In In re McDonald’s Corp. Stockholder Derivative Litigation, No. 2021-0324 (Del. Ch. Jan. 26, 2023), the Delaware Court of Chancery (Laster, V.C.) held that officers of a Delaware corporation are subject to a fiduciary duty of oversight as articulated in In re Caremark International Inc. Derivative Litigation, 698 A.2d 959 (Del. Ch. 1996). In doing so, the Court allowed stockholder derivative plaintiffs to proceed with oversight claims against the company’s former Global Chief People Officer, who allegedly presided over a corporate culture that condoned sexual harassment. The decision builds on Delaware jurisprudence to extend the duty of oversight to officers, not just directors, who will in most instances form part of the vanguard with respect to company efforts to implement effective reporting systems and/or to report on and respond to red flags regarding potential misfeasance at the company.

Continue Reading Delaware Court of Chancery Holds that Officers of a Delaware Corporation Are Subject to Fiduciary Duty of Oversight

The Securities Exchange Commission (“SEC” or “Commission”) has taken action against Genesis Global Capital, LLC (“Genesis”) and Gemini Trust Company, LLC (“Gemini”) (collectively, “Defendants”) in a recently-filed complaint alleging that the crypto companies violated federal securities laws by engaging in the unregistered offer and sale of securities in the form of their “Gemini Earn Agreements.” In doing so, the Commission not only relied upon the mainstay Howey Test for determining whether an agreement is a security, but also summoned Howey’s lesser-known cousin, the Reves Test, notably leading with the latter in its complaint.

Continue Reading SEC Showcases Lesser-Known Legal Theory in Crypto Lending Suit

1. Higher Jurisdictional Thresholds For HSR Filings

On January 23, 2023, the Federal Trade Commission announced revised, higher thresholds for premerger filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The jurisdictional thresholds are revised annually based on the change in Gross National Product (GNP).

Continue Reading Higher Jurisdictional and Filing Fees Thresholds for HSR Act Premerger Notifications and Interlocking Directorates Announced

Courts and state legislatures continue to take aim at post-employment non-competes. In a companion blog, we recently detailed the Federal Trade Commission’s proposed rule banning post-employment non-competes. However, for years (and even under the FTC’s overreaching proposed rule), non-competes in the sale of business context have generally received less scrutiny.

Continue Reading Buyer Beware: Delaware Declines to Enforce Sale of Business Non-Compete

FINRA punctuated its annual post-New Year’s Report on FINRA’s Examination and Risk Monitoring Program (the “Report”), by including a new target category “Financial Crimes.” The inclusion of this category is noteworthy not only for its newness but also because FINRA, as a non-governmental self-regulatory organization, does not have authority to prosecute criminal activity.

Continue Reading Financial Crimes Makes Debut in FINRA Annual Priorities Preview

As discussed in our December 16, 2010 blog article, the IRS issued final regulations in 2009 under Section 6039 of the Internal Revenue Code (the “Code”) that require employers to annually furnish each employee who exercised incentive stock options (“ISOs”) or sold or otherwise transferred shares acquired under an employee stock purchase plan (“ESPP”) during a year with a detailed information statement by January 31 of the following year. In addition, employers must generally file an information return with the IRS by February 28 of the following year, or by March 31 for employers filing electronically. These due dates are delayed until the next business day if they otherwise fall on a weekend.

Continue Reading Reminder to Perform Annual ISO/ESPP Reporting in January 2023

On December 14, 2022, the Securities and Exchange Commission (the “SEC”) adopted amendments to modernize Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and add new disclosure requirements to enhance investor protections against insider trading. Rule 10b5-1, which was adopted in 2000, provides a safe harbor for corporate insiders such as officers and directors to buy or sell company stock without violating insider trading regulations under Section 10(b) of the Exchange Act, and Rule 10b-5, if trades are made pursuant to pre-determined trading plans, also known as Rule 10b5-1 plans, entered into at a time when such parties are not privy to any material nonpublic information.

Continue Reading SEC Adopts Amendments Regarding Insider Trading Plans and Related Disclosures

On January 5, 2023, the Federal Trade Commission (“FTC”) announced a broad proposed rule that would ban employers from imposing noncompete clauses on their workers. The FTC press release announcing the proposed rule states that noncompete clauses—which apply to about one in five American workers—suppress wages, hamper innovation, block entrepreneurs from starting new businesses and reduce American workers’ earnings between $250 billion and $296 billion per year.[1] The proposed rule would prohibit employers from: (1) entering into or attempting to enter into a noncompete with a worker; (2) maintaining a noncompete with a worker; or (3) representing to a worker, under certain circumstances, that the worker is subject to a noncompete. The term “worker” covers paid staff in addition to independent contractors and unpaid staff. The proposed rule does not apply to noncompete provisions imposed upon 25% owners of a business in transaction documents related to the sale of the business. The proposal is subject to a 60-day public comment period commencing when the Federal Register publishes the proposed rule.

Continue Reading FTC Seeks to Ban Noncompete Agreements in Employment Contracts

On Dec. 29, 2022, President Biden signed into law H.R. 2617, the “Consolidated Appropriations Act, 2023.” Included within H.R. 2617 is The Merger Filing Fee Modernization Act of 2022, which impacts HSR filings as set forth below:

Continue Reading New Law Substantially Increases HSR Filing Fees for Large Transactions

On December 13, 2022, the Staff of the Division of Corporation Finance of the U.S. Securities and Exchange Commission updated its Non-GAAP Financial Measures Compliance & Disclosure Interpretations (“C&DIs”). The C&DIs are generally consistent with prior Staff guidance and companies should consider them in future filings and press releases that contain non-GAAP financial measures.

Continue Reading SEC Updates Non-GAAP Financial Measures Guidance