Last month, we described the increased threat of activists and acquirors seeking to capitalize on the COVID-19 sell-off to build positions in high-value companies at depressed prices. Even before the current crisis emerged, we recommended that all U.S. public companies regularly review their defense profile and have a shareholder rights plans “on the shelf.” For companies uniquely impacted by the crisis—especially those whose market capitalization has fallen below $1 billion—we suggested they re-assess their vulnerabilities in this new environment and consider whether now was the right time to adopt a rights plan to ward off potential opportunistic behavior. Some companies have done just that—since March 1, 2020, 24 U.S. public companies have adopted a defensive shareholder rights plan (6 other U.S. public companies have adopted NOL rights plans). Continue Reading ISS and Glass Lewis Issue Guidance for Poison Pills in COVID-19 Pandemic
As the COVID-19 pandemic continues to spread in the U.S. and abroad, public companies are grappling with the ramifications (real or potential) of a senior executive(s) contracting the virus. Together with senior management, boards of directors should be actively reviewing their emergency preparedness plans, including their emergency succession plans for key executives. Boards also need to proactively address the possibility that one or more directors become sick, including by reviewing the board’s contingency plans to ensure the board will be able to continue to perform its duties. Continue Reading The Keys to Emergency Succession: Planning For Boards and Senior Management During a Health Pandemic
On April 2, 2020, Glass Lewis announced the global expansion of its Report Feedback Statement (“RFS”) service. This service operates separately from the process for companies reporting factual errors or omissions in a research report and instead focuses on differences of opinion, allowing companies and shareholder proposal proponents to respond directly to Glass Lewis’s research and recommendations. Continue Reading Glass Lewis Expands Report Feedback Statement Service
Last week, the Delaware Court of Chancery upheld the terms of an agreement requiring The Chemours Company to arbitrate a challenge to its spin-off from DuPont. In doing so, Vice Chancellor Glasscock rejected Chemours’ claims that the process DuPont followed in structuring and executing the spin-off rendered the terms of the spin-off unconscionable and thus Chemours’ consent to arbitration ineffective. The Chemours decision is important as it recognizes that parent companies rely on the parent-subsidiary relationship in structuring spin-offs and in doing so need not follow an arm’s length process with its subsidiary as would apply to a transaction with an unrelated third party. Continue Reading Don’t Bite the Hand that Feeds You: Delaware Court of Chancery Holds Spin-Offs Are Not Unconscionable
On March 30, 2019, Paul Shim and Jim Langston joined Patrick Ramsey, Global Head of M&A at BofA Securities, and Amy Lissauer, Global Head of Activism and Raid Defense at BofA Securities, on a conference call panel titled “The Impact of COVID-19 on Shareholder Activism and Hostile M&A.”
The panelists shared their views on the state of activism and hostile attacks in the current environment, how the activism playbook may evolve, when and how the next wave of activism and hostile attacks is likely to emerge, and what companies can do today to prepare for the storm.
Dial-in Details to the Call Below:
U.S. toll-free: 888 203 1112
International: +1 719 457 0820
The replay will be available from Monday, March 30, 2020, at 4:00 p.m. through Wednesday, April 29, 2020, at 2:00 p.m. Eastern.
On March 25, 2020, due to the continuing impact of COVID-19, the SEC issued an order extending its previously-issued conditional relief from certain Exchange Act reporting requirements and proxy delivery requirements.
In particular, the March 25 order provides U.S. public companies with a 45-day extension to file or furnish certain filings otherwise due between March 1 and July 1, 2020.
Also on March 25, the SEC Division of Corporation Finance (Corp Fin) issued Disclosure Guidance Topic No. 9, Coronavirus (COVID-19), offering the Corp Fin staff’s current views on disclosure considerations, trading on material non-public information (MNPI) and reporting earnings and financial results (including non-GAAP measures) in light of COVID-19.
The order provides relief for companies who may have difficulty preparing their financial statements or other aspects of their periodic reports during this uncertain time, while the guidance provides valuable insight into how companies should be thinking about upcoming disclosures, particularly in light of the SEC’s continuing focus on a principles-based reporting regime.
The SEC has also provided guidance on signature and retention requirements as well as on relief from the notarization requirements for Form ID, which is required to make filings on EDGAR. The Form ID relief extends through July 1, subject to certain conditions.
Please click here to read the full alert memorandum.
Please click here for the latest edition of the Cleary Gottlieb M&A Telegram for Germany.
On March 20, 2020, news outlets reported that four U.S. Senators sold millions of dollars in stock following classified briefings to the Senate on the threat of a COVID-19 outbreak. Three days later, the Co-Directors of the Securities and Exchange Commission’s (“SEC”) Division of Enforcement, Stephanie Avakian and Steven Peikin, issued a statement reminding market participants of their obligations with respect to material non-public information (“MNPI”) and of the SEC’s commitment to protecting investors from fraud and ensuring market integrity. Continue Reading Insider Trading Risk During the COVID-19 Outbreak
Glass Lewis recently announced an update of its guidelines, which temporarily relaxes its standard policy against virtual meetings in light of COVID-19. The update provides that “[f]or companies opting to hold a virtual-only shareholder meeting during the 2020 proxy season (March 1, 2020 through June 30, 2020), [Glass Lewis] will generally refrain from recommending to vote against members of the governance committee on this basis, provided that the company discloses, at a minimum, its rationale for doing so, including citing COVID-19.” This formal update of Glass-Lewis’s guidelines comes on the heels of statements by both Glass-Lewis and ISS indicating openness to relax their positions on virtual meetings, which we discussed here. Continue Reading Glass Lewis Revised Guideline Regarding Virtual Meetings for 2020 Proxy Season
This is an updated version of our prior post to address a new guideline issued by Glass Lewis.
With rising concerns around the spread of COVID-19 (“coronavirus”) in the United States and globally, in order to mitigate health risks, many public companies may consider adding a virtual component to the format of their annual shareholder meetings. In the United States, state law generally governs the availability of a virtual meeting format. At the federal level, the SEC regulates the filing and mailing of proxy solicitation materials. While we have not seen direct guidance from state legislatures on virtual or hybrid meetings in the context of the coronavirus pandemic, on March 13, 2020, the SEC released guidance (“SEC Coronavirus Guidance”) addressing annual shareholder meetings in light of recommendations by the Centers for Disease Control and Prevention (“CDC”) and other public health officials to cancel, or explicitly state policies that prohibit, large, in-person gatherings in an effort to prevent the spread of coronavirus. Set forth below are various considerations that a company should take into account when determining whether to move from an in-person to a virtual or hybrid annual meeting Continue Reading UPDATE: Coronavirus & Virtual Annual Meetings