Posts Tagged ‘Wilson Sonsini Goodrich & Rosati’

Supreme Court Upholds Fraud-On-The-Market Presumption in Halliburton

Posted by Yaron Nili, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday June 24, 2014 at 4:00 pm
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Editor’s Note: The following post comes to us from Wilson Sonsini Goodrich & Rosati, P.C. and is based on a WSGR alert by Douglas Clark and Ignacio Salceda. The Supreme Court’s reconsideration of Basic and related legal questions are analyzed in detail in a Harvard Law School Discussion Paper by Professors Lucian Bebchuk and Allen Ferrell, Rethinking Basic, that has been published in the May 2014 issue of The Business Lawyer, and discussed earlier on the Forum here and here.

On June 23, 2014, the United States Supreme Court issued its much-anticipated decision in Halliburton Co. v. Erica P. John Fund, Inc. Halliburton called into question the very foundation of a securities class action—the presumption of class-wide reliance. A unanimous Court answered the question today, and the presumption of reliance lives. The Court’s decision may, however, have given defendants new opportunities to rebut the presumption in the earlier stages of a case.

…continue reading: Supreme Court Upholds Fraud-On-The-Market Presumption in Halliburton

Delaware Court Endorses “Fee-Shifting” Bylaw

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Wednesday May 14, 2014 at 9:02 am
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Editor’s Note: The following post comes to us from Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum by Chancellor William Chandler, David Berger, Katherine Henderson, Steven Guggenheim, Amy Simmerman, and Tamika Montgomery-Reeves. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On May 8, 2014, the Delaware Supreme Court provided an en banc answer to a certified question of law from the U.S. District Court for the District of Delaware captioned ATP Tour, Inc. v. Deutscher Tennis Bund, concluding that fee-shifting provisions in the bylaws of a Delaware corporation are facially valid under Delaware law and enforceable even against parties who joined the corporation before the bylaw was adopted. [1] Although this opinion arose in the context of a non-stock corporation, as discussed below, the opinion is relevant to traditional stock corporations as well. Further, the court acknowledged that the bylaw would not necessarily be rendered unenforceable as an equitable matter if adopted with the “intent to deter litigation.”

…continue reading: Delaware Court Endorses “Fee-Shifting” Bylaw

Dodd-Frank Rules Impact End-Users of Foreign Exchange Derivatives

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday April 3, 2014 at 9:13 am
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Editor’s Note: The following post comes to us from Michael Occhiolini, partner focusing on corporate finance, corporate law and governance, and derivatives at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum. The complete publication, including annexes, is available here.

This post is a summary of certain recent developments under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) that impact corporate end-users of over-the-counter foreign exchange (FX) derivative transactions and should be read in conjunction with the four prior WSGR Alerts on Dodd-Frank FX issues from October 2011, September 2012, February 2013, and July 2013.

Title VII of Dodd-Frank amended the Commodity Exchange Act (CEA) and other federal securities laws to provide a comprehensive new regulatory framework for the treatment of over-the-counter derivatives, which are generally defined as “swaps” under Section 1a(47) of the CEA. Among other things, Dodd-Frank provides for:

…continue reading: Dodd-Frank Rules Impact End-Users of Foreign Exchange Derivatives

Halliburton: The Morning After

Editor’s Note: Boris Feldman is a member of Wilson Sonsini Goodrich & Rosati, P.C. The views expressed in this post are those of Mr. Feldman and do not reflect those of his firm or clients. Doru Gavril also contributed to this post. The Supreme Court’s expected reconsideration of Basic is also discussed in a Harvard Law School Discussion Paper by Professors Lucian Bebchuk and Allen Ferrell, Rethinking Basic, discussed on the Forum here.

The blogosphere is abuzz over Halliburton. [1] Will the Supreme Court overturn
Basic
[2] and abolish the fraud-on-the-market presumption? Will the decision end shareholder class actions as we have known them? Presumably, by the Fourth of July, we will know.

The purpose of this post is not to predict the outcome of Halliburton. Rather, it is to begin thinking about ways in which the plaintiffs’ bar may respond if the Court does overturn Basic. Those who think that plaintiffs’ lawyers will go quiet into the night are, in my opinion, ignoring the lessons of history.

…continue reading: Halliburton: The Morning After

The Growth of Appraisal Litigation in Delaware

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday December 5, 2013 at 9:11 am
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Editor’s Note: The following post comes to us from David J. Berger, partner focusing on corporate governance at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum. The complete publication, including footnotes, is available here. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

Numerous commentators and academics have written about the growth of M&A litigation over the last several years. Less noticed, but perhaps more significant, has been the growing tendency of institutional and other large investors to exercise their appraisal rights under Delaware law. Investors in several recent high-profile mergers have announced their intention to, or sought to, exercise their appraisal rights, including in deals involving Dell, Dole Food Company, and 3M/Cogent.

In many of these situations, an even more novel phenomenon is occurring: hedge funds, arbitrageurs, and other money managers are buying the stock of target companies even after a deal is announced to have the option to exercise appraisal rights. Some funds even have been created expressly for this purpose, perhaps with the view that the risks in an appraisal proceeding may be far greater to the target company than to the shareholder.

One such risk is that historically the definition of “fair value” in an appraisal proceeding under Delaware law provides wide discretion to the court to “take into account all relevant factors” beyond the price paid in the underlying merger, even where that price was the result of an arms-length transaction. The practical impact of this standard is that the court’s determination of value may get reduced to a “battle of the experts,” while the experts’ own analyses may be based on future projections and/or other financial information that is, by definition, uncertain. As a result, there is often little hard data to predict what the value of an entity in an appraisal proceeding could be.

…continue reading: The Growth of Appraisal Litigation in Delaware

Delaware Court of Chancery Upholds Trados Transaction as Entirely Fair

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 3, 2013 at 9:26 am
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Editor’s Note: The following post comes to us from David J. Berger, partner focusing on corporate governance at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here. Additional reading about In re Trados Inc. Shareholder Litigation is available here.

On August 16, 2013, the Delaware Court of Chancery issued a much-anticipated post-trial decision in In Re Trados Incorporated Shareholder Litigation, holding that the sale of Trados to SDL was entirely fair to the Trados common stockholders and that the Trados directors had not breached their fiduciary duties in approving the transaction. [1] The case involved a common fact pattern: the sale of a venture-backed company where (1) the holders of preferred stock, with designees on the board, receive all of the proceeds but less than their full liquidation preference, (2) the common stockholders receive nothing, and (3) members of management receive payments under a management incentive plan.

…continue reading: Delaware Court of Chancery Upholds Trados Transaction as Entirely Fair

Court Affirms Dismissal of Stockholder Complaint as Derivative Following Merger

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday August 26, 2013 at 9:17 am
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Editor’s Note: The following post comes to us from David J. Berger, partner focusing on corporate governance at Wilson Sonsini Goodrich & Rosati, and is based on a WSGR Alert memorandum. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On August 12, 2013, the U.S. Court of Appeals for the Fifth Circuit affirmed the dismissal of a lawsuit contending that alleged controlling stockholders of Ascension Orthopedics, Inc. had expropriated voting and economic control from the minority stockholders via a series of financing transactions that occurred before Ascension merged with another company. The Fifth Circuit affirmed the district court’s decision that, under applicable Delaware law, the claims by the minority stockholders were derivative rather than direct, and thus were extinguished by the merger. Wilson Sonsini Goodrich & Rosati represented the former directors of Ascension in the litigation and represented Ascension in the financing and acquisition transactions.

…continue reading: Court Affirms Dismissal of Stockholder Complaint as Derivative Following Merger

Private Company Financing Trends for 1H 2013

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Thursday August 22, 2013 at 8:57 am
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Editor’s Note: The following post comes to us from Craig Sherman, partner focusing on corporate and securities law at Wilson Sonsini Goodrich & Rosati, and first appeared in the firm’s Entrepreneurs Report.

In Q2 2013, up rounds (including several second-stage seed financings) as a percentage of total deals increased modestly compared with Q1 2013. While pre-money valuations remained strong for both venture-led and angel Series A deals that had closings in Q2, valuations of companies doing Series B and later rounds declined significantly. Median amounts raised increased modestly for angel-backed Series A deals but fell for venture-backed companies, while amounts raised increased for Series B deals, but fell for Series C and later rounds.

Deal terms remained broadly similar in 1H 2013 as compared with 2012, with a couple of notable exceptions. First, the use of uncapped participation rights in both up and down rounds continued to decline. Second, down rounds also saw a shift away from the use of senior liquidation preferences.

Up and Down Rounds

Up rounds represented 67% of all new financings in Q2 2013, an increase from 60% in Q1 2013 but still down markedly from the 76% figure for up rounds in Q4 2012. Similarly, down rounds as a percentage of total deals declined from 26% in Q1 2013 to 18% in Q2 2013, but were still higher than the 14% figure for Q4 2012. The percentage of flat rounds grew slightly, from 14% of all deals in Q1 2013 to 15% in Q2 2013.

…continue reading: Private Company Financing Trends for 1H 2013

Proposed NASDAQ Rule Requires Internal Audit Function at Listed Companies

Posted by Boris Feldman, Wilson Sonsini Goodrich & Rosati, on Wednesday March 27, 2013 at 9:32 am
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Editor’s Note: Boris Feldman is a member of Wilson Sonsini Goodrich & Rosati, P.C. This post is based on a WSGR alert.

The NASDAQ Stock Market LLC (Nasdaq) recently filed with the Securities and Exchange Commission (SEC) a proposed rule [1] requiring listed companies to establish and maintain an internal audit function. [2] The SEC is soliciting comments on the proposed rule through March 29, 2013. [3]

Under the proposed rule, the internal audit function would be required to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control. In addition, new Rule 5645 would require the audit committee to:

  • meet periodically with the company’s internal auditors (or other personnel responsible for this function); and
  • discuss with the outside auditors the responsibilities, budget, and staffing of the company’s internal audit function.

Companies would be permitted to outsource their internal audit function to a third-party service provider other than their independent auditor. For companies that choose to outsource this function, Nasdaq has stated that the company’s audit committee maintains sole responsibility to oversee the internal audit function and may not allocate or delegate this responsibility to another board committee.

According to Nasdaq, the proposed rule is designed to:

…continue reading: Proposed NASDAQ Rule Requires Internal Audit Function at Listed Companies

The Best-Laid Plans of 10b5-1

Posted by Boris Feldman, Wilson Sonsini Goodrich & Rosati, on Wednesday February 6, 2013 at 9:53 am
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Editor’s Note: Boris Feldman is a member of Wilson Sonsini Goodrich & Rosati, P.C. The views expressed in this post are those of Mr. Feldman and do not reflect those of his firm or clients.

In the world of insider trading, Rule 10b5-1 plans are a blessing and a curse: a blessing, because they enable executives to diversify their company holdings in a stable, law-abiding manner; a curse, because they tempt cheaters into hiding their malfeasance in a cloak of invisibility.

For years, 10b5-1 plans received little scrutiny. In private shareholder lawsuits, plaintiffs’ lawyers generally scrunched their eyes shut and tried to ignore them. The SEC, having created the structure, lost interest postpartum. As a result, aggressive insiders sometimes were able to use the plans in ways the framers never intended.

Recently, journalists have started to focus on the specifics of 10b5-1 plans, along with perceived abuses of them. [1] Those articles appear to have roused the SEC. So this may be a good time for counsel, both inside and outside, to revisit their existing plans. In this post, I address what I consider to be best practices under 10b5-1. This does not mean that contrary practices are improper or unlawful. Think of it, rather, as 10b5-1 for the risk averse.

…continue reading: The Best-Laid Plans of 10b5-1

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