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Banco Barristers featured in The 2021 Edition of Best Lawyers

The recently published 2021 edition of Best Lawyers recognised the expertise and experience of 19 Banco Chambers’ barristers. Banco Chambers’ depth of expertise across a range of areas was highlighted with our barristers featured across 10 diverse practice areas including litigation, international arbitration, class actions, and insolvency. The barristers featured are:

  • Farid Assaf SC – ADR, insolvency, and international arbitration
  • Nick Bender – Litigation
  • Tom Blackburn SC – Litigation
  • Tim Breakspear – ADR, construction and infrastructure, and international arbitration
  • Peter Brereton SC – ADR and litigation
  • Sandy Dawson SC – Bet the company litigation
  • Kristen Deards SC – Tax
  • Robert Dick SC – ADR and litigation
  • Ruth Higgins SC – ADR and bet the company Litigation
  • Richard McHugh SC – ADR and litigation
  • Cameron Moore SC – ADR and litigation
  • Robert Newlinds SC – Insolvency and litigation
  • Jonathon Redwood SC – Class actions and international arbitration
  • Declan Roche – Competition law
  • Tim Senior – Defamation
  • Christopher Withers SC – Insolvency and litigation
  • Vanessa Whittaker SC – Insolvency and litigation
  • Tiffany Wong SC – Litigation
  • Robert Yezerski  – Competition law

 

Chongqing office set to further boost KWM’s presence in China

On 18 March 2021, King & Wood Mallesons Chongqing office officially opened. It is the second office set up by KWM in Southwest China, following Chengdu office, bringing the total of KWM China offices to 14. Located in Liangjiang New Area, Chongqing office obtained the approval for its establishment from Chongqing Municipal Bureau of Justice at the end of October 2020.

Chongqing, a municipality directly under the central government in Southwest China, is the largest industrial and commercial city in the southwestern of the country, an important modern national manufacturing base and a comprehensive transportation hub in the region. In recent years, the construction of the Chengdu and Chongqing Economic Circle has continued, and has been included into the 14th Five-Year Plan. The demand for high-end foreign-related legal services in the region is on the rise. KWM always pays close attention to the development of the economy and legal service market there, and has established its physical presence in Chengdu as early as in 1998. Based on the high reputation and extensive client base already established in Sichuan and Chongqing, the two offices will work together to serve a greater area, assisting more enterprises and institutions in keeping up with the global market trend and seeking cooperation worldwide. They will become the backbones of KWM in the region and even the west part at large.

By taking into consideration of the demands of clients and the market, Chongqing office will in the beginning contribute to the firm’s practice in capital market, corporate, dispute resolution, restructuring & insolvency, and to international cooperation relating to the Belt and Road Initiative, providing clients in the manufacturing, modern agriculture, technology, real estate and infrastructure, cultural tourism and other industries with professional and first-class legal services. The Chongqing team is made up of partners, counsels and associates who have been deeply delved in the regional market for many years. With a wealth of experience, strength and in-depth understanding of various sectors, the team is able to leverage the KWM platform and resources to assist clients in achieving better development locally.

Liu Rong, Finance & Securities

Liu Rong specializes in corporate, securities, and civil and commercial matters. He has more than 20 years of experience in the legal service market in Sichuan and Chongqing, and joined Chengdu office in 1999. Mr. Liu has advised many large and medium-sized SOEs, private enterprises, high-tech companies on their reorganization, restructuring, and merger and acquisition. He has also advised Chinese enterprises on their IPOs and listings on stock markets both in the Mainland and Hong Kong S.A.R. He has served as the counsel for many large SOEs, private high-tech companies and some large foreign-funded enterprises.

Liu Zhizhi
, Corporate

Liu Zhizhi focuses her practice on international construction projects and construction related investment, international trade in technology and goods, and civil and commercial dispute resolution. Ms. Liu knows the business processes of international construction projects and construction related investment, and international trade in technology and goods. She has a deep understanding of FIDIC contract conditions, standard goods procurement and engineering construction contract conditions of the World Bank and the Asian Development Bank, and other widely accepted international construction and engineering contract versions. She has substantial experience in drafting, review and negotiation of international construction contracts and imports and exports of major equipment contracts. She has advised clients on projects in Europe, Southeast Asia, the Middle East and Africa in such areas as railway, locomotive, minerals, power and other energy and infrastructure sectors.

Wang Xin, Dispute Resolution

Wang Xin focuses on M&A financing, real estate, disposal of non-performing assets, etc. Having been deeply engaged in the southwest legal market for many years, Mr. Wang has accumulated a wealth of experience in advising on real estate development, investment in and financing of real estate projects, financial assets M&A, corporate, M&A and restructuring, liquidation and disposal of financial claims and debts, dispute settlement involving atypical and defective warranties, dispute resolution & litigation, among others. He joined KWM at the end of 2020. Thanks to his deep understanding of the legal market environment of Chongqing, he earns a good reputation and rich client resources locally.

Li Baoshan
, Dispute Resolution

Li Baoshan specializes in civil and commercial litigation, arbitration and enforcement, corporate debt crisis resolution, etc. He has gained profound social connections and practice experience in his more than 20 years of dispute resolution experience. His understanding of the judgment thinking and the workflow of courts and arbitration institutions enabled him to provide reasonable and pragmatic solutions for clients. Prior to joining KWM, Mr. Li had been working as a judge entertaining hundreds of civil and commercial cases in the court system for nearly 15 years. After joining KWM, Mr. Li has provided legal services for a number of large SOEs, well-known listed companies and private companies. He is well trusted by his clients.

“We are delighted to announce that Chongqing office is open for business.” said Zhang Yi, Chairman of KWM China Management Committee, “We wouldn’t make it happen without the strong support from leaders at all levels in the Chongqing municipality and Liangjiang New Area and our clients. I would like to extend my sincere gratitude to you all. The establishment of Chongqing Office is an important step in our response to a series of national strategies underscored by the central government, such as further construction of Chengdu-Chongqing Economic Circle, the new western land-sea corridor and inland international financial centers. Chongqing office will continue KWM’s high-quality service and client-centric philosophy. With KWM’s strong legal service network and platforms spanning major cities like Beijing, Shanghai, Shenzhen and Guangzhou and even the whole world, Chongqing office will further contribute to the development of existing and new clients in the Southwestern region by taking root in the local market of Chongqing and fully tapping KWM’s global resources, which will help propel the regional development momentum and comprehensive competitiveness.”

Andersen Egypt signs acquisition deals worth one billion Egyptian pounds

Andersen Egypt’s is proud to announce that it has played a vital role in the expansion of several companies across the Middle East and Africa operating in a number of sectors, most notably tourism, hotels, real estate and pharmaceutical.  The firm’s role has been to provide an array of legal and advisory services for projects with a total value exceeding 1 billion EGP.
Andersen Egypt is one of a handful of companies licensed by the Egyptian Financial Regulatory Authority to provide financial advisory services, in addition to its comprehensive legal and tax service offerings.
This department is headed by Mohamed A. Abdelhaleem Senior Partner and Transaction Advisory Services Leader. Mohamed brings more than 20 years of experience in corporate finance and valuations with his expertise ranging from advising SMEs to large, global multinationals and family groups, as well as various private equity

To find out more, please click on the links below:

https://eg.andersen.com/services/advisory-services/

https://www.alnasher-elmasry.com/2021/03/blog-post_3064.html

Get to know Grant Thornton

Grant Thornton is one of the world’s leading organisations of independent assurance, tax and advisory firms. These firms help dynamic organisations unlock their potential for growth by providing meaningful, forward looking advice. Proactive teams, led by approachable partners in these firms, use insights, experience and instinct to understand complex issues for privately owned, publicly listed and public sector clients and help them to find solutions. More than 53,000 Grant Thornton people, in over 130 countries, are focused on making a difference to clients, colleagues and the communities in which we live and work.

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Read the full report: Download PDF [5221 kb]

Irwin Mitchell Boosts Employment Team With Partner Hire

Law Firm Continues To Invest In Its Services For Senior Executives And Employees

National law firm Irwin Mitchell has boosted its London Employment and Professional Discipline team with the appointment of partner Danielle Parsons from Slater & Gordon.

Danielle is a leading lawyer representing senior executives and professionals in high value discrimination, whistleblowing and high court claims. She also advises on bonus disputes, severance packages and restrictive covenants.

Her clients come from a wide range of sectors including individuals working in financial services, healthcare and medical sectors, and creative industries, including TV and print media. She also acts for senior solicitors and barristers.

Shah Qureshi, Head of the Employment and Professional Discipline team in London at Irwin Mitchell, said:

Expert Opinion

“The past year has been a difficult time for many senior employees with the Covid pandemic creating a great deal of uncertainty. The need for expert employment law advice has never been greater.

“We are delighted that Danielle has joined us and her arrival is a welcome boost for the team. She is well-respected and will bring a high level of expertise for our clients. The number of enquiries we receive from senior professionals suffering discrimination and whistleblowers being victimised has grown exponentially since the start of the pandemic and Danielle’s arrival continues our plans to grow the team and meet that need.”
Shah Qureshi – Partner

Commenting on her arrival, Danielle said: “Irwin Mitchell’s national Employment team is one of the largest in the UK with one of the strongest reputations. I am delighted to join the firm’s London team which specialises in advising senior executives and professionals. I am looking forward to building on this and supporting the team’s continued growth.”

Fergal Dowling, partner and National Head of the Employment team, added: “Our team in London is one of the UK’s leading teams advising senior executives and professionals. Employment services have been in high demand amongst our existing clients and we have been appointed by some very high profile businesses and individuals during 2020. Our new business pipeline looks very strong and we are anticipating further growth over the next 12 months.

“Our success is based on us being one of the most innovative and best resourced employment teams in the UK. It is our vision to offer practical solutions for our clients as their needs and demands change and this has certainly been evident over the last year.

“Danielle joining our senior team is an important development for us in 2021 and I’m confident that her appointment will help us stay one step ahead.”

Jeantet Advised Telecom Invest a Management Trust with Natixis

Paris, 12th April 2021 – Jeantet AARPI advised Telecom Invest in the establishment of a management trust with Natixis CIB, fiduciary.

This unprecedented structuring will enable the trust set up by Télécom Invest and managed by Natixis CIB to acquire receivables in respect of leases on land used for telecommunications infrastructures and rights to manage them, without transferring real property rights.

Telecom Invest, a subsidiary of US-based APWireless (Radius Group), is a leading investor in telecom infrastructure underlyings around the world.

On this operation Jeantet’s team was composed of Catherine Saint Geniest (Partner, Real Estate), Jean-François Adelle (Partner, Finance), Jean-Guillaume Follorou (Partner, Tax), Gabriel di Chiara (Counsel, Tax), Thibault Mercier (Associate, Finance), of Laure Asdrubal and Chloé Abgrall (Associates, Real Estate).

Jeantet has significant experience in the fields of real estate management, investment and trusts and advises numerous French and international clients on their real estate and financial engineering transactions.

Natixis CIB was advised by Fidal and Bentam (Guillaume Ansaloni, Partner).

About Jeantet

Committed to ethics and human values, Jeantet is one of the leading independent French business law firms that delivers customized services with added value.

Our lawyers are fully aware of the economic, technological, sectoral, and legal changes our clients face and are able to anticipate, take action and propose solutions that are reliable, pragmatic and tailored to their clients’ challenges.

Well-established in its market thanks to solid foundations, Jeantet combines its excellence in legal expertise, in both advice and litigation, along with its entrepreneurial culture, to contribute to the success of its clients’ projects.

Jeantet, with a presence in Paris but also in Budapest, Casablanca, Geneva, Kiev, and Moscow, has more than 120 lawyers, including 30 partners.

New Dutch legislative proposal on transfer pricing mismatches

A new Dutch legislative proposal has been published for public consultation in order to prevent tax avoidance due to mismatches that relate to transfer pricing. At the same time two other proposals have been filed with respect to Atad2 application and qualification of foreign entities, which will not be covered in this news flash.

The legislative proposal includes a new Corporate Income Tax law article, which targets mismatches that exist because of commercial to tax differences that lead to a lower taxable income without a pick-up in the other jurisdiction. The main reason being that a different system is being applied in the other jurisdiction.
In the Netherlands, the arm’s length principle implies that associated enterprises within a group have to comply with the arm’s length principle for corporate income tax purposes. Commercially, transactions are not always aligned with the arm’s length principle which may lead to commercial to tax differences as a consequence. If other countries involved apply the arm’s length principle differently or not at all, the risk of mismatches arises.

Mismatches may result in double non taxation.
Examples are interest rates, a “step-up” for assets or additional income reported on transactions, which are adjustments to align with the arm’s length principle. This may lead to either an informal capital contribution or a deemed dividend from the perspective of the Dutch company. If such adjustments lead to a lower taxable income in the Netherlands, but not to an equally higher taxable income, pick-up, in the other country(ies) involved, the new article will apply.

According to the newly proposed art. 8ba VPB, the deductibility of for example interest rate adjustments will partly be rejected for negative tax to commercial differences, if the taxpayer is not able to proof that a corresponding upward adjustment is made at the end of the foreign entity. Also downward income adjustments or a “step up” for assets with corresponding depreciation, will only lead to a lower taxable income, if the transactions are declared accordingly in the other jurisdiction. It may also impact back-to-back financials transactions.
It is intended that this new article will come into effect on 1 January 2022.

 

The inability to pay debts test before the Maltese Courts

In its recent decision Xuereb v Weber Construction Limited Et (decided 18 March 2021) the Civil Court (Commercial Section) weighed in once more on the appropriate tests to be applied when assessing a company’s inability to pay its debts under Maltese corporate insolvency law. One of Weber Construction Limited’s (“Weber”) shareholders filed an application in court requesting the company’s dissolution and consequential winding up on the grounds inter alia that it was unable to continue to pay its debts.

Article 214(2)(a)(ii) of the Companies Act, 1995 (the “Act”) grants the court discretion to order the dissolution and winding up of a company where the company is “unable to pay its debts”. For the purpose of this provision, a company is deemed to be unable to pay its debts if (i) a debt due by the company has remained unsatisfied (in whole or in part) after 24 weeks from the enforcement of an executive act specified under Article 273 of the Code of Organisation and Civil Procedure; or (ii) it is proved to the court’s satisfaction that the company is unable to pay its debts, account being taken also of the company’s contingent and prospective liabilities.

It is only once one of the above tests is proved to the court’s satisfaction that a Maltese court may consider exercising its discretion whether to order a company’s dissolution and consequential winding up. Therefore, a clear understanding and correct application of the various insolvency tests contemplated under the Act is central to the court’s application of its discretion in this regard.

In approaching this issue, Maltese courts do, as a matter of settled practice, refer to the corresponding provisions of the UK Insolvency Act, 1986, on account of the conceptual similarity between the two legal systems where matters of corporate insolvency are concerned.Indeed, the court in Xuereb v Weber did concede that although the Maltese concept of insolvency adopted a more restrictive application than the test applied under English law, there were “overlaps” between the two tests.

Under English law, there are 2 principal tests of insolvency – the “cash flow” test (where a company is deemed to be insolvent on account of its inability to pay its debts as they fall due) and the “balance sheet” test (where a company is deemed to be insolvent in the event that its liabilities exceed its assets).

Retaining this distinction is also possible under Maltese insolvency law however, any reference to a Maltese version of the cash flow test or balance sheet test only works to the extent that the application of specific statutory requirements under the Act are akin to a “cash flow” and/or “balance sheet”-type insolvency scenario.

Our courts (including in Xuereb v Weber) have been prepared to regard the Article 214(5)(a) of the Act (requiring for a debt to remain unsatisfied, whether in whole or in part, following 24 weeks from the enforcement of an executive act) as resembling the cash-flow test under English law, affirming nonetheless that the English law requirement that a company be “unable to pay its debts as they fall due” is a far wider test than the requirements under the Maltese statutory provision.

Similarly, Article 214(5)(b) which speaks of a company’s inability to pay its debts, account being taken also of the company’s contingent and prospective liabilities, can be treated, strictly for comparative purposes, as the Maltese law conceptual counterpart to the English law “balance-sheet” insolvency test. Here again, the Maltese courts have repeatedly pointed out a significant difference between the two tests, notwithstanding the accepted conceptual similarity. Section 123(2) of the Insolvency Act 1986 prescribes similar yet not identical wording to Article 214(5)(b) of the Act and states that: “A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.”

Under the Maltese “version” of the balance-sheet test, a court’s determination would be limited to assessing a company’s ability (or lack thereof) to service its debts, account being taken also of its contingent and prospective liabilities. On the other hand, a court in England carrying out a similar determination would inquire about the value of the company’s assets compared to the amount of its liabilities (account taken also of contingent and prospective liabilities).

Statutory divergences notwithstanding, a Maltese court will invariably draw upon the body of case-law developed by the English courts in determining a potential exercise of the balance-sheet test to reach a conclusion of inability of pay debts under the Act. In Xuereb v Weber, the court looked to English jurisprudence on the treatment of “contingent and prospective liabilities” for the purpose of determining potential balance-sheet insolvency. In so doing, a Maltese court will embrace and make part of its own determination those important principles developed before the English courts on this subject, for instance, that a court is able to take into account contingent and prospective liabilities, but not contingent and prospective assets [Byblos Bank SAL v Al-Khudhairy (1986) 2 BCC99 549 (CA)].

Based on the evidence submitted, and following an analysis of the applicable jurisprudence, the court in Xuereb v Weber did express its satisfaction that the company was shown to be in a position where it was not able to pay its debts, account having been taken of its contingent and prospective liabilities.

Having ascertained a case of “balance-sheet” insolvency, the court ordered that Weber was to be dissolved, and appointed the Official Receiver as liquidator to the company to commence the winding up process.

Gibson Dunn Wins Awards at 2021 Benchmark Litigation US Awards

Benchmark Litigation recognized Gibson Dunn at its 2021 Benchmark US awards ceremony with six awards. Gibson Dunn was named East Coast Appellate Firm of the Year, California Antitrust Firm of the Year and California Labor & Employment Firm of the Year.  Additionally, Los Angeles partner Theane Evangelis was named California Labor & Employment Litigator of the Year and Washington, D.C. partner Richard Parker was named East Coast Antitrust Litigator of the Year. Finally, Soundgarden et al. v. UMG Recordings, Inc, in which Gibson Dunn represented UMG, was named an Impact Case. The publication noted, “The firm continues to enjoy a coveted position as one of the nation’s strongest and most in-demand litigation institutions.” The awards were presented on March 31, 2021.

Theane Evangelis serves as Co-Chair of the firm’s Class Actions Practice Group and as Vice Chair of the California Appellate Practice Group. She has played a lead role in a wide range of appellate, constitutional, media and entertainment, and crisis management matters, as well as a variety of employment, consumer and other class actions.

Richard Parker is a leading antitrust lawyer who has successfully represented clients before both enforcement agencies and the courts. As an experienced antitrust trial and regulatory lawyer, Richard has been involved in many major antitrust representations, including merger clearance cases, cartel matters, class actions, and government civil investigations.  He has extensive experience representing clients in matters before the Federal Trade Commission (FTC)  and the U.S. Department of Justice Antitrust Division.

Delaware M&A Quarterly

In The Williams Companies Stockholder Litigation, the Delaware Court of Chancery enjoined a shareholder rights plan adopted by The Williams Companies at the outset of the COVID-19 pandemic.  This “poison pill” had a package of novel features, including a 5% trigger (albeit with a passive investor carve-out) and an “acting in concert” provision that extended to “parallel conduct” between different investors, which together constituted “a more extreme combination of features than any pill previously evaluated” in Delaware. The court, in an opinion by Vice Chancellor McCormick, found that two of the board’s three objectives in approving the rights plan—namely, to prevent shareholder activism and protect against potential “short-termism” generally without any specific threat—were not legally permissible rationales to adopt a rights plan. The board’s third objective—preventing rapid and undisclosed accumulation of shares by activists—was assumed to be permissible under Delaware law, but was found not to justify the highly unusual features included in this particular pill. All that said, the court was clear that the concerns boards typically identify when adopting an activist defense pill—the potential for creeping control from share accumulations and the potential for negative control from an activist hedge fund having a level of share ownership that could give it outsized influence over the company’s decision-making—remain legitimate justifications for adopting a pill, especially when faced with evidence of accumulation. While it is very rare for Delaware courts to enjoin a rights plan, this decision is likely to have very little, if any, effect on market practice or on the ability of Delaware companies to use rights plans to protect themselves from inappropriate and excessive accumulations of shares by activist hedge funds.  For more, click here.

Court of Chancery Allows Aiding and Abetting Claims to Proceed in Pair of Decisions

While noting the high barriers to alleging an aiding and abetting claim, two Court of Chancery decisions denied motions to dismiss where the court found clear evidence of active and knowing misconduct. In the first, Firefighters’ Pension Sys. of the City of Kansas City, Missouri Trust v. Presidio, Inc., the plaintiff alleged that the company’s financial advisor tipped off the third-party acquirer, BC Partners L.P. (“BCP”), regarding a competing bid by Clayton, Dubilier & Rice, LLC (“CD&R”), thereby enabling BCP to bid only slightly higher and to put time pressure on CD&R’s response.  CD&R indicated that it could make a superior offer for the company, but not a binding one on the tight timeframe, and for that reason, among other concerns, the Presidio board accepted BCP’s lesser offer. The court, in an opinion by Vice Chancellor Laster, found that the aiding and abetting claims against both BCP and the financial advisor should survive the motion to dismiss.  The advisor’s failure to inform the board of its tip to BCP created an informational vacuum that led the board to breach its duty of care.  With respect to the claims against BCP, although viable aiding and abetting claims against a third-party bidder are unusual, the court noted that BCP knew the tip was wrong. The court also held that the plaintiff adequately alleged that the Presidio CEO was self-interested in the transaction and that he “steered the sale process” toward BCP because it promised to retain current company management with a potentially lucrative compensation package, while CD&R did not. Moreover, plaintiff sufficiently alleged that the CEO knew and failed to disclose to stockholders that the financial advisor tipped BCP. For the Presidio opinion, click here.

The second decision, In re Columbia Pipeline Group, Inc. Merger Litigation, involved the sale of Columbia Pipeline to TransCanada Corporation. Similar to Presidio, the plaintiffs alleged that the Columbia Pipeline CEO and CFO steered the sale process toward TransCanada and away from other bidders because the CEO and CFO desired to retire in the near-term and they believed that TransCanada would pay cash for the company, while the other bidders would not. Applying heightened scrutiny under Revlon, the Court of Chancery, in an opinion by Vice Chancellor Laster, held that it was reasonably conceivable that the CEO and CFO breached their fiduciary duties by steering the sale process for personal reasons toward TransCanada, including by ignoring TransCanada’s multiple alleged breaches of its standstill agreement, providing confidential information to TransCanada, telling TransCanada it was unlikely to face competition, providing the board with materially incomplete and inaccurate information about the company’s value, delaying the carrying out of board directives, downplaying the interests of other bidders to the board and making a “moral” commitment to TransCanada to only consider fully financed offers from other bidders.   According to the court, these fiduciary duty breaches prevented the sale price from reaching its potential value. In addition, the court held that the complaint adequately pled a claim against TransCanada for aiding and abetting the breaches of fiduciary duty by the CEO and CFO. The plaintiffs’ allegations, taken as true at this stage in the litigation, suggested that TransCanada knew that the CEO and CFO were breaching their fiduciary duties “and sought to take advantage of the situation.” Vice Chancellor Laster observed that there was a “constellation of allegations” supporting the claim, including, to take just one example, the CFO’s “extreme behavior” that involved the CFO literally handing a TransCanada executive, who was also a friend of the CFO, the company’s negotiating talking points and explaining (contrary to the company’s obvious interests and the advice of its professional advisors) that TransCanada’s bid was unlikely to face competition. These and other allegations, “taken together,” supported an inference of knowing participation and allowed the aiding and abetting claim to survive a motion to dismiss. For the opinion, click here.

Delaware Court of Chancery dismisses Caremark Claims Where Directors’ Actions Did Not Amount to Bad Faith

In Richardson v. Clark, the Delaware Court of Chancery, in an opinion by Vice Chancellor Glasscock, dismissed claims alleging that the directors of Moneygram International, Inc. breached their duties of oversight (so-called “Caremark duties”) by ignoring alleged red flags relating to the company’s anti-money-laundering controls. Moneygram, which provides money transfer services, entered into a settlement agreement with federal authorities relating to its alleged noncompliance with anti-money laundering requirements and charges that it aided and abetted wire fraud. The settlement required the company to make a large restitutions payment to injured customers and take other actions to prevent future wire fraud and money laundering. For several years the company complied with the settlement, but ultimately failed, and was eventually forced to extend the settlement agreement and pay an additional sum in restitution. The plaintiff brought Caremarkclaims alleging that the board ignored red flags to ensure that the company complied with the settlement agreement. The court dismissed the claims based on plaintiff’s failure to make a demand on the board, holding that while the directors “may be plausibly accused of feckless oversight and lack of vigor” and “may have been wistless or overly reliant on management” based on the alleged facts, their actions did not amount to bad faith such that they would face a substantial likelihood of liability for unexculpated breaches of the duty of loyalty. For the opinion, click here.

Delaware Directors Cannot be Targets of Derivative Breach of Contract Suit Premised on Alleged Charter Breach

In Lacey v. Larrea, the Delaware Court of Chancery, in an opinion by Vice Chancellor Glasscock, dismissed a derivative breach of contract claim brought against the directors of Southern Copper Corporation that was premised on an alleged breach of the company’s charter. While Delaware law recognizes charters as a contractual arrangement between stockholders and the company that sometimes binds fiduciaries, it was the company itself, acting through the board, that allegedly breached the charter, and therefore the company (on whose behalf the derivative claim was brought) did not have a breach of contract claim against the directors.  The court explained that the relationship between directors and their corporation is typically fiduciary, rather than contractual, and if any derivative claim is created by a failure on the part of the directors to comply with the entity’s formative documents, it is a claim for breach of fiduciary duty. For the opinion, click here.