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SEC Chair Gary Gensler’s Annual Congressional Testimony

On September 12, 2023, Gary Gensler gave his annual testimony to the United States Senate Committee on Banking, Housing and Urban Affairs and then on September 27^th to the United States House of Representatives Committee on Financial Services (for a review of last year’s testimony see HERE). Both appearances included the same prepared remarks followed by robust Q&A from the lawmakers.

This year Chair Gensler’s prepared remarks focused on: (i) rule amendments and updates; (ii) improving efficiency in equity markets; (iii) disclosure matters and related enforcement including related to cryptocurrency; and (iv) general updates on the SEC and capital markets.

Prepared Remarks

We shouldn’t expect the busy SEC rule making agenda to slow down any time soon. Chair Gensler prioritizes updating rules for technology, business and market changes. Although Gensler’s speech focuses on rule changes to make the markets more efficient and resilient and lower costs, the reality is that not all rule changes will accomplish

October 17, 2023

2023 Changes To Delaware Corporate Law

Each year the Delaware legislature passes several amendments to the Delaware General Corporation Law (DGCL) which impact not only public and private companies incorporated in Delaware, but elsewhere, as many states follow the DGCL. This year the most significant changes relate to reduced stockholder approval provisions. Effective August 1, 2023, the DGCL has been amended to: (i) eliminating the need for stockholder approval for forward stock splits in certain cases; (ii) reducing the voting threshold for certain reverse stock splits or changes to authorized shares; (iii) allowing for the disposition of treasury stock for less than par value; (iv) simplifying the process for ratifying defective corporate actions; (v) simplify notices to stockholders following action taken by consent; (vi) expanding certain appraisal rights; and (vii) establishing “safe harbor” provisions from the stockholder approval requirement for certain dispositions of pledged assets.

Shareholder Voting Requirements for Certain Amendments to the Certificate of Incorporation – DGCL Section 242

One of the reasons Delaware

September 5, 2023

SEC Spring 2023 Regulatory Agenda

On June 13, 2023, the SEC published its semiannual Spring 2023 regulatory agenda (“Agenda”) and plans for rulemaking. The Agenda is published twice a year, and for several years I have blogged about each publication. Although items on the Agenda can move from one category to the next, be dropped off altogether, or new items pop up in any of the categories (including the final rule stage), the Agenda provides valuable insight into the SEC’s plans and the influence that comments can make on the rulemaking process.

The Agenda is broken down by (i) “Pre-rule Stage”; (ii) Proposed Rule Stage; (iii) Final Rule Stage; and (iv) Long-term Actions. The Proposed and Final Rule Stages are intended to be completed within the next 12 months and Long-term Actions are anything beyond that. The number of items to be completed in a 12-month time frame is 55, which is in-line with the average items under Gary Gensler’s regime (and much higher than

July 11, 2023

SPAC Director And Sponsor Fiduciary Obligations

A year following the Delaware Chancery Court’s decision in Multiplan Corp. Stockholders Litigation (f/k/a Churchill Capital Corp III), the court again issued an opinion supporting a breach of fiduciary duty cause of action against SPAC directors and sponsors and confirming that a de-SPAC transaction should be reviewed using the “entire fairness” standard. In the January 2023 case of Delman v. Gigacquisitions3, LLC, et al. the Delaware Court denied a motion to dismiss by SPAC sponsors and directors, upholding their potential liability. Interestingly, the Delman motion was in front of the same vice-chancellor as was Multiplan. My blog on the Multiplan Corp. Stockholders Litigation (f/k/a Churchill Capital Corp III) case and its ramifications can be read HERE.

In addition to confirming the inherent conflict of interest of SPAC sponsors and directors, the cases will undoubtedly cause practitioners and market participants to implement new policies and procedures related to proxy statement disclosures, diligence, board discussions, financial valuations, capital raising

May 30, 2023

Class Voting in Delaware – The Saga Continues

Just a few weeks ago, I wrote about the Garfield v. Boxed, Inc. case in Delaware questioning whether Class A and Class B common stock in a SPAC structure were different series of a same class or different classes of stock requiring separate class voting in certain circumstances (see HERE). The Delaware Chancery court in Garfield v. Boxed, found that in that particular case, the Class A and Class B were separate classes requiring a separate class vote to increase the total outstanding common stock as required by the Delaware General Corporate Law (DGCL) Section 242(b)(2).

Following the Garfield decision, there has been a run on the Chancery Court by post-business-combination SPACs seeking to ratify shareholder approvals obtained during the de-SPAC process, in reliance on DGCL Section 205. Although the wording has varied, in essence each of the companies have asked the Chancery court to (i) validate and declare effective the company’s current certificate of incorporation

May 2, 2023

Class Voting In Delaware And The Impact On SPACs

In December 2022, the Delaware Chancery Court entered a ruling sending the SPAC world spiraling, for what seems like the 10th time in the last couple of years. As is always the case in a SPAC (or at least 99% of the time), common stock is broken into two series, Class A and Class B. The Class A common stock is issued to the public shareholders in the underwritten initial public offering and the Class B common stock is issued to the sponsor. Upon closing a business combination transaction, the sponsor Class B common stock automatically converts into Class A common stock, leaving one Class of common stock. Also, in the majority of SPAC transactions, the shareholder approval for the business combination transaction involves other changes to the charter documents for the SPAC, including a name change, and changes in authorized capital stock, etc. The term “charter” in this blog refers to the certificate of incorporation and any amendments

March 28, 2023

Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part II

The Holding Foreign Companies Accountable Act (“HFCA”) was adopted on December 18, 2020, requiring both the SEC and the PCAOB to adopt rules and procedures implementing its provisions. The HFCA requires foreign-owned issuers to certify that the PCAOB has been able to audit specified reports and inspect their audit firm within the last three years. If the PCAOB is unable to inspect the company’s public accounting firm for three consecutive years, the company’s securities are banned from trading on a national exchange.

As part of the HFCA’s implementation, on November 5, 2021, the SEC approved PCAOB Rule 6100 establishing a framework for the PCAOB’s determination that it is unable to inspect or investigate completely registered public accounting firms located in foreign jurisdictions because of a position taken by an authority in that jurisdiction (see HERE.) On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA and published a sample

September 27, 2022

Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part I

As part of the HFCA’s implementation, on November 5, 2021, the SEC approved PCAOB Rule 6100 establishing a framework for the PCAOB’s determination that it is unable to inspect or investigate completely registered public accounting firms located in foreign jurisdictions because of a position taken by an authority in that jurisdiction (see HERE .) On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA and published a sample

September 20, 2022

SEC Proposed Mandatory Climate Disclosure Rules – Part 3

On March 21, 2022, the SEC proposed rules that would require publicly reporting companies to include certain climate-related disclosures in their registration statements and periodic reports. Among other information, the new disclosures would require information about climate-related risks that are reasonably likely to have a material impact on a company’s business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to its audited financial statements.

The proposed rules would include a phase-in period for all registrants, with the compliance date dependent on the registrant’s filer status, and an additional phase-in period for Scope 3 greenhouse gas emissions disclosure.

The proposed rules, which are heady and complex, initially only allotted for a 39-day comment period. Considering the size (490-page rules release), scope, complexity and ramifications, the marketplace pushed back on such a short window. On May 9, 2022, the SEC extended the comment period through June 17, 2022, and all aspects of the industry are

June 7, 2022

SEC Proposes New Rules For SPACs – Part 6

On March 30, 2022, the SEC proposed rules related to SPAC and de-SPAC transactions including significantly enhanced disclosure obligations including related to financial projections, making a target company a co-registrant when a SPAC files an S-4 or F-4 registration statement associated with a business combination, and aligning de-SPAC transactions with initial public offering rules. In addition, the SEC has also proposed rules that would deem any business combination transaction involving a reporting shell company, including but not limited to a SPAC, to involve a sale of securities to the reporting shell company’s shareholders. The new rules would amend a number of financial statement requirements applicable to transactions involving shell companies.

In addition, the SEC has proposed a new safe harbor under the Investment Company Act of 1940 (‘40 Act’) that would provide that a SPAC that satisfies the conditions of the proposed rule would not be an investment company and therefore would not be subject to regulation under the

May 17, 2022

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SEC Chair Gary Gensler’s Annual Congressional Testimony

2023 Changes To Delaware Corporate Law

SEC Spring 2023 Regulatory Agenda

Class Voting in Delaware – The Saga Continues

Class Voting In Delaware And The Impact On SPACs

Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part II

Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part I

SEC Proposes New Rules For SPACs – Part 6

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