New York partner Rashida La Lande is the author of "Deals With Controlling Stockholders: 5 Tips for Boards" [PDF] published on November 2, 2011 on Boardmember.com.
Topic: Corporate Governance
California Adopts Two New Corporate Forms to Advance Social Benefits
On October 9, 2011, California Governor Jerry Brown signed into law competing bills that create two new corporate forms in California — a "flexible purpose corporation" and a "benefit corporation" — intended to allow entrepreneurs and investors the choice of organizing companies that can pursue both economic and social objectives. The new corporate forms differ from traditional for-profit corporations that are organized to pursue profit (and not social purposes) and non-profit corporations that must be used solely to promote social benefits. These laws will take effect on January 1, 2012.
Delaware Court of Chancery Issues Important Guidance for Special Committees Negotiating M&A Transactions with Controlling Stockholders
On October 14, 2011, Chancellor Strine of the Court of Chancery of the State of Delaware issued a decision in In re Southern Peru Copper Corp. Shareholder Derivative Litig., C.A. No. 961-CS. In the 105-page decision, Chancellor Strine ultimately found that the controlling stockholder defendants had breached their fiduciary duty of loyalty and awarded damages of over $1.2 billion, which may be paid by the controlling stockholder by returning some of the stock consideration received from the controlled company in the transaction. The decision provides important guidance for companies engaging in M&A transactions with their controlling stockholders.
Observations on Key Corporate Governance Impacts of Dodd-Frank
Washington, D.C. partner John F. Olson is the author of "Observations on Key Corporate Governance Impacts of Dodd-Frank" [PDF] published in the September issue of U.S. News’s Best Lawyers "BEST LAW FIRMS’ 2010.
California Amends Corporations Code to Liberalize and Streamline Legal Standards for Corporate Distributions and Dividends
On September 1, 2011, the Governor of California signed into law California Assembly Bill No. 571 (“AB 571”), which will liberalize and streamline the legal standards for California corporations and quasi-California corporations to make cash and property distributions to shareholders, including dividends and share repurchases and redemptions. AB 571 amends portions of the California Corporations Code (the “Code”) limiting corporate distributions that have been in effect since 1977, which many lawyers and clients have found confusing and overly restrictive. The new law will make California’s restrictions on shareholder distributions more consistent with analogous restrictions applicable to California limited liability companies and limited partnerships and the corporate laws of most other states. With AB 571, boards of directors of corporations will be free to consider the fair market value of a corporation’s assets, instead of historical carrying cost, and rely on whatever financial information a board deems reasonable under the circumstances, when determining whether the corporation has sufficient assets relative to its liabilities to distribute cash or property to its shareholders. This change alone will make it significantly easier for financially healthy corporations with historical book losses and appreciated assets (as is common with many growth companies) to pay dividends or redeem or repurchase shares.
Public Company Accounting Oversight Board Considers Mandatory Audit Firm Rotation
On August 16, 2011, the Public Company Accounting Oversight Board (“PCAOB”) issued a Concept Release on Auditor Independence and Audit Firm Rotation (“Concept Release”). The Concept Release, available at http://pcaobus.org/Rules/Rulemaking/Docket037/Release_2011-006.pdf, solicits public comment on steps it could take under its existing authority to enhance auditor independence, objectivity, and professional skepticism, including, most notably, imposing for the first time mandatory audit firm rotation on public companies.
The SEC’s Final Whistleblower Rules: The Floodgates Open on a New Wave of Whistleblower Claims, as the SEC Authorizes Massive Bounties to Anonymous Tipsters
New York partner Jonathan C. Dickey and associate Brian M. Lutz are authors of “The SEC’s Final Whistleblower Rules: The Floodgates Open on a New Wave of Whistleblower Claims, as the SEC Authorizes Massive Bounties to Anonymous Tipsters” [PDF] published in the July/August 2011 issue of Thomson Reuters’ Securities Litigation Report.
The Extraterritorial Application of the Dodd-Frank Whistleblower Provisions
Washington, D.C. partner Jason Schwartz and associate Thomas Johnson are the authors of "The Extraterritorial Application of the Dodd-Frank Whistleblower Provisions" [PDF] published in the August 2011 issue of ALM’s Law Journal Newsletters: Employment Law Strategist.
Coping with the New Whistleblower Rules
Washington, D.C. partner John Sturc, associate Molly Claflin and Palo Alto associate Joshua Dick are the authors of "Coping with the New Whistleblower Rules" [PDF] published in the June 27, 2011 issue of Compliance Reporter magazine.
D.C. Circuit Vacates Securities and Exchange Commission’s Proxy Access Rule
Today the federal appellate court in Washington, D.C. invalidated the SEC’s "proxy access" rule, which would have required that director candidates nominated by certain large shareholders be included in a company’s proxy materials.