On February 21, 2025, President Donald J. Trump released a National Security Presidential Memorandum (“Memorandum”) proposing broad revisions to the inbound and outbound investment screening review processes maintained and administered by the U.S. Department of the Treasury (“Treasury”), including the Committee on Foreign Investment in the United States (“CFIUS”). Continue Reading Trump Administration Proposes Significant Changes to CFIUS and the Outbound Investment Review Processes

In its recent decision in Manti Holdings, LLC v. The Carlyle Group Inc., C.A. No. 2020-0657-SG (Del. Ch. Jan. 7, 2025), the Delaware Court of Chancery reaffirmed the high bar plaintiffs must meet to show that a private equity fund’s motivation to complete the sale of a portfolio company prior to the end of the fund’s life creates a problematic conflict of interest. Continue Reading Delaware Court of Chancery Clarifies Controller Transaction Conflict of Interest Rules

Public companies would be well advised, on a lovely, clear day (in the Delaware sense), to update their advance notice bylaws. In the normal course these bylaws receive little attention, but in the event of an activist campaign they are critical to the board’s ability to discharge its fiduciary duties.  The board will have a positive duty to inform itself, among other things, of the activist’s plans and proposals, the degree of the activist’s financial alignment with long-only stockholders, and the qualifications and independence of the activist’s nominees.  This information will inform any settlement discussions, support a recommendation for or against the activist’s nominee and allow the board to ensure that stockholders receive accurate and timely disclosure regarding the nomination. Continue Reading Alignment Advance Notice Bylaw

On October 10, 2024, the Federal Trade Commission (“FTC”) voted unanimously to adopt the final rule[1] for the new Hart-Scott-Rodino (“HSR”) Act Form and Instructions, with the concurrence of the Department of Justice (“DOJ”).[2] As anticipated, the new rule entails the most significant revamp of the HSR Form in the nearly 50-year history of the HSR Act, which has significant, long-term implications for all clients planning M&A going forward. Continue Reading The New HSR Form Is Here

The Delaware Supreme Court in Kellner v. Aim Immunotech[1]recently ruled on the enforceability of a “modern” set of advance notice bylaws. Advance notice bylaws are the key tool corporations have to regulate the director nomination process and ensure full and fair disclosure to stockholders in a proxy fight. Critically, advance notice bylaws also allow the board to gather information necessary to guide its recommendation for or against a nominated candidate. While the headline may be that the court found all the challenged bylaws to be unenforceable, looking at each bylaw individually reveals a much less discouraging picture for corporations.[2]

Continue Reading Delaware Supreme Court Ruling on Advance Notice Bylaws – What’s In, What’s Out and What’s Missing from Advance Notice Bylaws

Key Takeaways

  1. The Non-Compete Rule is set to take effect on September 4, 2024. On July 3, a US district court in Texas, however, preliminarily enjoined the Federal Trade Commission (the “FTC”) from implementing or enforcing the Non-Compete Rule against the specific plaintiffs who challenged the Rule in that case. The court held that these challengers are likely to succeed on the merits because the FTC lacks the statutory authority to promulgate the non-compete rule and because the rule’s overbreadth renders it “arbitrary and capricious.”
  2. The court intends to issue a final ruling on the merits on or before August 30, 2024. Given the court’s preliminary ruling, it is likely to rule in plaintiffs’ favor again. The open issue is whether the court will prevent the FTC from enforcing the Rule in any context or will limit the final relief to the specific plaintiffs. Either order will be subject to appeal to the Court of Appeals for the Fifth Circuit (likely an unfavorable forum for the FTC) and ultimately to the Supreme Court of the United States. Whether and when the rule might take effect thus remains an open question.
  3. Use of non-compete agreements continues to carry risks. The FTC remains free to target non-competes but will have to adjudicate the merits of individual non-competes on a case-by-case basis. State law also remains a source of limitations.
  4. Employers should evaluate existing and future non-competes and ask whether: (1) a non-compete agreement is necessary to protect legitimate business interests; and (2) if so, the agreement is sufficiently narrow in scope, time and geography. Employers also should continue monitoring compliance with the changing landscape of applicable state laws, including laws that prohibit non-compete restrictions on low-wage or non-executive earners.

Continue Reading UPDATE: Slow Down, You Move Too Fast: The FTC Non-Compete Ban May Not Last

Activist Settlements and A Proposed Amendment to the DGCL 

Perhaps the most fundamental expectation of public company investors is the expectation of investing in a company run by a board of directors – a board elected by stockholders and charged with managing the corporation on behalf of all stockholders. Delaware seems primed to upset that expectation. Continue Reading Contracting Out of Corporate Law: Should Public Company Boards Be Allowed to Delegate Governance to a Single Stockholder?

Summary

Founders and controlling stockholders often seek to retain control over their companies even after taking them public, typically via high-vote share classes or, as was at issue in this case, via stockholder agreements granting the pre-IPO owners broad governance rights.

In West Palm Beach Firefighters’ Pension Fund v. Moelis & Company, the Delaware Court of Chancery recently held that a “new wave” stockholder agreement between Moelis & Company (the “Company”) and its founder, CEO, and board chairman, Ken Moelis was invalid under Section 141(a) of the Delaware General Corporation Law (the “DGCL”) because it contained  “pre-approval rights” over a number of corporate actions, required the board to recommend individuals designated by Moelis for a majority of directorships and fill committee positions and board vacancies with Moelis designees, impermissibly constraining the board’s ability to manage the business and affairs of the company—powers the statute does not allow the board to delegate via contract.[1]

Moelis is a strong reminder that the foundation of the corporate form in Delaware is the independent authority of a board of directors, elected by stockholders and entrusted to manage the business and affairs of the corporation as fiduciaries. Delaware will not permit this foundation to be eroded through contractual arrangements with stockholders. Continue Reading Delaware Court of Chancery Rejects Validity of “New Wave” Stockholder Agreement Terms that Constrain Traditional Board Authority

This is the price paid for allowing our hopes, rather than established law, to guide public merger agreement drafting for the last 18 years.  Con Edison v Northeast Utilities[1], a 2005 Second Circuit decision regarding a New York law governed merger agreement, found that, absent clear contractual language to the contrary, a target company could not collect lost shareholder premium as damages for the breach of a merger agreement. ConEd caused quite a stir in public M&A circles, with some asserting that it caused every public merger agreement to be converted into a mere option agreement, where, if the buyer did not wish to close, it had only to pay the target’s out-of-pocket costs. This may have been a bit extreme, but given how infrequently specific performance has been ordered to remedy a failure to close, it probably was not far off the mark.

Continue Reading ConEd Is Not Dead In Delaware

On November 2, 2023, the New York Appellate Division, First Department held for the first time that New York state courts hearing claims under the Securities Act of 1933 are required to stay discovery pending resolution of a motion to dismiss under the Private Securities Litigation Reform Act of 1995 (“PSLRA”).[1]

Continue Reading New York Appellate Division, First Department Holds That PSLRA Discovery Stay Applies to State Court Actions