DOJ has expanded its efforts to give more concrete guidance to companies facing FCPA risk to M&A transactions and the question of successor liability. In a speech on July 25, 2018, at the American Conference Institute’s 9th Global Forum on Anti-Corruption Compliance in High Risk Markets, Deputy Assistant Attorney General Matthew S. Miner highlighted DOJ’s views on successor liability for FCPA violations by acquired companies. Miner sought to clarify DOJ’s policy regarding the voluntary disclosure of misconduct by successor companies and to highlight the benefits of such disclosure as spelled out in the joint DOJ and SEC FCPA Resource Guide (the “Resource Guide”). In general, as with other recent pronouncements and actions by DOJ, such as the FCPA Corporate Enforcement Policy, Miner’s speech seemed intended to highlight ways in which firms can gain cooperation credit (up to and including a declination) in FCPA investigations. Continue Reading DOJ Remarks Provide Guidance on Addressing FCPA Risk in M&A Transactions
On 16 July 2018, the Financial Reporting Council (FRC) published the final, revised version of the UK Corporate Governance Code (UK CGC). This will apply (on a “comply or explain” basis) to all companies with a premium listing in the UK for accounting periods beginning on or after 1 January 2019.
The new UK CGC is one of a range of corporate governance reforms currently being implemented in the UK in response to the UK Government’s wide-ranging Green Paper Consultation on UK corporate governance reform. Its publication concludes a seven-month consultation by the FRC, following the publication of a draft revised UK CGC in December 2017. The FRC received 275 responses to its consultation from a wide range of stakeholders and has made a number of changes to its original proposals to address the feedback received. We briefly explore the most significant of these changes below. Continue Reading New UK Corporate Governance Code Unveiled
On July 10, 2018, The Conference Board and Cleary Gottlieb Steen & Hamilton LLP hosted a panel discussion on the highlights of the 2018 proxy season and the key topics, including shareholder proposals trends, including with respect to environmental and social issues; the most surprising moments in the 2018 proxy season; the effect of the Staff’s release of Staff Legal Bulletin 14I; board composition, refreshment and diversity; shareholder engagement; and significant institutional investor developments. Participants in the panel discussion included Pamela Marcogliese, Partner, Cleary Gottlieb, Elizabeth Bieber, Associate, Cleary Gottlieb, Jason Alexander, Managing Director, Okapi Partners and Bill Ultan, Managing Director, Corporate Governance, Morrow Sodali. Continue Reading Cleary Gottlieb Participates in Panel Discussion on Highlights of the 2018 Proxy Season
As “social good” objectives (like the protection of the environment, the improvement of public health and the alleviation of poverty) rise up the corporate agenda in the UK, we examine how UK companies are reconciling the pursuit of these objectives with their directors’ duties, which normally require the prioritisation of the creation of shareholder value above other objectives. We also briefly explore the current trend of UK companies seeking to embed social and environmental purposes in their constitutions. Continue Reading Social Good, Shareholders’ Interests and Directors’ Duties: Recent Developments in the UK
In a previous post, we wrote that the UK Government announced a series of reforms to the UK Corporate Governance regime in August 2017. Some of these reforms are being addressed through the on-going consultation on revisions to the UK Corporate Governance Code (UK CGC) (see our previous post for further details). The UK CGC is the main corporate governance code in the UK and applies (on a “comply or explain” basis) to all UK companies with a premium listing in the UK.
Another of the announced reforms was the development of a corporate governance code for large private companies, backed by new reporting requirements. This was a significant proposal because corporate governance efforts in the UK have historically focussed on publicly listed companies where shareholders are often distant from executives running the company. The Government’s proposal was driven by evidence that private companies constitute a vast (and increasing) portion of the UK economy and its recent experience that their actions (including several recent large-scale failures) can have a significant impact on their employees, suppliers and other stakeholders. This reform is expected to have important implications for a wide variety of large private companies in the UK, including UK subsidiaries of multinational groups and UK portfolio companies of private equity funds.
On May 31, 2018, Cleary Gottlieb submitted a comment letter to MSCI regarding its public consultation on the treatment of unequal voting structures in the MSCI Equity Indexes. Cleary’s letter asserts that the approach in the proposal is highly problematic, arguing that the composition of broad equity market indexes is the wrong mechanism to address the relationship between equity interests and voting rights, and “one share, one vote” is the wrong principle.
Cleary’s letter focuses on the impact on Latin American equities. Dual-class structures are more common in Latin America than in the United States, so MSCI’s proposal would have more significant consequences for Latin American markets than in the United States. The proposal fails to take into account the alternative shareholder protections provided by law in many Latin American countries, and the specific characteristics of classes other than common stock in each jurisdiction. Cleary’s letter urges MSCI to instead consider following the example of the U.S. Securities and Exchange Commission and the principal U.S. securities exchanges, which broadly defer to home country corporate governance rules.
Please click here to read the full comment letter.
On May 21, 2018, The Conference Board and Cleary Gottlieb Steen & Hamilton LLP hosted a panel discussion on the work of the Sustainability Accounting Standards Board (SASB). Participants in the panel discussion included Alan Beller, Senior Counsel at Cleary Gottlieb, Tom Riesenberg, Director of Legal Policy and Outreach at SASB and Stephanie Tang, Director of Legal, Corporate Securities at Stitch Fix.
Moderator Doug Chia, executive director of The Conference Board, and the panelists outlined the history and mission of SASB, including the development and implementation of industry-specific standards for sustainability reporting. They discussed the robust processes by which these standards were developed, and how they have been received by both companies and investors. The session also focused on the standard of materiality and the issues of liability in the context of the SEC’s reporting requirements. Additionally, the panelists discussed the board of directors role and the governance considerations undertaken by management and the board of directors in the context of sustainability reporting.
A replay of the webcast is available (please note that your browser may require you to run an Adobe plugin to access this content).
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
- 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