No Calm In Delaware After Calma v. Templeton

In derivative suits, cases are essentially lost and won at the motion to dismiss stage.  Unless the defendants succeed in winning dismissal, they must confront an unhappy choice between continued litigation with all of its costs and risks or a settlement that “feeds the bulldog”.  Thus, the Delaware Court of Chancery’s rulings in Calma v. Templeton,

Out-of-State M&A Lawyer Can Be Sued In California

Many M&A transactions are negotiated across state lines.  When an out-of-state lawyer misrepresents facts in a phone call and email to a lawyer in California, do those communications render the foreign lawyer amenable to suit in California?  In essence, that was the question presented to the Sixth District Court of Appeal in Moncrief v. Clark, Cal. Ct.

Does The SEC Know How To Assess Risks And Rewards?

The Securities and Exchange Commission’s proposed rules governing stock exchange listing standards governing recovery of erroneously awarded compensation cause me to wonder whether the SEC understands how to assess risks and rewards. Proposed Rule 10D-1(b)(1)(iv) would require an issuer to recover such compensation in compliance with its recovery policy “except to the extent that it

Implementation Issues Abound For The SEC’s Proposed Clawback Rules

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When adopted, the incentive compensation clawback rules recently proposed by the Securities and Exchange Commission are likely to present issuers with a number of implementation challenges.  Some of these challenges have been discussed in prior posts.  Below is a brief outline of just a few of the many and multifarious headaches that I foresee for

Can The SEC Ignore Congress’ Plain Language?

In proposing executive incentive compensation clawback rules, the Securities and Exchange Commission departs materially from the plain words of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  Section 954 (codified at Section 10D of the Securities Exchange Act of 1934) states that an issuer will recover incentive-based compensation received during the

Some California General Corporation Law Nonsense

Recently, I gave a brief presentation concerning various provisions of the California General Corporation Law that could apply to corporations incorporated outside of California.  I emphasized that the CGCL defines the terms “corporation”, “domestic corporation”, “foreign corporation” and “foreign association” and that it is important to pay attention to these definitions when reading the CGCL.

The SEC’s Unconvincing Case Against Indemnification

The Securities and Exchange Commission’s proposed rules take a hard line against issuers indemnifying executives against clawbacks: We believe that indemnification arrangements may not be used to avoid or nullify the recovery required by Section 10(D).  Section 10D’s listing standard requirement that “the issuer will recover” is inconsistent with indemnification because a listed issuer does not

SEC Clawback Proposal Overlooks Contract Law Fundamentals

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In proposing the clawback rules for stock exchanges mandated by Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the Securities and Exchange Commission evinces little regard for contrary provisions in existing contracts: Further, we do not view inconsistency between the proposed rule and rule amendments and existing compensation contracts,

The SEC’s Clawback Proposal – An Unconstitutional Taking?

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In proposing incentive compensation clawback rules, the Securities and Exchange Commission studiously ignored any constitutional restraints on its actions.  Buried in the 198-page proposal is this chilling assertion: Issuer compliance would be required whether such incentive-based compensation is received pursuant to a pre-existing contract or arrangement, or one that is entered into after the effective

What The SEC Pretermitted In Proposing A Clawback Policy Rule

The Securities and Exchange Commission began the month by issuing proposed rules that would direct national securities exchanges and associations to establish listing standards requiring companies to adopt policies that require executive officers to pay back incentive-based compensation that was awarded erroneously.  Five years ago, Congress ordered the SEC to adopt these rules in Section 954 of the