August 17, 2010

Hooray! New York Retroactively Fixes Power of Attorney Law

Over the past year, we have recorded much angst on this blog over a new power of attorney law in New York as it didn’t appear to take into consideration how the law impacted many corporate & securities law transactions. As noted in this Sullivan & Cromwell memo, the New York Legislature has now passed – and the Governor has signed – amendments to the New York Power of Attorney Law, Sections 5-1501-5-1514 of the General Obligations Law, which became effective on September 1, 2009. The amendments will become effective on September 13, 2010 and will then be deemed to have been in effect on and after September 1, 2009, in effect amending the prior law retroactively. The amendments will alleviate the concerns about the effect of the prior law on business and commercial transactions and the automatic revocation of prior powers of attorney.

Books & Records: Investigations Into Rejections of a Director’s Resignation

John Grossbauer of Potter Anderson notes: Recently, the Delaware Supreme Court issued this opinion – in City of Westland Police v. Axcelis Technologies – affirming the dismissal of a books and records demand against Axcelis Technologies made for the purpose of investigating alleged wrongdoing in connection with the rejection of a takeover proposal and the refusal to accept the resignation of three directors who had failed to receive a majority vote in the election of directors under a board-adopted “plurality plus” system.

The Court found the failure to respond affirmatively to the offer was a matter of business judgment absent additional facts suggesting some wrongdoing by the directors. With regard to the demand for information related to the decision not to accept the resignations, the Supreme Court affirmed the Court of Chancery’s decision that a challenge to the failure to accept the resignations would not be governed by the Blasius standard of review.

However, in rejecting the claim, the Supreme Court provided a roadmap for future plaintiffs who desire to inquire into a board’s decision not to accept resignations under a plurality-plus system. The Court cited with approval the Court of Chancery’s decision in Pershing Square, LP v. Ceridian Corp., 923 A.2d 810 (Del. Ch. 2007), in which the Chancery Court found an inquiry into particular persons’ “suitability” to be directors to constitute a proper purpose. The Supreme Court stated that the failure receive a majority vote, at least under a board-adopted majority vote system, would constitute a “credible basis to infer that the director is unsuitable, thereby warranting further investigation” in the event the board fails to accept a resignation of one or more directors who failed to receive the required vote. Combination of Our Q&A Forums

For the many of you that are members of, you will notice that we just folded our “Electronic Filing Issues Q&A Forum” into our primary “Q&A Forum” on that site. The combined Q&As were integrated so that they are listed chronologically. We had created the “Electronic Filing Issues Q&A Forum” in 2003 after the SEC adopted rules that mandated electronic filing of Forms 3, 4 and 5. Now that time is passed, there had been relatively few new questions being added as the 2000 Q&As in that old Forum covered the waterfront pretty well. We figure the combination of the Forums will help simplify your searches of the treasure trove of past Q&As (now a combined 6300!) – since you will now only have to conduct a search once rather than twice…

– Broc Romanek