A fog of uncertainty hangs over U.S. public companies as 2013 approaches. The looming fiscal cliff, increased regulatory burdens, the ongoing European debt crisis, growing Middle East unrest and slowing global growth are just a few of the uncertainties companies will have to navigate as they chart a course for the coming year. Here is our list of hot topics for the boardroom in 2013:
Posts Tagged ‘Akin Gump’
On August 16, 2012, New York Supreme Court Justice Carol R. Edmead dismissed a defamation action brought by Silvercorp Metals Inc. (“Silvercorp”), a publicly-traded company, against a hedge fund and a group of other defendants who issued negative reports opining that Silvercorp might be engaging in fraud. This decision has important ramifications for professional investors and analysts who are considering publicizing their opinions regarding companies such as Silvercorp, who may retaliate with the threat of litigation.
Silvercorp, a Canadian based company, is reported to be one of the largest silver producers in China and mines other minerals in both China and Canada. Its securities are traded on both the New York and Toronto Stock Exchanges.
The reports in question, which were issued in August 2011 and September 2011, were prepared by hedge funds and investors looking into the accuracy and integrity of Silvercorp’s financials and statements concerning the quality of its mineral reserves. According to the filings in the case, the reports were disseminated anonymously through the Internet and mailings to Canadian securities regulators. The reports were issued by two different groups of defendants who were acting independently of one another. In essence, the reports reached the same conclusion: that Silvercorp was engaged in fraud. The reports were based on documents, both publicly available and privately obtained, which were disclosed with the reports. Among the documents relied on were Chinese news articles regarding an auction of a minority interest in one of Silvercorp’s most important mines, reports compiling financial data that was represented as being copied from Chinese regulatory filings, and an analysis of samples of ore that the authors believed came from a Silvercorp mine.
When individuals are approached to join the board of directors of a public or private company, they are often thrilled by the opportunity to provide strategic guidance and advice to a new business enterprise, build new relationships with board members and perhaps transition to a new point in their careers. However, it is rare for a nominee to complete adequate and systematic due diligence on the prospective company and the members of its board of directors prior to joining.
The premise of this article is simple: due diligence should be a two-way endeavor, undertaken by the company as well as the nominee. This article provides practical advice for prospective nominees regarding the more refined issues they should consider and the questions they should ask prior to joining a board. With these inquiries significant considerations may be identified and then used in a nominee’s decision calculus.