MSLaw Blog

Many corporations have changed their state of incorporation to move away from Delaware or are considering doing so. There are many reasons to consider alternative jurisdictions to Delaware but most often cited by public companies is the Delaware Chancery Court’s receptivity to claims asserted by plaintiff law firms on behalf of stockholders. Prolonged litigation, often frivolous, and expensive settlements add time and expense to corporate transactions. Some states have taken affirmative steps to create a corporate regime that will attract entities

Maryland Comptroller Brooke Lierman issued a letter Feb. 28 to address the challenges and concerns of tax practitioners regarding the policy and procedural changes to pass-through entity (PTE) filings and payments. Most significantly, the comptroller has agreed to provide a one-time waiver for taxpayers who missed electing PTE treatment on the first filing of the year. Background The comptroller said last April that, for tax years beginning after Dec. 31, 2022, PTEs are required to elect (or not elect) to pay tax

The Maryland Comptroller’s Office issued a Tax Alert on April 11, 2023, addressing policy and procedural changes to pass-through entity (PTE) filings and payments. For tax years beginning after Dec. 31, 2022, PTEs are required to elect (or not elect) to pay tax at the entity level on all members’ shares of income or pay the mandatory tax on behalf of its nonresident members by the first filing or tax payment for the applicable tax year. Additionally, the annual election (or

On May 12, 2022, Governor Hogan signed several bills into law that will affect the formation, ownership and operation of business entities under Maryland law.  Below is a summary of the new laws. Most noteworthy is the creation of a statutory process for the ratification of defective corporate acts.  All changes will become effective on October 1, 2022. Ratification of Defective Corporate Acts During legal due diligence, it is not unusual to discover that a corporation has issued more stock than it had

On April 14, 2020, Maryland Governor Larry Hogan issued Executive Order 20-04-14-02 intended to provide publicly traded Maryland corporations and real estate investment trusts with greater flexibility in holding stockholder meetings by remote communication. Applicable to Maryland corporations and REITs that are subject to the reporting requirements of the ’34 Act, the Executive Order will remain in effect until Maryland’s state of emergency has been terminated and the proclamation of the catastrophic health emergency has been rescinded. The Executive Order will

In light of the COVID-19 pandemic, Maryland corporations and their boards of directors are reassessing previously authorized and declared distributions (aka dividends) to stockholders. Here’s what you need to know: If the board of directors has “authorized” the distribution, but not made any public announcement or “declared” the distribution, the distribution may be freely rescinded by board action.  If shares of stock receiving the distribution are traded on an exchange and the ex-dividend date has passed, in addition to the state law

As Maryland corporations navigate this year’s proxy season, many have come face-to-face with the COVID-19 pandemic. The social distancing requirements related to the pandemic will often deter—or prevent—in-person stockholder meetings. At the same time, there is disinformation circulating regarding the availability of virtual stockholder meetings under Maryland law. Here are the key points: If the bylaws authorize the board of directors to determine the place of a stockholder meeting, Maryland corporations may cause a stockholder meeting to be held as a

With the numerous changes to working procedures as a result of COVID-19, the impact on the Maryland State Department of Assessments and Taxation (SDAT) is no different. For filings that are unable to be completed online, SDAT is currently working on a plan for arranging appointments and/or scheduling times for the drop-off of documents and filings. SDAT continues to assess its resources and capabilities. Currently, SDAT is closed to the public and that is unlikely to change soon. If SDAT is

During its 2019 session, the Maryland General Assembly (the “General Assembly”) passed two bills that amend the Maryland General Corporation Law (the “MGCL”). Both bills were proposed by the Business Law Section of the Maryland State Bar Association. On April 30, 2019, Governor Hogan signed both bills and they will take effect on October 1, 2019. The 2019 General Assembly had its sights set on the future. The amendments to the MGCL reflect the General Assembly’s recognition of the various electronic

During its 438th session, the Maryland General Assembly passed four bills that affect the Maryland General Corporation Law (the “MGCL”), all of which were supported by the Business Law Section of the Maryland State Bar Association. This update is intended to identify (i) bills that were passed affecting the MGCL in the last legislative session, and (ii) laws that will take effect on October 1, 2018. In the 2018 legislative session, the Maryland General Assembly: repealed the provision requiring articles of transfer; limited

The Delaware Court of Chancery fundamentally altered the M&A litigation landscape when it expressed its skepticism of disclosure-only settlements in the case of In re Trulia, Inc. Stockholder Litigation, 129 A.3d 884 (Del. Ch. 2016). There has subsequently been much written about Trulia and the relative scarcity of disclosure-only settlements in its wake. Of significantly lesser renown, the Court of Chancery further observed in Trulia that adversarial motions for attorneys’ fees, following a corporation’s “mooting” of plaintiff-stockholder disclosure claims through supplementary disclosures, are free of

Merger and purchase agreements involving Maryland corporations and REITs may be governed by Maryland law. For lawyers accustomed to agreements governed by Delaware or New York law, we are frequently asked to describe key differences that arise under Maryland law so that parties may make informed decisions during negotiations. This is the second post of a multipart series that will describe some common issues that arise in relation to Maryland law. The first post on open performance terms is available here. In

In 2017, the Maryland General Assembly, during its 437th session, adopted stockholder-friendly legislation concerning Maryland corporations and real estate investment trusts, while rejecting or delaying more radical changes to the Maryland General Corporation Law (“MGCL”) and the Maryland REIT Law. Changes to Maryland Corporate Law Effective October 1, 2017 In its 2017 legislative session, the Maryland General Assembly passed two bills that will impact Maryland corporations and Maryland real estate investment trusts, Senate Bill 481/House Bill 744 (the “2017 Miscellaneous Bill”) and

With the recent focus on appraisal rights in the Delaware Court of Chancery, it was only a matter of time before a Maryland court took up the issue. Although originally authored in April 2016, the Circuit Court for Baltimore City recently published its decision in Mark G. Egan, et al. vs. First Opportunity Fund, Inc. et al., Case No. 24-C-14-008132 (Cir. Ct. Balt. City April 22, 2016) construing a dissenting stockholder’s demand for fair value under Maryland law. The resulting

On January 31, 2017, an ad hoc task force (“Task Force”) of the Business Law Section of the Maryland State Bar Association issued a Final Report and Proposed Recommendations for the Business & Technology Case Management Program (“BTCMP”), proposing changes to the management of complex business and technology cases in Maryland.  The Task Force was initiated to address the concerns of the current management of the BTCMP, including the lack of uniformity in administering cases among the circuit courts; lack

Merger and purchase agreements involving Maryland corporations and REITs may be governed by Maryland law. For lawyers accustomed to agreements governed by Delaware or New York law, we are frequently asked to describe key differences that arise under Maryland law so that parties may make informed decisions during negotiations. This is the first post of a multipart series that will describe some common issues that arise in relation to Maryland law. Merger and purchase agreement covenants often require parties to perform

Closed-end funds trading at a discount to net asset value sometimes are the subject of attack by activist stockholders. Activist focus on short-term gains can be at the expense of the long-term strategy preferred by many retail stockholders. In 2016, several closed-end funds were the subject of campaigns by activist stockholders and corresponding demands that boards of directors liquidate or open-end their funds. This post discusses options available to boards of directors of closed-end funds formed as Maryland corporations. This

On Friday, October 7, 2016, the Court of Appeals of Maryland and the Maryland Court of Special Appeals will each hold oral argument in appeals with implications for Maryland corporations and their directors. In Oliveira v. Sugarman, No. 17 Sept. Term 2016, the Court of Appeals of Maryland will consider: Whether stockholders of a Maryland corporation may bring direct claims against a board of directors for alleged breaches of the duty of candor in a proxy statement and for alleged breaches

In Americold Realty Tr. v. ConAgra Foods, Inc., 136 S. Ct. 1012 (2016), the Supreme Court held that, for purposes of federal diversity jurisdiction, the citizenship of a Maryland real estate investment trust (formed pursuant to the Maryland REIT Law) is determined by the citizenship of all of its shareholders. The Supreme Court rejected arguments that the standard for determining the citizenship of a corporation or a “traditional” trust should be applicable to a Maryland real estate investment trust. The underlying

On May 26, 2016, the Business Law Section of the Maryland State Bar Association in collaboration with the Litigation Section, the University of Baltimore School of Law, and the University of Maryland Francis King Carey School of Law will host a Business and Technology Case Management Program Symposium at the University of Maryland Francis King Carey School of Law. Since Maryland implemented its Business and Technology Case Management Program to address complex commercial and business litigation in its circuit courts, an

On April 26, 2016, Governor Hogan signed House Bill 354 (chapter 171), which amends the Maryland General Corporation Law (the “MGCL”) to clarify that a director of a Maryland corporation only has an obligation to comply with the statutory standard of conduct – and not unspecified common law duties – when acting as a director. The bill also makes corresponding amendments with respect to the duties owed by trustees of Maryland real estate investment trusts (formed pursuant to the Maryland

In Oliveira v. Sugarman, No. 1980 September Term 2014 (Jan. 28, 2016), the Maryland Court of Special Appeals held that the decision of a board of directors of a Maryland corporation to refuse a stockholder demand is entitled to the presumption of the statutory business judgment rule, codified in Section 2-405.1(e) of the Maryland General Corporation Law. In reaching its decision, the Court of Special Appeals revisited the 2011 Court of Appeals decision, Boland v. Boland, 423 Md. 296 (2011),

The Federal Trade Commission (“FTC”) has announced revised monetary thresholds for determining whether companies are required to notify federal antitrust authorities about a transaction under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).  The new thresholds take effect February 25, 2016.  The HSR Act requires the FTC to revise the thresholds annually based on changes in the gross national product.  The FTC also revised the interlocking directorate thresholds under Section 8 of the Clayton Act,

Interested director transactions (transactions where one or more members of a board of directors will “receive a personal financial benefit … that is not equally shared by the stockholders.” Rales v. Blasband, 634 A.2d 927, 936 (Del. 1993)) are common sources of derivative suits. To protect the interests of the stockholders and to preserve the application of the business judgment presumption, a board of directors may appoint independent directors to a special committee authorized to approve, reject, or consider strategic

In the recently released Revenue Procedure 2015-43, the Internal Revenue Service (“IRS”) announced that it no longer will issue private letter rulings with respect to certain tax-free spin-offs where, immediately after the spin-off, there is a newly-formed real estate investment trust (“REIT”).  Given the frequency with which such REITs are formed as Maryland corporations and real estate investment trusts under Title 8 of the Corporations and Associations Article of the Maryland Code, this development will not only be of interests

In the 2015 legislative session, the Maryland General Assembly implemented several useful changes to the Maryland General Corporation Law (the “MGCL”). House Bill 522 (now Chapter 526 of 2015 Session Laws and referred to herein as the “act”) was signed by Governor Lawrence J. Hogan, Jr. on May 12, 2015, and became effective on October 1, 2015.  The resulting changes will be of interest to Maryland corporations, Maryland real estate investment trusts, and their mergers and acquisition counsel. Actions by Written

Generally, prior to bringing a derivative action and attempting to wrest control of a corporate claim from the board of directors, a stockholder must demand remedial action by the board. But because Maryland continues to recognize a very limited demand futility exception, we are frequently asked to consider: under what circumstances may demand be excused? The answer surprises many lawyers more familiar with Delaware practice: almost never. In Delaware, demand futility is well-established and its two tests are clearly drawn. First,

In 2014, the Maryland General Corporation Law (“MGCL”) was amended to provide a more simplified process for public company mergers via a two-step tender offer. With the addition of a new Section 3-106.1, buyers are permitted to effect a short form merger (without the need for a top-up option) instead of a longer form merger if the buyer acquires at least the percentage of shares of the corporation in the tender offer that would be required to approve the merger

As previously discussed, precatory stockholder proposals regarding proxy access in Maryland REITs were universally successful this past proxy season. As boards of directors and trustees now consider the propriety of proxy access, directors electing to adopt proxy access bylaws will confront choices concerning appropriate stock ownership thresholds, the number of stockholders permitted to comprise such groups, and the maximum number of nominees afforded to qualifying stockholders. While directors will undoubtedly tailor proxy access bylaws to address the needs of their

While many corporate lawyers and litigators are familiar with the Court of Chancery of the State of Delaware, few outside of the State of Maryland are acquainted with the Maryland analog, the Maryland Business and Technology Case Management Program. Here is a quick introduction to Maryland’s "B&T Panel." Background Fifteen years ago, the Maryland General Assembly recognized an increasing need for Maryland’s trial courts to focus on the particular aspects of complex business and technology cases. In response, the General Assembly created

In Hogans v. Hogans Agency, Inc., the Court of Special Appeals tackled the rarely litigated topic of demands for access to books and records under the Maryland General Corporation Law (MGCL). By way of background, stockholders of a Maryland corporation are granted access to certain books and records of the corporation pursuant to Sections 2-512 and 2-513 of the MGCL. Stockholders owning less than 5% of the corporation are limited to the right to inspect the bylaws, minutes of stockholder meetings,

Of interest to Maryland REITs, underwriters and investors, the Maryland Business and Technology Case Management program recently published the May 18, 2015 opinion of Judge Michel Pierson of the Circuit Court for Baltimore City in Poling v. CapLease, Inc., which held that a cash-out merger does not constitute a “redemption” of preferred stock and, therefore, is not prohibited by a common five-year redemption restriction contained in articles supplementary for preferred stock. Background In April 2012 and January 2013, CapLease, Inc., a Maryland

Earlier this month, Seritage Growth Properties (SRG), the long anticipated real estate spin-off of Sears Holdings Corporation (SHLD), began trading on the New York Stock Exchange. SRG was formed as a Maryland Real Estate Investment Trust (REIT) under Title 8 of the Corporations and Associations Article of the Code of Maryland. While the event itself received much publicity, the following corporate governance features of the trust will be of further interest to Maryland corporate lawyers. First, the SRG declaration of trust

In the recently decided case of Gary W. Stisser v. SP Bancorp, Inc., Case No. 24-C-14-003610, 2015 MDBT 3 (Balt. Cir. Ct. 2015), the Circuit Court for Baltimore City granted motions to dismiss in stockholder litigation for lack of personal jurisdiction and failure to state a claim upon which relief can be granted. A key holding in the case was the court’s determination that the non-resident directors of a Maryland corporation were not subject to personal jurisdiction in Maryland (see

On June 24th, shareholders of Equity Residential (EQR), a Maryland statutory real estate investment trust, voted in favor of a non-binding shareholder proposal concerning proxy access. Of the approximately 150 Maryland REITs traded on the New York Stock Exchange, the EQR proposal marked the fourth time in 2015 that equity holders of a Maryland REIT considered proxy access. Despite mixed results in the broader marketplace, the equity holders of every Maryland REIT to consider a proxy access passed the corresponding proposal. Proxy

A REIT – or Real Estate Investment Trust – is an entity that owns or finances income-producing real property. REITs facilitate investment in portfolios of large-scale properties by individuals through the purchase of stock. Similar to the way individuals benefit by owning stock in an underlying corporation, individuals owning shares in a REIT earn a share of any income produced through real estate investments without actually buying or financing the underlying real property assets. Additionally, under subchapter M of chapter

The “proxy put,” a common provision in debt agreements with publicly traded companies, has become a matter of increasing concern following recent opinions of the Delaware Chancery Court. The proxy put permits a lender to accelerate the debt of a borrower if a majority of the borrower’s board of directors is no longer comprised of continuing directors (i.e., directors who are either (i) the original board members from when the debt agreement was executed or (ii) directors who were approved