Corporate Securities Law Blog

China claims that more than 50% of foreign companies which have invested in China are currently reporting losses as the result of aggressive transfer pricing.  China has improved its tax sophistication and enforcement over the last several years and plans to increase the number of its audits to ensure that these companies are reporting an appropriate amount of tax.

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On March 21, 2006, the Supreme Court in Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Dabit, 547 U.S. 71 (2006), ruled that the Securities Litigation Uniform Standards Act of 1998 (“SLUSA”) pre-empts “covered class actions” purportedly brought under state law on behalf of persons who neither purchased or sold securities, but instead claim that they were defrauded into refraining from purchasing or selling securities. In doing so, the Supreme Court reaffirmed long-standing policy considerations underlying the application and interpretation of the federal securities laws which recognize that “litigation under Rule 10b-5 presents a danger of vexatiousness different in degree and in kind from that which accompanies litigation in general.” Continue Reading Questions & comments

The federal sentencing guidelines were recently amended to remove a suggestion that corporations be required to waive the attorney-client privilege and attorney work product doctrine in order to receive a reduced sentence. Though welcomed by the business community, this revision does not affect previously issued guidance by the Department of Justice requiring prosecutors to consider a corporation’s voluntary waiver of the attorney-client privilege and work product doctrine in determining whether to bring charges against the corporation in the first place. Continue Reading Questions & comments

It is well recognized that the ability of a corporation to attract and retain quality directors, officers and employees depends in large part on the corporation’s willingness to indemnify such individuals for personal losses suffered as a result of claims relating to actions taken in their corporate capacity. For example, Section 145 of the Delaware General Corporation Law specifically authorizes Delaware corporations to indemnify agents acting on behalf of the corporation. Included in these indemnification obligations is the requirement to advance or pay for the costs incurred in defending the individuals. These obligations ordinarily continue until entry of a final, nonappealable judgment against the individual finding that he or she engaged in intentional fraudulent or criminal conduct. Continue Reading Questions & comments

This past week, Symantec Corp., the maker of Norton AntiVirus software, received a $1 billion tax assessment for improper transfer pricing. The IRS alleges Symantec undervalued a license agreement with its Irish subsidiary. This result is especially unfortunate because it could have been avoided through an Advance Pricing Agreement ("APA") with the IRS. Continue Reading Questions & comments

After the Organization for Economic Cooperation and Development criticized Mexico for an inadequate number of transfer pricing audits, Mexico agreed to correct the problem.  In 2004, Mexico's Finance Ministry split the Central Administration for International Fiscal Audits ("CAIFA") into two offices. The new office of the Central Administration for Transfer Pricing Audits ("CAT") is dedicated to improving and increasing transfer pricing enforcement. The CAT is fulfilling Mexico's promise by examining the restructurings undertaken by a number of companies who have sought to shift the functions and risks of their Mexican operations to lower tax jurisdictions in Europe. Continue Reading Questions & comments