The long and winding road of the Corporate Transparency Act (CTA) litigation (as discussed in our most recent CTA client alert) has taken another turn, and this time companies are driving blind. On New Year’s Eve, the U.S. Department of Justice (DOJ) asked the U.S. Supreme Court to lift the injunction imposed by a Texas court and let the law go into effect while the legal contest over the constitutionality of the law is pending. Yesterday, the U.S. Supreme Court resoundingly agreed with the DOJ. In an 8-1 ruling, the nation’s highest Court lifted the stay on enforcement of the statute. One might assume that the Supreme Court ruling ended the injunction issue, but a separate order issued by a different federal judge in Texas blocking enforcement of the statute nationwide remains in place.

Continue Reading U.S. Supreme Court Lifts Initial Injunction Against Enforcement Of Corporate Transparency Act, But A Separate Injunction Continues To Halt Implementation 

2025 promises to be another turbulent year for boards of directors. On the heels of a historically unprecedented election, companies are still ramping up compliance with the ambitious agenda of the outgoing administration while simultaneously bracing for the changes promised by the next one. Against that backdrop, colleagues from across Cleary’s offices have zeroed-in on the impact of the issues that boards of directors and senior management of public companies have faced in the past year, as well as on what can be anticipated in the year to come.

Continue Reading Selected Issues for Boards of Directors in 2025

In our prior notes of December 4, 9, and 13, 2024, we reported that (1) a district court in Texas issued a nationwide injunction halting implementation of the Corporate Transparency Act (CTA), (2) the Financial Crimes Enforcement Network (FinCEN) acknowledged that companies need not file CTA mandated disclosures while that injunction remained in effect. Subsequently, the U.S. Department of Justice (DOJ) moved to stay the injunction pending appeal. The district court rejected that motion, but on December 23, 2024, the United States Court of Appeals for the Fifth Circuit granted the government’s motion, staying the district court’s injunction and expediting briefing of the appeal. In so doing, the Court concluded that the government had “made a strong showing that it is likely to succeed on the merits in defending CTA’s constitutionality.” In addition, the Court rejected the plaintiffs’ warnings that “lifting the . . . injunction days before the compliance deadline would place an undue burden on them,” reasoning that the plaintiffs filed suit only months ago and the injunction had been in place mere weeks, whereas businesses have had “nearly four years . . . to prepare since Congress enacted the CTA, as well as the year since FinCEN announced the reporting deadline.”

Continue Reading Fifth Circuit Pauses District Court CTA Injunction; FinCEN Extends Filing Deadline to January 13, 2025

As outlined in our prior update, on December 3, 2024, a Texas federal district court issued a preliminary injunction that temporarily blocks the Corporate Transparency Act (CTA) and its implementing regulations from taking effect nationwide. 

Continue Reading DOJ Appeals CTA Injunction; FinCEN Suspends Filing Requirement

We want to make you aware that yesterday, a Texas federal district court issued a nationwide preliminary injunction temporarily blocking the effectiveness of the Corporate Transparency Act (CTA) and its implementing regulations, which require certain companies (including certain non-U.S. companies registered to conduct business in the United States) to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury.

Continue Reading Federal District Court Enjoins Enforcement of U.S. Corporate Transparency Act

Earnout provisions in acquisition agreements can be a useful tool in bridging the valuation gap by deferring portions of the purchase price until certain post-closing milestones are achieved, and they are particularly common in developmental-stage pharmaceutical transactions.  Practitioners should take note of the September 5, 2024 opinion in Shareholder Representative Services LLC v. Alexion Pharmaceuticals, Inc., in which the Delaware Court of Chancery held a buyer, Alexion, liable for breach of contract both for its failure to use commercially reasonable efforts to achieve milestones for which future earnout payments may have become due and for its failure to pay an earned milestone payment to selling securityholders of Syntimmune, Inc.[1]

Continue Reading Delaware Court of Chancery Finds Buyer Failed to Use Commercially Reasonable Efforts in Pharma Milestone Payment Case

On August 14, 2024, the U.S. District Court for the Western District of Missouri (the “District Court”) issued a decision ordering a permanent injunction against rules promulgated by the Missouri Securities Division, colloquially referred to as Missouri’s “Anti-ESG” Rules, requiring that broker dealers and investment advisers disclose to and obtain written consent from customers if their investment decisions or advice “incorporate[] a social objective or other nonfinancial objective” (the “Rules”).  The District Court held the Rules were preempted by both the National Securities Markets Improvement Act of 1996 (“NSMIA”) and the Employment Retirement Income Security Act of 1974 (“ERISA”).  The District Court also held the Rules violated the First Amendment’s protection against compelled speech and were unconstitutionally vague.  The decision highlights the limits of U.S. state power in policing the social objectives broker dealers and investment advisers incorporate into their practice and, if not overturned on appeal, suggests that broker dealers and investment advisers may face less legislative pushback, at least at the state level, in pursuing environmental, social, and governance (“ESG”) objectives in the future.

Continue Reading District Court Holds Missouri’s “Anti-ESG” Rules are Preempted by Federal Law, Violate First Amendment, and are Unconstitutionally Vague[1]

In a May 31, 2024 opinion, the Delaware Court of Chancery denied a motion to dismiss a complaint challenging the sale of a public company with a controlling private equity sponsor to an unrelated, arms-length buyer, finding that the sale was potentially tainted by conflicts of interest.[1]  In particular, the court found that it was reasonably conceivable that the private equity sponsor’s receipt of an early termination payment under a tax receivable agreement put into place upon the target company’s initial public offering was a material non-ratable benefit, which may have led the sponsor to push for a sale (which would trigger the early termination payment), even if remaining a standalone company would have been better for the minority stockholders. The opinion also touches on important issues relating to financial advisors’ advice in connection with such a sale. While tax receivable agreements (“TRAs”) are common in sponsor-backed and “Up-C” IPOs, this case highlights a rarely considered issue involving these agreements, and the need for careful navigation of related potential conflicts of interest in a sale process where a private equity sponsor, and TRA beneficiary, continues to control the public company.

Continue Reading Delaware Chancery Court Finds Private Equity Sponsor’s Tax Receivable Agreement Potentially Led to Conflicted Sale Process

On April 4, 2024, the Delaware Supreme Court issued its decision on a stockholder suit challenging the fairness of IAC/InterActiveCorp’s separation from its controlled subsidiary, Match Group, Inc.[1]  In this decision, the Delaware Supreme Court provided clarity and guidance on two important issues involving the application of the MFW framework.

Continue Reading Delaware Supreme Court Provides Important Guidance on Application of MFW Framework to Controlling Stockholder Transactions

On March 6, 2024, the U.S. Securities and Exchange Commission approved in a 3-2 vote final rules that require most reporting companies to provide certain climate-related information in their registration statements and annual reports filed with the SEC. This memorandum summarizes a portion of the final rules, the amendments to Regulation S-X, as amended (Regulation S-X), under the Securities Act of 1933, as amended (the Securities Act), and the Securities Exchange Act of 1934, as amended (the Exchange Act), that require a new footnote in audited financial statements, analyzes some of the key challenges these requirements may impose and concludes with some general takeaways. This memorandum does not address the GHG emissions and attestation report disclosure requirements or the governance, business, risk and targets disclosure requirements set forth in the final rules’ amendments to Regulation S-K, as amended (Regulation S-K), under the Securities Act and Exchange Act.

Continue Reading SEC’s Final Climate-Related Disclosure Rules: A Closer Look at the Climate Note to Audited Financial Statements