Archive for May, 2009

Last week the New York Stock Exchange eliminated the requirement that listed companies must file their press releases with the NYSE.  The news release requirement had been criticized over the years as being redundant to the SEC Regulation FD filing requirements, which require that each registered company disseminate material news or information by furnishing a Current Report on Form 8-K, conference calls, webcasts, press releases or other reasonable methods.  The change was affected by a filing with the SEC on April 8, 2009.  Going forward, listed companies will be in compliance with NYSE requirements if they are in compliance with the SEC Regulation FD filing requirements.


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The Securities and Exchange Commission is establishing a new fellows program to help the Office of Risk Assessment keep track of complex securities and finance industry practices.  The SEC fellows programs has successfully paired the SEC with accountants and business people in the past to bring an outside perspective and professional expertise to the SEC.  The financial industry fellows will help the SEC stay abreast of evolving finance and securities industry practices, with the intent of strengthening the SEC’s security market oversight.  The SEC is looking for people with extensive experience in trading, structured products, complex derivatives, fund management, financial analysis and investment banking.

Applications are due by June 1, 2009.  A statement of qualifications and duties is available from the SEC.

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In late 2008 the Federal Deposit Insurance Corporation established the Temporary Liquidity Guaranty Program (TLGP), whereby the FDIC guarantees certain senior unsecured bank debt, and certain mandatory convertible bank debt.  The FDIC guaranty is backed by the full faith and credit of the United States.  Under an Interim Rule issued March 18, 2009, the FDIC has extended participation in the TLGP program, providing that banks that issued guaranteed debt before April 1, 2009 may continue to do so until October 31, 2009.  Banks that did not issue guaranteed debt before April 1, 2009 must apply to the FDIC to do so before June 30, 2009, if they want to participate in the TLGP program up to October 31, 2009.

The FDIC guaranty of bank debt issued under the TLGP program expires in 2012.

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The Delaware state legislature has updated the Delaware General Corporation Law for 2009 to provide additional indemnity protection for directors.  Delaware corporation law is important to businesses throughout North America because the Delaware Court of Chancery (a special business court) and the Delaware Supreme Court are the source of most common law on corporations, and the legislatures and courts throughout the United States and many countries throughout the Caribbean and some Latin American countries look to Delaware court decisions for guidance.  Additionally, a great many companies and other forms of business entity throughout the United States are formed in Delaware, and subject to Delaware law.

Effective August 1, 2009 Section 145(f) of the Delaware General Corporation Law is amended to provide that indemnification of directors, and their right to advancement of expenses for indemnity, may not be eliminated by the company after the occurrence of the act or omission giving rise to the indemnification claim, unless the by-law or charter provision providing indemnification allows for retroactive elimination.  To simplify, unless the articles or by-laws provide, a company cannot refuse to indemnify an officer or director after an act or omission occurs, if the company documents provided for indemnity when the act was committed.  This amendment legislatively overturns a 2008 Delaware Chancery Court decision in Schoon v. Troy Corp., 948 A.2d 1157, where a former director who was sued for breach of fiduciary duty sought advancement of defense expenses, but before the suit was brought, the company amended the bylaws to eliminate indemnification for former directors.  The court upheld the company’s action. 

The Colorado Business Corporations Act, C.R.S. § 7-109-103, requires Colorado corporations to indemnify their directors and officers unless the Articles of Incorporation specifically provide that no indemnification is to be provided.  If the holding of Schoon v. Troy was applied in Colorado, a company would be able to amend its articles to retroactively eliminate the company’s indemnification obligation. 

I recommend that directors and officers enter into indemnification agreements with the company.  Articles of incorporation and bylaws can be amended, but a contract between two parties can normally not be amended without the consent of both parties.

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