Banking and Finance Law Report : Banking & Finance Lawyer & Attorney : Porter Wright Morris & Arthur Law Firm : Bankruptcy, Commercial Lending

On December 27, we wrote a blog post regarding the NLRB proposed rule-making to require all employers to post notices advising employees of their rights to engage in union organizing. After a period of public comment, during which about 7,000 responses were submitted to the NLRB, the NLRB has now issued its final rule requiring the posting.

Effective November 14, 2011, all private sector companies covered by the National Labor Relations Act are required to post in the workplace a specific notice advising employees of their rights under the National Labor Relations Act to engage in union organizing, to bargain through a union with their employers, and to refrain from those activities. The notice also gives examples of employer and union conduct which is considered illegal and tells employees of actions they can file with the NLRB to enforce their rights. Here is a link to the NLRB announcement, which includes a copy of the required posting (as an Appendix.)  The NLRB promises that by November 1st, the posting will be available for downloading from the NLRB web site and that hard copies will be available from NLRB Regional Offices. All employers will be required to post the notices in conspicuous areas of the workplace where other employment notices are posted. Also, employers that routinely post notices regarding personnel rules or policies on an Internet or intra-net site will be required to post the new NLRB notice on those sites. However, employers are not required to distribute the notice to employees by email or other technological means. In workplaces where at least 20% of the workforce are not proficient in the English language, translated copies must be posted. The NLRB has indicated they will make copies available in various languages.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

In early July, the FDIC issued a report on an important subject to many community bankers: brokered deposits. The report to Congress, dated July 8, 2011, was required under Dodd-Frank and describes its view of the present role of brokered deposits in banking. Critical, of course, is the FDIC's observation that bank failures are frequently linked to brokered deposits.

Despite industry concerns that the present regulatory system for brokered deposits is outdated and poorly designed, the report concludes the present statutory scheme should not be amended or repealed.

Here is how the FDIC summarized the industry concerns it heard through the public comment process: (i) the brokered deposit statute creates liquidity problems if a bank becomes less than well capitalized; (ii) a combination of the statute and supervisory practices stigmatizes brokered deposits; and (iii) the brokered deposit statute is outdated and has not kept pace with technological change and innovation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Publicly traded companies may need to act quickly to review, and, if necessary, amend their stock option and stock appreciation right ("SAR") plans in order to preserve tax deductions for compensation in excess of $1 million paid to certain executives. The reason for this review is that the Internal Revenue Service (the "IRS") and the United States Treasury Department recently issued proposed regulations that clarify a few items with respect to the application of Section 162(m) of the Internal Revenue Code (the "Code") to such plans. One item relates to requirements that stock options and SARs must meet to qualify as performance-based compensation. Another item relates to a transition rule for companies that initially are privately held but that later become publicly traded companies.

As background, Code Section 162(m) limits the deduction a publicly traded company may take with respect to remuneration paid to its "covered employees"--- its CEO and 3 most highly paid officers (other than the CEO and CFO)---to the extent that such compensation exceeds $1 million. The deduction limit does not apply, however, to qualified performance-based compensation. Publicly traded companies often structure their stock options and SARs in a manner to qualify as performance-based compensation.

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Enforcement of a relatively new rule of the Financial Industry Regulatory Authority (FINRA) has resulted in significant fees in 2011 for small issuers with securities traded over-the-counter (OTC), such as some community banks. FINRA Rule 6490 requires issuers to provide notice to FINRA of certain company-related actions, such as dividends and stock splits, or face a $5,000 fee, which some might characterize as a fine.

FINRA’s ability to charge issuers is new as of 2010, and is a significant departure from FINRA’s historically ministerial role with respect to issuers. FINRA primarily oversees broker-dealer member firms, but it also performs certain functions for issuers of OTC securities. For example, it reviews and processes requests to announce or publish certain actions by issuers of OTC securities and maintains the symbols database for OTC securities. 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

Breaking with the Third Circuit and the Fifth Circuit, on June 28, 2011, the Seventh Circuit held that a debtor's plan of reorganization that provides for the sale of the debtor's assets free and clear of an existing security interest may only be confirmed over the objection of its secured creditor if the plan's sale procedure permits the secured creditor to credit bid its secured debt for the assets being sold. River Road Hotel Partners, LLC v. Amalgamated Bank, -- F.3d --, Nos. 10-3597 & 10-3598 (7th Cir. June 28, 2011).

The circuit split centers on the Bankruptcy Code's provisions that only permit the confirmation of a plan of reorganization over the objection of a creditor class (a so called "cram down") where the plan's treatment of such class is "fair and equitable." When the objecting class consists of secured creditors, the Bankruptcy Code requires that such fair and equitable treatment include provisions whereby either: (A) the secured creditor retains its liens in its collateral whether such collateral is retained by the debtor or transferred to another party and the secured creditor receives a specified level of cash payments under the plan, 11 U.S.C. § 1129(b)(2)(A)(i); (B) the secured creditor "realiz[es] … the indubitable equivalent" of its claim, id. § 1129(b)(2)(A)(iii); or (C) the secured creditor's collateral is sold subject to the secured creditor's right to credit bid for such property, the secured creditor retains a lien in the proceeds of the sale and the treatment of this new lien is in accordance with (A) or (B) above. Id. § 1129(b)(2)(A)(iii). Because the Bankruptcy Code does not define "indubitable equivalent" the courts, in providing their own definition have struggled over whether these three alternative "fair and equitable" treatments are mutually exclusive such that the only method for selling property free and clear is in an auction that permits credit bidding, or whether indubitable equivalent alternative is broad enough to encompass a free and clear sale that would not otherwise be "fair and equitable" because it did not honor credit bidding.

• Email This
• Print
• Comments
• Trackbacks
• Share Link