Free Annual Credit Reports

The Fair Credit Reporting Act requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. For a free report click this link:

http://www.ftc.gov/bcp/menus/consumer/credit/rights.shtm

Release of Emergency Funds to Russian Banks

On October 7th, Russian President Dmitry Medvedev announced a decision to release a subordinated loan to the largest Russian banks in the aggregate amount of 950 billion RUR. The loan will have a 5-year maturity. The recipients are: Sberbank - up to 500 billion; VTB - up to 200 billion; Rosselhozbank - up to 25 billion; all other banks - up to 225 billion.

New Ukrainian Corporate Law

On September 17, 2008 the Ukranian legislature, while in the midst of a political crisis, managed to pass a new law which substantially modifies certain corporate formation and corporate governance matters. Below are some highlights of the new statutory provisions. The law is expected to go into effect in early 2009.

1. Increased paid-in capital requirements.

2. Increased amount of the so-called "reserve fund" to 25% of stated capital.

3. New regime on preemptive rights and transferability of preemptive rights by operation of law.

4. Prohibition of in-kind dividends.

5. Restriction on places where a general shareholders meeting can be held. Such meeting is now required to be held at the place of incorporation, subject to certain limited exceptions.

6. Introduction of dual corporate management structure for corporations with over 10 shareholders. Supervisory board is now made mandatory.

7. Introduces the office of corporate secretary.

8. Certain material contracts are now required to be approved by the shareholders.

Incorporation by Reference of Website-Posted Materials into Commercial Contracts

Today I came upon an interesting case from Illinois where the court allowed online-posted materials to be incorporated by reference into a commercial contract. In reaching its conclusion, the court relied on the long-standing rule that a document is incorporated by reference if the contract describes the document and expresses the parties' intent to be bound by such document's terms. However, the court also placed significant reliance on the fact that the contract provided a detailed description of the online placement of the incorporated document, i.e. a simple reference to a website would not be sufficient for the incorporation. Rather, the parties need to provide a specific link that will route the browser directly to the incorporated text.

The case is International Star Registry of Illinois v. Omnipotent Marketing, 2006 U.S. Dist. Lexis 68420 (N.D. Ill. 2006).

New German Rules on Shareholder Loans

The German federal legislature has adopted a new set of rules as part of the German Insolvenzordnung (Insolvency Code) which codify and somewhat modify the existing regime on repayment priority of shareholder loans. Under the new rules, once formal insolvency proceedings against the company's assets have been initiated, all shareholder loans automatically lose their priority in the order of payment to all other creditor claims and any payments on the loans received by the shareholder(s) during the 12-months prior to the commencement of insolvency are subject to a claim for recovery by the insolvency trustee.

Outside of insolvency, repayment of shareholder loans is generally permitted. That being so, the officers of the company may become jointly liable to reimburse the company for any payments made to a shareholder, if such payments caused the company to become insolvent.

The new rules are expected to go into effect as of November 2008.

Foreign Corrupt Practices Act (FCPA) Enforcement Highlights

For the last year or so there have been a number of articles and CLE programs targeting the FCPA compliance "market" and pointing out to in-house counsel of international corporations and other international practitioners the dangers of recent U.S. Department of Justice (DOJ) enforcement activities. I personally attended an FCPA workshop organized by the Houston Bar Association in February and watched another unrelated FCPA program in June, both of which contained extensive discussions of recent FCPA enforcement trends. I realize that much of this hype is motivated by the presenters' business development efforts and is (usually) underwritten by large transactional law firms seeking to get their name out to the in-house crowd. However, I also came across some recent FCPA enforcement statistics and it appears that the DOJ is indeed up to something as far as increased FCPA investigations, prosecutions, monitoring and fines. A few clear trends appear:

1. The DOJ has increased its investigation activities regarding potential FCPA violations. The number of investigations practically doubled from 2005 through 2007. Foreign companies seem to have been hit particularly hard. The number of US companies under investigation is still higher, but the ratio is changing with a substantially higher number of foreign companies being investigated as well.

2. There were several large scale consolidated investigations in the last several years. E.g., in 2007 the DOJ opened an investigation against several oil companies' customs payments in Nigeria.

3. The number of cases prosecuted has pretty much doubled. There is a clear trend of increased number of FCPA prosecutions against individual executives, sales personnel, etc. The total penalties imposed by the DOJ in FCPA-related cases have increased as a result.

4. A lot of FCPA investigations these days seem to be conducted in tandem with similar investigations in other countries. The German company Siemens stands out as having been investigated in numerous jurisdictions for FCPA-type violations.

5. There is a trend of appointing FCPA monitoring consultants. It appears that the default term for such monitoring is up to three (3) years.

6. Lastly, as a result of the increased enforcement and the increased advertisement of FCPA issues among the international legal practitioners, the DOJ has seen a lot more self-reporting of FCPA violations. There are at least three cases where potential FCPA issues were uncovered during M&A due diligence and were voluntarily reported to the DOJ.

In light of the tougher FCPA enforcement environment, international companies may find it practical to apply for a DOJ opinion/release letter in advance of adopting some potentially questionable practice. They could also benefit if they pay better attention to potential FCPA issues during due diligence investigations of M&A targets and self-report the cases where wrongful conduct has been uncovered.

Updated UK Rules on Short Positions in Certain Derivatives

In June of this year, the UK Financial Services Authority (FSA) amended its Code of Market Conduct to require holders to disclose short positions of 0.25% or more of an issuer’s share capital where the issuer’s securities are listed on an exchange (except AIM) and where the issuer is undertaking a rights issue. In addition, in July, the FSA released the result of a study on current disclosure of derivative holdings, concluding that certain derivative long positions must be reported at a 3% holding. Final rules are expected early in 2009.

A few highlights on the UK rules:

-- 3% holdings in voting rights must be disclosed;

-- transactions in securities, where the issuer is under a takeover offer, by any person who holds gross long derivatives on 1% of those securities must be disclosed;

-- open net short positions of 0.25% or more of a listed company (excluding AIM-listed companies) which is undertaking a rights issue must be disclosed.

New SEC Interpretive Release on Website Disclosure

On August 1, 2008 the U.S. Securities and Exchange Commission released intepretive guidance regarding website disclosures by public companies. Among others, the new release attempts to deal with some of the issues concerning applicability of Regulation FD, some securities fraud and liability issues, enhance the way public companies can communicate with investors via features such as RSS feeds, blogs and discussion forums. However, in well-established SEC tradition, the interpretation leaves numerous matters into a sort of securities law gray area. For example, it is unclear how the selective disclosure requirements of Regulation FD will be enforced, or how the proxy solicitation rules would apply in the context of online disclosure. If anything, the interpretation leaves room for even further interpretation and clarification and I seriously doubt that it will open the gates to diversified online public disclosure by U.S. issuers. If anything, I expect public companies to continue to operate within their current websites' status quo.

If you crave some dense reading into the more obscure SEC disclosure and Exchange Act compliance rules, you may visit:

http://www.sec.gov/rules/interp/2008/34-58288.pdf

Republic of Georgia's National Bank Stops Credit Operations and Credit Card Services

Georgy Kalandadze, customer relations director of the National Bank of the Republic of Georgia, announced today a temporary stop order on all credit operations and credit card services by the National Bank of Georgia. Pursuant to the order, all commercial banks in the country should likewise halt all credit operations, including credit card services till the end ot the current week. The announcement states that there are no liquidity problems with any commercial bank in the Republic of Georgia. In the even ot such problems the National Bank of Georgia is prepared to open up its foreign exchange reserves.

New Chinese Anti-Monopoly Law Is In Effect from August 1, 2008

The new Chinese Anti-Monopoly Law came into effect on August 1, 2008. The law provides a basic framework for building a nationwide competition and anti-monopoly regime in China. It was adopted with some input from U.S. and E.U. business organizations and has been welcomed as a positive development. Some commentators express concern about the lack of clarity on the law's enforcement mechanism.