Kirkland & Ellis discusses NOL Poison Pill – A Timely Prescription

With recent stock market volatility and sharp drops in stock market prices coupled with the continuing low interest rate environment, management and boards of directors of companies with significant net operating loss carryforwards (NOLs) may want to consider taking steps to preserve these valuable tax assets. Section 382 of the Internal Revenue Code applies formulaic limitations on the ability of a company to utilize its NOLs in future years if it undergoes an “ownership change” (i.e., an ownership increase of fifty percentage points or more by 5% shareholders of the company during a three-year testing period). In general, the … Read more

Kirkland & Ellis discusses Shareholder “Books and Records” Demands after the Wal-Mart Decision

A recent Delaware Supreme Court decision highlights the growing risks to companies of extensive statutory “books and records” demands that recently have become a favorite in the toolkit of plaintiffs’ lawyers and even activist shareholders conducting what are often speculative fishing expeditions under the guise of investigating alleged corporate wrongdoing. The statutory inspection right under Section 220 of the Delaware corporation law (and analogous rights in other states) permits shareholders with a holding of any size to access almost any internal information under the control of the company as long as there is a “proper purpose” for the request. Most … Read more

Seinfeld and Director Compensation: A Decision That Wasn’t About Nothing

As companies prepare for the upcoming proxy season, the recent Delaware decision in the Seinfeld case offers a cautionary note for boards as they consider director equity and incentive awards and the terms of the plans under which they are issued. In the decision, Vice Chancellor Glasscock, while dismissing a number of other plaintiffs’ claims regarding compensation matters, found that the award to directors of time-vesting restricted stock units under the terms of the company’s stockholder approved equity plan was an interested party transaction and therefore subject to review under the stringent entire fairness standard.

Until Seinfeld, boards of … Read more

Editor's Tweet |
Editor's Tweet: David Fox and Daniel Wolf of Kirkland & Ellis discuss the implications of the recent Delaware decision, Seinfeld.