Category: Legal Developments

Consideration of Evolving National Security Risks by CFIUS

On September 15, 2022, President Biden issued Executive Order 14083 (“EO 14083”) which the White House describes as a “first-ever presidential directive defining additional national security factors for CFIUS to consider in evaluating transactions.” Rumors of its publication have been circulating in Washington, D.C. for months, and for those that follow foreign investment activity in the United States, it is revealing any time the Executive Branch speaks publicly about CFIUS. Click here for a few insights into how EO 14083...

“Everything zen? Everything zen? I don’t think so. . .”¹ – MAE Clauses in the Time of COVID

On March 1, 2022, the Delaware Court of Chancery delivered a memorandum opinion ordering a yoga franchisor to complete the acquisition of its franchisee’s chain of yoga studios. The case arose out of the parties’ pre-COVID asset purchase agreement (“APA”) through which the defendant, CorePower Yoga LLC, was set to acquire various yoga studios owned by the plaintiff, Level 4 Yoga, LLC, for nearly $30 million. Level 4 claimed that CorePower breached the parties’ APA in the early months of...

Trends in Chinese M&A

Companies involved in M&A and their deal professionals in China and Hong Kong have been navigating a very changed U.S.- China dynamics for the U.S. outbound M&A market in the last few years. Based on increased barriers to entry, including as a result of greater CFIUS scrutiny, there have been fewer outbound M&A transactions from China into America for the last three years. Instead of investments and acquisitions, deal professionals are seeing divestitures becoming the new trend in the U.S....

HSR Developments

In January 2022, the Federal Trade Commission (FTC) made two important announcements for M&A practitioners. First, on January 24, the FTC announced the annual adjustment of the thresholds that trigger premerger reporting obligations under the Hart-Scott-Rodino (HSR) Act. The new thresholds will apply to transactions closing after February 23, 2022. Second, the FTC announced the annual adjustment for maximum daily civil penalties for noncompliance with the HSR Act’s requirements (failure to file, failure to observe the mandatory waiting period, or...

FTC Announces New Position on Debt and HSR Valuation

On August 26, the Federal Trade Commission announced a new position on an important factor in determining whether a transaction must be reported under the Hart-Scott-Rodino Act: whether debt repayment at closing counts in determining the value of a transaction. The FTC’s new position is that “the full or partial retirement of debt should be included in calculating the Acquisition Price in any instance where selling shareholder(s) benefit from the retirement of that debt.” An explanation of the FTC’s new...

Semi-Annual M&A Update

On August 11th , Dorsey presented a review of corporate, alternative entity, and securities law developments of interest to the M&A practitioner, including the latest Delaware decisions. Watch the presentation by Brian Burke, Amelia Messa, and Jonathon Van Horn here.

Alaska Legislature Passes Bill Allowing Virtual Shareholder Meetings

Dorsey Assists Alaska Corporations to Hold Annual Virtual and Hybrid Meetings The Alaska Legislature unanimously passed Senate Bill 24, on March 22, 2021, allowing corporate shareholder meetings and nonprofit member meetings to be held via remote communications. The bill was signed into law by Governor Dunleavy on March 31, 2021. “This is a common-sense bill that makes Alaska an easier place to do business, and I expect it to have an immediate and positive impact,” said Alaska Representative Matt Claman....

FTC Temporarily Suspends Early Terminations

The FTC and DOJ announced today the temporary suspension of the practice of granting “early termination” of the HSR waiting period. In other words, for the time being, you should assume that any reportable transaction will require the full 30-day waiting period (shorter in all-cash tender offers). This is expected to be a short-duration suspension. See FTC press release here.

Decrease in HSR Reportability Thresholds and Other HSR Developments

On February 2, 2021, the Federal Trade Commission (FTC) announced the annual adjustment of the thresholds that trigger premerger reporting obligations (and the mandatory waiting period) under the Hart-Scott Rodino (HSR) Act. The new thresholds will apply to transactions closing on or after March 4, 2021 (that is, 30 days after publication of the announcement in the Federal Register). This year, for the first time in a decade, the thresholds decreased. Last month, the FTC also announced adjusted thresholds that trigger prohibitions...

How CFIUS Foreign Transaction Monitoring Broadened

2020 is a year we will not soon forget. 2020 was also a year full of dramatic changes for the Committee on Foreign Investment in the United States. The committee’s mandate remained the same — review foreign investments in U.S. businesses to protect national security. When necessary, the president can prohibit a proposed transaction, or require a foreign person to divest their interest in a U.S. business on national security grounds. However, important modifications to the CFIUS process were introduced...

New Guidance on PPP Loans in M&A

The Paycheck Protection Program (the “PPP”) created under the CARES Act has provided much needed assistance to millions of businesses and other organizations operating in the United States that have been impacted by the COVID-19 pandemic. This program continues to evolve with the latest development addressing situations in which a PPP borrower is participating in a change of control, merger or an acquisition transaction. On October 2, 2020 the Small Business Administration (the “SBA”) published SBA Procedural Notice (5000-20057) (the...

PPP Developments

The CARES Act Paycheck Protection Program (“PPP”) has provided much needed assistance to millions of businesses and other organizations impacted by the COVID-19 pandemic in the United States. This program, however, continues to be fraught with snares and traps for the unwary and the M&A space is no exception. To begin, any lender that participates in the PPP is required to utilize a promissory note to evidence each PPP loan it advances. Though the Small Business Administration (SBA) has provided...

Immigration Stability Amidst Corporate Restructuring: U.S. Immigration Service Announces Clarifications for Multinational Managers and Executives

The U.S. Citizenship and Immigration Service (“USCIS”) recently announced it has adopted an administrative law decision that clarifies issues relating to the transfer of multinational executives and managers from foreign offices to the United States.  This new decision should streamline the immigration aspects of multinational corporate restructurings and mergers. U.S. immigration law provides a special mechanism for multinational companies to sponsor their overseas executives and managers for U.S. permanent residency (“green cards”), provided those employees worked for a foreign entity...

CFIUS Abruptly Imposes New Notice Filing Fees

Beginning May 1, 2020, the Committee on Foreign Investment in the United States (“CFIUS”) will require a filing fee in connection with any formal notice of a “covered transaction” or a “covered real estate transaction.” The U.S. Treasury Department made the announcement on April 27, 2020 through an interim rule with its request for public comments until June 1, 2020. (See the interim rule here.) As of the date of this post, CFIUS has set the escalating amount of the...

Disaster Suspension Continues-COVID-19 Corporate Issues in Alaska

Earlier we reported that on March 19, 2020 (Effective Collaboration with Governor Nets Pragmatic Solution) the Governor of the State of Alaska temporarily suspended certain provisions of the Alaska Corporations Code AS 10.06.405(a) (in person requirement) and AS 10.06.410(a) (notice requirement) for annual meetings until April 12, or later date, if the disaster declaration is extended.  On April 10, 2020, Governor Dunleavy signed into law Senate Bill 241 (the “Act”).  The Act extended the Governor’s March 11, 2020 Disaster Declaration...

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COVID-19 Issues Appearing in Representation and Warranty Insurance Policies

Since the escalation of the COVID-19 pandemic, we’ve seen the emergence of proposed exclusions from coverage in representation and warranty insurance (RWI) policies.  For example, a buy-side policy found in a recently signed deal contains the following exclusion: the inability to fulfil customer orders based on a lack of stock in the period after 5 months from Closing caused by disruptions to the Target Group’s supply chain as a result of the spread of the Novel Coronavirus, including, but not...

Effective Collaboration with the Governor Nets Pragmatic Solution to COVID-19 Corporate Issues in Alaska

On March 19, Dorsey attorneys successfully obtained an emergency order from the Governor of the State of Alaska, which temporarily suspends certain state laws during the coronavirus public health crisis, and allows all Alaska corporations to hold virtual and hybrid (in-person and communications equipment) annual shareholder meetings on short notice. Every Alaska corporation must have an annual shareholder meeting, and Alaska Statutes require corporations to hold in-person annual shareholder meetings (AS 10.06.405). Most other states allow virtual or hybrid meetings,...

Increase in HSR Reportability Thresholds and Other HSR Developments

On January 28, 2020, the Federal Trade Commission (FTC) announced the annual adjustment of the thresholds that trigger premerger reporting obligations (and the mandatory waiting period) under the Hart-Scott Rodino (HSR) Act, which will apply to transactions closing 30 days after publication of the announcement in the Federal Register. The FTC also announced adjusted thresholds that trigger prohibitions on certain interlocking memberships on corporate boards of directors, which will become effective immediately on publication in the Federal Register. Both sets...