Moelis Decision (affecting Delaware corporations and their investors)
Moelis Decision (affecting Delaware corporations and their investors)
The Delaware Court of Chancery recently decided a case (West Palm Beach Firefighters' Pension Fund v. Moelis & Company) with potentially significant implications for the corporate governance of Delaware corporations. We encourage our clients which are Delaware corporations, or which are venture capital or private equity investors in Delaware corporations, to reach out to their Reitler attorneys to discuss the potential impact of this decision.
In the Moelis case, the Court of Chancery determined that some very commonly-negotiated investor rights concerning (1) key company actions such as future financings and sale events, (2) Board of Director designation rights, and (3) Board committee designation and composition, were unenforceable as written. The Court’s principal rationale was that the inclusion of such rights in stockholder agreements (such as Investors’ Rights Agreements or Voting Agreements, where they frequently appear), rather than in a corporation’s certificate of incorporation or bylaws, constituted an invalid limitation on a board’s discretion over a Delaware corporation’s internal governance affairs.
We are monitoring evolving market practices and proposed legislative changes to the Delaware General Corporation Law (expected in late April 2024) in response to this decision. Further updates and context will be available from your Reitler attorneys.
Corporate Transparency Act
Corporate Transparency Act
As a reminder, most corporations, limited liability companies, limited partnerships and other registered or chartered entities are now required to report their beneficial ownership and control persons to the US Department of Treasury under the Corporate Transparency Act. The deadline for filing the report varies depending on when an entity was formed or incorporated, but may be as few as 30 days following formation. For more information, please see our February 2024 client update or reach out to your Reitler attorneys.
