Taking Care of Business – Emerging legal issues impacting the business community.

13 Jan

Second Circuit: Insider Trading Conviction Does Not Require a Finding of Personal Benefit

On December 30, 2019, the Second Circuit issued its landmark decision in United States v. Blaszczak,^[1] which widened the berth for federal prosecution of insider trading activities under Title 18 of the United States Code. The court ruled that, unlike Title 15 securities fraud convictions, federal wire fraud and Title 18 securities fraud convictions do not require any proof that an insider received a personal benefit in exchange for the material, nonpublic information that he or she disclosed.^[2]

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20 Dec

SEC’s Proposed Overhaul to the Definition of an Accredited Investor

By: Lori S. Smith and Jeremy M. Miller

In June 2019, the Securities and Exchange Commission (the SEC) published a concept release (the Concept Release) that sought public comment on how to improve the framework for private securities offerings under the Securities Act of 1933 (the 1933 Act), with the goal of encouraging capital formation as well as opening up investment opportunities to a broader group of investors. After receipt and consideration of comments on the Concept Release, on December 18, 2019, the SEC issued a release in which it proposed expansion of the definition of an “accredited investor” in Rule 501(a) of Regulation D of the 1933 Act in an effort to further the goals discussed in the Concept Release. The SEC’s proposed rule changes are designed to modernize and broaden the criteria by which both individual and institutional investors can participate in private securities offerings. (more…)

21 Nov

Navigating the Path to a Successful Exit

White and Williams, in partnership with Citrin Cooperman and Hughes Klaiber LLC, recently hosted a breakfast seminar – “Navigating the Path to a Successful Exit.” The seminar featured Lori Smith, M&A attorney and partner with White and Williams LLP; Mandeep Trivedi, CPA and valuation partner with Citrin Cooperman; Sally Anne Hughes, M&A advisor and founder of Hughes Klaiber LLC; Rich Prestegaard, partner with private equity firm High Road Capital; and Andrew Reid, EVP with global PR firm Weber Shandwick.

The panelists discussed the stages of a sales process and shared insights from their experience in avoiding pitfalls and overcoming hurdles to successful exit. (more…)

12 Nov

US DOL Seeks to Clarify Fluctuating Workweek Pay Method

By: George C. Morrison

Under the current U.S. Department of Labor (DOL) regulations, if certain conditions are met, an employer may pay an employee who works fluctuating hours a fixed salary for all hours worked and then an additional half-time for all hours over 40–a number that decreases as the number of hours increases. Uncertainty regarding this fluctuating workweek method has resulted in many employers opting not to use it. However, on November 5, 2019, the DOL announced a proposed rule that seeks to clarify that employers may provide additional pay such as bonuses or premiums to employees subject to the method, even when the additional pay is tied to the number of hours worked, without jeopardizing the use of the method. (more…)

05 Nov

Succession Planning and Transitioning Your Business Leadership to the Next Generation

This post was originally published by Michael Verrill at The Sharp Financial Group.

After years or even decades at the helm of a business, all business leaders must eventually pass the torch to someone else. For business leaders who are also parents, the “someone else” is very often a son or daughter. Unfortunately, despite the idealistic image many mothers and fathers have of passing their business on to a daughter or son, the reality of planning a business succession strategy is far more complicated.

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14 Oct

Culture Shock: When Two Culturally-Different Enterprises Combine

By: Carl Koerner

Client issues often arrive like schools of fish – rapidly and in huge numbers. Sometimes this is the result of external events such as tariffs, shifts in the credit market, constraints on supply or falling demand. But sometimes there are no external events and I am left to conclude that it is just something in the air (cue Phil Collins), karma perhaps. Lately, I have been working with several clients who have been grappling with the challenges that come when business enterprises of different cultures combine. (more…)

The Long Arm of the Law Lengthens: What the <i>U.S. ex rel. Medrano v. Diabetic Care RX, LLC</i> Settlement Means for Private Equity Investors

07 Oct

The Long Arm of the Law Lengthens: What the U.S. ex rel. Medrano v. Diabetic Care RX, LLC Settlement Means for Private Equity Investors

By: Lori Smith and Dana Petrillo

In March 2018, White and Williams issued an alert covering the Department of Justice’s (DOJ) intervention in the False Claims Act (FCA) case United States ex rel. Medrano v. Diabetic Care RX, LLC, No. 15 Civ. 62617 (S.D. Fla.). We noted at the time that this case “should put private equity firms and their partners on notice of possible expansion of regulatory scrutiny in FCA complaints,” because, in an unprecedented move, the DOJ for the first time named a private equity (PE) owner in an FCA complaint-in-intervention alongside the portfolio company accused of making false claims.

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Delaware Court Of Chancery Extends <i> MFW </i> Framework to Board Decisions on Controlling Party Compensation

27 Sep

Delaware Court Of Chancery Extends MFW Framework to Board Decisions on Controlling Party Compensation

By: Marc Casarino, Lori Smith and Ryan Udell

It is a basic precept of Delaware corporate law that a corporation is managed by its board of directors. One of the board’s key managerial functions is the determination of executive compensation levels – a decision typically entitled to great judicial deference. When the board’s decision as to executive incentive compensation is submitted to stockholders for approval, and such stockholder approval is given, the decision is entitled to even greater deference. However, in Tornetta v. Musk, et al., C.A. No. 2018-0408-JRS, decided September 20, 2019, The Court of Chancery highlights an important exception to the general rule when the recipient of the compensation package is also a controlling stockholder.

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29 Aug

Signed, Sealed, Delivered, I’m (Not) Yours: How a Lapse in Record Keeping Can Lead to Non-Binding Contracts

By: Lori Smith and Gwenn Barney

Usually, once a contract is signed, sealed and delivered, it is a binding agreement between the parties. However, a recent Delaware case serves as a reminder that a murky path to a signed agreement and lack of good record-keeping can lead to a finding of non-enforceable contracts. (more…)

08 Aug

Delaware Supreme Court Clarifies That a Response to a Books and Records Demand Is Not Presumptively Confidential

By: Marc Casarino

Section 220 of the Delaware General Corporation Law permits stockholders to request inspection of a corporation’s books and records. This access is not unlimited. For example, the stockholder must demonstrate a proper purpose, such as valuing its investment or investigating mismanagement. Further, Section 220(c) provides that “the Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other or further relief as the Court may deem just and proper.” Therefore, beyond the statutory access restrictions, corporations often seek limitations on the disclosure and use to which the stockholder may put the information learned from the inspection. The most frequent limitation is a confidentiality order. Indeed, confidentiality orders have become so ubiquitous that a presumption of confidentiality pervades Section 220 inspections. (more…)

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