On October 18, 2023, the Securities and Exchange Commission (SEC) adopted amendments to the rules governing beneficial ownership reporting to “require market participants to provide more timely information on their positions to meet the needs of investors in today’s financial markets.”Continue Reading SEC Adopts Amendments to Modernize Beneficial Ownership Reporting
A Summary of Certain Proxy Advisory Firm and Institutional Investor Board Diversity Policies
Institutional investors and proxy advisory firms continue to develop and refine their policies regarding board diversity. While gender diversity on public company boards has been in focus for some time now, institutional investors and proxy advisory firms are also increasingly focusing on racial and ethnic diversity as part of their evolving approach to board diversity.
This post is a summary of published board diversity policies of certain institutional investors and proxy advisory firms into a singular resource for ease of reference. Below the initial breakdown, certain policies concerning board diversity shareholder proposals are described. Continue Reading A Summary of Certain Proxy Advisory Firm and Institutional Investor Board Diversity Policies
Second Quarter Form 10-Q Disclosure Reminder: SEC Guidance on Key Performance Indicators
Earlier this year, the Securities and Exchange Commission (SEC) issued interpretive guidance, effective February 25, 2020, regarding the disclosure of key performance indicators and metrics (KPIs) in Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), which we discussed in a previous blog post.
This guidance may not have been at the forefront of disclosure matters under consideration for many companies during the first quarter 2020 reporting cycle given the disclosure and other challenges resulting from the COVID-19 pandemic at that time.
Reminders for Public Companies
With the passage of time and a greater sense of clarity on COVID-19 disclosure matters, some companies may use the second quarter 2020 financial reporting cycle as an opportunity to revisit, review and, to the extent necessary, revise their KPI disclosure to ensure alignment with SEC’s interpretative guidance issued during the first quarter 2020. As companies do so, they should ensure that KPIs and other operating metrics disclosed in the MD&A are appropriately considered. For example, to the extent a company identifies an operating metric as a KPI, the company should ensure that its disclosure aligns with the SEC’s interpretive guidance, which may include current and prior-year period comparative disclosure and analysis of factors contributing to year-over-year changes, to the extent material.Continue Reading Second Quarter Form 10-Q Disclosure Reminder: SEC Guidance on Key Performance Indicators
Reevaluating Risk Factors in Response to COVID-19
As calendar-year public companies are beginning to prepare their Quarterly Report on Form 10-Q (Form 10-Q) for their first quarter, the novel coronavirus (COVID-19) pandemic and the related societal and economic impact continues to evolve. One important item that companies will need to consider as part of their Form 10-Q preparation is whether any new (or expanded) risk factors relating to COVID-19 should be included in their Form 10-Q.
Form 10-Q requires companies to disclose any material changes to the risk factors that were included in their Annual Report on Form 10-K (Form 10-K). Absent merger and acquisition activity or other material developments, it is not unusual for companies to determine no material changes have occurred since their Form 10-K was filed (and as a result no new risk factor disclosure is required).
However, given the significant impact of COVID-19 on businesses so far this year, we expect most companies will update their existing risk factor disclosure. Investors and other stakeholders are paying particular attention to COVID-19 disclosures, and the risks that COVID-19 poses to a company may not always be obvious to such stakeholders absent robust disclosure.Continue Reading Reevaluating Risk Factors in Response to COVID-19
Advance Notice Bylaw Provisions Upheld by Delaware Supreme Court
In a previous blog post, we discussed the Delaware Chancery Court’s decision in Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Trust and its relevance to the interpretation of advance notice bylaw provisions. On appeal, the Delaware Supreme Court reversed the decision of the Chancery Court and strictly applied the deadlines set forth in the defendants’ unambiguous advance notice bylaw provisions.
Background of the Chancery Court Decision
In Saba, the defendants were two affiliated closed-end funds who sought to disqualify the director nominees of an activist shareholder because the activist shareholder did not strictly comply with the requirements of the advance notice provisions of the defendants’ bylaws. As allowed pursuant to the bylaws of the funds, the defendants had requested a response to a supplemental information request from the activist shareholder before a five-business day deadline.Continue Reading Advance Notice Bylaw Provisions Upheld by Delaware Supreme Court
Revisiting Advance Notice Bylaw Provisions and Proxy Access
Advance Notice Bylaw Provisions
A recent Delaware case, Saba Capital Master Fund, Ltd. v. Blackrock Credit Allocation Income Trust, highlights the importance of advance notice bylaws and the careful application of the terms of such bylaws by public companies who may be subject to activist campaigns.
As backdrop, following Delaware cases in 2008 (Jana Master Fund Ltd. vs. CNET Networks, Inc. and Levitt Corp. vs. Office Depot, Inc.) which interpreted ambiguous advance notice bylaw provisions in favor of insurgent shareholders attempting to nominate their own slate of director nominees, a large number of public companies (particularly large-cap companies and public companies incorporated in Delaware) amended their advance notice bylaw provisions to eliminate perceived vulnerabilities in their advance notice bylaws and expand the information required to be provided by shareholder proponents (known as second generation advance notice bylaw provisions).
While the focus on advance notice bylaw provisions (including the law firm commentary on this subject) has waned over the last decade, advance notice bylaws remain an important aspect of a public company’s preparedness for shareholder activism.Continue Reading Revisiting Advance Notice Bylaw Provisions and Proxy Access