Corporate News: A Legal Update

On April 12, 2024, the United States Supreme Court issued a unanimous ruling in Macquarie Infrastructure Corp. et al v. Moab Partners, L.P., et al. which held that omissions, by themselves, are not subject to private rights of action under Rule 10b-5, but omissions can support an action if they make other statements materially misleading.

The Division of Enforcement (“Division”) for the Securities and Exchange Commission (“SEC”) released the 2024 Examination Priorities Report (“Report”) highlighting the key areas the Division will examine in 2024.

On March 1, 2024 in the case of National Small Business United v. Yellen 5:22-cv-01448-LCB the U.S. District Court for the Northern District of Alabama declared the Corporate Transparency Act unconstitutional stating in part that it “exceeds the Constitution’s limits on the legislative branch and lacks a sufficient nexus to any enumerated power to be a necessary or proper means of achieving Congress’ policy goals.”

On February 7, 2024 FinCEN issued a Notice of Proposed Rulemaking that would require certain professionals involved in real estate closings and settlements to report information to FinCEN about non-financed transfers of residential real estate to legal entities or trusts. FinCEN’s proposal targets residential real estate transfers considered high-risk for money laundering.

In this day and age, we have a world of resources right at our fingertips, including new ways to access legal matters that would traditionally be handled by an attorney. Like with everything, there are benefits and drawbacks to the accessibility of standardized templates and sample agreements online.

With the advent of the federal Corporate Transparency Act (“CTA”) that begins on January 1, 2024, financial institutions will need to re-think their information and certification requirements for account and loan customers.

The U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published a Notice of Proposed Rulemaking on September 27, 2023 to amend the final Beneficial Ownership Information (“BOI”) Reporting Rule to extend the deadline from 30 to 90 days following formation or registration for reporting companies created on or after January 1, 2024 to file BOI reports. The purpose of requiring BOI reports, which disclose companies’ beneficial owners to law enforcement agencies, is to help them combat money laundering and other crimes. The purpose for this extension of the filing deadline is to provide additional time for reporting companies to understand the reporting rules and, in turn, increase compliance.

On June 20, 2023, Governor Tony Evers signed 2023 Act 12 (“Act 12”) into law. Notably, Act 12 repeals Wisconsin’s personal property tax. The repeal takes effect on January 1, 2024 and eliminates the time-consuming and costly process for business owners trying to ensure compliance with personal property tax laws. Business owners may also need to review assets previously classified as personal property to determine whether they are now classified as real property.

MGM Resorts is the latest victim of a cyberattack occurring on September 10th, which has set back the gambling and leisure giant substantially, both in terms of business function and income. MGM is not alone. Household names such as Amazon, Facebook, Alibaba, Marriott, and many others have been victimized, as have governments around the world.

“I love you, but you are not serious people.” This is the curse that Logan Roy, the founder and  business titan of Waystar RoyCo, intones to his three stunned children during a poignant family moment. The three siblings (Kendall, Siobhan and Roman) vie for control of Dad’s media empire, and are monsters to each other. Yet, despite the hyperboles and cartoonish nature of the characters, the show reveals essential truths about succession planning for family businesses.

If you are a business owner, with the mergers and acquisitions market continuing to be active, you may have decided it could be the right time to sell your most valuable asset – the company that you’ve spent years building. Now that you have decided to sell your business, it is important to consider five things in order to receive the maximum value in this market.

The Federal Trade Commission and Department of Justice recently proposed drafts of new Merger Guidelines for their review and approval of mergers and acquisitions, with the intent of responding to the realities of the modern economy.

In a recent decision, Mallory v. Norfolk Southern Railway Co., the U.S. Supreme Court opened the door for companies to face lawsuits in the state where they have registered to do business. The ruling stems from a case involving a Virginia-based former employee’s lawsuit against Norfolk Southern in Pennsylvania, despite the alleged injuries occurring in other states. The Court’s majority decision upheld the notion of “registration by consent” laws, allowing states to assert jurisdiction over out-of-state companies based on corporate registration.

The recent issues involving community and regional banks, such as Silicon Valley Bank, Signature Bank, and First Republic, have led depositors to flock to the larger banks, such as Chase. Chase’s CFO Jeremy Barnum, in Chase’s earnings call last Friday, stated that Chase saw “significant new account opening activity and meaningful deposit and money market fund inflows” and they estimate that they “have retained approximately $50 billion of these deposit inflows at quarter end.” Barnum elaborated that these inflows reversed an intra-quarter trend of increased deposit outflows.

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published its guidance materials on March 24, 2023, to help companies understand the requirements of the Beneficial Ownership Information Reporting Rule, which will become effective on January 1, 2024. The rule was implemented under the Corporate Transparency Act to assist regulators in combatting crime and fraud.

The Securities and Exchange Commission (SEC) has been increasing its enforcement actions against cryptocurrency companies and individuals in recent years. In 2022, the SEC brought 24 litigation actions in federal courts and 6 administrative proceedings against cryptocurrency companies and individuals, a significant increase over the previous year.

The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) requires premerger notifications to be filed for larger transactions in order to prevent monopolies and other anti-competitive effects. Unless an exemption applies, acquisitions that exceed certain threshold amounts for the sizes of the transaction, the acquiring person, and the acquired person are subject to antitrust review by the U.S. Federal Trade Commission (the FTC) and/or the Antitrust Division of the Department of Justice.

PFAS, short for per- and poly-fluoroalkyls substances are man-made chemicals used to make hundreds of products for home and industry use, ranging from stain proofing and waterproofing to firefighting and non-stick surfaces. They are among the most durable and task-effective man-made chemicals, yet they can exist in the environment for hundreds of years. Unfortunately, PFAS are associated with serious health risks including cancer, children’s developmental issues, immune system and endocrine disruption, and diabetes. The greatest area of public concern is contaminated drinking water. Human exposure also occurs in soils, surface water contamination, air emissions and workplace exposure (especially manufacturing and firefighting). 

Private placements can be a great resource for companies to raise capital in the current economic environment. They are cost effective in comparison to public offerings and provide greater decision-making latitude to current owners. Raising capital while keeping an entity private is an effective method for growing a business. Keeping a company private helps officers and directors take a long-term view of the company. Further, staying private has reduced administrative costs compared to public companies because private companies do not have the ongoing reporting obligations of public companies. Private placements allow companies to structure investments to meet their needs by issuing debt or equity investments under their terms. Whether the company is a newly formed start-up seeking the capital necessary to grow its business, or the company is more mature and would like to expand its ownership group by taking on new investors, private placements are versatile in how they serve companies.

Business brokers and intermediaries who are active in the lower end of the M&A middle market have been lobbying Congress for 10 years to enact a limited exemption from broker registration under the Securities Exchange Act of 1934.  Their work and patience have finally paid off.  On December 29, 2022, President Biden signed into law the Consolidated Appropriations Act, 2023.  Hidden away in it was Division AA, Title V, Small Business Mergers, Acquisitions, Sales & Brokerage Simplification, including the M&A Broker Exemption.  

On January 1, 2023, Wisconsin’s new limited liability company (LLC) law goes into effect. The Wisconsin Uniform Limited Liability Company Law (WULLCL), created by 2021 Wis. Act 258 and signed by Governor Tony Evers on April 15, 2022, completely repeals and replaces Wisconsin’s existing LLC laws in Chapter 183 of the Wisconsin Statutes (the “Old Laws”). The WULLCL—the new Chapter 183 of the Wisconsin Statutes—represents Wisconsin’s take on the Revised Uniform Limited Liability Company Act, which has been adopted in some form by nearly half of all states. With less ...

Effective January 1, 2023, Wisconsin will arguably become a more creditor-friendly state for judgment creditors of an LP partner or LLC member by virtue of the additional rights afforded a judgment creditor under Chapters 179 and 183 of the 2021 Wisconsin Statutes. 

On August 24, the Securities and Exchange Commission (SEC) released a draft of its strategic plan for 2022 – 2026, outlining its key initiatives for the next four years. The SEC’s mission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation. Its strategic plan is intended to further that mission by laying out goals that will guide its policy and decision making.

According to the Consumer Price Index (CPI), the United States is facing the highest inflation numbers in over 40 years. On April 12, 2022, it was announced that the CPI has increased 8.5% over the last 12 months, based on March 2022 data. The CPI has been steadily increasing since May 2020, and the impact is being felt by individuals and businesses.

On March 21, 2022, in an effort to provide consistent, comparable, and reliable data for investors to enable them to make informed judgments about the impact of climate related risks on current and potential investments the Securities and Exchange Commission (“Commission”) proposed for public comment amendments to its rules under the Securities Act of 1933 (“Securities Act”) and Securities Exchange Act of 1934 (“Exchange Act”). Known as the Climate Risk Disclosure Act (S. 1217; H.R. 2570) the rules would require domestic and foreign public registrants to provide climate-related information in their registration statements and annual reports. The proposed rules would require information about a registrant’s climate-related risks that are reasonably likely to have a material impact on its business, results of operations, or financial condition. The required information about climate-related risks would also include disclosure of a registrant’s greenhouse gas emissions (“GHG”)(“Scope 1”), indirect emissions from purchased electricity or other forms of energy (“Scope 2”), and GHG emissions from upstream and downstream activities in its value chain (“Scope 3”) which have become a commonly used metric to assess a registrant’s exposure to such risks. In addition, under the proposed rules, certain climate-related financial metrics would be required in a registrant’s audited financial statements.