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It’s proxy season, and for most companies, the time for annual meetings is just around the bend. Publicly traded companies are coming off a tumultuous year. The link between corporation and community has never been more at the forefront — from COVID-19 to racial justice to worker treatment. And businesses are facing activist pressure. How should they navigate this complex environment?

Our latest episode of The Sidley Podcast addresses the interplay between shareholder activism and hostile M&A, including as to how ESG may impact activism. It also offers practical advice on what you can do as you prepare for a potential attack by an activist or hostile bidders. Join host and Sidley partner, Sam Gandhi, as he speaks with three of the firm’s thought leaders on proxy season — Beth Berg, Kai Liekefett, and Derek Zaba.

Shareholder Activism

Court of Chancery Sheds Light on When Documents Produced Under Section 220 May Remain Confidential

Feb 22 2021

Hille R. Sheppard and Will French

The Delaware Court of Chancery recently showcased its commitment to maintaining open judicial records and proceedings. In a derivative suit predicated on the widely covered Boeing crashes from 2018 and 2019, in which the Complaint featured materials that had been produced pursuant to a books-and-records inspection demand under Section 220 of the Delaware General Corporation Law, the Court rejected all but one of Boeing’s attempts to shield its internal documents from the public spotlight. Most cases, of course, will not be so charged with public interest. Nonetheless, the Court’s analysis should serve as a reminder that keeping information confidential in Delaware courts may be an uphill battle.

Best Practices; Section 220/Inspection Rights

Cornerstone Says Stockholder Suits Declined in 2020

Feb 18 2021

Andrew W. Stern and Joshua J. Card

We are pleased to share Cornerstone’s latest annual report on federal and state securities class actions, which reflects that new securities case filings fell substantially in 2020.

Uncategorized

Chancery Court Orders Company to Wave Goodbye to Privilege after Seconded Employees Use Other Company Email to Discuss Non-Company Business

Feb 03 2021

Jim Ducayet and Vincent J. Margiotta

The Delaware Court of Chancery decision in In re WeWork Litigation, issued on December 22, 2020, underscores the need for heightened care with respect to corporate communications and the preservation of the attorney-client privilege.

Best Practices; Privilege

“An Ounce Of Prevention Is Worth A Pound Of Cure”: Effective Practices for Board Minutes and Related Board Materials

Feb 01 2021

Charlotte K. Newell and Holly J. Gregory

The above-referenced turn of phrase was penned by Benjamin Franklin in admonishing his fellow Philadelphians to take heed of fire prevention strategies. Although the benefits discussed here are short of life-saving, attention to implementation and periodic review of your practices for the preparation and maintenance of board minutes and related materials can yield significant dividends in managing and mitigating litigation risk, including the risk of personal liability for directors. In addition to providing an accurate record of board decisions, to the extent that minutes evidence directors’ good faith, diligence, and absence of conflict (or appropriate handling of conflict), minutes can help support early termination of stockholder suits for breach of duty. Attention to board (and board committee) minutes is especially important given the increase in demands by would-be stockholder plaintiffs for corporate books and records to assist them in assessing potential claims and constructing their allegations.

Best Practices; Board Minutes and Materials; Section 220/Inspection Rights

Texas Appeals Court Confirms That Protections Against Usurpation of Corporate Opportunities Under Delaware Law Can Be Contractually “Worked-Around”

Jan 28 2021

Robert Velevis and Lora Chowdhury

A recent Texas Court of Appeals case held that members of a Delaware limited liability company (LLC) can contract around (i.e., waive) the general principle protecting against usurpation of corporate opportunities. This decision is of particular importance to private equity owners that may hold other investments in companies in the same industry and closely follows recent Delaware case law. The case also should limit the ability for parties to forum shop and seek to obtain a different outcome on Delaware legal issues by filing in another forum, in this case Texas.

Corporate Opportunity; LLCs; Private Equity

Caremark Claims: Not Mission Impossible, but Still Risky Business for Plaintiffs

Jan 21 2021

Andrew W. Stern and Charlotte K. Newell

The Court of Chancery provided its latest guidance on so-called Caremark claims in a New Year’s Eve opinion issued by Vice Chancellor Glasscock in Richardson v. Clark, an action brought derivatively by a stockholder of Moneygram International, Inc. The opinion dismissing the claims, in which the Court had some fun with film titles from Tom Cruise’s career, provides an important level-setting because some have questioned whether Delaware’s courts are lowering the bar for claims alleging that a board of directors failed in its oversight duties. Richardson should provide some comfort to directors that the standards have not changed: absent particularized allegations of bad-faith action (or inaction) by a board, such claims should not survive a motion to dismiss.

Caremark; Derivative Litigation

Court of Chancery Allows Breach of Fiduciary Duty Claims Stemming from CBS-Viacom Merger to Proceed

Jan 13 2021

Robert Velevis and Lora Chowdhury

On December 29, 2020, in a 76-page memorandum opinion, the Court of Chancery denied a motion to dismiss breach of fiduciary duty claims against National Amusements, Inc. (NAI), Viacom Inc.’s controlling stockholder; Shari Redstone, the director, president, and controlling stockholder of NAI; and four individual NAI directors. All were sued for their roles in the Viacom/CBS Corp. merger in a decision that is important for mergers in which a controlling party stands on both sides of a transaction and receives nonratable benefits that are measured in terms of control, rather than based on merger consideration.

Corporate Control; Director Independence and Conflicts; Post-Closing Disputes

Webinar: Hostile Takeovers and Shareholder Activism in a COVID-19 World

Jan 07 2021

Enhanced Scrutiny Contributors

Please join us for an exclusive discussion on the current state of hostile M&A and shareholder activism. The leaders of Sidley’s Shareholder Activism practice will discuss the evolution of hostile M&A and shareholder activism in the COVID era, what to expect in the 2021 proxy season, and how to stay on the front foot in the current environment.

COVID-19; M&A

Shareholder Activism, Hostile M&A, and Related Issues for the 2021 Proxy Season