Topic: Governance and directors’ liability

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The role of boards in M&A transactions

In a recent article from the Harvard Law School Forum on Corporate Governance and Financial Regulation, Alexandra R. Lajoux, chief knowledge officer at the National Association of Corporate Directors, discusses the role of boards of directors in M&A deals. Emphasis is made on readiness and oversight.

According to Dealogic, the value of M&A activity is at its highest since the global financial crisis with July 2015 totalling $549.7 billion globally, the second highest monthly total value since April 2007. A more detailed review of global M&A trends may be found here.

According to Ms. Lajoux, boards must consider M&A … Continue Reading

Private equity investments and common governance rights in investee companies

Private equity investors (PEIs) are often a good source of capital for companies looking to start, maintain, or grow their operations and can also provide significant operational and transactional expertise. Like other investors, PEIs operate with a primary goal in mind; that is, to receive a favourable return on their investment. However, PEIs generally seek to have a greater level of involvement in an investee company than other investors.  Accordingly, PEIs commonly negotiate for certain governance rights in the company via a unanimous shareholder or limited partnership agreement in order to maintain a certain level of oversight over … Continue Reading

When and how to use fiduciary out clauses

Almost every acquisition agreement involving the acquisition of a public company will include a provision whereby the board of directors of the target company agrees to stop soliciting competing bids or stop having any discussions with any other party who might be interested in a making a competing bid. This is generally known as the “no-shop” clause. However, the directors of the target company have certain fiduciary duties that they must comply with. Directors must act honestly, in good faith, and with a view to the best interests of the company, which in the context of an acquisition includes getting … Continue Reading

The impact of financial reporting periods on M&A success

Stock MarketWhile the success of a merger or acquisition may be best determined over a long time horizon of several years, investors tend to have a shorter-term view of what constitutes success or failure in M&A. Corporations are held to be only as successful as their latest quarterly results and many investors base their opinions off analysts’ reports and forecasts. Given the weight accorded to these reports by investors, corporations often focus on quarterly results in lieu of longer-term performance. One result is that the longer-term planning required to extract the most value from an M&A transaction may be abandoned in … Continue Reading

Directors’ duties in M&A

Directors have clear duties when acting for the corporation, particularly when choosing whether to engage in M&A.  Below is a brief summary of what duties directors owe to the corporation and how directors can uphold them in M&A.

Directors’ duties

At all times, and particularly during M&A, directors have the following duties: (1) a duty to supervise; (2) fiduciary duties; and (3) a duty of care.

  1. Duty to Supervise. Directors have specific, statutory duties to manage the corporation. To satisfy this duty, directors may select a senior management team that is qualified and worthy of the director’s trust.  However, directors
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Changes of note to the Yukon Business Corporations Act

On May 1, 2015, a significant number of changes to the Yukon’s Business Corporations Act and Business Corporations Regulation were proclaimed in force. This was the culmination of an almost seven-year process undertaken to modernize the Yukon’s corporations and securities legislation.

While many of these changes simply bring the Yukon’s corporations and securities legislation in line with that of other Canadian jurisdictions, there are a number of amendments that are unique to the Yukon.

Amendments of note include:

  • “Safe harbour” provisions which allow directors, with the approval the majority of directors or shareholders, to pursue a “business opportunity” which might
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A guide to change-in-control arrangements

Conducting thorough due diligence with respect to a target company’s compensation plans, employment agreements, employee benefit plans and employee policies is an integral component in evaluating a potential merger or acquisition. For an acquiror, another significant piece of the overall picture with respect to compensation, however, is the impact of a merger or acquisition on executive compensation and the payments and benefits to be provided to executives upon a change-in-control. Below is a brief summary of what constitutes a change-in-control event and some of the benefits that executives typically receive upon a change-in-control.

Change-in-control (CIC) arrangements

According to Meridian Compensation Continue Reading

Common liquidity rights in private equity investments in early stage companies

Early stage companies face an uphill climb in growing their business and ensuring their viability going forward. Private equity firms can provide capital as well as significant operational and transactional expertise to aid in a company’s growth. However, private equity investors often intend to exit any investment within a defined time period. As a result, private equity investors frequently demand concessions prior to investment to avoid exposure to liquidity risk. Common liquidity mechanisms sought by private equity investors include drag-along rights, and registration rights.

Drag-along rights and tag-along rights 

Private equity investors will frequently attempt to negotiate the inclusion of … Continue Reading

M&A activism 101: top 3 tips for companies

There is a wide range of issues that a board and management team must face in considering an M&A transaction in the normal course.

Increasingly, however, a company that is considering a potential merger or acquisition, or asking its shareholders to consider such a transaction, needs to be aware of the motivations of the stakeholder community that will also be evaluating the prospects of any such transaction, whether at a shareholder meeting or in the court of public opinion.

Stakeholders who do not like the merits of a transaction that is being proposed are increasingly actively and publicly campaigning against … Continue Reading

What can private companies learn from shareholder activism? Our top 5 tips for companies and boards

As a new year begins, it is always a good time to take stock of the successes of the past year and look forward to doing even better in 2015. Shareholder activism will continue to be a “hot topic” for publicly listed issuers in 2015, but what lessons from the activism arena translate to companies that are not publicly listed? Here is a checklist of our top 5 tips to help ensure a smooth year to come: 

  1. Effective communication of corporate strategy to employees, customers and the public – Having a great strategy that no one knows about will not
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Seminar: Norton Rose Fulbright’s 7th Annual Mergers & Acquisitions School

On Wednesday, September 10, 2014 to Wednesday, October 22, 2014 from 6:30 pm – 8:30 pm (US/Central), Norton Rose Fulbright  will be presenting its 7th Annual Mergers & Acquisitions School for corporate, in-house legal, investment banking and private equity professionals in Houston, Texas.

This comprehensive program is designed for participants that desire to develop a thorough understanding of the M&A process and agreements from a legal perspective. Invited organizations will have the exclusive opportunity to enroll up to two professionals.

Class Syllabus

Wednesday, September 10, 2014

  • Confidentiality, Non-Solicitation and Non-Circumvention Agreements • Legal Structures of Transactions – Asset Acquisitions, Stock/Equity
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M&A litigation part 1: trends regarding M&A transactions valued over $100 million

Last month, Cornerstone Research published a report titled Shareholder Litigation Involving Mergers and Acquisitions – Review of 2013 M&A Litigation, the first report in a 2-part series aimed at assessing trends involving lawsuits filed by shareholders of public target companies which challenge M&A transactions valued over $100 million. The purpose of the report was to consider litigation (usually in the form of a class action) for the period from 2007 to 2013 wherein plaintiff’s counsel would challenge an M&A deal on the basis that the target’s board of directors conducted a flawed sales process which neglected to maximize shareholder … Continue Reading

Ontario Securities Commission publishes proposed disclosure rules regarding women on boards and in senior management

The Ontario Securities Commission has published for public comment proposed amendments to its corporate governance disclosure requirements.  Check out Norton Rose Fulbright’s legal bulletin on this topic for more information.

For additional background, please visit Sara Josselyn’s previous article on this blog.

 … Continue Reading

Canada’s anti-corruption regime: implications for corporate governance practices

Legislative amendments and increasingly rigorous enforcement practices under the Corruption of Foreign Public Officials Act (“CFPOA” or “the Act”) mark the robust developments taking place in Canada’s anti-corruption regime. Changes to the law and the enforcement thereof carry significant implications for companies and their corporate governance practices.

The CFPOA sets out as a criminal offence any payments made or other benefits provided to foreign public officials, which payments or benefits are made or provided with a view to obtaining or retaining a business advantage.

The accused may be a Canadian or foreign national in the form of a natural person, … Continue Reading

Seminar – Corporate governance 2013: meeting shareholder expectations

Join us in Toronto on Tuesday, December 3, 2013 or in Calgary on Thursday, December 5, 2013 for a seminar on corporate governance in 2013.

Register now

In this full-day seminar, Co-Chairs Walied Soliman and Orestes Pasparakis will canvass a wide range of corporate governance issues including 2012 and 2013 developments, disclosure best practices, shareholder engagement, compensation governance, D&O liability, corporate social responsibility and reputational and business risks.

Norton Rose Fulbright speakers:

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Disclosure requirements regarding women on boards and in senior management

Earlier this month saw the closing of the comment period for the Ontario Securities Commission’s (OSC) Staff Consultation Paper 58-401 Disclosure Requirements Regarding Women on Boards and in Senior Management. The paper proposes amendments to National Instrument 58-101 Disclosure of Corporate Governance Practices such that TSX-listed companies (excluding venture issuers and investment funds) would have to meet disclosure requirements with respect to female representation on boards and in senior management.

The purpose of the OSC consultation paper is to enhance corporate governance by “advancing the representation of women” in leadership roles with a “comply or explain” system aimed at … Continue Reading

M&A in 2013: FCPA Successor Liability Issues

Houston Partner Marsha Gerber, Senior Counsel Elaine Lawson and Assistant General Counsel, Administration, Compliance and Regulatory Affairs of Marathon Oil, Kevin McDonald recently gave a presentation on successor liability under the Foreign Corrupt Practices Act.

View it here:… Continue Reading

Golden parachutes on the rise during down economy

This post was contributed by Éric L’Italien, Lawyer, Norton Rose Canada

Given the shaky economy over the past couple of years and the reduced number of takeovers, mergers and acquisitions, one would have expected a decline in indirect compensation such as golden parachutes.

However, according to a recent Alvarez & Marsal study, there has been a 32% increase over the past two years in the average value of the change-in-control benefits (i.e., golden parachutes) provided to US executives. Considering that the evolution of change-in-control benefits in Canada tends to be influenced by what takes place in the United … Continue Reading

Pre-emptive Defensive Tactics Against Dissidents’ Ambush

This post was contributed by Walied Soliman, Partner, Norton Rose Canada, and Evelyn Li, Associate, Norton Rose Canada

A scan of recent business headlines suggests shareholder activism continues to rise, and even the who’s who of deep-rooted Canadian businesses are not immune.

While preparing for the upcoming proxy season, whether or not your company is at risk for a proxy contest, it might be a good idea to consider adopting certain pre-emptive defensive tactics, including a by-law to provide advance notice for nomination of directors as recently proposed by Arius3D Corp.

Proxy fights

Dissidents in a proxy contest typically look … Continue Reading