August 22, 2016

How to Write a Good Earnings Release

This MarketWatch article has some great tips for writing an earnings releases that should help drafters. Here’s an excerpt:

Do a full earnings release

First, something basic: Investor-friendly companies always do a full press release that includes detailed financial tables, distributing it through a newswire that ensures fast distribution to all the major financial news and information publishers. Increasingly, companies are releasing truncated versions and linking to their websites for the rest. We’d prefer not to search multiple places for information when time is of the essence, and we’ve seen companies’ websites drag when thousands of investors are trying to reach them at the same time.

Many companies still do this. Department store chain Kohl’s Corp. produced one of the season’s cleanest, easiest-to-follow releases — and we thanked them for it.

Advancement of Legal Fees: Most Expansive of Conflicting Provisions Likely to Prevail

As noted in this Simpson Thacher memo, companies typically include mandatory advancement provisions in their bylaws – but they may also sign indemnification agreements with individual officers & directors that contain advancement provisions. If the advancement rights provided in each of these documents differ in scope, a question can arise as to whether the two documents should be read together or separately. The Delaware Court of Chancery – in Narayanan v. Sutherland Global Holdings – recently addressed this issue in a case involving an indemnification agreement that contained a condition precedent to the director’s right to be indemnified or to receive expense advances. That condition precedent was not, however, found in the indemnification provisions of the company’s bylaws. The Delaware Chancery held that, absent evidence of intent to the contrary, each document conferring advancement rights is a separate and independent source of advancement rights.

The Sutherland decision has practical implications. The decision highlights that – unless there is evidence suggesting contrary intent – Delaware courts will likely apply the most expansive among conflicting advancement provisions. So when drafting indemnification agreements, bear in mind that a more restrictive or conditional right to advancement than that provided in the company’s bylaws is unlikely to be enforced in the face of broader rights set forth in another instrument. You should ensure that the scope of all potential sources of indemnification-related rights are aligned – and if you wish to create an enforceable right to advancement that is narrower than that contained in the company’s bylaws, you must ensure that the indemnification agreement unambiguously expresses the intent of the parties that the agreement operate in conjunction with the company’s bylaws. Hat tip to Simpson Thacher’s Yafit Cohn for this!

Escheatment: Pennsylvania, Massachusetts & Arkansas Join the Fray

A recent question in our “Q&A Forum” (#8863) highlights how states other than Delaware are getting aggressive in the escheatment area. Here’s part of the answer to that query – thanks to Reed Smith’s Diane Green-Kelly for her expertise (also see our “Escheatment Handbook“):

It is important that each company consult with counsel on the degree of authority to provide to the transfer agent and the manner in which records are made available. It is important, as well, that in the end of the audit if shares are deemed abandoned, the test for last contact precisely fit the particular state’s definitions. Each state has a slightly different standard, and a company can become at risk for a claim of negligent escheat if shares are escheated prematurely.

Kelmar takes a “one size fits all” approach in these audits, which is incorrect. A number of companies have had to save shares from escheat in a number of equity audits by Kelmar because of this incorrect interpretation of the law.

You should consult with counsel who are familiar with these audits. For a few thousand dollars in legal advice, you can save yourself from considerable liability and headaches.

Broc Romanek