February 5, 2020

Shareholder Proponent Turns to Court

A shareholder proponent has filed a lawsuit against a Montana energy company in an attempt to ensure the proponent’s proposal is included on the company’s proxy ballot. The proposal asks the company to end using coal-fired generation of electricity from a power plant it operates no later than the end of 2025 and to replace the electricity with non-carbon emitting renewable energy.

The lawsuit follows the company’s no-action request to the SEC on grounds that the proposal relates to the company’s ordinary business operations and that the proposal contains materially false or misleading information about the company’s carbon emission rate.  As shown in the SEC’s chart detailing SEC responses to shareholder proposal no-action requests, the SEC has “no view” and indicates that litigation is pending.

Last year, Liz blogged about how the NYC Comptroller filed a lawsuit as it sought to ensure a proposal related to greenhouse gas emissions would be included on a company’s proxy ballot.  In that case, SEC correspondence shows the company withdrew its no-action request and included the proposal on its ballot.  Voting results for the company’s shareholder meeting show the proposal failed to receive majority support.

Time will tell how the proponent fares in federal court for the district of Montana and/or whether the company relents and includes the proposal on its ballot.  The company’s no-action request says that the company intends to file its proxy materials on or about March 6, 2020 – stay tuned.

IFRS: Proposed Changes Strike a “Reg G” Note

At the end of December, the International Accounting Standards Board proposed new rules that would impact companies audited under International Financial Reporting Standards. This Davis Polk memo summarizes the proposal – here’s an excerpt:

In an interesting departure from U.S. generally accepted accounting principles, IASB is proposing to require companies to disclose information about non-GAAP measures in a note to their financial statements when such measures (i) are used in public communications outside financial statements; (ii)complement totals or subtotals specified by IFRS standards; and (iii) communicate to users of financial statements management’s view of an aspect of the company’s financial performance. Companies would have to explain why such measures provide useful information, how they are calculated, and how they relate to the most comparable profit subtotal specified by IFRS, and would also have to provide a reconciliation to the IFRS-mandated measure. This requirement would be similar to Item 10(e) of Regulation S-K, which currently governs such measures, but would be substantially less prescriptive.

January-February Issue: Deal Lawyers Print Newsletter

The January-February Issue of the Deal Lawyers print newsletter is available now and focuses on Earnouts. Learn how to survive M&A’s “Siren Song.” This edition of the Deal Lawyers print newsletter covers:

– Overview of Earnouts
– Prevalence of Earnouts & Common Terms
– Tax & Financial Reporting Issues
– When Earnouts Are “Securities”
– The Risk of Post-Closing Disputes
– Earnout Litigation: Plenty to Fight About
– How Much Protection Does Good Documentation Provide?
– Key Issues in Structuring & Negotiating an Earnout
– Conclusion: The Sirens Still Sing

Here are FAQs about the Deal Lawyers print newsletter – including how members of who also subscribe to the print newsletter can access the issues online.

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– Lynn Jokela