The curtain is slowly closing on the era of (relatively) light regulation of Alternative Investment Funds in Europe. Key developments flowing from a meeting of European Finance Ministers on 19 October to discuss the ‘AIFM Directive’ include agreement on a slightly less onerous regime for depositaries and confirmation that there will eventually be a ‘passport’ regime allowing marketing of non-EU Funds on a pan-European basis. Although progress has been made, we are nonetheless concerned that the overall effect of the Directive will be to render meaningless over time the distinction between alternative funds marketed to professional investors and the (higher cost) retail funds established under the UCITS regime.
French Banking and Financial Regulation Bill: Summary of Main Provisions
On October 11, 2010, the French Parliament adopted the French Banking and Financial Regulation Statute (loi de regulation bancaire et financière).
The 100 page long Statute contains provisions significantly amending existing laws and regulations regarding, inter alia, (i) the activities and liabilities of credit rating agencies, (ii) short selling and naked short sales, (iii) temporary holding of shares before shareholders’ meetings, and (iv) mandatory takeovers.
SEC Proposes Rules for Say-on-Pay and Say-on-Golden-Parachute Votes
On October 18, 2010, the Securities and Exchange Commission ("SEC") proposed rules, available here, to implement the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") relating to: (1) shareholder advisory votes on executive compensation ("say-on-pay"); (2) shareholder advisory votes on the frequency of say-on-pay votes ("say-on-frequency"); and (3) shareholder advisory votes on compensation arrangements in connection with significant corporate transactions ("say-on-golden-parachutes"). The proposal includes transition provisions that companies may rely on until final rules are adopted. The SEC also proposed rules, available here, relating to disclosure by institutional investment managers of their proxy voting on executive compensation and other matters. Both rule proposals were issued pursuant to Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which we described in detail in our July 21, 2010 client memorandum, available here. Comments on the proposed rules should be submitted on or before November 18, 2010.
Bombay High Court Holds That Public Listed Company Shares Can Be Subjected to Preemptive Rights
On September 1, 2010, a division bench of the Bombay High Court held that consensual preemptive arrangements between shareholders in a public listed company do not violate the principle of free transferability of shares enshrined in section 111A of the Indian Companies Act, 1956 (“Companies Act“). In its 103-page opinion in the case of Messer Holdings Limited v. Shyam Ruia (Appeal No. 855 of 2003), the High Court overruled its previous decision in the case of Western Maharashtra Development Corporation v. Bajaj Auto [2010] 154 CompCas 593 (Bom) where it had taken a contrary view.
Delaware Court of Chancery Issues Important Opinion for Corporations with Staggered Boards
On October 8, 2010, the Court of Chancery of Delaware issued an important opinion, Airgas, Inc. v. Air Products & Chemicals, Inc. (Del. Ch. Oct. 8, 2010), with significant implications for public corporations with staggered boards. The decision arose out of the ongoing takeover battle by Air Products for control of Airgas, Inc. At Airgas’s 2010 annual meeting, held last September 15, Air Products successfully obtained all three board seats that were up for election on Airgas’s nine-member staggered board. In addition, holders of 45.8% of the shares entitled to vote at the annual meeting approved a bylaw amendment, proposed by Air Products, which would cause Airgas’s annual meeting to be held each year in the month of January as opposed to August, when Airgas’s annual meetings had historically been held. Adoption of the proposed bylaw means that Airgas’s 2011 annual meeting will take place barely four months after Airgas’s 2010 annual meeting was held, and Air Products will have the opportunity to replace a majority of Airgas’s staggered board in the space of four months. Airgas filed suit and moved to declare the bylaw amendment invalid.
Dodd-Frank’s “Say-on-Pay” Provisions
Orange County of counsel David C. Lee and associate Brian D. O’Neill are the authors of "Dodd-Frank’s ‘Say-on-Pay’ Provisions" [PDF] published in the October 2010 issue of Insights.
Repeal of Credit Ratings Agency Exemption from Regulation FD
On September 29, 2010, the SEC amended Regulation FD to remove the express exemption for disclosures of material non-public information to credit rating agencies (former Rule 100(b)(2)(iii) of Regulation FD), as required under Section 939B of the Dodd-Frank Act. This amendment became effective upon its publication in the Federal Register on October 4, 2010.
Proxy Access Litigation and Next Steps
The following provides an update on the litigation challenging the “proxy access” rules adopted by the Securities and Exchange Commission (“SEC” or “Commission”), and also discusses steps companies should consider during the pendency of the litigation. Our client alert dated August 25, 2010, available here, provided an overview of the proxy access rules.
Delaware Court of Chancery Issues Important Poison Pill Opinion
New York partner Eduardo Gallardo and associate Sharon I. Grysman are the authors of "Delaware Court of Chancery Issues Important Poison Pill Opinion" [PDF] published in the October 2010 issue of Insights.
Disclosure of Adviser Conflicts — When Is It Enough?
Investment advisers have a duty to disclose material conflicts of interest to clients. The more difficult question is: "how much disclosure is enough?" In a recent settled enforcement action, the SEC suggests that disclosure of material facts alone may not be sufficient, and that more explicit disclosure is needed when investment advice may result in additional compensation to the adviser. The case is Matter of Valentine Capital Asset Management.