On March 21, 2022, the U.S. Securities and Exchange Commission issued for public comment a rule proposal that, if adopted, would require reporting companies to provide certain climate-related information in their registration statements and annual reports filed with the SEC. Specifically, the proposed rules would require:

  1. A new section in annual reports and registration statements titled “Climate-Related Disclosure,” which would include climate-related governance, risk, business impacts, targets and goals and other related disclosures.
  2. Within that section, disclosure of the registrant’s Scope 1, Scope 2 and, if material, Scope 3 greenhouse gas (GHG) emissions, together with an attestation report from an independent GHG emissions expert covering the Scope 1 and Scope 2 emissions disclosures.
  3. A new note to a registrant’s audited financial statements that provides climate-related metrics and impacts on a line-item basis.

This memorandum addresses the third point above – the proposed amendments to Regulation S-X to require a new footnote in audited financial statements – and concludes with some general takeaways and possible issues for inclusion in comment letters on the proposal. Please see the other two memoranda in this series for a discussion of the GHG emissions and attestation report disclosure requirements and the Regulation S-K governance, business, risk and targets disclosure requirements described above.

Last month, the U.S. Securities and Exchange Commission issued a proposal to enhance and standardize disclosure requirements related to cybersecurity incident reporting and cybersecurity risk management, strategy, and governance. Among other changes, the SEC’s proposal would require disclosure about material cybersecurity incidents within four business days and require annual disclosure regarding a registrant’s policies and procedures for identifying and managing cybersecurity risks. The proposal, which has a short window for public comment, requires close consideration by public companies and other SEC registrants.

Please click here to read the full alert memorandum.

On March 30, 2022, the SEC voted 3-1 (Commissioner Peirce dissenting) to propose a package of rules and rule amendments governing special purpose acquisition companies (SPACs), SPAC initial public offerings (IPOs) and SPAC mergers with a target company (de-SPACs).  Part of the proposed amendments would also apply to any shell company business combination, whether or not a SPAC is involved. Continue Reading SEC SPAC Proposal

The SEC has proposed important changes to the rules governing 10b5-1 trading plans.  If the proposal is adopted – as seems likely –  there will be major changes in how companies execute share repurchases and how employees, officers and directors sell shares.

The proposal is on a fast track, with comments due April 1.  As of today, however, the SEC seems to be behind in posting the comments received on its website, so it is not clear what issues have been raised.

Cleary submitted a detailed comment letter on the proposal on March 23 – click here to read the letter.

On February 10, 2022, the Securities and Exchange Commission (the “SEC”) issued for public comment proposed rules that will, if adopted, significantly affect how investors report their beneficial ownership on Schedules 13D and 13G. The principal changes would:

  • accelerate the filing deadlines for Schedules 13D and 13G beneficial ownership reports;
  • clarify the circumstances under which two or more persons have formed a “group” that would be subject to beneficial ownership reporting obligations; and
  • expand the definition of beneficial ownership to include certain cash-settled derivative securities.

In this memo, we summarize the proposed changes and the implications for issuers, activists, financial institutions, and other market participants.

Please click here to read the full alert memorandum.

Welcome to the Winter edition of our UK Public M&A Round-up.

This issue includes:

We hope you find the topics in this issue to be of interest and invite you to contact the articles’ authors or your normal Cleary contact if you have any questions or would like to discuss.

To read the articles from our previous UK Public M&A Round-up, please click here.

In a noteworthy new post-sale appraisal ruling, the Delaware Court of Chancery in BCIM Strategic Value Master Fund, LP v. HFF, Inc.[1] awarded the petitioner additional consideration based on an increase in the value of the target company that arose between signing and closing.  The unique facts of this case, and particularly the sustained outperformance of the target in the interim period before closing, are worth keeping in mind in evaluating the risk that a successful appraisal proceeding can increase the amount of consideration payable in a public company acquisition.  Below we break down the Court’s analysis in determining fair value, how changes in each merger party’s valuation drove the appraisal result, and key takeaways. Continue Reading Appraisal Update: Post-Signing Value Changes Drive Appraisal Result

In Wei v. Zoox, Inc., the Delaware Court of Chancery found that an appraisal petition had been filed for the sole purpose of gathering discovery to be used in drafting a fiduciary duty complaint challenging a merger where the former stockholders had lost standing to seek books and records under Section 220 due to the rapid closing of the merger.  Nonetheless, in a novel ruling, the court permitted the appraisal petitioners to pursue some discovery in the appraisal action, limited to what would have been available to them under Section 220 had they not lost standing to seek such records.  The court rejected the petitioners’ request for broader discovery that is normally available in an appraisal action in light of its finding that the petitioners’ true purpose in filing the appraisal action was to seek Section 220-like books and records.

Continue Reading A Back-Door Section 220? Chancery Court Limits Appraisal Petitioners’ Demand for Broad Discovery

In a recent opinion addressing the enforcement of trading restrictions (“lock-ups”) that are commonly agreed in connection with a business combination transaction between a special purpose acquisition company (“SPAC”) and a target company (“de-SPAC transaction”), the Delaware Court of Chancery determined that the restrictions at issue did not apply to certain shares held by the target company’s former Chief Executive Officer because he did not actually hold SPAC shares immediately after the consummation of the transaction.  The decision illustrates that common formulations of lock-ups may give rise to unintended consequences which allow relevant major parties, insiders or management to trade during the intended lock-up period.  Given frequent share price volatility both pre- and post-combination, lock-ups are a critical element of de-SPAC transactions and the agreements creating them must be drafted carefully.

Please click here to read the full alert memorandum.