California Assemblyman Curt Hagman has introduced a bill in the California legislature that will, if enacted, repeal California’s corporate long-arm statute that imposes provisions of California corporate law on non-California corporations with substantial contacts in California. The bill (AB 2260) was introduced as a “spot bill” (i.e., a placeholder bill that does nothing other than identify a specific statutory provision to be amended) on February 24, 2012, and was substantially amended on March 29, 2012 to provide for the repeal of California Corporations Code Section 2115. For many private companies operating in California that organize as Delaware corporations (generally regarded as a preferred state for incorporating), Section 2115 creates uncertainty at times regarding whether California or Delaware corporate law controls. For example, when a Delaware corporation subject to Section 2115 undertakes to effect a merger, California and Delaware each impose different shareholder consent requirements and have different procedures for non-consenting shareholders to exercise dissenters’ rights, resulting in duplicative and sometimes inconsistent requirements and procedures. Similar to the impetus for the recently enacted JOBS Act, repealing Section 2115 is another example of deregulatory legislation aimed at removing hindrances to growth companies operating in California.
Division of Corporation Finance Announces Temporary Procedure for Confidential Submission of Draft Registration Statements
On April 5, 2012, shortly after President Obama signed the Jumpstart Our Business Startups (JOBS) Act into law, the Division of Corporation Finance of the Securities and Exchange Commission announced the procedure that an Emerging Growth Company (EGC) should follow for the confidential submission of its draft registration statement, as permitted under Sec. 106(a) of the JOBS Act, until the Division implements a system for electronic submission. An EGC should submit one copy of its draft registration statement in a text searchable PDF file on CD/DVD or, alternatively, submit it in paper (without staples or binding), together with a transmittal letter in which the company confirms its EGC status, to:
Jumpstart Our Business Startups (JOBS) Act Changes the Public and Private Capital Markets Landscape
On March 27, 2012, the House passed the Jumpstart Our Business Startups Act (“JOBS Act”), as amended and passed by the Senate on March 22. It is widely anticipated that President Obama will quickly sign the JOBS Act into law.
Survey of Responses to Say-on-Pay Advisory Votes from Recently Filed Proxy Statements
We have been monitoring proxy statement disclosures made by S&P 500 companies pursuant to Item 402(b)(1)(vii) of Regulation S-K. That provision, which was added as part of the SEC’s say-on-pay rules, requires companies to discuss in the Compensation Discussion and Analysis (CD&A), “[w]hether and, if so, how the registrant has considered the results of the most recent shareholder advisory vote on executive compensation . . . in determining compensation policies and decisions and, if so, how that consideration has affected the registrant’s executive compensation decisions and policies.”
U.S. House Passes Bill Reforming IPO Process for Smaller Companies
On March 8, 2011, the House of Representatives approved the JOBS (Jumpstart Our Business Startups) Act by a vote of 390 to 23. The JOBS Act is a package of six bills aimed at reviving the market for initial public offerings and other financing options for smaller companies by easing the rules governing capital formation in an effort to encourage private-sector job creation.
SEC Staff Grants No-Action Letter Excluding Proxy Access Shareholder Proposal
In a significant decision, the staff of the Securities and Exchange Commission today issued a no-action letter concurring that a proxy access shareholder proposal could be excluded from a company’s proxy materials under Rule 14a‑8. The proposal, submitted to Textron Inc. by John Chevedden on behalf of Kenneth Steiner, requested adoption of a bylaw amendment permitting shareholders to include in the company’s proxy materials director candidates nominated by any shareholder(s) that had continuously held one percent of the company’s voting securities for two years or by any group of shareholders “of whom one hundred or more satisfy SEC Rule 14a‑8(b) eligibility requirements.
Final SEC Conflict Minerals Rules Delayed
Contrary to the expectations of many that the SEC would imminently release its final conflict minerals rules, on March 6, 2012, at a hearing before the House Committee on Appropriations on the SEC fiscal year 2013 budget request, SEC Chairman Schapiro indicated that the rules will not be adopted until “the middle of the year.” Schapiro stated that the SEC needs “the next couple of months” to complete the rules as the conflict minerals rulemaking is “so complex” and “so out of the ordinary for the SEC.
ISS Extends Deadline for GRId 2.0 Data Confirmation and Release
Institutional Shareholder Services (ISS) announced today that it has extended the deadline for companies to review their updated GRId 2.0 data and submit corrections before GRId 2.0 is implemented. The deadline was previously Thursday February 23, 2012, at 8pm Eastern Time. The updated deadline is now Monday, February 27, 2012, at 8pm Eastern Time. ISS has also announced that the updated GRId scores will now be released on Monday, March 5, 2012, instead of the previously announced date of February 27, 2012.
SEC Provides Guidance on Say-on-Pay Description Language
On February 13, 2012, the Securities and Exchange Commission provided guidance on how a company should describe its advisory vote to approve executive compensation that is required by Rule 14a-21 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on its proxy card and voting instruction form. While the interpretation specifically addresses only the phrasing on the proxy card, best practice is to use the same terminology when identifying the voting item within the proxy statement. The guidance was provided under Compliance and Disclosure Interpretation (“C&DI”) Question 169.07 and stated the following:
UK Corporate Governance: The 2011 Report Card
Introduction: The Financial Reporting Council (“FRC”), the independent regulator responsible for promoting corporate governance in the UK, published its annual report at the end of last year assessing the impact and effectiveness of the new UK Corporate Governance Code (“CGC”) and the new Stewardship Code (“SC”) (the “Codes”), setting out proposals for reform and improvement in best practice.