Public companies and companies registering to go public should be aware of fee rate adjustments made by the Securities and Exchange Commission that will be effective as of October 1, 2011. We originally reported on this increase on September 6, 2011. The following fee rates will be affected by the adjustment:Continue Reading SEC Fee Rate Adjustment for Section 6(B), Section 13(E) and Section 14(G) To Be Effective October 1, 2011

On July 26, 2011, the U.S. Securities and Exchange Commission adopted new rules to phase-out and eventually eliminate credit ratings from the transaction eligibility requirements of Forms S-3 and F-3, the short forms that eligible issuers can use to register securities under the Securities Act of 1933 (the “Securities Act”). These forms enable eligible issuers to rapidly access the public capital markets in the United States. The SEC also adopted corresponding amendments to modify other SEC rules that reference credit ratings. The new rules were adopted in light of Section 939A of the Dodd-Frank Act (“Dodd-Frank”), requiring the SEC to amend its regulations to “remove any reference to or requirement of reliance on credit ratings and to substitute in such regulations such standard of credit-worthiness.” Following is background and a guide to the new short-form eligibility criteria for transactions.
 Continue Reading SEC Rulemaking: Guide to Newly Effective Eligibility Criteria to Replace Credit Ratings in Public Offerings

In Katz v. Gerardi, No. 10-1407, 2011 WL 3726279 (10th Cir. Aug. 25, 2011), the United States Court of Appeals for the Tenth Circuit affirmed the dismissal of claims alleging violations of Section 11 and Section 12(a)(2) of the Securities Act of 1933 (the “1933 Act”), 15 U.S.C. §§ 77k, 77l(a)(2), against a real estate investment trust (“REIT”). The claims were brought by a former minority unitholder of a REIT who, as part of a “squeeze-out merger” of the REIT with another entity, exchanged his units for cash. The Court held that the merger did not force the plaintiff to purchase newsecurities, but only to sell his old securities. Because Sections 11 and 12(a)(2) of the 1933 Act provide a private right of action only for purchasers, not sellers, of securities, the Tenth Circuit held that plaintiff lacked standing to assert a claim. The decision confirms that shareholders involved in forced sales resulting from a merger may not bring claims under the Section 11 and 12(a)(2) of the 1933 Act.
 Continue Reading Tenth Circuit Holds that “Forced Sellers” Resulting From a Squeeze Out Merger Lack Standing to Assert Claims Under Sections 11 and 12(a)(2) the Securities Act of 1933

In Fait v. Regions Financial Corp., No. 10-2311-cv, 2011 WL 3667784 (2d Cir. Aug. 23, 2011), the United States Court of Appeals for the Second Circuit affirmed the dismissal of claims under Section 11 and Section 12(a)(2) of the Securities Act of 1933 (“1933 Act”), 15 U.S.C. §§ 77k, 77l(a)(2), alleging that statements concerning goodwill and loan loss reserves contained in a prospectus and registration statement were false and misleading. The Court held that such statements were “opinions” which can be false or misleading only if defendants did not genuinely believe the opinions at the times they were made.  This decision is notable because it recognizes squarely that estimates of goodwill and loan loss reserves are inherently subjective and thus constitute “opinions” rather than statements of fact.
 Continue Reading Second Circuit Holds that Falsity of Estimates of Goodwill and Loan Loss Reserves For Purposes of Sections 11 and 12(a)(2) of the Securities Act of 1933 Hinges on the Speakers’ Subjective Belief in the Estimates’ Accuracy

On September 6, 2011, the Securities and Exchange Commission confirmed that it would not seek rehearing or Supreme Court review of the decision by the U.S. Court of Appeals in Washington, D.C. partially vacating the SEC’s proxy access rules. (Click here for our blog reporting on the D.C. Circuit’s decision.) Chairman Mary L. Schapiro issued a statement indicating her continuing interest in “finding a way to make it easier for shareholders to nominate candidates to corporate boards” but suggesting no immediate SEC plans to propose new proxy access rules.
 Continue Reading Amendments to SEC Rule 14a-8 Allowing Shareholder Proposals for Proxy Access Regimes to Come into Effect

On September 1, 2011, California governor Jerry Brown signed Assembly Bill No. 571, which simplifies restrictions on dividends, repurchases and redemptions of shares. The restrictions are set forth in Sections 500 to 509 of the California Corporations Code, and are commonly referred to collectively as “Section 500.[1]” These provisions are designed to protect the interests of creditors and senior equity holders against transactions that might undermine their seniority in the capital structure.   Section 500 applies to companies incorporated in California and to companies incorporated elsewhere but deemed subject to the same restrictions by virtue of satisfying the requirements of Section 2115 of the California Corporations Code for “pseudo-California corporations.” Section 500 uses the term “distributions” to encompass dividends of cash or property (other than shares of the corporation) and repurchases and redemptions of shares.
 Continue Reading California Corporations Code Amended to Simplify Restrictions on Distributions and Permit Waivers of Application of Section 500 to Preferences of Preferred Stock

Public companies and companies registering to go public should be aware of recent fee rate adjustments made by the Securities and Exchange Commission. The following fee rates will be affected by the adjustment:
 

  • the Section 6(b) fee rate applicable to the registration of securities, 
  • the Section 13(e) fee rate applicable to the repurchase of securities and 
  • the Section 14(g) fee rate applicable to proxy solicitations and statements in corporate control transactions.
     

Continue Reading SEC Announces Slight Decrease in Fee Rates for Section 6(b), Section 13(e) and Section 14(g) in Fiscal Year 2012

In Monty v. Leis, 193 Cal. App. 4th 1367, 123 Cal. Rptr. 3d 641 (2011), the California Court of Appeal, Second District, affirmed the order of the California Superior Court, Santa Barbara County, denying a motion by shareholders of Pacific Capital Bancorp (“PCB”), a California corporation, for a preliminary injunction to enjoin or rescind a transaction by which Ford Financial Fund, L.P. (“Ford”) would acquire between 80 and 91 percent of PCB’s stock. The Court held that because the transaction closed while the motion was pending, the appeal of the preliminary injunction motion was moot, and that California law would not permit the shareholder plaintiffs to seek rescission of the transaction after it had been completed. The Court also rejected plaintiffs’ argument that the investment agreement constituted an improper defensive mechanism because it did not include a provision that allowed PCB to back out of the deal if a better offer was received. Instead, the Court held, there is no requirement under California law that the board of directors negotiate a “fiduciary out” before binding the company to particular strategic transaction. This decision, in which the Court declined to follow Delaware law, underscores the latitude given to a board of directors of a California corporation to cause the company to enter into a strategic transaction.
 Continue Reading California Court of Appeal Refuses to Permit an Action for Rescission of a Strategic Transaction, Holding That a Board Has No Duty Under California Law to Include a “Fiduciary Out”

In two recent decisions, the United States Courts of Appeals for the District of Columbia Circuit and the Seventh Circuit each split with the Second Circuit’s 2010 decision in Kiobel v. Royal Dutch Petroleum Co., 621 F.3d 111 (2d Cir. 2010), that corporations cannot be liable under the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350. As we reported, the Second Circuit in Kiobel held that the scope of liability under the ATS does not extend to corporations because imposing liability on corporations for violations of the law of nations has not achieved a sufficiently “specific, universal, and obligatory” character so as to be considered a norm of customary international law. However, in Flomo v. Firestone Natural Rubber Co., No. 10-3675, 2011 WL 2675924 (7th Cir. July 11, 2011), and Doe VIII v. Exxon Mobil Corp., Nos. 09-7125, 09-7127, 09-7134, 09-7135, 2011 WL 2652384 (D.C. Cir. July 8, 2011), the D.C. and Seventh Circuits each concluded that the Second Circuit’s decision in Kiobel relied on factual inaccuracies and ignored the distinction between norms of conduct and remedies. The decisions deepen the circuit split on the question of corporate liability under the ATS, creating a likelihood that the conflict will be resolved by the United States Supreme Court.
 Continue Reading District of Columbia and Seventh Circuits Allow for Corporate Liability Under The Alien Tort Statute, Splitting With Second Circuit