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

On April 2, 2020, Glass Lewis announced the global expansion of its Report Feedback Statement (“RFS”) service.[1] 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.[2] 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.[1]  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, 2020, 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
Passcode: 1219818

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.

Continue Reading The Impact of COVID-19 on Activism and Hostile Attacks: Key Takeaways

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.