Monthly Archives: July 2008

FASB Proposes Amendments to SFAS No. 5, Accounting for Contingencies

This post is from John F. Olson of Gibson, Dunn & Crutcher LLP. We have received other memoranda on the proposed amendments to Statement of Financial Accounting Standards No. 5 by Eric Roth of Wachtell, Lipton, Rosen & Katz and our guest contributor Holly Gregory of Weil, Gotshal & Manges LLP. The memoranda are available here and here.

My colleagues and I have prepared a memorandum summarizing the serious concerns raised for public companies by proposed amendments to the Financial Accounting Standards Board’s Statement of Financial Accounting Standards Number 5, dealing with loss contingencies. Boards of directors, particularly audit committee members, and those who advise boards should become familiar with the proposed amendments and the potential consequences, which include earlier, more detailed public disclosure and, including liability estimates, for litigation and other claims, even in cases where the company expects to prevail or does not believe there will be a material cost to settle the matter. Comments in writing are due on this proposed amendment by August 8, 2008 and FASB will thereafter host an open forum on the issue at which those who have submitted comments may testify. We welcome reactions to the concerns we have expressed.

The memorandum is available here.

Delaware Supreme Court to Rule on the Validity of Shareholder-Adopted Bylaws

This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

The Staff of the Securities and Exchange Commission has certified to the Delaware Supreme Court two questions of law regarding the permissibility of a bylaw amendment submitted as a shareholder proposal to a Delaware corporation, CA, Inc. The amendment would require the company to reimburse reasonable stockholder expenses incurred in running a short slate of director nominees for election. This is the first time that the SEC has used this certification procedure.

CA asserts that the shareholder proposal may be excluded from its 2008 proxy materials under Exchange Act Rule 14a-8 on the grounds that the proposal is an improper subject for shareholder action under Delaware law and that the proposal, if adopted, would cause CA to violate Delaware law. The Court has agreed to an immediate determination of the questions certified and ordered briefs to be filed on or before Monday, July 7. Oral argument is to be held on Wednesday, July 9.

The Supreme Court’s order accepting the questions certified by the SEC is available here. The SEC’s certification of questions of law, with the SEC General Counsel’s covering letter, are available here and here. The competing legal opinions are available here and here.

Sovereign Wealth Fund Investment in the U.S. – An Update

This post is from Mark Gordon of Wachtell, Lipton Rosen & Katz.

Together with my colleagues Adam Emmerich and Sabastian V. Niles, I have issued a memorandum entitled “Sovereign Wealth Fund Investment in the U.S. – Six Months Later,” which discusses the surprising slowdown in SWF Activity in the U.S. since the end of 2007 and into the opening weeks of 2008 when investment activity by these funds reached new heights. Our memorandum discusses some of the reasons for the slowdown, highlighting the possibility that the uncertain political receptivity to SWF investments and heightened regulatory activity has chilled SWF interest in the U.S. by increasing the costs and risks of investment. The memorandum concludes by calling for continued SWF activity in order to develop a track record of successful investments that will help cause political concerns to recede and by identifying the critical issues for those SWF transactions that get to the negotiation phase.

The memorandum is available here.

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