On May 20, 2011, the Ministry of Corporate Affairs, Government of India ("Corporate Affairs Ministry"), issued two general circulars ("Circulars") permitting attendance of meetings of the Board of Directors ("Board") and general meetings of the shareholders of an Indian company by using an electronic mode of communication. The Circulars were issued by the Corporate Affairs Ministry as part of its "green initiative in corporate governance" and are a long-awaited change to the means of attending Board and shareholder meetings. The first circular[1] ("Circular 1") clarified that shareholders of an Indian company can participate in general meetings of the shareholders by using video conferencing facilities. The second circular[2] ("Circular 2") clarified that directors of an Indian company can participate in meetings of the Board using video conferencing facilities and also clarified that directors who participate via video conferencing facilities will be counted towards the quorum of such Board meetings.
The Securities and Exchange Board of India Takes the View that Put/Call Options and Rights of First Refusal are Unenforceable
In an unpublished letter dated March 18, 2011, the Securities and Exchange Board of India ("SEBI") has taken the view that put and call option arrangements and rights of first refusal are not enforceable in India. Although the law on this question is far from settled, the view taken by SEBI may potentially impact several public M&A transactions in India where such clauses are frequently included in transaction documents. Please note that this discussion is based on an unpublished letter and that the analysis should therefore not be taken to be final law on the subject.
SEC Adopts Final Rules Implementing Whistleblower Provisions of Dodd-Frank
On May 25, 2011, in a 3-2 vote, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) approved its final rules (“Whistleblower Rules”) to implement the whistleblower award program of Section 21F of the Securities Exchange Act of 1934, which was added by Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). The Whistleblower Rules establish the standards and procedures the SEC will apply in awarding whistleblowers monetary compensation for providing tips about possible securities law violations that lead to successful SEC enforcement actions and make definitions which set the contours for protections of whistleblowers under the Dodd-Frank Act’s anti-retaliation provisions. The SEC’s press release is available here: SEC Adopts Rules to Establish Whistleblower Program. A copy of the adopting release and the Whistleblower Rules is available here: Final Rules.[1]
The SEC Uses an FCPA Case for Its First-Ever Deferred Prosecution Agreement
On May 17, 2011, the U.S. Securities and Exchange Commission ("SEC") announced its first deferred prosecution agreement ("DPA"). The DPA was with Luxembourg-based Tenaris S.A., a global steel pipe manufacturer and supplier for the energy industry, to resolve alleged violations of the Foreign Corrupt Practices Act ("FCPA").[1] Tenaris, founded in Argentina, is a foreign private issuer with American Depository Shares ("ADSs") listed on the New York Stock Exchange. Tenaris agreed to pay $4.79 million in disgorgement plus $641,900 in prejudgment interest. Separately, Tenaris resolved a parallel investigation by the U.S. Department of Justice ("DOJ") by entering into a separate non-prosecution agreement ("NPA") and agreeing to pay $3.5 million in fines. The settlement is significant because it is the SEC’s first use of a DPA since it announced its Cooperation Initiative last year.
The Government of India Issues a New Consolidated Foreign Direct Investment Circular
On March 31, 2011, the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India ("DIPP"), issued a new consolidated foreign direct investment policy, Circular 1 of 2011 ("Circular"), which supersedes all prior press notes, press releases and clarifications issued by the DIPP relating to foreign direct investment in India. The Circular reflects the current policy of the Indian Government with respect to foreign direct investment in India, and has the force of law.
Budget Impasse May Lead to SEC Shutdown
UPDATE: On Friday, April 8, 2011, the SEC published its contingency Plan of Operations on its federal government shutdown page in preparation of a federal government shutdown due to the budget impasse. All updates and announcements regarding SEC operations during the potential shutdown will be posted on the same page. Gibson Dunn’s client alert originally distributed on April 6 follows below. On Tuesday, April 5, 2011, the Obama administration and Congressional leaders announced that they had failed to reach a budget agreement, which could lead to a partial shutdown of the federal government if no budget bill or continuing resolution is approved by the close of business on Friday, April 8, 2011. The U.S. Securities and Exchange Commission (“SEC”) is likely to be significantly affected by any shutdown due to the budget impasse.
Social Media and the Federal Securities Laws
New York partner Lois Herzeca is the author of "Social Media and the Federal Securities Laws" [PDF] published in the April 4, 2011 issue of BNA’s Securities Regulation & Law Report.
SEC Proposes Rules on Compensation Committee Independence and the Role of Compensation Consultants and Other Advisers
On March 30, 2011, the Securities and Exchange Commission (the “SEC”) voted unanimously to propose rules implementing Section 952 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) relating to: (1) compensation committee member independence; (2) compensation consultant and other adviser independence; and (3) compensation committee authority to retain, and disclosure regarding use of, compensation consultants and other advisers. In our July 21, 2010 client memorandum, available here, we describe in detail Section 952 of the Dodd-Frank Act, which added a new Section 10C to the Securities Exchange Act of 1934 (the “Exchange Act”).
Protectionism and Paternalism at the UK Takeover Panel — Part II
The Panel Holds Its Ground — An Analysis of Some of the Key Proposals
Introduction — The Panel Stands Firm
In late November 2010, we published an article on the policy statement of the UK Panel on Takeovers and Mergers (Panel) which set out the ground work for changes to the rules governing the conduct of public takeovers in the UK as embodied in the UK Code on Takeovers and Mergers (Code)[1]. Last week, the Panel published a public consultation paper (PCP 2011/1) which sets out the detailed proposed amendments to the Code[2] as trailed in our earlier article. In summary, notwithstanding an outcry from seasoned market participants (in particular the advisory community) on some of the proposed changes which are perceived as having a detrimental impact on the openness of the UK M&A market, disappointingly, the Panel has not shifted from its position as set out late last year on the fundamentals/principles of its new approach on key areas such as the ‘put up shut up’ (PUSU) regime and offeree protection arrangements. We examine below certain critical features of some of these proposed changes.
SEC Proposes to Readopt Existing Beneficial Ownership Rules as They Apply to Swaps
Last week the U.S. Securities and Exchange Commission (the "SEC") proposed to maintain–for now, at least–the current reporting rules under Sections 13(d) and 16 of the Securities Exchange Act of 1934 (the "Exchange Act") as they apply to security-based swap transactions. The SEC issued the proposal to preempt any uncertainty that may arise when Section 13(o)–which was added to the Exchange Act by Section 766 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act")–becomes effective on July 16, 2011. Specifically, because new Section 13(o) may require the SEC to adopt new rules to regulate security-based swaps, the SEC has proposed readopting the portions of Rules 13d-3 and 16a-1 that apply to security-based swaps to maintain the regulatory status quo. The SEC’s proposed rules are the same as the existing rules in all respects.