What's On Your Mind?
Tell us about your business needs.
We monitor key trends, significant updates, and related news that may affect established and new/growing companies across a variety of industries. Help us help you and your business by telling us what topics our team can address in upcoming editions of the Business News Digest. Click below to email our team of attorneys.
Featured Article
Event in Review: Major Fraud and Abuse Laws: Anti-Kickback and Self-Referral Prohibitions and False Claims
Investment in the healthcare industry requires careful consideration, as it involves numerous distinct areas of the law. Venable's Private Equity Investment in Healthcare webinar series explores the unique issues and timely developments that shape deals within the industry.
2024 Article Round-Up
Court of Chancery Provides Further Guidance on Advance Notice Bylaw Amendments Amidst a Proxy Contest
In "a tale of wins and losses on both sides," the Delaware Court of Chancery reiterated that advance notice bylaws adopted amid an approaching proxy contest are reviewed through the lens of enhanced judicial scrutiny to determine whether they are a reasonable and proportionate means to defend against potentially abusive and deceptive practices by activists or hostile acquirors, and held that certain provisions that the court found overbroad, ambiguous or ripe for subjective interpretation were not permissible. Kellner v. AIM ImmunoTech Inc., et al., C.A. No. 2023-0879-LWW (Del. Ch. Dec. 28, 2023).
ISS and Glass Lewis Release Proxy Voting Policy Changes for 2024
On December 19, 2023, Institutional Shareholder Services Inc. ("ISS") released its updates to its Proxy Voting Guidelines. Somewhat unusually, ISS made only one change to its voting recommendation policies for U.S. public companies this year, related to shareholder proposals that would require future executive severance payments to be submitted to shareholders for ratification. ISS says it will evaluate such proposals on a case-by-case basis and will consider certain factors, including the company's current change-in-control agreements, the existence of problematic compensation features, and recent compensation controversies.
Fiduciary Liability Limitations Under Nevada Law Trigger Entire Fairness Review of Conversion from Delaware Due to Controlling Stockholder
The Delaware Court of Chancery, in Palkon v. Maffei, et al., C.A. No. 2023-0449-JTL (Del. Ch. Feb. 20, 2024), determined that a reduction in the liability exposure of a fiduciary due to the conversion of a Delaware corporation to a Nevada corporation, which conversion is approved by a controlling stockholder, will subject the conversion to the entire fairness standard of review absent the "twin MFW protections" required to obtain business judgment review (i.e., approval of an independent, adequately empowered special committee that fulfills its duty of care, and the uncoerced, informed vote of a majority of the minority stockholders).
Alabama Federal District Court Declares CTA Unconstitutional: Here's What You Need to Know
The Corporate Transparency Act (CTA), which became effective on January 1, 2024, was enacted to combat the use of shell companies by those seeking to evade anti-money laundering laws and economic sanctions. The CTA imposes an obligation on many U.S. entities (and foreign entities doing business in the United States), unless exempted, to report to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, information of their beneficial owners and, for entities formed on or after January 1, 2024, information of "company applicants" who create or register them. The penalties for noncompliance range from civil fines to criminal penalties, including imprisonment.
Annual Stockholders Meeting: Preparation Guide
We often assist clients with preparation for annual meetings of stockholders. A variety of materials provide guidance on the major components of an annual meeting, such as proxy statement disclosures and board approvals, including our memorandum, Proxy Materials and Annual Meetings under Maryland Law - 2024. However, fewer resources exist for preparing the items necessary for the conduct of stockholder meetings. This brief guide is intended to serve as a reminder of certain items that should be included in the preparation for annual meetings.
Earnouts and Their Tax Treatment
As buyers and sellers engage in negotiations for the sale of a business, often there may be disagreements as to the value and expected growth of that business. One party might currently value the business higher than the other party does, or there may be economic uncertainty regarding the future performance of the business. These differing expectations are usually resolved through an earnout.
Comparison of the Principal Provisions of the Delaware and Maryland Corporation Statutes
The latest edition of our Comparison of the Principal Provisions of the Delaware and Maryland Corporation Statutes has been updated to include amendments to the statutes by the Delaware and Maryland legislatures in their 2023 sessions. As you will see in the Executive Summary, there are many advantages to being incorporated in Maryland, including the absence of any franchise tax (which can be as high as $250,000 in Delaware). Maryland consistently ranks high in number of New York Stock Exchange-listed companies formed under our laws.
In Conversation: Two Venable Tax Attorneys Discuss the Rise in Demand for Corporate Restructuring Services
Over the past few years, amid rising instability, more and more organizations are opting to restructure their businesses. In this Q&A, key members of Venable's San Francisco-based Tax Group—Becca Chappell and Friedemann Thomma—discuss some of the reasons for this increased demand and how their team draws on their substantial experience as both legal and business advisors to help clients undergoing restructuring to minimize their tax burden.
SCOTUS Rules for Landowner in Fifth Amendment Takings Clause Case
In a unanimous decision, the Supreme Court of the United States (SCOTUS) held that the Fifth Amendment's Takings Clause does not distinguish between legislative and administrative land‑use permit conditions. Building permit conditions are not exempt from traditional takings analysis, the Court found, simply because a legislative body imposes them, instead of such conditions being imposed by a zoning administrator or planning department. The Court's ruling stressed that state courts must determine in the first instance whether permit conditions rise to the level of a taking of private property. Despite this clear-cut ruling, SCOTUS's decision leaves several fundamental questions unanswered.
Attorney Spotlight: Nina Greene and Michael Joblove on Trends in Franchising Law and How Their Practice Has Evolved Since Joining Venable
Recently recognized by the Franchise Times among its Legal Eagles of 2024, Venable partners Nina Greene and Michael Joblove have been consistently ranked among the top franchising attorneys in the country. In this Q&A, Nina and Michael talk about recent developments in franchising law and what they enjoy most about their practice.
Delaware Supreme Court Strikes Down Advance Notice Bylaws as "Unintelligible" or Adoption with an Improper Purpose on a "Cloudy Day"
In a much-anticipated decision, the Delaware Supreme Court echoed the Court of Chancery's pronouncement that advance notice bylaws adopted amid an approaching proxy contest are reviewed through the lens of enhanced judicial scrutiny and clarified the framework for judicial review of advance notice bylaws on both a "clear day" and a "cloudy day." As described in our prior client alert, the case concerned a series of attempted proxy contests related to the board of directors of AIM ImmunoTech Inc. and amendments to the Company's advance notice bylaws adopted in anticipation of a third proxy contest.
Healthcare Impacts in a Post-Chevron World
The Supreme Court's landmark June 28, 2024 decision in Loper Bright Enterprises v. Raimondo abandoned the Chevron doctrine after 40 years of deferring to agency interpretations of ambiguous laws. As previewed in our June 28 alert, Loper continues the Court's departure from agency deference through this most significant blow. The practical impacts of Loper on the robust healthcare regulatory regime will be tested in the ensuing months and years. We examine what is and is not likely to change for the healthcare industry.
Whose Value Is It, Anyway?
On June 6, 2024, the U.S. Supreme Court issued a unanimous decision in Connelly v. United States affecting the valuation of closely held businesses for estate tax purposes. The Court explained that, for purposes of federal estate taxes, when a corporation is obligated to redeem an owner's shares at death, a corporation's value is not necessarily reduced by that obligation. The Court's decision affects succession planning for many owners of closely held businesses. However, as discussed below, there are alternative structuring methods that could allow small business owners to obtain the same benefits.
Forward-Looking Statements: Safe Harbors Compliance Guidelines
The securities law disclosure framework has evolved to encourage; companies acting in good faith to disseminate relevant projections pertaining to their businesses to the general public "without fear of open-ended liability." Sharing financial projections and other information about anticipated events and developments—in press releases, earnings calls periodic filings, and prospectuses of registered offerings—has become a routine practice for reporting issuers, but so have the stockholders' lawsuits alleging that such statements were fraudulent when forward-looking statements did not come to fruition or when they contain an error. Many issuers struggle to effectively leverage relevant safe harbors and craft appropriate safe harbor language, potentially inviting plaintiffs to capitalize on such errors.