Medley Capital Corporation (NYSE: MCC), a publicly traded business development company, has fallen out of compliance with the New York Stock Exchange following the resignation of two independent directors this week.
On Monday, John Mack and Mark Lerdal both resigned as directors, which the company said was not due to any dispute or disagreement, or any matter relating to its operations, policies or practices.
Medley Capital notified the NYSE that, following the resignations, it only had two independent directors on the board and two audit committee members. Listed companies are required to have a majority of independent directors on the board and a minimum of three members on the audit committee.
Medley said that it is currently searching for qualified candidates to replace Mack and Lerdal and regain compliance with the NYSE as soon as possible.
Both Mack and Lerdal were named in a lawsuit filed in the Delaware Chancery Court by FrontFour Capital, a significant Medley Capital shareholder, which accused the board of breaching their fiduciary duties to shareholders in connection with the proposed merger between the company and its affiliates Sierra Income Corp and Medley Management. The lawsuit sought to block the merger vote and enjoin enforcement of certain provisions of the merger plan.
The court ruled that Medley Capital’s directors breached their fiduciary duties in entering into the proposed merger and ordered the defendants to issue corrective disclosures and halt a vote of Medley stockholders on the proposed merger until the disclosures have been made and stockholders have had the opportunity to assimilate the information.
Medley Capital said that it is currently considering all available options, including appealing the court’s decision.
Shareholders of Medley Capital, Sierra Income Corporation, a non-traded BDC, and Medley Management Inc. (NYSE: MDLY) are scheduled to vote on the merger on March 29, 2019.
Medley Capital Corporation is a closed-end, externally managed BDC that trades on the New York Stock Exchange (NYSE: MCC) and the Tel Aviv Stock Exchange (TASE: MCC). The company lends to privately-held middle market companies, primarily through directly originated transactions. As of September 30, 2018, the company’s portfolio had a fair market value of approximately $655.4 million.