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Topic: Disclosure Requirements

Delaware Court Addresses De-SPAC Merger Claims

In an important decision, the Delaware Court of Chancery, in In re Multiplan Corp. Stockholders Litigation, 2022 WL 24060 (Del. Ch. Jan. 3, 2022), in denying the defendants’ motion to dismiss, addressed claims against the sponsor and other insiders of a special purpose acquisition company or “SPAC” for breach of fiduciary duties in connection with a de-SPAC merger. As we mentioned in our QuickStudy, “SPACs and the Implications for D&O Insurance, the Multiplan decision was highly anticipated and is significant because it was the first time the Delaware courts had to grapple with the unique structure of SPACs and determine how to apply fundamental principles of Delaware fiduciary duty law to them.

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Nasdaq Introduces Board Diversity Requirements

On August 6, 2021, the U.S. Securities and Exchange Commission approved Nasdaq’s proposed rule regarding diversity of boards of directors.[1] The approved rule requires that most companies listed on Nasdaq (i) “[p]ublicly disclose board-level diversity statistics using a standardized template,” and (ii) “[h]ave or explain why they do not have at least two diverse directors.”[2]

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SEC Reminds Companies That Earnings Management Can Have MD&A Consequences

In a settled enforcement action against Under Armour Inc. announced on May 3, 2020 the SEC reminded companies that managing earnings, even if accounted for correctly, can have MD&A implications triggering disclosure obligations.  According to the SEC order, Under Armour, in order to meet analyst projections and sustain its 20% quarter over quarter revenue growth record, pressured customers to move purchases forward into the current quarter, and did this for a number of consecutive quarters.

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SEC Provides Reminder that Form 12b-25 is a Disclosure Document

The SEC’s Division of Enforcement announced on April 29, 2021 settled enforcement ‎actions against eight companies for failure to adequately disclose the reasons for their inability to ‎timely file their Form 10-Ks or Form 10-Qs when filing a Form 12b-25 (commonly known as ‎‎“Form NT”) to extend the time to file those reports.‎

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SEC Revision of MD&A – Focus on Future Uncertainties Disclosure

The Securities and Exchange Commission has continued its effort to update and ‎streamline the disclosure requirements for filings with the SEC. In November, the SEC adopted ‎amendments to the rules for Management’s Discussion and Analysis and related financial ‎disclosures. ‎ ‎ MD&A, because of its principles-based nature, is among the most challenging of ‎the disclosure requirements.‎

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SEC Modernizes Disclosure Requirements

The Securities and Exchange Commission on August 26, 2020 adopted changes to the business, legal proceeding and risk factor disclosures made by public companies and companies going public. This was one of two actions taken by the SEC on that date; see our blog post describing changes to the definition of accredited investor and related changes to the qualified institutional buyer definition at this link.

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SEC Emphasizes Meaningful Disclosure Amid COVID-19 Uncertainties

In a Statement (available here) on April 8, 2020, SEC Chairman Jay Clayton and Corporation Finance Division Director Bill Hinman supplemented earlier SEC guidance (discussed here) to emphasize the importance of disclosures by public companies about the effects of the COVID-19 pandemic on their operations, financial condition and liquidity and their plans for handling those effects.

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SEC Issues Guidance on Deadline for Part III Information Omitted From Form 10-K

The SEC issued new guidance yesterday supplementing its previously-announced COVID-19 order that gives relief from Exchange Act filing deadlines (see our blog post about the COVID-19 order here).  The guidance details how the order applies to companies that omitted from their annual report on Form 10-K the information required under Part III of Form 10-K.

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