Deal Dividends

Legal Developments

Chancery Opinion Provides First Delaware Court Guidance on COVID-19’s Impact on MAE Provisions and Ordinary Court Course Covenants

On November 30, 2020, Vice Chancellor Laster of Delaware’s Court of Chancery issued the first case where the pandemic provided a company with the ability to walk away from its contractual obligations in a sale transaction, analyzing both the material adverse effect (“MAE”) provisions and ordinary course covenants. AB Stable VIII LLC v. MAPS Hotels and Resorts One LLC et al., C.A. No. 2020-0310-JTL (Del. Ch. Nov. 30, 2020). The AB Stable case involved the attempted sale by AB Stable...

New Guidance on PPP Loans in M&A

Legal Developments

New Guidance on PPP Loans in M&A

The Paycheck Protection Program (the “PPP”) created under the CARES Act has provided much needed assistance to millions of businesses and other organizations operating in the United States that have been impacted by the COVID-19 pandemic. This program continues to evolve with the latest development addressing situations in which a PPP borrower is participating in a change of control, merger or an acquisition transaction. On October 2, 2020 the Small Business Administration (the “SBA”) published SBA Procedural Notice (5000-20057) (the...

Legal Developments

Delaware Supreme Court Refuses to Apply Corporate Test in Limited Partnership Books and Records Case

The recent Delaware Supreme Court case of Murfey v. WHC Ventures, LLC serves as a reminder that limited partnerships are contractual in nature and therefore in a books and records demand, legal standards applicable to Delaware corporations may not be applicable. In the Murfey case, limited partners of multiple limited partnerships demanded access to Schedule K-1s of other limited partners for the purpose of valuing their partnership interests.  After their access was restricted, the limited partners brought their demand to...

Legal Developments

2020 Updates to Delaware Entity

The State of Delaware typically amends its entity statutes annually to ensure that the statutes are state of the art and most effectively meet the needs of the changing business community.  Consistent with this practice, Delaware’s governor recently signed into law this year’s amendments to the Delaware’s Limited Liability Company Act (the “LLC Act”), Revised Uniform Limited Partnership Act (the “LP Act”), Revised Uniform Partnership Act, General Corporation Law (the “DGCL”) and Statutory Trust Act.  Unlike most years when the...

Legal Developments

PPP Developments

The CARES Act Paycheck Protection Program (“PPP”) has provided much needed assistance to millions of businesses and other organizations impacted by the COVID-19 pandemic in the United States. This program, however, continues to be fraught with snares and traps for the unwary and the M&A space is no exception. To begin, any lender that participates in the PPP is required to utilize a promissory note to evidence each PPP loan it advances. Though the Small Business Administration (SBA) has provided...

Legal Developments

Delaware Court of Chancery Strictly Construes Shareholder Representative Provision, Complicating Discovery from Shareholders

Following a recent Delaware case, buyers in M&A deals should ensure that their purchase agreements adequately provide for access to information from the seller in case of post-closing disputes. In Fortis Advisors, LLC v. Allergan W.C. Holding, Inc., Vice Chancellor Morgan Zurn ruled that if a buyer consents to a single shareholder representative structure in a merger agreement, the buyer cannot later compel the individual selling shareholders’ participation in discovery as parties in interest.[1] The Fortis decision arose out of...

Cross Border / Legal Developments / Practice Pointers

Immigration Stability Amidst Corporate Restructuring: U.S. Immigration Service Announces Clarifications for Multinational Managers and Executives

The U.S. Citizenship and Immigration Service (“USCIS”) recently announced it has adopted an administrative law decision that clarifies issues relating to the transfer of multinational executives and managers from foreign offices to the United States.  This new decision should streamline the immigration aspects of multinational corporate restructurings and mergers. U.S. immigration law provides a special mechanism for multinational companies to sponsor their overseas executives and managers for U.S. permanent residency (“green cards”), provided those employees worked for a foreign entity...

Legal Developments / Practice Pointers

CFIUS Abruptly Imposes New Notice Filing Fees

Beginning May 1, 2020, the Committee on Foreign Investment in the United States (“CFIUS”) will require a filing fee in connection with any formal notice of a “covered transaction” or a “covered real estate transaction.” The U.S. Treasury Department made the announcement on April 27, 2020 through an interim rule with its request for public comments until June 1, 2020. (See the interim rule here.) As of the date of this post, CFIUS has set the escalating amount of the...

Purchase and Merger Agreements

Dorsey Represents Galileo Financial Technologies in $1.2 Billion Acquisition by SoFi

Dorsey recently advised fintech company Galileo Financial Technologies, Inc. (Galileo) in connection with its announced agreement to be acquired by Social Finance, Inc. (SoFi) for $1.2 billion. “I am honored to have led a terrific Dorsey team of more than 20 attorneys and paralegals in helping our client Galileo Financial Technologies in achieving this significant milestone,” said Dorsey Partner Nolan Taylor.  “This transaction showcases Dorsey’s ability to bring a world-class deal team together to complete a major transaction. Our team’s...

Legal Developments

Disaster Suspension Continues-COVID-19 Corporate Issues in Alaska

Earlier we reported that on March 19, 2020 (Effective Collaboration with Governor Nets Pragmatic Solution) the Governor of the State of Alaska temporarily suspended certain provisions of the Alaska Corporations Code AS 10.06.405(a) (in person requirement) and AS 10.06.410(a) (notice requirement) for annual meetings until April 12, or later date, if the disaster declaration is extended.  On April 10, 2020, Governor Dunleavy signed into law Senate Bill 241 (the “Act”).  The Act extended the Governor’s March 11, 2020 Disaster Declaration...

Image of book pages fanned open

Legal Developments

COVID-19 Issues Appearing in Representation and Warranty Insurance Policies

Since the escalation of the COVID-19 pandemic, we’ve seen the emergence of proposed exclusions from coverage in representation and warranty insurance (RWI) policies.  For example, a buy-side policy found in a recently signed deal contains the following exclusion: the inability to fulfil customer orders based on a lack of stock in the period after 5 months from Closing caused by disruptions to the Target Group’s supply chain as a result of the spread of the Novel Coronavirus, including, but not...

Uncategorized

Impacts of COVID-19 on Food, Beverage and Agribusiness M&A

The current macro and micro dynamics in the food and ag sector are rapidly shifting and uncertain, particularly in today’s world of the coronavirus. From a changing regulation and political environment to generational succession planning challenges, change and unknowns are creating both challenges and opportunities. As a result, consolidation in the food and ag sector is occurring at an unprecedented rate.  On March 25, 2020 Dorsey partner Michael Droke presented a webinar addressing the impacts of Coronavirus/COVID-19 on the M&A...

Legal Developments

More Grief for the “Big Guys”: Draft Revision of the China Anti-Monopoly Law Introduces Further Restraints on Influential Market Players

On January 2, 2020, China’s State Administration for Market Regulation, or the SAMR, released the Draft Revision of the Anti-Monopoly Law of China (the “Draft AML Revision”) for public comment.  The Draft AML Revision is significant in a number of respects, several of which will be highlighted below: (i) it makes it more likely that a transaction could trigger anti-monopoly review, (ii) it expands the concept of collusion to business operators who coordinate and assist in “collusion”, (iii) it increases...

Legal Developments

Effective Collaboration with the Governor Nets Pragmatic Solution to COVID-19 Corporate Issues in Alaska

On March 19, Dorsey attorneys successfully obtained an emergency order from the Governor of the State of Alaska, which temporarily suspends certain state laws during the coronavirus public health crisis, and allows all Alaska corporations to hold virtual and hybrid (in-person and communications equipment) annual shareholder meetings on short notice. Every Alaska corporation must have an annual shareholder meeting, and Alaska Statutes require corporations to hold in-person annual shareholder meetings (AS 10.06.405). Most other states allow virtual or hybrid meetings,...

Fiduciary Duties / Legal Developments

The “Long Goodbye” to Duty of Care as a Real Basis for Director Liability in M&A: The Legacy of Chancellor Allen

The fiduciary duty of care has become more aspirational than a real legal basis for potential director liability in M&A in the Age of DGCL Section 102(b)(7), Corwin v. KKR Financial Holdings LLC (Del. 2015) and In re Volcano Corp. Stockholders Litigation (Del. Ch. 2016).  At the 32nd Annual Tulane Corporate Law Institute in New Orleans on Thursday and Friday, March 5 and 6, 2020, a panel led by former Delaware Chief Justice Leo Strine (and including former Delaware Supreme...

Legal Developments / Practice Pointers

The Importance of Full Disclosure

Directors and officers of corporations owe a duty of care and a duty of loyalty to both the corporation and its shareholders, although the duty of care for directors can be exculpated.  A breach of these fiduciary duties can expose such directors and officers to liability.  In Morrison v. Berry, No. 12808-VCG, 2019 Del. Ch. LEXIS 1412 (Ch. Dec. 31, 2019), a recent decision published by the Delaware Chancery Court, Vice Chancellor Glasscock granted motions to dismiss against the majority...

Legal Developments

Increase in HSR Reportability Thresholds and Other HSR Developments

On January 28, 2020, the Federal Trade Commission (FTC) announced the annual adjustment of the thresholds that trigger premerger reporting obligations (and the mandatory waiting period) under the Hart-Scott Rodino (HSR) Act, which will apply to transactions closing 30 days after publication of the announcement in the Federal Register. The FTC also announced adjusted thresholds that trigger prohibitions on certain interlocking memberships on corporate boards of directors, which will become effective immediately on publication in the Federal Register. Both sets...

Legal Developments / Purchase and Merger Agreements

Recent Delaware Case Reinforces That Akorn is the Ceiling Not the Floor for MAE Terminations

2018’s landmark decision Akorn, Inc. v. Fresenius Kabi AG marked the first time that the Delaware Chancery Court upheld a buyer’s use of a Material Adverse Effect (MAE) clause to terminate a merger agreement. However, the Court’s reasoning in the case suggested that the favorable ruling was based on the particularity of the facts and that the general standard for successfully invoking such a clause remains high. The Court’s recent decision in Channel Medsystems v. Boston Sci. Corp confirms the...

Practice Pointers

Subsidiary Spin-Off Considerations

Care must be taken when a U.S. entity spins off assets to a newly formed wholly-owned subsidiary so that the legal protections offered by the desired separation are realized. This article presents a few high-level issues to consider. Fraudulent Conveyance Risks Associated with the Separation. A conveyance would be deemed fraudulent by a court of law if a company transfers assets for less than reasonably equivalent value while the company was insolvent. A board of directors cannot approve a spin-off...

Due Diligence / Private Equity

M&A and the Evaluation of Corporate Compliance Programs

Acquisitions of companies, especially target companies with international operations, require buyers to carefully scrutinize the target’s compliance programs, including the target’s compliance with the U.S. Foreign Corrupt Practices Act and other anti-bribery and anti-corruption laws. Doing so enables the buyer to more accurately assess the target’s value and risk profile, negotiate for the costs of any misconduct to be borne by the sellers and evaluate whether remedial steps are needed. When designing and executing a pre-M&A due diligence process on...