USA Law and Practice Contributed by: Elena Rubinov, George Casey, Heiko Schiwek, Vinita Sithapathy, Pierre-Emmanuel Perais and Clara Pang, Linklaters LLP
• transaction-specific information required in a proxy statement or a Schedule TO, as applicable. In addition, the staff of the SEC must approve (or “declare effective”) the registration statement, and typically make comments before granting such approval. Before the acquiror’s shares may be traded on a US national securities exchange, the acquiror must complete a listing application with the relevant exchange, unless the acquiror’s shares are already listed on the relevant exchange. 8.3 Producing Financial Statements In a registered exchange offer or merger where all or part of the merger consideration consists of securities, financial statement issues can add time and expense to the process, if financial statements – of the acquired business and pro forma for the combined company – are necessary. This depends on the magnitude of the transaction to the acquiror, and the requirement that financial statements filed with the SEC be prepared in accordance with GAAP or International Financial Reporting Standards (IFRS) as promulgated by the International Accounting Standards Board, or, failing those, with a reconciliation to GAAP. 8.4 Disclosure of Transaction Documents Although the transaction agreement must be filed for the merger of a public company, the parties generally need not include transaction agreement schedules, exhibits or attachments (or portions of such docu- ments) that do not contain terms or information that are material to the transaction or to the sharehold- ers’ investment decision; otherwise, they can request confidential treatment for portions of filed transaction documents. Nonetheless, the SEC may subsequently request that such materials be submitted to it confi- dentially. See 8.1 Making a Bid Public .
• Duty of care: This requires directors to act in an informed and considered manner (ie, to inform themselves, prior to making a business decision, of all material information reasonably available to them and, based on such information, to act with due care in discharging their duties). Directors are generally liable for a breach of this duty only if they are found to have acted with gross negligence. • Duty of loyalty: This requires directors to act without self-interest and in the best interests of the corporation and its shareholders (ie, to refrain from fraudulent conduct, self-dealing and actions intended to entrench themselves in office, and not to take personal advantage of business opportuni- ties at the expense of the corporation). Directors found to have breached this duty may be subject to personal liability under Delaware law. In Delaware, the obligation of good faith underlies the foregoing duties. While the Delaware approach to directors’ duties emphasises “the primacy of the shareholder”, other states permit, and even require, the board to consider the interests of other constituencies such as employ- ees, customers and suppliers. 9.2 Special or Ad Hoc Committees Boards of directors may establish special or ad hoc committees, comprised of independent directors, to negotiate the terms of potential business combina- tions. Such special committees may be formed where the majority of the directors are not independent (or are conflicted), or when a controlling shareholder stands on both sides of the potential transaction or will receive different consideration in the transaction or any side agreement to the detriment of the other shareholders. A proper special committee should select and retain its own independent advisers, and must be fully informed regarding the terms of the transaction and in diligence. 9.3 Role of the Board Board’s Role in Negotiations Boards generally do not play an active role in the negotiations of an M&A transaction, but are expected to make the final decision on whether to approve a
9. Duties of Directors 9.1 Principal Directors’ Duties
The directors of a Delaware corporation owe the core fiduciary duties of care and loyalty to the corporation and its shareholders.
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