The US Supreme Court has stayed the injunction against the Corporate Transparency Act (CTA), but the requirement for companies to file beneficial ownership information remains suspended, creating ongoing uncertainty about compliance timelines. This Legal Update summarizes status and notes potential developments that could impact companies’ reporting obligations. Continue reading.

Thinking about a dual listing? In this MB Sounding Board, partner Anna Pinedo talks to Joe Magnas, Senior Director of Legal Affairs of Protalix BioTherapeutics, Inc. Protalix is an Israel-based pharmaceutical company. During the discussion, Joe talks about the benefits, challenges, requirements, and special considerations associated with maintaining a dual listing.

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On December 26, 2024, a panel of the US Court of Appeals for the Fifth Circuit vacated an order issued by a different panel just days before that had stayed the nationwide preliminary injunction suspending enforcement of the Corporate Transparency Act (CTA) and its implementing regulations. The Fifth Circuit’s action has the effect of restoring the nationwide preliminary injunction that had been in effect since early December and once again putting on hold companies’ obligations to file beneficial ownership information with the US Financial Crimes Enforcement Network (FinCEN).

Read our Legal Update.

Webinar | January 15, 2024
Register here.

During this session, Mayer Brown panelists, Brian Hirshberg, Jason W. Parsont, Thomas Kollar, and Gilat Abraham Zaefen will discuss US SEC disclosure priorities and other recent developments for foreign private issuers (FPIs) that should be priorities as they draft their annual reports.  Topics will include:

  • Artificial Intelligence
  • Cybersecurity and climate change disclosure trends
  • The SEC staff’s comments on clawback and pay versus performance issues
  • Insider trading and beneficial ownership rules
  • Financial reporting issues, including non-GAAP disclosures, critical accounting estimates in MD&A and segment reporting
  • China-related matters, including the HFCAA and potential tariff risk factors
  • Considerations related to risk factor disclosures
  • Areas of likely SEC focus in the coming months
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On December 23, 2024, the US Court of Appeals for the Fifth Circuit granted an emergency motion by the federal government to stay the nationwide preliminary injunction that had suspended enforcement of the Corporate Transparency Act (CTA) and stayed its compliance deadlines, including the January 1, 2025, compliance deadline for reporting companies formed prior to January 1, 2024. 

This Legal Update explains the extended deadlines that the US Financial Crimes Enforcement Network (FinCEN) issued within hours of the ruling, notes how the plaintiffs have responded and the Fifth Circuit might further respond, and provides takeaways for companies that may be subject to the CTA’s reporting obligations. 

Read our Legal Update.

This past Saturday, the US Financial Crimes Enforcement Network (FinCEN) confirmed that reporting companies—i.e., companies that would be required to report their beneficial ownership information to FinCEN under the Corporate Transparency Act (CTA) and its implementing regulations—are not required to file beneficial ownership reports for as long as the current, nationwide injunction of the CTA remains in effect. Further, FinCEN noted that reporting companies will have no liability for failing to file required beneficial ownership reports during the pendency of the injunction. FinCEN will continue to accept beneficial ownership reports from reporting companies on a voluntary basis.

Continue reading this Legal Update.

On December 3, 2024, the US District Court for the Eastern District of Texas entered a preliminary injunction suspending enforcement of the Corporate Transparency Act (CTA) and its implementing regulations nationwide, concluding that the CTA is likely unconstitutional as it is outside Congress’s power. Although not the first court to reach such a conclusion, the breadth of the relief provided by the court—applying nationwide, rather than to the specific plaintiffs—reflects a significant development, given the rapidly approaching compliance deadlines for many existing companies under the CTA.

In this Legal Update, we discuss the Texas case and its immediate implications for the 32 million reporting companies facing a year-end deadline to report beneficial ownership information to the government. Read our Legal Update.

Webinar | Wednesday, December 11, 2024
1:00 p.m. – 2:00 p.m. EST
Register here.

Join experts from Mayer Brown and Georgeson as they discuss key issues companies should consider while preparing for the 2025 proxy and annual report season during this time of regulatory uncertainty. Topics will include new and evolving disclosure requirements, as well as a discussion of the 2024 proxy season and what may be on the horizon for the upcoming season.

Agenda

  • Recent proxy statement and annual report developments, including new insider trading policy disclosures
  • Executive compensation disclosure requirements, clawbacks, and pay versus performance
  • Proxy voting matters and trends in shareholder proposals
  • Changing focus on environmental and social matters, and more

During the Practising Law Institute’s 56th Annual Institute on Securities Regulation, Securities and Exchange Commission’s Division of Corporation Finance (the “Division”) Deputy Director for Disclosure Operations Cicely Lamothe shared valuable insights on implementation of the SEC’s pay versus performance (PvP) rules.  The SEC adopted these rules in 2022, which require disclosure of five years of PvP data in proxy and information statements in which executive compensation information is required to be included.  Read our Legal Update on the PvP rules.  

The Division took a pragmatic approach in the first year, issuing forward-looking comments on filings with a focus on essential disclosures and identifying compliance issues.  The Division again conducted reviews of PvP disclosures made during the 2024 proxy season, in some cases seeking additional information from registrants with respect to their disclosures. Key takeaways from the two years of reviews include:

  1. Relationship Disclosures.  Many companies in the first year of the rule’s effectiveness failed to adequately disclose the connection between executive compensation and company performance.  While disclosures improved in the second year, the staff stressed that meaningful insights are crucial, rather than just reiterating numbers.
  2. Net Income Reporting.  Filers are required to disclose GAAP net income in their PvP tables.  While there has been improvement since the first year, some companies continued to incorrectly report figures that excluded non-controlling interests.
  3. Non-GAAP Measures.  Although there is no requirement to provide a numeric reconciliation to a GAAP measure, companies using non-GAAP measures must clearly define how these figures are calculated from audited financial statements. The staff cautioned that clarity with respect to the adjustments is essential, and to avoid inconsistencies in how a measure is calculated from year to year.
  4. “Compensation Actually Paid” Calculation.  Adherence to the terminology and steps outlined in the rules is essential when calculating and presenting compensation actually paid.

With the third year of PvP rules’ implementation now underway, these observations aim to guide companies in enhancing their disclosures.  A recent study by Pay Governance, reporting on PvP disclosure in 2024, noted that 96% of the companies surveyed retained the same Company-Selected Measure as in 2023 with changes occurring only in cases of significant shifts in incentive programs.  Further, 86% of surveyed companies used the same peer group or index for total shareholder return (TSR) comparisons.  Companies using custom peer groups accounted for most changes, typically due to changes in peer group composition.

With regard to tabular list — a unranked list of the three to seven most important financial performance measures used by a company to link executive compensation actually paid company performance (Important Financial Metrics)–  87% of the surveyed companies reported the same number of Important Financial Metrics as in 2023, while 6% increased and 7% decreased the number of metrics.  Of the companies that kept the same number of Important Financial Metrics, 93% used the exact same metrics year-over-year, while the remainder changed their metrics. 

A study by Meridian Compensation Partners discussed the format of PvP disclosure.  Of Meridian’s study group, 81% of surveyed companies compared TSR against an industry-specific index, while 19% opted for a custom peer group.  Graphic disclosures were preferred over narrative disclosures with 92% of companies favoring graphic representations to illustrate the relationship between “Compensation Actually Paid” and performance.

Most companies listed three to five metrics in the tabular list, with 30% reporting three metrics, 22% reporting four metrics, and 23% reporting five metrics.  Only 13% of companies supplemented SEC-required disclosures with voluntary reporting.  Among these, 50% of surveyed companies defined pay as Realized or Realizable Pay, 31% defined pay using Summary Compensation Table Pay, excluding certain components, 27% used Target Pay, and 15% used Total Compensation from the Summary Compensation Table.

Overall, companies are embedding these requirements into long-term compensation strategies, reinforcing transparency and alignment between pay and performance.