On October 26, the Securities and Exchange Commission adopted final rules amending (1) Rule 147 promulgated under the Securities Act of 1933 (Securities Act) to modernize the existing safe harbor under Section 3(a)(11) of the Securities Act for intrastate securities offerings and (2) Rule 504 of Regulation D under the Securities Act to assist capital raising and to provide additional protections to investors. The SEC also adopted new Rule 147A to establish a new intrastate offering exemption and, in connection with the amendments to Rule 504, repealed Rule 505 under Regulation D. The SEC’s proposal for these Rules was discussed in the November 6, 2015 edition of the Corporate & Financial Weekly Digest.
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David S. Kravitz
SEC Seeks Public Comment on Disclosure Requirements of Subpart 400 of Regulation S-K
On August 25, the Securities and Exchange Commission announced that it is seeking public comment on the issues that the staff should consider in connection with its review of disclosure requirements under Subpart 400 of Regulation S-K.
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2016 Amendments to Delaware General Corporation Law Highlight Two-Step Mergers and Appraisal Rights
On August 1, a number of amendments to the Delaware General Corporation Law (DGCL) went into effect. Notably, several of the amendments modified sections of the DGCL pertaining to (1) two-step mergers effected under Section 251(h) of the DGCL, and (2) appraisal rights and proceedings.
Section 251(h) Mergers
DGCL Section 251(h) provides a mechanism for a buyer to effectuate the negotiated acquisition of a Delaware-domiciled publicly-traded corporation by a tender offer to purchase at least a majority of outstanding shares of the target, followed by a short-form merger to acquire any shares not tendered in such offer. This back-end merger does not require stockholder approval, thereby saving the buyer the time and expense involved in preparing and filing a proxy statement and holding a stockholders’ meeting if Delaware’s standard short-form merger threshold (90%) is not satisfied. The 2016 amendments to the DGCL clarified certain Section 251(h) requirements and increased the availability of such short-form mergers to potential buyers.
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SEC Division of Corporation Finance Issues C&DIs on Application of Rule 701
On June 23, the Staff of the Division of Corporation Finance (Staff) of the Securities and Exchange Commission released new Compliance and Disclosure Interpretations (C&DIs) relating to Rule 701 of the Securities Act of 1933, as amended, primarily in the context of a merger transaction.
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SEC Proposes Rules Updating Mining Registrant Disclosure Requirements
On June 16, 2016, the Securities and Exchange Commission proposed rules (Proposed Rules) to modernize the property disclosure requirements for mining companies under Item 102 of Regulation S-K. The Proposed Rules would also rescind Industry Guide 7 and add a new subpart to Regulation S-K to incorporate the SEC’s mining property disclosure requirements. In its press release announcing the Proposed Rules, the SEC Chair noted that the Proposed Rules would align Regulation S-K with “global standards and give investors more comprehensive information of a registrant’s mining properties that they can use to make informed investment decisions.”
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US District Court Orders SEC To Revise Resource Extraction Issuer Rule
On September 2, the US District Court for the District of Massachusetts ordered the SEC to file with the District Court in 30 days an expedited schedule for promulgating a final resource extraction issuer disclosure rule as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act. In its ruling, the District Court stated that it would retain jurisdiction over the rulemaking process so as to ensure compliance with its order. The District Court’s order followed an action by Oxfam America, Inc. to compel the SEC to promulgate a final resource extraction issuer disclosure rule. Section 1504 of the Dodd-Frank Act mandates the SEC to issue rules requiring a resource extraction issuer to disclose payments made by the issuer, a subsidiary of the issuer or another entity under the issuer’s control to the US federal government or foreign governments in connection with the development of natural gas, minerals and oil resources.
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US Court of Appeals for the District of Columbia Circuit Upholds Decision on Conflict Minerals Rule
On August 18, the US Court of Appeals for the District of Columbia Circuit issued its opinion on the rehearing of the lawsuit challenging the Securities and Exchange Commission’s conflict minerals rule. The ruling upheld the court of appeals’ previous ruling that, to the extent that the conflict minerals rule requires an issuer to disclose that any of its products “have not been found to be ‘DRC conflict free,’” the rule violates the First Amendment’s prohibition against compelled speech.
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Court of Appeals for Third Circuit Overturns District Court Ruling Regarding Exclusion of Shareholder Proposal From Proxy Statement
On July 6, the United States Court of Appeals for the Third Circuit issued an opinion overturning the November 2014 ruling of the United States District Court for the District of Delaware that Wal-Mart Stores, Inc. had improperly excluded a shareholder proposal from its proxy statement. The Third Circuit’s written opinion follows its prior order issued in April 2015 vacating the District Court’s earlier decision.
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SEC Division of Corporation Finance Issues New C&DIs Relating to New “Regulation A+”
On June 23, the Securities and Exchange Commission’s Division of Corporation Finance issued new Compliance and Disclosure Interpretations (C&DIs) relating to the recently expanded Regulation A, commonly referred to as “Regulation A+”. Regulation A+, which was promulgated under the Jumpstart Our Business Startups Act (JOBS Act), permits eligible issuers to offer up to $50 million of their securities within any 12-month period in quasi-public offerings. As noted in the June 19 edition of the Corporate & Financial Weekly Digest, Regulation A+ became effective on June 19.
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SEC Division of Corporation Finance Issues New C&DI Related to Resales Under Regulation S
On January 23, the Securities and Exchange Commission’s Division of Corporation Finance issued a new Compliance and Disclosure Interpretation (C&DI) regarding the resale of securities under Regulation S of the Securities Act of 1933 (Securities Act), which provides an exclusion from the Securities Act’s registration requirements for offerings made outside of the United States of …