Carlyle Group abandoned a plan to ban shareholders from filing class-action lawsuits, a proposal that could have delayed the private equity firm’s long-awaited stock sale.
Carlyle amended the documents for its IPO last month to include a provision that would have required future stockholders to resolve any claim against Carlyle through arbitration rather than in court.
The move provoked controversy among lawmakers and shareholder rights advocates, who were waiting to see whether the Securities and Exchange Commission would allow Carlyle’s IPO to proceed with the arbitration clause in effect.
“After consultations with the SEC, Carlyle investors and other interested parties, we have decided to withdraw the proposed arbitration provision,” Christopher Ullman, a Carlyle spokesman, said Friday in an e-mailed statement. “We first offered the provision because we believed that arbitrating claims would be more efficient, cost effective and beneficial” to the firm’s shareholders.
Carlyle’s initiative followed a series of U.S. Supreme Court rulings that said arbitration was the preferred method of resolving disputes between corporations and their customers and employees. That concept could have been extended to U.S. securities markets had Carlyle succeeded in going public with a mandatory arbitration clause.