Corporate Law

  • September 2017

    SEC Finds Securities Laws Apply To Some Initial Coin Offerings

    Businesses are increasingly using Initial Coin Offerings to raise capital – and the U.S. Securities and Exchange Commission has taken an interest. The commission recently issued a report concluding the coins offered in a high-profile ICO last year were in fact securities. The report serves as a warning to those using distributed ledger or blockchain technology to facilitate the raising of capital about the need to comply with securities laws.
  • August 2017

    Registration Rights: What You Need To Know

    Under federal law, securities can only be offered or sold pursuant with a registration statement filed with the Securities and Exchange Commission, or in accordance with an applicable exemption from the registration requirements. Stock held by venture capital funds and other investors in portfolio companies is not typically registered initially. This is where registration rights come into play.
  • August 2017

    Delaware Chancery Court Sends Dispute Over Purchase Price Adjustment To Auditor

    In a recent decision, the Delaware Chancery Court ruled that a dispute over a post-closing purchase price adjustment must be decided by an independent auditor rather than the courts. The court in Chicago Bridge & Iron Company N.V. v. Westinghouse Electric Company LLC and WSW Acquisition Co. LLC was required to interpret a dispute resolution mechanism found in many in private company M&A transactions. The decision highlights the importance of clearly drafting such provisions.
  • August 2017

    Innovative Capital Raising for Innovative Orange County Companies

    Stradling shareholders Parker Schweich and Amit Singh authored an article in the Orange County Business Journal about crowdfunding, a new capital raising method for small companies.
  • August 2017

    Interbake Can't Terminate Mrs. Fields' Cookie Deal Based On MAE Clause

    The Delaware Chancery Court in a recent decision held that Mrs. Fields Brands Inc. could force Interbake Foods LLC to honor an agreement to make Mrs. Fields-branded cookies for sale in certain retail store channels. In doing so, the court rejected Interbake’s argument that Mrs. Fields breached a “material adverse effect” clause and made false representations in the agreement.
  • August 2017

    Fraud Carveouts in M&A Transactions Must be Crafted Carefully to Avoid Ambiguity

    In a recent decision, the Delaware Chancery Court refused to throw out a lawsuit with post-closing claims for indemnification against the sellers of EMSI Holding Company, a medical information services business. The case involved allegations of fraudulent representations made by the company in the Stock Purchase Agreement. The court said “inelegant drafting” of the SPA created an ambiguity that prevented dismissal at this stage.
  • August 2017

    Are Non-Solicitation/No-Hire Agreements Enforceable In California?

    California has a strong public policy against agreements that prohibit employees from working for a competing company or starting up a competing business themselves. All blanket non-competes are automatically void under state law. Courts have also held agreements that prevent former employees from soliciting the company’s customers generally are not enforceable, unless they are limited to protecting the company's intellectual property rights.
  • July 2017

    SEC Focus on Creating IPOs Has Hurdles to Overcome

    Compliance Week interviewed shareholder Ryan Wilkins for a story regarding the steady decline in public offerings. In response to this trend and in an effort to encourage participation in the public markets, incoming SEC chair, Jay Clayton, announced that the Division of Corporate Finance will permit all companies to submit draft registration statements relating to IPOs for review on a non-public basis. Wilkins commented that control is always an issue when companies consider going public. However, he mentioned that “we have seen dual-class stocks come back to an extent in recent years. Issuers continue to have takeover defense provisions in their governing documents.

  • July 2017

    What is a Seed Financing?

    Startups will often go through several rounds of financing before they are able to generate enough revenue to finance their operations. The earliest funding round, the seed stage, is a critical period when money is needed to develop the business and prove the new product or service works before it is sold to consumers.
  • July 2017

    When Can a Board Resignation be a Breach of Fiduciary Duties?

    The board of directors has an important role in a company, acting as representatives for stockholders while making decisions for the company and putting in place corporate management policies. The number of individuals on the board can vary, as the structure and powers of the board are determined by the corporation’s bylaws.
  • July 2017

    Do Invitations To 'Connect' On LinkedIn Violate Non-Solicitation Agreements?

    Employees often use personal accounts on social media websites like LinkedIn and Facebook to promote their work and share information about new jobs. While this might seem harmless, the growing use of these sites has raised legal questions about how these sorts of activities interact with an employee’s obligations under a non-compete or non-solicitation agreement.
  • July 2017

    Delaware Supreme Court Upholds Decision Permitting Energy Transfer To Exit Williams Merger

    The Delaware Supreme Court recently affirmed a lower court’s decision allowing Energy Transfer Equity to abandon a planned merger with Williams Cos. based on ETE’s failure to obtain a tax opinion from outside counsel, which was a contractual condition to closing. The decision sheds light on how Delaware courts will view parties’ obligation in an M&A agreement to use "reasonable best efforts" or "commercially reasonable efforts.”
  • July 2017

    SEC Study Highlights "Troubling Characteristics" Of OTC Stock

    The Division of Economic and Risk Analysis of the Securities and Exchange Commission recently published a study that looks at trends in the market for over-the-counter (OTC) stocks and could have important implications for investor protections.
  • June 2017

    Delaware Ruling Provides Cautionary Tale Against Favoring Preferred Stockholders

    In a recent decision, the Delaware Court of Chancery refused to dismiss a breach of fiduciary duty claim accusing a board of directors of improperly favoring the interest of the company’s controlling stockholder to the detriment of the long-term interests of its common stockholders.
  • June 2017

    Precision And Drafting: Keys To Ensure Your Agreement To Negotiate In Good Faith Will Be Enforceable

    Term sheets, letters of intent and other preliminary documents can be useful for parties in complex negotiations, allowing them to handle the major issues of the deal first and worry about the details later. Agreements that say the parties will negotiate a future agreement in good faith can be enforceable. But how to do you ensure that your agreement will be enforced and that you will have recourse if the other side doesn’t live up to its end of the deal?
  • June 2107

    Regulation A+ Outpaces Regulation A Activity, SEC White Paper Says

    The SEC recently released a white paper entitled “Regulation A+: What Do We Know So Far?,” which examined Regulation A+ offerings between June 19, 2015 (the date the exemption took effect) and October 31, 2016. The study found that during the examined time period prospective issuers publicly filed offering statements for 147 Regulation A+ offerings, seeking up to approximately $2.6 billion in financing. This outpaced the past rate of Regulation A activity.
  • June 2017

    Revoking Severance Offers for 40+ Year Old Employees

    It’s not uncommon for a severance offer to be made when an employee is terminated. This is often a win-win for everyone involved: the employer obtains a release of potential claims, while the employee gets payments and/or benefits that they would not otherwise be entitled.
  • May 2017

    Structuring Earnounts In M&A Transactions

    An earnout is a mechanism in M&A transactions that allows the seller to receive additional compensation if the business achieves certain financial or operating targets after closing. Earnouts can bridge a valuation gap between a seller and skeptical buyer and are often used for startups that don’t have much operating history but have growth potential.
  • May 2017

    Electronic Signatures In Consumer Agreements

    Electronic signatures are increasingly becoming a way of life in business. A previous post discussed what constitutes an e-signature and their use in commercial transactions. This article takes a closer look at some of the case law surrounding customer agreements signed using an electronic signature pad.
  • April 2017

    Use Caution When Entering Into Side Letters With Investors

    Side letter agreements have long been used in private equity fund investments to supplement or interpret the terms of a partnership agreement and related documents. But as one notable decision from the Delaware Court of Chancery illustrates, the enforceability of these agreements cannot be take for granted.