How to Draft “Related-Person Transaction” Disclosure

Companies are required to disclose information about transactions involving the company and its directors, executive officers and other enumerated parties – promoters and control persons – in their proxy statements. No one likes drafting the “related person” section of the proxy. At least, I don’t.

At the 11:54 mark, our guests – Gibson Dunn’s Aaron Briggs and Mayer Brown’s Candace Jackson – tackle these queries:

1. Do you find that it’s hard for some officers or directors to remember to tell you everyone who’s in their household?
2. Do you include transactions that popped up during the year in the proxy even if they have since gone away by the time you file?
3. Can you talk about the Instruction to Item 404(b), can an insider resolve a related-party transaction before they become an insider to avoid disclosure about that?
4. I got in the weeds a little trying to describe indirect and direct interests. Can you spend a moment on that?
5. How hard is it to determine how much gloss to disclose about a related-party transaction? What would be material to investors?
6. What sort of processes do companies use to keep track of their related-party transactions? How much diligence do you need to do outside of the D&O questionnaire?
7. How hard can it be to convince an insider to agree to disclosing a related-party transaction in the proxy that sort of falls into a grey area?

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