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

08 Aug

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

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…)

06 Aug

IRS Reduces Affordability Requirement for Employers’ Healthcare Coverage

By: Stephen Bowers

Employers subject to the Affordable Care Act’s employer mandate (generally, those with 50 or more full-time equivalents) are required to offer qualifying, affordable health insurance coverage to substantially all full-time employees in order to avoid significant penalties. Note that “full-time equivalents” include both full-time employees, as well as part-time or temporary employees, if the total number of hours worked is sufficient. It is also important to note that the number of employees is determined on a “controlled group” basis, meaning that even employers with a sufficient level of common ownership are counted together, even if their business operations are unrelated. (more…)

26 Jul

Third Circuit Decision Highlights Important Distinction Between Directors and Board Observers

By: Lori Smith, Ryan Udell and Adam Chelminiak

A recent decision by the U.S. Court of Appeals for the Third Circuit offers an important reminder of the distinction between the roles (and exposure to liability) of corporate directors and board observers. In a precedential opinion on a matter that previously lacked judicial guidance, the appeals court held that as a matter of law the functions of the defendant nonvoting board observers were not “similar” to the functions of board directors for purposes of imposing liability under Section 11 of the Securities Act of 1933.

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25 Jul

FCC Proposes Pilot Program to Fund and Promote Telehealth in Underserved Communities

By: Ryan Udell and Patrick Devine

The Federal Communications Commission (FCC) recently took another significant step on the path towards expanding the availability of connected healthcare for certain underserved communities. Through the creation of a Connected Care Pilot Program (CC Pilot Program), the FCC aims to increase access to remote healthcare for patients who do not live near physical facilities, low-income urban patients and veterans, thereby promoting quality care and better outcomes. (more…)

24 Jul

Cybersecurity and Legal Due Diligence Considerations in M&A Transactions

By: Joshua Mooney, Lori Smith and Jeremy Miller

When prospective buyers conduct legal due diligence in merger and acquisition transactions the main focus is typically on the traditional items, such as financials, debt instruments, major contracts and other key metrics customarily analyzed. These items, among others, remain critical to evaluating a business. However, with technology continuing to advance at an exponential rate and hackers successfully breaching company information systems more frequently, as seen with Target, Equifax and many others, it is critical that prospective buyers thoroughly consider the risks associated with the target’s cybersecurity practices or lack thereof. (more…)

01 Jul

Evidence of Lack of Adequate Compliance Systems Sufficient to Plead Bad Faith by Board

By: Michael Mentzel and Gwenn Barney

Summer is usually the best time of year for ice cream companies, but the season is off to a rough start for Blue Bell Creameries, USA, Inc. The Delaware Supreme Court, in Marchand v. Barnhill, held on June 18 that a suit brought by a stockholder of Blue Bell, in part accusing the company’s directors of violating their duty of loyalty to stockholders in their handling of a listeria outbreak in 2015, could continue based on adequate pleading of facts demonstrating bad faith. The ruling was a reversal of a Court of Chancery decision. (more…)

25 Jun

Healthcare Executive Order Suggests Changes Are Coming

By: Stephen Bowers

On June 24, 2019, President Trump issued the “Executive Order on Improving Price and Quality Transparency in American Healthcare to Put Patients First” (the Order). The Order directs several executive agencies to issue regulations, primarily surrounding issues related to price transparency and controlling healthcare costs. The Order indicates that the intent is to increase consumer engagement and improve the “shoppability” of certain healthcare services. Although parts of the Order are directly aimed at healthcare providers, the text suggests that some of these changes will be more broadly relevant. (more…)

18 Jun

Rules Finalized Permitting Employees to Buy Individual Health Insurance Plans through HRAs

By: Dana Petrillo

On June 13, 2019, the U.S. Departments of Health and Human Services, Labor and the Treasury issued final rules that will expand the use of health reimbursement arrangements (HRAs), which are a type of account-based health plan that employers can use to reimburse employees for their medical care expenses. The unpublished final rule is scheduled to be published on June 20, 2019, after which it can be found at the Federal Register. (more…)

18 Jun

Delaware Chancery Court Addresses the Seller’s Preservation of Privilege Post-Closing

By: Marc Casarino and Ryan Udell

Preserving privilege with respect to pre-closing communications between a selling corporation’s counsel and its management is an important negotiation point in many transactions, so that the seller can prevent the buyer from using such communications against the seller in disputes between the buyer and the seller, but the buyer can continue to assert that privilege in disputes with third parties. The default rule under Delaware law is that the privilege passes to the buyer post-closing. More specifically, section 259 of the Delaware General Corporation Law provides, in part, that “all property, rights, privileges, powers and franchises” shall pass to the surviving corporation. However, the parties may negotiate around this provision in the transaction documents according to the Delaware Court of Chancery’s decision in Great Hill Equity Partners IV, LP v. SIG Growth Equity Fund I, LLLP.[1]

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17 Jun

Designing Tax Efficient Business Transactions

By: Carl Koerner

There is an old joke that a camel is a horse that has been designed by a committee. We all know that it isn’t true. In fact, camels are horses that have been bred for maximum tax efficiency. Tax efficiency is the benign term that we use for the tortured process of restructuring a business arrangement to minimize taxes—all taxes, including income, sales, estate, gross receipts, federal, state, city and foreign. When you realize how many taxes there are and how many jurisdictions impose them, the camel design looks pretty sleek. (more…)

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