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.

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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

When reviewing a corporation’s financial statements and internal controls, independent auditors frequently request copies of materials that were prepared for ongoing or anticipated litigation.  Auditors may wish to examine reports from internal investigations, legal opinions addressing potential liabilities, or presentations about prospective litigation prepared for the board of directors, among other materials.  Indeed, it is becoming more and more common for auditors to conduct their own “shadow investigation” of a company’s internal investigation and, as part of that shadow investigation, to request access to the internal investigation’s underlying work product:  the collection of documents that the company’s lawyers have deemed “key,” the analysis of transactions tested by forensic accountants working at counsel’s direction, and notes from interviews conducted by counsel in the course of the investigation.  Auditors may make similar requests when investigating the possibility of “illegal acts” at a company, as required under Section 10A of the Securities Exchange Act of 1934. Continue Reading Audits and Adversaries: Making Disclosures to Your Auditors Without Waiving Your Privilege

President Trump has repeatedly used his Twitter account to single out companies for criticism of their business practices, raising the question for a broad range of public companies of how to prepare for and potentially respond to such criticism. Of course, rhetorical attempts by politicians to influence the conduct of private enterprise – commonly referred to as “jawboning” – are an old political tactic. The nature and frequency of jawboning in the current environment makes this a serious issue for boards and management at a wide variety of public companies, in a way that it has not been in the recent past.

Crisis plans maintained by public companies for other circumstances may provide useful guidance for how to respond to a politician’s social media attack (an “SMA”). However, every type of crisis raises unique concerns and considerations. Many companies should carefully consider the appropriate response to an SMA in advance.

This note is intended to aid public companies for a discussion at the board level concerning SMAs. It covers three main areas that public companies should specially consider: (i) governance, (ii) executive compensation- and employment-related issues and (iii) communications, and provides senior legal advisors with an outline of relevant considerations. While the principal considerations relevant to responding to an SMA will not typically be legal concerns, corporate governance considerations constitute threshold legal issues and employment-related and communications considerations implicate important legal issues.

Please click here to read the full memo.