By: Marc Casarino and Lori Smith

The Delaware Court of Chancery in Manti Holdings LLC v. Authentix Acquisition Company recently confirmed that a stockholder agreement may contractually restrict the exercise of statutory appraisal rights. Although the court has previously ruled on the enforceability of waivers of preferred stockholders’ appraisal right, this marks the first time that a Delaware court has ruled on the enforceability of contractual restriction of appraisal rights for common stockholders. The decision provides guidance for negotiating and drafting investment-related documents to properly address effective waiver of appraisal rights when a triggering event occurs. (more…)

By: John McCarrick, Lori Smith, Ryan Udell and Sedgwick Jeanite

In this post, we summarize some of the highlights from AIG’s recently published Mergers and Acquisitions 2018 Claims Report, and include our own observations on the role that Representations and Warranties Insurance (R&W Insurance) is increasingly playing in M&A transactions. (more…)

By: Marc Casarino

The business and affairs of a Delaware corporation are managed by its board of directors. The board’s managerial oversight includes deciding whether to pursue a claim belonging to the corporation. A stockholder may demand that the board pursue a claim on behalf of the corporation. By doing so, the stockholder concedes the board’s capacity to properly evaluate pursuit of the claim. Delaware courts defer to the business judgment of the board in such circumstances, and therefore it is very difficult for a stockholder to successfully challenge a board’s decision not to pursue the claim. (more…)

By: Alexandria Kane and Jamie Wang

On August 10, 2018, the U.S. Securities and Exchange Commission (SEC) issued a Small Entity Compliance Guide for Issuers (the Guide) on the recently amended smaller reporting company (SRC) definition. On June 28, 2018, the SEC adopted amendments to the definition of SRC which expand the number of companies that qualify as SRCs and can thereby take advantage of the scaled disclosure requirements applicable to such companies. The expanded definition of SRC will be effective on September 10, 2018. (more…)

By: George Morrison

The State of New York is seeking comments on draft guidance from employers on mandatory sexual harassment prevention policies and annual employee training. Effective October 9, 2018, New York employers will be required to adopt the state’s written model sexual harassment prevention policy or issue a substantially similar policy to employees. A copy of New York’s draft model policy can be found here. (more…)

By: Ryan Udell and Melissa Pang

The #MeToo movement jumpstarted, by the sexual misconduct allegations against film producer Harvey Weinstein, has led to a sea of change in how companies address and handle inappropriate behavior in the workplace. Indeed, over the last few years, we have seen the swift removal of very high profile filmmakers, television figures, politicians, chefs and financial and public relations executives from their positions. Seeing the potentially devastating effects of a #MeToo claim – from public relations crises, to expensive lawsuits and other lasting harm, businesses are taking action to minimize the future occurrence of such behavior. This includes additional training, implementing better policies and mechanisms for addressing complaints, and increasing insurance coverage for sexual harassment. Because one #MeToo claim could substantially impair value, buyers are also now worried about acquiring a company in which sexual harassment claims have occurred or may be lurking and are increasingly focusing on understanding any potential exposure through more robust due diligence in addressing any such exposure in the definitive purchase agreement through so called “Weinstein Reps” or “MeToo Reps.”

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By: Alexandria Kane and Tarik Abdel-Meguid

The U.S. Securities and Exchange Commission (SEC) recently issued a final rule amending Rule 701, promulgated under the Securities Act of 1933 (the Securities Act). Rule 701 provides an exemption from the registration requirements of Section 5 of the Securities Act for offers and sales of securities under certain compensatory arrangements and covers securities offered or sold by a non-reporting company (including a foreign private issuer) to its employees, officers, directors, partners, trustees, consultants and advisors. The amendment increases the threshold for delivery of additional disclosures from $5 million in aggregate sales price or amount of securities sold during any consecutive 12-month period to $10 million. We previously discussed the Economic Growth Regulatory Relief and Consumer Protection Act and the proposed changes to Rule 701 in more detail in the article, “The Economic Growth, Regulatory Relief and Consumer Protection Act Amends a Key Provision of Rule 701”. (more…)

By: John K. Baker and Victoria Fuller

Today, August 10, 2018, Massachusetts Governor Charlie Baker signed into law a comprehensive economic development act which amends the Massachusetts General Laws Chapter 149 to create a new Section 24L, which will impose substantial new restrictions on employers’ use of non-compete agreements.

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By: Lori Smith

Effective August 1, 2018, Delaware amended the Delaware Revised Uniform Limited Partnership Act (LP Act) and the Delaware Limited Liability Company Act (LLC Act) to, among other things: (i) add a provision permitting the division of limited liability companies into two or more limited liability companies, (ii) permit the use of blockchain technology and distributed ledgers for certain activities, and (iii) create a new type of Delaware LLC series known as a “registered series.” (more…)

By: Howard Jiang and Lori Smith

Special purpose acquisition companies (SPACs) have experienced a renewed popularity over the past couple of years due to favorable capital markets conditions. A SPAC is a publicly traded acquisition and investment vehicle which is sponsored by an experienced team of investors or parties with significant operating experience who invest the seed capital for the SPAC. The SPAC has no current business operations and has gone public through an initial public offering to raise a desired amount of investment capital for the purpose of doing an acquisition or merger. A SPAC is in some ways similar to the use of a reverse merger to take a private company public in that its ultimate goal is the same – at the end of the day, the acquisition target becomes a publicly traded company through acquisition by, or merger with, the SPAC. (more…)