Business – Taking Care of Business

Board of Directors Guidance When Addressing Emergency Circumstances Occasioned by the COVID-19 Pandemic

Apr 2, 2020

By: Marc Casarino, Lori Smith and Gwenn Barney

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…)

EPA to Relax Environmental Legal Enforcement During the COVID-19 Pandemic

Mar 31, 2020

By: Ryan Udell, Shane Heskin and Gwenn Barney

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.

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M&A Representation and Warranty Insurance Considerations in the Wake of the Coronavirus Pandemic

Mar 30, 2020

By: Lori Smith and Patrick Devine

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.

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Amid Coronavirus Pandemic and Declining Stock Prices, Public Companies Implement Poison Pills to Deter Corporate Raiders

Mar 24, 2020

By: Alexandria E. Kane and Patrick Devine

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…)

FTC Acts to Block Jefferson/Einstein Hospital Merger

Mar 2, 2020

By: Ryan J. Udell, Geoffrey F. Sasso, and Patrick Devine

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…)

Liquidity in Today’s Economy

Feb 10, 2020

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 Year Later: California’s Corporate Diversity Initiative

Jan 24, 2020

By: Jeremy Miller and Ryan Udell

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.

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

Jan 13, 2020

By: Jay Shapiro and Patrick Devine

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

Dec 20, 2019

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…)

Navigating the Path to a Successful Exit

Nov 21, 2019

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…)

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