USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Vinita Sithapathy, Kristina Trauger, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters
7.7 Currency Control/Central Bank Approval This topic is not applicable.
• whether the arrangements that provide material benefits will be continued, or whether they will/can be terminated following the change of control. Employee Benefits Buyers should be aware of the Employee Retirement Income Security Act (ERISA), which governs the oper- ation and terms of certain employee benefit plans, including their treatment in connection with transac- tions. Retirement Plans Extensive litigation surrounds excessive fees, poorly monitored investments and claims related to employ- er stock investments in 401 (k) plans. Parties should determine whether any buyer or seller plans will be terminated prior to a change of control. If a seller maintains a defined benefit plan, actuarial assistance may be needed to understand a plan’s funded position. Often, the Pension Benefit Guarantee Corporation may insert themselves if either the buyer or seller has a significantly underfunded pension plan. If the target has a collectively bargained workforce, parties must determine whether the target partici- pates in multi-employer pension plans sponsored by a union, and whether the structure of the transaction will result in withdrawal liability. Health Plans Buyers must determine whether the target’s health plans are self-insured and assess stop-loss coverage. The parties must also understand their Consolidated Omnibus Budget Reconciliation Act (COBRA) and similar state law obligations that provide benefit con- tinuation coverage. Certain states may also require the payout of accrued leave or other benefits. Buyers must also consider the terminability of retiree medical liability and apportionment of plan liability between parties. Golden Parachute Excise Taxes Section 280G of the Code regulates “golden para- chute” payments made to certain key employees in M&A transactions. If Section 280G is triggered, excise taxes may be imposed on key executives and the company may lose corporate deductions.
8. Recent Legal Developments 8.1 Significant Court Decisions or Legal Developments Recent judicial decisions have clarified when Dela- ware courts may apply the most demanding stand- ard of judicial review – entire fairness. However, in March 2025 the Delaware state legislature amended the DGCL to codify certain holdings and to remove ambiguities relating to transactions involving con- trolling stockholders or conflicted management (the “Amendments”). In creating safe harbours for transac- tions involving interested directors/officers or control- ling stockholders, the Amendments were passed in part to maintain and enhance Delaware’s reputation as the most attractive jurisdiction in which technology companies and other businesses may seek to incor- porate or reincorporate. Section 144 (a), as amended, provides a safe harbour for transactions involving interested directors or offic- ers. For directors or officers to be protected by the safe harbour, either an informed majority of the cor- poration’s disinterested directors acting in good faith or stockholders must approve the transaction. Section 144 (b), as amended, now provides a safe har- bour for transactions with a controlling stockholder. For controlling stockholders, directors or officers to be protected by the safe harbour, either a committee of disinterested board members by majority vote, or a majority of disinterested stockholders, must approve the transaction. Note that both prongs of the forego- ing test must be met for the safe harbour to be avail- able for going-private transactions. If the safe harbours under Section 144 (a) or (b) are satisfied, such transactions cannot be subject to equi- table relief or be the basis for a damages award due to claims based on a breach of fiduciary duty. Section 144, as amended, also provides a compre- hensive definition of “controlling stockholders”. Prior to the Amendments, Delaware case law did not estab-
332 CHAMBERS.COM
Powered by FlippingBook