The COVID-19 pandemic has sent massive shockwaves throughout the global economy. This crises requires business leaders to confront a host of deleterious effects on an emergency basis – the likes of which many companies have never experienced. Boards of directors must remain cognizant of their oversight responsibilities in these trying times. This post offers guidance to directors of Delaware companies for addressing emergency circumstances occasioned by the COVID-19 pandemic. (more…)
The Environmental Protection Agency (EPA) announced in a memo released on Thursday, March 26, 2020 that it will relax its enforcement of environmental legal obligations under certain circumstances during the COVID-19 pandemic.
Applicable retroactively to March 13, 2020, the EPA will use enforcement discretion in specific situations where a company or governmental entity is unable to comply with an obligation usually required by the EPA due to the consequences of the COVID-19 pandemic, if the company takes certain steps to mitigate and document its noncompliance. This enforcement discretion only applies to civil violations of environmental legal obligations and explicitly does not extend to any criminal violations or conditions of probation in criminal sentences, activities that are carried out under Superfund and RCRA Corrective Action enforcement instruments or imports.
Increasingly, M&A transactions are using representation and warranty insurance (RWI) to bridge the gap between a buyer’s desire for adequate recourse to recover damages arising out of breach of representations in the purchase agreement and a seller’s desire to minimize post-closing risk and holdbacks or purchase price escrows traditionally used as the means to satisfy such obligations. When it works, RWI provides a significant benefit to both parties: it mitigates the buyer’s risk in the event that the seller’s representations and warranties prove untrue, and it permits the seller to reduce the portion of the purchase price that it would otherwise have to leave in escrow to cover future claims for breach of those representations and warranties. However, as the coronavirus pandemic ravages the global economy, insurers are now expressly adding COVID-19 exclusions to their RWI policies. If RWI insurers decline coverage for these losses, the allocation of risk in the representations and warranties (and related indemnity provisions) will be more critical than the parties contemplated when they negotiated the transaction documents.
On March 19, 2020, Dave & Buster’s Entertainment, Inc. (D&B) announced that it adopted a takeover-defense poison pill to deter activist investors from taking control of the company by accumulating its shares on the open market. This measure came after the stock of D&B decreased almost 90% over a one-month period due to concerns related to the coronavirus and after Kohlberg Kravis Roberts, an investment firm that made its name as a corporate raider in the 1980s, disclosed a 12.7% ownership interest in D&B (including certain cash-settled forward contracts). With experts predicting that shareholder activism will rise as stock prices plummet in the wake of the coronavirus pandemic, other potentially vulnerable public companies should consider following D&B’s lead. (more…)
On Wednesday, March 18, 2020, the Delaware Supreme Court overturned a Chancery Court decision that had prohibited Delaware corporations from adopting federal forum selection provisions for actions arising under the federal Securities Act of 1933 (Securities Act). In its opinion in Salzberg v. Sciabacucchi, the Court held that allowing federal forum selection provisions in a corporation’s governing documents advanced the goals of achieving judicial efficiency in resolving claims and offering flexibility to engage in private ordering. (more…)
In a legal challenge to a corporate transaction, the applicable standard of review is often outcome determinative. The deferential business judgment rule applies where the board is not majority conflicted. The burden is on the challenger to show bad faith sufficient to overcome the board’s business judgment – a high standard that almost always results in dismissal of the challenge. On the other hand, the more onerous entire fairness review applies to conflicted transactions. Where entire fairness applies, the burden is on the board to prove that the price and approval process were fair. This is a fact-intensive analysis that does not lend itself to dismissal at the pleadings stage. (more…)
On March 9, 2020, the United States Department of Health and Human Services (HHS) issued two new sets of rules under the 21st Century Cures Act designed to provide patients with more control over their health care data. With the goal of interoperability, the final rules developed by each of the HHS Office of the National Coordinator for Health Information Technology (ONC) and Centers for Medicare & Medicaid Services (CMS) require providers, payers and information technology vendors to provide patients with the ability to easily access their electronic health information (EHI) on electronic devices, including smart phones. (more…)
On February 27, 2020, the Federal Trade Commission (FTC) issued an administrative complaint seeking to block the proposed merger of Jefferson Health (Jefferson) and Albert Einstein Healthcare Network (Einstein). The FTC argues that the merger will reduce competition for inpatient acute rehabilitation services in the greater Philadelphia area. (more…)
By: Carl Koerner
I recently was chatting with a residential mortgage broker and learned that conventional mortgages, those that qualify for purchase by Fannie Mae, carry a higher interest rate than “jumbo” mortgages, those that are too large to conform to Fannie Mae requirements. For many years, conventional mortgages carried the lowest interest rates and borrowers who required larger mortgages paid a premium for the privilege. Today the market is inverted. Part of the reason has to do with higher charges imposed by Fannie Mae. There is also the possibility that the market perceives jumbo mortgage borrowers of higher credit quality than conventional borrowers. But another key factor is that there are more dollars seeking investment in mortgages than there are borrowers seeking mortgages. (more…)
A little more than one year ago, Taking Care of Business wrote about California’s adoption of a law, Senate Bill No. 826 (the California Statute), requiring gender-based diversity in the board room. A year later, the California Statute has been met with both enthusiasm and some criticism, including other states taking steps to enact, as well as enacting, similar laws and at least two lawsuits being filed in California opposing the California Statute.
- Board of Directors Guidance When Addressing Emergency Circumstances Occasioned by the COVID-19 Pandemic
- EPA to Relax Environmental Legal Enforcement During the COVID-19 Pandemic
- M&A Representation and Warranty Insurance Considerations in the Wake of the Coronavirus Pandemic
- Amid Coronavirus Pandemic and Declining Stock Prices, Public Companies Implement Poison Pills to Deter Corporate Raiders
- Delaware Supreme Court Upholds Federal Forum Selection for Securities Act Claims