the SEC, coming on the heels of its agreement to pay $80 million to civil class action plaintiffs alleging similar disclosure violations, underscores the increasing potential legal exposure for companies based on failing to properly disclose cybersecurity risks and incidents.

Please click here to read the full alert memorandum.

Disclosure of Ultimate Beneficial Ownership in German Companies

Key Takeaways

  • 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

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.

The SEC recently approved a proposal by NYSE to amend NYSE Listed Company Manual Rule 202.06 to prohibit NYSE-listed companies from issuing material news after the NYSE close of trading until the earlier of the publication of the company’s official closing price on the NYSE or five minutes after the NYSE’s official closing time (which is 4:00PM ET) for the placement of orders.

Continue Reading NYSE Requires Companies to Delay Release of Material Information After Market Close

On 29 August 2017, the UK Government published its response to its recent consultation on UK corporate governance reform. The Government has proposed 12 reforms to the UK corporate governance regime, centered around executive remuneration, employee and other stakeholder representation and corporate governance in large privately-held businesses. In this memorandum, we briefly explore each of the proposed reforms.

Click here, to continue reading.

As passive investing via funds that track market indices continues to grow, the terrain where investors are fighting battles over governance reform is now expanding beyond contested stockholder meetings and into debates over the criteria for eligibility of issuers for inclusion in these indices.  Indeed, in this era of index fund investing, a company focused on the future trading price of its shares should be much more concerned about gaining entry into and maintaining eligibility for indices than whether there will be a withhold vote recommendation on the members of its governance committee.  If this direction continues to gain traction, we could end up with a market dominated by passive strategy investing where the current importance of familiarity with the hot button governance concerns of proxy advisory firms and institutional investors becomes subsidiary to understanding how to navigate new, governance-related eligibility requirements of major equity indices. Continue Reading Index Eligibility as Governance Battlefield: Why the System is Not Broken and We Can Live With Dual Class Issuers

Investors frequently negotiate for a redemption right to ensure at least some return on preferred stock investments in a “sideways situation”—where the target company is neither a huge success nor an abject failure.  Continuing a consistent theme in recent Delaware jurisprudence, the Delaware Court of Chancery declined to dismiss a complaint alleging directors breached their duty of loyalty in taking steps to satisfy an investor’s redemption request.

Continue Reading Between Contractual and Fiduciary Duties: ODN Holding and the Rights of Preferred Stockholders

When a corporation sells corporate assets to its (or an affiliate of its) controlling stockholder, Delaware courts generally will review that transaction under the exacting “entire fairness” standard.[1]  But what if the corporation’s minority stockholders are given the opportunity to participate along with the controlling stockholder in the purchase of the corporate assets pro rata to the extent of their stock ownership? Continue Reading Chancery Court Suggests that Rights Offerings May Limit Liability in Transactions with Controlling Stockholders

Questions for Boards and Management

On April 10, 2017 Wells Fargo released the independent directors’ report on sales practices at its community bank. While the report covers familiar elements of the widely-publicized accounts-creation  problems at the bank, it also takes an inside look at the organization to determine what caused the problems in the first place and what allowed them to persist for years before last fall’s regulatory enforcement actions.  The report cites the following as principal causes: Continue Reading With the Benefit of Hindsight: The Wells Fargo Sales Practices Investigation Report