Carlyle Group Wants To Change Their Governing Documents So That Shareholders Can’t Sue The Firm After It IPOs

carlyle group

Future shareholders seeking redress against Carlyle Group LP would be banned from suing the company and would instead be forced to submit to arbitration in Wilmington, D.E. once the company goes public.

Miles Weiss at Bloomberg reports that the DC-based private equity firm revised governing documents last week to say that investors who purchase company shares would be required to waive their right to sue. 

Securities law has long held shareholders reserve the right to take companies to court.

But in recent years, the Supreme Court has ruled companies may include language in contracts with consumers that stipulates consumers waive their rights to a lawsuit. Carlyle is seeking to expand that logic to equity holders.

“What we are talking about is legally uncharted territory,” said Donald Langevoort, a law professor at Georgetown University in Washington who previously worked for the U.S. Securities and Exchange Commission. “I would be surprised if the courts allow any company to entirely foreclose shareholder rights to sue under federal securities laws.”

In October, Carlyle’s IPO was projected to yield $8.5 billion.