This week's corporate law news roundup includes discussions
of Laureate Education being the first benefit corporation to
successfully complete an initial public offering (IPO), a
California federal district court's holding that the protection
of whistleblowers under the Sarbanes-Oxley Act (SOX) preempts the
attorney-client privilege, and the elimination by the Trump
administration of the SEC's resource extraction rule.
On February 14, 2017, President Trump signed a joint resolution
of Congress to eliminate the SEC's rule requiring resource
extraction issuers to disclose payments made to the U.S. federal
government or foreign governments for the commercial development of
oil, natural gas or minerals. This joint resolution was passed
under the Congressional Review Act (CRA), which allows for recently
finalized regulations to be nullified by a simple majority vote of
both Congressional chambers with the President's signature. The
resource extraction rule was created under a directive of the
Dodd-Frank Act of 2010, and resource extraction issuers would have
been required to comply with the disclosure requirements beginning
with their fiscal years ending on or after September 30, 2018.
Companies doing business in Canada and the European Union will
still need to comply with those countries' resource extraction
disclosure requirements, which remain in effect. For more
information, see https://www.congress.gov/bill/115th-congress/house-joint-resolution/41/text.
LAUREATE EDUCATION IS THE FIRST BENEFIT CORPORATION TO COMPLETE
AN INITIAL PUBLIC OFFERING
On February 1, 2017, Laureate Education, Inc. became the first
public benefit corporation to consummate an initial public
offering. Laureate raised approximately $456.5 million (after
deducting underwriting discounts and commissions and estimated
offering expenses) by offering 35 million shares at a price of $14
per share. Unlike traditional corporations, benefit corporations
are required to pursue positive social and environmental impact
along with creating financial value for stockholders. For example,
Laureate's public benefit is "to produce a positive effect
for society and students by offering diverse education programs
both online and at campuses around the globe." According to
Laureate's Chief Executive Officer, Laureate registered as a
benefit corporation so that it would be clear to its IPO investors
that the company takes its social mission seriously and intends to
balance the needs of stockholders with the needs of students,
employees and communities in which the company operates. For more
information, see http://investors.laureate.net/phoenix.zhtml?c=91846&p=irol-newsArticle&ID=2243413.
CALIFORNIA FEDERAL COURT HOLDS THAT SARBANES OVERRIDES
According to a recent California federal district court
decision, the protection of whistleblowers under the Sarbanes-Oxley
Act of 2002 preempts the attorney-client privilege. In Wadler
v. Bio-Rad Laboratories, a Northern District of California
court held that a fired general counsel could use attorney-client
privileged materials to support his claims that he was terminated
in retaliation for reporting concerns about the company's
potential violations of the Foreign Corrupt Practices Act. The
fired general counsel ultimately prevailed in a jury trial and was
awarded $3 million in lost wages and $5 million in punitive
damages. The court's holding is a departure from the norm
followed by prior whistleblower retaliation cases involving former
general counsels, which had held that materials protected by the
attorney-client privilege were inadmissible to support a former
general counsel's claims. For more information, see http://hr.cch.com/ELD/WadlerBioRad122016.pdf.
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