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Navigating the NEXT.
Global Dealmaking & the Supply Chain
As dealmaking surges in most parts of the world, investors and companies are jockeying for new market positions. The dramatically different landscape of how people work, where they travel, and what they buy in a global economy still recovering from a major public health crisis has brought both opportunity and challenge. Assets for individual and company consumers may be tough to come by as international supply chains and trade restrictions remain in flux. Morgan Lewis lawyers from around the globe address these issues by offering insight into merger and acquisition trends, international trade and sanctions, and the global supply network.
Insights
The UK’s Financial Conduct Authority (FCA) published its 2021/22 Business Plan on July 15, setting out its future role, priorities, and how it intends to deliver them. The FCA’s website contains a summary and full copy of the business plan.
The proposed guidance also identifies principles that are applicable to each stage of the third-party risk management life cycle, including: (1) developing a plan that outlines the banking organization’s strategy, identifies the inherent risks of the activity with the third party, and details how the banking organization will identify, assess, select, and oversee the third party; (2) performing proper due diligence in selecting a third party; (3) negotiating written contracts that articulate the rights and responsibilities of all parties; (4) having the board of directors and management oversee the banking organization’s risk management processes, maintaining documentation and reporting for oversight accountability, and engaging in independent reviews; (5) conducting ongoing monitoring of the third party’s activities and performance; and (6) developing contingency plans for terminating the relationship in an effective manner. The proposed guidance provides extensive details on all the above identified principles.
Changes to complex commercial contracts are inevitable. These contracts, such as large outsourcing agreements, typically include a master services agreement (MSA) and a high number of exhibits and attachments describing the scope, performance standards, financials, and other contractual requirements in detail. Some deals can end up containing over 50–75 documents (or more!) in total. Given their strategic importance, these agreements often require numerous amendments as the relationship evolves over time and changes need to be formally documented.
The UK Financial Conduct Authority (FCA) announced on July 9 that, while changes to the scope of the UK commodity position limits regime are being consulted on, it will not take enforcement action against firms that breach position limits on cash-settled commodity derivative contracts unless the underlying is an agricultural commodity. However, the FCA will keep its stance under review, and reconsider if there are indications of market abuse.
The still evolving US sanctions (as well as the EU and now also separate UK sanctions) continue to challenge Russia-related business. The sanctions frameworks are complex, changing, and, at times, inconsistent as well as overlapping. Navigating this complex global framework is made even more difficult by the ongoing unpredictable and reactionary geopolitical environment as the Biden Administration gets underway.
The United Kingdom’s Department for Digital, Culture, Media & Sport (DCMS) is requesting views on supply chain cybersecurity, which it will look to incorporate into its new National Cyber Security Strategy.
Congress has enacted and President Joseph Biden has signed a joint resolution of disapproval under the Congressional Review Act (CRA) of the Office of the Comptroller of the Currency’s (OCC’s) “true lender” rule, which, as we previously discussed, had provided that a national bank is as a matter of law the lender on any loan for which it is the named lender or for which it provides the loan funding.
Our healthcare team recently launched a publication series highlighting the global impact of COVID-19 on healthcare transactions. Around the globe, the healthcare industry has faced similar issues from the unprecedented pandemic, prioritizing their operational response to COVID-19. Now, as countries begin to reopen, healthcare entities may refocus on planning for long-term transformation of their business models. In this series, we will explore how the pandemic impacted healthcare transactions in specific regions and what we can expect in a post-pandemic world.
After a sluggish year in 2020 for mergers and acquisitions among hospitals and health systems, 2021 has shown renewed vigor and is poised for considerable transactional activity.
Last year was a record-breaking one for capital raising in life sciences, and 2021’s first quarter was robust for special purpose acquisition company (SPAC) transactions. Now, after a second-quarter SPAC and initial public offering (IPO) slowdown, the outlook for summer SPACs has rebounded just in time for the Morgan Lewis Global Public Academy program, Going Public Through a SPAC: Current Issues for SPAC Sponsors and Private Companies 2021. Our panelists will discuss some of the most important legal issues for companies considering going public through a SPAC and for SPACs seeking an acquisition target. Topics covered will include the use of private investments in public equity (PIPEs), obtaining shareholder approval for a merger, and the required SEC filings and review process.
The new executive order continues the policy of prohibiting US persons’ transactions in the publicly traded securities of select Chinese companies, but expands the scope to include both Chinese companies that operate or have operated in the defense and related materiel sector and those in the surveillance technology sector of the economy of the People's Republic of China.
The UK National Security and Investment Act 2021 (NSI Act) received royal assent on 29 April 2021. Expected to come into force in late 2021, the NSI Act will introduce a standalone UK foreign direct investment and national security screening regime, replacing the current regime that links national security screening with UK merger control.
The State of New York has enacted a new law that should ease the transition away from US dollar LIBOR for legacy financial contracts that are governed by New York law but do not contain modern benchmark fallback provisions. A similar federal law is in the works, which if passed would apply nationwide.
The Financial Services Agency of Japan (FSA) recently submitted a bill to the National Diet of Japan including certain amendments to finance-related laws for purposes of strengthening Japan’s financial system and financial stability in response to social and economic changes caused by the COVID-19 pandemic. Among these measures, this LawFlash addresses the proposed amendments to the Financial Instruments and Exchange Act (FIEA) for purposes of promoting foreign asset managers’ entry into the Japanese market.
The UK Prudential Regulation Authority (PRA) published a policy statement (PS7/21) and a supervisory statement (SS2/21) on clarifying and modernizing regulatory expectations of outsourcing and third-party risk management on March 29. The expectations in PS7/21 and SS2/21 are relevant to banks, PRA-designated investment firms, insurers, and branches of overseas banks and insurers and apply not just to “outsourcing” but also non-outsourcing material or high-risk service arrangements. The expectations apply at a legal entity level rather than at a group level (save for expectations on intragroup arrangements).
The Singapore Exchange has launched a consultation on proposed rules governing special purpose acquisition companies.
China recently amended its primary regulation governing medical devices, the Regulation on Supervision and Administration of Medical Devices (2021 RSAMD), which will replace its previous 2014 version and become effective on June 1, 2021. While the 2021 RSAMD largely follows the structure of the 2014 version, it does introduce a few important changes of which medtech companies interested in marketing in China should be aware.
The president of the Republic of Kazakhstan signed Law No. 399-VI, On Amendments into Certain Labour-Related Legislative Acts of the Republic of Kazakhstan (the Amendment Law), on January 2, 2021. The Amendment Law entered into force on January 16 and amended a number of legislative acts of the Republic of Kazakhstan, including the Civil Code, the Budget Code, and the Entrepreneurial Code as well as the Law of the Republic of Kazakhstan on Public-Private Partnership (PPP), No. 379-V, dated October 31, 2015 (the PPP Law). This LawFlash summarizes the most important new elements introduced into the PPP Law through the Amendment Law.
With special purpose acquisition companies increasingly being used in initial public offerings and the commercial insurance market continuing to harden, captive insurance could be a solution for offering directors and officers protection against increased shareholder scrutiny and resulting derivative lawsuits.
With special purpose acquisition companies increasingly being used in initial public offerings and the commercial insurance market continuing to harden, captive insurance could be a solution for offering directors and officers protection against increased shareholder scrutiny and resulting derivative lawsuits.
France’s highest Court (Cour de Cassation) recently ruled that an acquiring entity, in this case Iron Mountain, could be found criminally liable for violations committed by the target, here Recall France, before the transaction. The November 25, 2020 decision, which reversed French case law, foreshadows serious concerns for future acquirers in M&A transactions.
The Financial Market Integrity Strengthening Act includes a large number of innovations aimed at strengthening confidence in the German financial market by placing more comprehensive obligations on auditors when auditing companies of public interest. In addition to optimizing balance sheet control and further regulating the auditing of financial statements, the innovations also affect corporate governance at companies.
All initial public offerings (IPOs) must be paperless from July 5, 2021 and documents put on display by issuers to support listings and transactions must be made available online from October 4, 2021.
Mexico’s Federal Consumer Protection Agency (Procuraduría Federal del Consumidor (PROFECO)) on February 26 announced its new voluntary Ecommerce Ethics Code (Código de Ética en Materia de Comercio Electrónico), which may be adopted by entities doing online business in Mexico. Although the adoption of the Ecommerce Ethics Code is voluntary, it signals the authority’s baseline expectation for market participants, and sets forth the parameters and guidelines for suppliers of goods and services that operate through digital platforms or virtual salesrooms.
The Biden administration has vowed to invoke the Defense Production Act (DPA) to increase domestic production of essential supplies needed to respond to the COVID-19 pandemic. In this Insight, we address key features of the DPA, guidance for companies that may receive a rated order, financing incentives offered by the DPA, and how we anticipate the Biden administration will use the DPA over the next year.
The German Act on the Further Development of the Restructuring and Insolvency Law (Sanierungs- und Insolvenzrechtsfortentwicklungsgesetz – SanInsFoG) took effect on January 1, 2021, transforming the European Restructuring Directive of June 20, 2019 ((EU) 2019/1023) and introducing a self-administrated restructuring option outside the standard insolvency proceeding.
The US Department of the Treasury’s Office of Foreign Assets Control (OFAC) published final rules on January 15, 2021, implementing the sanctions put in place by Executive Order 13936 (EO 13936) and the Hong Kong Autonomy Act of 2020 (the Act or HKAA). In EO 13936, then President Donald Trump found that Hong Kong was no longer sufficiently autonomous to justify differential treatment in relation to the People’s Republic of China (PRC), largely in response to the imposition of China’s national security legislation on Hong Kong by the PRC government. This finding and the HKAA authorize the Department of the Treasury to issue new regulations to implement the change in status.
Recent sanctions imposed by the European Union, United Kingdom, and the United States on Turkey and certain Turkish persons will be of interest to European and American investors in Turkey’s defense and energy sectors. The following update contains a summary of each regime.
When negotiating a service agreement there are many terms and conditions to be mindful of, but it’s important to review and consider the acceptance requirements.
The Consumer Financial Protection Bureau (Bureau or CFPB) on January 13 issued a Statement Regarding the Provision of Financial Products and Services to Consumers with Limited English Proficiency (Statement), which is intended to provide compliance principles and guidelines to inform and assist financial institutions in their decisionmaking related to serving limited English proficiency (LEP) consumers in non-English languages.
Recent proposed changes to the Singapore Electronic Transactions Act would allow for the digitalization of cross-border trade documents and other important legal documents.
China’s Ministry of Commerce (MOFCOM) published the Rules on Counteracting Unjustified Extraterritorial Application of Foreign Legislation and Other Measures (the Blocking Statutes) on January 9. The rules, which consist of only 16 articles, became effective upon publication.
The Japanese government announced on January 13 that it has added seven prefectures—Osaka, Kyoto, Hyogo, Aichi, Gifu, Tochigi, and Fukuoka—as areas subject to the Second Declaration of a State of Emergency (SDSE) from January 14, 2021. The decision expands the number of areas subject to the SDSE to eleven prefectures. In the current plan, this measure will be continued until February 7, 2021.
New changes to UAE corporate and foreign ownership laws will abolish longstanding foreign ownership restrictions and remove substantial barriers to doing business in the UAE.
Despite the challenges of an unprecedented global pandemic, cartel enforcement activity in 2020 increased in many leading enforcement jurisdictions. Corporate fines, for example, more than doubled from 2019 in the United States, Mexico, South Korea, and Taiwan.
In the News
Morgan Lewis partner and co-leader of the firm’s SPAC task force Alec Dawson spoke with The Deal for its “Drinks with The Deal” podcast.
Partners Daniel Nelson, Kate Habershon, and Kathryn Hambrick and associates Meghan McCarthy, Alexios Hadji, and Grace Tan co-authored an article for the Journal of Investment Compliance regarding tax-related issues in the private wealth fund investment area. The article dives into regional tax considerations for sovereign wealth funds that are looking to ramp up investments post-pandemic.
Leonidas Theodosiou was quoted in a Global Competition Review article regarding the United Kingdom’s new Subsidy Control Bill that was introduced in Parliament.
Fund Management 2021, published by Lexology’s Getting The Deal Through (GTDT), gives a high level overview of the key considerations for the fund management industry and predictions for the year ahead.
Partners Mark Geday and Edwin Luk and of counsel Jeffrey Letalien co-authored an article for Law360 looking at current trends across the international special purpose acquisition company (SPAC) market.
Partner Tom Cartwright provided insight ahead of the Medtech Investing Europe Forum on the outlook for life sciences industry amid COVID-19.
Motonori Araki co-authored "The Impact of the Rules on Counteracting Unjustified Extra-territorial Application of Foreign Legislation and Other Measures (Order of the Ministry of Commerce of the People’s Republic of China 2021 No.1) Japanese companies at the mercy of trade conflict between US and PRC" in Japanese for the Journal of the Japanese Institute of International Business Law.
Morgan Lewis partner Todd Liao authored an article for Medtech Insight about China’s amended regulation governing medical devices. The update of the Regulation on Supervision and Administration of Medical Devices, which came into effect on 1 June 2021, introduces important changes that medtech companies should be aware of.
London-based partners Georgia Quenby and Victoria Thompson consider how the new Restructuring Plan under English law interacts with intercreditor agreements which have voting restrictions and other contractual prohibitions on creditor actions.
Morgan Lewis partner Mark Geday authored an article for IFLR looking at current deal making trends and considerations in the context of a challenging market.
Morgan Lewis partner Jeffrey Raskin was quoted in Business Insurance in an article about how insurance policies can protect special purpose acquisition companies (SPACs).
Partner Sandra Vrejan spoke with Bloomberg Law about a shift from the Small Business Administration regarding bankrupt companies’ eligibility for Paycheck Protection Program (PPP) loans. In the piece, Sandra noted that the guidance doesn’t address a key issue—whether bankrupt companies are eligible for PPP loans. “At the end of the day, the thumbnail conclusion is that it hasn’t changed all that much,” she said.
Morgan Lewis partner Jeffrey Raskin and associate Lauren Burke authored an article for Law360 about how captive insurance policies can protect special purpose acquisition companies (SPACs) from lawsuits and scrutiny from shareholders.
Partners Rob Mailer and Oli Rochman and associate Funke Omisore authored a column for Private Equity International which provides practical and commercial considerations for first-time fund managers.
Webinars
Please join us for the next installment of the Morgan Lewis Automotive Hour Webinar series, focused on SPACs and Other Vehicles for Investment in the Automotive and Mobility Sectors.
Partner Giovanna M. Cinelli will join Strafford as a panelist for its webinar, “China's New Blocking Statute: Implications for Multinational Companies, Reporting Obligations, Impact on Affiliates.”
SPACs have become the preferred route for companies to enter the public markets in 2020. Our panelists will discuss some of the most important legal issues for companies considering going public through a SPAC and for SPACs seeking an acquisition target.
There are various tax, employment, and immigration considerations for companies to consider when engaging independent contractors in the United Kingdom. While the use of contractors can provide a cost-effective and flexible solution for early-stage or fast-growing firms, there are various risks including reclassification and potential increased tax and employment right liabilities.
Partner K Lesli Ligorner will present “Recent Actions and Investigation in FCPA Enforcement” during the 5th China International Anti-Corruption Compliance Summit being held from July 8-9 in Beijing.
Join Aset Shyngyssov and Klara Nurgaziyeva for an overview of the tech, fintech, and other innovations and opportunities in Kazakhstan via the Astana International Finance Center (AIFC).
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