May 29, 2014

Fee-Shifting Bylaws: Delaware Might Change Statute In Wake of Court Decision

Recently, I blogged about how the Delaware Supreme Court decided that fee-shifting bylaws were permissible in ATP Tour v. Deutscher Tennis Bund (see these memos posted in the “Securities Litigation” Practice Area). Now Francis Pileggi of Eckert Seamans blogs this news:

A proposed new addition and amendments to the Delaware General Corporation Law would limit the impact of a recent Delaware Supreme Court decision in ATP Tours, Inc. v. Deutscher Tennis Bund,(No. 534, 2013, May 8, 2014), highlighted on these pages, regarding the ability of a corporation to provide in its bylaws for a stockholder to pay the legal fees of a suit against the corporation when the stockholder loses that suit. The intent of the new statute would be to restrict the ability of a corporation to include such a provision in its bylaws.

The public policy reasoning behind the proposed statute is that such a provision would chill the willingness of a stockholder to file claims in order to enforce the fiduciary duties of directors, especially a stockholder who might have only a modest holding of stock. Though I’m sure there are those who might see such a provision as a cure for what some regard as an excess number of stockholder suits, “throwing the baby out with the bathwater” would discourage inappropriately the function of meritorious stockholder suits as the only means to hold fiduciaries accountable for not fulfilling their fiduciary duties.

The proposed legislation is expected to be presented to the Delaware General Assembly for passage prior to the end of the current legislative session on June 30, with a proposed effective date of August 1, 2014.

Exclusive Forum Bylaws: Chart of Companies That Have Adopted Them

You must see this Sullivan & Cromwell memo that not only analyzes four non-Delaware cases in the wake of Boilermakers that have enforced exclusive forum bylaws in favor of the Delaware courts, but provides sample language (pg. 10) and provides a nifty chart of some of the companies that have adopted them (pgs. 13-28)…

Meanwhile, Keith Bishop of Allen Matkins blogs about how a Delaware court rules that Nevada law governs – but applies Delaware law.

SEC Approves Significant Amendments to FINRA Rules 5110 & 5121

As noted in this Latham & Watkins memo, the SEC recently approved FINRA’s amendments to Rules 5110 (the Corporate Financing Rule) and 5121 (the Conflict of Interest Rule) that should facilitate participating in public offerings by:

– Excluding from the Corporate Financing Rule’s definition of “participation or participating in a public offering” a FINRA member that acts exclusively as an “independent financial adviser”
– Excluding from the current lock-up restrictions of the Corporate Financing Rule certain securities acquired by a participating member (as defined in Rule 5110) as a result of an issuer reorganization or conversion to prevent dilution
– Limiting the Corporate Financing Rule’s affiliation disclosure requirements to apply only to relationships with “participating” members (rather than any FINRA members)
– Narrowing the scope of the definition of “control” in the Conflict of Interest Rule
– Expanding the circumstances under which participating members may receive termination fees and rights of first refusal
– Exempting from the Corporate Financing Rule’s filing requirements certain ETFs

May-June Issue: Deal Lawyers Print Newsletter

This May-June Issue of the Deal Lawyers print newsletter includes:

– Prospective Bidders: Will the Pershing Square/Valeant Accumulation of Allergan Lead to Regulatory Reform?
– Proposed Amendments to the Delaware General Corporation Law: Section 251(h) Mergers & More
– The Evolving Face of Deal Litigation
– Rural Metro: Potential Practice Implications Going Forward
– New Urgency for Corporate Inversion Transactions

If you’re not yet a subscriber, try a Half-Price for Rest of ’14 no-risk trial to get a non-blurred version of this issue on a complimentary basis.

– Broc Romanek