On May 18, 2020, partners Michael Albano and Jennifer Kennedy Park participated in a webcast hosted by The Conference Board entitled “Reopen Ready: Managing Governance and Legal Risks in the New Normal.” Michael Ullmann, Executive Vice President, General Counsel of Johnson & Johnson, also participated on the panel. Continue Reading Cleary Partners Participate in Panel Discussion on Reopening Considerations

The COVID-19 pandemic has created market conditions ripe for increased cross border investment as businesses scramble for capital and investors target distressed assets.  The Committee on Foreign Investment in the United States (CFIUS) is focused on the trend.  Senior Department of Defense officials have recently and repeatedly stressed the need for the active use of CFIUS reviews to protect against “adversarial capital coming into our markets for nefarious means” during the current economic crisis.  Against this backdrop, U.S. businesses and foreign investors must be mindful of the CFIUS implications of acquisitions and financing transactions (including the exercise of creditors’ rights with respect to distressed companies).  The attached memorandum explores these issues and available approaches to mitigating them.

Please click here to read the full alert memorandum.

While much of the focus today is on restarting segments of the economy and developing action plans to reopen businesses, history outside of corporate America teaches us important lessons on how incentives can play a role in driving effective outcomes.  It shows us that incentives, not just rules, may be the solution businesses need.  Consider the British prisoner dilemma over two centuries ago as a powerful lesson in incentives and how these lessons can be applied to the current pandemic. Continue Reading Incentives in the Pandemic

Today, the U.S. Department of the Treasury (“Treasury”) published an interim rule (the “Interim Rule”) implementing the filing fee provisions of the Foreign Investment Risk Review Modernization Act (“FIRRMA”) along the lines set out in Treasury’s proposal of March 9. The Committee on Foreign Investment in the United States (“CFIUS”) will assess tiered filing fees for all final notifications filed on or after May 1 (whether or not a draft notification was filed before May 1). The Interim Rule is open for public comment until June 1, 2020.

Please click here to read the full alert memorandum.

This is an updated version of our prior post to address Governor Cuomo’s most recent Executive Orders.

In response to the COVID-19 pandemic, Governor Cuomo declared a disaster emergency and ceased operation of all non-essential businesses in New York state with the March 7 Executive Order 202 and its successor Executive Orders.  In particular, the March 20th Executive Order 202.8 provided temporary suspension of several state law regulatory requirements, including with respect to shareholder meetings of New York corporations. Continue Reading UPDATE: Cuomo Executive Order Gives New York Corporations Relief on Physical Annual Meetings

In the current climate of market volatility prompted by the COVID-19 pandemic, more and more public companies with valuable US tax assets (e.g., net operating loss carryforwards) may, or at least should, consider adopting a shareholder rights plan in order to preserve those tax assets.  These plans are commonly referred to as “NOL rights plans” (or “NOL poison pills”). Continue Reading Is Now a Good Time to Adopt an NOL Rights Plan?

On April 8, Institutional Shareholder Services (“ISS”) published additional guidance on application of its benchmark voting policies amid the COVID-19 pandemic.[1] ISS had previously issued its 2020 benchmark policies update to be applied for shareholder meetings on or after February 1, 2020.[2] Noting the societal and economic uncertainty wrought by COVID-19 since its prior update, ISS provides further guidance focused on four key areas:

  • Annual General Meeting (“AGM”) Issues;
  • Poison Pills, Shareholder Rights and Boards/Directors;
  • Compensation Issues; and
  • Capital Structure and Payouts.

Continue Reading ISS Issues Additional Voting Policy Guidance in Response to COVID-19 Pandemic

Executive pay in the midst of the pandemic presents an obvious dilemma.  On the one hand, it would be a stretch to blame fairly management teams for most of the adverse financial performance that will stretch across a broad range of industries.  On the other, they cannot escape the consequences either.

Consider that while stock values may bounce back for many companies in the reasonably short term, it is unlikely that business will quickly return to the status quo ante.  In some industries, the markets for products and services may change permanently; in other industries, supply chain and inventory management may also be permanently affected.  Not least, rank and file employees and other stakeholders across the economy will suffer.  Many executives will take short-term salary cuts in recognition of the hardship, but that is a preliminary and largely symbolic step and compensation committees need to find the right overall balance between reward and respect for the economic environment. Continue Reading The Executive Pay Dilemma

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