In Miramar Police Officers’ Retirement Plan v. Murdoch[1] the Delaware Court of Chancery dismissed plaintiff’s claims, refusing to hold that an “unambiguous” boilerplate successors and assigns clause operated to bind a spun-off company to the terms of a contract entered into by its former parent company.  The contract at issue generally restricted the former parent company from adopting a poison pill with a term of longer than one year without obtaining shareholder approval.  The decision will serve as a reminder to practitioners to carefully consider  the impact that significant corporate transactions could have on their clients’ contractual rights and obligations.  Continue Reading Successors, Assigns and Spincos, Oh My!: Binding Spincos to Parent Obligations Requires Specificity

The UK Companies Act provides that a company can amend its constitutional documents by special resolution (being a shareholders’ resolution passed by 75%+ of votes cast by those shareholders voting on the resolution).  In private M&A transactions where the target has multiple shareholders and a drag right does not apply, a bidder wishing to acquire the entire issued share capital of the target may, given an amendment to the constitutional documents does not require unanimity, consider conditioning its proposal on the insertion of a drag right into the target’s constitutional documents.  Some practitioners have historically taken the view that amendments of this sort are unlikely to be enforceable. Continue Reading Court of Appeal of England and Wales considers important questions for UK M&A transactions

The recent up-tick in covenant lite financings in the European leveraged loan markets has caused some in the investor community to express concern about what impact it will have when the debtor becomes distressed. This article examines the causes of the recent trend, and dispels some of the myths about covenant lite in the context of a restructuring.

Continue Reading The Resurgence of Covenant Lite, and What it Means for the Restructuring Market

In Pontiac Gen. Employees Retirement Syst. v. Ballantine (Healthways) [1], the plaintiffs  alleged that Healthways’ directors had breached their fiduciary duties by entering into a credit agreement with a “dead-hand proxy put” – that is, a provision that provides for an event of default under the credit agreement if the majority of directors on the board are replaced without the consent of the directors in office on the date of the credit agreement (or the consent of successors approved by such directors), without any room for existing directors to approve new directors if they were nominated in connection with a proxy contest. The complaint also alleged that, as lender, SunTrust should be liable for aiding and abetting such a breach of fiduciary duty.   Continue Reading Recent Developments on “Proxy Puts”

On April 29, 2015 the Securities and Exchange Commission announced the issuance of proposed rules requiring issuers to disclose information that shows the relationship between executive compensation and the financial performance of the issuer. Our memorandum summarizes the proposed rules, highlights issues and suggests sample disclosure approaches.

Please click here to read our memorandum.

Based on the SEC’s Spring 2015 rulemaking agenda, issuers are getting additional breathing room on certain of the unfinalized executive compensation provisions under the Dodd-Frank Act.  While there is no indication as to the timing of final pay-versus-performance rules, no action on final rules for pay ratio and hedging disclosure and proposed rules for compensation clawback is contemplated until the second quarter of 2016.  For proxy statement purposes, this most likely means no pay ratio disclosure until the 2018 proxy season, although hedging disclosure may be in play for the 2017 proxy season.  However, financial institutions subject to Dodd-Frank Section 956 need to prepare themselves for a re-proposal of rules on incentive compensation arrangements by the SEC and bank regulators in June 2015.

The Delaware Supreme Court issued a welcome decision, In re Cornerstone Therapeutics Inc. Stockholder Litigation (Del. May 14, 2015), to remove an anomaly that had been inhibiting lower courts from dismissing monetary claims against independent directors based on their roles in the approval of related party transactions.  Nevertheless, even as the Delaware Supreme Court adopts principles to distinguish the state’s courts as director-friendly venues, independent directors will continue to bear burdens of discovery in Delaware and consequent risks of actions that seek monetary damages and survive motions to dismiss. In addition, the considerations for the insider counterparties (e.g., the controlling stockholders) participating in related party transactions, as outlined in our prior memoranda, remain unchanged.  Continue Reading Liability of Independent Directors and Insiders in Conflict Transactions: A Practical Perspective on Recent Delaware Case Law

In his recent decision in In Re: El Paso Pipeline Partners, L.P. Derivative Litigation [1], Vice Chancellor Laster awarded $171 million in damages to the limited partners of a master limited partnership (“MLP”) that had challenged the MLP’s acquisition of  assets from a related party.   The transaction at issue — a so-called “dropdown” of assets — involved the sale to the MLP by its controller and general partner (El Paso Corporation) of certain LNG-related assets in exchange for approximately $1.41 billion in cash. Continue Reading Related Party Transactions – Lessons from the El Paso MLP Decision