Publicly traded companies have long been concerned with Internal Revenue Code Section 162(m) in order to maximize the deductibility of compensation paid to certain covered officers. Last year’s tax reform act made significant changes to Code Section 162(m). The IRS also recently published a Notice that explained some of these changes in more detail. To address these issues, public companies may need to review their administrative practices, particularly how they keep track of their covered…

Federal Securities Law Source

Virtual shareholder meetings: advantages, disadvantages and practical considerations

By Nathan Sisodia on April 11, 2018

As spring approaches, so do annual shareholder meetings for many public companies. Traditionally, these meetings were held in-person. However, due to fairly recent advances in technology, companies now have the option to hold these meetings exclusively online or by providing for online participation, which both offer advantages and disadvantages to shareholders and company leaders. Furthermore, not all state corporate statutes permit a virtual component, and those that do may impose specific requirements. With an increasing…

Federal Securities Law Source

How to avoid registration under the Investment Company Act of 1940

By Porter Wright on March 13, 2018

One of the worse situations a company may face to be determined to be an investment company under the Investment Company Act of 1940, as amended (the act). If determined to be an investment company, the company is subject to the full regulation under the act. In addition, a company may inadvertently become an investment company; in such a case, all of its contracts are potentially voidable and it cannot engage in any other business.…

Federal Securities Law Source

SEC seeks to regulate transactions utilizing cryptocurrencies under federal securities laws

By Nathan Sisodia on February 7, 2018

Any person who regularly monitors the U.S. financial markets has likely noticed the recent emergence of digital currency, also referred to as “cryptocurrency,” in recent months. For example, the price of bitcoin, the most widely known form of cryptocurrency, surged from a price below $800 per bitcoin in 2016, to a remarkable $17,000 per bitcoin recently in 2017. Despite this potential volatility, the acceptance of cryptocurrencies as legitimate forms of currency is likely; as evidenced…

Federal Securities Law Source

How to structure a joint venture

By Porter Wright on January 24, 2018

Joint ventures should be considered as an alternative to an acquisition if the acquiring party feels it does not have the experience or the business risk appetite to do it individually. They have the benefit of allowing parties to have greater success working together on a specific project than if they did it themselves. Benefits of a joint venture There are many benefits of entering into a joint venture. Some of them include:…

Federal Securities Law Source

Boilerplate provisions in a contract

By Porter Wright on December 8, 2017

The term “boilerplate” refers to standardized language in a contract that usually appears at the end of the agreement (often in a section titled “miscellaneous” or “general terms”). While boilerplate provisions are common clauses in a contract, they should always be checked carefully and tailored to the particulars of the situation as they will address important issues that will be determinative of the parties’ rights with respect to the business contract. You should remember that…

Federal Securities Law Source

Methods to minimize indemnification obligations

By Porter Wright on November 15, 2017

Because most indemnification claims are made by a buyer, the seller seeks to limit its indemnification obligations. Some ways in which the indemnification obligations can be limited include: Materiality of breach or claim amount Caps on indemnification Baskets Payment adjustments for insurance proceeds or tax benefits Sellers often like to include materiality qualifiers in the indemnification clause as to the claim amount and the type of claim. These qualifiers serve the purpose of limiting the…

Federal Securities Law Source

Litigation provisions v. arbitration provisions in business contracts

By Porter Wright on October 12, 2017

Arbitration is an increasingly popular method of resolving disputes, but drafters of business contracts need to be aware that arbitration may not be suitable for every dispute. The question of whether or not to arbitrate often comes down to when you want to decide arbitration is right – before or after a dispute. Many people decide to include an arbitration clause during the negotiation of the business contract. The parties may decide to include an…

Federal Securities Law Source

Delaware limits appraisal rights, but at what cost?

By Kyle Schrodi & Porter Wright on October 2, 2017

Back in August 2016, Delaware amended Section 262 of the Delaware General Corporation Law to address the rise of the appraisal arbitrage strategy where certain sophisticated investors would find a target company that is involved in a merger or acquisition, buy stock in the target company, and then invoke appraisal rights under Section 262. The main goal of the strategy is to strong-arm management to settle for a higher sale price in order to avoid…

Federal Securities Law Source

Rate increases for issuers registering securities

By Ryan Steele on September 7, 2017

New rates will take effect at the beginning of the next fiscal year, Oct. 1, 2017, for public companies and other issuers to register their securities with the U.S. Securities and Exchange Commission (SEC). The SEC announced on Aug. 24, 2017, that the fiscal year 2018 fees to register securities will be set at $124.50 per million dollars. This is up from the $115.90 per million dollars fee for fiscal year 2017. The 7.4 percent…

Federal Securities Law Source

Information on federal securities law, news and developments

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Recent IRS guidance affects corporate tax deductibility of public company executive compensation arrangements and related proxy statement disclosures

Virtual shareholder meetings: advantages, disadvantages and practical considerations

How to avoid registration under the Investment Company Act of 1940

SEC seeks to regulate transactions utilizing cryptocurrencies under federal securities laws

How to structure a joint venture

Boilerplate provisions in a contract

Methods to minimize indemnification obligations

Litigation provisions v. arbitration provisions in business contracts

Delaware limits appraisal rights, but at what cost?

Rate increases for issuers registering securities

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