October 19, 2018
Activism: Consequences of a Board Seat
This Schulte Roth memo discusses the issues associated with an investor obtaining representation on a public company board. Although the memo is addressed to the investor, it’s a useful resource for companies as well. Here’s the intro:
Representation on the board of directors of a public company has significant advantages for an investment firm looking to maximize, or just simply protect or recover, an investment. But a huge compliance minefield awaits if not thought through beforehand. Seats on a public company board can result from an activist campaign, a private equity investment that has completed an IPO, participation in a private placement of securities in an already public company or even a friendly invitation from an issuer looking for investor representation on its board. However you get there, if a principal or employee of your firm sits on the board of a public company, or any company, the value of understanding the issues that come along with that cannot be understated.
Among other topics, the memo reviews trading restrictions, reporting requirements, consequences of “affiliate” status & state law fiduciary duty issues.
– John Jenkins