U.S. DOL’s Final Rule on Fiduciary Duties owed in connection with Retirement Plan Advice

USDOL_Seal_circa_2015_svgOn April 6, 2016, the United States Department of Labor issued a Final Rule with respect to the fiduciary duty owed by any individual or entity providing recommendations with respect to a retirement plan.  It takes effect in April of 2017.

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M&A Deals: Sandbagging and using an Anti-Sandbagging Provision

We are going to be doing a series of posts on issues that arise in most mergers and acquisitions.  In this post I am going to discuss what “sandbagging” is with respect to an M&A deal and how to prevent it.

sandbag_setup_by_zulu_neko-d5in74j

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Best Practices for Issuing Stock Options to Startup Employees @ Paper this Deal

stock-optionsHere is a quick list a company can refer to prior to issuing stock options to its employees.  I’ve covered the basics of stock options in a previous post, as well as a more in depth pricing item related to stock options, but wanted this post to give the broad overview to founders.

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Funding Portal Rules for Regulation Crowdfunding a/k/a Equity Crowdfunding

Geefunding_crowdfundingThe JOBS Act from way back in 2012, set forth the Crowdfunding exemption to the securities laws, and required that any Funding Portal that engaged in Crowdfunding registered with the SEC and became a member of FINRA.  In late 2015, the SEC came out with the Regulation Crowdfunding Final Rules and forms to permit companies to offer and sell securities through Crowdfunding and to regulate the intermediaries which can sell the crowdfunded securities.  The latest Funding Portal rules have been finalized by the SEC and FINRA.

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Crowdfunding Investor Alert from SEC

On February 16, 2016, the Securities and Exchange Commission issued an investor bulletin addressing the new crowdfunding opportunities that will be available to investors starting as of May 2016.  The SEC issues these alerts so that investors will be knowledgeable about such offerings, especially the risks inherent in same.

The full bulletin can be found here – SEC Crowdfunding Investor Alert.

The alert does a good job breaking down the ways investors calculate their net worth and how much can be invested in any twelve month period. It also cautions investors on the risks of crowdfunding investing and the structure of how such offering can be conducted through portals.

Equity Crowdfunding a/k/a Regulation Crowdfunding Coming Soon (May 16, 2016) to a Startup Near You

crowdfunding imageThe SEC’s Final Rules for Regulation Crowdfunding were published on October 31, 2015, and are  considered effective 180 days after such publication.  Meaning that on May 16, 2016, Regulation Crowdfunding will be a go.

On that date, a company will be able to raise money under the new rules and file Form C (which still does not appear on the SEC’s Form Page).

To get a head start prior to the final rules allowing sales, and to catch up to broker-dealers who can also act as intermediaries and sell securities through the Regulation Crowdfunding final rules, Funding Portals were allowed to begin registering with the SEC on January 29, 2016, by filing the Form Funding Portal, among other things.

I’ve blogged on this before (here and here) and will be doing a number of posts solely on Regulation Crowdfunding in the near future to make sure that the basics are covered and will dig into some advanced topics.

Anyone company looking to take advantage of the new rules should start getting its house in order, by preparing its financials, its legal structure and investigating which intermediary it wishes to use for the sale of its shares, whether a broker-dealer or a funding portal.

After a further review of the new Regulation Crowdfunding rules I think they exemption provided may best serve companies looking to raise smaller amounts, such as below $500,000 (to avoid the audited financial requirement), or who are raising equity capital for the first time.  There is a huge need for smaller companies to get access to capital.   The Regulation Crowdfunding rules may allow investments to happen which otherwise wouldn’t, which is what Congress intended by passing the JOBS Act to modernize the antiquated securities laws.  Companies that can attract accredited investors will likely continue to rely on the private placement exemption under Rule 506(b) due to its relative simplicity compared to other offerings. But again, I do think the Regulation Crowdfunding rules have a specific subset of issuers that can benefit from them.

Is your Trademark License Agreement really a Franchise Agreement? In New York the answer is “Yes”

franchise picMost companies licensing the use of their trademarks would not think that a simple license agreement, which provides nothing more than use of the trademark in exchange for a fee, would for legal purposes be treated as a franchise agreement.  But if the trademark licensor is in New York then what it thought was a simple trademark license agreement relationship is likely really a franchise arrangement.

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Using “Tested” or “Market” Contract Language

This is a response to a post by Ken Adams of Adams on Drafting.   In one of my earlier posts about the desires of certain clients to have as short a contract as possible, I stated that it was beneficial to draft an agreement a certain way, including certain terms and language, because judges have seen similar items before. Ken identified this and he reiterated his position that a contract drafter should not rely on what he deems “tested” contract language.

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Updates to IRS Tax Partnership Audit Rules

There are changes coming to any business operation that is currently taxed as a partnership in the United States. The concept of the “tax matters partner” is being done away with in favor of what is called a “partnership representative.” 

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Famous Last Words: “The Shorter the Better”

Over the years, I’ve lost track of the number of times I’ve sat with or been on the phone with a client and we went over the deal they were trying to close (or more often some part of the overall deal), where they said “We just need something short to memorialize this, preferably a one page agreement.”

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