Private Equity Newsletter
March 29, 2016
This edition of Dechert’s Private Equity Newsletter reviews recent developments in private equity worldwide, including:
- Lessons for PE Managers from the SEC’s Ongoing Scrutiny of Private Equity Funds
- Recent Changes to Rules Governing Tax Audits of Partnerships
- Acquisitions by Non-EU Buyers of German Targets May Require Special Regulatory Review or Approval
- New UK Requirement for UK Companies and LLPS To Maintain A Register of People With Significant Control
- Russian Competition Law Update: Impact on M&A and Joint Ventures in Russia
- Recent Developments in Acquisition Finance
- Drafting Matters: Non-Reliance Provisions Barring Extra-Contractual Fraud Claims Effective in Delaware Only if Drafted as a Clear Statement by the Aggrieved Party
- Preparing for and Responding to Data Breaches, A Webinar Presented by Dechert LLP
Lessons for PE Managers from the SEC’s Ongoing Scrutiny of Private Equity Funds
A large number of private equity managers were required to register for the first time with the U.S. Securities and Exchange Commission pursuant to the Dodd-Frank Act. Since the Act’s enactment in 2010, there has been a significant increase in the SEC's scrutiny of private equity managers – primarily through investigations and civil enforcement actions initiated by the SEC’s Division of Enforcement, as well as the Presence Examination Initiative. Given the scope of the deficiencies cited by the SEC Staff following the Initiative, it seems clear that the bar has been raised in this area.
Recent Changes to Rules Governing Tax Audits of Partnerships
Congress recently amended the rules governing tax audits of partnerships that file U.S. partnership returns, including U.S. partnerships (and limited liability companies treated as partnerships) and certain non-U.S. partnerships. The amended rules provide opportunities and challenges for both existing and new funds, and should be considered by both fund sponsors and investors. These new rules will generally apply to years beginning after December 31, 2017, although a partnership may elect to apply the new rules to years beginning after November 2, 2015. This article provides an overview of the new rules and how they may affect partnership operating agreements.
Acquisitions by Non-EU Buyers of German Targets May Require Special Regulatory Review or Approval
A German regulatory requirement applying to non-EU buyers of German-based companies, which remains fairly unknown, is the approval or the clearance declaration, which must or should be obtained under the German Foreign Trade Law and the German Foreign Trade Regulation. This article will give a short summary of the existing legal framework and required processes in Germany for non-EU buyers. It will also provide some guidance on the circumstances where the regulatory clearance under the German Foreign Trade Law might not be only a formality but might entail a thorough investigation by the German authorities.
New UK Requirement for UK Companies and LLPS To Maintain A Register of People With Significant Control
With effect from April 6, 2016, all companies incorporated or formed under the UK Companies Acts, other than exempt companies, and all limited liability partnerships (LLPs) incorporated under the UK Limited Liability Partnerships Act 2000, will need to keep a register of people with significant control (PSC) over them. Failure to keep and maintain this register (the PSC Register) will be a criminal offence (on the part of the company/LLP and its officers). The PSC Register will be publicly accessible. Information on PSCs will also need to be filed at Companies House in an annual confirmation statement (which replaces the annual return) from June 30, 2016.
Russian Competition Law Update: Impact on M&A and Joint Ventures in Russia
A new version of the Russian Competition Law amended by the so-called ‘fourth antimonopoly package' (the “275 Law”) came into effect on January 5, 2016 (except for certain minor provisions with an earlier effective date). The 275 Law includes long-expected changes to the Competition Law, the Natural Monopolies Law and the Administrative Code, which will significantly affect M&A and joint venture transactions in Russia.
Recent Developments in Acquisition Finance
Two recent court decisions may affect an equity sponsor’s options when deciding whether and how to put money into - or take money out of - a portfolio company. The first may expand the scope of “inequitable conduct” that, in certain Chapter 11 settings, could lead a court to equitably subordinate a loan made by a sponsor to its portfolio company, placing the loan behind all of the company’s other debt in the payment queue. The second decision muddies the waters of precedent under the U.S. Bankruptcy Code on the issue of the avoidability of non-U.S. transfers, casting some doubt on the previously held notion that transfers outside the U.S. are beyond the scope of avoidability under U.S. law.
Drafting Matters: Non-Reliance Provisions Barring Extra-Contractual Fraud Claims Effective in Delaware Only if Drafted as a Clear Statement by the Aggrieved Party
Seller beware: do your disclaimers mean what you think they mean? Drafting matters, and the Delaware Chancery Court's most recent decision on non-reliance clauses reminds lawyers and clients that when it comes to fraud, the devil is in the details.
Preparing for and Responding to Data Breaches, A Webinar Presented by Dechert LLP
While companies may be aware of the threats posed to their businesses by a data breach, they should also have a concrete plan in place so that they can respond effectively should one occur. In a recent webinar, attorneys from Dechert’s Privacy & Cybersecurity Group discussed how companies in the U.S. – or with U.S. customers or clients – can prepare for a data breach (including issues relating to cyber-insurance), the rapid response actions that must be taken immediately after one occurs and the questions companies should ask themselves in order to understand the full scope of their post-breach obligations.
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