Unlimited Liability for New York Business Owners

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By Arina Shulga

One of the main benefits afforded to a corporate structure is the limited liability protection for its owners. This means that the corporation and its shareholders are treated as separate legal entities and it is the corporation’s assets, and not the assets of its individual shareholders, that are available to pay for judgments and claims of creditors.

In certain limited circumstances such as fraud, disregard for corporate formalities, and inadequate capitalization, the limited liability shield can be “pierced” by the courts to hold the corporation’s shareholders personally liable for the corporation’s debts and other obligations. Such “piercing” of the corporate limited liability shield is a prevalent practice in most if not all states. Continue reading “Unlimited Liability for New York Business Owners”

Test the Waters, but Don’t Make Waves

SEC Adopts New Rule Allowing All Issuers to Test the Waters in Registered Offerings

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By Latore Price and Nimish Patel

On September 26, 2019, the SEC announced that all issuers —including non-reporting issuers and investment companies (including registered investment companies and business development companies) will soon be able to “test-the-waters” in initial public offerings and other registered securities offerings. Under the newly adopted Rule 163B, any issuer will be able to engage in “test-the-waters” communications with qualified institutional buyers and institutional accredited investors.

Previously, under the Jumpstart Our Business Startups Act, only emerging growth companies were permitted to engage in “test-the-waters” communications. Rule 163B provides relief from the from restrictions imposed by Section 5 of the Securities Act on written and oral offers prior to, or after filing, a registration statement for issuers who do not qualify as emerging growth companies. This will give all issuers “flexibility in determining whether to proceed with a registered public offering while maintaining appropriate investor protections.”

Once in effect, communications made under Rule 163B will: Continue reading “Test the Waters, but Don’t Make Waves”

SEC Issues First Cryptocurrency No-Action Letter – Where’s the Action?

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By Mark Hiraide

On April 2, 2019, the Division of Corporation Finance of the Securities and Exchange Commission issued a no-action letter to TurnKey Jet, Inc. in connection with a proposed sale of tokens in the United States. It was the first no-action letter relating to cryptocurrencies and was widely heralded as a watershed event (e.g., “SEC Issues First ‘No-Action’ Letter Clearing ICO to Sell Tokens in US”) (see here).

But what does the SEC’s no-action letter really mean? First, a no-action letter is the SEC’s staff response to a request that the SEC not take enforcement action against the requestor based on the specific facts and circumstances set forth in the request. In most cases, the staff will not permit parties other than the requester to rely on the no-action letter. As was the case here, the staff’s response often is based in part on the legal opinion rendered by the requester’s lawyer that the proposed conduct is not a violation of the federal securities laws. Continue reading “SEC Issues First Cryptocurrency No-Action Letter – Where’s the Action?”

FAST Act Update: SEC Adopts Amendments to Modernize and Simplify Public Disclosure

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By Blake Baron and Nimish Patel

 What Happened?

On March 20, 2019, the SEC adopted amendments to modernize and simplify disclosure requirements for public companies. Specifically, the SEC adopted amendments to modernize its disclosure requirements for public filings in a way that the SEC believes will minimize the costs and burdens on public companies while continuing to provide all material information to investors.

Why It Matters

Investors will benefit from these new amendments as they eliminate out-of-date, repetitive and unnecessary disclosure, and should simplify the process by which they assess material information. The SEC hopes investors will benefit from its work to improve disclosure, as they focus on modernizing their disclosure system to meet the expectations of today’s investors while eliminating unnecessary costs and burdens. Continue reading “FAST Act Update: SEC Adopts Amendments to Modernize and Simplify Public Disclosure”

The Definition of Film Fest Success – For Financiers and Filmmakers

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By Steve Krone

The familiar annual rhythm of the major film festivals – Sundance in January, Berlin in February, Cannes in May and so on through Toronto in September – is well underway. And with Sundance and the Berlinale already in the rear-view, and SXSW right around the corner, it’s fair to say the 2019 sales environment looks to be very buoyant.

Although the single-film Sundance sale record was not eclipsed in 2019, the number of films that sold for eight figures was the highest ever, with numerous films racking up paydays in the $10-15 million range. Understandably, press reports out of Sundance tend to focus on these lofty (and once dreamlike) selling prices. It makes sense: the big numbers make great headlines, and the selling price is often the only deal information made publicly available.

But filmmakers – and in some situations, even film financiers – are not always best served by selling to the highest bidder. From a filmmaker perspective, the largest upfront payment, as great a thrill as it may be, does not necessarily translate into the best support for the film or most effectively accomplish the short- and long-term goals of the filmmakers. And even from a financier perspective, the biggest initial return does not always equate with maximizing the profitability of the film and the long-term interests of the financiers. Continue reading “The Definition of Film Fest Success – For Financiers and Filmmakers”

Will Semiannual Reporting Soon Be a Reality for Public Companies?

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By Blake Baron & David Gordon

Last week, the President said that in his discussions with the business community on ways to improve the business ecosystem, one particular idea was raised as a means to bolster business: move to a six-month financial reporting calendar from the current quarterly one.

Now, there is an argument to be made for such a move. One could say this would help deter “short-termism,” seeing as how companies would no longer need to focus on meeting analyst expectations on a quarterly basis at the expense of longer term thinking (not to mention this would save businesses time and money). In addition, some executives view quarterly reporting as one of the hindrances to going public and/or maintaining public company status and, as a result, have already been advocating for changes to be made to the current reporting schedule. Continue reading “Will Semiannual Reporting Soon Be a Reality for Public Companies?”

New Federal Act Amending Dodd-Frank Also Seeks to Help Startups

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By Mark Hiraide & David Gordon

In late May, President Trump signed the Economic Growth, Regulatory Relief and Consumer Protection Act. Although the president and many Republican members of Congress had threatened to repeal and replace Dodd-Frank, the new law’s actual changes are relatively minor. The new law rolls back some of the post-financial crisis legislation enacted in 2010, particularly for smaller community banks and credit unions. But it largely leaves intact the core framework of Dodd-Frank.

Less publicized but worthy of attention is the new law’s Title V—Encouraging Capital Formation, which amends the Securities Act of 1933 and Investment Company Act of 1940 with regard to early stage companies. Like the amendment to Dodd-Frank, the new law’s amendments to the federal securities laws are modest.  Continue reading “New Federal Act Amending Dodd-Frank Also Seeks to Help Startups”

Premerger Notifications and Interlocking Directorates: FTC Increases Thresholds

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By Melanie Figueroa & David Gordon

On January 26, the Federal Trade Commission (FTC) announced their annual update to the size-of-transaction thresholds for both premerger notifications and interlocking directorates. The FTC revises these thresholds annually based on changes in gross national product. This year’s update included significant increases.

Changes to Premerger Notification Thresholds

Under the Hart-Scott-Rodino Act (HSR), transactions that meet the following three tests are required to file premerger notifications with the FTC and the Antitrust Division of the Justice Department: Continue reading “Premerger Notifications and Interlocking Directorates: FTC Increases Thresholds”

Modernizing and Simplifying Disclosure with the FAST Act Mandate

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By Blake Baron

Under the FAST Act mandate, the U.S. Securities and Exchange Commission (SEC) voted on October 11, 2017 to propose amendments to Regulation S-K and related rules and forms aimed at modernizing and simplifying the current disclosure requirements for investment companies, public companies, and investment advisers.

What are the Proposed Amendments?

If adopted, the amendments would:

  • Revise rules or forms to update, streamline or otherwise improve the Commission’s disclosure framework by eliminating the risk factor examples listed in the disclosure requirement and revising the description of property requirement to emphasize the materiality threshold;
  • Update rules to account for developments since their adoption or last amendment by eliminating certain requirements for undertakings in registration statements;
  • Simplify disclosure or the disclosure process, including proposed changes to exhibit filing requirements and the related process for confidential treatment requests and changes to Management’s Discussion and Analysis that would allow for flexibility in discussing historical periods; and
  • Incorporate technology to improve access to information by requiring data tagging for items on the cover page of certain filings and the use of hyperlinks for information that is incorporated by reference and available on EDGAR.

Continue reading “Modernizing and Simplifying Disclosure with the FAST Act Mandate”

SEC Cyber Unit & Task Force

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By Melanie Figueroa

With increased attention to how securities laws may apply to digital token sales and the disruptive nature of increased cyber threats to the investor community, the Securities Exchange Commission (“SEC”) last week announced two new initiatives.  The SEC’s press release, found here, outlined the creation of the Cyber Unit (“Unit”) and the Retail Strategy Task Force (“RSTF”).

According to the press release the Unit will focus the Enforcement Division’s substantial cyber-related expertise on targeting cyber-related misconduct, including: Continue reading “SEC Cyber Unit & Task Force”