June 19, 2017

Voting Rights: Blue Apron Goes Triple-Class!

The debate over voting rights (or lack thereof) wound up being the hottest issue of the proxy season. As Broc recently blogged, the debate over Snap’s dual-class structure continues. More recently, this Form S-1 filed by Blue Apron has created a stir. Here’s an excerpt that describes its triple-class voting rights:

We have two classes of voting common stock, Class A common stock and Class B common stock, and one class of non-voting stock, Class C capital stock. Each share of Class A common stock is entitled to one vote and each share of Class B common stock is entitled to ten votes. Shares of Class C capital stock have no voting rights, except as otherwise required by law.

Holders of Class A common stock and Class B common stock vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, unless otherwise required by law. Upon the completion of this offering, the holders of the outstanding shares of Class B common stock will collectively have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change in control transaction.

We are issuing shares of Class A common stock in this offering. The outstanding shares of Class B common stock are held by our executive officers, employees, directors and their affiliates, and certain other stockholders who held our capital stock immediately prior to this offering. The Class C capital stock is available for use for, among other things, strategic initiatives, including financings and acquisitions, and the issuance of equity incentives to employees and other service providers.

As described in this blog from Cooley’s Cydney Posner, Professor Charles Elson predicts that Delaware courts will be reluctant to apply the business judgment rule when there are multi-class structures like this. See this blog by Manifest for a UK perspective on multiple classes.

Pay Ratio: Odds of a Delay?

Here’s an excerpt from this blog by Steve Seelig & Puneet Arora of Willis Towers Watson:

If the SEC follows the lead of the Department of Labor (DOL), which recently decided it will not further delay its controversial fiduciary rule, we may not get a delay of CEO pay ratio. In essence, the DOL determined that as a matter of regulatory procedure, it cannot move to delay a final rule without reopening the rulemaking process for additional comments.

Regarding pay ratio, we think Acting Chairman Michael S. Piwowar’s request for additional comments earlier this year may have been anticipating this regulatory hurdle, so it is possible the SEC would view those comments as supporting a delay.

Even if this was the thinking, the question would not be considered until the SEC has a sufficient number of Commissioners in place. As of today, Jay Clayton (R) is Chairman, with Kara M. Stein (D) and Mr. Piwowar (R) holding the other seats. SEC rules require three commissioners to constitute a quorum, and the thinking is that Commissioner Stein would not agree to attend a meeting where delay of the CEO pay ratio rule would be on the agenda.

July-August Issue: Deal Lawyers Print Newsletter

This July-August Issue of the Deal Lawyers print newsletter includes (try a “Half-Price for Rest of ’17” no-risk trial):

– Special Considerations in California M&A Deals
– Alternatives to Traditional Working Capital True-Ups: The Locked Box Mechanism
– Chart: Delaware Standards of Review for Board Decisions

Remember that – as a “thank you” to those that subscribe to both & our Deal Lawyers print newsletter – we are making all issues of the Deal Lawyers print newsletter available online. There is a big blue tab called “Back Issues” near the top of – 2nd from the end of the row of tabs. This tab leads to all of our issues, including the most recent one.

And a bonus is that even if only one person in your firm is a subscriber to the Deal Lawyers print newsletter, anyone who has access to will be able to gain access to the Deal Lawyers print newsletter. For example, if your firm has a firmwide license to – and only one person subscribes to the print newsletter – everybody in your firm will be able to access the online issues of the print newsletter. That is real value. Here are FAQs about the Deal Lawyers print newsletter including how to access the issues online.

Liz Dunshee