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A Closer Look at New York State’s Proposed Ban of Non-Compete Agreements
New York may become the latest state to ban non-compete agreements after the New York State Assembly and Senate each passed legislation seeking to curtail their use by employers.
IRS Issues Notice 2023-44 Clarifying the 48C Program Application Process and Timeline
On May 31, 2023, the Department of Treasury and the Internal Revenue Service released Notice 2023-44 to provide additional guidance on Section 48C, a revised and expanded allocation-based investment tax credit for qualified investments in eligible qualifying advanced energy projects. The Notice modifies and clarifies Notice 2023-18, which was released on February 13, 2023 and provided detailed mechanical guidance on applying for allocations of the Section 48C Credit
Benefits and Legal Risks of Embracing Generative AI Applications
One of the industries that can be transformed by generative AI is the legal industry. The revolutionary tools powered by generative AI raise many questions: will the legal industry prohibit or embrace this technology? If it embraces the technology, what will adaptation look like in practice? And, it even poses an existential question – does it have the potential of making lawyers obsolete?
Board Warns Employers to Pare Back Overbroad Non-Disparagement and Confidentiality Provisions in Severance Agreements
Severance agreements offered to non-supervisory employees that include broad-based non-disparagement and confidentiality provisions are unlawful according to the National Labor Relations Board. The Board’s decision in McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023), reverses Trump administration era Board decisions on this issue, and if upheld, may have far reaching consequences for both unionized and non-unionized workplaces.
New York State Offers Matching Investment Funds for Qualified Early Stage Start-Ups
New York Governor Kathy Hochul recently announced the establishment of a new initiative to match up to $30 million in funding received by early stage companies operating in New York. Through the Pre-Seed and Seed Matching Fund Program, start-ups could receive $50,000 to $250,000 to match investments in the form of convertible debt, a Simple Agreement for Future Equity (SAFE), or equity securities.
In this alert, we provide an overview of the program and its eligibility requirements.
Extending for Success: The Rising Trend of Extension Rounds and the Importance of Due Diligence
In light of a slowing market, companies that have already secured venture capital funding are increasingly resorting to extension rounds as a means of obtaining additional capital in an attempt to avoid a down round financing and extend their runway until the fundraising environment improves. Extension rounds can provide several strategic benefits for startups.
Do You Have The Rights? How to Maintain Investor Confidence When Using Third-Party Intellectual Property
Imagine the following scenario: You, as the founder of a business, have spent the past three years building your company. You have been bootstrapping until now, but the company is at a crossroads and in order to grow the company to its full potential, you have decided to turn to venture capital to attract additional funding. Because yours is a younger company, and therefore a riskier investment, your potential investors have decided to conduct thorough due diligence to allay some of their concerns. You suddenly think about the third parties whose intellectual property your company uses in its regular operation – you paid for access to that intellectual property so you are free to use it however and whenever you want, right?
“Ding Dong” -- FTC-Drizly Data Breach Settlement Will follow CEO Personally for a Decade
The Federal Trade Commission (“FTC”) announced on Monday that it is settling a case against Drizly and its CEO stemming from a 2020 data breach that impacted roughly 2.5 million consumers. The proposed order not only contains a laundry list of security-related obligations for Drizly that span twenty years, but also names and targets its CEO James Cory Rellas personally, hitting him with obligations that will follow him for a decade, even if he moves to other organizations. There are also hints that the FTC intends to elevate information security issues to boards of directors and other top-level executives.
FINCEN Publishes Final Rule on Beneficial Ownership Requirements - A Critical Step Towards Heightened Transparency in U.S. Financial System
FinCEN began the slow, arduous process towards a final set of regulations in April of 2021. Now, nearly eighteen months later FinCEN has published the first of three expected final rules. The first rule, published on September 30, 2022, deals with beneficial ownership reporting requirements and provides clarity regarding which entities must report BOI and what constitutes beneficial ownership (the “Final Rule”). While the full version of the Final Rule can be found on FederalRegister.gov, we further discuss these points and some additional components below.
California Assembly Passes Sweeping Age-Appropriate Privacy Legislation
California is leading the way on privacy regulation --- again. The California State Assembly has passed AB 2273, which, if approved by the California Governor, would require businesses that provide online services, products, or features likely to be accessed by children or teens under the age of 18 to increase their privacy and safety protections.
Amendment to Delaware Law Permits Exculpation of Officers in Corporate Charters
Delaware has long permitted corporations to limit or eliminate monetary liability of directors from breach of fiduciary duty of care lawsuits. However, the same protections have not been afforded to a corporation’s officers. Effective August 1, 2022, the Delaware General Corporation Law has been amended to address this discrepancy.
Is a Public Benefit Corporation Right for Your Mission-Driven Business?
This article is geared towards founders who have an idea for a mission-driven business and want to know what to do next.
INSIGHT: Important Matters to Consider When Facing a Possible Down Round Financing
The financial press has been reporting that investors are concerned that the United States economy may be heading toward a recession. In light of this and other factors creating uncertainty in the financial markets, investors are questioning the valuations that companies achieved during the heady times of 2020 and 2021, and are indicating that if a company needs to raise funds, they may need to consider a “down round” financing. A down round financing is when a company’s valuation is lower and its shares are sold at a lower price per share than the company’s most recent financing round.
Determining Entity Status Before the United States and Patent Trademark Office: Large, Small, or Micro?
When filing any patent application with the United States and Patent Trademark Office (USPTO), patent applicants must designate their entity status. Selecting the correct entity status can significantly reduce costs, so it is important to determine the correct entity status and update the status as needed throughout a patent’s and patent application’s life. Below is a discussion on how a patent applicant or patentee can determine their entity status and change their entity status after an initial designation, if appropriate.
Six Common Contract Traps: A Field Guide
Here, I present a basic field guide to help you spot and navigate six of the most common and most impactful traps you may encounter out there in the wild, in no particular order.
Delaware Supreme Court Upholds Advance Waiver of Statutory Appraisal Rights
Delaware Supreme Court Decision Affirms Key Component of “Drag Along” Critical for M&A Exits for Venture-Backed Companies
NEW RULE 148 TO EXEMPT “DEMO DAYS” FROM GENERAL SOLICITATION
Effective as of March 15, 2021, the SEC adopted the new Rule 148 which permits entrepreneurs to speak more openly about opportunities for investment in their new enterprises at “Demo Days.” Outlined here are the essential elements of the new Rule 148.
Crowdfunding Considerations for Early Stage Companies
The SEC expanded its capital raising rules for Regulation Crowdfunding. Since, there has been significantly more interest from start-ups to make use of the expanded investment opportunities. This article highlights key considerations for start-ups raising capital by crowdfunding.
California Legislature Passes New Key Privacy Laws, Expected to Be Signed Next Week
California lawmakers wrapped up this year’s legislative session, passing roughly 900 bills this year. Among those were only a few privacy initiatives, which we outline in this article.
Waivers of Obligations and Deadlines under the Investors’ Rights Agreement
Founders should understand and appreciate each of the new requirements to which they are subject by virtue of their company’s IRA. This article reviews two provisions of the IRA where a company’s management team might find itself stymied if it fails to appreciate the relevant deadlines and deliverables, many of which may not have applied to the company before it took on new investments.
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