As the 116th United States Congress came to a close, in its final hours, and skipping weeks of political drama for purposes of this post, the legislative body took the unprecedented step and overrode a presidential veto for the first time during the Trump Administration to pass the National Defense Authorization Act for Fiscal Year 2021 (the Defense Act). Included in the Defense Act is the Corporate Transparency Act (the CTA). The CTA, which was initially introduced by the House of Representatives in 2019, seeks to provide appropriate safeguards to identify bad actors engaged in terrorism, money laundering, sex trafficking and other heinous acts through “shell companies” that are not actually engaged in a bona fide business venture but instead are created for the principal purpose of shielding the owners from liability for engaging in illicit behavior and, in many cases, their identities. (more…)
Following the lead of California, Illinois and other states, Nasdaq, which is home to some of the largest companies in the world including Amazon, Google and Facebook, may require diversity on the board of directors of those companies. Earlier this month, Nasdaq submitted to the Securities and Exchange Commission (SEC) its proposal to require at least two diverse board members and certain disclosure requirements on the 3,000+ public companies that trade on the Nasdaq exchange. Currently more than 75% of Nasdaq’s listed companies do not meet this requirement. (more…)
On September 28, 2020, House democrats released an updated version of the Economic Recovery Omnibus Emergency Solutions Act (the HEROES Act) to address needs that have developed since its introduction on May 15, 2020. The updated version continues to include cannabis reform in the form of reintroducing the Secure and Fair Enforcement Banking Act (the SAFE Act), with the purpose “to increase public safety by ensuring access to financial services to cannabis-related legitimate businesses and service providers and reducing the amount of cash at such business.” As with the introduction, the same ambiguities, problems and hurdles to Senate approval still exist as identified in our June 18, 2020 post, and passage appears unlikely.
By: Carl Koerner
My colleague, John McCarrick, an expert on director and officer responsibility, recently gave a talk about emerging issues in D&O liability and discussed the impact of the ESG movement. ESG is an acronym for Environmental, Social and (Corporate) Governance. The movement asks business enterprises to extend their purview beyond financial success to address issues of public concern, such as global warming or racial injustice. John was asked by a program participant whether the ESG movement might force more companies to reorganize as public benefit corporations (PBCs). (more…)
On Monday, August 31, 2020, the Employee Benefits Security Administration of the United States Department of Labor (DOL) released a proposed regulation governing the conduct of employee benefit plan fiduciaries (the “Regulation”). Specifically, the Regulation restricts the manner in which fiduciaries of employee benefit plans governed by ERISA exercise shareholder voting rights, including proxy voting power, on securities owned by such plans. (more…)
Businesses Should Strike the Proper Balance Between Their Desire for Management Autonomy With Sensitivity to Social Justice Issues
By: John K. Baker
American business has been preparing to return to normal operations, with some tweaking due to COVID-19-related governmental guidelines, for weeks. Owners, managers and supervisors are being (or should be) trained about enforcing social distancing and the wearing of masks. As we return to the workplace, businesses should also focus on creating a safe and socially-conscious workplace for all employees. The failure to do so puts an employer at risk in the long term. The combination of savvy union organizers and the Black Lives Matter movement is putting the spotlight on injustice and can endanger the viability of an employer who chooses not to strike the proper balance. (more…)
On June 1, the Supreme Court of the United States decided Thole v. U.S. Bank, National Association, a case involving a breach of fiduciary duty claim under the Employee Retirement Income Security Act (ERISA). In affirming the Eighth Circuit’s decision, the Court determined that Article III of the U.S Constitution does not permit individual participants and beneficiaries to bring such claims against fiduciaries responsible for the investment of assets for defined benefit pension plans.
The U.S. and many other countries are stuck in, or just emerging, from stay-at-home orders that, among countless other consequences, have largely shut down the pipeline for new investment in early stage ventures. According to PitchBook, after a robust investment market in the 4th quarter of 2019 and 1st quarter of 2020, the amount of new financings since the pandemic began has fallen off a cliff, with steep declines in both numbers of completed deals and total dollars invested compared to April 2019. To those of us who lived through previous downturns, this change feels a lot like the dot com bust circa 2000 or the “Great Recession” that followed the global financial crisis of 2008 all over again.
In our August 2017 alert, we cautioned that Delaware choice-of-law provisions standing alone will not confer jurisdiction in Delaware. To best support an argument for litigating in Delaware, we advised that a combination of contractual provisions distinctly establishing consent to Delaware law, forum and jurisdiction should be incorporated into the parties’ agreement. A pair of recent decisions ratify this advice, and serve as further reminder that failure to expressly cover selection of venue and consent to jurisdiction, in addition to choice of governing law, could frustrate a party’s ability to litigate in Delaware. (more…)
Just as no human being is naturally immune to the COVID-19 virus, no industry is immune to its economic effects—and related M&A activity across all industries proves no exception. In the weeks following the issuance of stay-at-home orders in states across the country, multiple lawsuits have been filed by parties to agreements whose terms have been rendered economically dubious, impracticable or contrary to the fundamental assumptions on which the parties relied because of the pandemic: in the Delaware Court of Chancery alone, WeWork has filed suit to compel a Japanese investor to close a $3 billion tender offer; Bed Bath & Beyond has attempted to force 1-800-Flowers to complete a $252 million purchase of its subsidiary, PersonalizationMall.com; and a franchisee has sued its franchisor, CorePower Yoga LLC, for specific performance of a pre-pandemic agreement to buy its thirty-four yoga studios. Though all three of these cases are in the early stages of litigation—only the complaints have been filed—they involve issues and circumstances that are certain to recur in actions throughout the country. These cases represent only the tip of the iceberg when considering the types of litigation that are likely to arise from both pending and closed M&A deals and the issues that M&A attorneys and commercial litigators should be considering in addressing upheaval to the deal market caused by COVID-19. (more…)
- Corporate Transparency Act and Implications for Entity Formation and Transaction Structures
- Nasdaq’s Giant Leap Towards Diversity on the Board
- The Marijuana Opportunity Reinvestment and Expungement Act of 2019
- IRS to Allow “Workaround” to Deduction Limits for State and Local Income Taxes
- Finders May Finally Be Keepers: SEC Proposes Rules Allowing for Unregistered Broker-Dealers to Participate in Capital-Raising Transactions Under Certain Circumstances