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.

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“The Context Is Different” – Court of Chancery Opinion Blesses Implied Covenant Gap Filling in LLC Agreement

The Delaware Court of Chancery’s recent opinion in Cygnus Opportunity Fund LLC et al. v. Washington Prime Group LLC et al. presents a veritable grab bag of potential blog posts, from a suggestion that an officer of an Limited Liability Company could be contractually bound by an LLC Agreement he never signed to the interesting interplay (and potential conflict) between an officer’s duty of obedience to the LLC’s board and the officer’s duty of disclosure to investors. The focus here — and we believe chief among the thorny issues addressed in Cygnus — is the Court of Chancery’s decision to sustain a claim for breach of the implied covenant of good faith and fair dealing with respect to an issue that the LLC Agreement expressly addressed. What makes it even more fascinating is the tone of the Opinion: Vice Chancellor Laster evidently came to an early conclusion that, taking the allegations as true for purposes of a pleading motion, there was some inherent unfairness in the Defendants’ conduct that needed to be set right. Left unclear is the impact of this decision, assuming it is not disturbed on appeal, on Delaware’s long-standing deference to parties’ agreements and, in particular, limitations of duties, in the LLC context. In any event, the Opinion should serve as a cautionary tale for companies considering converting to an LLC form through a non-consensual bankruptcy process.

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Sidley Perspectives on M&A and Corporate Governance

Sidley is pleased to share the September 2023 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.

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The First Test Passed: Corporations Are Free To Use Identity-Based Voting, For Now…

In a recent ruling on summary judgment, the court found that Bumble, Inc.’s “identity-based voting” does not violate Sections 212(a) or 151(a) of the Delaware General Corporation Law (the “DGCL”). Colon v. Bumble, Inc., et al., C.A. No. 2022-0824-JTL. However, the court left open for another day the question of whether such a governance structure is equitable.

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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.

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For Delaware LLCs, Contractual Freedom Overrides Equitable Defenses

Limited liability companies, as “alternative entities” under Delaware law, enjoy significantly greater freedom in ordering their internal affairs than do corporations.  The contractarian bent of Delaware law is at its height in both the legislative and the judicial treatment of LLCs.  Unlike corporations, LLCs may contract out of fiduciary duties on the part of their managers, and may control the nature and availability of remedies for breach of an LLC agreement.

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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?

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Meet the Team

<a target=‘_blank’ href="https://www.sidley.com/en/people/s/stern-andrew-w">Andrew W. Stern</a>

Andrew W. Stern

New York
<a target=‘_blank’ href="https://www.sidley.com/en/people/n/newell-charlotte-k">Charlotte K. Newell</a>

Charlotte K. Newell

New York
<a target=‘_blank’ href="https://www.sidley.com/en/people/a/austin-elizabeth-y">Elizabeth Y. Austin</a>

Elizabeth Y. Austin

Chicago
<a target=‘_blank’ href="https://www.sidley.com/en/people/b/bartlett-jaime-a">Jaime A. Bartlett</a>

Jaime A. Bartlett

San Francisco
<a target=‘_blank’ href="https://www.sidley.com/en/people/d/ducayet-james-w">Jim Ducayet</a>

Jim Ducayet

Chicago
<a target=‘_blank’ href="https://www.sidley.com/en/people/g/garcia-yolanda-c">Yolanda C. Garcia</a>

Yolanda C. Garcia

Dallas
<a target=‘_blank’ href="https://www.sidley.com/en/people/h/heyworth-james">James Heyworth</a>

James Heyworth

New York
<a target=‘_blank’ href="https://www.sidley.com/en/people/k/kaplan-alex-j">Alex J. Kaplan</a>

Alex J. Kaplan

New York
<a target=‘_blank’ href="https://www.sidley.com/en/people/l/lopez-jodi-e">Jodi E. Lopez</a>

Jodi E. Lopez

Los Angeles
<a target=‘_blank’ href="https://www.sidley.com/en/people/m/muenz-jon">Jon Muenz</a>

Jon Muenz

New York

<a target=‘_blank’ href="https://www.sidley.com/en/people/r/ross-ian-m">Ian M. Ross</a>

Ian M. Ross

Miami
<a target=‘_blank’ href="https://www.sidley.com/en/people/s/sheppard-hille-r">Hille R. Sheppard</a>

Hille R. Sheppard

Chicago
<a target=‘_blank’ href="https://www.sidley.com/en/people/s/sultanian-heather">Heather Benzmiller Sultanian</a>

Heather Benzmiller Sultanian

Chicago
<a target=‘_blank’ href="https://www.sidley.com/en/people/v/velevis-robert-s">Robert S. Velevis</a>

Robert S. Velevis

Dallas
<a target=‘_blank’ href="https://www.sidley.com/en/people/w/wechkin-robin-e">Robin E. Wechkin</a>

Robin E. Wechkin

Seattle

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