May 23, 2006

Delaware Bar Association to Propose Majority Vote Bill

Last week, the annual legislation amending the Delaware General Corporation Law was introduced. Among other things, the bill addresses some of the majority voting issues raised recently by investors. As is customary, the Council of the Corporation Law Section of the Delaware Bar Association proposed the changes, which are expected to be approved.

I was able to catch up with a member of the Council that worked on the draft bill, John Grossbauer of Potter Anderson & Corroon, to discuss this development in this podcast, including:

– What does the Delaware bill say?
– How does it compare to the ABA’s recommendations for the Model Business Corporation Act?
– When is the Delaware legislature expected to act?

Clarifying the SEC’s Latest Section 404 Deadlines

In last week’s press release on Section 404, the SEC stated that there will be a new short postponement of the effective date for the rules implementing Section 404 for non-accelerated filers – this statement noted that all filers will nonetheless be required to comply with the Section 404(a) management assessment for fiscal years beginning on or after December 16, 2006. Quite a few members were confused because under the existing deadline – emanating from Release 33-8618 from September 2005 – non-accelerated filers are not required to comply with the rules under 404 until the first fiscal year ending on or after July 15, 2007.

As Alan Dye was quick to point out to me, the key difference between the SEC’s two statements is that the new one refers to the beginning of a fiscal year and the older one refers to the end of a fiscal year. However, the upshot of the SEC’s latest announcement is that there is no real change for companies with fiscal years that coincide with the calendar year.

Remember that the SEC’s September 2005 release established two extended deadlines: fiscal years ending on or after July 15, 2006 for foreign private issuers meeting the accelerated filer deadline and a July 15, 2007 for non-accelerated filers. Under its latest announcement, the SEC does not intend to extend both deadlines as the upcoming extension will be limited only to non-accelerated filers (but of course any foreign private issuers that also happen to be non-accelerated filers will get the benefit of that extension).

Fielding Those Option Back-Dating Phone Calls

I’m being told that institutional investors and investment bankers are calling the investor relations departments at companies and giving them the third degree about whether those companies have any “backdating” issues. Hopefully, the IR folks remember Regulation FD because I would love to know which companies are going to confirm they have backdating issues too – I could sell short and retire. A lot of fishing going on. And of course, the IR folks need to be sure that their companies don’t have the problem before they say they don’t…

In my blog last week on this topic, I forgot to mention that the most recent issue – March/April – of The Corporate Counsel contains extensive analysis of issues posed by options-backdating. In addition, in the “Timing of Stock Option Grants” Practice Area on, we have now added some research reports and an article analyzing the issues as well as several complaints filed in lawsuits against some of the companies accused of backdating.