Yearly Archives: 2016

Sun Capital Redux: Private Equity and Pension Liability

Posted by Michael J. Segal, Wachtell, Lipton, Rosen & Katz, on

Tuesday, April 5, 2016

Asset management, ERISA, Investor protection, Liability standards, Management, Ownership structure, Partnerships, Pension funds, Private equity, Retirement plans, Securities litigation, Securities regulation, U.S. federal courts
More from: Alicia McCarthy, Michael Segal, Wachtell Lipton

Michael J. Segal is senior partner in the Executive Compensation and Benefits Department of Wachtell, Lipton, Rosen & Katz. This post is based on a Wachtell Lipton memorandum by Mr. Segal and Alicia C. McCarthy.

In the latest chapter of a case that has been closely followed by the private equity community for over four years, a Federal District Court in Massachusetts held on remand from the First Circuit in Sun Capital Partners III, et al v. New England Teamsters & Trucking Industry Pension Fund, 10-10921-DPW (D. Mass. March 28, 2016), that non-parallel private equity funds with the same sponsor are jointly and severally liable for the multiemployer pension plan withdrawal liability of a portfolio company in which they both invest under the Employee Retirement Income Security Act of 1974 (“ERISA”), where the funds together indirectly owned 100% of the portfolio company. The First Circuit decision is discussed in our memorandum of July 29, 2013.

Social Covenants in Mergers: Legal Promises or Moral Commitments?

Posted by Daniel E. Wolf, Kirkland & Ellis LLP, on

Monday, April 4, 2016

Acquisition agreements, Board composition, Board dynamics, Boards of Directors, Corporate culture, Covenants, Management, Merger litigation, Mergers & acquisitions, Negotiation, Reputation, Target firms
More from: Daniel Wolf, Kirkland & Ellis

Daniel E. Wolf is a partner focusing on mergers and acquisitions at Kirkland & Ellis LLP. The following post is based on a Kirkland memorandum by Mr. Wolf.

With the return of acquirer stock as a featured form of consideration in many recent deals, dealmakers are once again focusing on “social” issues in striking a merger agreement. As compared to most straight cash takeovers where price garners the overwhelming share of, if not exclusive, attention, an acquisition featuring stock consideration, and especially a so-called merger-of-equals, often involves significant discussion between the parties of softer issues, including governance, board composition, management, people, and corporate identity (e.g., corporate and brand names, headquarters and facility locations, and charitable and community commitments). A number of deal developments over the last few years highlight some of the risks and considerations unique to these social terms.

The Trust Indenture Act and the Courts: Bringing the SEC to the Table

Posted by Mark J. Roe, Harvard Law School, on

Monday, April 4, 2016

Bankruptcy, Bondholders, Bonds, Debtor-creditor law, Distressed companies, Restructurings, SEC, Securities regulation, Trust Indenture Act, U.S. federal courts
More from: Mark Roe

Mark J. Roe is the David Berg Professor of Law at Harvard Law School. This post is based on a recent article by Professor Roe, available here.

Distressed firms with publicly-issued bonds often seek to restructure the bonds’ payment terms to better reflect the weakened firm’s repayment capabilities. The Depression-era Trust Indenture Act, however, bars the bondholders from voting on whether or not to accept new payment terms, requiring individualized consent to the new payment terms. Yet, such votes that bind all bondholders are commonplace now in bankruptcy. Recent application of this securities law rule to bond recapitalizations has been more consistent than it had previously been, with courts striking down restructuring deals that twisted bondholders’ arms into consenting to apparently unwanted deals. These court decisions faithfully apply the securities law rules, reducing such coercive exchanges. But the bond market, and distressed firms, would be better served by adding an exemption to the securities rules, allowing binding bondholder votes to restructure payment terms. The Securities and Exchange Commission now has authority to exempt fair restructuring votes from this now out-of-date securities law. I analyze these issues in The Trust Indenture Act of 1939 in Congress and the Courts in 2016: Bringing the SEC to the Table, a short article recently posted on SSRN.

Freedom to Trade in the Age of Heightened Market Protection

Posted by Anthony Candido, Clifford Chance LLP, on

Sunday, April 3, 2016

CFTC, Commodities, Commodities Exchange Act, Derivatives, Dodd-Frank Act, Fair values, Futures, Investor protection, Liability standards, Market efficiency, Misconduct, Securities enforcement, Securities regulation
More from: Anthony Candido, Benjamin Berringer, David Yeres, Robert Houck, Clifford Chance

Anthony Candido is a partner in the New York office of Clifford Chance LLP. This post is based on a Clifford Chance publication by Mr. Candido, David Yeres, Robert Houck, and Benjamin Berringer; the complete publication, including footnotes, is available here.

The CFTC is taking a position in enforcement litigation that would lower the bar for proving unlawful price manipulation. By abandoning the requirement of proving that the accused had a specific intent to create an artificial price and replacing it with an intent to influence price, the CFTC would materially ease its burden of proof. While doubtlessly motivated by the desire to enhance price integrity, the CFTC’s position is being strongly questioned from a legal and a policy point of view by the futures industry. A group representing the major futures industry institutions and trade associations is seeking to oppose the CFTC in an amicus brief on grounds that the CFTC’s position deviates from decades of precedent and would blur the line between legitimate trading and manipulation to create inappropriate legal uncertainty, which would act to the detriment of well-functioning markets.

Rule 144: Resale of REIT Shares in Exchange for OP Units

Posted by Daniel P. Adams, Goodwin Procter LLP, on

Saturday, April 2, 2016

Capital markets, No-action letters, Partnerships, Private placements, Registration exemptions, REITs, Rule 144, SEC, Securities regulation
More from: Audrey Leigh, Daniel Adams, David Roberts, Yoel Kranz, Goodwin Procter

Daniel P. Adams is a partner in the Business Law Department at Goodwin Procter LLP. This post is based on a Goodwin Procter publication by Mr. Adams, Yoel Kranz, Audrey S. Leigh, and David H. Roberts.

On March 14, 2016, the SEC issued a no-action letter [1] permitting holders of shares of common stock of a publicly traded REIT, or REIT shares, received in exchange for privately placed units of the REIT’s operating partnership, or OP units, to tack the holding period of the OP units to the REIT shares for purposes of Rule 144. This new position is a very significant change from the way Rule 144 has been interpreted historically by the SEC, and may lead to the elimination of registration rights in many OP unit transactions as well as to changes in the way OP unit transactions are structured.

SEC Enforcement of Internal Control Over Financial Reporting

Posted by Avrohom J. Kess & Yafit Cohn, Simpson, Thacher & Bartlett LLP, on

Friday, April 1, 2016

Accounting, Accounting standards, Audits, Financial reporting, Internal auditors, PCAOB, SEC, SEC enforcement, Securities regulation
More from: Avrohom Kess, Yafit Cohn, Simpson Thacher

Avrohom J. Kess is partner and head of the Public Company Advisory Practice and Yafit Cohn is an associate at Simpson Thacher & Bartlett LLP. This post is based on a Simpson Thacher memorandum by Mr. Kess and Ms. Cohn.

On March 10, 2016, the Securities and Exchange Commission (“SEC”) instituted settled cease-and-desist proceedings against the oil company Magnum Hunter Resources Corporation (“MHR”), its Chief Financial Officer (“CFO”), Chief Accounting Officer (“CAO”), audit engagement partner and a consultant, due to alleged failures to “properly implement, maintain, and evaluate” internal control over financial reporting (“ICFR”). [1]

Weekly Roundup: March 25-March 31

Posted by HLS Forum on Corporate Governance and Financial Regulation, on

Friday, April 1, 2016

Weekly Roundup
More from:

This roundup contains a collection of the posts published on the Forum during the week of March 25, 2016 to March 31, 2016.

Gender Diversity on Boards: The Future Is Almost Here

Posted by David A. Katz & Laura A. McIntosh, Wachtell, Lipton, Rosen & Katz, on Friday, March 25, 2016

Tags: Board composition, Board dynamics, Boards of Directors, Corporate culture, Director nominations, Disclosure,Diversity, ESG, Institutional Investors, International governance, Nominating committees, Securities Regulation

2016 Spin-Off Guide

Posted by Gregory Ostling, Wachtell, Lipton, Rosen & Katz, on Saturday, March 26, 2016

Tags: Boards of Directors, Compliance and disclosure interpretation, IPO Spinning, IRS, Mergers & acquisitions, Public firms, Securities Regulation, Spinoffs, Taxation

Can Falling Interest Rates Increase a Company’s Financing Costs?

Posted by Meyer C. Dworkin, Davis Polk & Wardwell LLP, on Sunday, March 27, 2016

Tags: Accounting, Banks, Bonds, Central banking, Corporate debt, Cost of capital, Debt securities, Financial institutions,Financial policies, Financial Regulation, Hedging, Interest, International governance, LIBOR, Risk, Risk management

Nordic Corporate Governance and Concentrated Ownership

Posted by Klaus Ilmonen, Hannes Snellman, on Monday, March 28, 2016

Tags: Controlling shareholders, EU, Europe, International governance, Investor protection, Ownership, Ownership structure, Securities Regulation, Shareholder rights, Stakeholders

Compensation Committee Guide

Posted by Michael J. Segal, Wachtell, Lipton, Rosen & Katz, on Monday, March 28, 2016

Tags: Board communication, Boards of Directors, Compensation committees, Compensation disclosure, Compensation ratios, Disclosure, Dodd-Frank Act, Engagement, Executive Compensation, Management, Proxy advisors, Say on pay,SEC, Securities Regulation, Shareholder activism

The Inside Counsel Revolution

Posted by Benjamin W. Heineman, Jr., Harvard Law School and Harvard Kennedy School of Government, on Tuesday, March 29, 2016

Tags: Boards of Directors, Compliance & ethics, Corporate culture, Corporate governance, Corporate Social Responsibility, Fiduciary duties, General counsel, Inside counsel, Management, Risk, Risk management

Supervising Large, Complex Financial Institutions

Posted by William C. Dudley, Federal Reserve Bank of New York, on Tuesday, March 29, 2016

Tags: Banks, Compliance & ethics, Federal Reserve, Financial Crisis, Financial institutions, Financial Regulation, Liquidity,Oversight, Risk management, Risk oversight, SIFIs, Stress tests, Systemic risk

Rethinking Corporate Governance for a Bondholder Financed, Systemically Risky World

Posted by Steven L. Schwarcz, Duke University School of Law, on Wednesday, March 30, 2016

Tags: Bondholders, Bonds, Corporate governance, Credit risk, Fiduciary duties, Management, Ratings agencies, Risk,Risk management, Risk-taking, Shareholder rights, SIFIs, Systemic risk

2016 Amendments to the DGCL

Posted by Gregory P. Williams, Richards, Layton & Finger, on Wednesday, March 30, 2016

Tags: Appraisal rights, Boards of Directors, Charter & bylaws, Delaware law, DGCL, Dual-class stock, Fair values,Incorporations, Jurisdiction, Mergers & acquisitions, Ownership, Shareholder voting, Special committees, State law,Tender offer

Mergers and Acquisitions: Law, Theory, and Practice

Posted by Steven Davidoff Solomon, UC Berkeley School of Law, on Thursday, March 31, 2016

Tags: Acquisition agreements, Acquisitions, Appraisal rights, Buyouts, Cross-border transactions, Deal protection,Delaware law, Firm valuation, Freezeouts, Go-shop, Hostile takeover, Mergers & acquisitions, Negotiation, Securities Regulation, Williams Act

Cross-Ownership by Institutional Investors

Posted by Barry A. Nigro, Jr., Fried, Frank, Harris, Shriver & Jacobson LLP, on Thursday, March 31, 2016

Tags: Antitrust, Controlling shareholders, DOJ, Hart-Scott-Rodino Act, Incentives, Institutional Investors, Management,Minority shareholders, Ownership, Securities Regulation, Shared ownership

Cross-Ownership by Institutional Investors

Posted by Barry A. Nigro, Jr., Fried, Frank, Harris, Shriver & Jacobson LLP, on

Thursday, March 31, 2016

Antitrust, Common ownership, Controlling shareholders, DOJ, Hart-Scott-Rodino Act, Incentives, Institutional Investors, Management, Minority shareholders, Ownership, Securities regulation
More from: Barry Nigro, Matthew Joseph, Nathaniel Asker, Fried Frank

Barry A. Nigro Jr., is a partner in the Antitrust and Competition and Corporate Practices and chair of the Antitrust Department at Fried, Frank, Harris, Shriver & Jacobson LLP. This post is based on a Fried Frank publication by Mr. Nigro, Nathaniel L. Asker, and Matthew E. Joseph.

On Capitol Hill last week, the Assistant Attorney General for the Antitrust Division of the Department of Justice, William J. Baer, confirmed that the DOJ is investigating potential antitrust issues arising from investors’ “cross-ownership,” or minority shareholdings, in firms that compete against each other in concentrated industries. Baer’s statement follows two recent academic papers suggesting that institutional investors’ minority interests in major U.S. airlines may reduce competition among the carriers. Baer told a Senate subcommittee that the DOJ is investigating cross-ownership “in more than one industry,” and press reports indicate that the airlines industry is one of these. [1] Notably, Baer acknowledged that it was unclear whether cross-ownership alone would violate the existing antitrust laws, absent evidence of collusion. [2]

Mergers and Acquisitions: Law, Theory, and Practice

Posted by Steven Davidoff Solomon, UC Berkeley School of Law, on

Thursday, March 31, 2016

Acquisition agreements, Acquisitions, Appraisal rights, Buyouts, Cross-border transactions, Deal protection, Delaware law, Firm valuation, Freezeouts, Go-shop, Hostile takeover, Mergers & acquisitions, Negotiation, Securities regulation, Williams Act
More from: Brian Quinn, Claire Hill, Steven Davidoff

Steven Davidoff Solomon is a Professor of Law at UC Berkeley School of Law. The following post is based on a textbook written by Professor Davidoff Solomon; Claire Hill, Professor of Law at the University of Minnesota School of Law; and Brian Quinn, Associate Professor of Law at Boston College.

In our recently released textbook Mergers and Acquisitions: Law, Theory, and Practice we aim to change the way that transactional law is taught in U.S. law schools by immersing students in a deal environment.

We wrote this book with the intent of teaching students not just the law and theory behind mergers and acquisitions, but the practice of the art itself. Being an M&A practitioner or litigator requires not only a knowledge of the law—the statutes, cases, and regulations—but also the documentation and the practices within the transacting community. The textbook can also serve as a treatise—outlining and documenting the current state of M&A law and practice. It is therefore useful not just for students but also for practitioners and academics.

2016 Amendments to the DGCL

Posted by Gregory P. Williams, Richards, Layton & Finger, on

Wednesday, March 30, 2016

Appraisal rights, Boards of Directors, Charter & bylaws, Delaware law, DGCL, Dual-class stock, Fair values, Incorporations, Jurisdiction, Mergers & acquisitions, Ownership, Shareholder voting, Special committees, State law, Tender offer
More from: Gregory Williams, Richards Layton

Gregory P. Williams is chair of the Corporate Department at Richards, Layton & Finger. This post is based on a Richards, Layton & Finger publication, and is part of the Delaware law series; links to other posts in the series are available here.

Legislation proposing to amend the General Corporation Law of the State of Delaware (the “DGCL”) has been released by the Corporate Council of the Corporation Law Section of the Delaware State Bar Association and, if approved by the Corporation Law Section, is expected to be introduced to the Delaware General Assembly. If the amendments become effective, they would result in several changes to the DGCL. Among other things, the proposed amendments would clarify the requirements and procedures relating to so-called “intermediate-form” mergers under Section 251(h) of the DGCL and would make several changes to Section 262 of the DGCL, which governs appraisal rights, to dispense with certain de minimis appraisal claims and to give parties an opportunity to make pre-judgment payments to appraisal claimants to limit the amount of interest that would otherwise accrue on an appraisal award. READ MORE »

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Yearly Archives: 2016

Sun Capital Redux: Private Equity and Pension Liability

Social Covenants in Mergers: Legal Promises or Moral Commitments?

The Trust Indenture Act and the Courts: Bringing the SEC to the Table

Freedom to Trade in the Age of Heightened Market Protection

Rule 144: Resale of REIT Shares in Exchange for OP Units

SEC Enforcement of Internal Control Over Financial Reporting

Weekly Roundup: March 25-March 31

Gender Diversity on Boards: The Future Is Almost Here

2016 Spin-Off Guide

Can Falling Interest Rates Increase a Company’s Financing Costs?

Nordic Corporate Governance and Concentrated Ownership

Compensation Committee Guide

The Inside Counsel Revolution

Supervising Large, Complex Financial Institutions

Rethinking Corporate Governance for a Bondholder Financed, Systemically Risky World

2016 Amendments to the DGCL

Mergers and Acquisitions: Law, Theory, and Practice

Cross-Ownership by Institutional Investors

Cross-Ownership by Institutional Investors

Mergers and Acquisitions: Law, Theory, and Practice

2016 Amendments to the DGCL

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