What’s in a Name, Part II
Naming a registered investment company will become more challenging now that the Securities and Exchange Commission has significantly broadened the scope of the rule governing fund names. Moreover, the SEC estimates that when the Names Rule goes into effect, three out of four registered funds will be subject to the new requirements.
“Simplify, simplify, simplify”: Delaware Chancery Declines to Dismiss Claims Regarding a Gordian Knot of Private Equity-Related Contracts
Vice Chancellor Sam Glasscock III recently declined to grant a motion to dismiss in Paul Capital Advisors, L.L.C. et al. v. Holland, 2023 WL 5551017, C.A. No. 2022-0167-SG (Del. Aug. 29, 2023) (“Paul Capital”), which involved claims arising out of an intricate set of transactions intended to monetize certain illiquid assets. In sustaining the claims, the Court of Chancery colorfully outlined the challenges of deciphering a highly complex, “monkey’s fist of contracts” without accompanying provisions describing the purpose for such complexity in the first place, and encouraged practitioners to instead choose the path of simplicity.
Two Cautionary Tales: Fee Shifting Imposed for Litigating Books-and-Records Inspection Demands
While there are limits to a stockholder’s right to inspect books and records under Section 220 of the Delaware General Corporation Law or other sections allowing inspection—and corporations can negotiate the scope of inspection—there are also limits to how vigorously a corporation can resist a stockholder’s inspection demand, particularly when it does not present novel legal issues. Two recent fee-shifting decisions issued by Vice Chancellor Zurn provide a cautionary reminder of those limits, which were previously set out by the Court of Chancery in opinions such as Pettry v. Gilead Scis. Inc. (2020), Marilyn Abrams Living Trust v. Pope Invs. Inc. (2017), and McGowan v. Empress Entm’t (2000). The unmistakable message: if the right to inspection is clear, a defendant should think twice about a blanket opposition, unless the defendant does not mind paying the plaintiff’s legal fees in the end.
Don’t Become Complacent About Confidentiality
The filing of any action, even one that is quickly settled or dismissed, nevertheless poses a risk of exposing a party’s nonpublic information to public view. Many are familiar with efforts to maintain confidentiality at the outset of a litigation, including through a well-crafted confidentiality order. But a recent Delaware Court of Chancery decision reminds us that parties must reinforce those efforts after final disposition of the case or risk the exposure of previously sealed material.
SEC’s Cybersecurity Disclosure Rules Are Here. Is Your Company Ready to Comply?
Companies are facing more attacks on their information systems. And, as their cyber risk skyrockets, the SEC has stepped in with new regulations, telling businesses what to disclose about these incidents — and requiring detailed disclosures on cyber risk management more broadly. With the deadline for compliance fast approaching, businesses are scrambling to mitigate their legal risk and comply with regulations that some say may be an overreach.
Special Committees Require Special Attention: Lessons from GoDaddy
Previously this blog has discussed the importance of procedural compliance with various transaction structures when the transaction involves controlling or interested parties (see an example here). For instance, in Kahn v. M & F Worldwide Corp., 88 A.3d 635 (Del. 2014) (“MFW”), the Delaware Supreme Court held that compliance with certain process elements enables deferential business judgment review of decisions regarding interested transactions with controlling parties (see here for a helpful discussion about MFW protections). Delaware courts have since expanded the role of MFW-like process protections in various contexts, thus demonstrating that adequate decisionmaking procedures are a central prerequisite to business judgment deference when controllers or interested parties are involved in contemplated transactions.
Five Essential D&O Insurance Questions
Recent cases highlight the increased risk of personal liability for directors. Is your company doing enough to protect the board?
Timely Takes Podcast: Earnings Pre-Releases
Three Sidley partners come together to discuss various issues surrounding a decision to release earnings earlier than scheduled, including the legal, investor relations, and practical considerations that should be considered in making such a decision.
AI and the Role of the Board of Directors
Can ChatGPT Do Our Jobs Better Than Us? Not Yet.
Artificial intelligence and its impact on the practice of law is in the news again. Readers likely have heard about the attorneys that used ChatGPT, an artificial chatbot that synthesizes high volumes of data, to draft a legal brief that they submitted in a civil action in the U.S. District Court for the Southern District of New York. Unfortunately for these practitioners, ChatGPT cited multiple cases that did not exist, and the attorneys recently endured a sanctions hearing before the presiding district judge.
