Barbara L. Becker is partner and co-chair of the Mergers and Acquisitions Practice Group at Gibson, Dunn & Crutcher LLP, and Eduardo Gallardo is a partner focusing on mergers and acquisitions, also at Gibson Dunn. The following post is based on a Gibson Dunn M&A report excerpt by James Moloney and Matthew N. Walsh. The full publication is available here. Work from the Program on Corporate Governance about bundling includes Bundling and Entrenchment by Lucian Bebchuk and Ehud Kamar, discussed on the Forum here.
The recent decision by the U.S. District Court for the Southern District of New York in Greenlight Capital LP v. Apple Inc. [1] serves as a good reminder of the importance of ensuring that management proposals do not run afoul of the Securities and Exchange Commission’s (“SEC”) unbundling rules. Impermissible “bundling” of management proposals, as covered by Rules 14a4(a)(3) and 14a-4(b)(1) promulgated under the Securities Exchange Act of 1934, as amended, is the practice of combining two or more separate matters as one proposal, such that shareholders must evaluate and vote on issues as a single matter, rather than voting on each matter individually. The Greenlight decision focused on the disclosure in Apple’s proxy statement, which included a proposed amendment to Apple’s articles of incorporation that, if approved, would: (1) facilitate majority voting for incumbent members of Apple’s directors; (2) revoke the board of director’s power to unilaterally issue preferred stock; (3) establish a par value for Apple’s common stock; and (4) eliminate certain obsolete provisions, such as references to preferred stock.
Plaintiff, Greenlight Capital, alleged that Apple’s proposal violated the SEC proxy rules prohibiting the “bundling” of multiple items. Judge Richard J. Sullivan rejected Apple’s argument that the proposal was merely a single proposal to amend its articles of incorporation, and ordered the matters unbundled. Importantly, the court noted that Apple could not simply rely upon the prevailing market practice (coupled with apparent SEC inaction) with respect to bundling management proposals—the court was compelled to exercise its “independent judgment” regarding the matter.
Investor Organizations Oppose Tightening of Canadian Disclosure Regime
More from: Alex Moore
The following post comes to us from Alex Moore, partner at Davies, Ward, Phillips & Vineberg LLP, and discusses an MFA and AIMA joint comment letter submitted with the Canadian Securities Administrators. The comment letter is available here.
The Managed Funds Association (“MFA”) and the Alternative Investment Management Association (“AIMA”) and have jointly submitted a comment letter with the Canadian Securities Administrators with respect to proposed changes to Canada’s block shareholder reporting regimes known in Canada as the Early Warning Reporting (“EWR”) system and the Alternative Monthly Reporting (“AMR”) system. The EWR and AMR systems are the Canadian equivalents to Schedule 13(d) and 13(g) disclosure in the United States.
The comment letter provides an extensive discussion of the importance of shareholder engagement and activist investing and the consequential benefits from such activity that accrue to all shareholders, as well as to target companies and the economy more generally. The letter submits that the CSA’s proposed tightening of Canada’s block shareholder reporting rules will stifle shareholder engagement and democracy and insulate incumbent managers from owners. The full text of the MFA and AIMA comment letter is available here: http://www.osc.gov.on.ca/documents/en/Securities-Category6-Comments/com_20130712_62-104_kaswellsj.pdf.
The changes to the EWR and AMRS regimes proposed by the CSA include:
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