The Carried Interest Tax Debate - Installment Two: Carried Interest as Part of a New Tax Plan
October 9, 2008
Tobias J. Butler
Terrence Allen Childers
Stuart C. Johnson
M. Todd Wade
The following discussion on the “Carried Interest Tax Debate” is the first installment of a two-part series that analyzes the potential ramifications of a change in the tax treatment of an equity fund manager’s carried interest against the backdrop of the impending United States presidential election.
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Ryan v. Lyondell Chemical Co.
October 6, 2008
Mitesh Patel
Michael K. Rafter
On July 29, 2008 the Delaware Chancery Court decided the case of Ryan v. Lyondell Chemical Company (“Ryan”)(Del. Ch., July 29, 2008), and found that despite a shareholder stock price well above the market rate, seemingly customary deal protection terms and overwhelming stockholder approval, independent directors could be held to be personally liable for their role in approving a cash merger.
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Federal Reserve Loosens Limitations on Private Equity Investments in Banking Organizations
Private Equity/Financial Institutions
September 25, 2008
Stuart C. Johnson
Robert D. Klingler
Kathryn Knudson
Amanda Lang Norcross
On September 22, 2008, the Federal Reserve Board issued a policy statement easing the limitations on private equity investments in banks and bank holding companies. The policy statement addresses when such an investment creates a presumption of “control” which would require registration as a bank holding company.
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Choice of Entity Update: Delaware Court Reinforces Freedom of Contract in LLC Operating Agreement
Private Equity
September 2008
Stuart C. Johnson
Robert J. Lystad
Kevin A. McGill
In a recent case, the Delaware Court of Chancery considered the enforceability of certain provisions in a limited liability company operating agreement, and its ruling reinforced the principle of freedom of contract for Delaware LLCs.
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The Carried Interest Tax Debate: An Overview - 08/08
Private Equity & Venture Capital
August 2008
Tobias J. Butler
Terrence Allen Childers
Carried interest, or the percentage of profits equity fund managers and general partners earn for managerial services, is currently taxed at the capital gains rate of 15%. However, proposed revisions to the Internal Revenue Code would classify, and then tax, carried interest as general income - a change that could subject managers to significantly higher income taxes.
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The SPAC as an Alternative Exit Opportunity for Private Equity Firms - 07/08
Private Equity & Venture Capital
July 16, 2008
Terrence Allen Childers
Hannah Yi Crockett
Rick Miller
Michael K. Rafter
Eliot W. Robinson
Against the backdrop of today's tightening initial public offering and credit markets, private equity firms are finding it increasingly difficult to exit their investments using traditional vehicles. The special purpose acquisition company, or SPAC, presents an intriguing exit opportunity for private equity firms looking to capitalize on the ready capital and flexibility offered by SPACs.
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Stock Options Revisited: A Renewed Focus on Net Exercise Provisions - 06/11/08
Private Equity & Venture Capital
June 13, 2008
Jody M. Arogeti
M. Todd Wade
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Recent Delaware Cases Highlight the Importance of Specificity in Advance Notice Bylaw Provisions and Annual Meeting Notices - 05/08
Private Equity & Venture Capital
May 2008
Andrew R. Hough
Kevin A. McGill
A pair of Delaware Court of Chancery decisions narrowly interpreted advance notice bylaw provisions.
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Federal District Court Rules That a Joint Bidding Arrangement by Private Equity Funds Did Not Violate Antitrust Laws
Private Equity
March 13, 2008
Tobias J. Butler
F. Donald Nelms, Jr.
G. Patrick Watson
On February 21, 2008, the U.S. District Court for the Western District of Washington ruled that a joint bidding arrangement between competing private equity funds in a contest for corporate control did not violate the Sherman Act.
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Recent Cases Highlight Important Considerations Regarding Confidentiality Agreements - 01/08
Private Equity
January 8, 2008
Jody M. Arogeti
M. Todd Wade
Misuse of Confidential Information - Recently, a potential investor was ordered to pay $80 million for breaching a confidentiality agreement, alerting investors that they need to consider carefully before entering into what may seem like a routine, benign confidentiality.
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An Update on Earnouts in M&A Transactions - 12/07
Private Equity and Venture Capital
December 12, 2007
Stuart C. Johnson
LaPoint v. Amerisource Bergen Corporation
An earnout is a traditional way of bridging different expectations of value between a buyer and a seller in an M&A transaction.
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SEC Shortens Holding Periods for Unregistered Stock - 11/07
Business and Finance
November 20, 2007
Robert D. Klingler
Michael K. Rafter
On November 15, 2007 the Securities and Exchange Commission (SEC) announced amendments to Securities Act Rules 144 and 145 that are intended to reduce the cost of capital and increase access to capital.
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The Bright Light: Director Payments to Themselves and the Entire Fairness Test - 11/07
Private Equity & Venture Capital
November 14, 2007
Stuart C. Johnson
Thomas R. McNeill
Christopher J. Rylands
A recent Delaware case is an important reminder of the care which should be taken by directors in considering bonuses that include payments to themselves.
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Practical Implications of the Supreme Court's Recent Decision - 08/02/07
Private Equity
August 2, 2007
Thomas R. McNeill
Mitesh Patel
On June 28, 2007, in Leegin Creative Leather Products, Inc. v. PSKS, Inc., 550 U.S. ___, (2007), overruling Dr. Miles Medical Co. v. John D. Park & Sons, 220 U.S. 373 (1911), the Supreme Court overruled a nearly 100 year old antitrust decision by holding that vertical agreements to institute minimum resale price maintenance are not per se illegal. Courts must now judge such agreements on a case-by-case basis under a rule of reason.
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NASDAQ Capital Market Securities to Receive Blue Sky Exemptions - 05/07
Business & Finance
May 21, 2007
Terrence Allen Childers
Robert D. Klingler
Eliot W. Robinson
The Securities and Exchange Commission approved an amendment to a rule under Section 18 of the Securities Act of 1933 that will designate securities listed on the Nasdaq Capital Market as for purposes of Section 18.
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Recent Supreme Court Cases Emphasize Importance of Monitoring Patent Portfolio for Investors - 05/08/07
Business & Finance: Private Equity & Venture Capital
May 8, 2007
Amanda Lang Norcross
Ryan T. Pumpian
M. Todd Wade
The Supreme Court has handed down two decisions this year that make obtaining and protecting patents more difficult. These decisions highlight important issues for companies as they seek new patents or make business decisions affected by previously issued patents and for investors in analyzing potential investments.
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Delaware Court Considers Fiduciary Duty Issues in Stock Option Backdating and Spring-Loading - 04/24/07
Business & Finance
April 24, 2007
Eliot W. Robinson
While most of the attention and controversy regarding stock option grant practices has focused on potential accounting misstatements and related securities law violations, a pair of recent decisions of the Delaware Chancery Court demonstrates that corporate law fiduciary duty issues are presented as well.
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Searching for Capital: Selected Legal Issues - 04/2007
Private Equity
April 11, 2007
Stuart C. Johnson
Robert J. Lystad
Many entrepreneurs ask third parties to help them raise capital. Such persons can be classified in two different ways, from a legal perspective: as a "finder" or as a "broker-dealer". This Alert will summarize the differences between "finders" and "broker-dealers," the potential risks of using the wrong person to accomplish fundraising activities, and best practices to consider when undertaking to raise capital.
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SEC Proposes New Rules That Impact Private Funds and Their Advisers - 01/23/07
Business & Finance
January 23, 2007
Hannah Yi Crockett
Andrew R. Hough
M. Todd Wade
On December 13, 2006, the Securities and Exchange Commission voted unanimously to propose new rules and amendments designed to provide additional protections for investors in private funds.
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Important Considerations Regarding Letters of Intent - 11/15/06
Private Equity
November 15, 2006
Amanda Lang Norcross
M. Todd Wade
Recently, the United States District Court for the Southern District of New York held that the terms of a letter of intent were not definite enough to constitute a binding agreement. This ruling was particularly unsettling to the plaintiff, the potential buyer of the defendant, who had incurred $100,000 in due diligence expenses and had expected reimbursement for those expenses when the transaction fell apart.
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Private Equity Update: Pension Act Liberalizes ERISA 'Plan Asset' Rules - 09/07/06
Business & Finance
September 7, 2006
Richard L. Arenburg
Stuart C. Johnson
Robert J. Lystad
Steven G. Schaffer
The Pension Protection Act of 2006 (the "Act") was passed by the United States House of Representatives on July 28, 2006, and the United States Senate on August 3, 2006. The Act removes government benefit plans, certain church benefit plans, and foreign benefit plans from the ERISA definition of "plan assets." This change is a significant benefit to many private equity, venture capital and hedge funds (collectively, "private equity funds") because they will no longer be subject to ERISA fiduciary duties or need to meet the Venture Capital Operating Company requirements to avoid ERISA fiduciary responsibilities.
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Assumption of Liabilities in Asset Acquisitions: Make Sure You Know What You're Getting - 02/21/06
Business & Finance
February 21, 2006
Stuart C. Johnson
M. Todd Wade
When agreeing to assume the liabilities related to the assets that one is acquiring, be careful that the agreement spells out the liabilities being assumed. Otherwise, as illustrated by the recent decision from the Eleventh Circuit Court of Appeals in Clanton v. Internet Global, LLC, you may find yourself taking on more obligations than initially presumed.
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