USA LAW AND PRACTICE Contributed by: George Casey, Heiko Schiwek, Elena Rubinov, Pierre-Emmanuel Perais, Clara Pang and Gregory Gewirtz, Linklaters LLP
Health plans The buyer would need to know whether the health plans are self-insured and assess stop- loss coverage. The parties must also understand their Consolidated Omnibus Budget Reconcili- ation Act (COBRA) and similar state law obli- gations that provide benefit continuation cover- age. Certain states may also require the payout of accrued leave or other benefits. In addition, the buyer 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 par- achute” payments made to certain key employ- ees in M&A transactions. If Section 280G is triggered, excise taxes may be imposed on key executives and the company may lose corporate deductions. 7.7 Currency Control/Central Bank Approval This is not applicable for US M&A transactions. 8. Recent Legal Developments 8.1 Significant Court Decisions or Legal Developments In the past year, Delaware courts opined on several cases involving controlling sharehold- ers or conflicted management, highlighting the circumstances where the strictest standard of review, entire fairness, would be warranted or otherwise detailing the procedural steps to be taken by parties to benefit from a lower standard of review by the court. In the case of In Re Match Group, Inc (“Match”), the Supreme Court of Delaware clarified the application of the so-called MFW framework,
Non-qualified Deferred Compensation Plans Key issues for the buyer to consider include: • whether the seller maintains non-qualified deferred compensation, and whether such arrangements are compliant with Section 409A; and • whether the arrangements that provide mate- rial 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 Retire- ment Income Security Act (ERISA), which gov- erns the operation and terms of certain employ- ee benefit plans, including their treatment in connection with transactions. Retirement plans There has been an avalanche of litigation sur- rounding excessive fees, poorly monitored investments and claims related to employer stock investments in 401(k) plans. Buyers and sellers need to also determine whether any plans of the buyer and seller should be terminated pri- or to a change of control. If a seller maintains a defined benefit plan, actu- arial assistance may be needed to understand the funded position of such plans. Often, the Pension Benefit Guarantee Corporation may insert themselves if either the buyer or seller has a significantly underfunded pension plan. If the buyer has a collectively bargained work- force, attention will be needed to whether the buyer participates in multi-employer pension plans sponsored by a union, and to whether the structure of the transaction will result in with- drawal liability.
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