The January-February issue of the Deal Lawyers newsletter was just sent to the printer. It is also available online to members of DealLawyers.com who subscribe to the electronic format. This issue includes the following articles:
– So, You Think You Can (Deal) Jump?
– Delaware Chancery Litigation Over Continuation Vehicle Transaction Highlights Considerations for GP-Led Secondaries
– Just Announced: The 2026 Proxy Disclosure & 23rd Annual Executive Compensation Conferences
The Deal Lawyers newsletter is always timely & topical – and something you can’t afford to be without to keep up with the rapid-fire developments in the world of M&A. If you don’t subscribe to Deal Lawyers, please email us at info@ccrcorp.com or call us at 800-737-1271.
A trio of proponent lawsuits have sprung up in the past week, which was one of the predicted outcomes for this year’s Rule 14a-8 process. This Cleary memo summarizes the complaints and potential consequences. Here’s an excerpt:
On February 17, 2026, two separate lawsuits were filed challenging company decisions to exclude shareholder proposals from their 2026 proxy materials. A third lawsuit followed just two days later, on February 19, 2026. These cases mark the earliest examples of litigation under this season’s revised Rule 14a-8 no-action letter process.
The first two lawsuits, filed in federal courts in New York and Washington, D.C., both challenge exclusions based on the ordinary business exception under Rule 14a-8(i)(7). One involves a group of New York City pension funds challenging AT&T Inc.’s exclusion of an EEO-1 workforce diversity disclosure proposal; the other involves the Nathan Cummings Foundation challenging Axon Enterprise, Inc.’s exclusion of a political spending disclosure proposal. The third lawsuit, also filed in federal court in New York, involves a procedural dispute over whether PepsiCo, Inc. properly notified an individual shareholder represented by People for the Ethical Treatment of Animals (PETA) of alleged deficiencies in the proposal submission.
All three companies filed exclusion noticesi with the SEC and included the unqualified representation required by the Commission—namely, that each company has a reasonable basis to exclude the proposal based on the provisions of Rule 14a-8. While the SEC has yet to react, and may not given prior statements, these lawsuits offer useful lessons for companies navigating exclusion decisions this season. This alert focuses on the first two lawsuits, though the emergence of a procedural challenge underscores that litigation risk extends beyond substantive questions of excludability.
I blogged about one of the initial lawsuits last week on the Proxy Season Blog – along with other risks that companies may want to consider when deciding which path to take this year on Rule 14a-8 shareholder proposals. The Cleary memo details the parade of horribles that companies could have to contend with if a court grants a mid-season injunction to order inclusion of a previously excluded proposal in a proxy statement. It also looks at the procedural history of the cases to-date, to try to draw lessons for the rest of us. Here are the high points of the suggested takeaways:
– Provide detailed, company specific analysis in (j) notices – but know it’s not a complete shield
– Consult data to inform your exclusion strategy – how close does your situation track with no-action precedent?
– Track past settlements, withdrawals or commitments made to proponents
– Engage with proponents before excluding
– Consider the full spectrum of risks
As the Cleary team notes, the SEC’s lighter touch this year has not made the exclusion calculus any simpler. We’re continuing to track updates on the Proxy Season Blog and in our “Proxy Season” Practice Area.
The SEC’s Small Business Capital Formation Advisory Committee is meeting virtually today at 10:00 am ET (they were going to meet at SEC headquarters but got snowed out). Here are the agenda highlights:
– 10:20 am – Deep Dive on “Finders” (continuing a July 2025 discussion)
– 1:00 pm – Update from the SEC’s Office of the Advocate for Small Business Capital Formation – reviewing the FY25 Staff Report
– 1:15 pm – Shedding Light on the Private Secondary Market
You can watch the webcast by going to the agenda page.
In this 31-minute episode of the Women Governance Trailblazers podcast, Courtney Kamlet and I spoke with Jen Sisson, who serves as CEO of the International Corporate Governance Network. We discussed:
– ICGN’s mission, members, and current activities.
– Jen’s thoughts on balancing global corporate governance standards with local and business-specific nuances.
– Finding common ground in conversations about governance standards and regulatory changes.
– Different approaches to the shareholder proposal process across the world.
– Perspectives from long-term institutional investors financial activism.
– Things that excite Jen about corporate governance right now.
– Jen’s advice for the next generation of women governance trailblazers.
To listen to any of our prior episodes of Women Governance Trailblazers, visit the podcast page on TheCorporateCounsel.net or use your favorite podcast app. If there are governance trailblazers whose career paths and perspectives you’d like to hear more about, Courtney and I always appreciate recommendations! Drop me an email at liz@thecorporatecounsel.net.
Like a bad on-again, off-again relationship, tariffs were “off” early Friday when SCOTUS issued its opinion in Learning Resources v. Trump – ruling 6-3 that the International Emergency Economic Powers Act doesn’t give the president the authority to unilaterally impose a tax. Before the day was out, the White House issued a proclamation imposing a (mostly) across-the-board 10% import – beginning tomorrow, February 24th, lasting for a limited time period of 150 days, and subject to a list of product exceptions. Here’s the fact sheet.
Of course, in today’s world, you can’t just rely on an official fact sheet. The president said in a Truth Social post on Saturday that he planned to raise the Section 122 tariff to the statutory cap of 15% – and also indicated that the administration would continue to work to issue new tariffs. See this Politico article for more about that, this summary from GHY International (a customs brokerage) for key points on how the Section 122 tariff is expected to apply, this Global Trade Alert explainer for a comparison of the Section 122 tariffs to the IEEPA tariffs that were struck down, and this NYT article for other potential tariff avenues.
Similar to last year, this tariff drama is playing out at a time when many companies are finalizing their Form 10-K. For better or worse, companies have become somewhat accustomed to flip-flopping and uncertainty on this topic, so that may already be built into many tariff-related disclosures. We’ve also blogged about tariffs in one way or another over 3 dozen times since February of last year (compared to 4 mentions in the entire history of the blog before that) – and we continue to post resources in our “Trump Administration Tariffs” Practice Area for members – so these issues are relatively fresh in disclosure lawyers’ minds.
Nevertheless, the disclosure issues still require a fresh think each time around because the facts and circumstances are always evolving. And although it would be great if you could simply unwind your tariff disclosure to pretend like this all never happened, the reality is that things are still very uncertain and it’s unlikely we’ll return to the old status quo. So, I’ll recap a few key points:
– Risk factors should discuss material company-specific impacts (and ongoing uncertainties). This AP article gives an example of how tariffs (and their recission) affect companies in different ways. Keep in mind that even if a company is sourcing domestically, the global trade war may affect local supply and pricing. We’ve blogged many times about different types of risks that could arise – a few examples relate to prices, costs of goods, inflationary impact, supply chain disruptions, trade deal uncertainty, and adaptation decisions.
– Non-GAAP issues could come into play if the company has been adjusting for tariff impacts.
– As Meredith shared last fall, companies have been discussing tariffs in the MD&A (consider similar material issues as noted above for risk factors), Quantitative & Qualitative Disclosures About Market Risks, and even in the financial statements in some instances. Affected companies will need to consider whether to add, remove, or modify any of these disclosures.
– Reuters reported that thousands of companies have sued the administration over tariffs and are seeking refunds. Whether and when refunds will be distributed is very much up in the air. Especially for large companies, it may be a stretch to say that this type of thing is a material legal proceeding not incidental to the business, but securities lawyers should think through Item 103 of Regulation S-K to make sure. It doesn’t seem like this type of proceeding would generally involve a loss contingency either – but I’m not an accountant (or a litigator)! Companies should make sure to evaluate their particular circumstances.
John blogged last week that debt offerings are having a moment – in large part to fund AI-related capex – and “hyperscalers” are negotiating atypical terms. The AI boom is also one factor that’s driving a surge in convertible notes issuances, according to this Cleary memo.
In the converts space, PIPEs and pre-IPO issuances are becoming more common – and the notes often look different than their traditional counterparts. The memo says that PIPE convertible notes are including bespoke features such as:
– Governance rights, such as board or observer seats, and the right to vote the underlying shares on an as-converted basis.
– Consent rights over items such as changes of control, M&A or other extraordinary transactions; material asset sales, investments, expenditures, borrowings, or issuances; related party transactions; material changes to organizational documents or lines of business; and other material adverse changes.
– Guarantees or collateral.
– Financial covenants.
– Prepayment provisions.
– Purchase price adjustments beyond standard anti-dilution provisions in capital markets convertible notes – e.g., ratchets for lower-priced issuances within a certain period.
– Equity sweeteners, such as warrants.
– Paying interest cash or in kind (PIK interest), or a combination of the two.
– Alternative return calculations – e.g., based on a specified internal rate of return (IRR) or multiple on invested capital (MOIC).
– An extended lock-up or standstill for the investor, as well as restrictions on hedging and transfers.
– Registration rights to facilitate SEC registered resale.
– Issuing in the form of preferred stock, rather than debt.
The memo says that converts are also playing a growing role in the pre-IPO ecosystem, with pre-IPO convert deals often involving discussions of similar features as PIPE converts. See the memo for a more nuanced discussion. If you’re looking for more on converts, check out our “Convertible Debt” Practice Area for more resources.
We’ve posted the transcript for our annual webcast “The Latest: Your Upcoming Proxy Disclosures” with Mark Borges from Compensia and CompensationStandards.com, Dave Lynn of Goodwin Procter, TheCorporateCounsel.net and CompensationStandards.com, Alan Dye from Hogan Lovells and Section16.net and Ron Mueller from Gibson Dunn. They broke down all you need to know for the upcoming proxy season. The webcast covered the following topics:
– Status of SEC Executive Compensation Disclosure Requirements
– Other Possible Topics for SEC Review
– Incentive Compensation – Disclosure Considerations for Tariff Challenges and Discretionary Adjustments
– Executive Security and Other Key “Perks” Disclosures
– Investor Perspectives: “Homogenization” and Performance Equity
– Proxy Advisors – Impact of the Executive Order
– Proxy Advisors – Voting Policy Updates for 2026
– Proxy Advisors – Impact of Announced Move Towards “Customization” of Voting Policies
– Proxy Advisors – Status of Legal Challenges in Texas and Florida
– New Challenges with Shareholder Engagement
– Clawback Policies – Lessons from 2025
– Compensation-Related Shareholder Proposals in 2026
– ESG and DEI Goals: Impact of Shifting and Conflicting Perspectives
– Managing Stock Price Volatility When Granting Equity
This program covered a lot of ground on how to anticipate and handle difficult proxy season issues. Members of this site can access the transcript of this program for free – as well as on-demand CLE credit. If you are not a member of TheCorporateCounsel.net, email info@ccrcorp.com to sign up today and get access to the replay and full transcript. It’s a great way to get up to speed!
While securities fraud claims based on alleged “hypothetical risk factors” aren’t likely to be a high priority for the SEC in the current environment, they continue to get some traction in private securities litigation. The 9th Circuit’s decision earlier this month in Const. Laborers Pension Trust v. Funko, (9th Cir.; 2/26) provides further evidence of that – and highlights the potential for these claims to preclude companies from relying on the PSLRA’s safe harbor for forward-looking statements. Here’s an excerpt from The 10b-5 Daily’s blog about the case:
In [Funko], the plaintiffs alleged that Funko’s “risk disclosures” about its ability to manage its inventory in the future “concealed the facts that Funko had already failed to manage its inventory and that its business, financial condition, and operations were already adversely affected.” The district court found that these risk disclosures were protected by the PSLRA’s safe harbor because the plaintiffs failed to adequately plead actual knowledge of their falsity. On appeal, however, the Ninth Circuit panel appears to have created a new exception to the safe harbor.
In particular, the panel concluded that because the alleged omission related to Funko’s current failure to manage its inventory, the risk disclosure “implicitly serves as a comment on the present state of affairs, because it suggests that the circumstance posing the risk has not yet occurred.” And, as a result, the risk disclosure “does not fall under the safe harbor for forward-looking statements because its falsity lies not in the failure to predict the future, but in the implicit assertion about the present that the risk identified has not happened yet.” In other words, if a plaintiff alleges an “affirmative misrepresentation theory” then the otherwise forward-looking risk disclosure is converted into a statement of present fact and is not subject to the safe harbor.
The blog notes that the 9th Cir.’s position here is unusual, and that taken to its logical conclusion could essentially gut the PSLRA’s safe harbor, because “virtually every forward-looking statement securities fraud claim is based on the alleged omission of some ‘undisclosed fact tending to seriously undermine the accuracy of the statement.’”
It’s worth pointing out that federal courts have long had a somewhat tortured relationship with the PSLRA safe harbor for forward-looking statements. If you’re interested in learning more about how judges have sometimes twisted themselves into a knot to avoid applying the safe harbor, check out this article that I wrote for The Corporate Counsel newsletter a few years ago.
Over on The Business Law Prof Blog, Ben Edwards provides some interesting statistics on the jurisdiction of incorporations for companies that went public in 2025. Those statistics come from a slide deck prepared by Houlihan Lokey’s Robert Rosenberg for a PLI M&A conference in which both gentlemen participated. Houlihan Lokey’s data indicates that while Delaware was the jurisdiction of incorporation for over 80% of IPOs conducted in 2022-2024, its share fell to just under 62% in 2025. Nevada was the jurisdiction of incorporation for nearly 17% of IPO issuers in 2025, while Texas came in at just under 4%.
Does this mean it’s time for Delaware to panic? Ben doesn’t think so:
Although I can’t speak for the other panelists here, I think we all expect that Delaware will remain king of the hill by a substantial margin. There have been some shifts and some companies moving, but Delaware will continue to grow both in terms of overall numbers from private entity formation, public company IPOs, and public companies deciding to move to Delaware from other jurisdictions.
Delaware’s overall numbers depend on both DExits and DEntries. Companies sometimes shift their incorporation from one jurisdiction to another. As long as more are moving in than moving out, Delaware will continue to grow. Delaware has a dominant product. That isn’t likely to change anytime soon. But that doesn’t mean that there isn’t any room for other states to offer alternatives.
Traditionally, most companies confronted with an SEC enforcement action have opted to negotiate a settlement with the agency. However, this Dentons blog says that with the change in the SEC’s approach to corporate penalties and uncertainties regarding the continued viability of disgorgement in cases not involving investor harm, companies should give some thought to potentially litigating with the SEC:
Corporate penalties took a nose-dive following the change in administration, and this downward trend is generally expected to continue in 2026, with the possibility of a change in penalty policy. And expect the SEC to consider giving more credit for cooperation and remediation than before. There is also more uncertainty about the SEC’s use of the disgorgement remedy until the US Supreme Court decides later this year whether the SEC must show “pecuniary harm” to investors to obtain disgorgement.
Given this uncertainty, litigating instead of just settling should be carefully considered as an option in the defense toolkit. Litigation, or even the credible threat of litigation, can often yield better results, especially when regulators are seeking unreasonable monetary and non-monetary sanctions.
The blog also speculates on likely corporate enforcement targets, and says that companies with foreign ties, those with prior regulatory issues, and companies that are promoting new products (whether AI-related or not) may find themselves on the SEC’s radar.
