Indemnification clauses in purchase and sale agreements are intended to address the obligation of one party to indemnify and hold the other party harmless from direct and third party claims. However, indemnification clauses also allocate the risk of losses between the parties. An indemnification clause should specify the rights of the parties following a breach … Continue Reading
Last week, the Securities and Exchange Commission (SEC) made good on its promises to enforce violations of its non-GAAP financial measure disclosure rules. MDC Partners agreed to pay a $1.5 million dollar penalty to settle the SEC’s charges relating to non-GAAP disclosures made by the company. The SEC alleged that MDC Partners had misused several … Continue Reading
On Jan. 22, 2016, the Delaware Court of Chancery released its opinion in In re Trulia Stockholder Litigation in which it rejected a “disclosure only” settlement of a shareholders’ suit challenging an M&A transaction. This decision confirms the trend of increasing hostility of the Delaware courts towards “disclosure only” settlements and serves as a warning … Continue Reading
Andrew Ross Sorkin wrote an interesting article in Tuesday’s New York Times regarding the practice of private equity firms designating the legal counsel to be used by its lenders in a leveraged buyout financing. In other words, the private equity firms engaging in this practice are hand selecting, and paying the fees of, the lawyers … Continue Reading
Earlier this month, The Wall Street Journal published an article on the ongoing litigation in the wake of the 2014 sale of Tibco Software Inc. to Vista Equity Partners. The Tibco litigation involved an error in the calculation of the number of shares outstanding that resulted in Tibco shareholders receiving approximately $100 million less than the … Continue Reading
The SEC has approved 12 Regulation A+ offerings (and about 40 initial Form 1-A filings have been made) since the new Regulation A+ rules became effective in June. The companies now raising money under Regulation A+ include a dental device manufacturer, technology companies, an automaker, a cannabis company and a bank. Regulation A+ allows private companies … Continue Reading
Regulation A+ is a potentially attractive way for real estate developers to raise up to $50 million for specific projects by selling debt or equity to the public without having to meet all of the requirements of a traditional initial public offering. Several investment platforms for real estate development allow developers to market investment offerings … Continue Reading
We reported previously in April 2014 on the ruling by the United States Court of Appeals for the District of Columbia Circuit striking down the part of the SEC’s conflict minerals rules that requires a registrant to describe its products as not “DRC conflict free” and upholding the remainder of the conflict minerals rules. Upon … Continue Reading
The SEC has proposed rules that require the securities exchanges to adopt rules that in turn require listed companies to adopt, disclose and comply with a clawback policy for executive compensation based on erroneous financial statements. The new rules would apply to almost all companies listed on a securities exchange (such as NASDAQ and NYSE), … Continue Reading
Recently finalized Regulation A+ allows most private companies to raise up to $50 million by selling securities to the public. Companies using Regulation A+ can advertise the offering and solicit investors, and anyone can invest (subject to some reasonable investment limits for non-accredited investors). Owners of a company raising capital with Regulation A+ can sell up … Continue Reading
Opinions in registration statements continue to be one of the most commonly litigated items under Section 11 of the Securities Act of 1933 (“Section 11”). On March 24, 2015, the U.S. Supreme Court in Omnicare, Inc. v. Laborers District Council Construction Industry Pension Fund clarified a lower court split in the application of Section 11 … Continue Reading
Drag along rights and an accompanying waiver by a minority stockholder of appraisal rights in connection with a change in control transaction approved by the majority stockholder are common features in stockholders agreements among majority stockholders and minority stockholders. The recent case of Michael C. Halpin, Et. Al. v. Riverstone National, Inc., No. 9796–VCG (Del. … Continue Reading
The Securities and Exchange Commission (SEC) has approved the Financial Industry Regulatory Authority’s FINRA Rule 2040, which will permit the payment of compensation, fees, concessions, discounts, commissions or other allowances to unregistered persons if a member firm determines the activities of the unregistered person in question do not require registration as a broker-dealer. Support for … Continue Reading
HR 686, The Small Business Mergers, Acquisitions, Sales & Brokerage Simplification Act, was introduced in the U.S. House of Representatives on Feb. 3, 2015. This bill is identical to HR 2274, which was passed unanimously in the U.S. House of Representatives in 2014, but was never acted upon in the U.S. Senate. HR 686 would … Continue Reading
The Broker-Dealer Section of the North American Securities Administrators Association is seeking comments no later than Feb. 16, 2015, on a proposed uniform state model rule exempting certain merger and acquisition brokers from registration as brokers, dealers, agents or broker-dealers under state securities laws. The proposed uniform model rule represents the evolution among regulators and … Continue Reading
During 2014, Congress has gained momentum toward creating an exemption from federal broker-dealer registration for “M&A brokers” who facilitate mergers, acquisitions, sales and similar transactions involving privately held companies. H.R. 2274 unanimously passed the U.S. House of Representatives, but the U.S. Senate did act on the bill. If passed, the measure would have permitted M&A brokers to … Continue Reading
A recent Sixth Circuit case, interpreting Ohio law, found that a merger agreement stating that the representations and warranties “shall survive…the Closing until… the second anniversary date of the Closing…,” without more, was not sufficient to modify the statute of limitations for breach of contract claims related to the merger agreement. Fortunately, this issue can … Continue Reading
Yesterday, the SEC announced penalties totaling approximately $2.6 million against directors, officers, beneficial owners and issuers for failure to promptly report information about holdings and transactions in company stock. The primary enforcement weapon for these types of failures historically has been public shaming: Rule 405 of Regulation S-K requires issuers to identify insiders who failed … Continue Reading
Almost 40 years ago, Congress passed the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”). The HSR Act provided a mechanism pursuant to which parties to an acquisition of assets or voting securities would be required, if certain thresholds were met, to file a notification form with the antitrust enforcement agencies — the Federal … Continue Reading
It has been more than two years since the JOBS Act was passed and almost nine months since the SEC proposed crowdfunding rules — but still no final rules. Should entrepreneurs care? Probably not. The proposed SEC rules are burdensome. The rules limit the total amount raised to $1 million in any rolling 12-month period, … Continue Reading
Captive insurance companies have a long history worldwide and in the United States. A majority of states have captive insurance legislation in place and onshore jurisdictions such as Vermont, Utah, Delaware, Tennessee, Arizona and Connecticut promote their captive legislation as an economic engine to attract new businesses. In general, a captive insurance company is a … Continue Reading
We reported previously on the ruling by the United States Court of Appeals for the District of Columbia Circuit striking down the part of the SEC’s conflict minerals rules that requires a registrant to describe its products as not “DRC conflict free” and upholding the remainder of the conflict minerals rules. Many observers have been … Continue Reading
On April 24, 2014, Siliconware Precision Industries Co., Ltd. (Siliconware) earned the distinction of being the first registrant to file a conflict minerals report on Form SD. Here are links to Siliconware’s Form SD and its conflict minerals report. Although the filing deadline is not until June 2, 2014, this example gives registrants a glimpse … Continue Reading
On April 14, 2014, the United States Court of Appeals for the District of Columbia Circuit issued its ruling in the challenge to the SEC’s conflict minerals rules. The court struck down the requirement that an issuer describe its products as not “DRC conflict free” because it violates the First Amendment by compelling speech by … Continue Reading
