On July 26, 2023, the U.S. Securities and Exchange Commission (the “SEC” or “Commission”) adopted rules to enhance and standardize disclosure requirements related to cybersecurity incident reporting and cybersecurity risk management, strategy, and governance.
Continue Reading New SEC Disclosure Rules for Cybersecurity Incidents and Governance and Key TakeawaysNew York Advances Towards Banning All Non-Competes
By Alan Levine & Emily C. Barry on
Earlier this week, the New York State legislature passed a bill banning all non-competes entered into on or after 30 days past the bill’s enactment, including those entered into by employees or in connection with the sale of a business. If the bill becomes law, it would make New York the fifth state in the U.S. to enact a ban on non-competes. California, Minnesota, North Dakota, and Oklahoma have also enacted bans on non-competes, but theirs do not go as far as New York’s full ban, instead banning only employee non-competes, but preserving those that are entered into in connection with the sale of a business.
Continue Reading New York Advances Towards Banning All Non-CompetesUpdates on Non-Competes
By Alan Levine, Melissa Reid, Ashley Moss & Edward Chung on
Minnesota bans new employee non-competes beginning July 1, 2023, and the United Kingdom intends to cap their duration at 3 months
Minnesota Becomes the 4th U.S. State to Ban Employee Non-Competes
Following in the footsteps of California, North Dakota and Oklahoma, Minnesota has banned all employee non-competes beginning July 1, 2023, and bars employers from utilizing choice-of-law or choice-of-venue clauses in an attempt to use a more favorable state’s law as a workaround. Importantly, the new law is not retroactive and does not affect other employee restrictions, such as confidentiality and non-solicitation covenants.
Continue Reading Updates on Non-CompetesNasdaq and NYSE Propose October 2, 2023 as Effective Date in Amendments to its Proposed Clawback Listing Standards
By Michael Albano & Ariel Adler on
[Note: This post has been updated to reflect the SEC’s approval of the Nasdaq and NYSE amendments.]
On Friday, June 9, 2023, the U.S. Securities and Exchange Commission (“SEC”) approved, on an accelerated basis, each of the Nasdaq Stock Market’s (“Nasdaq”) and the New York Stock Exchange’s (“NYSE”) proposed listing standards, as modified by the Exchanges’ respective amendments from last week, implementing the requirement for issuers to adopt and disclose “no fault” clawback policies providing for the recovery of erroneously awarded compensation.[1]
Continue Reading Nasdaq and NYSE Propose October 2, 2023 as Effective Date in Amendments to its Proposed Clawback Listing StandardsNLRB General Counsel Unleashes Regional Offices to Clamp Down on “Overbroad” Non-Competes
By Alan Levine on
NLRB GC’s Action Potentially More Far-Reaching than Federal Trade Commission’s Proposed Rule Banning Non-Competes Altogether
On May 30, 2023, the General Counsel to the National Labor Relations Board (the “NLRB”), Jennifer A. Abruzzo, issued a memorandum stating that most non-compete agreements violate the National Labor Relations Act (the “Act”). In doing so, General Counsel Abruzzo directed the NLRB’s regional offices to investigate employers using non-competes to determine whether their usage is “overbroad” or not. General Counsel Abruzzo also directed the regional offices to seek make-whole relief for employees who lost employment opportunities because of a non-compete agreement, even where the employer did not enforce the agreement and, if necessary, present evidence of such lost opportunities at trial.
Continue Reading NLRB General Counsel Unleashes Regional Offices to Clamp Down on “Overbroad” Non-CompetesPrivate Equity Buyer Permitted to Walk From Deal Based on Capitalization Representation Breach
By Matthew P. Salerno & John A. Kupiec on
In a May 29, 2023 opinion by the Delaware Chancery Court addressing a claim by sellers for specific performance under a merger agreement following buyer’s termination for breach of the capitalization representation, the court found that sellers breached the capitalization representation under the merger agreement based on the post-signing discovery that a former employee held phantom equity in a subsidiary of the target company. Despite buyer’s concession that the financial value of the former employee’s interest in the subsidiary was “minor relative to the deal value,”[1] the court concluded that buyer was entitled to terminate the merger agreement since the capitalization representation was brought down flat at closing (and not subject to any de minimis or materiality qualifier).
Continue Reading Private Equity Buyer Permitted to Walk From Deal Based on Capitalization Representation BreachDerivative Claim Against Shell’s Board by Climate-Change Activist Shareholder is Refused Permission to Proceed
By James Brady‑Banzet & Maurits Dolmans on
On February 9, 2023, NGO ClientEarth sued all eleven members of the board of directors of Shell plc before the English High Court, for allegedly failing to take steps to protect Shell against climate-change-related risks (see our alert memorandum of February 22, 2023). Our follow-up alert memorandum of April 17, 2023, also set out some answers to some common questions on derivative claims in the context of ESG litigation.
Continue Reading Derivative Claim Against Shell’s Board by Climate-Change Activist Shareholder is Refused Permission to ProceedDelaware Chancery Court Highlights Tension Between Freedom of Contract and Corporate Fiduciary Duties
In a recent decision, the Delaware Court of Chancery grappled with the question whether—and to what extent—claims for breach of fiduciary duty can be waived ex ante in a corporate shareholder agreement. Specifically, in New Enterprise Associates 14 LP v. Rich, the court denied a motion to dismiss claims for breach of fiduciary duties brought against directors and controlling stockholders of Fugue, Inc. (the “Company”) by sophisticated private fund investors who had agreed to an express waiver of the right to bring such claims.[1] Importantly, the court found that fiduciary duties in a corporation can be tailored by parties to a shareholders agreement who are sophisticated, and were validly waived by the voting agreement in this case (which specifically addressed the type of transaction at issue). The court, however, held that public policy prohibits contracts from insulating directors or controlling stockholders from tort or fiduciary liability in a case of intentional wrongdoing, which the court found was plausibly alleged in this case. The court’s opinion has implications for sophisticated investors in venture capital and other private transactions involving Delaware corporations. The opinion cautions against overreliance on express contractual waivers, on the one hand, while also serves as a reminder that at least in some circumstances sophisticated parties can contract around default legal principles (including fiduciary duties), even with respect to corporations.
Continue Reading Delaware Chancery Court Highlights Tension Between Freedom of Contract and Corporate Fiduciary DutiesCorwin Cleansing Denied In Action For Post-Closing Injunctive Relief Under Unocal
On May 1, 2023, the Delaware Court of Chancery addressed an unsettled question under Delaware law—whether a fully informed, uncoerced vote of disinterested stockholders (so-called “Corwin cleansing”[1]) can be applied to defeat claims to enjoin defensive measures under Unocal Corp. v. Mesa Petroleum Co.
Continue Reading Corwin Cleansing Denied In Action For Post-Closing Injunctive Relief Under UnocalCorporates Face Novel, Greater Risks from Debt Ceiling Impasse—Even if No Default Occurs
By Cleary Gottlieb on
As the threat of an unprecedented default in U.S. government debt plays out over the coming months, the United States is in uncharted territory.
Continue Reading Corporates Face Novel, Greater Risks from Debt Ceiling Impasse—Even if No Default Occurs