July 19, 2016 Corporate News Update: Delaware Applies Business Judgment Standard to Two-Step Mergers Approved Through Tender Offer Acceptance, NASDAQ Requires Companies to Disclose Third Party Compensation Paid to Directors and Nominees, and SEC Proposes To Require Investment Advisers To Adopt Business Continuity and Transition Plans
This week's Corporate news roundup includes information regarding Delaware's application of the business judgment standard to two-step mergers approved by a stockholder majority through tender offer acceptance, NASDAQ's new rules requiring listed companies to disclose third party payments to directors and director nominees and the SEC's proposed rules that would require investment advisers to adopt business continuity and transition plans for clients in the case of business interruptions:
DELAWARE COURT APPLIES BUSINESS JUDGMENT STANDARD TO TWO-STEP MERGER APPROVED BY MAJORITY STOCKHOLDERS THROUGH TENDER OFFER ACCEPTANCE
In a recent case, the Delaware Court of Chancery held in favor of shifting the standard of review under Delaware General Corporation Law Section 251(h) from enhanced scrutiny to the more deferential business judgment rule in a two-step merger approved by a majority of disinterested stockholders by their acceptance of a first-step tender offer. The court had previously shifted the standard of review for single-step mergers approved by majority stockholder vote from enhanced scrutiny to the business judgment rule. In the new ruling, the court found that a first-step tender offer has the same cleansing effect as a vote in favor of a merger to shift the standard of review to the business judgment standard. For more information on the In re Volcano Corporation Stockholder Litigation case, click here.
NASDAQ ADOPTS GOLDEN LEASH DISCLOSURE RULE
The SEC recently approved proposed NASDAQ Rule 5250(b)(3) requiring listed companies to annually disclose third party compensation to directors or director nominees on their websites or through proxy or information statement disclosure. Compensation is defined broadly to include non-cash compensation including indemnification and health insurance premiums. Arrangements that need not be disclosed under the rule include those that relate to expense reimbursement in connection with the director's candidacy, those that existed before the director's nomination (if the nominee's relationship with the third party has been publicly disclosed by proxy or annual report) and those that were disclosed under applicable proxy or Form 8-K rules (but such disclosure does not relieve a company of its future obligations under the rule). For more information, click here.
SEC PROPOSES RULES REQUIRING INVESTMENT ADVISERS TO ADOPT BUSINESS CONTINUITY AND TRANSITION PLANS
The SEC recently proposed rules requiring registered investment advisers to adopt and implement written business continuity and transition plans in case of business disruptions that could harm clients and investors. The rule would require that an adviser's plan be based upon the particular risks that are associated with its operations and include policies and procedures addressing certain specified components. Specified components include system maintenance, data protection, pre-arranged alternative physical locations, communication plans, review of third-party service providers and a transition plan in the event of a winding down or inability to continue providing services. Advisers would be required to review the plans for adequacy and effectiveness at least annually and retain related records. For more information, click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
