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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Banking and Finance

Date & Time
  • event Date

    Wednesday, June 7, 2023

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$347.00
CLE
ALL

This CLE webinar will discuss dual class share structures from adoption to exit, including key issues at each step. We will review typical features of IPO dual class structures, including common charter and bylaw provisions, such as how the high-vote shares may convert to low-vote shares, and how the structure may affect day-to-day corporate governance considerations. The webinar will then discuss key issues implicated by such structures in M&A transactions, including challenges that can be faced by the high-vote holder when entering into voting agreements to support a possible sale of the company.

Faculty

Kyle T. Seifried
Partner
Paul, Weiss, Rifkind, Wharton & Garrison

Mr. Seifried’s practice focuses on public and private company acquisitions and divestitures, leveraged buyouts, cross-border transactions and securities transactions. He also regularly advises clients on activist defense, corporate governance and compliance matters, federal and state reporting obligations, takeover preparedness and other significant corporate matters. Additionally, Mr. Seifried has advised numerous investment banking clients in transactional and financial advisory work.

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Frances F. Mi
Counsel
Paul, Weiss, Rifkind, Wharton & Garrison

As counsel in the Corporate Department and a member of the M&A Group, Ms. Mi's practice focuses on corporate governance-related issues. She advises clients on these topics on an ongoing, non-transactional basis as well as in the context of M&A, activism defense, initial public offerings and spin-offs.  

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Description

There has been an upward trend in companies implementing dual class share structures in connection with their initial public offerings, particularly in the technology sector. This structure provides founders with numerous benefits, including allowing founders to achieve short-term liquidity while preserving an ability to drive their long-term vision and goals by addressing in advance potential market pressures. However, there are also numerous considerations to the structure, including negative reaction from investors and proxy advisory services, exclusion from stock indexes, and potential for challenging conflict of interest and fiduciary duty issues.

Additionally, the adoption of a dual class structure may have implications for the structuring and viability of future M&A transactions. For example, one is the possibility that the terms of the high-vote stock may not permit the holders to enter into a voting agreement without triggering the automatic conversion of the high-vote stock into low-vote stock, eliminating what could otherwise provide greater deal certainty. Other related issues include fiduciary concerns with "locking up" a deal through the execution of a voting agreement in the dual class structure, as well as considerations related to U.S. federal securities laws (e.g., Securities Exchange Act Rule 13e-3 (aka the "going-private" rule)) and state antitakeover statutes.

Listen as our authoritative panel discusses these and other issues related to dual class structures.

Outline

  1. Overview of the dual class structure and considerations in adoption
    1. Common features and provisions: what to have and what not to have
    2. Typical rationale for implementation/customary benefits of the structure--typically provides founders an ability to maintain governance control and allows founders to achieve short-term liquidity while preserving an ability to drive their long-term vision and goals by addressing in advance potential market pressures
    3. Drawbacks of the structure, including market considerations, potential negative reaction from investors and proxy advisory firms, and stock index exclusion and stock exchange rule violations
  2. Day-to-day governance considerations in dual-class companies
    1. Fiduciary duties in control situations, including dual class structures
    2. Mitigation strategies
    3. Trading pressure and lack of M&A premium
  3. Key M&A issues in a dual class structure
    1. Voting agreements
    2. Fiduciary concerns with "locking up" a deal
    3. Securities Exchange Act Rule 13e-3 considerations
    4. Anti-takeover statute considerations

Benefits

The panel will review these and other important issues:

  • Why have dual class share structures become more common, and how can they present problems in a merger or acquisition?
  • What provisions can be added to a corporate charter to prevent the conversion of Class A shares to Class B shares upon execution of a voting agreement?
  • What should a dual class company do if it is entering into an M&A transaction in which the counterparty seeks a voting agreement?