ISS Provides Guidance on the Universal Proxy Card, Puts “Weakest” Directors on Notice

On August 23, 2022, Institutional Shareholder Services (ISS), the leading global proxy advisory firm, issued a special situations research note on the new, mandatory “universal proxy card” rules instituted by the U.S. Securities and Exchange Commission.

In its note, ISS declared the new rules the “superior” way for shareholders to exercise their voting franchise and observed that this system will make it “dramatically easier” and “cheap” for activist shareholders to launch proxy fights. ISS also offered perspectives on how the new system could help activists in their campaigns. Public companies should pay close regard to these perspectives in light of the weighty influence of ISS’s proxy voting recommendations on the outcomes of contested director elections. The most notable of ISS’s perspectives are that under the new framework, directors’ individual qualifications may come into greater focus relative to the merits of an overall slate and that a board’s “weakest” members may now become more vulnerable in a proxy contest.

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“Twice Tested” and Still Fair, and the Ongoing Relevance of Schnell

This blog recently discussed the Delaware Supreme Court’s decision in Coster v. UIP Companies, Inc., wherein the Court held that a stock sale that satisfied the entire fairness standard — the most rigorous in Delaware’s corporate law — should undergo still further review to assess the board’s motivations in approving the sale. The Court reversed the decision of the Court of Chancery, which had assumed that entire fairness was the “end of the road” for judicial review, and instead invoked the seminal 1971 decision in Schnell v. Chris-Craft to explain that “inequitable action does not become permissible merely because it is legally possible.”  Under Delaware law, therefore, board actions are “twice tested”: first for legal authorization, and second to determine whether such action was equitable. (more…)

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Sidley Perspectives on M&A and Corporate Governance

Sidley is pleased to share the March 2022 issue of Sidley Perspectives on M&A and Corporate Governance, a quarterly newsletter designed to keep you current on what we consider to be the most important legal developments involving M&A and corporate governance matters. (more…)

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Court to Activists (Again): Follow The Rules Or Suffer The Consequences

On February 14, 2022, Vice Chancellor Lori W. Will issued a post-trial decision affirming the Lee Enterprises, Inc. board of directors’ rejection of a shareholder nomination of directors because, in contravention of Lee’s bylaws, the notice neither was submitted by a stockholder of record, nor utilized the company’s required nominee questionnaire forms. This decision in Strategic Investment Opportunities LLC v. Lee Enterprises, Inc. further underscores the Court of Chancery’s recent decision in Rosenbaum v. CytoDyn, Inc., in which (as this blog previously reported here) the Court upheld a board’s decision to reject a nomination notice for failure to comply with information requirements in the governing bylaws. (more…)

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Board Oversight: Key Focus Areas for 2022

In her regular column on corporate governance issues, Holly Gregory explores issues that are likely to require board attention in 2022 in an environment of heightened scrutiny of the board’s oversight role. (more…)

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Sidley Perspectives on M&A and Corporate Governance

Sidley is pleased to share the December 2021 issue of Sidley Perspectives on M&A and Corporate Governance, a quarterly newsletter designed to keep you current on what we consider to be the most important legal developments involving M&A and corporate governance matters. (more…)

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SEC Dramatically Changes the Rules for Proxy Contests, Adopts Universal Proxy

On November 17, 2021, the U.S. Securities and Exchange Commission (SEC) adopted new Rule 14a-19 and amendments to existing rules under the Securities Exchange Act of 1934 to require the use of “universal” proxy cards in all nonexempt director election contests at publicly traded companies in the U.S. The new “Universal Proxy Rules” contain only slight modifications from rules the SEC first proposed in October 2016, for which the SEC reopened the public comment period during 2021. The rules will take effect for shareholder meetings after August 31, 2022. We expect a significant increase in proxy contest threats once the Universal Proxy Rules go in effect. (more…)

Sidley Secures Trial Win; Court of Chancery Enforces Advance Notice Bylaw Where Stockholders Failed To Supply Required Information

On October 13, 2021, Vice Chancellor Joseph R. Slights III issued a post-trial decision affirming the CytoDyn Inc. board of directors’ decision to reject a stockholder nomination of directors for failure to supply information required by the company’s advance notice bylaw. This is the first decision from a Delaware court addressing informational deficiencies in such a nomination notice, and provides important guidance for the many public companies with similar bylaws. (more…)

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SPACs: A New Frontier for Shareholder Activism

In NIRI’s IR Update, Derek Zaba, Kai Liekefett, and Joshua DuClos published an article titled, “SPACs: A New Frontier for Shareholder Activism.” Their article discusses how the SPAC boom has created a new breeding ground for activism targets and how SPACs should prepare for an activist attack. (more…)

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A Delaware Corporate and M&A Checklist: 11 Cases That Every Practitioner Should Know

As regular readers know, this blog typically covers the latest developments and trends emerging from the Delaware Court of Chancery. For this post, however, we revisit first principles and remind our readers of the bedrock decisions of modern Delaware M&A practice, and highlight 11 key decisions with which every practitioner should be familiar. (more…)

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