The most comprehensive tax reform in the United States since 1986 made its way into law just before the end of 2017, bringing with it a range of potential effects, from its influence on M&A and capital markets activity to sector-specific issues like the health insurance mandate and the expensing of capital purchases. However, changes to the treatment of multinational corporations could make it more difficult to achieve global consensus, as Europeans pursue ways to counter aggressive tax planning by these companies. Individuals and family offices also may increase their gift planning and use of trusts in order to take advantage of changes under the new law.
Strategic activity continued to drive M&A deals globally and in the U.S. in 2017, and the factors that contributed to market confidence last year point to a robust environment in 2018. Deal scrutiny likely will remain challenging, as Congress proposes changes to toughen CFIUS reviews, Europe continues to push novel theories of antitrust enforcement and jurisdictions around the globe focus on tightening foreign investment controls.
We also look at favorable market conditions fueling optimistic expectations for the U.S. capital markets, the slowing of restructurings across most sectors and the flexibility asset-based loans offer international businesses.
GOVERNANCE AND #METOO
Social responsibility is becoming an increasingly important focal point for corporations. Amid this governance landscape, boards must focus on composition and diversity as well as communication and connection with investors. Compensation-related issues and key areas of Delaware corporation law were further clarified in the courts in 2017, and the #MeToo movement shined a light on workplace harassment, giving employers an opportunity to evaluate how strongly their culture supports professionalism and respect.
This year’s focus on Europe features more than a dozen Skadden attorneys discussing their perspectives on a range of issues impacting businesses. From the current state of M&A and capital markets activity to Brexit to developments in the regulatory and enforcement environments, we share our insights on legal and business developments in the U.K., France, Germany and throughout the EU.
Although companies should expect continued vigorous enforcement from U.S. regulatory authorities, public statements from officials at these agencies indicate a desire to better target enforcement actions while continuing to rely on cooperation and self-reporting. We also offer a closer look at the SEC's priorities in year two of the Trump administration. Increased collaboration among agencies also seems to be on the radar, a development that would be welcomed by multinational companies, which can face enforcement actions in multiple jurisdictions, including in China and throughout Europe.
CHINA'S GROWING GLOBAL PRESENCE
In its current term, the U.S. Supreme Court will address constitutional protections, class actions and other corporate liability issues, including securities litigation cases, which may bring welcome news to public companies that face record-high securities class action filings. Trade secret litigation also is on the rise, thanks in part to how easy technology, which also creates cybersecurity threats from insiders with privileged access to proprietary systems. Our international arbitration attorneys also look at the increased use of arbitration to resolve financial institution disputes and the challenges of enforcing “home country” clauses in commercial contracts.
US REGULATORY ACTION
Signing tax reform legislation into law just before the end of 2017 gave President Trump and Congressional Republicans a significant regulatory achievement in the president’s first year in office. Additionally, legislation has been proposed to make national security reviews under CFIUS more thorough and lengthy. President Trump also moved to roll back climate change initiatives enacted by his predecessor and imposed a temporary trade barrier with significant implications on the solar industry. Meanwhile, rather than large-scale policy changes, health care and infrastructure initiatives made smaller adjustments. We also look at areas where FERC could take steps to deregulate as President Trump has asked agencies to do.
Although the anticipated Financial Choice Act didn’t transpire in 2017, various agencies addressed issues of relevance to financial institutions: The CFTC continues to work to achieve clarity on international derivatives clearing, the CFPB is expected to bring welcome changes to rulemaking and enforcement with a new director, the SEC chairman is seeking public comments on standards of conduct for investment advisers and broker-dealers, and New York state’s cybersecurity regulations impacting financial institutions (including foreign banks) took effect. Technology companies and their cultural dynamics often shape deal negotiations in fintech M&A, making legal, regulatory and compliance issues particularly critical. And while bitcoins garner the bulk of attention in virtual currency, the growing adoption of blockchain technology has brought additional legislative and regulatory scrutiny to this area.
As indicated in our governance discussion, social responsibility is becoming more important for businesses. In-house pro bono programs can provide corporations another way to give back to the communities in which they live and work. We share our insights on creating successful programs that are dedicated to bringing the culture of skills-based volunteering to in-house legal departments.
House Committee Holds Hearing on Export Control Reform Bill
The newly introduced Export Control Reform Act, a bipartisan effort to modernize U.S. export control regulations, would establish mechanisms designed to preserve U.S. technological advantages in industries critical to national security and foreign policy. U.S. companies owned or controlled by foreign entities and companies engaged in the development of new technology could be significantly impacted if the bill becomes law.
Supreme Court Holds That Class Actions Brought Under Securities Act in State Court Are Not Removable
Today, in a unanimous decision, the U.S. Supreme Court held in Cyan, Inc. et al. v. Beaver County Employees Retirement Fund, et al. that state and federal courts have concurrent jurisdiction over class actions based only on claims brought under the Securities Act, and that such claims are not removable to federal court. This decision brings to an end an almost two-decades-long split among federal district courts over the jurisdictional provisions of SLUSA.
Fifth Circuit Vacates Department of Labor’s Fiduciary Rule
In a 2-1 decision, the U.S. Court of Appeals for the Fifth Circuit has vacated entirely the Department of Labor's fiduciary rule. It is not yet clear if the DOL (or another party) will challenge the ruling, which could include appealing to the U.S. Supreme Court. DOL spokespersons have indicated that, at least for the moment, the department will not enforce the rule.