- within Intellectual Property, Food, Drugs, Healthcare, Life Sciences and Transport topic(s)
Welcome to the latest edition of Quorum.
In this issue:
- Strategic investor rights, shared risks: Governance requirements when interests diverge
- Delaware Court of Chancery reinforces high bar to plead existence of a control group and dismisses action challenging take-private acquisition
- SEC staff issues new Section 13 guidance clarifying beneficial ownership determinations and disclosures
- U.S. Supreme Court rejects investor loss requirement for SEC disgorgement
- SEC Updates
- Divided FTC statements in IonQ/SkyWater reward close study by parties to vertical and defense-sector transactions
1. Strategic investor rights, shared risks: Governance requirements when interests diverge
In a recent Delaware Court of Chancery opinion1, Vice Chancellor J. Travis Laster examined the limits of strategic investor rights, upholding pleading-stage claims against an investor and its board designee. The claims arose out of an alleged scheme to utilize contractual governance and veto rights to access a start-up's technology, force the start-up to effectively shut down, and obtain a competitive advantage by an investor. Zync reaffirms the propriety of strategic investor relationships, but serves as a cautionary tale for both sides, highlighting the limits of contractual governance rights and the risks absent an alignment of interests.
2. Delaware Court of Chancery reinforces high bar to plead existence of a control group and dismisses action challenging take-private acquisition
The Delaware Court of Chancery, in Le Clair v. KnowBe4, Inc., issued a decision dismissing a putative class action challenging Vista Equity Partners’ (“Vista”) take-private acquisition of KnowBe4, Inc. (“KnowBe4” or the “Company”). Specifically, former stockholders of KnowBe4 alleged that two institutional investors and KnowBe4’s CEO had formed a unified “control group” that forced through a conflicted buyout and that the directors who approved the acquisition breached their fiduciary duties. At the pleading stage, the Court found that Plaintiffs failed to adequately allege a control group. The Court then held that, assuming director-level conflicts, a fully informed, uncoerced stockholder vote cleansed the transaction.
This decision is notable for its stringent application of the control-group pleading standard and its application of amended Section 144 of the Delaware General Corporation Law. The Court noted, where entire fairness applies because of director-level conflicts, “either a fully empowered, independent special committee or a fully informed, uncoerced stockholder vote can cleanse the transaction.” Le Clair also highlights the value of robust deal protections in analogous M&A transactions featuring director-level conflicts of interest, including an empowered Special Committee and/or a majority-of-the-minority stockholder vote.
3. SEC staff issues new Section 13 guidance clarifying beneficial ownership determinations and disclosures
On July 9, 2026, the SEC's Division of Corporation Finance issued five new Corporation Finance Interpretations (CFIs) relating to Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G. This regulatory scheme requires beneficial owners of more than 5% of a class of voting equity securities registered under Exchange Act Section 12 to report their ownership on either a Schedule 13D or a Schedule 13G. The filings inform the market about acquisitions of securities that could allow filers to control or influence control over an issuer.
4. U.S. Supreme Court rejects investor loss requirement for SEC disgorgement
On June 4, 2026, the U.S. Supreme Court unanimously held in Sripetch v. Securities and Exchange Commission that the SEC may obtain disgorgement without proving that investors suffered financial loss under provisions governing the remedies available in actions and proceedings brought by the Commission under the securities law. Justice Gorsuch, writing for the Court, grounded the decision in traditional equitable principles, explaining that disgorgement has always been measured by the defendant’s wrongful gain, not the victim’s loss. The ruling resolves a circuit split in the SEC’s favor and forecloses one of the principal arguments defendants have used to defeat or limit disgorgement awards. But Justice Thomas’s concurrence may matter more in the long run. Writing separately, he argued that the Court should soon address whether disgorgement is now a legal remedy that triggers the Seventh Amendment right to a jury trial. If it does, then the SEC might be more hesitant to seek disgorgement in cases not otherwise requiring a jury trial.
5. SEC Updates
Key focus areas of the SEC in 2026 under Chairman Atkins
The 2026 regulatory reset agenda of SEC Chairman Paul Atkins reflects a fundamental shift in the SEC’s approach to disclosure and rulemaking, which the Chairman frames as a return to first principles grounded in materiality, capital formation, and regulatory clarity. In his April 2026 remarks and related speeches, Atkins has stressed that the SEC is seeking to simplify and modernize the disclosure regime, particularly Regulation S-K, by eliminating immaterial or duplicative requirements, reducing compliance burdens, and replacing “regulation by enforcement” with clear, forward-looking rules, all while maintaining the SEC’s core investor protection mandate. This agenda also includes broader initiatives that are intended to revitalize U.S. public markets, enhance access to capital (including through scaled disclosure and reporting reforms), and improve competitiveness by aligning regulation with evolving market conditions. These initiatives are primarily focused on domestic issuers, as the SEC has signaled that the treatment of foreign private issuers remains under review through its concept release on foreign private issuer eligibility, which considers whether existing accommodations should be narrowed or otherwise recalibrated. Accordingly, foreign private issuers are generally not the immediate focus of these disclosure reforms pending the outcome of that review.
More information relevant to non-U.S. public companies can be found here.
Among its most significant early reform actions, the SEC has proposed the rescission of its 2024 climate-related disclosure rules, which had been adopted in March 2024 but was stayed shortly thereafter following legal challenges and never took effect. The proposed rescission is largely procedural and would formally conclude the rulemaking process. The agency’s action marks the final step in winding down this regulatory initiative and reflects the SEC’s shift toward a less prescriptive approach to disclosure that emphasizes evaluating the materiality of specific topics in light of the individual company’s particular circumstances.
SEC staff issues exemptive order permitting shortened tender offer periods for all-cash equity transactions
The SEC’s Division of Corporation Finance recently issued an exemptive order under the Exchange Act permitting certain tender offers for equity securities to remain open for a minimum period of ten business days instead of a minimum period of 20 business days as required under the SEC’s tender offer rules.
The abbreviated offering periods are available for all-cash third-party and issuer tender offers for equity securities of reporting companies, as well as for all-cash tender offers by non-reporting companies for their own equity securities. To qualify for this relief, the third-party equity tender offer must be made in connection with a negotiated business combination transaction. Parties relying on the exemptive order must comply with conditions specified in the order.
The exemptive order offers acquirors in negotiated M&A transactions involving a “two-step” acquisition process new flexibility to reduce the time to closing. The relief also may enable reporting companies engaged in self-tenders to limit their exposure to market fluctuations during the shortened offering period.
More information can be found in our SEC Update published on 12 May.
SEC staff issues exemptive order expanding availability of shorter debt tender offer periods
The SEC's Division of Corporation Finance subsequently issued an exemptive order under the Exchange Act expanding the availability of abbreviated minimum offering periods for tender and exchange offers for non-convertible debt securities.
The exemptive order permits qualifying offers to remain open for a minimum period of five business days rather than the minimum period of 20 business days required under the SEC's tender offer rules. The order supersedes the Division's 2015 no-action letter and any similar letters that had permitted abbreviated offering periods for non-convertible debt tender offers conducted in compliance with more restrictive conditions.
Abbreviated offering periods are available under the new order only for tender and exchange offers for non-convertible debt securities made by the issuer of the securities, a direct or indirect wholly-owned subsidiary of the issuer, or a parent company that directly or indirectly owns 100% of the issuer's capital stock. The offer consideration may consist of cash, non-convertible debt securities with specified terms, or a combination of cash and such securities. Parties relying on the exemption also must comply with other conditions described in the order.
More information can be found in our SEC Update published on 4 August.
6. Divided FTC statements in IonQ/SkyWater reward close study by parties to vertical and defense-sector transactions
The Federal Trade Commission (“FTC” or “Commission”) closed its investigation of IonQ, Inc.’s (“IonQ”) acquisition of SkyWater Technology, Inc. (“SkyWater”) — an American semiconductor foundry serving IonQ and several of IonQ’s rivals in the race to develop the first fault-tolerant quantum computer — and permitted the transaction to proceed, after the Commission’s two sitting members were divided over whether the transaction warranted a negotiated behavioral consent order.
The IonQ/SkyWater statements of Chairman Andrew Ferguson and Commissioner Mark Meador are detailed accounts of how each Commissioner analyzes vertical transactions, the weight each assigns to the efficiencies of vertical integration, and the circumstances in which each would consider a behavioral remedy. Parties planning vertical transactions — and, particularly, transactions in the defense and national-security sectors — should study both.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
[View Source]
