Emerging Companies Insider

The Emerging Companies Insider blog focuses on recent and developing areas of the law affecting startup and emerging growth companies and their investors, including choice of entity, shareholders’ agreements, issuance of equity to employees, preparing for and executing a capital raise, exit strategies and the JOBS Act and its impact on how companies can and should raise capital from investors.

Recent Blog Posts

  • California Limits Choice of Law and Forum in Employment Contracts In a development that applies to all businesses operating in California, Governor Jerry Brown recently signed a new bill which prohibits employers in California from requiring employees, as a condition of employment, to submit to the law of another state or foreign jurisdiction for disputes related to their employment. Applicable to employees who primarily reside and work in California, the new law provides that employers may not include provisions in employment agreements that require the adjudication of claims outside of California,... More
  • Founders Keepers? Even Founders Must Purchase Their Stock Founding a company is an exciting moment in an entrepreneur’s career.  But even on Day 1, there are steps entrepreneurs should take to avoid major financial and diligence issues in the future.  In this series of posts, we’ll cover some basics that often trip up founders to help guide you through those early steps. Entrepreneurs often assume they own their company de facto (i.e., by virtue of the fact that they formed it, without any other required action)- a proposition that... More
  • Is Brand Control the Same as Employment? In Williams v. Jani-King, counsel for Jani-King has requested the Third Circuit en banc reconsider its decision to allow class certification to franchisees who claim to be employees, rather than independent contractors. Although the Third Circuit did not reach the merits of the case, which claims misclassification of the franchisees as independent contractors, the Third Circuit considered the controls inherent in the franchise relationship as a factor under Pennsylvania law.  In a strong dissent, Circuit Judge Cowen recognized franchising as a... More
  • Someone Quit? Act Immediately to Protect Digital Data. A recent article in Wired instructed employees in how to digitally erase all their stuff when they quit their jobs. The problem is that the author drew few distinctions between wiping computers of all personal items–family photographs or videos, personal emails, etc.–and company-related work product. Most franchisors and franchisees will take the position–and rightly so!–that employees’ work product on their company-issued laptops, cell phones, and voicemail accounts is company property. The corollary to the Wired article is what the employer should shut... More
  • California Governor Vetoes New Franchise Legislation On September 22, 2016, California Governor Brown vetoed two pieces of franchise legislation which had been passed by both houses.  Both of these bills originated with the State Bar of California’s Franchise Law Committee. The first bill is Assembly Bill 1782.  Effectively, Bill 1782 provided for a Limited Trade Show Exemption, which means that a franchisor can attend a trade show in California without being registered in California.  The provisions of the bill included numerous conditions for allowing a franchisor to... More
  • Diversity Immigrant Visa Program Opens Oct. 4th The State Department announced that it will begin accepting applications for the FY 2018 Diversity Immigrant Visa Program—commonly called the diversity visa (DV) lottery—beginning Tuesday, October 4, 2016. Applicants who are selected and approved may apply for a green card starting on October 1, 2018. Each year, the State Department randomly selects 50,000 immigrant visa applications from a pool of foreign national applicants who were born in certain countries with historically low rates of immigration to the United States. The State Department will... More
  • Last Chance to Provide Your Comments on the NASAA FPR Commentary! Copyright: stuartphoto / 123RF Stock Photo My colleagues and I have posted in the past about the proposed commentary on Item 19 Financial Performance Representations (“FPR Commentary”) drafted by the North American Securities Administrators Association, Inc. (“NASAA”).   The FPR Commentary is intended to provide practitioners with clarification about how franchisors should make an FPR in Item 19 of the Franchise Disclosure Document and will answer frequently asked questions about how franchisors can make a financial performance representation (also known as an earnings... More
  • Craig Tractenberg Joins the Franchise Group at Fox Rothschild Copyright: bbbar / 123RF Stock Photo The attorneys in Fox Rothschild’s Franchising, Licensing & Distribution practice are excited to welcome Craig R. Tractenberg as he joins Fox’s franchise practice in our Philadelphia and New York offices. Craig is the former head of the franchise practice at Nixon Peabody and also enjoys a terrific reputation as an international litigator. All of our clients will benefit from the remarkable depth of experience that Craig brings to the table, and all of us — Craig’s new colleagues... More
  • Can Customer Information Be Sold? Carefully, Very Carefully Copyright: wattanaphob / 123RF Stock Photo The Radio Shack bankruptcy case raised a fundamental question regarding the sale of personally identifiable customer information: Can it be done? The answer is “Probably”. (You expected anything else?) When Radio Shack filed for bankruptcy protection, it had collected personally identifiable customer information respecting 117 million individual customers. Radio Shack had promised customers in its privacy policy that it would not “rent or sell” their personally identifiable information to any third party. In the bankruptcy proceedings, the... More
  • “Give Me Your Startups”:  Newly Proposed Rule Opens Borders to Foreign Entrepreneurs A new rule proposed by the U.S. Citizenship and Immigration Services (USCIS) grants limited entrée to entrepreneurs establishing stateside startups.  The “International Entrepreneur Rule” would permit the Secretary of Homeland Security to offer parole (temporary permission to be in the U.S.) to individuals whose businesses provide “significant public benefit.” Who Qualifies? Copyright: dvrcan / 123RF Stock Photo So what is a “significant public benefit”?  According to the proposed rule, an entrepreneur can meet this standard by demonstrating that the startup has substantial potential... More
  • Joint Employer Legislation Introduced in Virginia Copyright: goldfinch4ever / 123RF Stock Photo Following on the heels of other states, Republicans in the Virginia House of Delegates have pre-filed a bill intended to override any action by the U.S. Department of Labor to make the employees of a franchisee also employees of the franchisor.  The bill is House Bill No. 1394 for the January 2017 General Assembly legislative session.  A very similar bill was vetoed by Governor Terry McAuliffe during the 2016 session.  Virginia Republicans are hoping to gain the... More
  • Required Maintenance: Upgrading and improving disclaimers and disclosures If your brand standards require franchisees to upgrade and improve their locations, a recent federal case demonstrates how thoughtful disclaimers and disclosures can shut down a franchisee lawsuit in its early stages.  In Devayatan, LLC v. Travelodge Hotels, Inc., a franchisor terminated a franchise agreement due to the franchisee’s alleged failure to improve and maintain a hotel in accordance with brand standards.  No. 6:14-cv-561-Orl-41TBS (June 24, 2016 M.D. Fla.).  The franchisee filed suit, alleging the franchisor negligently misrepresented the amount of... More
  • Alert: FDA Says Dietary Supplements Subject to Strict New Guidance Copyright: newrossosh / 123RF Stock Photo In an Alert published yesterday, I provided an update on new FDA guidance regarding dietary supplements: Dietary supplements that came on the market after October 15, 1994 must have a new dietary ingredient notification (NDI) to the FDA, according to an extensive new guidance document issued on August 11. This includes manufacturing processes on supplements prior to this date that change the identity of the ingredient such as a different chemical structure or composition, use of extraction... More
  • ​Legalized Marijuana Business Denied Federal Trademark Registration Copyright: silvia / 123RF Stock Photo In an Alert published today, I examined the Trademark Trial and Appeal Board’s recent decision in In re Morgan Brown: Owners of medical marijuana dispensaries cannot obtain federal trademark protection on marks used in connection with marijuana sales — even if their home state’s laws have legalized marijuana businesses — because marijuana is an illegal substance under federal law, and therefore encompasses a use that is unlawful, the Trademark Trial and Appeal Board has ruled. In its July 14 decision in... More
  • Cybersecurity Startups: Two Bills Aim To Streamline Federal Contracting High-growth cybersecurity startups have received a total of $9 billion in venture capital funding in the past six years, according to the National Venture Capital Association.  The private sector has rapidly adopted the cybersecurity solutions developed by these emerging companies; however, the federal government has been missing out on these innovations due to its cumbersome and confusing procurement process. Copyright: maxkabakov / 123RF Stock Photo Two bills recently approved by the House Committee on Homeland Security aim to jumpstart a prohibitively slow... More