In this episode, Robyn Bew, EY Americas Center for Board Matters Director, shares insights from the EY Americas Board Priorities 2025 report.  Robyn discusses how corporate boards’ priorities have evolved year-over-year, including oversight of management’s response to volatile economic conditions and capital allocation strategies. Our guest also talks about directors’ increased focus on innovation and evolving technologies, such as AI, one of several key areas where board members reported they want to spend more time and receive additional information from management.

Watch our latest MB Sounding Board.

See the EY Americas Board Priorities 2025 report.

Shannon Nash, a chief financial officer, public company board director, investor, qualified financial expert, attorney and CPA with over 25 years of experience, is also a documentary film director. Shannon produced the documentary OnBoard, which is the story of the first African American woman to serve on a public company board. In this MB Sounding Board episode, Shannon discusses the documentary, lessons learned in telling this important story, and the continued importance of talented directors.

Watch our latest MB Sounding Board.

Watch the trailer for OnBoard.

On April 25, 2025, the staff (the “Staff”) of the U.S. Securities and Exchange Commission’s Division of Corporation Finance (the “Division”) announced several new, withdrawn or revised Compliance and Disclosure Interpretations, all relating to Exchange Act Rule 10b5-1, covering trading “on the basis of” material nonpublic information as it relates to insider trading.  In all, the Staff revised or withdrew 23 CDIs and issued two new CDIs.  The majority of these changes were non-substantive, generally to ensure that the CDIs correctly and completely addressed current Rule 10b5-1 requirements, following its amendment in 2022.

Revised and Withdrawn CDIs

The Staff made identical changes to the CDIs below, clarifying that Rule 10b5-1 applies to the scenario detailed in each CDI at “a time when [the individual in question] is not aware of material nonpublic information and satisfies all applicable conditions of Rule 10b5-1(c)(1)(ii),” (emphasis added).  Among other things, these conditions include that the plan or contract to purchase or sell securities was entered into in good faith, that the person who entered into the contract or plan has acted in good faith with respect to the contract or plan, and that such person will abide by a cooling off period between entering into the plan and completing transactions thereunder.

120.03120.04120.05120.06120.07
120.08120.09120.10120.11

The Staff also revised or withdrew, as applicable, the following CDIs to reflect the 2022 rule amendments:

CDIRevisions
120.01Updated to reflect Rule 10b5-1(c)(ii)(B) cooling off periods.
120.02Withdrawn; beginning in April 2023, Form 144 filers were required to check a box indicating that a reported transaction was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).
120.12Updated to reflect that, when a written trading plan does not specify the dates when a non-discretionary limit order will be in force, the conditions of Rule 10b5-1(c)(1)(ii) apply when an individual instructs a broker to place a non-discretionary limit order.
120.15Clarifies that a market order to sell securities outside of a written trading plan would not affect the availability of the written trading plan defense for sales under the written trading plan; however, the market order would not be an additional contract or plan that would qualify for the affirmative defense under Rule 10b5-1(c)(1) for purchases or sales of the issuer’s securities on the open market under Rule 10b5-1(c)(1)(ii)(D).
120.16Reflects codification of Rule 10b5-1(c)(i)(iv), providing, in part, that modifications to the amount, price, or timing of the purchase or sale of the securities underlying a Rule 10b5-1 plan is a termination of the plan and the adoption of a new plan.  Similarly, the Staff withdrew CDI 120.19, which stated, in part, that the cancellation of one or more plan transactions would be a modification of the plan, which would terminate that plan, now codified under Rule 10b5-1(c)(i)(iv).
120.18Clarified that termination of a plan or cancellation of plan transactions could affect the availability of the Rule 10b5-1(c) defense for prior plan transactions if it calls into question whether the plan was “entered into in good faith and not as part of a plan or scheme to evade” the insider trading rules and whether the person who entered into the plan has acted in good faith with respect to the plan within the meaning of Rule 10b5-1(c)(1)(ii)(A), in accordance with amendments (emphasis added).
120.21,
120.22, 
120.23		All revised to reflect the impact of the amendments on certain transactions in an employee’s 401(k) plan, where the 401(k) plan allows employees to transfer the assets in their accounts among funds within the plan (including the employer stock fund) through fund-switching transactions.
220.01Withdrawn; guidance regarding transfers of plan transactions to a different broker is codified in Rule 10b-5(c)(1)(iv).

In a few of these CDIs, the Staff also updated references to the correct section of Rule 10b5-1.  The Staff updated rule references only in CDIs 120.14, 120.24 and 220.02.

New CDIs

The Staff also adopted two new CDIs.  CDI 120.32 applies when a company sponsors a 401(k) plan that permits both employer and employee contributions to be invested through a self-directed “brokerage window.”  The counterparty to the self-directed “brokerage window” transaction will be an open market participant, so instructions for such a “brokerage window” transaction must satisfy all conditions of Rule 10b5-1(c)(1), including those applicable to purchases and sales of the issuer’s securities on the open market. 

The second new CDI, 120.33, states, as background, that Rule 10b5-1(c)(1)(ii)(D)(3) provides an exception to the general requirement that an individual may not have multiple Rule 10b5-1 trading plans for open market transactions.  This exception applies only to eligible sell-to-cover transactions, or contracts or plans covering the sale of securities to satisfy tax withholding obligations arising from the vesting of a compensatory award, where the insider does not exercise control over the timing of such sales.  In the new CDI, the Staff defined “necessary to satisfy tax withholding obligations” as referring to “tax withholding payments that are calculated in good faith to satisfy the employee or director’s expected effective tax obligation solely with respect to the vesting transaction, consistent with applicable tax law and accounting rules.” 

Find the updated Exchange Act Rules CDIs here.

A significant revision to the Delaware General Corporation Law has changed how corporations approve transactions with their directors, officers, and controlling stockholders. The amendments include “safe harbor” protection from certain equitable and monetary claims for qualifying transactions. This Legal Update offers a step-by-step guide for boards evaluating transactions under this new framework.  

Continue reading this Legal Update.

In this episode (approx. 10 minutes), Professor Anat Alon-Beck of Case-Western Reserve University School of Law (follow her work on SSRN) talks to us about her scholarship. In particular, Prof. Alon-Beck discusses some of the findings regarding competition among states to attract businesses—including Texas and Nevada. Prof. Alon-Beck also discusses incorporation trends for growth companies and unicorns in her article, Incorporating Unicorns: An Empirical Analysis.

Watch our latest MB Sounding Board.

Delaware Governor Matt Meyer signed Senate Bill 21 (“SB 21”) into law Tuesday night, pushing forward a measure that has drawn strong criticism from shareholder and consumer advocacy groups.

The bill made its way to the governor’s desk after a debate in the House, where it passed with a 32 to 7 vote and two members absent on March 25, 2025. Attempts by House critics to amend the bill were rejected, clearing the way for final approval. On March 13, 2025, SB 21 sailed through the State Senate with a unanimous 20-0 vote. 

SB 21 provides a safe harbor for controlling shareholders, shielding them from certain legal challenges, as discussed in this blog post. It outlines procedures allowing companies and their controlling shareholders to carry out transactions—such as asset sales—while minimizing the risk of lawsuits from minority investors. 

The Delaware Secretary of State’s testimony before the Senate Judiciary Committee on March 12, 2025 revealed some notable statistics about Delaware entities. In 2024, more than 289,000 entities—including LLCs, corporations, LPs/LLPs and statutory trusts—were formed in Delaware. Of that total, 58,000 were corporations. Additionally, there were 2,166 conversions in 2024, including LLCs converting to corporations and Delaware LLCs converting to out-of-state entities.

According to the Governor’s press release, Delaware is home to 2.2 million registered entities and incorporated 81% of U.S. IPOs in 2024. The corporate franchise represents over one-third of Delaware’s state budget at roughly $2.2 billion. 

In his press release, Governor Meyer said: “Delaware is the best place in the world to incorporate your business, and Senate Bill 21 will help keep it that way, ensuring clarity and predictability, balancing the interests of stockholders and corporate boards…

The law will be effective back to February 17, 2025.

Mayer Brown partner Jennifer Zepralka will participate in the 2025 Corporate Governance Roundtable, hosted by the Harvard Program on Corporate Governance. The Roundtable focuses on current issues in corporate governance, including:

  • Legal/political changes at the federal level;
  • Issuers and the ESG backlash;
  • Investors and the ESG backlash;
  • Engagement practices;
  • Compensation issues;
  • Activism: Looking forward to 2025 and back to 2024;
  • Delaware’s proposed legislation.

    To learn more, visit the program website.

    The current proxy season presents new challenges and opportunities for U.S. companies as they face shifting expectations regarding board diversity. There are a number of notable developments. The Fifth Circuit Court of Appeals decision to vacate the Nasdaq diversity rules, which required Nasdaq-listed companies to disclose board diversity statistics and have a minimum number of diverse directors was the first. This ruling, along with recent updates to the proxy voting guidelines of proxy advisory firms and institutional investors, has created uncertainty and variability in the board diversity landscape. Moreover, recent presidential executive orders have put increased scrutiny on such initiatives. In this Legal Update, we discuss these developments and highlight some practical considerations for U.S. companies preparing for the upcoming proxy season.

    Continue reading this Legal Update.

    On February 12, 2025, the staff of the Division of Corporation Finance (the “Staff”) of the U.S. Securities and Exchange Commission issued Staff Legal Bulletin No. 14M (“SLB 14M”), which rescinds in part Staff Legal Bulletin No. 14L (“SLB 14L”). In addition, SLB 14M provides guidance and clarification on the Staff’s views on the scope and application of Rule 14a-8(i)(5), Rule 14a-8(i)(7), and certain other aspects of Rule 14a-8, which governs the conditions under which a company can exclude a shareholder proposal from consideration in its definitive proxy statement. SLB 14M also provides guidance for companies that previously submitted and/or plan to submit no-action requests, pursuant to which the Staff agrees not to take action against the company for excluding a shareholder proposal on such grounds, during the 2025 shareholder proposal season.

    Continue reading this Legal Update.

    On February 10, 2025, the Ninth Circuit Court of Appeals ruled in favor of Slack Technologies LLC, dismissing an investor class action lawsuit brought under Sections 11 and 12(a)(2) of the Securities Act.  This decision follows the 2023 U.S. Supreme Court ruling, which held that the Slack plaintiffs must trace their purchased securities to the particular registration statement alleged to be false or misleading in order to bring a Section 11 claim.  The Supreme Court declined to render judgment on the Section 12 claim.  At that time, the case was remanded back to the Ninth Circuit for reconsideration.

    In the context of Slack’s direct listing, the traceability requirement posed challenges for investors.  In order to satisfy the requirement, an investor must show a direct connection between the shares purchased and the specific document containing the alleged misstatement.  In traditional IPOs, this chain of title is typically well-documented.  However, because a direct listing involves the simultaneous public trading of pre-existing shares—without underwriters or lockup periods—the mingling of registered and unregistered shares makes it challenging to trace their individual origins.

    On appeal for the Section 11 claim, the Slack plaintiffs sought to establish traceability through a statistical analysis.  They argued that traceability should not require proving the registration status of particular shares but rather whether the plaintiffs can plausibly allege that at least some registered shares were purchased pursuant to the registration statement.  According to the plaintiffs, traceability should be established by simply relying on the statistical inference that given the number of shares purchased and the percentage of shares on the exchange that were registered (approximately 42%), “the likelihood that none of the 30,000 shares was registered is infinitesimally small.”  However, the appeals court rejected the plaintiff’s statistical inference theory as both factually and legally flawed and inconsistent with applicable judicial precedents.

    The appeals court also separately confirmed that the tracing requirement similarly applies to a Section 12(a)(2) claim.  Under Section 12(a)(2), a plaintiff must show that the security was offered or sold by means of a prospectus containing a material misstatement or omission.  The appeals court rejected the Slack plaintiffs’ argument that the provision should cover non-public offerings or exempt transactions.  Since the Slack plaintiffs conceded that it was impossible to trace their shares back to the registration statement, they failed to state a claim and the appeals court reversed the district court’s decision and remanded with instructions to dismiss the complaint in full and with prejudice.

    The court’s ruling narrows Sections 11 and 12(a)(2) liability by requiring investors to prove that their shares are linked to an offering’s registration statement to have standing to sue for disclosure deficiencies.  This narrowing of liability is likely to influence how companies consider direct listings as a means of listing their securities in the future.  Going forward, companies may see direct listings as more favorable for avoiding certain types of liability, given the added complexity in tracking which shares are linked to the registration statement.  A link to the court’s opinion can be found here.