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Changes to Subscription Agreements as a Result of Revised Accredited Investor Definition | Lexology
As we noted here, the SEC has expanded the definition of accredited investor. This means many forms of subscription agreements may need to be updated. No two agreements are exactly alike, but we have updated one form we use. You can find a word version here, and a PDF version showing changes to the prior version here.
Court Examines Intended Third Party Beneficiaries of Indemnification Provision | Lexology
In CHS/Community Health Systems, Inc. et al v. Steward Health Care System LLC, the Delaware Court of Chancery examined who was an intended third-party beneficiary of an indemnification provision in an Asset Purchase Agreement. The dispute arose in a transaction where Steward agreed to purchase substantially all the assets of certain hospitals owned by CHS. Specifically, the APA listed a series of “Seller Entities” that would “sell to [Steward] . . . substantially all of [their] assets . . . which are . . .
SEC Charges Ex-CEO with Aiding and Abetting Company’s Financial Reporting and Disclosure Violations | Lexology
The SEC charged former Hertz CEO and Chairman Mark Frissora with aiding and abetting the company in its filing of inaccurate financial statements and disclosures. Frissora agreed to settle the charges and repay Hertz nearly $2 million in incentive-based compensation. Frissora did not admit or deny the allegations. Select portions of the SEC complaint are discussed below.
Homefed: MFW Conditions Not Timely Implemented | Lexology
In Re Homefed Corporation Stockholder Litigation arose from a transaction in which Jefferies Financial Group Inc., the 70% stockholder of HomeFed Corporation, acquired the rest of the shares of the company in July 2019 by exchanging two of its shares for each share of HomeFed held by its minority stockholders. The transaction traced its roots back to 2017, when a HomeFed director proposed that Jefferies take HomeFed private in a 2:1 share exchange.
SEC Relief for Late Filings Expires | Lexology
The SEC previously issued an order that, subject to certain conditions, provided publicly traded companies with an additional 45 days to file certain disclosure reports. The current relief provided public companies with a 45-day extension to file certain disclosure reports that would otherwise have been due on or before July 1, 2020.
Controller’s Influence Must be Completely Disabled for MFW to Apply | Lexology
In 2013, Michael Dell and Silver Lake Group LLC took Dell, Inc. private through a leveraged buyout. The privately held successor of Dell, Inc. was Dell Technologies Inc. (the “Company”), which Mr. Dell and Silver Lake control. In 2016, the Company sought to acquire EMC Corporation, a data-storage firm. One of EMC’s most valuable assets was its ownership of 81.9% of the equity of VMware, Inc.
SEC Charges Alternative Asset Manager with Failing to have Sufficient Policies to Prevent Use of MNPI | Lexology
In 2016, Ares Management LLC, a subsidiary of a global alternative asset manager, invested several hundred million dollars in client funds in a portfolio company in the form of debt and equity. Confidentiality provisions in the loan agreement remained in effect between Ares and the portfolio company on a going forward basis. The equity investment allowed Ares to appoint two directors to the portfolio company’s board.
SEC Simplifies Accounting Disclosures for “Significant” M&A Transactions | Lexology
The SEC has adopted amendments to the financial disclosure requirements in Regulation S-X for acquisitions and dispositions of businesses. When a registrant acquires a significant business, other than a real estate operation, Rule 3-05 of Regulation S-X generally requires a registrant to provide separate audited annual and unaudited interim pre-acquisition financial statements of that business.
Treasury Proposes to Modify CFIUS Mandatory Declaration Requirements | Lexology
Treasury has proposed rules that would modify provisions in the regulations of the Committee on Foreign Investment in the United States, or CFIUS, that implement the Foreign Investment Risk Review Modernization Act of 2018, or FIRRMA. The proposed rule would modify the mandatory declaration provision for certain foreign investment transactions involving a U.S. business that produces, designs, tests, manufactures, fabricates, or develops one or more critical technologies.
SEC Publishes FAQs on Form S-3 and COVID-19 | Lexology
The SEC has published a series of FAQs relating to how its COVID-19 Order affects certain matters with respect to the use and filing of Form S-3. The COVID-19 Order provides that, subject to certain conditions, publicly traded companies have an additional 45 days to file certain disclosure reports.
Examples of Paycheck Protection Program Disclosures in SEC Reports | Lexology
Public companies have begun to make disclosures regarding receipt of loan proceeds from the Paycheck Protection Program established by the CARES Act. Two recent examples are set forth below.
SEC Provides Limited Relief for Paper Filings of Form 144 | Lexology
The SEC staff provided limited relief for those who wish to file Form 144 in paper as a result of the COVID-19 pandemic. A Form 144 must be filed with the SEC upon the sale of restricted securities when specified in Rule 144. The relief is temporary and covers those who submit a Form 144 for the period from and including April 10, 2020 to June 30, 2020.
Pandemic Class Action Refund Lawsuits Against Airlines Ignore Long-Standing Precedent | Lexology
Class action plaintiffs lawyers have reacted to the COVID-19 pandemic by filing putative class actions against airlines which, in order to conserve desperately needed cash, are offering travel credits in lieu of cash refunds for flights canceled because of the pandemic.
ISS Announces COVID-19 Policies | Lexology
ISS issued guidance on its policy application in light of the global impacts of the COVID-19 pandemic. The guidance addresses how ISS plans to apply ISS’ benchmark proxy voting policies over the coming months as annual shareholder meeting season gets underway. The guidance provides direction on a number of annual meeting issues including postponements and virtual-only meetings.
IRS and Other Federal Agencies Provide New Guidance on Paid Leave Tax Credits | Lexology
The U.S. Treasury Department, Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL) collectively, the "agencies," issued a press release Friday, March 20 updating employers required to provide paid leave to employees under the Families First Coronavirus Response Act, signed into law by President Trump on March 18, 2020.
SEC Charges Contracted Investor Relations Person with Disclosure Violation | Lexology
Shawn Severson is the owner and manager of EnergyTech Investor, LLC. Between August 2015 and March 2018, UQM Technologies, Inc., or UQM, retained Severson, through EnergyTech Investor and another firm, to provide investor relations services and advice in exchange for a monthly fee. During this time, Severson provided various services to UQM that included, among other things, assisting with press releases, communicating with investors, and preparing written materials.
SEC Sets Disclosure Expectations on IP Risks Associated with International Operations | Lexology
The SEC has issued new guidance it believes will assist public companies both in assessing materiality and in drafting disclosure related to risks to technology and intellectual property that may result from conducting business outside the United States.
SEC Statement on Role of Audit Committees and Key Reminders | Lexology
SEC Chairman Jay Clayton, Sagar Teotia, Chief Accountant and William Hinman, Director, Division of Corporation Finance issued a Statement on Role of Audit Committees in Financial Reporting and Key Reminders Regarding Oversight Responsibilities. The statement does not include any new information.
Non-Parties Must be Physically in the Same Room as Arbitrators | Lexology
I don’t mean to be imprecise, but I think that the Eleventh Circuit may have recently issued the most luddite opinion I’ve seen in a good long while. See Managed Care Advisory Group, LLC v. CIGNA Healthcare, Inc., 2019 WL 4464301 (11th Cir. Sept. 18, 2019). According to the court, Section 7 of the FAA, which allows arbitrators to subpoena non-parties and their documents, must be interpreted narrowly. And when I say narrowly, the Eleventh Circuit isn’t joking around.
Enforcement Action Reveals Misleading Customer Counts | Lexology
In a settled enforcement action, the SEC resolved allegations related to non-monetary transactions regarding certain Comscore transactions. The enforcement action also involved disclosures surrounding the number of customers. In 2014 and 2015, Comscore disclosed its total number of customers and net new customers added in quarterly earnings calls. Comscore also disclosed its customer total in periodic filings with the Commission.
Changes to D&O Questionnaires for 2020 Proxy Season | Lexology
We have identified only a few possible changes to date for D&O questionnaires for the 2020 proxy season. New rules adopted to implement the FAST Act clarify that registrants may, but are not required to, rely only on Section 16 reports that have been filed on EDGAR (as well as any written representations from the reporting persons) to assess whether there are any Section 16 delinquencies to disclose.
Activist Investor to Pay $609,810 to Settle HSR Violations | Lexology
Activist investor Third Point LLC and three funds that it controls have agreed to settle Federal Trade Commission charges that the funds violated the premerger notification and waiting period requirements of the Hart-Scott-Rodino Act, or HSR Act, after they acquired the voting securities of Dow DuPont Inc. (“Dow DuPont”). Dow Chemical Company (“Dow”) and E.I du Pont de Nemours and Company (“DuPont”) entered into a Merger Agreement pursuant to which Dow and DuPont would consolidate into Dow DuPont.
ArbitrationNation Bookworm: Inaugural Post | Lexology
I’m adding something new to our Blog experience, the ArbitrationNation Bookworm. Basically, once or twice a month, I’ll provide a brief overview of an article or book that readers of the Blog might find interesting. I’m also going to add a sidebar that includes other stuff that we’re reading related to arbitration. For the inaugural post, I’m recommending an article from early 2019, , by Andrea Cann Chandrasekher and David Horton.
2nd Big 4 Audit Report with 2 CAMs | Lexology
An audit report was filed with a 10-K that includes two CAMs. One is related to revenue recognition and the other is related to uncertain tax positions.
A Bit More on Who Decides Class Arbitrability, From the Alabama Supreme Court | Lexology
Happy August! What’s a better way to start the month than thinking about class arbitrability! Again. Ugh. Trust me, I would much rather consider so many other exciting arbitration issues, but this one seems to be occupying a lot of court attention, so I’d be remiss not to report on it. Since my last update, I ran across a recent state court’s perspective on the question of who decides class arbitrability. In Alabama Psychiatric Servs. P.C. v. Lazenby, 2019 WL 2560096 (Ala.
The Fifth Circuit Weighs in About Who Decides Class Arbitrability | Lexology
The Fifth Circuit just deepened (and confused) a Circuit split over the question of who decides whether an arbitration agreement permits class proceedings. See 20/20 Communications, Incorporated v. Crawford, 2019 WL 3281412 (5th Cir. July 22, 2019). Liz has written about the split here, here, and here. (You might also recall that SCOTUS flagged this issue, though it punted on it, in Lamps Plus, Inc. v. Varela, 139 S.
Changes to Minnesota Laws Affecting Construction | Lexology
RETAINAGE (MINN. STAT. 15.72 AND 337.10- EFFECTIVE 8/1/2019) In 2019, the legislature incorporated changes to retainage requirements for both public and private projects in Minnesota.
ISS Opens Global Policy Survey for 2020 | Lexology
Institutional Shareholder Services Inc. has launched its Annual Policy Survey. The survey is a key component of ISS’ annual benchmark policy development process, looking at potential policy changes globally for 2020 and beyond. Institutional investors, companies, corporate directors, and all other market constituents are invited to respond to the survey.
Revlon Lives - Chester County Employees’ Retirement Fund v. KCG Holdings, Inc. | Lexology
In Chester County Employees’ Retirement Fund v. KCG Holdings, Inc. et al the Delaware Court of Chancery considered the interplay between the Corwin and Revlon doctrines. In July 2017, Virtu Financial, Inc. (“Virtu”) acquired KCG Holdings, Inc. (“KCG”) for $20 per share. A former KCG stockholder alleged KCG’s directors failed to maximize value for the KCG stockholders in negotiating the merger. In April 2017, Virtu made its best and final bid of $20 per share.
First Things First: Who Decides Issues of Subject Matter Arbitrability? | Lexology
Happy summer! It’s been far too long since my last update, but rest assured I have been thinking a lot about arbitration. In fact, I’m currently teaching a summer course at Queen Mary University of London’s International School of Arbitration, which is a ton of fun. My teaching, in fact, partly inspired this post. Teaching arbitration in an international context reminds me of the fact that the United State’s permissive “everything can be arbitrated” approach isn’t universal or inevitable.
Chancery Addresses Spring-Loading of Options | Lexology
In Howland Jr. v. Kumar et al the Delaware Court of Chancery addressed the alleged spring-loading of options in connection with the repricing of options when considering a motion to dismiss. In that case, a stockholder of Anixa Biosciences, Inc. challenged the 2017 repricing of stock options held by Anixa’s directors and officers. The repricing occurred shortly before those directors and officers publicly announced news of a key patent’s issuance to a subsidiary of Anixa.
Missouri Reminds Us Just How Small the Bullseye Is for Challenging a Delegation Clause | Lexology
The interplay of the separability doctrine and delegation clauses can create a bullseye that only Hawkeye, the OG Avenger with a bow, might have a prayer of hitting. The Missouri Supreme Court provided a nice reminder about this problem in a recent case, State Ex Rel. Newberry v. Jackson, 2019 WL 2181859 (May 21, 2019). The underlying facts of the case are simple enough: employees filed timely charges of sex, age, and disability discrimination with the Missouri Human Rights Commission.
SEC Awards First Ever $4.5 Million to Internal Whistleblower | Lexology
The SEC awarded more than $4.5 million to a whistleblower whose tip triggered the company to review the allegations as part of an internal investigation and subsequently report the whistleblower’s allegations to the SEC and another agency. According to the SEC this is the first time a claimant is being awarded under this provision of the whistleblower rules, which was designed to incentivize internal reporting by whistleblowers who also report to the SEC within 120 days.
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