July 24, 2015

Section 13(d): More Court Guidance on “Group” Status

For those of you that have been tasked with determining whether a “group” is formed for purposes of Section 13(d), you know that it’s a fact-intensive analysis – and often very difficult to determine with any real certainty. In recent months, even more pressure has been put on this analysis because of the SEC’s Sections 13(d) & 16 enforcement initiatives that Broc has blogged about (also see this blog). Fortunately, the Southern District of New York’s recent opinion – in Greenberg v. Hudson Bay Master Fund – provides some additional guidance that may be helpful when grappling with group formation. This blog summarizes the guidance:

– While participation in private placements with other investors does not in and of itself create a Section 13(d) group, it is advisable to include language in the transaction documents expressly providing that the obligations of the parties are several and not joint and that no action taken by a buyer pursuant to such agreements shall be deemed to create a group or create a presumption that the buyers are in any way acting in concert;

– It is essential for blocker provisions to expressly apply the conversion cap with other parties that may be deemed to be a member of a Section 13(d) group with the applicable holder; and

– Hedge funds cannot evade Section 16 obligations and liabilities by claiming that they have divested themselves of voting and dispositive power over shares in favor of their registered general partners or investment advisors; the funds themselves will generally be deemed beneficial owners of the shares that they hold.

Also see Alan Dye’s blog for a discussion of the particulars & analysis of the case.

SOX After 13 Years: Evolving Compliance & Increasing Costs

As we recover from the 5th Anniversary of Dodd-Frank and head towards the 13th anniversary of the adoption of Sarbanes-Oxley – check out Protiviti’s 2015 Sarbanes-Oxley Compliance Survey. This survey takes a detailed look – including a number of charts & diagrams – at the most recent Sarbanes-Oxley compliance trends and the time & money being spent on Sarbanes-Oxley related compliance. Here’s an excerpt from the findings:

SOX compliance costs, together with external audit fees and scrutiny, are increasing – External auditors are enhancing their scrutiny of internal controls and their fees are increasing as a result. Nearly three out of four organizations reported that their external audit firm is placing more focus on evaluation of internal control over financial reporting, and external audit fees rose for more than half of companies in the most recent fiscal year. In terms of overall internal SOX compliance costs (excluding external audit fees), 58 percent of large company respondents spent more than $1 million in their most recent fiscal year, while 95 percent of small companies spent less than $500,000. Bottom line: The larger your company, the more you will need to invest in SOX compliance.

More on our “Proxy Season Blog”

We continue to post new items regularly on our “Proxy Season Blog” for members. Members can sign up to get that blog pushed out to them via email whenever there is a new entry by simply inputting their email address on the left side of that blog. Here are some of the latest entries:

– Sample: Proxy Statement Reg Summary Sheet
– Shareholder Proposals: Corp Fin Allows Exclusion of “Review of Company’s Voting Policies” Proposal
– More Debate: Harvard’s “Shareholder Rights Project”
– Trinity v. Wal-Mart: Serious Implications for the Ordinary Business Exclusion
– Shareholder Proposals: Playing Games With Submission Deadlines

– Jeff Werbitt