Unlike the past couple of years, nobody’s been running around with their hair on fire about proposed changes to the DGCL, so you may have missed the news that the Delaware General Assembly passed this year’s amendments. Here’s the official synopsis:
Section 1. Section 1 of this Act confirms that if a certificate of incorporation includes a provision that “opts out” of the class vote specified in § 242(b)(2) of Title 8 to increase or decrease the number of shares of a class of stock authorized for issuance, including a provision that requires the affirmative vote of the holders of a majority of the stock (or a majority of the votes of such stock) entitled to vote, that “opt out” will not be deemed an express provision that has the effect of “opting out” of the default provisions of § 242(d). Instead, § 242(d) will apply unless the § 242(b)(2) “opt out” expressly states that the corporation is not governed by § 242(d)(1) or (2), or the § 242(b)(2) “opt out” provision specifies a greater or additional vote to increase or decrease the authorized number of shares of 1 or more classes of stock.
Section 2. Section 2 of this Act amends § 275 of Title 8, which addresses the dissolution of a corporation. New § 275(h) provides that the authority and responsibilities of the registered agent of the corporation terminate at the time the dissolution of the corporation becomes effective, except with respect to service of process that the registered agent has received before that time. New § 275(i) establishes procedures for the Secretary of State to accept service of process for a dissolved corporation after the dissolution has become effective. The amendments to § 275(d) and (f) require a corporation to include in its certificate of dissolution an agreement that the dissolved corporation may be served with process in the State by service to the Secretary of State in accordance with the Secretary of State’s rules and regulations.
Section 3. Section 3 of this Act amends § 312(j) of Title 8, which addresses the revival of the certificate of incorporation of a nonstock corporation if the certificate has become forfeited or void. The amendments delete reference to actions taken by members of a nonstock corporation who are entitled to vote on a dissolution of the corporation. The provisions of § 312(j), when read together with § 312(h), contemplates member action only to elect persons to the governing body of the corporation if there are no such persons then in office to revive the corporation. Because no action by members entitled to vote on a dissolution is required for revival, the reference to these members is being deleted. In addition, because no member action is required to revive a corporation if there are persons then serving on the governing body of the corporation, amended § 312(h) also clarifies that member action will be taken for a revival only “if any” member action is necessary.
Section 4. Section 4 of this Act provides that this Act takes effect on August 1, 2026. This Act requires a greater than majority vote for passage because § 1 of Article IX of the Delaware Constitution requires the affirmative vote of two-thirds of the members elected to each house of the General Assembly to amend the general corporation law.
The legislation will now be sent to Governor Matt Meyer for signature, and as noted above, the amendments will go into effect on August 1st.
I’ve got a feeling that we’ll all be drinking water through a firehose over the next several months when it comes to new SEC guidance and rulemaking – and that means our 2026 Proxy Disclosure and Executive Compensation Conferences on October 12th & 13th in Orlando, Florida are going to be more essential than ever! With an agenda featuring two days of fast-paced, topical panels, an all-star speaker lineup, and Dave Lynn’s interview with Corp Fin’s Deputy Director Christina Thomas, attendees will receive critical insights into the latest SEC rulemaking initiatives and developments in governance, disclosure practices, activism & shareholder engagement, and executive compensation.
By the way, keep an eye on our agenda – if the next few months are as action-packed as we expect them to be, we’ll tweak it as necessary to ensure that we’re bringing you the most up-to-date information on the SEC initiatives that mean the most to you and your clients.
Register online at our conference page or contact us at info@CCRcorp.com or 1-800-737-1271. If you register now, you can take advantage of our discounted “early bird” rate!
Ideagen/Audit Analytics recently issued its 2026 report on comment letter trends. The report looks at comment letters issued during the period from 2016-2025. Here are some of the highlights:
– The total number of comment letter conversations referencing periodic filings declined overall in the past 10 years. However, prior to 2025, there had been a slight rebound in the trend. Total conversations were at their highest in 2016, with 1,485 conversations started, and dipped to a low of 545 in 2021. In 2022, there was a nearly 76% increase in comment letter conversations from 2021, the highest amount seen since 2017. Conversations remained elevated in 2023 at 1,074 before declining to 975 in 2024. The 2025 figure of 423 conversations reflects data disseminated through March 6, 2026; conversations initiated in the later part of 2025 may not yet be publicly available, which may account for the lower volume relative to prior years.
– For 2025, results of operations was the leading issue, referenced in 140 conversations and comprising 33% of all conversations started during the year. This figure combines references to both the results of operations disclosure topic and SEC Release No. 33-8350, which addresses the same MD&A guidance. Financial statement segment reporting was the second most common issue in 2025, appearing in 117 conversations and 28% of all conversations — nearly double its 14% share over the full ten-year period — likely driven by the implementation of ASU 2023-07. Non-GAAP measures, which has led this list for the majority of the period, ranked third in 2025 at 26% of conversations.
– For 2025, segment reporting emerged as the leading accounting issue, cited in 117 conversations and 38% of all conversations that included an accounting issue — a significant shift from its third-place position over the full period. Revenue recognition ranked second at 23% of accounting conversations. Research and development issues ranked third in 2025 at 12% of accounting conversations, reflecting increased SEC scrutiny of R&D capitalization and clinical-stage company disclosures, particularly in the Life Sciences sector. Fair value measurement, which ranked first over the ten-year period, did not appear in the 2025 top 10, indicating a notable shift in SEC staff focus.
The report goes into detail about the Staff’s comments on segment reporting and revenue recognition, and notes that the sharp increase in segment reporting comments in 2025 continues a trend that began following implementation of ASU 2023-07 in 2024, and reflects the fact that companies are still adapting their disclosures to the new standard, and the Staff is actively reviewing their efforts. When it comes to revenue recognition, many Staff comments focus on how companies recognize revenue, but many also address disclosure issues relating to disaggregation of revenue information required under ASC 606-10-55-89 through 91.
With the conflict between the United States and Iran still simmering, US companies face an increased threat of Iran-backed cyber-attacks. This Weil memo addresses areas of potential vulnerabilities and attack vectors that companies should be monitoring, and this excerpt discusses some of the actions that companies should take now to protect themselves:
First, validate that incident response plans, escalation pathways and external contact lists (e.g., forensic firms, data breach counsel, cyber insurers, etc.) are current. The most common foot-fault in fast-moving events is not the absence of a plan, but the inability to operationalize it quickly.
Second, review external attack surface exposure and related vendor risk. That includes internet-facing remote access tools, privileged access pathways, legacy systems, third-party integrations and unmanaged assets. Companies should also identify vendors, service providers and other external parties with access to sensitive systems, data or operational environments, and assess whether those connections are necessary, appropriately secured and subject to heightened monitoring. Organizations that operate industrial processes or rely on building management and other facility control systems should ensure those environments are appropriately separated from the company’s general corporate network and that remote access is limited to necessary, secure and closely monitored connections.
Third, heighten monitoring for phishing, credential abuse, anomalous logins, multi-factor authentication bypass attempts, suspicious use of remote administration tools and early signs of denial-of-service or destructive activity. Where feasible, logging should be centralized and retained for a sufficient period to support investigation and remediation.
The memo also recommends testing business continuity plans with a focus on third-party dependencies and communications resilience preparing for the legal and regulatory dimensions of a cyber-attack.
I still get a sizeable knot in my stomach when I think about Barclays’ over-issuance debacle, but a recent 2nd Cir. decision suggests that some good for Barclays and other issuers may come out of the company’s misfortune. This Sullivan & Cromwell memo notes that in Knapp v. Barclays PLC, (2d. Cir.; 3/26), the Court affirmed the SDNY’s prior decision dismissing Securities Act claims brought by purchasers of an exchange traded note involved in the over-issuance.
The plaintiffs brought claims for rescission under Section 12(a)(1) of the Securities Act, and for misstatements under Section 11 of the Act. This excerpt from S&C’s memo summarizes the 2nd Cir.’s decision to affirm the lower court’s decision to dismiss the case:
As to the Section 12(a)(1) claim for rescission, the court held that the 4:1 reverse-split was not a “sale” that can trigger liability under the Securities Act. In resolving this novel issue, the court emphasized that the reverse-split did not constitute a “disposition for value” (which is the statutory definition of “sale”), because the reverse-split did not change the “nature of the investment” and the plaintiffs made no investment decision when Barclays exercised its contractual right to effectuate a reverse-split.
As the court stated, the “combination of four notes into one larger note is exactly the kind of nonsubstantive exchange that will not be treated as a sale.” Because the reverse-split “alter[ed] only the form of the securities,” the exchange did “not require distributees to give any value in exchange.” The court further explained that “[t]his conclusion neatly matches the purposes of the Securities Act”: “The design of [the Securities Act] is to protect investors by promoting full disclosure of information thought necessary to informed investment decisions. But when an issuer announces a mandatory split, as happened here, investors have no choice and make no investment decision.”
As to the Section 11 claim for misstatements, the court followed the strict tracing requirement that the Supreme Court adopted in Slack. Addressing Slack for the first time in the Second Circuit, the court explained that, “[b]ecause section 11 focuses on securities issued under a ‘particular registration statement,’ plaintiffs must first plead that they acquired securities ‘traceable to that allegedly defective statement.’”
Although the plaintiffs argued that the notes they received after the reverse-split were traceable to the registration statement that Barclays issued on the same day that the reverse split took effect, the court rejected that argument based on a careful parsing of the language in that registration statement. The registration statement’s “own terms show that it does not cover those [notes] but rather governs the ‘initial sale of the [post-split] [notes]’ that Barclays still held in its inventory, and which it had thus not distributed via the [reverse] split.” Accordingly, because the plaintiffs failed to meet Slack ’s tracing requirement, the court affirmed the dismissal of the Section 11 claim without addressing whether there were any misrepresentations in the registration statement.
From an issuer’s perspective, the decision is helpful precedent. Not only does it indicate that the 2nd Cir. isn’t amenable to efforts to end run Section 11’s tracing requirement, but it’s nice to have something to point to from one of the nation’s most respected appellate courts holding that stock splits don’t involve a “sale” of securities.
It looks like the SEC’s “neither admit nor deny” settlement policy may at last be on its way to the ash heap of history. On Friday, the SEC filed a document with OIRA titled “Rescission of Policy Regarding Denials in Settlements of Enforcement Actions.” While the document itself isn’t publicly available, its title doesn’t leave much to the imagination.
The SEC’s so-called “gag rule” and the repeated efforts to eliminate it has provided us with plenty of fodder for our blogs over the years, but we’d be happy to find something else to write about. Personally, I think Judge Ronnie Abrams of the SDNY was on the money in a 2022 opinion slamming the SEC’s neither admit nor deny policy. In her opinion, she noted that the effect of the policy was to ensure that the public would never know whether the government’s charges were true, and said that this ability to draw a curtain down over governmental action was precisely the kind of societal harm that the First Amendment was intended to protect against:
The dominant purpose of the First Amendment was to prohibit the widespread practice of governmental suppression of embarrassing information . . . . Secrecy in government is fundamentally anti-democratic, perpetuating bureaucratic errors. Open debate and discussion of public issues are vital to our national health.
Of course, some – including former SEC commissioners and Enforcement chiefs – have contended that the “neither admit nor deny” policy is in many instances too lenient, and have pushed for the SEC to require admissions of wrongdoing in more cases. As this Bloomberg Law article on the move to repeal the gag rule notes, its elimination won’t preclude the SEC from negotiating for admissions as part of a settlement.
Given the current environment, many boards may be asking themselves whether they need to add directors with AI expertise in order to fulfill their oversight responsibilities with respect to their companies’ development and usage of AI tools. This Debevoise memo says that the answer to that question is more complicated than it seems at first glance:
While appointing a director with AI expertise may be appealing, it can present practical and governance challenges. First, the pool of individuals with both deep AI expertise and the qualifications to serve effectively as a public company director is limited.
Second, the percentage of companies for which AI is so fundamental to their business that it requires an AI expert on the board is very small. The appointment of a director with AI expertise could raise questions about a lack of specific board expertise covering other areas of potential enterprise risk (e.g., such as cybersecurity, political or environmental risks).
Third, the presence of a designated expert may inadvertently undermine effective board dynamics. For example, other directors may defer excessively to an AI expert, reducing the level of constructive challenge and debate that is critical to effective oversight. This dynamic can undermine the collective decision-making that is at the heart of board function and weaken the board’s ability to independently assess management’s approach to AI. Over time, concentrating AI knowledge in a single director may also reduce other directors’ incentives to learn about AI, which is likely to become increasingly important in the future.
Finally, individuals with deep AI expertise often have extensive experience in the technology industry and may have conflicts of interest, such as investments in AI companies or commercial relationships with vendors, which would require careful management.
The memo goes on to explain that adding an AI expert as a director isn’t the only way for a board to “get smart” about AI-related issues and discusses the role that expert guidances and appropriate education and regular reporting from management and outside advisors can play in supporting the board’s oversight of AI.
According to a new study by B-school profs at The University of Cincinnati and Penn State, the accelerated reporting of gifts adopted as part of the SEC’s 2022 Rule 10b5-1 amendments and the SEC’s comments in related releases about the potential insider trading implications of well-timed gifts may have had significant and unexpected consequences on corporate R&D expenditures. Here’s an excerpt from the study’s abstract:
[W]e compare firms whose insiders historically concentrate stock gifts on unusually high-price days with other firms. We find that these treated firms significantly reduce R&D investment following the reform. The effect is strongest where opportunistic gift timing is likely most valuable and where insiders have greater discretion to influence investment policy.
In contrast, we fail to find a corresponding effect for firms whose insiders historically engage in opportunistic Rule 10b5-1 stock sales, helping isolate the gift-disclosure channel from other features of the amendment. Overall, our evidence suggests that a disclosure reform aimed at curbing opportunistic insider behavior had the unintended consequence of reducing corporate risk-taking.
One of the study’s authors summarized its implications in a LinkedIn post:
The key takeaway is that a disclosure reform designed to curb insider opportunism may have had real effects on corporate investment. More broadly, personal tax-planning opportunities can shape insiders’ willingness to support risky corporate policies, and regulatory changes that constrain those opportunities can affect firm decisions in ways that extend well beyond the regulated transaction itself.
Companies that are considering the possibility of moving to semiannual reporting have plenty of things to think about. Fortunately, the law firm memos on the SEC’s semiannual reporting proposal are rolling in and are full of helpful insights for these companies and their advisors. Here are a few examples from some of the memos that we’ve received so far:
Weil’s memo discusses the implications of reporting covenants in debt instruments on the ability of companies to opt in to the semiannual reporting regime, and as this excerpt explains, it all depends on how the covenant is written:
– Rule 144A Indentures for companies that are already reporting companies sometimes provide that “whether or not the Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC and provide the Trustee and Holders with such annual reports and such information, documents and other reports as are specified in Sections 13 and 15(d) of the Exchange Act, within the time periods specified in such Sections or in the applicable forms.” This formulation should provide flexibility for companies to report on a semiannual basis.
– Other Rule 144A Indentures instead require the issuer to deliver “all annual and quarterly financial statements that would be required to be contained in a filing with the SEC on Forms 10-K and 10-Q if the issuer were required to file such forms” within a specified timeframe. Because the proposed rules do not eliminate Form 10-Q, but instead make the filing of Form 10-Q optional, it is less clear that the issuer could choose not to continue to provide quarterly financial statements under this formulation.
This excerpt from Sidley’s memo discusses the need for companies to consider the seasonality & volatility of their business when deciding on the timing of their periodic reports and voluntary disclosures:
Does the company’s quarterly performance vary dramatically due to seasonality or other factors? Do investors focus on consecutive quarterover-quarter results more than results over corresponding prior-year periods? Companies with results that vary dramatically quarter to quarter would likely face longer trading blackout periods and longer quiet periods under a semiannual reporting regime absent voluntary Form 8-K filings or expanded earnings releases.
Latham’s memo highlights, among other things, the implications of the proposal for current market practice regarding auditor’s comfort letters:
Currently, an auditor’s comfort letter cannot include negative assurance regarding subsequent changes to financial statements as of a date 135 days or more after the most recent balance sheet date of the most recently completed audit or review, under PCAOB Auditing Standard 6101 (formerly SAS 72). The SEC has requested comments on whether to modernize that standard to accommodate semiannual reporting.
Investment banks have traditionally been unwilling to underwrite securities offerings without market-standard comfort letters. As a result, we would expect implementation of semiannual reporting to prompt reconsideration of the 135 day limit in AS 6101 to facilitate traditional comfort letter practice in a world of semiannual reporting.
Hunton’s memo also focuses on the proposal’s implications for capital markets transactions:
We expect market practice around securities offerings to evolve for companies electing to report semi-annually. Even if SEC rules would permit an offering on financial statements that are six months old, underwriters may be less comfortable going to market with interim financial statements older than 135 days.
Other prudential factors may also encourage companies on a six-month reporting schedule to disclose material interim developments. Quarterly ATM programs, for example, may pose unique challenges. Accordingly, companies reporting under a semi-annual cycle may still be motivated to publicize quarterly results or flash numbers, at least when contemplating an offering of securities. Again, practices across industries and companies of different sizes may diverge.
According to a recent Barker-Gilmore research report, the way that corporate boards and general counsels work together could use some improvement. The report says that Boards and General Counsel are aligned on outcomes, but operating models for corporate governance haven’t kept pace with the GC’s expanded role.
The report argues that the way to address this issue and strengthen governance & decision-making is by modernizing the norms for how the GC interacts with and accesses members of the board to better reflect the way in which the GC’s role has evolved. The report’s conclusion offers some specific suggestions on how to change existing norms to improve the alignment between boards and GCs:
The research points to a clear opportunity to modernize governance interaction models to reflect the expanded scope of the General Counsel role. Effective models consistently include:
– Explicit expectations that GC input shapes strategy before board materials are finalized
– Normalized, recurring interaction with Committee Chairs and Lead Directors
– Clear CEO–GC alignment on when and how the GC may engage directors directly
– Visible GC ownership within enterprise risk management, M&A documentation, and strategic disclosures
– Use of the Corporate Secretary role to shape agenda flow, executive exposure, and risk framing
Barker Gilmore says that these modernized norms do not dilute CEO authority, but strengthen decision-making “by ensuring risk, governance, and legal judgment are integrated early and visibly.”
